John Ransom with Team Ray Jay. I've got Aaron Foley of Service Corp. They sent him alone, so you guys be gentle on him. Welcome to the 44th Investor Conference. I remember when we did it at the Don CeSar, and they had one elevator. That was 1997, so we've come a long way. I believe Service Corp is the longest-standing attendee at our conference of consecutive years. Somebody told me that. I don't know if it's true, but I'm gonna pretend like it is 'cause it's a good stat, so we've covered this name for 20-plus years, seeing the stock go from basically $1 in the dark days of the late '90s to $70. So it's been a good ride, and it's good timing. It's a little controversial this year, you know, with a good debate on the stock. So no slides. Aaron's gonna make some opening remarks. I've got a few questions, and we probably will have some time at the end for questions from you guys. So, Aaron, take it away. Thank you, John, and happy to be here, and thanks for everyone's time. Yeah, I mean, that's a great opening, controversial stock. We've definitely seen a lot of volatility over the past several years. I would say from 2019 to today, our company, through the volatility, has grown tremendously. In the early days, we were a little worried about how COVID would impact our business. We saw pre-need cemetery volumes drop tremendously. We thought the world was falling apart at the beginning, but what we found out that COVID really ultimately has made us a better company, and I'm sure we'll talk through a lot of those aspects today, but as John mentioned, we were founded back in the 1960s and ultimately grew through a clustering strategy that hadn't been really employed within the death care industry. And we've grown a funeral and a cemetery segment to be the largest in the industry, pretty much by far here in the U.S. We have about 1,500 funeral home locations. We've got about 450 cemeteries across the U.S. and Canada. To John's point earlier, where we were a $1 stock back in the late 1990s, that was really under an EPS-accretive roll-up model that not only SCI, but really the entire industry had followed and grew just much too quickly, paying much too high prices for the locations that we were acquiring. Really no focus on return on invested capital. We actually grew, if you can believe it, to be in about 22-23 different countries, 4,500 locations across those countries, across South America, Europe, Southeast Asia, and Australia. But, you know, through that process, of growing and then realizing, we needed to actually also pay our debt, we found out that, you know, that probably wasn't the right strategy for us. Spent the good part of the early 2000s, from 2000 to 2005, really trying to refound our business in the U.S., spending, those four or five years to really integrate the last 30 or 40 years of acquisitions that had had occurred. We divested of all of our locations, outside of the U.S. and Canada and, really kind of got our balance sheet back in order, if you will. And in 2006, really kind of, I'd say actually 2004, 2005, kind of started the current strategy that you see us, undertaking today that's really kind of helped drive an 8%-12% earnings growth framework that we've done over that time. And that's been through acquisitions that we've done. In 2006, really kind of started our acquisition strategy, acquiring our largest competitor at that time, Alderwoods Group. Went on to purchase SCI Direct. We purchased Stewart more recently in 2013. We also started our share buyback approach as well back in 2004. We've gone from about 340 million shares outstanding in mid-2004, down to about 100, just over 150 million shares outstanding today. We do pay a dividend as well. Did you apologize to President Biden about that? Yes. No, you did. Okay. Thank you. Thank you for that, John. So, yeah, that's ongoing. You know, the last couple of years, though, COVID definitely has thrown a wrench into things. You've seen, obviously before Biden had an impact in 2020, 2021, and 2022, the business just really was positively impacted by COVID and generated a tremendous amount of cash flow during that time. You've seen us have quite a trend of share buybacks as well during that time. Last year, we did $660 million of share buybacks because as we look to deploying capital outside of acquisitions, which we view as our best and highest use, incurring capital for cemetery development and other maintenance purposes, the excess capital then goes to share buybacks. But it's been a very. It's outside of the COVID years. It's been a pretty stable business. I would say, like many out there in the industry, we're still wrangling with it ourselves and trying to figure out and understand where volume is going, and we've got approaches that we've come to ultimately land where we think today, as we look at 2023, where we think we may ultimately end up, but you know, I'll be the first to tell you, the last two or three years, as we've looked at COVID transpire, we've gotten it wrong every single year. I'd say our confidence interval has probably, you know, shrunk some, that we're feeling a little bit better now, but you know, it remains to be seen, and we'll see kind of where it ends up. So if we were to take 2019 and compound it at 10%, and land at 2023, your implied guidance is, I think, $0.60 above where that would be $3.60 versus $3, roughly. So maybe talk through the components of that $0.60 elevated EPS baseline, you know, what's contributing to that. Thanks. Sure. We talked about it some back at the May Investor Day. And if you haven't had a chance to take a look at those slides, it covers a lot about our strategy. But when you look at the differential above that, 10% compounded growth that John was talking about, about 75% of that really relates to some of the improvements, enhancements, and efficiencies and effectiveness of our sales team and really driving our pre-need cemetery sales efforts. As you think about SCI as a whole, on the funeral side, we really don't have the ability to drive volume. That's something that's completely out of our control. So really, as it impacts current period of earnings, what we do have the ability to impact is our pre-need production. Driving efficiencies and effectiveness on that front, which during COVID we had the ability to really grow and learn through that process. We'd already started the process of investing in different technology to improve the marketing efforts, to improve the sales counselor effectiveness and efficiencies. Actually, if you look back to 2019 to today, I think we've grown production to $6-$700 million with 600 fewer sales counselors. Driving that 75% is our counselors really being forced to utilize Salesforce and then us having the ability to understand which counselors are being more effective, which counselors aren't, to be able to figure out which counselors are better at which type of leads, whether it's seminar, website leads, or direct mail. We were able to figure all that out pretty effectively to build a better structure underneath to help drive better sales. Our marketing teams, we've spent a lot of capital there to improve some of the data analytics and platforms they have to identify and drive leads on that front, just better and more leads on that front, so that's really driving what I'd say 75% of that, you know, $0.60 differential. I'd say, you know, another 10%-15% has been this deployment of capital to share buybacks that we've been able to do to help drive just lower denominator of shares in that calculation, and then finally, just looking at some of the cost efficiencies, like the lower, the fewer headcount on the sales counselors and such. One thing I would add to that is if you look at your guidance and at least our model, our funeral volume estimate is probably 10% above what it would have been on kind of a normal 1% compounding. Maybe just touch on, you know, Tom's unfortunate, unhealthy America thesis and kind of what you're seeing as the excess deaths have been a phenomenon all over the world, just kind of what you're seeing with that and why you think that might continue. Sure. I guess let me start. Our perspective of 2023, as we compare to 2022, is a low, mid-single-digit percentage decline in volume. I'd like to say that we have the perfect crystal ball that can tell us exactly what it's gonna be, but we looked at various analytics to get there. At kind of as Tom mentioned on the call, we have an expectation from 2019 being our last kind of normal year out there for funeral volume that we'd grow at 0.5%-1.5% or so per year, and then we add in whatever amount of acquisitions that we've kind of done during that period. The next piece of detail that is somewhat strong, but even then, there are biases or details associated with COVID deaths that have occurred during those years and our view of what our capture rate of those COVID deaths have been. As we've looked over 2020, 2021, and 2022, you've probably also heard us talk about the pull forward of deaths. So people who would have passed away in, you know, 2023, 2024, and 2025, and so on, had there not been COVID, we've modeled in some amount of headwind looking forward into those years associated with those deaths that have been pulled forward into these COVID years. And what we've been left with as we've looked at the information is these excess deaths that we've seen come through very strongly. And I'm sure many of y'all have read articles around whether it be, you know, diabetes rates have been increasing because obesity rates have been increasing. We've seen the incidence of cancer, you know, deaths, unfortunately, increase to some degree as well because during COVID, conditions that should have been captured at stage one and two, unfortunately, were captured at stages three and four and much more difficult to treat. Also, we're seeing the mental illness, whether it be through suicides, whether it be through increased alcoholism, increased drug overdoses. Another anecdote is, you know, if you drive the streets of Houston, it just seems that people are more angry on the roads, and you're just seeing more incidents of accidents and, you know, kind of traffic fatalities, unfortunately. And so when we looked at 2022 and we, you know, captured what we viewed as, you know, the amount of excess deaths there, that's something we just didn't feel right just kind of sticking our heads in the sand and saying, "That's something that's just gonna completely go away." We don't expect it to be at the same level of 2022 in 2023, so it's gonna come down some. But kind of all those components together get us to where that mid-single-digit decline in volume's gonna be. And I expect, you know, over time, hopefully, that excess death dynamic is gonna moderate and completely go away, and then kind of we'll be back on a normal trend. There was a lawsuit, an accrual in the Q4. I think they caught some people by surprise, and you know, the team made an estimate based on expected cancellations. Mm-hmm. So how are cancellations running versus your accrual? And maybe you could just kind of level set people on what this issue is before we dive into the specifics of. Sure. That question. Thanks. Sure, so this is specifically related to our SCI Direct business, and that's about 5% of our $4 billion of revenue, about $200-$250 million of revenue, and it's really our only piece of our funeral business as well that we're delivering something on a pre-need basis before the time of death. And so usually when we talk about our pre-need sales, it's where we're selling the funeral service, the casket, the flowers, the catering. We collect those pre-need funds before the time of death, and then we put those funds into trust in accordance with state laws and regulations. And as I mentioned, SCI Direct, we're delivering, it's really one of three piece. It's three-piece contract. There's an urn kit that gets delivered at the time of sale. There's an away-from-home travel protection product that's also being delivered at the time of sale because our obligation has been completed on that. And then the third component is the actual cremation service itself, which obviously we've not provided that, so that is being trusted. And specifically, when you look at California, there were two kind of conflicting laws there, one that clearly states that if you've delivered a product, there's no need to trust it. And that's the law that we've been following, what SCI Direct had been following before we purchased them, and we've been audited on over time as well. Well, there's another law that's out there as well in California that essentially says all those three components of that contract are collateral components, and until all three have been delivered, all three components need to be trusted. So as we've gone through this process, in California and as well as in Florida, which is under very similar circumstances, we started working with the regulators, started working with the legal groups, and ultimately got to a point, actually quicker here in Florida, to say, "We have an expectation and kind of a settlement in place," if you will. Actually, last week, there was a press release associated with that kind of stipulating out of the 80,000, 90,000 or so contracts. Again, this charge related specifically to contracts that have been sold over the last five to 10 years. But of those, we expect about 10,000 of those contracts to potentially be refunds back to the customer. We now kind of start a process where we're going to be sending out mailers to these customers that have return labels that expect them to return to us the urn, as well as communication to explain that when they do this, they're going to be losing their price guarantee on these contracts that they put into place over the past five to 10 years. So I'd expect that that 10,000 figure would be coming down. We use that same kind of approach to extrapolate into California, and that's kind of how we came up with the one-third of the $65 million charge that we talked about was gonna be legal and investigative cost, and the other two-thirds was really relating to these refunds and cancellations. It's accounting basically says, "Once you get to a certain point in the negotiations and discussions, you need to go ahead and put a reserve in place." We went ahead and did that. One thing I wanna make sure is clear that I think may be a little confusing. The $65 million relates to historical contracts that have been sold, and that will be managed and taken care of. Eric also mentioned about a $0.05 or $0.07 headwind, as we look forward 2023 and beyond, associated with changes in our business practices in Florida and California associated with now instead of, you know, delivering, we're holding onto them and trusting those until delivery. It's really deferring those earnings, until 8, 10, 12 years down the road when we ultimately do provide those products and services. So to be clear, the accrual, cancellations are still running in line with the accrual? Yeah. No, it is. And. Okay. You know, one thing I do also wanna mention is, you know, this line of business. We've gotten, you know, the best customer reviews pretty much from any of our lines of business. And at the end of the day, it's not necessarily that anyone has been injured associated with. There's not really been a loss because we've continued to provide, you know, everything in accordance with kind of the contractual terms. Just the other obvious thing, if I return a 10-year-old product, if I wanna rebuy it, I'm probably gonna pay, what, double? That's right. So there's an incentive. So that's going up. The incentive, so if I remember, I think of the $64 million, one-third was sunk cost and two-thirds was cancellation. Yeah. Which. Which could go up or down. Yeah. Two-thirds of the 64 could go up or down, but it's a one-time backward-looking accrual. Yeah. Okay. The other fun issue to talk about, FTC, is back, but not a lot seems to be known. But maybe you could talk about, you know, what's going on there, what the industry, what your commentary was, and then kind of next steps. Thanks. Sure. So every 10 years, the FTC requires a review of the rules that they have in place. I think they look over 40, 45 different industries and have different rules in place. And so the Funeral Rule was up for evaluation in 2018. They opened the comment period in 2019 to initially say, "Hey, do we even need to look at this Funeral Rule?" And after COVID came into play and all the noise, it wasn't until June of 2020 that this comment period ended. About 700, a little over 700 comments were received. It wasn't really until this past October 2022 that the commissioners came out and said, "Okay, we've had a chance to look at these, these responses over the last two and a half years or so, and we're gonna open the rule up for potential modification." They asked a list of about 40 different questions. Ultimately, through these lists of questions, you can gather that what they're looking for is funeral homes be required to put their pricing online, so just as it relates to the process itself, the comment period for the 40 questions closed in January of this year, so they're now gonna be using the balance of this year, likely into the next year to evaluate those comments and then come back with, you know, an expectation of what that rule should look like. And then they're gonna be opening a public hearing process to, you know, evaluate and ultimately conclude on a rule. But at the end of the day, you know, our expectation is most likely they're gonna expect prices be put online. Already, customers are required to be, provided with a General Price List when they come into the location. What we've been doing over the past, really three, four years as this process has been transpiring, has been working with our marketing team, working, in conjunction with the improvement of our websites to help drive pre-need leads, also look at different approaches and processes to, incorporate that pricing online. And when you think about our 1,500 funeral homes, about half of those funeral homes already have pricing measures in one way or another already incorporated into those websites. You know, and at this point, we don't expect that there's gonna be too tremendous big of an impact associated with the Funeral rule coming into play. We do kind of in addition to looking at Google star ratings and making sure that our locations are performing up to expectations and standards, we also send out J.D. Power surveys and request responses. We get about a 30% response rate, and about 97% of those who respond say they would recommend our, you know, business or our services to someone else. So again, it seems like the FTC potentially is coming out and trying to fix something that there doesn't seem to be an issue for. Kind of going back to the Ransom math that we were talking about earlier, when you look at all of the disputes or issues that the FTC receives from consumers, it's like in the basis point type range, how many come from the funeral care industry. So, you know, one factor maybe to drive home for people looking at the stock is, you know, your funeral volume simplistically is separated into at-need versus pre-need. And what always strikes me is that the funerals coming out of the backlog have a higher ASP than the funerals, for people who haven't planned and they walk in. So maybe talk about why the backlog funerals, you know, are a good guy. And what's your expectation is with that mix going forward? Is or the% of backlog stable, or do you think it'll keep growing? And then is it a function of the compounding and the trust, or is it a function that at the point of sale, you're generally selling a higher price point to begin with? So maybe just kind of talk about that a little bit. Thanks, John. I think it's honestly probably a portion of all of that, really. If you look at the investor day presentation I was mentioning back in May, there are a few slides at the back where we look at those contracts coming going either into the backlog or coming out of the backlog and how those pricing average trends compare to what the at-need business is today. And just to level set, out of every 10 services that we perform, six of those services already are just at-need services coming in. Two of those four have a pre-need insurance contract backing them, and two of those four have a trust contract backing them at a very just high level, simplistic approach. And so the contracts going into the backlog, to your point, are a little bit higher quality. What you find is, when they do come in and do a pre-need, they're able to pay over, let's say, 48, 60 months type basis. And so in that type of scenario, they may be willing to spend more. What you find sometimes too is people are more willing to spend money on themselves than maybe their family members would at on an at-need. Thank you, baby boomers. Right. So that's an aspect of kind of good quality going into the backlog. Over time, we have a targeted real return expectation on those trust contracts of around 4%-5% in excess of inflation. Obviously, 2022 didn't help us with that, because both the pieces were going the wrong way. But over time, those 10-year returns have been, you know, north in the high single digits. And we've been very, very fortunate and I think very disciplined in that investment approach as well. And so I think that those components have helped to drive that differential between what's coming out of the backlog versus what's going in. So this is a little in the weeds, but if we think about a trust-funded funeral contract, for example, let's just say hypothetically it's a $5,000 contract. Mrs. America pays in $5,000 over 5 years, $1,000 a year. I can do that math. Good math. So on paper, that $5,000, if it were truly the full amount, if it compounded at, say, 6%-7% a year, it would get to a higher number than the number that you were. So you were able to pull some of those dollars out of the trust either in the form of a management fee or excess funding. So typically, again, using the $5,000 example, how much really is in there? How much has to be in there to satisfy the letter of the law? Then how much can you kind of pull forward for cash flow reasons? It's not revenue, but it's cash flow. Just kind of talk about that dynamic, if you would. Sure. So every state is different with their trusting laws. I mean, you've got Florida, which on the funeral side actually has some of the more lenient trusting laws. I wanna say it's around 70%. And then you've got several. 'Cause we believe in freedom here. There you go. Okay. Freedom. Yes. So you've got that, but you've also got several states that require 100% be trusted. But on average, it's about 85% needs to be trusted. We're able to collect 15%, which is what we term retainage, that goes to help defray those selling costs associated with those contracts as well as the maintenance of those contracts over time. And you know, when I'd say so the remaining 85% gets trusted, stays in there for that 10 years. It grows at that targeted 4%-5% growth over that time frame. You know, I think that the way that we look at it is not we don't look at the trust fund income kind of standalone. What we do is kind of go back to that. What is a contract on an at-need basis? What are we earning from a sales average on that contract on an at-need basis? And then when we look at that pre-need contract, what is that pre-need contract with the principal that's gone in, the 15% retainage, and then the income on top of that? How are we doing in the totality of those three components versus that at-need contract? And are we making sure that we're keeping up with what that average should be? And over time, we are. And the reason I say that is, you know, if we sold a contract 10 years ago, it may be at $4,000, a $4,000 contract, and it matures today with the earnings and everything on top of it, gets us to the $5,800-$6,000 average that we're seeing coming out of the backlog. When you look at our at-need average, we're at $5,800. If we were to see that deviate, you know, tremendously, up or down, that's where we're, you know, gonna go in and pivot and maybe retrain or change our strategy over time. But what we found is, you know, over the long term, because of the 10-year kind of time horizon that these contracts have, it's worked for us over the past, you know, two or three decades or so. And, you know, I expect that we're gonna continue pursuing that path. Obviously, there's no guarantee that the markets are gonna perform the way, you know, we hope or expect. But, over the long term, it's worked historically. One more question on that. Let's say that it was a $4,000 contract and you have $6,000 in the trust. What's the letter of the law? What's the minimum you would have, versus what you would normally have? Like, is it 85% of $4,000 is the minimum? over the entire country, yes. It kind of goes to that. Yeah. So let's say you're an 85% state. So it's just 85% of the original contract. So the fact that you're would have $1,500 more. On top. That's at your discretion to kind of manage up or down. Well. In terms of like that, that's what's. No. We don't have the power to take that out or not. We have to leave that in until maturity. Okay. But what happens at the end is, again, each state is different. But let's say that 1,500 had grown to 2,000. Uh-huh. In our contract, it had only gone up 1,500. Gotcha. There'd be $500 of excess over on top of what that contract may be. Certain states require us to give that back to the consumer. Okay. In you know, our counselors, I think, have done a very good job. You know, 10 years ago, we hadn't sold much catering. And so to say, "Hey, you've got that extra $500. Would you be interested in doing catering, additional flowers, and so on and so forth." Really, those funds, the principal and that income have to stay in that trust until maturity. We're not able to take anything out for the most part. There, again, the state laws are all different. There may be very minute instances where we do have flexibility. All right. So last question. We're almost on time. You know, company's got a pretty hefty real estate base of over 1,500 funeral homes. Certainly, we've noticed that some funerals are moving to event space versus funeral home. I mean, your funeral homes are very nice, but maybe celebration of life at Palma Ceia Country Club versus Blount & Curry, which is right up the road. So how does the company think about its real estate base? And do you think there's a potential for a pivot in some markets toward event space where your real estate footprint becomes a little obsolete? No, we definitely are watching that and trying to make sure that we understand what the consumer is looking for. Will a consumer, you know, wanna come here and maybe have a service here? Would the other guest at the hotel want that? Would the hotel, want that? We are always watching what the consumer wants. Every five years, we do a voice of the customer kind of segmentation analysis to try to understand and figure out where it's going. Here in Florida, let's say, we're continuing to deploy capital at our current locations to build out that event space. I mean, we've got actually, we have one funeral home here that has a disco hall, you know, and a bar, included because, you know, some people, you know, want the party. They want more of a celebration. I think I'm gonna do a scramble. I'm gonna do a funeral scramble. We'll do it for you. Right here. Yeah. We can handle it. All right. Thank you, everybody. On to breakout. Take care.