STON - Earnings call transcript Q3 2019

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Operator

Greeting and welcome to the StoneMor Partners, 2019 Third Quarter Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded Thursday, November 7, 2019.

I would now like to turn the call over to Mr. Treasury Relations. President, Vice Puskar, and Investor Michael Please sir. go ahead

Michael Puskar

XXXX afternoon and you. conference again results. our for Thank call quarter you discuss Partners joining everyone StoneMor thank Good financial the us to third on

and the should Joe our issued today. Executive copy, Vice website With we Chief you at You press find Redling, the have on does earlier have www.stonemor.com. of If Financial a Jeffrey the call all and full are release DiGiovanni, not and can President anyone President Officer. this a afternoon copy release Officer us on Senior Chief

Before of will we to usual, include XXXX. are address operating All like Securities or meaning would call statements everyone future forward-looking forward-looking statements. Private to the statements that anticipate within that remind begin, or as events we expect certain of occur performance conference Act that developments the Reform this in the I Litigation

based beliefs are faith on good statements forward-looking These management's assumptions. and

are that these Our reasonable. forward-looking management believes statements

you future statements speak except undue However, forward-looking as of such do of revise date. today's to update statements as required not information, otherwise or a reliance such We forward-looking law. whether publicly should new any on any only events, because obligation any or statements place undertake as result not by

projections. to or addition, statements expectations from certain developments In differ experience actual and our are risks to present materially and subject cause our forward-looking events uncertainties that results, could and historical

to with who'll in now SEC. it I'll These Joe reports risks With and uncertainties file over here. not take the those but include the Redling call from turn the to are which we limited described that,

Joe Redling

joining quarter successfully Since When I Good XX ago, listed joining results. XXXX discuss agenda have joined, priorities. major Mike. our that to five afternoon. milestones. us Thank we an and set I Thank major several StoneMor months you through transitions navigated for you, third

our year QX accomplished improve timely First XX-Q on quarter will filer. a was this was financial to third of This for also filed and reporting in the be become and time.

recapitalize to million balance XXXX the which we of Second, strategic end we a our $XXX was QX a and in at our sheet recapitalization, plan. immediate had need of significant step overall an announced

the with to conversion equity we to continue In a our restructuring, addition end we year. track complete expect by on C-Corp be and debt which to of this the to

was a laser on reducing a cost identified with Today, reductions Next, costs. we review of comprehensive $XX exceeding structure our cost million. have focus

many sales addressed We key field operations. G&A, and have corporate, areas across

expect through savings areas corporate a on field phase detail this that organization implemented we deliver momentarily. also additional the additional have second will in of additional provide Jeff will efficiencies operations, We to efforts the overhead. and effort drive these procurement, of

delayering are announced Last and of operating reporting were the focused I same leaders page on costs. improve will benefits has more for as enhance reduce decision-making. the communication support goals everyone having clarify shared management work with chief communication, would be consolidation eliminating to Simply closely and directly We month, to process themes Eliminating and make and with now improving me. divisional show with our execution. the already management begun priorities, or accountability on layer role of officer efficient that and to goal more the presidents clear and I organizational we divisional a

was Jeff process. I instrumental our was Accounting reporting promotion Jeff in to also announced the financial CFO. improving recently DiGiovanni our of Chief and Officer

Jeff has his Jeff accounting in has valuable background the to congratulate to team. Officer will improve Accounting to make and impressive replacing the officially Chief already him not on roles hard an recent I want to Financial contributions thank us again for to Chief role, and public his and work be enables promotion We efficiency. which begun consolidate Officer.

us be today, and to a Vice with will the IR leader. with Mike recognize has valued for to Relations. President change team. the our and StoneMor Investor Treasury Puskar, one is our years I'd and Mike under This member two treasury continue been like of new also functions has who been call consolidated on and

priority asset to base This effective our was transformational and and our a strategy key evaluate determine Another most component to plan. is assets. the of turnaround overall critical divest

As market StoneMor by encouraged the Johnson process. interest. Consulting announced, we represent and recently have this we to have overall progress been Group engaged our throughout I

our allows $XXX net requires of to that million proceeds pay quarter debt. I and of these to to first net for $XXX beginning today, divestures the While million XX% will transactions definitive of have in XXXX. agreement of million asset closings I up of down used and diligence, nothing report the current next occur we to say the indenture $XX proceeds expect to Subject be of due further to first

will effort multiple This result benefits. in

deleverage sheet First, debt. we reducing our can our balance by

footprint generate improve and from liquidity of efficiency. will reduce we will Second, we assets, operating additional our the and sale these geographical our third

accretive to seeing of We multiple we cash be flow level to divestitures are expect multiples. among high attractive these as a at interest buyers potential

with performance. by Throughout was regions. in see fifth the had to stabilize the sequential of increase improvements the in true strong to saw We with My Division Several we third quarter over QX year. culminated are the encouraged our the of our priority showed sales I've in highlight third of across from monthly we improvement this improving September. within for continues XX% which our sales been and to improvements year-over-year year quarter. prior strength major a QX beginning an regions X% Northeastern increase month quarter

on-boarding our over improvement the our top-tier Northeastern on this combined supporting focus our important and continued This is properties staffing Division is additional with programs. new with Driving training for an of sign production. accounts total sales XX% as

have In fact, on their for overall significant our a been improvement national six have new hires had that productivity. us less basis months or with in

still has increased progress. training year-to-date encouraging more do XX% We having group effective. XX% and this we regions, predictable falls to on cohort. good versus force improving an sales that making but indicate the has have be across our results been on growth last these production or sales less year are steady To much all specific, focus of in our within person on-boarding Per indicator six-month

let's to for and driven were flat sales look of the a the production revenue cemetery from year and our Total overhead. we were prior benefit servicing backlog. able X% down and results reductions COGS, quarter. our period Revenues as to compared were Now the take deferred financial at prior the stabilization the pre-need compared in year by the expense expenses to corporate of costs period

narrowed as goodwill in our it impacted and loss quarter negatively expenses quarter in Our a non-cash as $XX.X both corporate materially. Were nonrecurring for in these loss operating was well increased one-time would by million not field. operating third impairment the of the have items,

of an prior million sales to $X.X improvement year initiatives strategic profit representing in and force million. reductions for segment cost period operating $X.X increased to $X.X the Our increase productivity quarter compared the million of

forward. continue will to We further improvements profitability on focus [ph] to wall going four

call Let Jeff now detail more results. turn me provide financial on to to the the over

Jeffrey DiGiovanni

Good Thank Joe. you, afternoon everyone.

recent to get I and Before few a mentioned. into the some on want for elaborating details minutes spend quarter, that the Joe initiatives provide the context additional financial I

assets. selected with on pleased divestiture are for the program progress We our

We we the encouraged interest these have of buyers and the by of level with are that from parties. completed review first received potential round

upcoming to potential the We Consulting have continue due to in expect the offers work process buyers and and final weeks. through with diligence Group Johnson

will divestiture sheet, for delever this and operating Executing generate balance our efficiency. optimize program geographical liquidity our additional footprint

with net expense. non-cash million Our to on of remainder The the receive the will and indenture the permits up $XXX interest the $XX to proceeds X% notes. terms sales asset our of utilized load first on would reduce Under next XX% pay reduced current proceeds debt million. $XXX the indenture immediately in being StoneMor million cash down and

goals intends EBITDA properties while on portion us our A other of to generate efficiency would assets focus retaining were and on Throughout quality an further portfolio capital into retained of sales and will the locations. reinvest capabilities. smaller operating improve better to improving process company our multiples at high its to The the identify strategically allow significant proceeds operational improved the that footprint. to locations projects and our assets in strategically operational

been divestitures expect goals XXXX. on While of first executed, close the in no we our quarter of are these to and sale have start yet agreements that will making progress

rightsizing future success the the In our and program, to divestiture to a StoneMor. reducing base, organization, optimizing our our cost addition of component infrastructure, critical remains

from As is already $XX and supply over and Cemetery the overhead. of in generated restructuring June and million operations field in announced further cost phase with underway the executed part focuses savings of of chains, we on procurement, corporate plan operations. second these reduction A this being savings have cost majority of annualized year,

have we chain procurement order a supply like I system. purchase Today, talk about without for to a a decentralized moment.

chain procurement state-of-the-art presents with labor month each transformation. process. invoices XX,XXX to functions, operational significant over pathway supply scale process our our partnerships, technology company and of step on manually economies technologies to chain material we supply the proficiencies support the strengthening Upgrading introducing and is administrative and example, an to for strategic realize opportunity As minimal a infrastructure a and

digitize Accordingly, administrative the a categories. on opportunity technology management cost management we This manual major signed an transact real-time upon majority business and Today vendors of implementation, presents cloud platform. invoices to XX% of Cooper the reducing spend agreement the Cooper, tremendous with leading platform. our providing of expense vast our already spend

to KPMG engaged have We facilitate this implementation.

the is of XXXX. date completion for target second Our implementation quarter this

million policies. to $X $X million indirect procurement our platform. vendors We related are benefit are platform partnerships To a ranging direct creating annualized to from utilization we directly this to and the of this of work targeting with savings strategic to and enhance maximize team

area have group Earlier years. performance deficit close XX%. properties our experienced a that experiencing focus of Joe significant XX of of As This key year, compared improvement sales. prior on to to shortfalls year-over-year another top we mentioned, locations were previously is this

the the that Our September, the locations, X% these in in efforts first completely increase quarter. collectively a reversing saw improved performance we year-over-year have delivered which of underperformance

new this higher key rightsizing staff, and evidenced of The improved new improvement were in increase sales training by productivity on-boarding and programs XX% productivity. as the drivers

corporate savings significant overhead having made $X.X strides generated we annual totaling Finally, on million.

Chief the with Officer are of We de-layering Chief positions. evidenced elimination the organization and aggressively Officer Accounting as Operating the

the $X.X our count half decreased in million of savings. cost XX% head In resulting first annualized XXXX in corporate

high recurring nonrecurring $X.X million on continued these impact and conversion, an implemented have that expenses C-Corp spent the associated outside the our by upcoming rights overhead is of efforts consultants. basis. reduced annualized offering, have reduction cost with corporate the We corporate actions Offsetting other

not as we expectation expenses that XXXX. enter is one-time in Our continue these will

minutes. these expenses a few discuss will We one-time in

of Our provide to with all participate rights was on offering unitholders in the of retirement concluded units million offering subscription to a rights purpose the late the units our associated opportunity The recapitalization. preferred June one-to-one equal X basis. and in October an of over equity

$X.X the cash by continue From a we by our The cash quarter. driven in cash to the position evidenced increase increase perspective in was management. manage million unrestricted liquidity capital diligently as primarily working in

increasing through continue will improve of working divestitures revenue the reduction liquidity to cost the the business profitability, initiatives and enhancements, through effective both management We capital. profile of contemplated

into on December Lastly, is which quarterly that track the our unitholder XX jumping on C-Corp the with results, scheduled place by before is pending we conversion meeting take year-end. to to financial to close announced regards

excited that about date. progress the through the are transforming We company all to we've and initiatives made these

With at that, quarter let's a take performance. our look

Our prior we sales over of when the XXXX and quarter million years. that a with XX% the year-over-year third given quarter in XX% XXXX third result same was total is periods were the that down down both was From flat and XXXX. combined development year compared to flat a quarter quarter the This positive revenues a our the the the in XXXX. third gross third of first commercial a recognized were second GAAP in $XX.X started with in that quarter XXXX standpoint quarter

XXXX XXXX the the we $X.X million a third over million. $X.X lost is operating quarter of quarter an million loss we In of which improvement $X.X had third

cost For discussed. September in September a loss improvements improved previously XXXX, we operating better gross the which months related operating million nine nine ended The and by of the XX, had $X.X that we the driven margins were loss initiatives ended to XXXX. management is months XX, million $XX.X an over improvement

was XXXX third $XX.X by a charge of cap. our impairment During quarter driven the net in charge primarily The that negatively market we impacted decline million non-cash goodwill incurred the our impairment loss. goodwill

to $XX.X decline the XX, The was the ended total X.X% represents Cemetery representing Total revenues GAAP XXXX. was Our recognized driven months revenues XX% third for quarter three XXXX of third projects. Cemetery primarily compared September decrease preconstruction of a quarter million for by revenue less segment from the XXXX.

realized XXXX. $X.X third to representing million for the quarter quarter increase X.X% The Cemetery well in by driven reductions XXXX operations July segment operating The in the in income of operating the and of this third of third compared the X.X% improved margins operating improvement cost were margin is field the third quarter margin million in was over of completed realized rationalization an year. XXXX quarter in XXXX. as primarily as in $X.X gross that margin

XX% to Operating for the third quarter million operating in segment year-over-year segment third profits Our million while the represents This average quarter unit increased. the the compared for the $XX.X XXXX. Funeral Home Home for of $X.X of were over third quarter which third third the $X quarter that quarter was per Funeral period. XXXX third revenues XXXX flat X.X% profit to Call stable the with revenue increase for a million call quarter XXXX. our segment total XXXX volume for compared was represents a the

include recurring costs, XXXX. and which nonrecurring the XX% third expenses, of overhead decreased both quarter with Corporate compared

We have offset although our expenditures to certain previously are one-time initiatives Rights conversion. those partially implemented recapitalization, related and saving been C-Corp from the cost benefits seeing by benefits Offering

We success our of have the date. initiatives XX% to and corporate second from overhead a in also evidencing quarter further decline XXXX, the efforts experienced

charges, for million $X.X expense in the compared quarter to third XXXX. third our to quarter declined corporate $X.X million Excluding nonrecurring overhead the

beginning progress in savings and initiatives. management $X.X our XXXX see are and expense to signs million. prudent cost The of charges the of nonrecurring quarter third were We the

summarizes quarter information third key for financial the This XXXX. the

ahead There for quarterly be remainder of the much As in XXXX. found our XXXX XX-Q. of details form always, and us and on work additional is information can in report

our We cost cash liquidity revenue improve profile continue to capital seek enhancements, flow to including and initiatives. working ways and savings

I'll Thank you Joe. back and now turn it to

Joe Redling

times The last have the our critical actions Jeff. positioned challenging we over many achieved company milestones. turnaround and through have some navigated you, have continue year We've taken plan. well the Thank to

better will growth. StoneMor positioned As XXXX we for approach be

execute We key will continue to across priorities. our

by We will complete our year-end. conversion a C-Corp to

X optimize our and drive to divestitures increase sales productivity continue costs We Phase liquidity, reduce finalize to improvement and to to plan operational in additional and growth sales to will to drive in integration return XXXX. QX footprint, continue our deleverage improvements synergies through

field the and progress moment I'm accomplishments thank StoneMor have always, dedication take I'd to like we for a Even and associates work. in to As families proud our do made still much to team have the and and to we our for dedication date. confident commitment their I we and and team hard communities to their though the continued leadership all remain serve. appreciate recognize in of the

We will now line questions. open the for

Operator

Instructions] [Operator up questions Thank you. this appear to phone have no time. the queued over We at lines

We and your now thank disconnect your please that the conference. you We end and go participation you ahead ask for will lines.

StoneMor (STON) 7 Nov 192019 Q3 Earnings call transcript