Financial Data and Key Metrics Changes - The company reported adjusted earnings per share (EPS) of $0.87 for Q3 2025, a more than 10% increase from $0.79 in the prior year period [4] - Total comparable funeral revenue declined by almost $2 million, or less than 1%, compared to the prior year quarter [5] - Comparable core funeral revenue decreased by $3 million, or just under 1%, primarily due to a 3.5% decrease in core funeral services performed [6] - Cemetery revenue increased by $31 million or almost 7%, driven by a $27 million increase in total recognized preneed revenue [11] Business Line Data and Key Metrics Changes - Funeral gross profit decreased by $9.5 million, with the gross profit percentage declining by 170 basis points to about 18% [9] - Non-funeral home revenue increased by $3 million, primarily due to a 13.4% increase in the average revenue per service [7] - Comparable cemetery revenue increased by $31 million or almost 7%, with core revenue up by $27.5 million or 7% [11][12] - Preneed funeral sales production increased by $6 million or about 2% over the third quarter of 2024 [10] Market Data and Key Metrics Changes - The core cremation rate increased modestly by 50 basis points to 57.3% [6] - Total recognized preneed revenue benefited from growth in comparable cemetery preneed sales production of $30 million or almost 10% [12] - Large sales grew by $8 million or 19% over the prior year quarter [12] Company Strategy and Development Direction - The company confirmed the midpoint of its normalized EPS guidance for 2025 at $3.80-$3.90, slightly raising its cash flow outlook due to stronger working capital trends [13] - The company expects modest funeral revenue and gross profit growth compared to the fourth quarter of 2024 [14] - The company anticipates low to mid single-digit cemetery preneed sales production growth, with a focus on educating consumers about cremation options [44][45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving EPS growth within the long-term growth framework of 8%-12% [15] - The company expects favorable trends in funeral volume, average sales, and cemetery sales, alongside lower interest rates [15] - Management noted that the impact from the share repurchase program would favorably affect EPS compared to the prior year [15] Other Important Information - The company generated adjusted operating cash flow of $268 million in the quarter, an increase of $10 million from the prior year [17] - Capital investments totaled $140 million in the quarter, with $123 million returned to shareholders through dividends and share repurchases [19][20] - The company ended the quarter with liquidity of just under $1.5 billion and a leverage ratio of 3.6x net debt to EBITDA [23] Q&A Session Summary Question: Discussion on cemetery preneed sales production and trends - Management noted strong velocity in cemetery preneed sales and expressed confidence in sustaining this trend into next year [26][30] Question: Confidence in achieving 8%-12% EPS growth - Management indicated a historical assurance level of 85%-90% for achieving the EPS growth target, emphasizing revenue growth as a key driver [31][32] Question: Sales trends at the largest location, Rose Hills - Management reported strong performance at Rose Hills, with double-digit growth expected to continue [51] Question: Expense control and pressure areas - Management acknowledged some pressure on cemetery maintenance costs but expressed confidence in managing overall expenses [55] Question: Education on cremation options - Management highlighted efforts to increase consumer awareness of cremation options and the potential for growth in this area [59][60] Question: Transition effects on SCI Direct production - Management expects growth in SCI Direct sales production in 2026 but does not anticipate returning to pre-transition levels immediately [76]

Core Insights - The Federal Reserve is increasingly focused on the implications of artificial intelligence (AI) for economic policy, with a significant portion of discussions dedicated to this topic [2][3] - The Fed governor emphasizes the historical trend that new technologies lead to economic growth and job creation, despite initial job losses [3][4] - There is a recognition of the challenges posed by AI, including potential job displacement, particularly among college-educated workers, but also an opportunity for retraining and adjustment [5][6] Group 1: Economic Impact of AI - The Fed governor believes that the disruption caused by AI should be embraced, as the long-term benefits are expected to outweigh the costs [2][3] - Historical evidence suggests that technological advancements typically result in greater employment and productivity, with capital and labor being complementary [3][4] - The transition period may involve job losses before the benefits of new job creation become apparent, highlighting the difficulty in forecasting future job markets [4] Group 2: Job Market Dynamics - Current AI-related job losses are primarily being managed through attrition rather than mass layoffs, with companies focusing on retraining employees [5] - Layoffs are anticipated to rise, particularly affecting workers with college degrees, as AI continues to evolve [5][6] - The Fed governor acknowledges that there will be both winners and losers in the AI landscape, with productivity gains being a key focus for the Fed [6] Group 3: Regulatory Perspectives - The U.S. approach to AI regulation, which allows technology to develop before implementing regulations, is viewed as superior to the European model of preemptive regulation [7] - This regulatory philosophy is credited with enabling the U.S. to lead in technological advancements during the 1990s [7] Group 4: Future Outlook - A Barclays report suggests that AI investment may have peaked in the first half of the year, indicating a potential shift in the investment landscape [8] - The Fed governor notes that increased capital investment from AI could lead to a higher neutral interest rate in the future [8][10] - The integration of large language models in analyzing Fed communications has been ongoing for nearly a decade, indicating a long-standing relationship between AI and economic policy discourse [9]

Financial Data and Key Metrics Changes - The company reported net income of $71.7 million or $0.69 per diluted share for the second quarter, compared to $50.2 million or $0.49 per diluted share in the first quarter [10] - Net interest income increased to $207.2 million, up by $2.2 million from the prior period, primarily due to a reduction in interest expense [10][11] - The net interest margin was 3.32% on a fully tax equivalent basis, with an increase of 12 basis points from the prior quarter [11] - Non-interest income decreased to $41.1 million, down by $0.9 million from the prior quarter [11] Business Line Data and Key Metrics Changes - The company experienced a decline in loans held for investment by $1 billion, influenced by strategic moves including the Arizona and Kansas transaction [16] - Non-interest expense declined by $5.5 million to $155.1 million, attributed to lower seasonal payroll taxes and reductions in incentive-based compensation [12] - Net charge-offs totaled $5.8 million, representing 14 basis points of average loans on an annualized basis [14] Market Data and Key Metrics Changes - Deposits declined by $102.2 million in the second quarter, remaining approximately flat compared to the prior year [17] - The company ended the quarter with a 72% loan to deposit ratio, indicating strong liquidity [8] Company Strategy and Development Direction - The company is refocusing capital investment, optimizing the balance sheet, and improving core profitability [6][24] - Strategic actions include outsourcing the consumer credit card product and ceasing new originations in indirect lending [6][7] - The company aims for organic growth through relationship banking and anticipates a high single-digit increase in net interest income in 2026 [8][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about stabilizing loan balances and returning to growth in the medium term despite near-term declines [16][19] - The company is focused on proactive credit risk management, with stability in nonperforming asset levels and a disciplined approach to repricing maturing assets [7][8] Other Important Information - The common equity tier one capital ratio improved to 13.43%, with expectations for continued accretion [17][19] - The company declared a dividend of $0.47 per share, yielding 7% [17] Q&A Session Summary Question: Timing on loan portfolio stabilization - Management anticipates modestly lower loans in the third quarter but is hopeful for stability in the fourth quarter [28][29] Question: Earning asset levels at year-end - The third quarter is expected to be the bottom for earning asset levels, with a shift towards investment securities [32][33] Question: Capital priorities and CET1 expectations - CET1 is expected to increase by approximately 40 basis points from the branch transaction, with strong capital levels providing flexibility for various options [34][35] Question: Special mention migration in classified loans - The increase in criticized loans was driven by new information on multifamily projects, but management remains confident in the underlying collateral [41][42] Question: Expense guidance and reinvestment of savings - Management anticipates higher reported expenses in the third and fourth quarters due to various timing factors, with no branch divestitures included in the guidance [43][44] Question: High single-digit growth in net interest income for 2026 - This growth expectation does not include the impact of the branch divestiture, which is not expected to materially alter the figure [47][48] Question: Loan portfolio and relationship-based loans - Most deliberate runoff has already occurred, with a focus on replacing loans with production and growth [69] Question: Capital deployment options - The company is considering various capital deployment options, including share buybacks and balance sheet restructuring, to enhance shareholder value [76][77]

Financial Data and Key Metrics Changes - Total net sales for 2024 were just over $3 billion, with conversion revenue at $1.46 billion, a decrease of $10 million or 1% compared to 2023 [8][10] - Adjusted EBITDA for 2024 was $217 million, up approximately $7 million from 2023, with adjusted EBITDA as a percentage of conversion revenue improving by approximately 60 basis points to 14.9% [11][12] - Reported net income for 2024 was $47 million, or $2.87 per diluted share, consistent with 2023 [11] Business Line Data and Key Metrics Changes - Aerospace and high strength conversion revenue totaled $530 million, down $4 million or approximately 1%, reflecting a 4% decline in shipments [9] - Packaging conversion revenue was $490 million, down $13 million or approximately 3%, with a 3% decline in shipments [9] - General engineering conversion revenue for 2024 was $313 million, up 3% year over year due to a 6% increase in shipments [9] - Automotive conversion revenue was $120 million, up 3% over 2023 despite a 3% decline in shipments [10] Market Data and Key Metrics Changes - The market backdrop in 2024 was complex and rapidly changing, with challenges in each end market, particularly in packaging [6][7] - The company expects market conditions to stabilize and become more favorable as it moves through 2025 [8] Company Strategy and Development Direction - The company is focused on niche areas in served markets with significant barriers to entry, building strong competitive positions through product differentiation [16] - Investments are being made to upgrade facilities and expand capacity, particularly in the packaging and aerospace sectors [17][21][23] - The company anticipates a transformational year in 2025, driven by strategic investments and strong market positions [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of customer contracts and the potential for increased demand in the second half of 2025 [41][42] - The company expects to see meaningful EBITDA and EBITDA margin uplift in the second half of 2025, with around 60% of full-year EBITDA expected to come in during that period [31][59] Other Important Information - The company returned approximately $51 million to shareholders through dividend payments in 2024, marking the eighteenth consecutive year of dividends [15] - The company is assessing alternative inventory accounting methods and expects to provide an update prior to the release of first-quarter 2025 results [15] Q&A Session Summary Question: What are the assumptions regarding scrap spreads and their impact on EBITDA? - The company modeled EBITDA improvement based on last year's performance, expecting 150 to 200 basis points of improvement from scrap spreads [35][36] Question: What is the outlook for the aerospace market and inventory levels? - Management expects build rates to increase with large OEM airframers, leading to a potential uptick in demand in the second half of the year [42] Question: What is the impact of pricing in the packaging segment? - The fourth quarter pricing decline was attributed to a mix impact, with strong demand anticipated for higher value-added products in the second half of the year [44][46] Question: What is the expected CapEx for 2025? - The company expects CapEx to be around $125 million for 2025, including finalizing investments in the RollCoat line and Trentwood expansion [61] Question: What is the status of NOLs and cash tax payments? - The company has utilized its NOLs and expects cash tax payments in 2025 to be in the range of $5 million to $7 million [62]