Earnings Call Transcript
CARRIAGE SERVICES INC (CSV)
Earnings Call Transcript - CSV Q1 2021
Steve Metzger, Senior Vice President and General Counsel
Thank you, operator, and good morning, everyone. Today, we'll be discussing our first quarter results. Our related earnings release was made public yesterday after the market closed, and we have posted this release, including supplemental financial information, on the Investors page of our website. This audio conference is being recorded, and an archive will be made available on our website later today. In addition to myself, on the call this morning from management are Mel Payne, Chairman and Chief Executive Officer; Ben Brink, Senior Vice President and Chief Financial Officer; Shawn Phillips, Senior Vice President and Regional Partner; Peggy Schappaugh, Vice President of Operations and Acquisitions Analysis; Paul Elliott, Senior Vice President and Regional Partner; Chris Manceaux, Senior Vice President and Regional Partner; and Carlos Quezada, Senior Vice President of Sales and Marketing. Today's call will begin with formal remarks from management, followed by a question-and-answer period. Before we begin, I'd like to remind everyone that during this call, we will make some forward-looking statements. Any comments made by our management team 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 differ 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 those 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. Thank you for joining us this morning. And now, I'd like to turn the call over to Mel.
Mel Payne, Chairman and Chief Executive Officer
Thank you, Steve. This is the first time in Carriage's history that all 8 executive team members are together in a room for questions. It will be 30 years, with our anniversary on June 1, since I co-founded Carriage. If you haven't read my 2020 shareholder letter titled A Tale of High Performance Transformation, I highly recommend you do. It's lengthy but packed with valuable content and data. By the end of it, and after reading our first quarter, you should understand why I frequently mention at 78 that my children and I own 10% of the company and wish we owned more, with no other investments. If you're considering investing in our company, either in bonds or equity, you should definitely read the shareholder letter. It will help you ask more insightful questions during our next discussion, which will deepen your understanding of why this is a great investment for the next 5 to 10 years. Today, we will begin with formal remarks from Ben, followed by Shawn Phillips. As mentioned in the shareholder letter, I detailed our entire organizational structure, from the Board down to our operations, sales, and support teams. You will gain a clear understanding of how Carriage is organized. Shawn is the Regional Partner for the Central region and is also the main contact for any new candidates considering succession planning and joining Carriage. Any acquisition inquiries today will be directed first to him, and I may add further commentary later. Then, Shawn will pass it to Carlos. There is a lot of information about the momentum in our cemetery sales in the shareholder letter, especially regarding the 4 new acquisitions we made at the end of 2019. We are much more than just a funeral home and cemetery company, with almost 350 in sales over the past year. If you want to understand why I describe us as a high-performance culture company in this industry, there's plenty of material for you to explore. We look forward to discussing this with you. I will now turn it over to Ben.
Ben Brink, Senior Vice President and Chief Financial Officer
Thank you, Mel, and thank you everyone for joining us on the call today. Our first quarter operating and financial results were exceptional and show that our teams across Carriage are propelling the high-performance flywheel in line with our 2021 annual theme. We see these results as validation for the high-performance strategies we have at Carriage and they highlight the remarkable earnings potential of our business. The ongoing achievements by our managing partners and their teams reinforce our strong belief in the First Who, Then What philosophy for every role at Carriage. I, along with the rest of our leadership team, extend our gratitude to them for their hard work and commitment to their businesses and communities over the past year, and I am genuinely excited to see them speed up our high-performance flywheel in the years ahead. Now let's talk about our record-setting first quarter results. For the first quarter, our total revenue rose 24.7% to $96.6 million. Total field EBITDA increased 52.1% to $45.8 million, and field EBITDA margin improved by 860 basis points to 47.4%. Adjusted consolidated EBITDA rose 51.7% to $34.7 million, and its margin went up 640% to an industry-leading 35.9%. Additionally, our adjusted diluted earnings per share jumped 131.4% to $0.81. The quarter's results were driven by increased funeral home volumes in January and February, ongoing growth in average revenue per contract in our Funeral Home segment; as Mel indicated, strong momentum in our cemetery pre-need sales programs; effective margin management by our managing partners and their teams across all of our businesses; successful integration of the four acquisitions made at the end of 2019 and 2020; and an increase in financial revenue stemming from our trust fund repositioning strategy implemented nearly a year ago. I will let Shawn and Carlos further elaborate on the specific drivers of high performance in their respective Funeral Home and Cemetery segments. Since our third-quarter earnings release in 2020, we have issued detailed five-quarter operating and financial trend reports to offer more transparency into the transformative high-performance dynamics occurring in real-time across our company. In follow-up press releases and in Mel's shareholder letter, we have provided additional performance data to give investors deeper insight into the factors behind our record operating and financial results. In our latest release, the five-quarter trend report included specific details about the outstanding performance and momentum we are seeing in our Cemetery segment by showcasing the actual number of pre-need property contracts sold and the revenue generated from pre-need services. The five-quarter trend illustrates that transformative high-performance is accelerating in all areas at Carriage. We trust this extra level of transparency, which is uncommon for a publicly traded company, will help investors not only grasp the drivers behind our recent performance but also appreciate the true earning power of Carriage and share our enthusiasm for our future earnings potential. In the first quarter, our total overhead rose by $5.7 million to $13.6 million compared to last year, which included about $2.5 million for severance and retirement expenses, as well as costs related to supporting our operations during the coronavirus pandemic. The significant increase in overhead this quarter can be entirely attributed to a rise in incentive compensation. Due to the uncertainties brought about by the pandemic a year ago, we chose to significantly cut back on incentive compensation accruals in the first quarter. In the following three quarters of 2020, we found ourselves needing to increase these accruals again, particularly for our field Good to Great annual incentive awards as performance in our businesses improved rapidly. Our incentive programs for managing partners and their teams are the best in our industry, and we firmly believe in paying for high performance. In 2020, we distributed approximately $5 million more in additional incentive compensation compared to 2019, with $3.8 million, or 75% of that increase, going to our managing partners and their teams. The rise in first-quarter incentive compensation accruals reflected the increases we observed in 2020, with most of the additional compensation allocated to our field businesses. To put it differently, the incentive compensation accruals increased by around $0.16 for the first quarter, with $0.12 attributable to field compensation, and still, EPS surged 131.4%. That exemplifies the kind of high performance for which we are pleased to increase accruals. Our discretionary pre-need trust funds achieved an 8.3% total return in the first quarter, compared to 6.2% for the S&P 500 and 2.4% for our 70/30 high-yield bond/S&P 500 benchmark. This investment outperformance of our trust fund portfolio in the first quarter continues a long-term trend, leading to a 14.4% annual return since early 2009. The trust fund performance over the last 12 months is directly linked to the execution of our trust fund repositioning strategy that commenced nearly 14 months ago. As a result of this strategy, the annual income from our discretionary trust fund portfolio rose by 112% to $16.3 million and resulted in significant realized yet primarily unrealized capital gains in our trust fund portfolio. The advantages of the increases in recurring annual income and long-term capital gains in our trust funds can be seen through our reported financial revenue and EBITDA from increased earned income via our cemetery perpetual care trust in the timeframe and from higher values in maturing pre-need funeral and cemetery merchandise and service contracts upon the time of death. During the first quarter, our financial revenue saw a 34.1% increase to $5.7 million, while our financial EBITDA grew 38.2% to $5.3 million, primarily driven by the rise in earnings acknowledged from our cemetery perpetual care trust. These results align with our anticipated financial revenue of between $22 million and $23 million for the year and a financial EBITDA margin of approximately 94%. It is crucial for investors to recognize that our trust fund performance and associated increases in financial revenue and EBITDA are not isolated incidents; they are part of a 12.5-year history of successfully managing our pre-need trust fund assets. Moreover, this elevated level of financial revenue and EBITDA is sustainable for the foreseeable future. Our adjusted free cash flow for the quarter escalated by 115.3% to $27.1 million, with the adjusted free cash flow margin increasing an incredible 1,180 basis points to 28.1%. Over the past 12 months, our adjusted free cash flow totaled $84.5 million, while our adjusted free cash flow margin grew to 24.2%. Last year, we introduced the adjusted free cash flow margin metric to demonstrate how much cash is generated for each dollar of revenue available for shareholder value creation and capital allocation. The strong operating performance we've seen over the last 15 months has enabled us to pay down about $94 million in total debt and reduce our total debt to adjusted consolidated leverage ratio by 2.2x to 3.8x from a peak of 6x following our acquisition of Oakmont on January 3, 2020. This remarkable and swift improvement in our credit profile underscores the significant cash earning power of our business and equips Carriage with the financial flexibility to pursue various capital allocation opportunities after refinancing our current senior notes at a lower interest rate. Most of our future capital allocation will be self-financed through our growing and recurring free cash flow, ensuring we maintain a normalized leverage ratio of 4x or below as a matter of policy moving forward. We are thrilled to once again share an updated two-year scenario for 2021 and 2022 with enhanced ranges of financial performance across all metrics. We refer to this as Roughly Right at Carriage because, like all good forecasts, they are bound to be 100% wrong at some point. Nevertheless, our ongoing operating performance and the momentum we are witnessing throughout our portfolio instill us with confidence to raise our 2021 ranges for adjusted consolidated EBITDA to $112 million to $118 million, increase our target for adjusted consolidated EBITDA margin to roughly 32.5%, and adjust the range for adjusted diluted earnings per share to $2.45 to $2.55. For 2022, we have also increased expectations for adjusted consolidated EBITDA to between $116 million and $122 million, with an adjusted consolidated EBITDA margin of about 33%, and adjusted diluted earnings per share ranging from $2.60 to $2.80. We anticipate normalized pro forma adjusted free cash flow to reach $75 million in 2022 and continue to grow from there. While there remains considerable uncertainty surrounding the coronavirus, the ongoing vaccination campaign, and its impact on death rates and specifically our funeral home volumes, we believe we have several controllable drivers to achieve the outlined ranges in the updated scenario. These drivers include increased cemetery pre-need sales that will enhance cemetery revenue growth rates and sustained higher cemetery field EBITDA margins, continued local market share growth across our funeral home and cemetery portfolio, increases in average revenue per funeral contract as we offer more value to families selecting cremation, and maintaining the same elevated levels of financial revenue and EBITDA. Our expanded two-year performance scenario does not factor in any potential capital allocation for acquisitions or share repurchases. Therefore, an additional driver of future earnings growth will stem from higher returns on invested capital through disciplined capital allocation not included in the performance ranges, coupled with our projected lower cost of capital. Again, I appreciate everyone for being on the call today. To reiterate what Mel mentioned, we provide a wealth of information. It is accessible on our Investor Relations website, Mel's shareholder letter, our recent 2020 earnings release, and our most recent earnings report, which collectively tell an impressive story of transformative high performance at Carriage and outline a clear vision for our future. I encourage anyone interested in our company to take the time to review, comprehend, and appreciate those documents. Now, I will hand it over to Shawn. Thank you.
Shawn Phillips, Senior Vice President and Regional Partner
Thank you, Ben. As we look back on our 2020 and first quarter 2021 performance, I reflect on all the leadership changes that occurred to ensure we have the right managing partners to drive our high-performance bus. Since September of 2018, we've made 29 leadership changes in our businesses with our managing partners, which transformed the performance of the entire company that moved several underperforming businesses from poor performance to high performance. In the first quarter 2021, our funeral same-store revenue was up $10 million or 21.4% versus the first quarter 2020. The primary driver of our huge increase in same-store funeral revenue in January and February was from the spike in COVID deaths. Some of the volume increased during this period, along with market share gains throughout our funeral portfolio. In March, we started to see volumes settle down to more normal levels, while our averages have continued to increase with a favorable variance of $259 or a 5.2% increase in March this year versus last year. With this favorable variance, we see a shift in our revenue increase in March coming from improved averages. This trend has continued into April, which will yield a more favorable variance compared to last year, as we experienced our lowest averages in April and May of 2020. Funeral acquisition revenue was up $1.3 million or 14.1% in the first quarter 2021 versus the first quarter 2020, while funeral acquisition EBITDA was up $1.2 million or 37.6%, which reflects an impressive conversion rate of 92% of the revenue growth in field EBITDA. This performance is a reflection of our tremendous progress in successfully integrating these businesses into our portfolio, which includes our 4 newest large strategic acquisitions. As to Ben's earlier comments regarding growth in field incentive compensation, what makes Carriage unique is how we reward outstanding performance and share the success of the business with the managing partner and their teams. Businesses that achieve above 50% of standards are eligible to participate in the annual Being The Best incentive program. As businesses achieve higher levels of performance, they are generously rewarded with this annual incentive. In 2019, 36% of our businesses were below 50% standards achievement. In 2020, with improved business performance, only 18% of our funeral homes were below 50% standard achievement. We saw similar trends continuing into the first quarter 2021. Managing partners also have the opportunity to earn a 5-year Good to Great long-term incentive. The first Good to Great Journey class started in 2012, with 12 managing partners that earned this incentive. With the high performance in 2020 and into 2021, we have 30-plus managing partners that are on track to achieve a Good to Great incentive at the end of this year. In addition to these generous incentive programs, managing partners also have the opportunity to earn Pinnacle of Service Awards by achieving an average of 70% of standards over a 3-year period or by achieving 100% of standards in a single year, which neither is easy to accomplish. On Page 50 of the 2020 shareholder letter, you will see a list of 41 businesses that earned their 2020 Pinnacle of Service Award. What you don't see are all the other businesses that stepped up their performance big time and accelerated their Good to Great journey, which has contributed to the flywheel momentum in a huge way. There are 22 businesses that would have earned Pinnacle that lacked the 3-year tenure as managing partner because of all the leadership changes that were made across the portfolio in all 3 regions since September of 2018. I can personally attest, after almost 14 years with Carriage, for the right person in the right seat on the high-performance bus, this culture will change your life both personally and professionally. It takes time to understand the uniqueness of Carriage. What you've seen over the last several quarters is the high-performance culture in action at its best during some of the worst times. When the pandemic started, we had no idea what to expect. What we did know was we worked hard in the months prior to COVID ensuring we have the right entrepreneurial leaders in place to drive this unique culture company that just happens to be in the funeral and cemetery business. In order to understand how unique Carriage is, you have to be curious. You have to want to discover more, have the ability to listen, learn; and just as important, have the ability and willingness to unlearn, observe and ask thoughtful questions only after the proper time has been invested in doing the research. At Carriage, we call it getting to the other side. The worst thing anyone can do is to think we are just like everyone else. The recent 50-page letter of love that Mel wrote truly outlines the dynamics of our people and our businesses. It's truly a proof-of-concept when leadership and high-performance transformation dynamics are married together and create the Flywheel Effect. I will now turn it over to Carlos.
Carlos Quezada, Senior Vice President of Sales and Marketing
Thank you, Shawn, and thank you all for being with us today. I introduced our transformational high-performance plan and our 6 sales drivers on February 17 when we had our 2020 earnings release. Today, I'm excited to present to you our cemetery portfolio performance update, where we have been able to sustain pre-need cemetery sales growth above the highest quarter in Carriage history, which was in Q2 2019. This sustainable pre-need sales high performance is consistent in both same-store and acquisitions. For example, during the period ending Q1 2021, our same-store pre-need cemetery sales performance was 34% over Q1 2020 and a combined growth in same-store and acquisitions of 58% over the same period. The sales success comes from both a focus on higher-end inventory sales and an activity-based approach that led to writing an additional 513 contracts or 52% more than we did in Q1 2020. And while cemetery at-need revenues are starting to normalize, our pre-need sales performance is contributing to our very impressive total cemetery field EBITDA margin of 45.3%, which is at an all-time high. Our total cemetery operating revenue growth trend over the past 5 periods starting the first quarter of 2020 are as follows: Q1, $13.7 million; Q2, $15.6 million; Q3, $19.6 million; Q4, $20.2 million; and Q1 2021, $21.6 million, which represents a compounded growth of 12% over these last 5 quarters. This amazing growth, combined with our unique operational leverage advantage, allowed us to convert 68.5% of cemetery same-store revenue growth into same-store cemetery field EBITDA and 78.3% of cemetery acquisition revenue growth into acquisition cemetery field EBITDA, making our total cemetery revenue growth to total cemetery field EBITDA conversion rate of 73.7%. Moreover, while these numbers are quite impressive, our transformational high-performance journey has just begun, and we are at the early stages of our plan. I have been traveling and visiting more locations where I have met our amazing partners and found tremendous opportunity for sales program and sales growth. Therefore, to give you a vision of the future and the reason why we know we're creating sustainable high performance that is above anything else we ever had before, I will go over our main 6 sales drivers, followed by an update on the execution of our transformational high-performance plan. Our sales drivers are: number one, leverage technology as an enabler of 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 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. This is our progress on our sales drivers. Our CRM is now underway, and we have a tentative pilot program launching to early adopters in August 2021. We have come to an agreement with Microsoft to provide tablets to our sales consumers that will accelerate our success with fast, simple and readily available information. We have implemented our new performance-based compensation plan on April 1 across the cemetery portfolio, aligning compensation with performance to target. And the feedback from the field as well as our sales trend has been very positive. We have designed new reports that highlight performance expectations that align to our new sales compensation program and provide sales counselors and sales leaders with insights on where they stand to their target at any given day during the month. We have started the deployment of capital to projects that have been reviewed and approved by the executive team, where the return on investment accelerates while creating beautiful inventory that is appealing to the local community and the target audience at each of our cemeteries. With the markets starting to soften COVID-19 restrictions, we have launched our advanced planning strategy with a full focus on selling pre-need cemetery through 5 new teams we created during the first quarter of this year, and with 5 more teams coming before year-end. This will result in additional sales production above the growth we will achieve from our legacy teams in some of these services, which are both included in our updated 2-year Roughly Right Scenario. We developed the process through a third party to deploy direct mailing campaigns in a fast, simple and effective way, generating new opportunities for our sales teams. We launched our grassroots events program and created a standardized toolkit that enables sales leaders and sales counselors to attend community events and have a professional look that appeals to the consumer and engage with them while creating value and the significance of pre-planning. We have standardized selling compensation, sales policies, incentive methodology, and we're in the process of standardizing park tours, giving families a different experience focused on service when they are looking to buy at one of our premier locations. We have launched Carriage Academy, which includes light classes. This is a full week, 8-hour-a-day program for new sales counselors where they learn the foundation of cemetery pre-need sales and leave the class with tools and resources that will help them achieve their goals and dreams. From this program, we have successfully graduated our second class, with the third one starting this Monday. Carriage Academy also offers a core program for existing sales counselors where we focus on the culture and skills that lead to sales success at Carriage Services. We have created a new sales presentation as well as our new version of our planning guide, which we now call Caring Decisions Planner, and all the training that supports its success. We believe this new professional and systematic approach to sales will allow Carriage sales counselors to engage families in a way that generates interest, builds trust and mutual benefits. As we continue on our transformational high-performance journey and goal of creating sustainable pre-need cemetery sales over time, we have achieved so much in just 9 months, and there is much more to come. But for now, I can say that the sky is blue, our future is brighter than ever before and that there has never been a better time to be with Carriage, and the best is yet to come. Thank you, and I will now pass it to Mel.
Mel Payne, Chairman and Chief Executive Officer
Thank you, Carlos. I want to conclude the formal comments by highlighting a few points. In the shareholder letter and in Ben's earlier comments, we are planning a refinancing. Once that is complete, I believe our cost of capital, based on Ben's recent analysis, will decrease to about 6.5%. Is that correct, Ben? Yes, 6.5% cost of capital. I have been coaching the 50 people in our Good to Great II 5-year shareholder value incentive plan on how to think about their roles individually and as teams while we implement our three core models: Standards Operating, 4E Leadership, and Strategic Acquisition. I’ve also been instructing them on calculating various price ranges for our shares based on performance metrics that we expect to improve over time, regardless of external factors. If we analyze the two-year scenario—comparing actual results from 2019 and 2020, and the upcoming 12 months to March 2022 against all of 2021 and 2022—it's quite evident how these numbers are transforming. While I cannot predict what the COVID environment will be like at the end of 2021, we will provide another scenario at the beginning of 2022, even though we haven't wrapped up the 2022 year. The transformation has been significant. We will introduce a 5-year scenario that allocates our capital in different ways to enhance intrinsic value per share. This will involve various scenarios, including potential acquisitions, share buybacks, increased dividends, and maintaining our debt levels at 4 or below. We will have the free cash flow to support these initiatives. The exciting part of my job and Ben's is to educate our team. While someone outside may also benefit from this knowledge, my main aim is to ensure our own team understands how to create value. I'm confident that others will eventually grasp these concepts as they read the materials Ben referred to, as they are genuine and will continue to improve. Ben just mentioned that we anticipate $70 million in free cash flow after the refinancing, which could range up to $75 million. Let's take the midpoint, $72.5 million, and divide that by 18.2 million shares. This results in free cash flow per share of $4. One of the reasons I love this industry and founded this company at 48 is for insights like these. I knew such information before starting at Carriage. With a free cash flow per share of $4 and a share price of $37, the math tells me that's a 10.8% free cash flow equity yield, which stands in contrast to a projected 6.5% cost of capital. In typical valuations of free cash flow equity yield, you would divide the free cash flow per share by your cost of capital or something close to it, indicating a current price or potentially a price a year from now of around $60 or $61. Applying a 20x multiple on the EPS brings us to about $50. Therefore, I expect our price to reach somewhere between $50 and $60. This is what I am teaching our people, and there’s no reason to withhold this information from you since they all believe it and know we can execute it. This is without even having leveraged new capital post-refinancing, and we are poised to pursue new initiatives that will add even more value. The team here has had limited input; my focus has been on the Good to Great II 5-year shareholder value incentive plan, which should be your focus too. You should see the excitement surrounding it. As Ben mentioned, reviewing the material, reaching out, and visiting us is encouraged. If you want to learn more, visit one of our locations managed by a Standards Council member who is part of the plan. You'll gain valuable insights about our company. We are transparent and have nothing to hide because what we are doing is genuine and will only improve. To wrap up with a light-hearted story, I almost missed this call because I was being prompted for my whereabouts. If you noticed the shareholder letter, I acknowledged my wife for the first time. I returned home for Easter, and my 35-year-old son and 27-year-old daughter, who keep me youthful, had their reactions. My daughter mentioned that if she had been in my position years ago, she would have flown home to celebrate after a debt restructuring trip to Paris. She's insightful, and I know she's right. My son called me this morning to check if I was prepared for the call, and I confidently responded affirmatively because having a company like this requires minimal preparation. My daughter, who texted me before I had even showered, said she found the release powerful and unbelievable, expressing wonder at why anyone wouldn’t want to own shares in our company. That is why she is holding onto all her shares and even considering buying more. I believe my kids are simply becoming smart investors. With that, I’ll open it up for questions.
Operator, Operator
Our first question comes from Alex Paris with Barrington Research.
Alex Paris, Analyst
Congratulations on another great quarter.
Mel Payne, Chairman and Chief Executive Officer
Thank you, Alex.
Alex Paris, Analyst
Well, first, I think it's the fourth consecutive quarter of beating expectations and raising guidance. Carriage Services' performance is becoming more reliable, which is something investors have been seeking for a long time, often referring to it as a "desert island stock." The financial results from Carriage Services reflect the certainty that we all recognize about death in life. So, congratulations again. I have a few questions for the team, if I may. Starting with the funeral side of the business, as you mentioned on the call, and this also applies to at-need cemetery services. As volume growth stabilizes due to the pandemic receding, we've seen the average revenue per contract increase in both March and April, thanks to the clearer information provided in the quarterly reports. This is the first time we've seen this in over a year. What do you think has contributed to the improvement in averages? The comparisons are easier because they were affected at the onset of COVID, but what steps are you taking to raise funeral averages, both for burial and cremation?
Peggy Schappaugh, Vice President of Operations and Acquisitions Analysis
From the funeral home perspective, we actually started to see some average improvements after May, as our managing partners became creative with their teams in holding outdoor services. We experienced more growth in our averages in October and November. There was a slight dip as COVID cases increased in December, January, and February. However, in March, we observed favorable comparisons since we experienced a dip in March of last year, hitting the bottom in April of last year. This improvement is attributed to the creativity of our managing partners starting in May and June, along with an increase in vaccinations, the opening up of more states, and the lifting of restrictions, allowing for small gatherings. Families are becoming more comfortable with this. Additionally, we maintain a focus on improving our commission conversion and educating families about the possibilities of cremation. We actively engage in educating families on what is available to them and how they can celebrate the lives of their loved ones.
Mel Payne, Chairman and Chief Executive Officer
Yes, Alex, it's Mel. I want to add to what Peggy mentioned. Early on, I highlighted this in the shareholder letter. The Forbes article suggested that the current situation would lead to lasting changes in behavior, such as people opting for direct cremations and simpler services surrounding cremation and burials. That's simply not true. It may have caught attention briefly, but it was misleading. We observed that people who were restricted by government mandates and fear are now loosening up, even though COVID is still present. The fear is diminishing. Death has been a part of human existence for thousands of years; it’s unavoidable. There’s research on how to initiate the grieving process, and it certainly isn’t done by isolating individuals and imposing restrictions. People are now seeking more than ever. Our team recognized this shift, and they are now fully engaged, leading to significant increases. California faced tough times, but the averages have rebounded and the volumes remain strong there. It's the one region where the volumes continue to rise, and averages have significantly improved. Even when things stabilize, April's performance was exceptional and widespread. We believe that this trend will result in higher revenues for Carriage moving forward. We have improved and will not regress. This reflects the nature of an adaptive company, which is why we describe ourselves as a business in the funeral and death care sector. When discussing these topics, it’s easy to get lost in the details and miss the essence of what we do, but this is the key distinction.
Alex Paris, Analyst
Well, that makes perfect sense as volumes spiked due to COVID and averages came down as COVID recedes and volumes normalize averages go back up again. It's kind of an offsetting function. And then you have all these other levers to grow the company like cemetery. And Carlos did a good job outlining that. So I don't have any further questions for Carlos at this point, except to say I remember last year, the Ching Ming holiday was severely impacted in the early days of COVID. I was just wondering, anecdotally, how did the Ching Ming festivities go this year versus last year, particularly in California?
Paul Elliott, Senior Vice President and Regional Partner
Alex, this is Paul Elliott. Very successful. It wasn't the same turnout as 2019. However, we were able to have the event, and some good success in our trends in April are looking very favorable.
Mel Payne, Chairman and Chief Executive Officer
I can’t disclose specific individuals, but I want to emphasize that the talent in our company is exceptional, and I don’t want to risk anyone trying to recruit our top performers. Additionally, I often hear people talking about cremations, and I find that frustrating. It’s interesting to note that when I started the company, cremations were below 20%. Now, they’re at 56% or 57%, and our revenue is growing significantly. I appreciate you bringing up this topic, and I’d like Chris to share his thoughts on it.
Chris Manceaux, Senior Vice President and Regional Partner
We have been putting in significant effort with cremation families who initially opt for no service. We're engaging in conversations to understand their life journey and accomplishments. This ongoing dialogue allows us to present options that reflect what we've learned from the family, helping to create service options where everyone can come together to celebrate the loved one and share their stories, whether it's a small gathering or a larger event. We've noticed that as we take the time to have these discussions, many families realize they haven't fully considered the options. This approach is leading to a gradual improvement in our take-up rate each period. For those families still choosing no service, we’re seeing an increase in small gatherings or celebrations.
Mel Payne, Chairman and Chief Executive Officer
Yes, I explained this in the shareholder letter. Most families don't choose cremation and are surprised by the method of disposition. This secular change will continue. Even though the rate of cremation has increased from the teens when I started the company 30 years ago to around 57% or 60% now, one of the greatest upsides is the higher averages for all cremations. We are gaining significant market share in the cremation sector, presenting a major opportunity over the next 5 to 10 years rather than a major drawback. It's a significant positive.
Alex Paris, Analyst
Great. My last question is likely for Shawn since he oversees M&A. Although our guidance doesn't account for any upcoming M&A activity, what are your plans for M&A moving forward after refinancing? You haven't closed any deals since January 3, 2020. There was a significant number of acquisitions, around $170 million in cash spent, and you’ve been successfully integrating them. I assume you plan to re-engage in M&A consolidation after refinancing. What can we anticipate in that regard, and what are you aiming for?
Shawn Phillips, Senior Vice President and Regional Partner
So Alex, I’ve had numerous discussions during this time with many of our targeted acquisition candidates whom we would like to partner with. We have maintained communication with them and will begin to engage more actively. I’m currently sending out the shareholder letter along with personal messages from myself or Mel to reconnect. I can share that the number of conversations has increased. In the last 45 days, I’ve had about 12 to 15 calls. However, our acquisition strategy remains very focused on what we pursue, and we will continue along that approach. The activity has indeed picked up.
Mel Payne, Chairman and Chief Executive Officer
And one other point on what you said. Since Carlos joined us on June 26 and then brought his 8-player team in and has done everything he's outlined, made a huge difference on how we view acquisition candidates. We want more cemeteries that are high-quality cemeteries, combination businesses. But there's another way to think about it. We acquired our own existing cemetery portfolio of 32 cemeteries. They were sitting right here, and we owned them all. It was like we bought 32 of them. And now we're going to have acquired all the performance out of those own cemetery that we never could get before broadly. That's the way to think about that.
Alex Paris, Analyst
That's great. And then one more sneak in question. Ben, you didn't say anything about CapEx plans for the year. I think last quarter, you said $18 million to $20 million. Is that still a good number?
Ben Brink, Senior Vice President and Chief Financial Officer
Yes. Alex, I'd probably say we're probably around that $20 million range for the full year. We were just over $4 million in total CapEx for the quarter, split almost evenly between maintenance and growth CapEx. Really big focus this throughout the year in cemetery inventory developments. We'll be making more investments in that than we have historically. So very excited about that and the projects that we are evaluating and getting started right now.
Alex Paris, Analyst
And then for the full year, 50-50 growth CapEx.
Ben Brink, Senior Vice President and Chief Financial Officer
Yes, that's probably $10 million, and $10 million is going to be the number. Thank you.
Operator, Operator
Our next question comes from Chris McGinnis with Sidoti & Company.
Chris McGinnis, Analyst
It was a great quarter. I was also looking at the shareholder letter and comparing it to previous ones. It really provides a lot of insight into the business. Thank you for sharing that, and congratulations on the numbers. I have a quick question regarding the competitive landscape. You've gained a significant amount of market share. Can you discuss the situation with the more fragmented part of the market? Are they starting to recover? Are you noticing any signs of them opening up, or are they still struggling to operate in the current environment? Additionally, how does this relate to your mergers and acquisitions strategy? Are there more opportunities arising for you in this fragmented market? I know you briefly touched on M&A, but could you elaborate on the current state of that fragmented market and the opportunities you see?
Shawn Phillips, Senior Vice President and Regional Partner
Yes. This is Shawn. I can tell you that with our IT strategy, we were able to get out to our businesses quickly. We're able to do things that a lot of our competitors were not. The other interesting thing, Chris, is a lot of competitors were not doing services. They were only offering direct burials or direct cremations, where our managing partners were like, 'Let's bring it in and celebrate the life lived.' So I don't know if that's really going to translate into M&A activity. But again, as people hear our story, they see what we're doing out in the market. I do see it ramping up over the next probably 6 to 12 months.
Mel Payne, Chairman and Chief Executive Officer
Shawn, can you explain to Chris how this might spread in relation to Carriage, including those who have joined us like Rest Haven, Oakmont, and others? They expressed gratitude for joining Carriage before this occurred.
Shawn Phillips, Senior Vice President and Regional Partner
Yes. I've received a lot of feedback directly from managing partners, particularly from several of the businesses we collaborated with recently. They mentioned that if they were independent, they wouldn't have been able to achieve the same results because we are able to provide all the necessary support from here, whether it’s PPE, refrigerated trailers, or anything else. This allows them to concentrate on serving their families without the distraction of sourcing those supplies themselves. This strong support resonates within the community, and our competitors take note of it. Larger, more established businesses recognize the level of support we provide.
Chris McGinnis, Analyst
Great. Great. And I guess just are they starting to get back to normal? Or are they still operating kind of in a tougher capacity at this point?
Mel Payne, Chairman and Chief Executive Officer
It's hard for us to know here. We're back into Pentagon. We don't pay attention to what competitors are doing against our local managing partners, but our managing partners know. And that's why we follow their data and they're incentivized to grow volumes and compound revenues. So based on what we're seeing our own people do, I wouldn't want to be the competition.
Chris McGinnis, Analyst
Yes. Clearly, clearly. And then just a question for Carlos. In going to the market with the pre-need, can you just talk about how you're approaching that now in the COVID environment? How was it different, I guess, prior to that? And do you see that maybe normalizing as well as the economy starts to open?
Carlos Quezada, Senior Vice President of Sales and Marketing
Thank you, Chris. That’s a great question. With restrictions starting earlier last year, it became really challenging to connect with families, schedule appointments, and visit homes, which is crucial for driving pre-need sales through community efforts. However, pre-need can be approached in two ways. First, there are family services opportunities, where we interact with families daily, including those who may currently have a pre-need contract they want to expand for their family members, or those who have lost loved ones and we want to reach out to see if they’re interested in being alongside their loved ones. Through these two methods, we managed to continue our pre-need initiatives despite the COVID restrictions. As those restrictions ease and many cities and markets begin to open, it allows us to adopt a more aggressive strategy. For instance, we’ve secured booths in grocery stores in California to provide information and engage shoppers directly, while still adhering to social distancing and necessary precautions. As we move forward, we anticipate expanding to seminars, in-home appointments, and other initiatives as families become vaccinated and feel less anxious about the pandemic. Overall, we see increasing opportunities as restrictions are lifted.
Chris McGinnis, Analyst
Great. Now I really appreciate that insight. Congrats on the quarter, and good luck in Q2.
Operator, Operator
Our question comes from Andrew Boord with Fenimore.
Andrew Boord, Analyst
It's great to talk to you guys. First thing, I just want to say thank you to everybody at Carriage. I mean I knew things were going to get better a couple of years ago. But even excluding COVID, I mean, I knew things were going to get better, but this is a lot better. You guys have really just done a fantastic job. And my only complaint is you didn't hire Carlos when he was coming out of high school. So you've just done great jobs.
Mel Payne, Chairman and Chief Executive Officer
Some things are a little slow on the uptick. That's my fault.
Andrew Boord, Analyst
That's okay. I have a couple of questions. One is a follow-up, and I might be showing my lack of knowledge here, but I have never planned a funeral, fortunately. At some point, I will. What is the process like for a cremation? What additional services can you offer to increase the average revenue per cremation over time? I'm not concerned about the impact of COVID on those numbers, but looking ahead 5 to 10 years, what services can you provide? How does that work at the local level?
Chris Manceaux, Senior Vice President and Regional Partner
Yes, Andrew, this is Chris. It's really all about whether it's a religious service or gathering, just some way to assemble family and friends to share information or stories rather than information. And when we host these services, whether it's at our venue or another, it allows us to pick up the revenue to host, to provide our team to guide this family through a very difficult time of their life. Most of these families are not thinking of service when death initially occurs. So we help guide them through this process.
Mel Payne, Chairman and Chief Executive Officer
So Andrew, let me elaborate on that a bit. When a call comes in, the family expresses their wish for mom to be cremated. I touched upon this in the section about entrepreneurialism, innovation, and adaptation in the shareholder letter. The family indicates their intention to bury her, which involves a decision about the manner of disposition. I recall my mother-in-law stating that she didn’t want to be cremated, as she viewed it negatively. Her preference was burial. Conversely, some people today might say they are uncomfortable with the idea of a body lying in the ground over the years. That reflects the choice people face. Cremation is often seen as a newer alternative compared to traditional burials, which have roots going back to ancient civilizations. Many believe there are rules governing what can and cannot be done, but there really aren’t any— as long as it’s legal, the options are wide open. You can hold any kind of service anywhere, with or without the body present. You can embalm the body, host a visitation, and even have the casket open for viewing. Ultimately, however, the final disposition can still be cremation, regardless of these other arrangements. There are no restrictions on what can be done as long as it complies with the law, which allows for a multitude of choices. Unfortunately, many people are unaware of this. To help them, it’s essential to engage and present a variety of options, taking into account the individual’s life, what was special to them, and what was important, before recommending different services and products, always keeping cremation as the final option. Additionally, there are many choices regarding what to do with the remains, ensuring a meaningful place for loved ones to visit in a beautiful cemetery, among other possibilities. It's a highly creative process, and if there aren’t creative individuals involved, the outcome can resemble more of a commodity. This represents a significant opportunity for us. The key is to ensure that the right people work with the family during this process.
Andrew Boord, Analyst
That's outstanding. I really appreciate it. I hadn't even thought about some of those variables. So that's great. The only other question I have, and there were some great questions before me. I appreciate those. But you mentioned 6.5% is your cost of capital. Did you mean that is likely the cost of the new debt? Or are you talking about a higher math, black, finance and BA type cost of capital?
Ben Brink, Senior Vice President and Chief Financial Officer
Yes, Andrew, we believe that our weighted average cost of capital will be significantly improved after the refinancing transaction, which will have a substantial positive effect on our return on invested capital going forward.
Andrew Boord, Analyst
Excellent. Yes, that's great. We're getting pretty close to that time period. You can call that debt. I think it was a June 1, maybe. I can't remember. I promise I read that letter, but it took me 3 days. I may have forgotten a few details, but when should we expect some news on that?
Mel Payne, Chairman and Chief Executive Officer
That's a 30-year anniversary at Carriage. How cool is that? June 1.
Ben Brink, Senior Vice President and Chief Financial Officer
Yes, Andrew, you're correct. June 1 is the call date. We're focused on refinancing those notes, and we'll provide details as they become available. Absolutely.
Andrew Boord, Analyst
Okay. I look forward to that. That's great. Outstanding. Well, guys, that's really all the questions I have, but I do want to say thank you again to everybody, and I really enjoy those letters. I've read them all. So thank you for keeping those coming.
Mel Payne, Chairman and Chief Executive Officer
Thank you, Andrew. I want to take a moment to express my gratitude to my sixth grade teacher, Barbara. She really had a great class, moving quickly through grammar and then saying, 'Now I'm going to challenge you sixth graders with creative writing.' I'll always remember writing a story about a day in the life of an ant, but I didn't reveal it was an ant until the end. My classmates still remember that to this day. How this connects to Carriage, I'm not sure.
Operator, Operator
Thank you. And I'm showing no further questions at this time. I'd like to turn the call back to Mel Payne for any closing remarks.
Mel Payne, Chairman and Chief Executive Officer
Well, you heard from all of our 8 players on the executive team today. And if you want to know why I never plan to retire, it's them and everybody else in this company. You come to work. You have a lot of fun. You work really hard. You work really smart. You work together. And you take a journey, and we hope you take it with us. Thank you very much for your support.
Operator, Operator
This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.