Earnings Transcript for SCI - Q4 Fiscal Year 2024

Alanna:

Operator: Good morning, and welcome to the Service Corporation International Fourth Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation there will be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to SCI management. Please go ahead.

Alanna O'Connor: Good morning. This is Allie O'Connor, AVP of Investor Relations and Financial Reporting. Welcome to our fourth quarter earnings call. We will have prepared remarks about the quarter from Tom and Eric in just a moment. But before that, let me quickly go over the safe harbor language. Any comments made by our management team that state our plans, beliefs, expectations or projections for the future are forward-looking statements. 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, those factors identified in our earnings release and in our filings with the SEC that are available on our website. Today, we might also discuss certain non-GAAP financial measures. A reconciliation of these measures can be found in the tables at the end of our earnings release and also on our website. With that out of the way, I will now turn it over to Tom Ryan, Chairman and CEO.

Thomas Ryan: Thanks, Allie. Hello, everyone, and thank you for joining us on the call today. This morning, I'm going to begin my remarks with some high-level color on our business performance for the quarter, then provide some greater detail around our funeral and cemetery results, and I will then close with some thoughts about our 2025 business and financial outlook. For the fourth quarter, we generated adjusted earnings per share of $1.06, which compared to $0.93 in the prior year. Revenues, gross profit and comparable margin percentages increased in both the funeral and cemetery segments, contributing $0.09 to adjusted earnings per share growth, while lower general and administrative expense contributed an additional $0.05 per share, resulting in a combined $0.14 earnings per share growth from operating income. Below the line, the favorable impact of a lower share count and a slightly lower interest expense was offset by a higher effective tax rate. Now let's take a deeper look into the funeral results for the quarter. Total comparable funeral revenues increased over $5 million or about 1% over the prior year quarter as strong core general agency and other revenue growth exceeded declines in core revenue and SCI Direct nonfuneral home preneed sales revenue. Comparable core funeral revenues decreased by $9 million or about 2%, primarily due to a 4.4% decrease in core funeral services performed, which was somewhat offset by a healthy 2.7% growth in the core average revenue per service. This core average revenue growth was achieved despite a modest increase of 100 basis points in the core cremation rate. SCI Direct nonfuneral home revenue decreased by over $4 million, driven primarily by a $6 million decline in nonfuneral home preneed sales revenue as a result of the anticipated negative effect of operational changes to defer merchandise deliveries. This was partially offset by growth in general agency commissions, as we are in the process of switching from a trust to an insurance-funded preneed model. This net decline from preneed sales revenue was slightly offset by a $2 million increase in nonfuneral home revenue, generated by a 10% improvement in average revenue per service from the effect of higher value contracts maturing from the backlog. Certain of these contracts now include merchandise or travel protection that more recently was deferred at the time of sale into the backlog. This healthy average revenue per service growth should continue as more contracts with merchandise and travel protection mature over the coming years. Core general agency and other revenue grew by an impressive $19 million, primarily due to growth in general agency revenue, driven by higher average commission rates derived from our new preneed insurance marketing agreement as well as the effect of selling a larger percentage of underwritten insurance products, which carry higher commission rates versus a flex or a non-underwritten product. General gross profit increased by about $4 million, while the gross profit percentage increased by 40 basis points to just about 22%. This increase was the result of a modest revenue increase, combined with managing fixed costs to about a 1% increase for the quarter. Preneed funeral sales production decreased by $27 million or about 9% over the fourth quarter of 2023. Core preneed funeral sales production decreased by $14 million or 6%, primarily due to the transition to our new preneed insurance provider during the back half of 2024. We expect to continue to see increased underwritten insurance product sales production as our counselors focus on raising customer awareness of the benefits of a fully insured product. We anticipate comparable core preneed sales production to normalize later in the spring or early summer months. Nonfuneral home preneed sales production decreased $13 million or 20% as SCI Direct transitions from the sale of trust to insurance-funded preneed contracts. This transition required many of our sales counselors to go through extensive training and obtain insurance licenses and change the payment terms for customers financing their preneed, all of which contributed to a temporary slowdown in sales. As of today, we have made the transition in markets that represent 75% of our production. So, this, too, should stabilize over the next few months and begin to grow again, probably beginning in the second half of 2025. Now shifting to cemetery. Comparable cemetery revenue increased by $20 million or about 4%. Core revenue was primarily responsible for the increase, as it grew by $21 million over the prior year quarter. Higher recognized preneed property revenues accounted for $14 million of this increase, generated by a combination of higher preneed cemetery sales production and higher preneed cemetery sales recognition rates as completed construction projects triggered the recognition of prior period sales in the fourth quarter. Recognized preneed merchandise and service revenue accounted for an additional $5 million of core revenue growth, as contracts with a higher sales average are being delivered out of the backlog. The backlog value has been enhanced by cumulative merchandise trust on earnings over the life of the contract. Comparable preneed cemetery sales production increased by $7 million or about 2%, primarily due to an increase in large sales, while our core production was relatively flat. Cemetery gross profits in the quarter increased by $14 million, and the gross profit percentage increased by 150 basis points, generating an operating margin percentage of 36%. The 4% revenue growth, which includes an increase in higher-margin merchandise and service trust fund income, was slightly offset by a 4% increase in our fixed costs, impacted by increased maintenance costs primarily due to damages incurred at locations impacted by natural disasters during the quarter. Now let's shift to discussion about our outlook for 2025. As you saw in our earnings release, we provided a normalized earnings per share guidance range of $3.70 to $4 for 2025 for a midpoint of $3.85. The 2025 range would be 5% to 13% growth, with a 9% growth at the midpoint. We anticipate that the effective tax rate for 2025 will be about 25.5%, some 180 basis points higher than 2024. So by neutralizing the tax effect, we would be guiding to a 12% growth, at the midpoint of our range, versus the current guidance midpoint of 9%. Within our funeral segment, we expect flat to slightly down funeral volume compared to 2024, with the average revenue per case growing at inflationary rates, slightly negated by the effect of a modest cremation mix increase. We do expect to see higher general agency revenue generated from the favorable impact of our new insurance agreement, which should drive healthy profit growth for the funeral segment, increasing the gross margin percentage by 80 to 120 basis points. We expect preneed funeral production to be slightly lower in 2025 as we continue the transition of SCI Direct and as we focus on increasing the underwritten insurance product sales in our core channel. While down for the year, for some perspective, the $1.2 billion of preneed funeral sales production this year is 27% higher than 2019, or 5% compounded growth rate over the last five years. As we think out to 2026, we would expect preneed funeral sales production to return to low to mid-single-digit percentage growth rate. For the cemetery segment, we anticipate that we can grow preneed cemetery sales production in the low to mid-single-digit percentage range, resulting in cemetery revenue growth of about 2% to 3%. Continued focus on managing inflationary costs should result in reasonable segment profit dollar growth while maintaining our impressive gross margin percentages as compared to 2024. Below the line, we expect favorable impacts from slightly lower interest expense and a lower share count that will be negated by the higher effective tax rate caused by the loss of deductibility of excess tax benefits from stock option exercise. In conclusion, I want to acknowledge and thank the entire SCI team for their daily commitment to our customers, our communities and to one another. Your dedication is the foundation of our success. Thank you for making a difference every day. With that, operator, I'll now turn it over to Eric.

Eric Tanzberger: Good morning, everyone. Sequentially, I'm going to do exactly what Tom just did, and I'm going to start by taking a moment to really extend my deepest gratitude to each of our 25,000-plus dedicated associates. Your unwavering commitment and exceptional service continued to make a profound impact on the lives of the families we serve This last year in 2024, our team cared for almost 700,000 families during some of their most challenging life moments, as well as provide a peace of mind through preneed arrangements. Thank you for your tireless dedication to delivering service excellence to our customers, as well as our communities. So, with that, I'm going to shift to the financial part of this and talk about our cash flow results and capital investments for the fourth quarter. I'm going to follow that by a recap of our full year performance in 2024, then provide an [ph]ATLEC of 2025 cash flow in those capital investments, and then we'll conclude with an update on our overall financial position. So in the fourth quarter, we generated an impressive adjusted operating cash flow of $268 million. This did exceed our expectations and is at the high end of our guidance range for the quarter. So let me give you a little bit of color and break this down a little bit. Adjusted operating cash flow was positively impacted by higher operating income of about $20 million that Tom just discussed, highlighting the strength in our underlying funeral and cemetery operations during the quarter. Cash interest was also lower by about $12 million. This is really just a timing issue associated with the bond finance that we completed this past September. Offsetting these favorable impacts was a $27 million use of cash resulting from an additional payroll cycle in the current year quarter compared to the prior year. Again, this happens from time to time with timing of our payroll funding. Additionally, preneed and other working capital resulted in a combined use of about $15 million in the quarter. So in total, we finished 2024 very strong with adjusted operating cash flow of just over $975 million, which is above the high end of our most recent annual guidance range, which, again, was $940 million to $960 million. So continuing on in the fourth quarter. We invested $140 million into our current locations, new growth opportunities, business acquisitions and real estate. We invested $102 million of maintenance capital back into our current businesses, with $42 million allocated to valuable cemetery development projects, $43 million, about the same amount, into our funeral and cemetery locations and $16 million into our digital strategy and other corporate investments. For the full year, we invested a total of $348 million of maintenance CapEx, which was up $23 million from both the prior year and the high end of our guidance range as we dedicated a portion of the strong cash flow during this quarter toward reinvestment into the maintenance of our funeral and cemetery businesses. We also invested about $19 million of growth capital in the quarter towards the purchase of real estate, construction of new funeral homes and the expansion of existing funeral homes and cemeteries. For the full year, this brought the total growth capital spend to just over $100 million, which was up about $9 million from 2023 as we identified meaningful opportunities to invest in greenfield cemetery and funeral projects. Let's talk a little bit about acquisitions. So we invested $19 million into business acquisitions in the fourth quarter. In total, we finished the full year with an impressive $181 million of acquisition spend. As I noted in our November earnings call, acquisition spend this year has outpaced our annual guidance range of $75 million to $125 million, and we are thrilled about these high-quality funeral homes and cemeteries joining our company, and we are happy to welcome all of these new associates to the SCI family. Let's move on to capital investments. We returned $100 million of capital to shareholders in the quarter through $43 million of dividends and $56 million of share repurchases. We repurchased just under one million shares at an average price of $79 during the quarter. For the full year, we returned $428 million to our shareholders through $174 million of dividends and just over $250 million of share repurchases. This brings the number of shares outstanding to just under 145 million shares at the end of the year. Subsequently, we have completed $28 million of share repurchases at an average price of $78 so far during 2025. So I'd like to shift to the 2025 outlook. But before I go there, I just want to make a brief comment about our corporate G&A expense during the quarter. Year-over-year corporate G&A expense decreased $30 million in the quarter to about $15 million. This is primarily a result of reducing our California legal reserve made in the fourth quarter of 2022 by about $20 million as the primary claim period expired during the quarter. When we exclude this impact, G&A expenses still declined about $10 million quarter-over-quarter, and this was primarily resulting due to differences in timing of long-term incentive compensation expenses compared to the prior year. When we look forward to 2025, we expect that corporate G&A will average about $39 million to $41 million a quarter. But keep in mind, there may be some variability in our long-term incentive compensation plans that could push us above or below this quarterly range during a particular quarter. Let's talk about 2025 in more detail. As we disclosed in the press release, our 2025 adjusted operating cash flow guidance range is $830 million to $890 million, with a midpoint of $860 million. The midpoint of this range assumes the following

Operator: [Operator Instructions] The first question comes from John Ransom of Raymond James. Go ahead, please.

John Ransom: Hey, good morning. Looking forward to seeing you guys in a couple of weeks in Orlando, but Tom, the spending teacups are down, so you might -- Eric might be disappointed. The -- look, I'm going to try to do some math, which is always dangerous, but we're getting -- between the general agency good guy next year, this year, '25 and then the acquisition timing, we're getting something like a $40 million to $45 million pretax benefit from those two. Is that in the ballpark?

Thomas Ryan: I think look at the numbers, it's probably a little high, John, but not dramatically off. Probably a little higher than what we had at our midpoint.

John Ransom: Okay. And then just looking at the long-term funeral pricing algo, I mean you've got stuff coming out of the backlog at a higher price point, you got cremation mix, you've got other stuff. Is that -- is this just kind of settling into a CPI-like price increase when you net all that stuff together? And are you seeing -- were you implying -- and I don't know that you were, but is there some sign that maybe the cremation mix effect is starting to taper off a little bit?

Thomas Ryan: Take off in a higher rate, you're saying?

John Ransom: Meaning, is it still that 100 to 150 bps long term? Or is that going to hit a ceiling at some point where it doesn't -- it isn't as much of a drag?

Thomas Ryan: Yes, I think it will definitely begin to slow. I mean, that's what we're kind of experiencing in the last couple of years. It's probably -- more likely it could be closer to the 100 basis points than 150. And again, that's just math. But yes, that is fair to say. And I think on your pricing question, the same, I do think CPI is a fair way of how we look at pricing from a backlog perspective. And I think the real opportunity to step on the gas a little bit is as we're selling more preneed now with a general agency commission of the way they are that that's an ability for us to drive future profitability.

John Ransom: Right. And so lastly, I just kind of step back and look at your funeral and preneed revenue growth. It's probably, let's call it, against CPI, to call that 3%. So to grow at 5% EBIT margins, have to do a little more work. Is that how you're seeing it?

Thomas Ryan: Yes. I think, again, we expect that when we have the volume impact from the demographics that are in front of us, that you'll begin to see that revenue growth on the funeral side tip into the 3%, 4% and 5% and 1% incremental revenue growth, as you know, the incremental profit is pretty big. So we see a future of -- like we talked about next year, we think funeral margins percentages go up. And I would expect that we would see that continue to occur as the demographic impact takes hold.

John Ransom: Yes. So just said another way, and you can't make it too obvious for me, obviously, is that you think '24 is kind of the last year of the COVID pull-through and it gets more normalized starting next year, '26?

Thomas Ryan: I think there's still some hangover pull-through because there'll be -- it's just a diminishing amount. And I think the other factors take over market share, preneed demographics that those things will offset what little impact COVID will continue to have.

Operator: The next question comes from A.J. Rice of UBS. Go ahead, please.

Albert Rice: Hi everybody. I wondered if I could maybe ask a couple of questions here. You had some volatility again on the funeral volumes and comparable cases year-to-year, and we saw that in the second quarter as well. I wonder if you've been able to drill down and -- is this just the ebb and flow you get from month to month? Or is there anything going on there? And it sounds like maybe you backed off a little bit in your expectation for '25 case growth to now sort of flat to slightly down versus flat to slightly up. Is that because of what we've seen this year?

Thomas Ryan: Yes. I think that's correct. We're just seeing a lessened impact, what I'll call the ripple effect of COVID. The good news for the United States and everybody is the life expectation numbers are going back up. And so all the categories that were indirectly affected, going back to driving desks, suicide, overdose, a lot of those numbers are going the other way, thank goodness. And so I think that's got a little residual effect has got us to thinking we could still definitely achieve flat volume for 2025. But there's also a pretty good -- there's probably a good expectation that could be slightly down. So that's -- we have changed it. It is kind of a month-to-month and we see some volatility within months. I think if you take the fourth quarter this year, I think we were -- October was like down two. December was down two, November is down six, right? So you get some lumpiness as you get through these quarters. And I think that's actually just a continued factor of this disruption from COVID that makes it a little less predictable than it has been in circle.

Albert Rice: Okay. I want to delve into this switching from trust to preneed insurance sales. And you threw out 75%. I didn't know. Is that -- you think that you'll ultimately settle out with 75% of your preneed funeral sales being insurance related as you make this transition? I guess that's the question.

Thomas Ryan: Yes, A.J. So that -- I probably confused you a bit on this. We're not talking about this 75% is specifically related to SCI Direct. Because remember, SCI Direct was selling 100% trust. And we're converting state by state over time. And what I meant by the 75% is that the states that historically have produced 75% of our production, we've now converted. And so by having converted, we're beginning to compare back against insurance producing quarter. So I think we're kind of bottoming out, if that makes any sense from a production perspective, and going back up. Now we do still have 25% of the production. Those states still need to convert this year.And that's why I was saying, I think over the coming months, you'll see it stabilize. And as you get to the back half of the year, you should see SCI Direct continue to grow. Now on the core side, it's slightly different. We've been selling insurance predominantly, although we sold some trust product, too, historically, but we've converted to a new vendor. And remember, when we have our new partner, one of the things that we were trying to do is increase the number of sales productions, or I should say, the number of contracts that have underwritten insurance products. Because what you could do is you could sell a flex product or a trust product, but it doesn't provide the protection to the consumer. And sometimes the consumer thinks they have production, they may not because it's in the form of an insurance product, but it was a flex product. So we're trying to eliminate that confusion that could happen at the time of need and get people to write underwritten insurance production. And we're seeing some success. We're actually growing that component. And we anticipate that again, those production levels can begin to climb back up. We'll probably see again some mix of trust, but probably a higher mix of insurance than we historically have sold. So two channels, kind of two different reasons, and sorry for the long explanation.

Albert Rice: No, that's good because I think I did misunderstand it. When you made the conversion this new contract, I think you talked about potentially having about $900 million in business that you would move over annual business. Is that still the number with all the puts and takes? Or do you think it's a bigger number than that now at this point?

Thomas Ryan: Well, if you add in SCI Direct, we're running at a $1.2 billion annual clip. I think of that as $900 million from core and $300 million from SCI Direct. Remember, SCI Direct didn't write insurance before. So in that regard, we're going to write a lot more insurance. And again, the commission rates vary depending on the type of products sold. So it's hard to predict exactly what it's going to be. But overall, we've got better general agency commission rates that should be worked to our favor. And again, if we sell better products to younger people, you're going to get higher commissions, if you sell them to older, lower commissions is the way insurance commission rates were.

Albert Rice: Okay. And maybe just one final one for me. The comment on the deal. So you're guiding for 75 to 125 of acquisitions this year. I think you came into last year, if I remember right, with a similar target but ended up at 181, which obviously is a positive. Is there any comment about the pipeline? Is the pipeline still quite robust? Or is that 75 to 125 really reflective of what you see in the pipeline right now?

Eric Tanzberger: Hey A.J., this is Eric. I would say the pipeline continues to be robust. And if you remember, we've been saying that really kind of coming out of COVID. But these deals ebb and flow. You have to make sure that it's a win-win situation with the independent family and organization that is ready and wants to raise their hand for a liquidity event. Sometimes you have a start and stop in those situations. Sometimes it takes a lot longer. These are sometimes second, third, fourth-generation families that need to align accordingly, and all want to create the liquidity event. So the pipeline has been strong. And -- but in terms of closing the deals, it's going to ebb and flow based on that. But just as strong as I said last year that end up coming to fruition in terms of the timing of closing, I still am just as excited this year with the strength of the pipeline. So we're going to give you an initial guidance of 75 to 125. If it ebbs and flows in the right direction based on the strength of the pipeline, I hope we could exceed that again this year like we did last year. But again, a little bit of this is we want a win-win situation. We're not in a situation where we are going to force people to sell. We want to -- that family and that organization to be very excited about joining us and have all their ducks in a row and ready.

Albert Rice: All right. That sounds good. Thanks so much.

Operator: Our next question comes from Joanna Gajuk of Bank of America. Go ahead please.

Joanna Gajuk: Hey, good morning. Thanks so much for taking in the questions here. So a couple of -- same topics. So I guess, first, maybe a little more color on this funeral volume outlook. I appreciate it could be very lumpy month-to-month. But I guess any comments you might be able to give us in terms of January? Because it sounds like November was a weak month, but then, I guess, December might be a little bit still down year over year, but like how is January trending?

Thomas Ryan: Sure, Joanna. January, on the funeral volume side is down just about 3%, which wasn't very far off our expectation, quite honestly, but we expected a tough comparison. So that's where we are, and we're too early to sell.

Joanna Gajuk: All right. Because you also made it sound like you don't think that this is some sort of like a higher headwind from the pull-forward effect. It could be just like some other bigger factors going on. But is there anything else you might be able to glean into when you look at these numbers in terms of like why this November was such a weak month or is it some sort of like you said, volatility? Or is it more like the macro stop and the pull forward?

Thomas Ryan: Yes. I think it's a little of a pull forward. And like I said, it's not -- I guess, it's not technically the pull forward when I say we saw extended periods of excess deaths that had occurred maybe longer than other people anticipated. And you couldn't explain why, right? You just had -- you knew these categories of deaths are down, there could be cancer screenings, it could be overdose, all these different things, mental health issues. And now I think categorically, all the data that we're looking at is saying that the country is kind of healing, which is a good thing. And so maybe normalizing back. And that's the piece that's probably moved us a little bit is to say, hey, in a good way, those things are normalizing again. And now the factors that we would anticipate to contribute to our growth, which would be our strong preneed backlog, our competitive position in the markets to grow market share. And then just the general aging of America, that those three things will begin to be the more dominant talking point as we go forward, and we'll see less and less COVID impact, less and less excess deaths conversation. So that's kind of where we are. And again, we feel pretty good about where we are. We think it could be slightly down, it could be flat. I mean, it may surprise us to be up slightly, but it's pretty hard to predict right now. And we haven't seen a real impact from the flu season yet. We hear a lot about the flu, but really hadn't seen it, I'd say, in our numbers.

Joanna Gajuk: Right, yes. Because I mean, from hearing hospitals talk about Q4 was like a year-over-year -- the lower activity on the flu, but I guess generally is tracking higher, so I guess we'll see what that means for your business. So another topic, I guess, around just in Q1, the wildfires in California, specifically outside Los Angeles. Do you assume any impact of that lingering for when it comes to your Rose Hills location from those wildfires around -- in the communities?

Thomas Ryan: Yes. So first of all, we've had some employees that are impacted by this, and that's been our primary concern is their health and safety and getting them back to some whatever form of normalization can occur. So that's been mission number one. And I'd say as it relates to sales, it surely had an impact temporarily during the month, I think, is a distraction and people just getting displaced from their homes and all the like. So as that heals, our thoughts are, as it relates to preneed cemetery, it's a deferral and not a lost sale. So we think while there is some impact in January and probably into February, that again, as things normalize, we'll have the opportunity to bring more people and see some of our beautiful sections that we'll be opening up this year and should have a return to normalcy and some growth as it relates to California. But our thoughts are with everybody there as they continue to deal with an incredibly disruptive event.

Joanna Gajuk: Right. Yes. I guess there was like 200,000 people dislocated. So hopefully, that takes maybe some time. But when it comes to your preparations there, I guess, so you mentioned opening up new sections because last time you talked about there was a section that's being developed, but that kind of blocked off access to some other sections. So where are you on that front? Like, is everything kind of now open up and ready for the traffic to come through?

Thomas Ryan: I think it's on schedule to be. I don't think everything is there yet, but we would anticipate to have new sections that open up and allow the opportunity to have some of those great sections open up and -- to our consumers. So yes, that's still scheduled to happen, I don't think the fire will have any disruption there.

Joanna Gajuk: Okay. And if I may squeeze the last one. So there was a restructuring charge in the quarter. Can you give us a little bit of color like what was the driver for doing it now? And what exactly was happening?

Eric Tanzberger: Thanks, Joanna. This is Eric. The restructuring charge was a little over $11 million. I think the thing that you have to realize is culturally, as you've seen us over the past years and the past before that is really trying to manage this fixed cost structure in a high inflationary environment. And you're starting to see that in the numbers. As you see the margins and you see the fixed costs on the funeral side, the fixed costs on the cemetery side really start to be managed well. And the fruits of our labor are finally there over the past several years coming out of COVID, trying to manage it. This restructuring charge is primarily related to our corporate and home office and back-office functions. It really has nothing to do with the field. Any time that we go through and try to get better, this is one of those opportunities where we were looking at some things to introduce technology and to always strive to get better and more efficient. And it kind of crescendoed into 1 particular quarter, which caused it to be more or less a restructuring charge. You could see these things under the radar, but they're not big enough to just sum it together and call a restructuring charge based on our continuous process improvement type mentality, but this quarter, it did. And so of the $11 million, I would call it, 80% to 90% cash. And I would say that probably half of that is some cash savings in 2025. And that's how I'd describe it.

Joanna Gajuk: Great. That's very helpful.

Operator: The next question comes from Scott Schneeberger of Oppenheimer. Go ahead, please.

Daniel Hultberg: Hey guys, good morning, it's Daniel on for Scott. Could you elaborate a little bit, please, on the outlook for cemetery preneed sales in terms of how you think about large sales activity versus the volume component?

Thomas Ryan: Sure. I think for next year, what we've been looking at, again, we've guided to kind of this low single-digit percentage growth. And the way we're thinking about that is we'd anticipate the large sales that are hard to predict, as you know. So our anticipation is those would be relatively flat compared to the prior year. And so the growth is really going to come from the core production component of cemetery sales.

Daniel Hultberg: Got it. And the recognition rate looks a bit accelerated in the fourth quarter. Could you speak to how you think about that in 2025 as well as some perspective on cemetery margins for next year?

Eric Tanzberger: Sure, Daniel. It was higher than 100% during the quarter, and you're going to see that at certain periods of time. We try to get our projects done and spend the capital equally. But it does tend to -- as projects get started in the summer months across the entire network, it tends to kind of peak a little bit in the fourth quarter, and that's why you always have traditionally seen a little bit higher. On the global basis for the entire year, it's in the mid- to high 90s. I like that guide, frankly, for 2025. I think it's more of the same. I think we're going to spend about $160 million in the cemetery development area. They are high return projects. We love those projects. And I think the recognition rate will be somewhere between 95% and 100% or maybe the mid-90s. In terms of margins, as we get back to growing preneed cemetery sales in the low- to mid-single digits, you're going to see some type of margin expansion that we've seen. But I still think it's probably a low-ish, kind of 30% area that you're going to see for 2025, maybe a little bit above, maybe flat, maybe a little bit above 2024 levels because we still have a little bit of inflationary pressure, especially in the cemetery maintenance area. That still continues to come over, although we're doing a lot better job managing that. But generally, you're going to see some time low, approaching mid-30s over the next couple of years in cemetery.

Daniel Hultberg: Great. Thank you so much.

Operator: Our next question comes from Tobey Sommer of Truist Securities. Go ahead, please.

Tobey Sommer: Thank you. Can you just give us an update on your expectations for the funeral rule and kind of what you're hearing from your government people?

Eric Tanzberger: Well, there's -- there's so much going on in that world, I don't quite know what to say. I don't know anything that you don't know with the volatility that's happening right now with the change out of the situation in Washington. What I will tell you is we haven't heard anything specific related to the funeral rule since November or since the change out of the administration. We continue to think be supportive of the funeral rule, but we as you know, do not think some of the things that were proposed are going to have a material effect in any way to our company. And a lot of the things we think are good business practices perhaps, and we're well on the way of implementing those intelligently by market and uniquely based on what we think the value proposition is for certain prices online and experiences online. Our focus is on the customer. And our focus is on the customers' digital experience and maximizing that. And that's the good business practice, and we'll continue to do so. And if the FTC does something that changes that, I still don't think it's going to materially affect our business model as we move forward.

Tobey Sommer: Within cemetery, tell us your -- how are your expenses trending, in particular, labor? And how do you think that, that sort of comps year-over-year? Is that a tailwind or headwind?

Eric Tanzberger: You're going to have labor pressure always, but it's definitely less than labor pressure that we've seen and talked about during the COVID years and coming out of the COVID years. When you think about labor, it's a $750 million to $800 million spend for our company all in with benefits across all the 25,000 associates that we have. A lot of the pressure came over the past couple of years in the lower tiers of the labor market, which particularly would impact cemetery and us operationally trying to take care of 35,000 acres of cemetery property that we have. And so that was some of the pressure that we saw. I think you're continuing to see kind of mid-single-digit percentage pressure in labor on the cemetery side, and it's more a lower single-digit percentage on the funeral side right now. But both of those are -- feel a lot better than they did several quarters ago or a couple of years ago coming out of COVID that we described to you.

Tobey Sommer: If I could sneak a last one in. From a baby boomer perspective, what do you think that trend is likely to do in terms of incremental service volumes? And what's your best forecast for when it starts to fold into the P&L?

Thomas Ryan: Well, the first baby boomers turn 80 next year. And so we think within, I'd say, the window of the next few years, that you'll begin to see an incremental impact, really difficult to predict how that's going to roll out. But I do think it's kind of a stair step, a slow stair step over time as you think about the next three to five to 10 years. But that's the way we're thinking about it with taking historical trends into consideration.

Operator: Our next question comes from Parker Snure of Raymond James.

Thomas Ryan: I think we lost Parker.

Operator: We lost Parker, yes. Well, we just lost Parker. Did we want to wrap up the Q&A?

Thomas Ryan: Sure. That would be great. I want to thank everybody for participating on the call today. We look forward to speaking to you again in April. Have a great week and weekend.

Operator: The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.