Operator: Ladies and gentlemen, thank you for standing by. And welcome to the Carriage Services Second Quarter 2020 Earnings Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will follow at that time. [Operator Instruction] As a reminder this conference is being recorded.

I would now like to hand the conference over to Carriage Services Management. Thank you. You may begin.

Viki Blinderman: Thank you, and good morning everyone. This is Viki Blinderman, Chief Accounting Officer at Carriage Services.

Today we will be discussing the company's record second quarter results for 2020. A related earnings release was made public yesterday after the market closed. Carriage Services has posted a press release, including supplemental financial tables and information on the investors page of our website. This audio conference is being recorded and a archive will be made available on our website later today through August 3rd. Replay information for the call can be found in the press release distributed yesterday.

On the call today from the management are Melvin Payne, Chairman and Chief Executive Officer; and Benjamin Brink, Chief Financial Officer. Today's call will begin with formal remarks from management followed by a question-and-answer period. Before we begin, I would like to remind everyone that during this call we will make Forward-Looking Statements. Certain statements on this call, including financial estimates, assumptions or statements about our plans, future results, expectations or beliefs, may constitute forward-looking statements under applicable securities laws. We make these statements on the basis of our reviews and assumptions regarding future events, business performance and other factors at the time we make them and do not undertake any obligation to provide updates or revise any of these forward-looking statements after the date of this call, whether to reflect the occurrence of events, circumstances or changes in expectations except as required by law.

These forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially from the results expressed or implied in light of a variety of factors, including factors contained in our annual report on Form 10-K, quarterly reports on Form 10-Q and in our other filings with the SEC. Please note that a reconciliation of non-GAAP measures that may be referred to on this call to equivalent GAAP measures can be found in our earnings press release that was issued yesterday and on the company's website. And with that, I would like to turn the call over to Mel.

Melvin Payne: Thank you, Viki. The great blessing of my life is that I have found my way into the [funeral] (Ph) and cemetery business at age 48 when I cofounded Carriage.

It has been an incredible life journey, career journey, and indeed a labor of love, a love affair with our wonderful people ever since that has involved my entire family, my wife, my son, and my daughter who are big shareholders. The work our people do is more than meaningful, it is noble and it is necessary beyond description. It is therefore only appropriate, at this earnings release, this call and this transformative year of high performance we dedicated to all of our wonderful leaders and employees in the portfolio of businesses of Carriage who have risen to the challenge of two once in a lifetime crises over the last four and counting months. Our managing partners, sales managers, and their teams of employees dealing with the fear and uncertainty of the corona virus pandemic and the constantly changing mandated behavioral and social restrictions, family-by-family on the front lines of this battle against an invisible enemy have been, and are continuing to do no less courageous even heroic work than the front line army of doctors, nurses and first responders across America. Speaking for all of us, including our Board who are honored and privileged to serve you, our people.

We thank you and salute you. The second quarter earnings release published yesterday after the market was not about a record quarterly and first half performance. The release is full of substantive content about our company, and represents no less than a statement about the evolution of a radical idea we call our standards operating model, which when well-led, executed and supported, which is obvious in the second quarter and the first half has this capacity to unleash human performance potential, beyond what would normally be thought possible. When the current environment normalizes, we welcome all of you who have a curiosity and an interest to learn more about us and this idea. To visit our home office as our special guests or even better arrange a visit to one or more of our businesses to witness up close in personal, the uniqueness and what our company is all about, where it matters most in our local businesses.

With that, I will turn it over to Ben.

Benjamin Brink: Thank you Mel, and thank you to everyone for joining us on the call today. Today, we will discuss a record-setting performance for Carriage in the midst of an unprecedented operating conditions brought on by the CORONA virus crisis and the stay-at-home and other social distancing measures put in place to curb the spread. Over the past four months, our teams across the company have moved quickly to creatively adapt and embrace change in order to continue to serve their families and their communities no matter of the circumstances. We have remained vigilant in putting the safety of our employees and clients, families first while providing the high-value personal service that they have always been known for.

To deliver the type of operational and financial results in the face of these challenges is a testament to the leadership and professionalism we have across our company and demonstrates the commitment from everyone here at Carriage to make 2020 a year of transformative high performance. While we hope you take away from our comprehensive press release, and this call is that our results in the second quarter are not a one-time occurrence in the middle of a pandemic, but rather they are indicative of the growing earnings and cash flow generation potential of our portfolio of funeral homes and cemeteries. The foundation for these results and for our transformative high-performance expectations have been laid over the course of the last 21-months through a series of difficult leadership decisions and evolutionary update to our funeral home and cemetery standards operating model that prioritize compound revenue growth, improved alignment of our incentive compensation structure throughout the entire company, and the successful acquisition and integration of four high-quality funeral home and cemetery operation late last year that allowed Carriage to reach an important stage of critical mass. We view our second quarter and year-to-date results as the start of our good degrade journey part two, and we remain extremely excited for the future of Carriage. Now onto the results.

For the second quarter, Carriage reported the following record-setting performance metrics. Total revenue increased 14.4% to $77.5 million. Total field EBITDA increased 22.6% to $33.2 million, while total field EBITDA margin improved 290 basis points to 42.9%. Adjusted consolidated EBITDA was $25.4 million an increase the 32% and adjusted consolidated EBITDA margin expanded 440 basis points to 32.8%. Adjusted diluting earnings per share was $0.45, which was an increase of 45.2%, compared to the second quarter of last year.

Our year-to-date results included the following record-setting six month performance metrics. Total revenue of $155 million an increase of 13.3%. While total field EBITDA increased 14.2% to $63.3 million. Adjusted consolidated EBITDA of 48.3% an increase of 20.3%, while adjusted consolidated EBITDA margin improved 190 basis points to 31.2%. And while now quite a record, our adjusted diluted earnings per share for the first six months of the year increased 14.5% to $0.79.

In our same-store funeral segment revenue increased 2.3% in the second quarter, while the expense control we experienced in April continued for the rest of the quarter, which led to same-store funeral field EBITDA increasing 2.5 million or 15.9%. And funeral field EBITDA margin increasing 500 basis points to 42.3%. The increase in revenue was driven by 12% increase in the number of families we served in the quarter. Early in the quarter the volume increase was primarily related to COVID deaths in hot spots in the northeast and in New Orleans. For the balance of the quarter.

The increase of same-store funeral volumes were related to the long term trends of local market share gains we believe we have made since the beginning of 2019. In conjunction with the changes to our standards operating model to focus on three year compound revenue growth through local and market share gains. Volume increases in our same-store funeral segments were offset by almost $400 decline in our average revenue per funeral contract to approximately $5200. The worst of the decline in average revenue per contract occurred in April, and we saw improvement in averages as we move through the quarter and they continue to be about 4% to 5% lower here in July. The decline in average revenue per funeral contract was due to reduce service opportunities related to COVID social distancing restrictions, and an almost 300 basis point increase in our cremation rate for the year.

The increased cremation rate can be tied to the increase in COVID related deaths we experienced early in the quarter, which were mostly direct cremations and our focus on increasing market share by serving families in our communities. We do not believe the long term trend of 1% increase in our annual cremation rate has changed due to the Corona Virus crisis, and believe we have significant opportunity to improve our average revenue per cremation contract through our continued focus on cremation convergence. The ability to leverage a 2.3% increase in same-store funeral revenue into a 15.9% increase in same-store funeral field EBITDA was remarkable, as indicative of the operating leverage as inherent in our funeral home businesses. Upon a deeper review of our portfolio, the margin improvement in our funeral home businesses was broad based, as we experienced a high degree of expense management, no matter if your business was in a COVID hotspot at a normal level of quarterly revenue, or if they were negatively impacted from the Corona Virus restrictions. This broad base of transformative high performance can be directly correlated to the challenge we issued all of our managing partners earlier this year, to improve margin performance, and the announced change to reduce the being the best annual incentive for any managing partner whose business did not achieve the EBITDA minimum standard.

Based on our analysis of our portfolio and witnessing the rapid change that has occurred in our local businesses, we believe that focus on expense management and the change in behaviors we have experienced in the second quarter are sustainable into the future. In the second quarter, our same-store cemetery segment revenue declined 11.6% to 11.7 million. Same for cemetery field EBITDA declined 23.6% to 3.7 million and cemetery field EBITDA margin declined 490 basis points to 31.7%. Year-to-date, same-store cemetery revenue declined 7.7%, same-store cemetery field EBITDA declined 19.4% to 6.8 million and cemetery field EBITDA margin declined 440 basis points, the 30.1% Our cemetery performance was negatively impacted due to the decline in pre-need property sales, from the stay at home and other social distancing orders put in place during the early stages of the Corona Virus crisis. A large portion of our decline and pre-need property sales is due to our inability to host families and celebrate the chiming holiday at our rolling Hills Memorial Park in Richmond, California in early April.

We were encouraged to see the performance in our cemeteries improved throughout the month of April. And that momentum has continued through the end of the quarter where June cemetery, revenue and field EBITDA were up year-over-year. Even as we have begun to see new restrictions put in place in many jurisdictions where we have large cemetery operations, our teams continue to find new and creative ways, including leveraging new technologies to serve our cemetery families. We remain encouraged by the current cemetery pre-need property sales trends this quarter, we believe the reduction in pre-need property sales in the quarter are deferred rather than lost sales. And we look forward to serving those cemetery customers in the near future.

We are also excited to welcome Carlos Quezada to our leadership team, we look forward to working with Carlos to take our cemetery sales performance to the next level, with higher growth rates at higher end sustainable field EBITDA margins versus our historical performance. With our most recent acquisitions of three large funeral and cemetery combination businesses, we believe this is the right time for this leadership position at Carriage. As we see significant opportunity for improved performance across our entire cemetery portfolio. At the beginning of the year, we outlined a three-year milestone scenario and stated that the first six months of 2020 will be focused on integration of the four large acquisitions we made at the end of last year and the first part of January. Given the size and scale of our acquisition activity in such a short amount of time, we knew it is critically important to successfully integrate these businesses early this year, while we can never predict the unprecedented operational challenges brought on by the Corona Virus crisis, we are proud of the results of these businesses and as a whole, they are ahead of our expectations for the first six months of the year.

In each of these businesses, we have seen positive momentum and performance improvement almost on a monthly basis, particularly in the areas of cemetery, pre-need property sales and field EBITDA margins, which was evidenced by the 500 basis point improvement in acquisition funeral field EBITDA margin to 41.2% and the 590 basis point improvement in acquisition cemetery field EBITDA margin to 35.4% in the second quarter, compared to the first quarter. We remain excited for the future opportunities for these acquisitions and we will continue to focus for the remainder of the year on integrating each of them onto the Carriage platform, which will lead to improved organic growth rates and higher and sustainable field EBITDA margins. We expect these businesses to be significant contributors to Carriage’s improved organic growth rates at higher of adjusted consolidated EBITDA and adjusted free cash flow margins in the years ahead. Our discretionary trust fund had a return of 22.3% in the second quarter, which brought our year-to-day performance through negative 5%. Since Carriage began to actively manage the majority of our pre-need trust assets in the fall of 2008, our compound annual return is 12.8%.

Over the course of our 12-years of managing these assets, we have always taken a long-term and patient view of our investment portfolio has been most active in times of significant market dislocation. We have used periods such as the 2008, 2009 financial crisis, the downgrade of the U. S. credit rating in August of 2011 and the energy crash in late 2015 to make significant reallocations within our portfolio that have led to higher long-term capital appreciation and higher reoccurring annual interest and dividend income. In each of these periods, the successful repositioning of our trust fund portfolio translated into corresponding increases in reported financial revenue and EBITDA here at Carriage.

The execution of our most recent repositioning strategy in the midst of the Corona Virus crisis, market crash has positioned our pre-need trust portfolio to be more resilient in the short-term and produce higher capital gains and significantly higher amounts of recurring annual income over the long-term. Over the course of the past four months, we have invested over $62 million of capital in our Trust Fund portfolio and grew our re-occurring annual income by 68% to $14 million annually, a record high amount. This $5.7 million increase in re-occurring annual Trust Fund income will lead to sustainable annual increase of $3 million in reported financial revenue and increase in financial EBITDA margin to 95% and contribute an additional $0.10 of earnings per share annually to Carriage. We began to see the increases reflected in our reported second quarter cemetery trust earnings, which increased 45.8%, compared to last year, primarily from the significant increase in earned income from our cemetery perpetual care trust. This type of increase will be consistent throughout the rest of the year and into 2021.

On a pro forma basis, including non-GAAP add backs for acquisition costs, severance expenses and COVID related natural disaster costs, overhead for the first six months of the year was flat at $15.7 million. Overhead as a percentage of revenue continued to fall and it was 10.1% through June. The strong operating performance in the second quarter allowed us to fully accrue for both field and corporate incentive compensation through the first six months. An important component of our decision to partner with the four large acquisitions made at the end of the year was the ability to support these businesses without a large increase in our overhead platform. Our ability to leverage our overhead platform in the future will be a key driver of growth in our adjusted consolidated EBITDA margin.

We are blessed to have an amazing team here at our Houston support center who have been able to provide first class support to our businesses, to drive digital transformation and produce a timely set of financial statements, pretty much from the comfort of their homes. We will continue to make the necessary investments in this team and infrastructure to support our growth and accelerating competitive advantage for many years to come. Our strong operational performance in the second quarter, translated into a 90.1% growth and adjusted free cash flow to a record of $17.9 million and adjusted free cash flow margin improved 920 basis points to 23.1% in the quarter. For the first six months, adjusted free cash flow grew 60%, to $30.5 million and adjusted free cash flow margin improved 580 basis points to 19.7%, both of which were also records. This exceptional free cash flow performance is indicative of our ability to generate high and sustainable amounts of recurring cash flow that provides Carriage with a significant amount of financial flexibility.

We expect our free flow growth and expansion of our free cash flow margin to only accelerate once we execute a senior note refinancing transaction in the second quarter of next year, depending on market conditions. We are confident in our ability to execute this transaction, given the continued momentum in our operational performance over the next year, our rapidly improving credit profile, current credit market conditions and the trading performance of our current 6.65% senior note, since issuance. We expect this refinancing to translate into a minimum of $8 million annual cash interest savings to Carriage. Our strong free cash flow performance in the second quarter also allowed us to continue with our de-leveraging program as we pay down a total of $24.4 million of debt in the quarter, including cash we held on our balance sheet at the end of the first quarter. Our total debt outstanding was $508.5 million at the end of the quarter and our total debt to pro forma adjusted consolidated EBITDA leverage ratio was approximately 5.5 times.

Current total debt outstanding is approximately 498 million which brings our pro forma leverage ratio closer of 5.4 million as we sit here today. We will pay down debt at a faster pace over the second half of the year as we execute on our previously announced divestiture program. We expect to sell 14 to 15 businesses or properties for approximately $15 million of proceeds. The bulk of these transactions will occur before your end. We have already divested three businesses in the corona and our purchase agreements or letters of intent on four additional properties that were closed in the third quarter.

We have increased our adjusted free cash flow, and adjusted free cash flow margin ranges and our updated 2020 post COVID outlook to $46 to $50 million and 15.7% respectively. We expect that to be approximately 475 million and our total debt to consolidated EBITDA ratio to fall below 5% by year end. Over the next 12-months we expect to generate over 50 million in adjusted free cash flow have a leverage ratio call close to 4.5 times by the end of June next year. We reduce our adjusted free cash flow margin metrics in our previous release as we believe it is the most important metric to illustrate carried this transformation into a superior shareholder value creation platform. Over the course of the next 2.5 years using 2019 as our base here, we expect adjusted free cash flow to grow by 71%.

Our adjusted free cash flow margin to increase by approximately 540 basis points. The growing amount of free cash flow and improved free capital margin will give us the necessary financial flexibility to allocate to allocate capital to grow the intrinsic value - per share value of Carriage. Our focus over the next 12-months will be to continue to pay down debt and improve our credit profile ahead of the senior note refinancing next year. We also continue to make select investments and high return on invested capital internal growth projects primarily focused on cemetery inventory developments and funeral home remodels. Given our improve free cash flow performance in the second quarter we expect to spend 13 to 14 million in capital expenditures this year split evenly between maintenance and growth, which will be slightly higher than our previous expectation.

Additionally, this high amount of free cash flow coupled with our lowest cost of capital balance sheet post a refinancing transaction will provide Carriage the maximum amount of financial flexibility and allow us to pursue additional value creation capital allocation opportunities. The acquisition landscape remains highly favorable to Carriage and once this period of uncertainty caused by the Corona Virus crisis is over, we will believe there will be a number of owners of high quality funeral homes and cemeteries that will be looking to find the right succession planning solution their local business. The additional financial flexibility will also allow us to resume making opportunities share repurchases, should our shares continue to trade at what we believe is currently a significant discount to their intrinsic value. We are also pleased to announce the decision by our Board of Directors to increase our annual dividend by $0.05 to $0.35 beginning with the next payment in September, we will continue to have a strong and growing dividend as part of our shareholder value creation capital allocation strategy. In our press release, we provided an update in three-year milestone scenario and introduce an updated rolling four quarter outlook.

Based on our strong performance in the second quarter and expectations for continued high performance for the rest of the year, we increase our 2020 post-COVID outlook to 91 million to 95 million of adjusted consolidated EBITDA, 30% to 31% of adjusted consolidate EBITDA margin $1.50 to $1.60 in adjusted diluted earnings per share, and $46 million to $50 million of adjusted free cash flow. We expect to reach the important milestone 30% adjusted consolidated EBITDA margins here in 2020, which would be a record for Carriage a threshold that has never been achieved by another publicly traded death care consolidator. The increases in the ranges for 2021 and 2022, roughly right, outlooks are entirely due to the increase amount of recurring cemetery, Petro care income that will drive higher financial revenue and EBITDA over those years. We have reintroduced our rolling four quarter outlook as it syncs perfectly with our goal over the next year to show the true earning power of Carriage for a full four quarters and improve our credit profile, leading up to an expected [indiscernible] refinancing transaction next June. Over the next 12-months, we expect total revenue between 312 million and 320 million, adjusting consolidated EBITDA of 95 million to 100 million, adjusted consolidated EBITDA margin sustainably between 30% and 31%, adjusted diluted EPS of a $65 to $75, adjusted free cash flow growing to 50 to 54 million, adjusted free cash flow margin continuing to expand to between 15.8 and 16.8 and total debt to EBITDA leverage ratio falling close to 4.5 times.

As a reminder none of these outlooks include any acquisition activity. We firmly believe all of these milestone ranges are achievable over the next two to three years as we control our own high-performance destiny. Our second quarter performance was nothing short of amazing and was entirely driven by the execution of our managing partners and their teams. We believe the success of Carriage is predicated on strong local leadership and power to make the best decisions for their business. Our belief has vindicated by the extraordinary results our teams produced in the second quarter.

The transformative high-performance good grade flywheel effect is in full motion here at Carriage, and we look forward to reporting our progress to you going forward. And finally, I will leave you with this. Our amazing teams across the country care for families are dealing with the most tragic effects of Corona Virus. So when it comes to COVID, I encourage you to stay vigilant, stay healthy practices social distancing and wash your hands. And with that I will open up for questions.

Operator: [Operator Instructions] Your first question comes from the line of Alex Paris from Barrington Research. Your line is open.

Alex Paris: Hey guys congratulations on the Q2 beat and raise what a difference three months makes?

Melvin Payne: Thank you, Alex. It is a big difference.

Alex Paris: Yes.

I want to dive a little deeper into the two metrics that have been seen to be most influenced by COVID recently. Funeral averages and pre-need cemetery sales, you have put up a lot of information in your prepared comments, but I believe you said funeral averages in the same-store bases were down 7% in the quarter, improved throughout the quarter, but were still down 4% to 5% in July. Did I hear that correctly?

Melvin Payne: Yes Alex that was correct.

Alex Paris: Okay, good. And I'm wondering what impact COVID had on that, and maybe it starts with COVID volumes, have you disclosed or will disclose orders of magnitude you know how many COVID cases you handled at Carriage Services.

It sounds like their choice of disposition was direct cremation. Obviously that in and of itself would have an impact on the averages, but it you know maybe it a little bit more color there please.

Benjamin Brink: Yes so Alex I would definitely say, the volume increases we saw early in the quarter were really primarily related to the increase in deaths from COVID. Like I said in the hotspots, in the Northeast and New Orleans, a lot of that increase in April and the early part of May was due to those COVID related deaths. While we track that number, we don't feel as appropriate to release the exact number of COVID families we served.

As we went into May and into June, we continue to see that high level of volume increase, contracts volume increase on our same-store portfolio and I guess that was really driven by local market share gains. So, we believe we have been gaining over these past couple of years.

Melvin Payne: Alex, it is Mel. We did all kinds of breakdowns of the portfolio. We had 22 businesses and hotspots.

Those were in the five states Massachusetts, Connecticut, New Jersey, New York and Pennsylvania and they had a big quarter starting in April, that is 22 businesses. But if you looked at how much revenue those businesses increased as a group, it was a very substantial and they brought 107% of the additional revenue mostly, all from additional volume, because their averages were down over a thousand on average per funeral. About all the additional revenue 107% to the EBITDA so the margins went way up like a thousand points. But, then we had a large group of non-hotspots that had volume increases and their averages were down, but down maybe 20% of the COVID places. And they, they brought 117% of the additional revenue into field EBITDA.

And we saw other businesses, large groups that didn't have revenue increases from volumes and some of them had revenue decline. So, it is just a natural thing for a large portfolio. Some places were slow. But we had the expense management. And so, we actually had a group that had a revenue decline, a meaningful amount, and they increased their margin 500 basis points.

So what we saw was very broad improvement, and we did see normalization in the total average of close to 98%, 99% at one point. But then COVID is spreading, the taxes and other places and other restrictions, and so now the average is back down as a group. But we don't expect the outcome to be any different. We see broad performance and lots of feedback across the portfolio from a managing partners are directors. Our support that this is a different kind of company that it was 18-months ago, 21-months ago and that COVID is not the reason.

We are outperforming. It is all these other things and we are outperforming in spite of COVID is the best way I can describe it.

Alex Paris: That is all. Thanks for that additional color. So, just to be clear, you said you were back up to 98% or 99% said another way, average were down 1% to 2%.

But resurgence in some of the states in the month of July, it was down 4% to 5%.

Melvin Payne: Yes. It is gone back down, but we don't expect the outcomes to be any different.

Alex Paris: Got you.

Melvin Payne: We will see volume increases broadly and we don't think it is all - we know it is not all COVID related.

We have done a lot of things here to improve our competitive position. And our people realize, these standards, drives behavior and incentives and disincentives drive behavior. And over the last 21-months, we have got a lot of great behaviors in place, compared to what we had at that time. And so when you get a lot of great who's employees with the right incentives and disincentives good things happen.

Alex Paris: And then I would assume, in March, we are all taken by surprise by COVID.

Here in June and July, really July the resurgence of COVID, and some of these states, is that new to these funeral directors, and that they are a little bit better prepared for it. So, I would think intuitively that they should be able to weather that storm of increased social gathering restrictions, better this time than he did last time, the last time worked out pretty well?

Melvin Payne: You hit the nail on the head, we had a conference call with the Standards Council on Monday to go over the press release, because there's a whole page dedicated to them. And we have four or five in California, then four in California, because they were the first ones to deal with this. And then we get three in Northern California, one in Southern California. And this is exactly what they said.

You could have been articulating their firm conviction that look, we have been here before we learned a lot now we are more prepared than ever. Let's go back to work and get it done. And so I think you will find that same attitude throughout our portfolio.

Alex Paris: That is great. Alright, so that helps me with regard to funeral averages.

Same for cemetery was down 12% same-store field EBITDA in cemetery was down to 24% that just to be clear, did you say June? Same-store revenues in June, same-store field EBITDA was up year-over-year?

Benjamin Brink: Yes, so Alex, all that decline really happened in April, we saw the performance really come back strong in, in May, it was out even where we were in last year. And then June, we were up about half a million dollars in revenue and EBITDA in our theme store, cemetery.

Melvin Payne: So, I'm looking at here, Alex and in April, we were down 2.1 million. Same for revenue in the cemetery. In May, we were just up a little bit.

Call it flat and then in June, we were we were ahead $600,000, so that is the trend we see.

Alex Paris: Got you.

Melvin Payne: When Carlos gets here, that trend will become our big time friend.

Alex Paris: Yes, absolutely. Carlos, he has an impressive background, having been most recently at service corps in this area?

Melvin Payne: So, he has got very impressive background and when you meet him and talk to him, you will see why he is going to be a perfect fit here.

And why we are all excited about every single one of us.

Alex Paris: Great. I look forward to it. And then that within cemetery pre-need cemetery sales, obviously impacted by potential customers inability to come out to the cemeteries, and this was exacerbated by a really, really tough comp I guess the chimney holiday last year. Is that right?

Melvin Payne: Yes.

Alex Paris: And has that been improving in May and June and July?

Benjamin Brink: Yes, that is what I was coming. On April we were 2.1 million in the whole, May was about flat same-store center revenue. And then June we are actually up 600,000, which is 15%. So we don't expect to go back to April deficit. We expect to dig out of the hole and get it head by the end of the year.

Alex Paris: Alright. And then couples of my questions were answered in the overview comments. I guess I got one little book keeping sort of question for Ben. As roughly write range for 2020, with regard to the gap numbers that are in the back of the press release pre-tax income net income, tax expense include or exclude that $14.7 million impairment on good will in the first quarter and its corresponding impact on tax expense in the first quarter, which is actually a tax credit in the first quarter.

Benjamin Brink: I have multiple people motioning.

Alex I will follow-up with you on that question.

Alex Paris: That is fine. But thank you so much for this information. Thanks for the additional color.

Melvin Payne: You want to know for about technical accounting you should call me.

I'm just kidding.

Alex Paris: Alright, guys. Thanks again. Congratulations on the quarter and the guidance choice.

Melvin Payne: Thank you Alex.

Benjamin Brink: Thanks Alex.

Operator: [Operator Instructions] Your next question comes from the line of Chris McGinnis from Sidoti and Company. Your line is open.

Chris McGinnis: Good morning. Thanks for taking my questions and echo obviously great result and so congrats on that.

Can you guys just talk, some of the questions was that, you mentioned the market share gains we're seeing that is really kind of driving some changes, fundamentally what you talk about, what you know maybe the changes in those markets that you made around, the ability to drive those markets gains.

Benjamin Brink: Chris really pointing back to the changes we made. The update we made to the standards operating model in late 2018 and implemented at the beginning of 2019 to focus on three year compound, average revenue growth, eliminating a very rigid standard of average revenue per contract. There in 2019, allow people the freedom and the flexibility to continue to grow their, their local market share. And again, talking about a long-term change in behaviors that we have witnessed in Carriage that's certainly one of them.

Melvin Payne: So Chris Mel. So I mean, you would have to go back and read the 2018 shareholder letter that talks about the diagnosis of all the low performance and the declining trends and what were some of the obstacles and how the standards council - we went through an updating and rebooting of all the standards. And what we did was we eliminated a standard call, average revenue per contract that was causing a lot of our funeral homes, managing partners to not seek or even to take lower average business like cremations, where they at least had an opportunity to turn it into something better. So they were not, there were living a lot of market share in the market, when we eliminated that. And then we changed the incentives earlier this year about the margin, and then in the meantime, we have made a lot of changes in the managing partner ranks over the last 21 months as well as the directors of support who support them.

So, we had a lot of talent come into this company that are high performance, and then a lot of changes in incentives and in performance standards. And when you combine all that, you've got a lot of entrepreneurs out there figuring out what to do. So, we don't have to go figure out what to do. When we figure it out, you don't get buy in and you don't get the result that you're seeing right now.

Chris McGinnis: Sure, sure.

Okay. No, that makes a lot of sense. And I do remember the 2018 letter, that is when my daughter was born in. I think it was the same week so.

Melvin Payne: Yes I mean this is not - this didn’t happen overnight and we got an incredible group of talented entrepreneurial people in charge of these businesses.

And I think, probably Wall Street doesn't have a great understanding of just how entrepreneurial this business can be at the local level. And they are coming up with ideas of how to grow market share that we couldn't dream up in a million years. I mean, I heard about one business up in Kentucky blew away their community because the family - his favorite holiday was Christmas. So, we had Christmas in June. All place was decorated with Christmas decorations blew away the community.

Well, you can't come up with ideas like this up here in Pentagon and push it down. But, when they come up with ideas like that world gets around.

Chris McGinnis: Sure. And I guess in the same vein, just on the expense side, obviously it is very helpful for driving the margin improvement. Can you just talk about maybe some of the things that they are - where they are saving the money at the local level to drive the setup?

Melvin Payne: So, here is what we have noticed.

We have noticed. I mean, the business is a very social people business in a local communities. And for that reason, you have a lot of older people, maybe retired police chief or school principal as part-timers. And a lot of these mandated restrictions did not allow people over 65 because they were in vulnerable groups for example in California. And so, they were mandated not to work.

And so, a lot of our people were able to get the service done beyond expectations without the same amount of SMB and also our directors support, we are able to support our analytical group without travel and entertainment. So, you had a lot of performance happening without the same degree of cost. And we believe that will lead to - plus you had all the focus on cost management. We believe that will lead to a higher level of total portfolio margin performance in the future.

Chris McGinnis: Okay.

And I guess those restrictions, not everything is going to be brought back online is what I guess is kind of what -.

Melvin Payne: Well when your managing partner owns a business and actually what they can do. They are going to do what is best for the business.

Chris McGinnis: Sure. And then just one last question around the acquisition improvement needed on there.

And I think it is kind of you said it was ahead of your expectations, what is driving the performance of those acquired assets and maybe performing as well as they are just, something changed from your kind of guidance, or wisdom?

Melvin Payne: How about everything changes? We take a great family franchise. And we put our framework on it and support and, and a lot of things change and what doesn't change is the local people. But the performance, I mean, we have all these support services we heard from every single business. I don't know how they would have endured this crisis without being part of Carriage . And so being part of us turned out to be a blessing and I have heard that over and over from the former owners, from the managing partners.

This has been a blessing for some and at the same time, they are turning into great partners they want to contribute. They see what the standards are. And they don't want to be a weak partner, they want to be a strong partner. So it is sort of win, win.

Benjamin Brink: And Chris my follow-up is when we talk about these acquisitions, because they will happen to want to kind of four combined, but really Fairfax, stands out in the size and scale of that business.

And we are starting to see, end of the first quarter and here into second quarter, you really started to see the emergence of the earning power of that business. And that has a real big effect on the margins and our acquisition portfolio.

Melvin Payne: Yes [indiscernible] in Dallas area is really kicking in Lombardo and Buffalo is kicking in. The one that has been the slowest is the one we expected to be because of all the restrictions in Northern California. But it will come around as well.

Chris McGinnis: And I guess, just given the increased cash generations, the ability to kind of reduce your leverage. I know it is early still, but just expectations about maybe when you would step back in the market on the M&A side again. Thanks.

Melvin Payne: I think it is very important that you do what you say you are going to do. We are going to deliver, next year we are going to pay our debt down fast.

And that is what we said we were going to do. So as we pay it down and refinance, we will have moderate leverage. I have no problem maintaining moderate leverage, but I don't really see us being back in the market before we do what we said we were going to do.

Chris McGinnis: Great. Thanks for taking my questions and good luck in Q2.

Operator: Presenters, I'm showing no further questions at this time. I would now like to turn the conference back to Melvin Payne.

Melvin Payne: Thank you very much. There is one last piece of business I would like to attend to. We want to wish our very best to Bill Goetz.

He was here six months. He made a difference. He made a lot of friends. He is a great guy. He was the first one that reached out to me yesterday by fax to congratulated me Carriage on our quarter.

And, and I really appreciated that. And I texted him back Bill, whatever you do, don't sell your Carriage shares. He texted me back. Don't worry Mel, I won't. With that.

We will let it go and look forward to reporting our third quarter. Thank you.