Good day and thank you for standing by. Welcome to the Carriage Services Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steven Metzger, President. Please go ahead.

Good morning, everyone, and thank you for joining us to discuss our second quarter results. In addition to myself, on the call this morning from management are Mel Payne, Executive Chairman of the Board of Directors; Carlos Quezada, Chief Executive Officer and Vice Chairman of the Board of Directors; and Kian Granmayeh, Executive Vice President and Chief Financial Officer. On the Carriage Services website, you can find our earnings press release, which was issued yesterday after the market closed. Our press release is intended to supplement our remarks this morning and include supplemental financial information, including the reconciliation of differences between GAAP and non-GAAP financial measures. Today's call will begin with formal remarks from Mel, Carlos, Kian, and me and will be followed by a question-and-answer period. Before we begin, I'd like to remind everyone that during this call, we'll make some forward-looking statements, including comments about our business and plans. Forward-looking statements inherently involve risks and uncertainties and only reflect our views of today. These risks and uncertainties include, but are not limited to, factors identified in our earnings release as well as in our SEC filings, all of which can be found on our website. Thank you all for joining us this morning. And now I'd like to turn the call over to Mel.

Good morning, everyone. I'm excited to be with you this morning. As we kick off our first earnings call since the announcement of our succession plan on June 22. As most of you know, we've been working on this CEO succession plan for more than two years, and the thoughtful investment of time in preparation is paying off, which is evidenced by the seamless transition that has occurred since our announcement. I have also been hard at work on my continued rehabilitation following my stroke and continue to be encouraged by my progress. I recently graduated at the top of my class from an intense 12-week program and have become more motivated, energized, and passionate about what we are doing and where we're going than ever before. While I meet with our strategic vision and Principal Group leadership team regularly, I look forward to spending even more time with them and focusing on the job I enjoy the most, which is serving as a mentor to Carlos, Steve, and Kian. As a cofounder and largest shareholder of Carriage, I'm pleased to report that Carlos and Steve continue to exceed my exceedingly high expectations as they focus on their new roles. Together with Kian, this executive leadership dream team has been working closely together to lead the continued evolution and maturation of Carriage, which three of them will talk more about in detail this morning. The alignment of this team, together with their talent, has never been stronger, and the execution of our clearly defined strategic vision has never been more compelling. We appreciate your interest in Carriage and for taking the time to listen this morning. I will now turn this call over to Carlos for more color on a really good quarter of performance.

Thank you, Mel, and good morning, everyone. Thank you for joining. Before I start with our report, I'd like to thank Mel and the Board of Directors, our executive team, and everyone at Carriage for their support as I take on the new CEO role. This has been a thoughtful and well-planned process for over two years, where Mel, through countless hours of mentoring and coaching, has prepared me to lead Carriage and continue the legacy he created for years to come. I am grateful for this opportunity and committed to continuing our good to great journey and pursuing our mission and vision of being the best every day. So thank you. Now moving to our second quarter high performance. For today's call, I will report our financial performance with some operational color. Steve will provide an update on the composition of our new Board of Directors. He will share the integration process of our most recent acquisitions and other M&A activities, and Kian will provide detailed financial information. Now on to the results. We are very excited to share that our financial performance in the second quarter has exceeded our expectations. As previously communicated, we have diligently focused on delivering high performance for execution excellence. Here are the consolidated financial results for the second quarter. Total revenue reached $97.7 million, an impressive increase of $7 million or 7.8% compared to last year. These outstanding results were primarily driven by the exceptional work of our hard performance preneed cemetery sales teams and the recent acquisition in Beckersvale, California. I will give more color on this point later on this call. Total field EBITDA was $40.8 million, showing an increase of $2.1 million or 5.6% and field EBITDA margin of 41.7%, experiencing a slight decrease of $879,000 or 90 basis points. This decrease is primarily attributed to higher costs in salary and benefits and general and administration. The incremental expenses in these two areas totaled $2.3 million during the second quarter. However, thanks to the dedicated efforts of our managing partners at each business, we managed to offset $1.4 million through other cost savings opportunities. Overhead expenses amounted to $12.1 million or 12.4% of total revenue, reflecting a significant reduction of $1.4 million compared to the same quarter last year and under our previously communicated goal of reaching 13% in overhead cost by the end of 2024. GAAP income in the second quarter was $8.3 million, indicating a decrease of $2.6 million or 24% compared to last year. This decline can be attributed to a notable increase of $3.4 million or 56.9% in interest expense over what we paid the previous year, resulting in GAAP diluted earnings per share of $0.53. The decrease in interest expense approximately equates to $0.22 of GAAP diluted earnings per share, and as we continue executing every item of our high-performance credit profile restoration plan, we will reduce our interest expense. For our adjusted numbers, adjusted consolidated EBITDA for the second quarter was $28.7 million, showing an impressive increase of $3.4 million or 13.3%, adjusted consolidated EBITDA margin was 29.4%, an increase of 150 basis points, and adjusted diluted earnings per share of $0.53 outperforming consensus. We are immensely proud of these results as they reflect our efforts and progress in executing our strategic plan to consistently and sustainably enhance our financial performance over time. These efforts have allowed us to make up for most of the decrease we experienced in the first quarter of this year due to the record high first quarter of 2022 at the peak of COVID-19. Now let's move to our funeral portfolio. Funeral Home total revenue reached $60.8 million, an increase of $2.7 million or 4.6%. Our newest acquisitions primarily drove this growth, with comparable revenues decreasing by only $308,000 or 0.6%. Total funeral field EBITDA remained steady at $21.9 million compared to the previous year with a slight decrease of only $108,000 or 0.5%. Total funeral field EBITDA margin was 36%, showing a reduction of 190 basis points from last year. However, thanks to the dedicated efforts of our managing partners in the field and at the Houston Support Center, the inflationary cost margin decrease has been significantly curbed. Their work in revenue growth, pricing strategy, and efficient management of their controllable cost has contributed to this financial performance, and we extend our gratitude for the determination and commitment to our Being the Best mission and vision. Now switching to our cemetery portfolio. We are thrilled to report that our total cemetery revenue hit an all-time high, reaching $29.1 million in the second quarter, reflecting an increase of $4 million or 16.1%. Moreover, total cemetery field EBITDA saw significant growth reaching $12.9 million, a $1.8 million growth or 16.2% compared to the same quarter last year. Total cemetery field EBITDA margin remained very strong at 44.4%, maintaining the exact performance level achieved in the previous year. This record-high revenue and EBITDA margin results were mainly due to the outstanding performance of our preneed cemetery teams. Establishing our preneed sales organization over the last three years has been a true game changer, coupled with the strategic acquisitions of premier cemetery since 2019 and our existing cemetery portfolio, in addition to the impact of the execution of our premier cemetery strategy. Our customer relationship system and lead generation marketing provide us with multiple growth opportunities, and that is why we're confident that we can continue maximizing these opportunities as we execute and create additional high performance in the years ahead. Regarding our prearranged funeral sales and strategic national partnership, we are delighted to announce that the integration strategy between Pricoa, the National Guardian Life Insurance Company, and Encourage has been officially launched after two months of planning. This strategic move will revolutionize how we add value to families by offering the arrangement options for their funerals, securing future market share for each of our businesses and generating additional recurring revenue like we never had before. We will integrate our funeral home portfolio into the new program in a phased approach, and we anticipate that preneed funeral sales will experience substantial growth in the range of 40% to 60% within a year of integration. This exciting venture holds incredible potential for Carriage, our partners, and the communities we serve, while generating added value for our shareholders. We want to express our heartfelt gratitude to our entire team for their unwavering dedication and hard work without whom none of this would be possible. Witnessing the tangible results of our strategic plan during the second quarter filled us with much excitement, and we are thrilled about the prospects for the future as we firmly believe that for Carriage, the best is yet to come. Thank you, and I will now pass it over to Steve.

Thank you, Carlos. As most of you are probably aware, the past couple of months have seen us welcome three new directors to our Board, fulfilling the commitment we made earlier this year to add new talent and diversity to our Board of Directors. We began working with a national search firm in the first quarter, and our Board management team has spent the past several months meeting with a number of impressive candidates. From that group, we were able to identify three individuals who bring diverse experience and thought that will help drive our focus on continuous growth and improvement throughout Carriage. The newest member of our Board, Julie Sanders, currently serves as Senior Vice President and Chief Audit Executive for Dell Technologies, one of the world's leading technology companies where she's held a variety of leadership positions over the past 20 years. Julie has served as a CFO for two other companies and has extensive experience with everything from M&A to financial planning and analysis. She also serves on Dell's ESG and Disclosure Committee and will be a tremendous resource as we continue to identify opportunities to enhance our focus on corporate responsibility. We've also recently welcomed Somer Webb to the Board. Somer currently serves as the Chief Financial Officer for a publicly traded direct-to-consumer platform company focused on outdoor and lifestyle brands. Somer has worked for some of the top consumer-focused companies in the world, including Amazon and Southwest Airlines, and she brings valuable experience to Carriage, particularly as it relates to growing companies through acquisitions. Finally, Chad Ferguson joined our Board in late June. After receiving his PhD in mathematics from Duke University, Chad spent 10 years with KKR and has spent the last 10 years as a senior portfolio manager for an investment firm with approximately $15 billion under management. Chad's experience identifying and analyzing capital allocation strategies for various companies, coupled with his deep valuation expertise and knowledge of the markets, will serve Carriage and our shareholders well as we execute on the 10-year growth-focused vision laid out in this year's shareholder letter. Since the beginning of this year, there's been an immense amount of time and thoughtful effort dedicated to identifying and recruiting new leadership to join our Board of Directors. We're proud of that focus and confident that the experience and talent that Julie, Somer, and Chad bring to our Board will be of great value to our shareholders, and we look forward to their contributions in helping drive Carriage forward in the years to come. As it relates to our focus on growth, we continue to be encouraged by the opportunities presented by our three most recent acquisitions. In particular, since we put a top sales team in place to support our Charlotte business, the production from the cemetery segment of that business continues to highlight why we were initially so excited to partner with Heritage in Forest Lawn East. Similarly, our most recent acquisition in Bakersfield, our largest acquisition by revenue in the history of Carriage, is only entering month five of our integration, and we're excited about the potential that will be realized in the months and years ahead as we continue to optimize the strong foundation of this great business. As we dedicate our time and resources to supporting these new additions to the Carriage portfolio, we also continue to build relationships with owners of other premier businesses throughout the country. In fact, this past quarter, we had several visits and conversations with owners of businesses that we believe will be great future partners for Carriage. These owners are aware that our current focus is integration of our newest acquisitions and paying down our debt, and many of them are willing to wait, given their belief that Carriage is the right choice for their business. We look forward to continuing these conversations and building relationships as we learn more about their succession plans and timelines. Finally, as we announced on June 29, our Board has initiated a process to explore potential strategic alternatives, possibly including a merger, sale, or other potential strategic or financial transaction to maximize shareholder value. As we noted at the time, there can be no assurance that this process will result in a transaction. While the Board continues this review process with the support of outside advisers, we don't have further updates at this time and will have no further comment on the topic. We will, however, provide an update when we have more news to share. With that, I'll pass it over to Kian to provide more color on our second-quarter performance.

Thank you, Steve. In the second quarter of 2023 under generally accepted accounting principles, Carriage reported total revenue of $97.7 million and net income of $8.3 million or $0.53 per diluted share. This compares to total revenue of $90.6 million and net income of $10.9 million or $0.69 per diluted share in the same period in 2022. Now looking at our adjusted financials, which are reconciled in the appendix tables of our press release, this quarter we reported adjusted consolidated EBITDA of $28.7 million, adjusted consolidated EBITDA margin of 29.4%, and adjusted free cash flow of $3.8 million. This compares to adjusted consolidated EBITDA of $25.3 million, adjusted consolidated EBITDA margin of 27.9%, and adjusted free cash flow of $12 million in the second quarter of 2022. We are very pleased with our financial results and operational performance with considerable growth in both adjusted consolidated EBITDA and margin this quarter as compared to the same quarter last year. Now that we are able to compare and examine operational performance to prior periods that are minimally affected by COVID, this further highlights all the improvement, efficiencies, and growth related to our operational decisions from the Houston Support Center down to the field level that translate into our financial results. This is a perfect example of the resiliency of our unique business model and strategy and how we are able to successfully navigate the near-term choppy waters of a post-COVID world. Now turning to this quarter's income statement, I will highlight some of the expenses down to net income. First, I'll start off by circling back to Carlos' comment on total overhead, which excludes stock-based compensation and other minor overhead costs. On the income statement, the combination of total G&A and other, along with regional and unallocated funeral and cemetery costs decreased by $800,000, primarily related to our continued effort and discipline to meet our 2024 overhead target. Second, as Carlos mentioned, interest expense increased nearly $3.4 million, mainly driven by the average interest rate for our credit facility, increasing from 2.9% in the second quarter of 2022 to 8.6% this quarter. Lastly, income tax expense decreased $800,000 in the second quarter as a result of a lower taxable income applied to a similar tax rate for the quarter. Turning to the cash flow statement, cash flow from operations this quarter decreased approximately $1 million to $13.3 million as compared to the same quarter last year despite net income decreasing nearly $2.6 million during the same period. When expanding the comparison period to the first six months of the year, cash flow from operations and free cash flow have increased $9 million and $11 million, respectively. As you can see, cash flow continues to remain strong, and we continue to strictly adhere to our capital allocation plan as outlined in the high-performance credit profile restoration plan back in December. Similarly, we continue to deleverage methodically from a peak leverage ratio in the first quarter of this year after closing on the Green Lon acquisition. Using our bank covenant compliance ratio as defined by our credit agreement, we ended the second quarter with 5.37x leverage. We expect the leverage ratio to steadily decrease throughout the year. Lastly, turning to our annual guidance, we are pleased with how we are tracking operationally in the first half of the year relative to our annual guidance. Nonetheless, we would like to take a prudent approach to our guidance and gain more visibility into the seasonality of our business in a post-COVID world before revising our guidance ranges. As a result, we are reaffirming 2023 guidance of $375 million to $385 million in total revenue, adjusted consolidated EBITDA of $110 million to $115 million, adjusted diluted earnings per share of $2.25 to $2.40, and adjusted free cash flow of $50 million to $60 million. Next quarter, we will look to tighten and/or update our guidance ranges for the year.

Thank you. We will now conduct a question-and-answer session. Our first question comes from the line of Alex Paris at Barrington Research. Your line is open.

Thank you and congratulations on the better-than-expected second quarter results, everyone. I have a few follow-up questions. First off, I'd like to start with the impact of inflation, both on your P&L and on consumer behavior. Your Service Corp. announced earnings earlier this week, and this was a big topic on their call. So, I thought I'd ask you some of the same questions. In the second quarter, your field EBITDA was better than expected, driven by cemetery. Your overhead expense was less than expectations. But within funeral, while revenues were up 4.6%, the field EBITDA was down 0.5%, suggesting some margin compression. So my first question is based on your decentralized structure, how do your funeral managing partners evaluate price increases in the context of the funeral standards incentive comp structure?

Alex, this is Carlos. Let me address a few key points first. When you compare margin compression from the first quarter to the second quarter, there is a notable difference due to our focus on pricing and cost-saving strategies at the business level. Our managing partners are empowered to set their pricing based on competition. As a decentralized organization, we believe that decision-making on crucial matters should stay in the field. Our competitors have an advantage over us since we are far removed from many of them, and they have a better understanding of what families are experiencing. We trust them with pricing decisions. We are actively identifying opportunities to drive the right decisions based on expected financial performance for each business. We feel optimistic about our efforts to catch up with inflationary costs. Although we haven't fully achieved this in our EBITDA, we have made significant progress compared to last quarter. As we move forward, we anticipate that margin compression will decrease further, as we are not facing continuous increases each quarter. The changes have been steady, with only minor fluctuations. Therefore, we are very hopeful that we can keep this situation largely under control.

That's helpful. So while there's compression year-over-year, there's improvement sequentially from the first quarter during this period in which you're trying to pass along those costs. Great. Second and related question is Service Corp noted on their last conference call that, within their cemetery business, they noted more price sensitivity with their lower-tier property sales, less so on their mid- and premium-level property sales. Did you see similar behavior in your cemetery business?

Contrary to that, Alex, we had a phenomenal quarter for preneed cemetery sales. The entire team of directors and every sales manager in the business did an exceedingly well job. We did 116% over prior year of preneed property alone and pretty much the same thing, 116% on preneed merchandise and services. This is the result of two companies at different stages as it relates to preneed properties. Before let's say three years ago, Carriage didn't really have the structure to sustain growth on the preneed side through a very structured approach on compensation, lead generation, CRM, and things of that nature. So, we are very young, really in the early stages of cemetery growth over time—almost at a toddler stage. One of the executives pointed out to me today. I believe SCI has done an incredible job for many, many years, and so they are a more mature organization. Because of that, given Carriage's past history of not having that type of organization, we have far more opportunity. As a result, we have not found any significant pushback as it relates to lower-income families and discretionary spending.

That's good to hear. Just to be clear though, you had a 116% increase in preneed property sales in the quarter.

Correct. Now remember that this includes unrecognized revenue, right? So just pure preneed sales?

So Alex, this is Mel. Good to be back and talking to you again. I've been so impressed at what Carlos has built over the last three years. When he got promoted, he turned over the organization to Shane Pudenz. I've been equally impressed at what Shane has done and his growth in development as a senior leader. We had our first Board meeting with all three new members yesterday, and I was blown away by Shane and his presentation of a game plan to keep the momentum going in preneed property sales. He didn’t mention the consumer being an obstacle in the third and fourth quarter of this year. So I'm assuming the momentum that he has going, which continued into July, will also carry into the third quarter and the fourth quarter and next year and years after that. I agree with Carlos. I never could get a preneed organization to be a high-performance culture organization. Carlos knew how to do that. It took time and effort and a lot of sophistication, and now he's guided in place. We have strategic plans in all of our largest properties. We never had those before. Now we can allocate precious capital to a very high return on investment in these developments. Now that we have the organization to sell it at very high margins, that will be sustainable into the future. I'm excited about it. We never had this engine to push. We were always too reliant on death rates. Now we're not.

Great. Super helpful. And then just a point of clarification, I think I know the answer to this, but pre-property sales were up 116%. But in the press release, you talked about a 3.4% decrease in the number of preneed interment rights sold. Am I thinking about apples and oranges here? Could you explain the difference in terminology there?

Absolutely, I apologize for that. So when you think about it, there are a few components on the cemetery side, preneed specifically. One could be the number of interments, which is just the actual number of burials that will take place over time. But that doesn't correlate directly to the revenue per one of those increments. The other piece is unrecognized revenue. That's why you'll see a difference between the 116% on preneed property and the revenue we had recognized from those preneed profits. Even though we have a phenomenal preneed recognition rate, you still have timing differences between the 16%—almost 17% and the 16.2% that you can see on total cemetery field EBITDA.

And is that because we don't get the down payment enough?

No. That could be because, well, yes, the down payment is one and maybe the development has not been delivered and we need to wait for the delivery to take place in order to be able to recognize that revenue.

Got you. So it’s a question of timing. Yes, it does. And then I guess that's it for me, I'll go back into the queue. Thank you very much and again, congrats on the quarter.

One moment for our next question. Our next question comes from John Franzreb of Sidoti & Company. John, your line is open.

I guess I would like to start with the guidance expectations. I notice you still have a cautionary note that you revised the outlook for the next quarter, but I'm wondering what's the status of the December 2022 outlook for 2024? Any thoughts about that midterm guidance outlook and maybe an update there?

John, yes, this is Kian speaking. Focusing on 2023. The revision that we kind of signaled is more just tightening things up for 2024. When we look at—I’m sorry, for 2023. Now when we look at 2024, we kind of want to see how things play out, but nothing has really changed in terms of our guidance and expectations that we've laid out as a result of the December 2022 forecast we had and the goals we put out there. So, we feel comfortable with that guidance as of now. But as we get more visibility into next year, we will update the market appropriately.

John, this is Mel. I know Carlos is going to come in too. We did that, and it's always dangerous when you try to predict what will happen two years out. So, we did it at a very high level, and now what we're seeing so far is that we're on track to do that. But we don't want to change anything right now. We'd rather see a little more progress. Post-COVID, we are actually seeing pretty good volumes in our funeral business, better than we actually thought we would and even more success in our preneed property and cemetery portfolio. So if things keep tracking the way they are and we get more updates, we'll have a tighter range for you. That's what Kian is alluding to, but it will be based on more data and more precise success, I think, in where we wind up at the end of '24. So, our main thing here now is not to disappoint. We would rather under-promise and over-deliver rather than overpromise and under-deliver, which is something we did in the past, in my opinion.

I’ll add a little more color too. When you think about seasonality, this has always been a seasonal business. We talked about this in the past, Q1 being typically the number one quarter for the year, then Q4 being the second quarter, and the second quarter being the third. I apologize for that. The third quarter will be the last one. So, going into the third quarter. In last year's third quarter, we experienced something interesting coming off COVID-19. We had a record-breaking phenomenal Q1, a great Q2, but then in September, we suddenly dropped about 20%, mainly due to COVID-19, and that's not showing anymore. We believe there should be some seasonality in 2023. However, we're highly encouraged, as the normalization is sitting way above the pre-COVID '19 levels. Between 2019 and 2020, the cremation rate dropped by 3% in just one year, mainly due to restrictions and families not being able to gather. Then as we move into 2021 and 2022, it went to around 1.2% to 1.3%. What we've seen on a quarterly basis between 2022 and 2023 in the second quarter is a variation of only 0.9%. It seems like even the cremation mix is going back to what it was, which was about a rate of 1% every year, and that's highly encouraging as we continue to move forward. We want to be thoughtful, prudent, and gain more insight into the next couple of months, and then we should be able to provide more guidance, especially coming off the third quarter in a row outperforming.

Fair enough. And just thinking—I want to know about the properties, whether you're seeing any meaningful regional differences in pricing or the willingness to accept pricing.

Yes, ma'am, we can hear you now. Thank you very much—sorry for the technical difficulties, folks.

Is your—when you say meaningful, do you mean like lower prices? Or are we able to increase prices?

The ability to push back and/or accept. I'm just curious if there's any changes.

I'll give you some granularity here. So, for example, the difference between our funeral average per contract between the second quarter of 2022 and this quarter of 2023 is just $1 at $54.90 for this quarter. The burial contract is $68 above what it was last year and the cremation contract is $71 above what it was last year. From an even preneed funeral sales average is $143 above what it was last year. We do feel pretty encouraged that our pricing strategy is working and that we can sustainably increase revenue as we continue to work on that.

Okay. Fair enough. And I was curious that last quarter, you talked about hiring additional sales personnel. Is that process complete? Do you have all the people you need?

It is in terms of upgrading. We are looking to add teams for advanced planning in specific properties that will just add more to our preneed strategy. As we continue to recruit and place those teams, as those teams recruit consumers and get them to a sale, it will aggregate to our performance that we have today. It's not even calculated into our outlook just yet.

Okay. And one last question, and I'll let other people because I'm sure people have been waiting. On the relationship with National Guardian, I think you said you expect 40% to 60% growth in preneed funeral revenue a year after it's fully implemented. What gives you confidence in that kind of a number?

Things—just some color on that. We did around $80 million in prearranged funeral production in general terms. We have a lot of relationships right now, over 40, and that's why we have this new agreement to move all those 40 over time. It's going to be a phased approach over the next year. By managing this strategy, we expect to significantly grow the $80 million. The 40% to 60% that I'm referring to is in reference to that $80 million. I believe we should be somewhere around $120 million to $145 million sometime within a full year of execution after the full rollout.

Thank you very much. One moment for our next question. Our next question comes from George Kelly of ROTH MKM. Your line is open.

So first, just to follow up on a point, Carlos, that you were just reviewing the 40% to 60% growth in the preneed funeral that you expect over the next, I think, you said 12 to 18 months. The question for you is just what is it about this relationship that's so superior to your existing relationships? And I guess, what do they bring that's so new and incremental?

Well, yes, what's different is, well, first, we never really focused on trying to grow our prearranged funeral program. By managing so many relationships with so many different commission schedules and strategies by business, you lose, number one, your leverage in terms of being able to have better commissions from a general agent perspective because you have to negotiate each one of those four different parties. We have more than 40, but it becomes very complicated. So you lose leverage. Most importantly, you don't have a national strategy. You don't have a marketing advantage that you can utilize. You don't have a CRM because you have to rely upon the strategy that each one of those partners has in their training and capacity. There are really good ones out there, but Pricoa is really the number one national provider in the United States. They have a robust marketing program and a robust CRM already in place. And by partnering with NGL, the National Guardian Life Insurance Company, they're backing us in terms of phenomenal advantages to Carriage and to every partner within this agreement. Everyone benefits. We estimate we should be doing four times the general agent commission we were doing before this agreement was signed. When you add that in addition to the acceleration of preneed sales on the funeral side, it becomes very, very accretive to our financial performance.

Okay. That's great. That's helpful. Thanks. And then second question for me. Is there—I don't know if maybe this is for Mel or Kian, not sure. But is there a target leverage number that you're— I don't know if it's 4x or maybe something between 4x, but something that you just have in the back of your head that you're working towards and you're going to prioritize debt pay down until you reach that and then you'll kind of start to consider other uses of cash. Just curious what that number is.

Yes, this is Mel. You're right. We do have a number, and we've always had a number. We just haven't lived up to it; it's 4x or less. The reason I was told early on that you don't need to know a whole lot except there's a lot of cash that comes out of the funeral business, so you can leverage it. I did that, and they were right. Then we built a bigger company. We now have too much leverage. It scares a lot of common equity holders; I understand that. When we put out our high-performance credit profile restoration plan, we mentioned that we wanted to get back to 4x or less. SCI has proven that they can operate really well at less than 4x and sometimes less than 3x while still generating a lot of cash to allocate value creation. So, when we grow up, we want to be like them. I think I can say they've done a great job at it. We want to create value for our shareholders, and I don't want anybody to lose any money on credit or equity. Getting down to a perceived safer leverage ratio will enhance the multiple of our performance metrics, and we'll shoot for that by the end of '24.

Thank you very much. At this time, I would now like to turn the conference back to Mel Payne for closing remarks.

Thank you all so much for tuning in today. This is a very special day for me. I've been back in the office for a few days after working on my stroke recovery for months and months. It’s been a very emotional time for me because I've received so many good wishes for recovery and so many prayers. I just didn't know how to thank all those people. And lo and behold, Carlos came up with a brilliant idea: he said, 'Mel, why don't you make a video out of your return and send it out to all of our people?' So I did, and A.J. and his team put magical stuff together. Thanks A.J. for all that you do. They came into my library, and we recorded a video message from me to all of our people a week or so ago. I told my wife I’ve had many people send me messages, and I haven’t known how to thank all of them; this is going to do it. Carlos handed me pages of responses to the video, and while they were answering all your good questions, I’m blown away once again. So I just wanted to share one message to give you a sense of how they all sound: 'Mel, please pass on the message about the video you sent this morning. It takes a lot of courage to get in front of a camera and be open and honest about such a situation. Your message was filled with love and encouragement. It was inspiring to say the least. Thank you. You have shown me that this company was built by a man who cares about his people and his company. This is not a company based on profit alone but a company that cares about its people and the families the people serve in every business. Your words are encouraging and motivating, and God bless you.' Here’s the deal: it always surprises me why people say our people are our greatest assets, but they don't act like that toward them. I've always acted like that to our people, and they respond. We say we're decentralized. We have these high-performance standards. The way I define the company is as a high-performance culture company that happens to be in the funeral and cemetery business. What we do in the funeral business is deliver high-value emotional personal services. And when you do that, you build financial performance, market share, and reputation in the local community and in the industry, the same thing in the cemetery. Our people do a wonderful job, and I'm grateful to be back among those I care about the most in my life. Building this company has been the highlight of my life, and I hope to keep doing this for a long time. I know a lot of people are observing us right now. I'm fine with that. Look closely, dig under the surface because it's all good. I just want to thank you all for calling in and listening today. I'm so grateful for the leadership team I have in place. You got to hear from Carlos, Steve, and Kian. This is the dream team I always wanted. It just took me a while to get them in place, and now they are, and I'm thrilled. Thank you all for tuning in, and we look forward to reporting our progress for the rest of the year.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.