Carriage Services, Inc. (CSV) Q4 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to Fourth Quarter and Year End 2020 Results 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 call is being recorded. I would now like to turn the call over to your host today, Mr. Steve Metzger from the Management. Sir, please go ahead.

Thank you, operator, and good morning, everyone. This is Steve Metzger, Senior Vice President and General Counsel for the company. Today, we'll be discussing our fourth quarter and year end results for 2020. Our related earnings release was made public yesterday after the market closed. We have posted the press release, including supplemental financial tables and information on the Investor's page of our website. This audio conference is being recorded and an archive will be made available on our website later today through February 23. In addition to myself, on the call this morning from the Management team are Mel Payne, Chairman and Chief Executive Officer; Ben Brink, Senior Vice President and Chief Financial Officer; Pablo Casado, Senior Vice President of Sales and Marketing; Peggy Schappaugh, Vice President of Operations and Acquisitions Analysis; and Jason Buchbinder, Director of Talent Acquisition. Today's call will begin with formal remarks from management followed by a question-and-answer period. Before we begin, I would like to remind everyone that during this call, we will make some forward-looking statements. Any comments made by our management that state our plans, beliefs, expectations or projections for the future are forward-looking. These forward-looking statements are subject to risks and uncertainties that could cause actual results to defer materially from those contemplated in such statements. These risks and uncertainties include, but are not limited to both factors identified in our earnings release and in our filings with the SEC, both of which are available on our website. During this call, we'll also discuss certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to the appropriate GAAP measures can also be found in our earnings press release as well as on our website. Now, I'd like to turn the call over to Mel.

Thank you, Steve. It's hard to describe in words what this last year has meant when the world is in crisis with a once in a lifetime hopefully, pandemic of COVID-19 with new variants around the world popping up even now and yet the shock of that hit the world and hit the U.S. state by state, area by area, then it hit our industry and our company and our people. And it was a year of great tragedy for many individuals, companies, families, and yet we are in the business of death. And death has been around since the human species has been around and so we have a mission and a vision of our company of being the best at serving families when they are most in need and there were many more of them in 2020 than ever before in need. For that reason, this earnings release of the fourth quarter and year was not really just an earnings release. It was the story about our people. There was a story about courageous, heroic service, overcoming adversity and obstacles, both nature made and man-made with government restrictions and mandates. And our people rose to the occasion after initial shock and adaptation period and innovation period and entrepreneurial period and it is impossible to put in words what our people achieved, business by business, community by community throughout 2020. In the process they absolutely were, what I call, a proof of concept of how we operate and consolidated highly fragmented industry called the funeral and cemetery industry. I wrote about this at the end of the '16shareholder letter, it is at the end of this one. So this release is more like a shareholder letter. It's a story of love toward our people and their love toward their entire families and communities. It's a story of support. Those up here -- of us in the Houston office and across the country that have the privilege and honor of supporting such courageous service by so many high performance heroes. I've waited for this kind of moment as the cofounder almost 30 years ago to use this description that I'm about to read you. I'm a big fan of investing. After losing everything on October 19, 1987 I committed to become a great investor. I studied all the masters available then in a sense [ph] and I wound up studying the very simple, but wonderful investment ideas and philosophies about human nature, on Warren Buffett and Charlie Munger. So I'm going to read you a page from Snowball that could really be a page about me and about this company. So this is a quote from Warren Buffett. "I feel like I'm on my back, and there's the Sistine Chapel", he is talking about Berkshire Hathaway, "and I'm painting away. I like it when people say, 'Gee, that's a pretty good-looking painting. But it’s my painting, and when somebody says, ‘Why don’t you use red instead of blue?’ Good-bye. It’s my painting. And I don’t care what they sell it for. He is talking about the share price of Berkshire Hathaway. The painting itself will never be finished. That’s one of the great things about it. The big question about how people behave is whether they've got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard. I always pose it this way, I say, look her would you rather be the world's greatest lover or have everyone think you're the world's worse lover or would you rather be the world's worst lover but have everyone think you're the world's greatest lover? Now that's an interesting question. Here's another one. If the world couldn’t see your results, would you rather be thought of as the world's greatest investor but in reality have the world's worst record or be thought of as the world's worst investor when you actually were the best? In teaching your kids I think the lesson they are learning at a very, very early age is what their parents put the emphasis on. If all the emphasis is on what the world is going to think about you, forgetting about how you really behave, you'll wind up with an outer scorecard. Now my dad, he was a 100% inner scorecard guy. He was really a maverick, but he wasn’t a maverick for the sake of being a maverick. He just didn’t care what other people though. My dad taught me how live should be lived. I've never seen anybody quite like him. That's the end of my quote. But I editorialized, I used this a lot inside our company. And where he's talking about the Sistine Chapel and somebody coming along and say, oh you should use this or use that to make it better. I put that as a founder's view of the world, and it captures my thinking perfectly. And when it comes to finding people who have an inner versus outer scorecard, I have editorialized the following. How do we measure and quantify this behavioral characteristic, because we need more people that have an inner scorecard and are not looking at the scorecard, rather than being on the playing field making plays to win the game. And then at the bottom I say, I finally arrived here talking about his dad didn't care what other people thought, rather late in life, and I'm a better person and leader because of this confidence and my self identity. So, that's how I would do an analogy of Carriage today. For those who don't do enough studying about how we actually are and how we actually behave, you would not want to buy our shares. For those who do and there's a lot of meat on the bone in this release, and in every release we've made, there is a lot of meat on the bone in the '16 shareholder letter, and the '17 shareholder letter, and the '18 shareholder letter. If you want to see what it looks like for a company to go through a transformation in a short amount of time, put side by side the '18 shareholder letter in this release, and you will be shocked. Read the '18 one first, and then read this release. You will find that Jim Collins had it right. First Who, Then What. All the companies who subsequently failed to sustain greatness, and there are only 11 of them that made the cut, did it because they picked the wrong Who, either the Board or the CEO, sometimes both. First Who, Then What. You've got to get the Who right most of the time to really have the What to be the kind of performance. This company showed in 2020, in the middle of a pandemic. Now there are those out there and I've heard these theories that think this was a COVID lift only. You could not be further from wrong. And to prove it, I'm going to introduce one of the right, First Whos and we've never had a First Who like this in our company. Carlos Quezada.

Thank you, Mel, and thank you all for being with us today. When I came on board with Carriage, I was leaving behind a very successful, almost 11-year career and outstanding record of accomplishment with SCI [ph]. Virtual continuity, innovation and cultural transformation, I was able to exceed expectations constantly over both, sales and operations. When I met with Mel for the first time during my interview process, I was able to conclude very quickly, why Carriage would be a perfect fit for me. Concepts like good grade, flywheel effect, the right people on the right seat of a high performance bus. It focused on people and their development over the same leadership concepts and ideas that I had been implementing during my whole career, and in great measure the main reason for my success. I joined Carriage on June 26 2020 and spent some time understanding the dynamics of the cemetery sales teams across the portfolio. And while nothing is broken, we are not yet maximizing our true high performance potential, and I can see the vast blue sky that Carriage has to offer. Mel said it perfectly when he wrote on the 2020 second quarter earnings release and I quote, "When in the past, we have had spurts of broad high property sales performance in our 10 largest cemeteries, we have never been able to sustain such performers over the long-term on their other centralized decision making business model, designed originally for a standalone funeral business portfolio. Carlos will have the primary responsibility for building high performance sales teams, and standardized sale systems across our portfolio of cemeteries, as we believe that his leadership in past successes are building high performance winning teams will finally unleash the broad and sustainable performance power within our cemetery portfolio". End of quote. With that mission in mind, I went to work and introduced an executive team that planned for the creation of high performance sales teams across the cemetery portfolio. The plan while ambitious and aggressive in respect to goals and timelines, inspired excitement, possibility, and full support towards its execution. In summary, the plan is made of six main high performance sales drivers; number one, leverage technology as an enabler sales acceleration; number two, introduction of performance based rewards and incentives; number three, a strategic capital allocation to high-yield cemetery products and offerings; number four, sales growth through advanced planning and strategies and robust marketing; number five, deployment of lead generation programs, while improving conversion ratios; and number six, a standardization of cemetery sales processes, policies, and systems. Over the past seven months, we have experienced incredible progress through the execution of our transformational high performance plan; traveling were permitted to visit the cemetery portfolio, meet the team, build new relationships and understand and identify possibilities. Moreover, while it was difficult to do in a challenging pandemic environment, we were able to get things done. For example, we recruited two new sales leaders that now complete our sales leadership team made of three top talented high performance Director of Sales Support, Tulio Bertello, Shane Pudenz and Paula Harris. We're also able to bring on board a sales development partner, Erin Embry. Erin is now the leader owner of our new learning platform, which she will focus on instilling the sales skills conducive of a top sales team across our sales organization. We have also selected a new customer relationship management system, and we're in the process of customization through our implementation partner. We created a compensation committee to review and evaluate our current rewards and incentive programs and transform it into a performance based high reward compensation program. We deployed a communication management system that displays multiple types of content in the forefront of our sales teams instantly, enabling quick, direct and effective communication across the portfolio. We developed an internal campaign promoting our core values and what it means to be part of a high performance sales organization. We call it Care Edge [ph], and it means that when you join Carriage, you're joining more than a member, the middle member of a sales team, you are part of a higher performance culture, this is by people who truly care for our clients families while being inspired and energized by incredible passion for sales success and excellence. Care Edge [ph] defines the tree pillars of our sales DNA; who we are? What we do? And how we do it? We also had record breaking months on total preneed property sales during Q4 of 2020 and this past January 2021 we had an exceptional total sales performance of 152.2% over January of last year. As I share all of the progress made thus far, I realize how much we have achieved in such little time and all because of the amazing partnership and support from everyone here at Carriage. Our good sales, the great sales journey has begun. Moreover, our updated two-year roughly ride scenario sets high expectations on preneed property sales that we plan on meeting and exceeding, as we are a high performance team that is highly inspired totally driven, very passionate and fully committed to success. This is just the beginning on our quest to being the best at sales and reach our true potential, and there's a lot more to come, but for now, I can say that Carriage's services future is very bright, it will become even brighter, as we capitalized on every blue sky opportunity and continue to build up an effective, agile and very successful high performance organization across the portfolio of businesses. In closing, I want to highlight that this company is primed for remarkable success. And as we accelerate execution and continues to gain momentum with our flywheel effect, we will become a predictable and sustainable, high performance sales organization. There has never been a better time to be with Carriage and the best is yet to come. Thank you everyone and then I pass it to Ben.

Thank you Carlos, I appreciate your comments and I'm excited for the opportunities that we have for our cemetery performance going forward. Before I dive into an explanation of our record operating and financial results for the year, I would like to make the following two points. For any current or curious investor, prospective acquisition candidate, someone thinking about joining our high performance teams, or any other deeply interested party, I would highly recommend you take the requisite time to read our year end 2020 earnings press release as it will certainly do a much better job at encapsulating our record setting results, and our clear vision for the future success of Carriage that I could in my remarks. Combined with the previous 2020 quarterly earnings releases, these documents tell in striking detail and clarity the story of Carriage's remarkable transformation over the course of the past 12 months and should be required reading for all that are truly interested. Secondly, the results I will discuss are our direct results of the incredible dedication, passion and professionalism of every member of Carriage's high performance teams across the country. As the coronavirus pandemic has persisted and measures to limit the spread have become a way of life, our Funeral and Cemetery professionals have overcome previously unimaginable obstacles to answer the bell every single day to provide a high value personal service to every family who has lost a loved one that we have the privileged opportunity to serve. They are supported 24x7 by another amazing group of dedicated professionals here in our Houston Support Center. To all of our employees here, Carriage is with tremendous pride and admiration that I simply say thank you for all your incredible efforts over the course of the past year. Now onto our results. For the full year 2020, our total revenue increased 20.2% to $329.4 million. Our total Field EBITDA increased 29.3% to $141.9 million. Total Field EBITDA margin increased 310 basis points to 43.1%. Adjusted consolidated EBITDA increased 36.1% to $104.3 million. Adjusted consolidated EBITDA margin increased an incredible 370 basis points to 31.6%, and our adjusted diluted earnings per share increased 48.8% to $1.86, all of which were records. In the fourth quarter, our record results resulted in total revenue increasing 26.6%, to $90.1 million, total Field EBITDA increasing 44.4% to $41.3 million, total Field EBITDA margin increasing 570 basis points to 45.9%, adjusted consolidated EBITDA increasing 47.5% to $28.3 million, and our adjusted consolidated EBITDA margin, increasing 440 basis points to $31.4 million. Our record adjusted diluted EPS for the quarter increased 103.6% to $0.57 per share. In our year end press release we included our preliminary unaudited January operating and financial results in order to present the most up-to-date information regarding our business, much as we did with our first quarter 2020 results when we included the full month of April performance. The performance we experienced in the latter weeks of the fourth quarter persisted into January with revenue increasing 30.4%, to $34.7 million, adjusted consolidated EBITDA increasing 99.1% to $13.6 million, adjusted consolidated EBITDA margin increasing an incredible 1350 basis points to 39.2%, and adjusted diluted EPS accelerating 288.9% to $0.35 per share equaling our total adjusted diluted EPS for the entire first quarter in 2020. For the full year 2020 our same-store Funeral Home revenue grew 6.5% to $179.8 million. Same-store Field EBITDA grew 14.9% to $74.8 million while the Field EBITDA margin expanded 300 basis points to 41.6%. We experienced an incredibly strong finish to the year as the elevated death rate caused by the coronavirus pandemic combined with our continued ability to grow market share broadly across our portfolio led to our fourth quarter same-store Funeral revenue increasing 22.6% to $14.8 million, same-store Field EBITDA increasing 30.2% to $21.8 million, and Field EBITDA margins expanding 500 basis points to 44%. The ability of our Funeral Home Managing Partners and their teams to be able to continue to safely serve their communities throughout this past year has been nothing short of remarkable. They've worked tirelessly to leverage new technology, reconfigure their physical space and provide unique and creative service and celebration of life moments to our client families. We know we have gained market share broadly across our portfolio because of all of these efforts, and we believe this increased market share in 2020 will lead to even more opportunities to serve those families again for many years to come. While there remains uncertainty about the impact of the coronavirus pandemic and the pace of the vaccination programs that will have on death rate this year, I know our Funeral Home Managing Partners and our teams are intently focused on maintaining the momentum, and high performance results experienced in 2020 throughout the rest of this year and beyond. In 2020, our same-store Cemetery revenue increased 5% to $51.7 million, while our same-store Field EBITDA increased 13.7% to $19.5 million and same-store cemetery Field EBITDA margins expanded 290 basis points to 37.7%. Similar to our Funeral Home segment, we had a strong finish to the year in our cemeteries with fourth quarter revenue increasing 22.6% to $14.8 million, Field EBITDA increasing 55.6% to $6.5 million and same-store Cemetery Field EBITDA margins expanding 930 basis points to 43.8%. This performance by our Cemetery sales managers and counselors is extraordinary, as a testament to the their ability throughout the year to adapt to the challenging restrictions brought on by the coronavirus pandemic, in order to continue to serve both existing and many new families within our cemeteries. Additional momentum was experienced in the second half of the year at the very early stages of the implementation of our enhanced preneed cemetery property program led by Carlos and his team took hold. As he outlined in his comments, Carlos and his team have an incredible plan to drive our cemetery preneed property sales to levels never experienced here before at Carriage. We're all incredibly excited about the future performance of our cemetery businesses and view the performance in the second half of the year as indicative of great things to come. Our acquired funeral home and cemetery portfolio as evidenced in our press release where we outlined our five-quarter trend reports, you can see in there, in 2020 a sustained quarter-over-quarter improvement in both Field revenue, Field EBITDA and Field EBITDA margins of our acquired funeral home and cemetery portfolio. This is due to the work, incredible work done by all in those portfolios, especially as we integrated the four large strategic acquisitions we made at the end of 2019. All four have made tremendous progress in their integration plans, even as we had to adjust with the effects of COVID and are well ahead of our expectations for their performance in the first year under Carriage's ownership and on our high performance platform. We're excited about the opportunities we have within those four acquisitions to continue improvements going forward and expect great things to come. Our 2020 financial revenue increased 24.5% to $19.7 million. Financial EBITDA increased 29.3% to $4.2 million and financial EBITDA margin increased 340 basis points to 93.3%. The majority of the increase we experienced in our 2020 financial revenue and EBITDA occurred in the second half of the year and was a direct result of our trust fund repositioning strategy executed at the depths of the Coronavirus market crisis. For a more in depth explanation of the execution of our strategy, please refer to the four 2020 earnings press releases for more detail. In total, we deployed approximately $90 million of new capital under our repositioning strategy, the majority of which was deployed at the depths of the Coronavirus market crisis within four weeks in late March and early April. As a result of these strategic decisions, that $90 million of newly deployed capital has resulted in new $8.3 million of recurring annual income, an increase of 108% to a total of $16 million of annual recurring income and our trust fund portfolio. It also resulted in $36.3 million of capital gains, the majority of which remains unrealized. We view the recurring income and our trust fund portfolio as locked in for the next five years, while the portfolio remains positioned for further upside capital appreciation. The significant increases in financial revenue and EBITDA in 2020 was driven by the increases in earned income through our Cemetery Perpetual Care Trusts accounts, as a result of the higher amount of recurring annual income. In 2021 and 2022, we expect financial revenue to be between $22 million and $23 million at a 94%, 95% financial EBITDA margin, all of which will add an additional $0.10 of earnings per share in 2021 compared to full year 2020. The current unrealized capital appreciation and overfunded status in our trust fund portfolio provides upside potential to our future financial revenue EBITDA. Overhead for the year grew 7.9% to $40.5 million. While our overhead is a percentage of revenue, the metric we use to judge the effectiveness of our overhead platform fell to 12.3%. This included approximately $2.8 million of non-reoccurring, non-GAAP add backs in our performance. Overhead for the fourth quarter was higher than the rest of the year as we were forced to accrue more for variable field compensation as a result of improved performance as we went through the fourth quarter. Here at Carriage we believe in paying for performance, and those are accruals we're happy to put on our books. Our record operating performance in 2020 led to a record adjusted free cash flow of $70 million and adjusted free cash flow margin of 21.2%, incredible increases of 80.3% and 700 basis points respectively. We introduced the free cash flow margin metric in the first quarter, as yet another transparent data point for investors to gauge our success at converting an ever increasing percentage of revenue into cash capital available to allocate to increase the intrinsic value of Carriage. Capital expenditures totaled $15.2 million in 2020, split approximately $9 million in maintenance CapEx and $6 million in growth CapEx. We expect to have total capital expenditures between $18 million and $20 million in 2021, which will be evenly split between growth and maintenance CapEx. The increase of our growth capital expenditures will be in support of our increased development of high quality differentiated cemetery inventory across our cemetery portfolio. Over the foreseeable future, our growth capital will be targeted towards cemetery inventory development, along with evolutionary funeral home remodels, and new build funeral homes and select high growth markets. We remain excited about the opportunities to invest in our businesses across our portfolio in complete alignment with our commitment to being the best owners and operators of funeral homes and cemeteries or being disciplined stewards of our precious capital. Our 2020 adjusted free cash flow benefited from tax relief, pass as part of the CARES Act, as well as tax methodology changes we instituted over the past year to enable Carriage to defer cash taxes in 2020. Given our strong 2020 operating performance, we expect to be a full cash taxpayer in 2021 at approximately 70% of our GAAP effective tax rate. We expect adjusted free cash flow to be lower in 2021 between $63 million and $67 million compared to 2020, almost entirely due to the increase in cash taxes to be paid this year. When we made the decision to deploy $172 million of capital in for high quality large strategic acquisitions at the end of 2019 and early 2020, we made the commitment to allocate the majority of our capital to paying down debt and reducing our total debt to adjusted consolidated EBITDA ratio from a high of six times over the course of 2020. The strong free cash flow generation combined with tremendous operating performance allowed Carriage to pay down our total debt by $72.9 million or 13.7% from our peak debt of $534 million after the closing of Oakmont on January 3, 2020 and allowed us to reduce our total debt to EBITDA leverage ratio an outstanding 1.6 times to just under 4.4 times at year end. We currently expect our debt to EBITDA ratio to fall to approximately four times by the end of the first quarter, ahead of our expected refinancing transaction in the second quarter of this year. Our ability to quickly pay down debt was aided by $8.5 million divestitures we closed in 2020. We are working diligently to divest or have under contract to sell another $10 million to $11 million in divestitures by the end of the second quarter. Year-over-year total revenue growth will be lower in 2021 due to the invested revenue declining as we execute these transactions, while long-term organic growth rates and overall Field EBITDA margin will benefit from these divestitures. Our continued intention is to execute a refinancing transaction of our $400 million 6.65 unsecured Senior Notes when they become callable at just under 105 on June 1. Given the continued low interest rate environment and attractiveness of the high yield bond market, we are currently in position to refinance the $400 million of notes with a new eight to 10 year unsecured senior note with a coupon approximately 250 basis points lower than our current rate. Based on our targeted reduction in our coupon rate this transaction will be accretive to annual earnings per share by $0.34 to $0.38 and annual adjusted free cash flow by reducing cash interest expense by $9 million to $10 million. We believe Carriage will have the necessary financial flexibility to allocate capital in a disciplined and strategic manner to grow the intrinsic value per share of Carriage. Moreover, this reduction in our interest rate on our senior notes will lead to an almost 100 basis point reduction in Carriage's overall cost of capital to approximately 6.5%. As such, we view this transaction as the final piece of our capital structure renewal that we'll set up Carriage to be in a value creation sweetspot over the next five to 10 years. We view our future where we will have more attractive investment opportunities that have higher rates of return on invested capital than ever before in our history. This capital allocation will primarily be funded by our own internally generated recurring and growing free cash flow that will allow us to maintain a more moderate total debt to adjusted and consolidate EBITDA leverage profile than we have in our recent past. What investors should be excited about is the continued high performance execution of our core models, combined with savvy capital allocation will lead to a significant improvement in our overall return on invested capital beginning this year. Over the past three weeks, we released two 8-Ks detailing a cyber security incident we experienced here at Carriage. Our IT team has worked diligently and with the help of outside experts to quickly restore our systems and greatly enhance our cyber security posture. All costs associated with this incident will be covered under an insurance policy and any investments we make to continue to improve our network environment will not impact any of our published roughly right forecast performance ranges. We take seriously the security of our client, family and employee data. We have and will continue to take necessary steps to mitigate the risk of a similar event occurring in the future. And now finally, I will turn our attention to our future. We are excited to announce an updated what is now a roughly right two-year performance scenario. Given the uncertain nature of the impact of the continued Coronavirus pandemic, we have presented slightly wider ranges for our performance, particularly in 2021 compared to previous versions. We do view these ranges as achievable targets with numerous areas for upside potential that are well within our control over the next two years. These roughly right ranges do not include any potential acquisition activity and includes conservative estimates, particularly in our segment given the strong performance we have witnessed in the second half of 2020 and into the first part of this year. We expect our 2021 and future earnings per share growth will be driven by a combination of the following factors. Continuation of local market share gains in both are at need funeral home and at need cemetery businesses as our amazing teams continue to provide high value personal service to their clients families. Accelerated growth of our cemetery preneed property sales revenue at sustainably higher Field EBITDA margins, as we demonstrated more consistent operating leverage within our cemetery portfolio. Continued integration and performance improvements of our four recent strategic acquisitions, a full year impact of the financial revenue and financial EBITDA performance from the higher amount of recurring investment income generated in our preneed funeral and cemetery trusts. Successful execution of our plan and senior note refinancing on June 1 by lowering our interest expense and improving our cost of capital, growth in our funeral cremation average revenue per contract as we continue to focus on cremation conversions and offerings of differentiated personal unique service opportunities, and increased growth capital investments across our portfolio with more of a focus and velocity on cemetery inventory development. We expect 2021 adjusted and consolidated EBITDA to grow to a midpoint of $107 million and adjusted diluted earnings per share to grow to a midpoint of $2.30. For 2022, we forecast adjusted consolidated EBITDA growing to a midpoint of $111 million and adjusted diluted EPS growing to approximately $2.55 or higher. I thank you all for participating on our call today. Please continue to reach out if you have any questions regarding Carriage. And with that, I'll turn the call back over to Mel.

Thank you, Ben. Starting in 2001, after Jim Collins published his great book Good to Great, we did an analysis of what it would take to take Carriage from a good company to a great company. The conclusion was we were not yet good. This was sometime in 2001. It was another 10 years before we revisited the book, Good to Great, in October, November of 2011, and I had everybody read the book, everybody that was still left in the company, we had to do a major reorganization back then and I asked them what they thought. And so the consensus, unanimous consensus was, we are good and we want to go toward the direction of great. So we launched our first good to great journey starting January 1, 2012. Over the next five years, and we think in terms of five-year timeframes, our performance went up, our share price compounded from a beginning price of $5.60, at the end of '11 to $28.64, at the end of '16. That was our 25th year. I wrote the '16 shareholder letter, which was 40 some pages long. And we focused on First Who, Then What as being the primary reason we were able to have a good to great journey that successful over an entire five years. I made a decision at the end of '16 to back out of operations and I made some, First Who, Then What mistakes, cost the company morale, cost the company at a later point a declining performance in all of our areas and trends. And so I had to step back in to operations in September of '18 and we began to make a lot of changes to get the company back on that journey. And so I began to replace a lot of people who no longer had the fellowship across the portfolio, whether it was in support teams or operating teams and businesses or whatnot. A lot of change came very fast and continued all the way through first quarter of 2020. But in turning for help, where are we going to find eight players to take these seats on the bus, these are important seats on the Carriage bus? I was told Jason Buchbinder, I met Jason the day he started Carriage. I couldn't believe that six months later, I was turning to him to be my biggest savior from my mistake. And once I had Jason in the team that I had put together back then, and I said look, I don't know where you're going to find this talent, because I mean, we need quite a few of these eight players in these spots. Can you do it and how much time will it take? You know, six months to a year? Jason said, I can do it, I have a pipeline of talent and I will do it. What you're seeing today is to a very large degree, our performance in 2020 and continuing, a function of Jason Buchbinder quickly figuring out what Carriage was all about, and then finding the talent that fit the company culturally and skill wise. And if you ever wanted to say, First Who, Then What, you get it right, it is magical. I will now turn it over to the real magician, when it comes to a player talent, Jason Buchbinder.

Thank you, Mel and good morning. It is a tremendous honor to have this opportunity to be on the call today. As an Ambassador for Carriage Services and our 210 partner businesses, I have the distinct privilege of sharing the Carriage Services story to talented men and women across the country. I'd like to begin this morning with a brief quote from our very own CEO, Mel Payne, from the 2016 shareholder letter, aptly named, The Evolution of our Learning Journey. "Yes, Carriage is unique and unorthodox in an otherwise black and white, predictable, conservative industry". I would certainly agree. However, I would argue that there's a word missing from this statement. That word is special, unique, unorthodox and special. You can as I did learn to understand and appreciate the foundation of this unique and unorthodox business model with its five guiding principles, decentralized concept, high performance culture of framework, and Good to Great methodology by looking no further than the 2016 shareholder letter. This 43 page missive, born out of heart and soul, body and mind and brutal honesty, reads much more like a love letter than does a shareholder document. Carriage Services have so thoughtfully designed and crafted itself to be a sustainable, decentralized business model and it's firmly rooted in being a people based, people focused partnership. As we have learned from the Jim Collins book, Good to Great, First Who, Then What, is at the very core of any business in a Good to Great journey. Executing now at the highest level, with the collaborative support of our partners across the country, and placing the right people in the right seat, we are at just the beginning stage of our newfound success, shattering the norm and delivering on amazing results. The First Who, Then What concept allow us here at Carriage Services to better prospective candidates both heart and head and determine their true expectations while aligning them with a perfect environment for success. In doing so, we learn what is important to them, both professionally and personally and as we bring them into the Carriage family, we too learn about their own. We seek and make the real connection. In fact, it's First Who, Then What that drives our people focused success here at Carriage Services and across the country, with the amazing men and women in the funeral homes and cemeteries that we here in Houston are fortunate enough to call partner. We have moved away from the traditional interviewing and hiring practices and have engage entirely into our First Who, Then What methodology, coupled with a concept exercise from Jack Welch’s only the leadership. Our leaders across the country are seeing greater results in their hiring and team dynamics, resulting in high value personal service, and guest experience. Further results of our higher success can be seen by the reduction of additional hiring needs an attrition rate lower than 10% and greater tenure in all employment categories across the portfolio. Simply, our right who's and the right seat philosophy has allowed Carriage Services to hire better people and achieve greater results. The First Who, Then What concept and execution thereof is a value creator that can and will continue to pay dividends, as you've heard today, and will do so in further earnings release calls. In a tight labor market, specific to our industry, where strong talent is scarce. Carriage Services continues to attract and onboard the most talented professionals in our industry. We have found that there's a plethora of industry based individuals seeking their opportunities to join the Carriage Services Network. Only time will with the next feed on the box will become available. In 2020, prior to the COVID-19 outbreak to hit the news wires Carriage Services was aggressively focused on successful recruitment efforts, seeking talent to top rate in several key markets. The momentum coming out of 2019 did not stop once the pandemic was fully recognized. While other firms took a watch and learn approach, subsequently reducing their requisition activity, sidelining their internal talent departments and seeking ways to reduce expenses, Carriage services soldiered on, doubled down and produced higher results not seen in years prior. The 2020 year's success cannot be highlighted without the mention of those eight plus leaders who joined this past year and made significant impact alongside their peers. I'd like to thank a few of those amazing leaders now who have come to join the Carriage family in 2020. Salvador Orozco at Oakmont Mortuary and Memorial Park; Bridgette Oester at Dieterle Funeral Home; Chris Karn at Carlson and Kirby-Morris Funeral Home, Russell Marshall at Memory Garden Cemetery and Blackburn-LaGrone-Shaw Funeral Home; Clarke Thompson at Alsip and Persons Funeral Home, Michelle Callahan at [indiscernible] Funeral Home; Daisy Bordeau at Allison Funeral Services; Amanda Gittelman at Hillier Funeral Home; Tara Steininger, at Becker Bradshaw Funeral Home; Courtney Mourey at Baker-Stevens-Parramore Funeral Home; John Winstead at Seaside Funeral Home and Memorial Park; and Kevin Sandoval at White's Funeral Home. This is just a short list of the newly aligned leaders we are fortunate to bring into the Carriage fold in 2020. I would certainly be remiss if I did not make a very special mention to our new Senior Vice President of Sales and Marketing, Mr. Carlos Quezada, who joined Carriage in June of 2020 during the Zenith of the pandemic, getting right to work placing the building blocks for very new and exciting high performance sales organization. Carlos certainly cannot do this alone. Joining Paula Harris already on board, I'm pleased again to welcome Mr. Tulio Bertello and Mr. Shane Pudenz to tenured sales mentors in our industry, who have joined the Carriage family in addition to Erin Embry, sales development partner who support our trading platform nationwide. As Carlos has stated before, the best is yet to come. Carriage Services, both our managing partners and sales vendors do not require a handbook to lead their local business as it is in their internal DNA, their entrepreneurial, competitive mindset, and people first focus that drives at the very heart of their respective business. We here and [indiscernible] as partners support their drive to success. Carriage Services and its partners have successfully built relationships through true collaboration and partnership. We've eliminated the layers of management, removed the hierarchy and have through First Who, Then What, successfully on-boarded the best talent in the industry. We have removed the bulky talent acquisition technology, extracting unnecessary policies, spending less time mulling over questionable statistics, and brought back the human, in human resources. Conference calls and a full email inbox are non-existent, that we may focus entirely on peer-to-peer connection, innovation and families services. Here at Carriage Services, doors remain open for learning, growth and development. Carriage Services and its partners continue to move the goalposts and push past boundaries, unselfishly supporting social causes and their respective communities and have been for years. Whether it's supporting the local food bank, sponsoring a pancake breakfast for the local girls and Boy Scouts, a toy drive, a food drive or the collection of back-to-school items for children in the community, our team has been there out in front. And when COVID came, we were more than ready. Those business partners who have come to join the Carriage Services Network over the past 29 years enjoy our special connection and back office support services while employing the same hometown, independent, local business relationships with the community that has made them the go to funeral home for families, time and time again. In my capacity, I'm often asked, what is the Carriage difference? Surely there are many. However, I simply respond with this comment. For 29 years and counting, Carriage Services has had one mission, to be the best people based operating organization in the funeral and cemetery industry. Our goal has never been to be the biggest, but to be the best. Our core principles and values have never wavered. We stay true to the families we serve, and continue to be a local family run market operation with an entrepreneurial spirit, who just happens to be a publicly traded company. I'm profoundly thankful that I have the honor every day to align myself with 2,727 of the most unbelievable, hardworking, caring, compassionate group of eight plus leaders in my chosen industry. I know I speak for all of us here in Houston when I say thank you to each and every one of you for serving our community family. You are heroes before Carriage [ph] and will always be. Mel has in his theme letters dating back to 2012, signed off with this thought coming from author Jim Collins. Greatness is not a function of circumstance. Greatness, it turns out is largely a matter of conscious choice. We choose greatness. Now, I would add we are truly unique, unorthodox and special and I too, have chosen Greatness. Thank you. Operator, I’ll now return the call back to you, so you may open the call for Q&A.

Thank you. [Operator Instructions]

Sorry. I think I will have a few closing remarks. I just want to thank Jason, for that wonderful presentation on First Who, Then What, and the importance it is to Carriage. In his section in the release, I think it's on page 12, High Performance Talent Acquisition Program, First Who, Then What? In the second paragraph, I referenced the most recent example of just how valid and powerful the First Who, Then What concept is in relation to Tom Brady leaving New England Patriots and joining the Tampa Bay Buccaneers. Anybody who knows me well, knows that they can compare coaching, whether it's baseball, Tony La Russa, whether it's Bill Belichick, the New England Patriots and all the players that make up winning teams and winning legacies. That's how I view our company as a public holding company, full of winning teams, supported by all the people at the holding company level, being the best, that they can be in the world and supporting the best in every community locally. It's a simple concept. It's a very difficult concept to pull off and sustain. You've got to get the first to then ride it, every seat on that bus. So what's interesting about this is that I mentioned in the second paragraph, Tampa Bay had a losing team, they had a losing franchise, they had a losing mindset, they had a losing culture, it was acceptable to lose. But when time came, it was unacceptable or he wouldn't have come there, if he thought they were going to continue to have that mindset of losing being acceptable. And I heard during the Super Bowl many times, by the various people, that when he came, took a while, but he changed the culture, changed the mindset of the players who already had the talent. They had the coachee, they had the talent. They added some, okay, Rock came by retirement, they got Antonio Brown, but I mean, they had the talent. What they didn't have was the culture and the mindset of winning, being the only option. And I can promise you, I know I've gotten a bad reputation over the years of turnover. You can't win Super Bowls, and win every year, unless you have the talent. And that's the way it will always be at Carriage. That's our competitive advantage as I wrote in the last section. And I do want to mention this. Jason mentioned, great. Tom Brady is known as the greatest of all times. Maybe Patrick Mahomes, will one day get there. Not yet. Tom still got it. He doesn't want to be anything less than great at 43 years old. At 78 years old, I don't want to be anything less than Great. Great is the only option. Winning is the only option and to have a winning company that wins in the performance locally. And you have all that performance being shared with the people who create it and so much left over for the rest of us and shareholders. I mean, this is fun. This is so much fun. And it's got to continue to be fun, after COVID is diminished. And so I want to simply say it is a true blessing to be here at this company having reached a point after almost 30 years. And right in front of us we have the refinancing where Carriage will be in a position we've never been in before, which is to allocate a lot of free cash flow, more than any other company for every dollar revenue has been pointed out. To maximize and optimize over long periods of time, intrinsic value per share, and to have 47 of our great people involved in a Good to Great to shareholder value creation incentive plan is such an exciting thing. That means we have to compound our shares at a minimum of 20% to 40% through 2024. Now I've told every one of them, I've educated them. I'm pouring my heart out with passion and energy they love, 20% and 25% is nothing that was a gift Mr. Market gave us during the pandemic crash. 50%, 30% only gets us to 53 and change. That's kind of a ridiculous low hanging fruit. Let's go for the 40%, 35% would be second place. That's not Super Bowlish. Let's go for the 40% compounding category. That gets us to $77 and change. Now that is more like what, a real player and a real team of winning teams can and will do. That's what every one of them believe we will do. And so we look forward to that journey hopefully with you on this call because we will not let you down. And with that, I'd like to open it up for questions.

[Operator Instructions] And your first question comes from the line of Alex Paris from Barrington research. Your line is open. Alex Paris, your line is open.

I'm sorry, I was on mute. I wanted to say congratulations on the beat and raise, the strong finish to a very strong year. And then Mel, specifically to you, a belated Happy Birthday and congratulations on an extension of your employment contract for another seven years. I think that's well placed confidence in your leadership.

Thank you, Alex. I might be technically 78, but I feel 28. You cannot be here, where I am right now and not be having fun because of all the talent we have in the company. It's not like I have a whole lot to do, except cheer them on.

Well keep doing, what you're doing because it's working.

Yes.

Great. I have a number of questions. The first one related to, this is probably for Ben, quarterly cadence in 2021. Obviously, you've raised your guidance for the full year revenue adjusted EBITDA, free cash flow and EPS and January has started off very, very strong. How should we think about the quarterly cadence of revenue in 2021?

Yes, Alex I think you can certainly say that the first half of this year, our expectation is for much like the second half of 2020, higher revenue growth year-over-year, compared to where we were last year. And hopefully, as we see vaccinations continue to take hold and the coronovirus pandemic becomes less of a part of our lives, that the death rates would come to, a higher, probably a higher elevated level, then “normal” as we move in the back half of this year. Cemetery performance, we expect to be strong and continuing to build on the momentum throughout the year. And really, you have the full impact of that financial revenue, that we didn't have last year. So you see a strong year-over-year comparison in the first half on the financial revenue side, certainly compared to last year. That's how we're kind of thinking about the cadence right now. Yes, and for that, I'll turn it over to Peggy Schappaugh with some additional comments.

Now, just and to add that. Sorry, just to add to that, we've seen great improvements on our average as well. So even all in addition to what Ben has said, we've got averages working in our favor. We've got, our cremation average conversion being very strong in the fourth quarter, and really leading into January, and we're seeing that into February. So even as the volume may settle down a little bit, we have all of our funeral homes are serving families. They're actually getting families thanking them for taking the time to serve their families, where other funeral homes may -- might not be doing so or may not be having services. So we continue to see improvement in our average and that will also go up as the year goes along.

Great, thank you. That's helpful. And I was going to ask about that. So you had a spike in the death rate in December and January because of COVID. Tragic and unfortunate, but this is the impact on your financials. Has that settled down in February or halfway through February are we still dealing with this spike in deaths, particularly in places like California?

California has been really busy. We have a lot of businesses in Central California and Southern California and they've definitely been very busy. We do see that continuing into February. We may be a slight slowdown, but it's been really busy. And again, with even with some restrictions out there, they're still able to have those services. So it's, we think the first quarter, just January alone will be better, as Ben said earlier, better than Q1 of last year. So we expect that to continue.

Yes, this is Mel. We see strong momentum continuing in February, which has 28 days this year versus 29 last year, but it will be, it will probably be our second highest revenue month after January in the history of the company. And the margin, so will continue to be this ridiculous, it's hard to tell.

Got you. And then, Ben you mentioned that you're going to be a full tax payer in 2021. What rate? What's the GAAP net tax rate we ought to be using for our models?

We're starting off the year at 30%. As you saw last year, it ended up being a little higher. And that's really driven by divestiture activity, as we sell businesses that potentially have goodwill on the books, and we have to write that off as we sell these assets, that can drive the effective tax rate higher. We'll continue to update as we go through the year. Some of that's obviously really unknown, but for right now, we're going to start at 30% for the year.

So Alex, let me add a little more color to your first question. It's out there, and we're getting this from some investors and about pull forward, pushed down later performance because of COVID. We don't see that. Okay? I don't agree with that. I don't agree with the speculation and prediction that somehow our performance in the second half will be lower, our '22 will be lower. We've got all these other things going on. This company is good. Our people know they're good. And we have updates every Thursday across the country. So we get to hear what's going on business-by-business, area-by-area. And we had a Standards Council update meeting, those are 10 of our best two days ago. And I will tell you, California hasn't started to slide yet. They had a little slow, few days, but now it's back to where it was. And our people are doing unbelievable things, but there are other markets too. I mean, so it's an unusual thing. And I think I've reached out to people who probably have the best data, the best sense of what the future might bring in terms of death rates returning to normal. And I don't know that anybody actually believes that's going to be the case. The baby boomer population has been building up forever. I won't say they've been living the best lives, when they get up into the high 80s and 90s and that's evident by all the assisted living and nursing deaths. And so, you really can't say whether this will turn out to be an endemic problem with COVID, that you need booster shots, various variants of that thing and the medicine trying to keep up with it. No one knows the unknowable right now. And anybody who says they do, bet in the opposite direction, and you probably have a chance of making some money. But right now, I would say what is expected is probably an elevated death rate compared to the past, if this is not a pandemic that reaches finish. In other words, it will be around like the flu forever or for at least years. And this is not coming from me, this is coming from people who have done a lot more work on this with a lot of different modeling all over the world. And so I think it's too early for anybody who's an investor to be viewing our shares as overpriced or underpriced because of COVID. I think you have to look at what the company is and what we're going to be doing in the future because we have a lot of drivers. You get $70 million of free cash flow here and you go, Wow, let's go to work. Mr. Market doesn't think highly of it, we're a buyer, Mr. Market's a seller, we're buying. We know our company is getting better and we know that the next four years will be better than the last four years. Otherwise, we wouldn't have created this hype, this Good to Great to shareholder value creation incentive plan, which we fully expect to execute in a way that gets the higher compounded share returns. If people don't believe that, then it's a free world, you believe whatever you want. Anyway, I wanted to add that.

I appreciate that. And then I'll just finish with one question and this one is for Carlos, since I had the opportunity to speak to him on today's call. The -- Carlos your primary responsibility is to build a high performance sales team and sales systems across the cemeteries, as I recall, you have more than 30 cemeteries in 12 states. What does the sales organization look like before you got there? Are there one or two people in each location out there selling preneed cemetery? And then what changes should we expect from you? And in your prepared comments, you touched on some of this, but sales may be a little more centralized than the funeral services side, interested to hear your thoughts there?

Let me tee that up for you Alex. I had it wrong. This decentralized decision making model, I put it out in '07 for the cemeteries. We did then for the funeral homes. And my concept was, if you get the right managing partner, and then you get the right sales manager, that whole function can remain decentralized. That is wrong and I proved it over and over. But I never could find anybody else who knew how to get it right, until I met Carlos. So I knew that we had an over reliance on a couple of big cemeteries in California Rolling Hills and Los Gatos, Northern California, when they've got a cold my entire cemetery portfolio performance, got a really bad flu. And it didn't look like they were going to get over it anytime soon. Carlos, his first job was to do diagnostics. What have we been doing wrong that you now can get right? So Carlos, I teed it up for you?

Thank you, Mel and thank you Alex for the question. So when it came aboard, so the centralized model, the local decision is made upon the managing partner, right. And so what happens is that the civility between sales teams, local sales teams, amongst other peers within the company is not really there, the competition is just within 3 to 5, 10 counselors in the cemetery, rather than higher competition. Also the previous compensation plan in some cases, would not incentivize higher performance or would not have, an expectation to meet specific targets for specific positions. Some of that is that we're testing right now, and also changing, in some other areas, and that will create higher expectations with higher rewards. That's one of the comments that I made regarding the creation of performance based incentives and rewards. But also, training has been decentralized at Carriage since its creation. And by creating a sustainable and well robust training program that includes all the different components, for instance, sales positions, like family services, in addition to advanced planning, positions that are most than anything generating leads outside the cemetery will create a significant impact, which by the way, there was only one formal team of AP counselors of Carriage when it came on board. With a few exceptions with an AP counselor reporting to our family service manager here, and there are a couple. And so part of the plan is creating, 12 to 14 AB teams in the top 14 cemeteries, where we can now double up our sales force through the means of outside sales. The communication system, CRM, all of that is providing an additional platform for, sales, learning, sales, progression, and of course all success. I hope that some of the answers that you were looking for.

Yes, no, that's great. Carlos. Thank you. And Carlos, you come from Service Corps, but what was your role there? And then the people that you've recruited since, where did they come from, are they from in the industry or people you've worked with in the past?

Yes, so I spent there almost 11 years with SCI started, leading sales for one of the divisions that SCI, which about the size of a Carriage, leading sales from the south of United States and then moving to operations as a Managing Director for the same division leading, now operations. And so, through that time, of course, I met a lot of people develop a lot of good relationships and work with some very incredible people that wanted to continue to work with us. One of those [indiscernible] who was not at SCI at the time that he was brought up, he went from SCI to another funeral, cemetery consolidator and he came on board from that company, and then Shane Pudenz who was in fact working for SCI when he came on board.

So Alex, if you want to ever be inspired by someone's life story, spend some one-on-one time with Carlos.

I look forward to that. That sounds great. That sounds great and thank you all. I appreciate it and I'll get back in the queue.

Thank you. Our next question comes from the line of Dan Bellehsen from Columbia Threaded Needle. Your line is open.

Hi, guys, first I hope everyone is healthy and doing well. I have two questions and perhaps I may be joined at the hip here. The first one I understand maybe somewhat harder to answer at times, given the highly decentralized nature of the portfolio. But if you guys had to boil it down, and perhaps Carlos, maybe this question is for you, what are the one or two most impactful common threads that have changed from a customer value proposition that you're now offering customers that you weren't before? And then now, I know how much you love Munger, my favorite Mungerism is show me the incentives, and I'll show you the outcome. What do you think are the most impactful changes in the incentive structure that's driven the operating team in such a different way? And how does that extend beyond the top managing partners that are highly incentivized in very tangible cash payouts?

Yes, I mean Dan, thank you. I mean, I can't thank you enough for those two questions. There is a section here. I'll start with the incentives first, but they are linked the answer. The answers are linked. I'll just start with, when we get shocked the last two weeks of March. And it continued into the first two weeks of April. We had to adapt quickly. And one of the things about Carriages is that we were very flat. We don't have layers of management; there really are no layers of management in Carriage. That's why we call our, we call them the managing partners. They're like the owners of each business and that's one of the, if you go to the fifth bullet point back on the observations. Got to a fifth bullet point we talked about that and I'll just read it to you, because it goes to the question you must ask. The fifth bullet point is, I’ll get there. Our high performance culture framework is more cost effective organizationally. As the corporate organizational overhead does not ease up, a substantial amount of the incremental, financial performance of our field businesses, especially as we leverage our consolidation platform, with growth highly selective acquisitions, enabling more of the value creation to be shared with both those who create it locally and with public shareholders. Now in the prior section, Good to Great to five-year shareholder value creation incentive plan, there are four paragraphs in the middle of that section that go directly to your question about incentives and I agree with Charlie. In order to have our organizational structure, the more effective and efficient to create more EBITDA per dollar of revenue, to create more free cash flow per dollar of revenue we eliminated many layers and unnecessary processes and stuff, we wrung out what I call all the bureaucratic stupidity, perks and privileges and cost. And we made the most important jobs in the company. Those are the managing partners in charge of every business. And that's where the management occurs and it's a pretty simple concept. If you buy a good franchise at a fair price, this is another Charlie Mungerism and then that good business becomes better by joining a company like Carriage that provides all the support so that the people in the business can focus only on what makes the business grow and compete better than anybody else in the market. And this comes to your first question. I've had many people tell me, you should do best practices and push it down what you learned push it down. We tried that many times it doesn't work. The best practices are bubbling up and we make those available now on technology tools. But when the Coronavirus mandates hit, our people went after getting over a shock and knowing that our support teams were there in their [indiscernible], and believe me, it was battlefield conditions. And it still is and especially in California. And we've had so many of our people tell us, including the Standards Council two days ago, that without all the support, and the people in the [indiscernible] with them day and night, 24/7 they could not have innovated. They came up with ideas and you could put a brain trust together and you can't come up with ideas like our people came up with, I don't know where they come up with all these ideas. All I know is, you're talking about entrepreneurs and competitors and they want to win, when their competitors are in shock, turning down business saying they won't do any embalming services, or this or that most of it is, we can't do this, we can't do that. And our people are, we can do this and we can do that. Because what you want to do, may have been your best idea of what was best, but this is what we can do. And in almost every case, our people came up with better ideas than the original idea the family would have had in the first place. And then the families have such incredible appreciation and respect. The word of mouth from that is priceless in the community. I mean, we've had Christmases outside, in July, everything decorated, families driving by in their cars. We've had, I don't know what all, I can't even remember them all. I don't -- you know, what are these days and I'm looking at Peggy now, and Ben we should make access to some of our websites where our people put these ideas on there. So I mean, I don't have a problem with it, but competitors stealing these ideas, but I don't think they're good enough to do it. But this would, it's hard for an investor like Dan or anyone else to imagine just how this happens and it's kind of magical. We're shaking our heads here to Dan, how they come up, we hear this every Thursday, we get these stories. And it makes us honored and proud to have a company where people are empowered to do things, just do it, if it seems right to you and if it's in line with our guiding principle, do it. It's the right thing to do, based on the power of people through individual initiative and teamwork. When you turn them loose, and you have the right people, they come up with ideas that win hearts and minds locally and this is what has happened. And the incentives, I really tried to lay it out and put a little more meat on the bone and I had the right to section. But we had had more high performers. Now what you didn't see and what I haven't made public was the meat of my 2020 theme letter that went out on February 18, 2020, just before COVID-19. 2019 might have looked like a big turnaround here. That's not how we viewed it. And so I wrote this theme letter. I didn't make it public. I just showed you the last paragraph in this release, but the theme letter was about a tale of two companies, a tale of high performance Carriage in 2019 and a tale of low performance Carriage in 2019. Using the analogy of a Tale of Two Cities by Charles Dickens, most popular book ever written a lot of people say during the period 1775 and 1792. And it was about the difference between living in London at the height of the British Empire, primarily because of, lots of colonial possessions that were very productive versus living in Paris, which was beginning to go into a revolutionary period, the reign of terror. And so I made that analogy and it was tough. I outlined all the businesses that had low performance, but actually declining revenue, compounded and low margins. And we changed some things to incentivize people to get in the margin range and to get their revenue positive, or else. You know, when you have an or else, that's pretty brutal. That's also an incentive. Failure is often a hobby motivating thing or not wanting to fail or are not wanting to be sold. And so it just happened to be very timely, that we did all this before COVID shows up. And you can ask Peggy, if you want to follow up question on this, this is one of the better pairs of questions we ever got and I just can't thank you enough, because you're right. Our people are highly incentivized both to be successful, and not to fail. Not to fail. We have league tables every month. If you're going 50%, you're failing. They know what they have to do, and they've got a lot of support doing it. You don't want to fail in this company, because you're being subsidized by a winner. And it's a very Darwinian thing. That's why I liked the book, Seeking Wisdom, From Darwin to Munger, From Darwin to Munger natural selection. Jason knows how to naturally select winners. You put the winners in charge of a business, you get higher value per event, higher revenue per event, higher customer satisfaction, you grow your market share. And I'm sorry, I got on my soap box here because of the quality of your question and I hope that you get an answer in there. But we share the profit with no limit and there's some big payments that went out. I mean, we had to load up the fourth quarter after December with incentive copper coils or we wouldn’t have an EBITDA margin, I don't know 35% like we did in January, and we'll have in February, we're loading it up. These numbers are after big accruals for paying our people and believe me once they get the payments for '20 they don't want to get anything less than that. Ask Peggy, she's already telling us all. Man, they're hooked now. So anyway, it's an exciting thing Dan and we appreciate very much all your support, and all the skin in the game that you have in our company, we will not let you down.

Terrific, thanks, Mel. As I said to Ben recently, I think I picked the right party and it certainly turned into a really fun one. I just arrived a little too early. So patience was important here, but happy to be along for the ride and hope you guys continue to do well.

At any day you want to compare me to a Japanese CEO, just picture Chihiro Kanagawa. And I'll be glad to be, I’m his student by the way, he was my mentor, look him up, Chihiro Kanagawa, you will be blown away. Unfortunately, I can't make a reunion every year, he got to an age still the Executive Chair, not Chairman of his company, Shin-Etsu Chemical and we had a reunion every year lunch until last year, but I hope he's still around. I hope to do it again. He's a wonderful man and I learned a lot from him.

Thank you. And our next question comes from the line of Chris McGinnis from Sidoti and company. Your line is open.

Hi good morning. Thanks for taking my questions and nice quarter. Thanks for all the detail as always and again, congrats on putting up the numbers on top here. Carlos, I just had one kind of question. I guess just starting over in some sector at courage, how did you approach this business coming in differently than the way it was operated at your prior employer and maybe setting that up for success as you go forward? Thanks.

Thank you very much, Chris for your question. So it's, there's a few steps to that, right. And everything starts with, understanding what the opportunity is, and really recognizing the possibility for each one of the properties. And, of course, within a very restrictive environment, with COVID-19 traveling around to every single property has been quite a challenging task, even though I have been able to visit some of those properties. And the second piece to that is creating a plan that takes care or results each one of those possibilities and blue sky opportunities, as I called them in my previous comment. And then the third piece is also making sure that we have the support, right. So having senior leadership involved in building those relationships and having full understanding over the plan entails and the level of commitment that it takes and the collaboration, partnership and support needed to make that happen. And then the final step to that would be, building those local, managing partners of manager really, you know, self customers relationships to make things work. It is a complete change of mindset from the centralized to standardized approach, and it is new, it is change and change is sometimes difficult. But I got to tell you, in the cases that I've been able to visit the cemeteries and meet the team and be involved with the managing partners I have received nothing but support and welcome arms to the change and adopting what we're trying to achieve. So a lot of phenomenal things are coming up our way. This is really just the beginning and I feel very strong about the future for preneed cemetery sales, out of Carriage services.

I appreciate that. Thank you very much and good luck for Q1.

Thanks, Chris.

Thank you. And at this time, I would now like to turn the call over back to Mr. Mel Payne for the closing remarks.

Thank you very much. It's been a great call after challenging and wonderful year for our company, in terms of what our people were able to achieve in the face of adversity that we've never seen before. And because of the continuing epidemic, and the peak period of deaths that we're experiencing in our portfolio, it causes you as a human being to be reflective of what really matters. And that's the last part of this release, I put that in there for a reason. Because we really do in dealing with death, we also deal with life, and how to live a life that matters. And I've reflected on that and went back to my, to the end of my '17 shareholder letter. And I do want to end this call with a quote from that end. Sorry, as follows. As I was finishing my 2016 shareholder letter, I tried to remember how Good to Great ended the book, but drew a blank. So I retrieved my well worn generously highlighted and tabbed copy from my office and turned to the last paragraph on page 210 which reads as follows. When all of these pieces come together, not only does your work move toward greatness, but so does your life. And it is very difficult to have a meaningful life without meaningful work. Perhaps then you might gain that rare tranquility that comes from knowing that you've had a hand in creating something of intrinsic excellence that makes a contribution. Indeed, you might even gain the deepest of all satisfactions, knowing that your short time here on this earth has been well spent, and that it mattered. And that I can tell you, on March 5, 2018 I sent our annual theme letter to all employees and we'll share with you the ending which also comes, becomes the end of the shareholder letter. Recently, a new friend of the Carriage family sent me the poem, What Will Matter? by Michael Josephson and I will share a few thoughts which are perfectly aligned with how we think about our Good to Great journey and which may provide you with inspiration as well. This is the quote from the poem that was sent to me and I'll tell you who that was in a minute. What will matter is not what you brought, but what you built. Not what you got, but what you gain. What will matter is not your success but your significance. Living a life that matters doesn't happen by accident. It's not a matter of circumstance but of choice. Choose to live a life that matters. So this guy wrote this in '03, Jim Collins wrote Greatness is a Choice, Conscious choice. Now, this poem was sent to me and I'm going to mention the name for the first time by Prem Watsa. Prem Watsa is the founder of Fairfax Financial out of Toronto. He is known as the Warren Buffett of Canada. And he sent someone to meet me, I met him in New York. I had dinner with him, I'm wondering, is this real or why are they here? And then I found out quickly that it was real and so I went to Toronto with my wife. I met Prem Watsa and his team. They wanted to invest in Carriage back when we had an issue with our convertible notes he wanted to be the solution. He really liked what the company had become, what it stood for. And yet, Prem is a very clever guy like Warren Buffett. He wanted to do a subordinated convertible piece with no downside risk. I said Prem, I appreciate you wanting to do that, but I've got a better idea. Let's do a vanilla chocolate ballad, so you just buy a bunch of the common. So we agreed to be friends and we still are. And that's a real compliment to this company. Because this goes back a couple or three years ago, before we had our slide, and now we've made this comeback. And this comeback is going to have legs. There is no way that what happened in '18 will happen again with this team. They all know it. We all know it. Our team is talented, they're inspired. They're motivated with the right incentives. We're all aligned. And I can only imagine what this company will look like in five years. But I can't imagine what the share price will look like. I hope you are there to enjoy it with Dan. So thank you and we look forward to reporting our progress in the future.

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