Conference call on Thursday, October 28, 2021, at 9:30
a.m. Central Time
- Record Third Quarter Revenue of $95.0 million and Adjusted
Diluted EPS of $0.82;
- Increase in Rolling Four Quarter, 2021 and 2022 Roughly Right
Range Outlooks;
- Invested $53.2 million to repurchase 1,203,493 shares ($44.24
per share) since second quarter release;
- Invested $65.5 million to repurchase 1,528,197 shares ($42.89
per share) since May 13th (8.5% of outs.);
- Increase of $10 per share in Intrinsic Value Roughly Right
Range to $65 to $75 Per Share;
- Increase of $75 million in Approved Stock Repurchase Program to
$85 million after YTD repurchases;
- Dividend increase of 5 cents per share to total 45 cents per
share annually; and
- Declaration of Quarterly Cash Dividend reflecting recent
increase.
HOUSTON, Oct. 27, 2021 (GLOBE NEWSWIRE) --
Carriage Services, Inc. (NYSE: CSV): Mel Payne, Chairman and CEO,
stated, “Our third quarter pre-COVID performance has historically
been our lowest seasonal performance quarter because of low
seasonal death rates related to warm weather prior to the flu
season, as well as our 75% funeral/25% cemetery portfolio revenue
mix. Yet our third quarter 2021 performance with Total Revenue of
$95.0 million, Field EBITDA of $44.7 million (Field EBITDA Margin
of 47.0%), Adjusted Consolidated EBITDA of $32.4 million (Adjusted
Consolidated EBITDA Margin of 34.1%), Adjusted Diluted EPS of
$0.82, and Adjusted Free Cash Flow of $25.9 million (Adjusted Free
Cash Flow Margin of 27.3%), was the second highest in our thirty
year history, almost equaling the historically highest performance
metrics of this year’s first quarter during the peak spike in COVID
deaths (first quarter Adjusted Diluted EPS was $0.81 but after
proforma lower interest costs from our bond refinancing on May 13
was $0.90). All five of our field reporting segments executed at an
extremely high level during the quarter with revenue and margin
growth accelerating with strong momentum throughout each month to a
spectacularly strong September, indicating a likely strong finish
to the year in the fourth quarter.
Just as we stated in our second quarter release
dated July 27 in the section titled “Capital Allocation Framework,”
we have since allocated $53.2 million to aggressively repurchase
1,203,493 of our shares at an average price of $44.24, a discount
of 19.6% to the $55 per share bottom price of our opinion of the
Roughly Right Range of Intrinsic Value Per Share on July 27. Based
on the continuing high organic growth rate of all of our
performance valuation metrics, as more fully described below, we
are raising our opinion of Carriage’s Intrinsic Value Per Share by
$10 per share to a Roughly Right Range of $65 to $75 per share.
Since we restarted our Share Repurchase Program in the second
quarter after our bond refinancing on May 13, we have repurchased
1,528,197 of our shares (8.5% of Total Outstanding) from “Mr.
Market Rodney Dangerfield” for approximately $65.5 million or an
average price of $42.89, a discount of 34.0% from the bottom price
of $65 per share of our updated and increased Intrinsic Value Per
Share Range.
We have entered a “Per Ownership Share Value
Creation Sweet Spot” dynamic with accelerating high operating and
financial performance and an “actually outstanding” share count
that is rapidly shrinking while our leverage profile is currently
at 3.98 times and close to our upper sustainable policy limit of 4
times. I calculate a Non-GAAP share count equal to the actual
number of shares outstanding of 16.65 million at September 30, 2021
after our YTD repurchases of 1,528,197, plus “in the money vested
options” of 235,000, but not including 511,614 shares “in the money
and price vested” under our Five Year Good To Great II Shareholder
Value Creation Incentive Plan which are conditionally delivered in
early 2025 to plan participants under a requirement that they are
still employed at the end of 2024. My Non-GAAP proforma share count
using this methodology becomes 16.885 million as of September 30,
2021, whereas our Adjusted Diluted share count for reporting
purposes under GAAP at September 30, 2021 equals 18.246 million or
8.1% higher than my proforma share count.
As the largest individual shareholder and a
self-taught professional investor, I care much more about my
proforma share count number as the “current shareholder ownership
reality” than the sometimes confusing GAAP methodology for diluted
shares outstanding. It can actually be misleading in the short term
when a company like Carriage has such a rapidly increasing earnings
and Free Cash Flow profile in combination with a rapidly
shrinking share count, yet the GAAP rule for diluted shares
outstanding is a rolling multi-quarter average and also
surprisingly includes price vested incentive shares that require 49
leader participants to still be employed at least in their current
roles another 3¼ years to the end of 2024. For example, since the
one time only Five Year Good To Great II Shareholder Value Creation
Incentive Plan was approved on May 16, 2020 after our shares had
plummeted to $14.38 per share during the COVID market crash, five
senior participants have left the company who otherwise had they
stayed would be currently price vested to receive 129,899 shares in
early 2025 (25.4% of current total of 511,614), but received none
upon their departure.
The GAAP share count rules based methodology
would seem much more appropriate for public enterprises that can’t,
except in rare cases, execute a radical High Performance
Transformation within a two year timeframe as Carriage has
successfully done in 2020 and continues to do in 2021, especially
since May 13 on a per share basis. When we proforma Adjusted
Diluted EPS for my proforma share count at September 30, 2021 and
lower interest costs prior to our refinancing on May 13, the
combined proforma impact of lower interest costs and fewer
outstanding shares increases our reported Adjusted Diluted EPS from
$0.82 to $0.89 in the third quarter of 2021, from $2.27 to $2.64
for the first nine months of 2021, and from $2.84 to $3.36 for the
trailing twelve months ending September 30, 2021.
Our initial Roughly Right Range of Intrinsic
Value Per Share on May 13 was $50 to $60 per share using our
preferred valuation methodology of Free Cash Flow Equity Yield. The
Intrinsic Value Per Share Range was raised by $5 per share in our
second quarter release on July 27 and now $10 per share in this
third quarter release, so in only 5½ months the midpoint of our
opinion of Intrinsic Value Per Share Range has increased from $55
per share to $70 per share, an increase of $15 per share or 27.3%.
Using our Proforma(1) Adjusted FCF of $81.2 million over
the most recent twelve months performance period and our cost of
capital of 6.4% as a FCF discount factor along with my Proforma
Share Count at September 30 of 16.885 million, the Intrinsic Value
Per Share based on FCF Equity Yield equals $75.14 per share, just
above the $75 per share top price of our new Intrinsic Value Per
Share Range. Since our current share price of $44.23 is 32.0% below
the $65 per share bottom price of our new Roughly Right Range of
Intrinsic Value, we will continue to place a high capital
allocation priority on share repurchases during the fourth quarter
while maintaining a moderate leverage position of about 4 times
Total Debt to EBITDA.
During the third quarter, we began to process
and qualify a much higher level of acquisition activity, some of
which we expect to meet the highly selective Strategic Criteria of
our Strategic Acquisition Model as well as our updated high ROIC
Standards relative to other capital allocation options. We expect
the pace of growth by acquisition to pick up in 2022 and beyond
compared to 2020 and 2021 when the COVID Pandemic challenged many
independent owners not part of a company like Carriage with all of
its best in class support services. The COVID Pandemic challenges
together with the potential for a large tax increase in capital
gains taxes have produced two compelling motivations for
independent business owners to consider a succession plan solution
sooner rather than later.
On May 13 we began stating publicly our
opinion of Intrinsic Value Per Share within a Roughly Right Range
of $10 per share between the bottom price and top price of the
range, a valuation concept that commits our Senior Leadership Teams
and Board of Directors (the “Board”) to execute our Capital
Allocation Program with savviness, flexibility, discipline,
patience and wisdom in order to optimize the Intrinsic Value Per
Share over time, especially over longer timeframes of five to ten
years. We believe “Mr. Market Tom Brady” will sooner rather than
later recognize the many value creation strengths of our Operating
and Consolidation Platform and over time our market price will
align with our opinion of intrinsic value per share and produce
long-term market beating compounded shareholder returns.
Just as we have done in each of our quarterly
earnings releases over the last two years of Carriage’s
HIGH PERFORMANCE TRANSFORMATION, the balance of
this release will be a continuing journey of understanding our
past, present and future performance told through “highly
transparent” high performance data sequentially shown on the
following pages as follows,” concluded Mr.
Payne.
- Third Quarter and First Nine Months Comparative Performance
Highlights;
- Five Quarter Trend Report Ending September 30, 2021;
- Same Store Funeral Revenue Monthly Trends and Drivers Six
Months Ending September 2021;
-
Third Quarter and First Nine Months 2021 versus 2020 Overhead / Incentive Compensation Comparison;
- Update on Strategic Acquisition Activity and Outlook for
Acquisition Growth;
- Updated and Increased Rolling Four Quarter Outlook Ending
September 30, 2022 and Two Year Scenario 2021/2022;
- Updated and Increased Intrinsic Value Per Share Range and
Capital Allocation Strategy and Priorities;
- Free Cash Flow and Leverage Update; and
- Third Quarter and First Nine Month Trust Performance/Impact on
Reported Financial Segment.
THIRD QUARTER 2021 COMPARATIVE
PERFORMANCE HIGHLIGHTS
- GAAP Funeral Operating Income of $22.9 million, an increase of
$8.9 million or 64.0%;
- GAAP Cemetery Operating Income of $9.5 million, an increase of
$0.5 million or 5.4%;
- GAAP Net Income of $13.0 million, an increase of $7.5 million
equal to 136.1%;
- GAAP Net Income Margin of 13.7%, an increase of 720 basis
points; and
- GAAP Diluted EPS of $0.71, an increase of $0.40 per share equal
to 129.0%.
- Total Revenue of $95.0 million, an increase of $10.6 million or
12.6%;
- Same Store Funeral Contracts of 10,664, an increase of 1,222 or
12.9%;
- Same Store Funeral Revenue of $55.5 million, an increase of
$7.6 million or 16.0%;
- Same Store Funeral EBITDA of $25.0 million, an increase of $5.1
million or 25.4%;
- Same Store Funeral EBITDA Margin of 45.0%, an increase of 340
basis points;
- Acquisition Funeral Revenue of $9.4 million, an increase of
$1.1 million or 14.0%;
- Acquisition Funeral EBITDA of $4.0 million, an increase of $1.0
million or 35.1%;
- Acquisition Funeral EBITDA Margin of 42.5%, an increase of 660
basis points;
- Acquisition Cemetery Revenue of $6.4 million, an increase of
$1.1 million or 21.9%;
- Acquisition Cemetery Field EBITDA of $3.5 million, an increase
of $1.2 million or 51.9%;
- Acquisition Cemetery Field EBITDA Margin of 55.8%, an increase
of 1,110 basis points;
- Total Field EBITDA of $44.7 million, an increase of $7.3
million or 19.7%;
- Total Field EBITDA Margin of 47.0%, an increase of 280 basis
points;
- Adjusted Consolidated EBITDA of $32.4 million, an increase of
$4.7 million or 17.1%;
- Adjusted Consolidated EBITDA Margin of 34.1%, an increase of
130 basis points;
- Adjusted Diluted EPS of $0.82, an increase of $0.31 per share
equal to 60.8%;
- Adjusted Proforma(1) Diluted EPS of $0.89, an
increase of $0.38 per share equal to 74.5%;
- Adjusted Free Cash Flow of $25.9 million, a decrease of $1.7
million or 6.1%; and
- Adjusted Free Cash Flow Margin of 27.3%, a decrease of 540
basis points.
Carlos Quezada, Executive Vice President and
Chief Operating Officer stated, “As Mel had previously discussed in
our first and second quarter earnings releases, and Steve Metzger
will cover in detail later in this release, the increases in our
record consolidated performance metrics, i.e. Adjusted Consolidated
EBITDA/Margin, Adjusted and Proforma EPS, and Adjusted and Proforma
Free Cash Flow/Margin in the third quarter and first nine months of
2021 compared to 2020 would have been even higher if not for the
under accruals of primarily field incentive compensation in the
first nine months of 2020 amidst the portfolio performance
uncertainty of the early and middle phases of the COVID-19
Pandemic. Contrary to last year, we are fully accrued this year, as
corporate and field incentive compensation in the third quarter of
2021 was $1.0 million or about 4 cents per share higher
than third quarter last year (using Adjusted Proforma shares of
16.885 million) and $5.7 million or about 25 cents per share higher
in the first nine months of 2021 versus last year, which is more
fully explained in our overhead section on Pages 10 and 11 of
this release.
FIRST NINE MONTHS 2021
COMPARATIVE PERFORMANCE HIGHLIGHTS
- GAAP Funeral Operating Income of $65.4 million, an increase of
$27.2 million or 71.4%;
- GAAP Cemetery Operating Income of $30.5 million, an increase of
$12.0 million or 65.2%;
- GAAP Net Income of $19.8 million, an increase of $12.1 million
equal to 156.5%;
- GAAP Net Income Margin of 7.1%, an increase of 390 basis
points; and
- GAAP Diluted EPS of $1.08, an increase of $0.65 per share equal
to 151.2%.
- Total Revenue of $280.0 million, an increase of $40.6 million
or 17.0%;
- Total Same Store Funeral Contracts of 30,793, an increase of
3,190 or 11.6%;
- Same Store Funeral Revenue of $159.7 million, an increase of
$20.6 million or 14.8%;
- Same Store Funeral Field EBITDA of $69.5 million, an increase
of $12.8 million or 22.5%;
- Same Store Funeral Field EBITDA Margin of 43.5%, an increase of
280 basis points;
- Acquisition Funeral Revenue of $28.0 million, an increase of
$1.9 million or 7.4%;
- Acquisition Funeral Field EBITDA of $11.7 million, an increase
of $1.8 million or 17.7%;
- Acquisition Funeral Field EBITDA Margin of 41.7%, an increase
of 360 basis points;
- Same Store Cemetery Revenue of $47.9 million, an increase of
$10.9 million or 29.6%;
- Same Store Cemetery Field EBITDA of $20.1 million, an increase
of $7.1 million or 54.4%;
- Same Store Cemetery Field EBITDA Margin of 41.9%, an increase
of 670 basis points;
- Acquisition Cemetery Revenue of $21.5 million, an increase of
$9.4 million or 78.2%;
- Acquisition Cemetery Field EBITDA of $12.4 million, an increase
of $7.8 million or 169.4%;
- Acquisition Cemetery Field EBITDA Margin of 57.6%, an increase
of 1,950 basis points;
- Total Field EBITDA of $130.5 million, an increase of $29.8
million or 29.6%;
- Total Field EBITDA Margin of 46.6%, an increase of 460 basis
points;
- Adjusted Consolidated EBITDA of $95.8 million, an increase of
$19.8 million or 26.1%;
- Adjusted Consolidated EBITDA Margin of 34.2%, an increase of
250 basis points;
- Adjusted Diluted EPS of $2.27, an increase of $0.97 per share
equal to 74.6%;
- Adjusted Proforma(1) Diluted EPS of $2.64, an
increase of $1.34 per share equal to 103.4%;
- Adjusted Free Cash Flow of $65.4 million, an increase of $7.3
million or 12.5%;
- Adjusted Free Cash Flow Margin of 23.4%, a decrease of 90 basis
points;
- Adjusted Proforma(1) Free Cash Flow of $68.2
million, an increase of $10.2 million or 17.6%;
- Adjusted Proforma(1) Free Cash Flow Margin of 24.4%,
an increase of 20 basis points; and
- Bank Covenant Compliance Leverage Ratio of 3.98
times(2).
(1) |
Proforma lower interest impact of recent refinancing effective as
of January 1, 2021 (pre-tax lower interest cost of $4.0 million for
the first half 2021) and Non-GAAP Proforma Diluted Shares
Outstanding of 16.885 million as of September 30, 2021. Non-GAAP
Diluted Shares Outstanding includes 16.65 Basic Shares Outstanding
plus .235 million vested equity options and excludes .512 million
shares from “in the money and vested” shares related to Carriage’s
Five Year Good To Great Shareholder Value Creation Incentive
Plan. |
(2) |
Bank Covenant Compliance Rolling 12 Months Adjusted Consolidated
EBITDA of $125.1 million, which includes $1.0 million of cash add
backs for deferred purchase price and Total Debt of $497.6 million
on September 30, 2021.
|
FIVE QUARTER TREND REPORT
Mr. Quezada continued, “We report our
performance results publicly using the same highly transparent
Non-GAAP “Trend Reports” that we use internally and which have been
explained in previous shareholder letters, including Five Year and
Five Quarter Trend Reports that reflect long and short term trends
in our core operating, financial and overhead sectors over time.
Shown on the next page are highlights from our Five Quarter Trend
Report that clearly reflect the accelerating transformative high
performance process that occurred at Carriage in the midst of the
COVID-19 Pandemic from the second quarter of 2020 through the peak
of the Pandemic impact in the first quarter of 2021, which has
continued through the third quarter and is reflected in our updated
outlooks through 2022.
The Five Quarter Trend Report is followed on
Page 7 by the Same Store Funeral Monthly Revenue Trends Report for
the six months ending September. Both the Five Quarter and Same
Store Funeral Revenue Six Month Trend Reports reflect that after an
elevated high performance “normalization” in the second quarter,
our amazing third quarter performance fully reflects our Annual
Theme: CARRIAGE SERVICES 2021: ACCELERATING HIGH
PERFORMANCE FLYWHEEL EFFECT!
|
FIVE QUARTER OPERATING AND FINANCIAL TREND REPORT
HIGHLIGHTS |
(000’s except for volume, averages &
margins) |
|
3RD QTR
2020 |
|
4TH QTR
2020 |
|
1ST QTR
2021 |
|
2ND QTR
2021 |
|
3RD QTR
2021 |
Funeral Same Store Contracts |
|
|
9,442 |
|
|
|
10,199 |
|
|
|
11,049 |
|
|
|
9,080 |
|
|
|
10,664 |
|
Average Revenue Per Contract
(1) |
|
$ |
5,069 |
|
|
$ |
5,160 |
|
|
$ |
5,143 |
|
|
$ |
5,220 |
|
|
$ |
5,205 |
|
Funeral Same Store Burial
Contracts |
|
|
3,383 |
|
|
|
3,794 |
|
|
|
4,052 |
|
|
|
3,203 |
|
|
|
3,597 |
|
Funeral Same Store Burial
Rate |
|
|
35.8 |
% |
|
|
37.2 |
% |
|
|
36.7 |
% |
|
|
35.3 |
% |
|
|
33.7 |
% |
Average Revenue Per Burial
Contract |
|
$ |
8,982 |
|
|
$ |
9,015 |
|
|
$ |
8,991 |
|
|
$ |
9,259 |
|
|
$ |
9,442 |
|
Funeral Same Store Cremation
Contracts |
|
|
5,389 |
|
|
|
5,706 |
|
|
|
6,290 |
|
|
|
5,164 |
|
|
|
6,133 |
|
Funeral Same Store Cremation
Rate |
|
|
57.1 |
% |
|
|
55.9 |
% |
|
|
56.9 |
% |
|
|
56.9 |
% |
|
|
57.5 |
% |
Average
Revenue Per Cremation Contract |
|
$ |
3,283 |
|
|
$ |
3,249 |
|
|
$ |
3,293 |
|
|
$ |
3,415 |
|
|
$ |
3,443 |
|
Funeral Same Store
Revenue |
|
$ |
47,865 |
|
|
$ |
52,632 |
|
|
$ |
56,829 |
|
|
$ |
47,397 |
|
|
$ |
55,502 |
|
Funeral Same Store EBITDA |
|
$ |
19,903 |
|
|
$ |
23,164 |
|
|
$ |
25,829 |
|
|
$ |
18,665 |
|
|
$ |
24,960 |
|
Funeral
Same Store EBITDA Margin |
|
|
41.6 |
% |
|
|
44.0 |
% |
|
|
45.5 |
% |
|
|
39.4 |
% |
|
|
45.0 |
% |
Funeral Acquisition
Revenue |
|
$ |
8,205 |
|
|
$ |
9,348 |
|
|
$ |
10,139 |
|
|
$ |
8,557 |
|
|
$ |
9,354 |
|
Funeral Acquisition
EBITDA |
|
$ |
2,942 |
|
|
$ |
3,683 |
|
|
$ |
4,467 |
|
|
$ |
3,261 |
|
|
$ |
3,974 |
|
Funeral
Acquisition EBITDA Margin |
|
|
35.9 |
% |
|
|
39.4 |
% |
|
|
44.1 |
% |
|
|
38.1 |
% |
|
|
42.5 |
% |
Cemetery Same Store Preneed
Property Contracts Sold |
|
|
1,067 |
|
|
|
1,033 |
|
|
|
1,161 |
|
|
|
1,211 |
|
|
|
1,280 |
|
Cemetery Same Store Preneed
Sales Revenue |
|
$ |
8,317 |
|
|
$ |
9,231 |
|
|
$ |
9,718 |
|
|
$ |
11,445 |
|
|
$ |
11,366 |
|
Cemetery Same Store
Revenue |
|
$ |
14,391 |
|
|
$ |
14,814 |
|
|
$ |
14,635 |
|
|
$ |
16,906 |
|
|
$ |
16,342 |
|
Cemetery Same Store
EBITDA |
|
$ |
6,161 |
|
|
$ |
6,497 |
|
|
$ |
5,704 |
|
|
$ |
7,907 |
|
|
$ |
6,465 |
|
Cemetery Same Store EBITDA Margin |
|
|
42.8 |
% |
|
|
43.9 |
% |
|
|
39.0 |
% |
|
|
46.8 |
% |
|
|
39.6 |
% |
Cemetery Acquisition Preneed
Property Contracts Sold |
|
|
304 |
|
|
|
345 |
|
|
|
338 |
|
|
|
475 |
|
|
|
294 |
|
Cemetery Acquisition Preneed
Sales Revenue |
|
$ |
4,073 |
|
|
$ |
5,394 |
|
|
$ |
5,089 |
|
|
$ |
6,839 |
|
|
$ |
5,148 |
|
Cemetery Acquisition
Revenue |
|
$ |
5,220 |
|
|
$ |
5,509 |
|
|
$ |
6,980 |
|
|
$ |
8,175 |
|
|
$ |
6,362 |
|
Cemetery Acquisition
EBITDA |
|
$ |
2,335 |
|
|
$ |
2,532 |
|
|
$ |
4,102 |
|
|
$ |
4,737 |
|
|
$ |
3,547 |
|
Cemetery Acquisition EBITDA Margin |
|
|
44.7 |
% |
|
|
46.0 |
% |
|
|
58.8 |
% |
|
|
57.9 |
% |
|
|
55.8 |
% |
Total Financial Revenue |
|
$ |
5,631 |
|
|
$ |
5,263 |
|
|
$ |
5,706 |
|
|
$ |
5,405 |
|
|
$ |
5,639 |
|
Total Financial EBITDA |
|
$ |
5,282 |
|
|
$ |
4,923 |
|
|
$ |
5,305 |
|
|
$ |
5,058 |
|
|
$ |
5,225 |
|
Total
Financial EBITDA Margin |
|
|
93.8 |
% |
|
|
93.5 |
% |
|
|
93.0 |
% |
|
|
93.6 |
% |
|
|
92.7 |
% |
Total Revenue |
|
$ |
84,393 |
|
|
$ |
90,088 |
|
|
$ |
96,637 |
|
|
$ |
88,277 |
|
|
$ |
95,041 |
|
Total Field EBITDA |
|
$ |
37,309 |
|
|
$ |
41,318 |
|
|
$ |
45,787 |
|
|
$ |
40,014 |
|
|
$ |
44,651 |
|
Total Field EBITDA Margin |
|
|
44.2 |
% |
|
|
45.9 |
% |
|
|
47.4 |
% |
|
|
45.3 |
% |
|
|
47.0 |
% |
Adjusted Consolidated
EBITDA |
|
$ |
27,666 |
|
|
$ |
28,300 |
|
|
$ |
34,657 |
|
|
$ |
28,720 |
|
|
$ |
32,389 |
|
Adjusted Consolidated EBITDA
Margin |
|
|
32.8 |
% |
|
|
31.4 |
% |
|
|
35.9 |
% |
|
|
32.5 |
% |
|
|
34.1 |
% |
Adjusted Diluted EPS |
|
$ |
0.51 |
|
|
$ |
0.57 |
|
|
$ |
0.81 |
|
|
$ |
0.64 |
|
|
$ |
0.82 |
|
Adjusted Free Cash Flow |
|
$ |
27,608 |
|
|
$ |
11,870 |
|
|
$ |
27,140 |
|
|
$ |
12,313 |
|
|
$ |
25,922 |
|
Adjusted Free Cash Flow Margin |
|
|
32.7 |
% |
|
|
13.2 |
% |
|
|
28.1 |
% |
|
|
13.9 |
% |
|
|
27.3 |
% |
(1)
Excludes Preneed Funeral interest earnings reflected in Total
Financial Revenue. |
SAME STORE FUNERAL MONTHLY REVENUE TRENDS SIX MONTHS ENDING
SEPTEMBER 2021 |
(000’s except for volume, averages) |
|
|
Same Store Funeral |
|
APR |
MAY |
JUN |
|
JUL |
AUG |
SEP |
Contracts (volume)
2021 |
|
3,044 |
|
|
2,911 |
|
|
3,125 |
|
|
3,081 |
|
|
3,647 |
|
|
3,936 |
|
Contracts (volume) 2020 |
|
3,194 |
|
|
2,950 |
|
|
2,937 |
|
|
3,163 |
|
|
3,210 |
|
|
3,069 |
|
Volume Variance |
|
(150 |
) |
|
(39 |
) |
|
188 |
|
|
(82 |
) |
|
437 |
|
|
867 |
|
Average Revenue Per Contract 2021(1) |
|
$ |
5,168 |
|
|
$ |
5,234 |
|
|
$ |
5,257 |
|
|
$ |
5,294 |
|
|
$ |
5,101 |
|
|
$ |
5,231 |
|
Average
Revenue Per Contract 2020(1) |
|
$ |
4,619 |
|
|
$ |
4,943 |
|
|
$ |
5,134 |
|
|
$ |
4,927 |
|
|
$ |
5,148 |
|
|
$ |
5,135 |
|
Average Revenue Per Contract Variance (ARPC) |
|
$ |
549 |
|
|
$ |
291 |
|
|
$ |
123 |
|
|
$ |
367 |
|
|
$ |
(47 |
) |
|
$ |
96 |
|
Operating Revenue
2021(1) |
|
$ |
15,731 |
|
|
$ |
15,235 |
|
|
$ |
16,429 |
|
|
$ |
16,313 |
|
|
$ |
18,603 |
|
|
$ |
20,588 |
|
Operating Revenue 2020(1) |
|
$ |
14,754 |
|
|
$ |
14,583 |
|
|
$ |
15,080 |
|
|
$ |
15,585 |
|
|
$ |
16,524 |
|
|
$ |
15,758 |
|
Operating Revenue Variance |
|
$ |
977 |
|
|
$ |
652 |
|
|
$ |
1,349 |
|
|
$ |
728 |
|
|
$ |
2,079 |
|
|
$ |
4,830 |
|
Net Revenue Volume
Variance |
|
$ |
(693 |
) |
|
$ |
(193 |
) |
|
$ |
965 |
|
|
$ |
(404 |
) |
|
$ |
2,249 |
|
|
$ |
4,452 |
|
Net
Revenue Average Variance |
|
$ |
1,670 |
|
|
$ |
845 |
|
|
$ |
384 |
|
|
$ |
1,132 |
|
|
$ |
(170 |
) |
|
$ |
378 |
|
Net Revenue Variance |
|
$ |
977 |
|
|
$ |
652 |
|
|
$ |
1,349 |
|
|
$ |
728 |
|
|
$ |
2,079 |
|
|
$ |
4,830 |
|
(1) Excludes Preneed Funeral interest earnings reflected in
Total Financial Revenue. |
Funeral Home Segment
While we experienced a large increase in funeral
volumes in the third quarter, only about 60% of the variance was
attributable to deaths from the Delta COVID-19 variant, as our
record performance in the third quarter of 2021 was primarily a
consequence of our agility and adaptability to the continued
changing environment and consumer preferences in our industry.
These new industry dynamics have challenged funeral homes across
the nation that were not able to adapt and offer new and innovative
ways to serve families. Consequently, many independent businesses
as well as some consolidators have lost market share since the
pandemic began to competitors like Carriage that have adapted with
creative solutions that have led to broadly higher funeral volumes
(Same Store Contracts up 12.9%) in the third quarter this year
versus last.
To make a market share comparison under
normalized pre-pandemic levels, we compared 2019 Same Store Funeral
Contracts against 2021. The data reflects that non-COVID
volume growth after offsetting for COVID-19 deaths during the third
quarter of 2021 was also 12.9% versus the same period of 2019
(volume growth excluding COVID deaths presumed to be a combination
of market share gains and higher normalized death rates). For the
nine months ending September 2021, non-COVID volume growth was 8.1%
higher than 2019.
Our long term pre-COVID historical seasonal
trends indicate that the third quarter has been the slowest quarter
of the year and September the slowest month. However, our Same
Store Funeral Revenue in the third quarter of 2021 increased by
$7.6 million or 16.0%, accelerating higher each month year over
year to a peak increase in September (63.2% of total quarterly
increase) as shown in the Same Store Funeral Monthly Variance table
above, while our acquisition portfolio increased $1.1 million or
14.0% in the third quarter. Both of these dollar increases exceeded
the correlation of the increase during the quarter in Same Store
Funeral Contracts of 12.9% and Acquisition Funeral Contracts of
7.4% when compared to the same period last year, a result of our
combined Funeral Average Revenue Per Contract (ARPC) of $5,372
being $129 or 2.5% higher than the ARPC of $5,243 last year.
The creativity, passion and devotion to our
profession with which our team of 4E Leadership Managing
Partners and Funeral Directors serve families has further
accelerated the growth in market share broadly across our
portfolio, as our leaders and teams of employees continue to
welcome families and offer all options available to each family
every time. Because of the determination of our Managing Partners
and teams of employees to serve all families regardless of method
of disposition or revenue potential, our Same Store Total Cremation
Volume grew to 6,133 contracts or 13.8% over the 5,389 last year,
and as our Managing Partners and their employee teams continued to
focus on educating families on the many products and service
options possible with cremation, our Average Revenue Per Cremation
increased to $3,443 or 4.9% in the third quarter over the $3,283
ARPC last
year.
Our Same Store Funeral Field EBITDA grew to
$25.0 million in the third quarter or 25.4% over the same period
last year, while our Acquisition Funeral Field EBITDA increased to
$4.0 million or 35.1% over last year, increases that exceeded
revenue growth as our Managing Partners focused on optimizing the
inherent operating leverage in each business in alignment with
their annual Being The Best High Performance
Standards. As a result, Same Store Funeral Field EBITDA Margin
increased by 340 basis points in the third quarter while our
Acquisition Funeral Field EBITDA Margin increased by 660 basis
points.
At the beginning of 2020, we changed the annual
Funeral Being The Best incentive bonus to 50% of
what otherwise would have been paid to Managing Partners that
didn’t achieve their Field EBITDA Margin Range (4 percentage points
spread). This major incentive change, when combined with 50% of
Funeral Performance Standards being updated and rebooted at the end
of 2018 (covered in detail in Mel’s 2018 Shareholder Letter) to
correlate to 3 year compounded growth in revenue and volumes, has
had a significant impact on our funeral revenue and field margin
growth in 2020 and 2021.
These core critical recognition and financial
rewards modifications together with a large degree of “topgrading”
of Funeral Managing Partners in larger “meter moving” funeral homes
since September 2018 have led to substantially higher Revenue,
Field EBITDA and Field EBITDA Margins across our funeral portfolio.
The COVID Pandemic might have accelerated our Funeral High
Performance Trends but the foundational high performance elements
and concepts of First Who, Then What and
Why preceded the beginning of the COVID Pandemic
in March 2020.
Cemetery Segment
Over the past fifteen months, we have been in
execution mode of our High Performance Sales Plan to generate
momentum on the Carriage Cemetery High Performance Flywheel
consistently and sustainably over time. This newly created High
Performance Sales Culture has produced consistent and increasingly
higher sales growth as reflected by the following highlights:
For the Third Quarter of 2021
- Total Cemetery Operating Revenue of $22.7 million or 15.8%
higher than last year;
- Total Cemetery Field EBITDA of $10.0 million or 17.8% higher
than last year;
- Total Cemetery Field EBITDA Margin of 44.1% or 80 basis points
higher than last year;
- Preneed Cemetery Property Sales of $13.5 million or 25.3%
higher than last year; and
- Total Cemetery Sales Production of $25.4 Million or 22.8%
higher than last year.
For the Nine Months ending September
2021
- Total Cemetery Operating Revenue of $69.4 or 41.6% higher than
last year;
- Total Cemetery Field EBITDA of $32.5 million or 84.5% higher
than last year;
- Total Cemetery Field EBITDA Margin of 46.8% or 1,090 basis
points higher than last year;
- Preneed Cemetery Property Sales of $40.6 million or 55.8%
higher than last year; and
- Total Cemetery Sales Production of $76.8 Million or 41.2%
higher than last year.
Even with COVID-19 restrictions mandated in many
States and Counties, our Cemetery Transformative High Performance
accelerated due to the tenacity and drive of our Sales Teams across
the Cemetery Portfolio who were able to achieve our goals in
alignment with our Being The Best Mission and
Vision regardless of the many uncontrollable challenges.
We reached critical mass in our cemetery portfolio with three large
acquisitions at the end of 2019, developed the sales culture
strategy, designed the tools and executed the plan to create
sustainable High Performance Sales Teams. The performance result
was broadly higher Cemetery Same Store and Acquisition Sales and
Total Revenue Trends which in turn produced historically high Field
EBITDA and Margin trends in the second half of 2020 and the first
nine months of 2021. We can say with 100% certainty that our
sales teams are ready, highly energized and resiliently inspired to
continue conquering higher altitudes on the Carriage Services
Transformational High Performance Rocket we have launched to reach
places we have never been before,” concluded Mr. Quezada.
THIRD QUARTER / NINE MONTHS 2021 VERSUS 2020
OVERHEAD/INCENTIVE COMPENSATION
Steve Metzger, Executive Vice President, Chief
Administrative Officer and General Counsel, stated “In our first
and second quarter earnings releases, we discussed in detail how
our Overhead segment is broken into three categories. We
highlighted in each of those releases the “Total Variable Overhead”
category which consists of two major sub-categories, field and
corporate incentive compensation accruals (and payments after each
calendar year) and various types of non-recurring items
(termination or severance costs, legal settlements, natural
disaster related costs, etc.). Given our continued strong
performance, we have accrued both corporate and field incentive
compensation aggressively throughout the year.
Our Total Variable Overhead increased $3.0
million or 74.2% in the third quarter of 2021 compared to the third
quarter of 2020, but only $1 million of the increase was corporate
and field incentive compensation equal to about 4 cents per
share. The other approximately $2 million consisted of items
that were either one-time non-recurring charges or continuing
pandemic costs that we expect to diminish to a much lower
normalized level in 2022. Total Variable Overhead for the first
three quarters of 2021 increased $9.1 million or 96.3% compared to
the first three quarters of 2020, of which $5.7 million equal to 25
cents per share was attributable to substantially higher accruals
for corporate and field incentive compensation that are directly
correlated to the amazing field operating and financial performance
of our High Performance Managing Partners and Sales Managers
throughout our portfolio of funeral homes and cemeteries.
Total Overhead Margin as a percentage of Total
Revenue, which has been elevated this year because of the large
increase in incentive compensation accruals and non-recurring or
unsustainable “overhead noise,” should normalize over the next
fifteen months ending 2022 (before any new acquisitions) within a
range of 11% to 12% with Total Variable Overhead comprised of
mostly incentive compensation representing about one-third of Total
Overhead.
Our High Performance Culture Flywheel highlights
“First Who, Then What” for a reason. We are
focused on attracting and then motivating the very best talent by
closely aligning their annual and five year performance with
associated one and five year incentive programs that cannot be
found elsewhere in our industry. As these leaders’
performance continues to grow and alignment strengthens, incentive
compensation for that talent increases in kind – and that is
exactly how “Pay for High and Sustained Performance” incentive
compensation should work because our shareholders get rewarded with
superior long term compounded investment returns. Simply
stated, Best In Class Performance results in Best In Class
Incentive Compensation at Carriage, which results in the Best In
Class Talent being recruited and retained in all of our critical
leadership positions.
THIRD QUARTER AND FIRST NINE MONTHS OVERHEAD COMPARISONS
(000'S) |
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
Overhead |
|
2020 |
|
|
2021 |
|
Variance $ |
Variance % |
|
|
|
2020 |
|
|
2021 |
|
Variance $ |
Variance % |
|
|
|
|
|
|
|
|
|
|
|
Total Variable |
$ |
4,077 |
|
$ |
7,103 |
|
$ |
3,026 |
74.2 |
% |
|
$ |
9,450 |
|
$ |
18,548 |
|
$ |
9,098 |
96.3 |
% |
Total Regional |
|
1,020 |
|
|
1,326 |
|
|
306 |
30.0 |
% |
|
|
2,930 |
|
|
3,881 |
|
|
951 |
32.5 |
% |
Total
Corporate |
|
4,841 |
|
|
5,855 |
|
|
1,014 |
20.9 |
% |
|
|
14,971 |
|
|
16,893 |
|
|
1,922 |
12.8 |
% |
Total
Overhead |
$ |
9,938 |
|
$ |
14,284 |
|
$ |
4,346 |
43.7 |
% |
|
$ |
27,351 |
|
$ |
39,322 |
|
$ |
11,971 |
43.8 |
% |
% Total
Revenue |
|
11.8 |
% |
|
15.0 |
% |
320 bp |
27.1 |
% |
|
|
11.4 |
% |
|
14.0 |
% |
260 bp |
22.8 |
% |
Corporate Incentive Comp. |
$ |
975 |
|
$ |
1,367 |
|
$ |
392 |
40.2 |
% |
|
$ |
2,200 |
|
$ |
3,467 |
|
$ |
1,267 |
57.6 |
% |
Field Incentive Comp. |
|
2,787 |
|
|
3,411 |
|
|
624 |
22.4 |
% |
|
|
5,055 |
|
|
9,510 |
|
|
4,455 |
88.1 |
% |
Separation Expenses |
|
73 |
|
|
99 |
|
|
26 |
35.6 |
% |
|
|
621 |
|
|
1,830 |
|
|
1,209 |
194.7 |
% |
Disaster Recovery and Pandemic
Costs |
|
312 |
|
|
752 |
|
|
440 |
141.0 |
% |
|
|
728 |
|
|
1,753 |
|
|
1,025 |
140.8 |
% |
Acquis/Divest. Expenses |
|
65 |
|
|
84 |
|
|
19 |
29.2 |
% |
|
|
283 |
|
|
311 |
|
|
28 |
9.9 |
% |
Other
Variable |
|
(135 |
) |
|
1,390 |
|
|
1,525 |
N/A |
|
|
|
563 |
|
|
1,677 |
|
|
1,114 |
197.9 |
% |
Total Variable
Overhead |
$ |
4,077 |
|
$ |
7,103 |
|
$ |
3,026 |
74.2 |
% |
|
$ |
9,450 |
|
$ |
18,548 |
|
$ |
9,098 |
96.3 |
% |
% Total
Revenue |
|
4.8 |
% |
|
7.5 |
% |
270 bp |
56.3 |
% |
|
|
3.9 |
% |
|
6.6 |
% |
270 bp |
69.2 |
% |
UPDATE ON ACQUISITION ACTIVITY
AND OUTLOOK FOR ACQUISITION GROWTH
Mr. Metzger, continued, “In our second quarter
earnings release we explained how our capital allocation priorities
remain driven by a disciplined approach focused on generating the
greatest return for our shareholders. We encourage everyone
to reference our prior release to learn more about these priorities
and the metrics we use to guide our capital allocation
analysis.
As discussed in prior releases as well as on
earnings calls, given the current market price of our shares as
compared to the intrinsic value per share calculations we outlined
earlier in this release, we continue to believe share repurchases
remain one of the best value creation opportunities for our
shareholders. With the recent increased share repurchase authority
approved by our Board, we will maintain the flexibility to be
opportunistic with repurchases as we continuously assess the market
price compared to our increasing and sustainable financial
performance using metric driven intrinsic value analysis.
The higher operating and financial performance
of our portfolio of businesses, together with our new low cost
balance sheet is providing the financial strength and flexibility
to continue our share repurchase program, invest in internal
growth projects such as increased cemetery development, increase
our dividend for a third time in the last 18 months, while also
maintaining our previously articulated Net Debt to Adjusted
Consolidated EBITDA target Leverage Ratio of approximately 4 times
or less.
We have also increased the frequency and nature
of ongoing conversations with several wonderful business owners who
we believe are excellent candidates to join the Carriage
Family. We are working closely with these owners to help them
learn more about Carriage, our people and our unique locally driven
approach defined by our High Performance Culture Framework for
operating and consolidating the best remaining independent
businesses in the best strategic markets. These discussions
have centered around listening to what succession approach and
timeline is best for each owner, their teams and their
businesses. We believe a strong, long-term win-win
partnership begins before a Letter of Intent is ever signed so we
are excited about these ongoing conversations and the possible
future additions to the Carriage Family in 2022 and
beyond.
We do not create pre-determined quarterly or
annual targets for acquisition investments for two very important
reasons. First, it is impossible to predict when owners of
the right businesses will be ready for a succession plan solution
and, when they are, what process and timeline will be best for
those owners. Secondly, and just as importantly at any given
time, there may be other capital allocation opportunities which
provide stronger return potential for our shareholders, so we
always review potential five to ten year investment returns on any
acquisition candidate in comparison to long term returns on other
capital allocation options to ensure the highest and best use of
our shareholders’ capital. This focus, in lieu of spending or
timeline targets, disciplines us to be particularly selective when
it comes to acquisitions, given how high the bar currently has been
set related to other capital allocation options. With that
said, the number of high quality businesses and owners that we have
met with recently has grown and we are excited about where these
conversations are headed. Stay tuned as we expect the next
quarter to bring more developments on this front.
As we look beyond the upcoming quarter, we
expect more and more high quality business owners to be ready to
transition to the next chapters in their lives over the course of
the next 3-5 years. We look forward to the opportunity to
share the Carriage Story with these owners and introduce them to
our fantastic team. Our experience is that once an owner gets to
know us, many will consider us as the succession option that best
protects their legacy and allows them to feel confident and excited
as they head into that next chapter of their life, while also
knowing they will have no regrets about their business continuing
to prosper and grow with the Best In Class support provided by
Carriage.
The Carriage High Performance Flywheel
components of Capital Allocation and Value Creation Dynamics are
truly at their best right now. The financial flexibility
generated by the high performance of our businesses combined with
our disciplined, metric driven capital allocation approach, is
truly the value creation “sweet spot” that we have been working
towards. Now that this “sweet spot” is in front of us and we
are positioned with a strong balance sheet, we will continue to be
good, disciplined stewards of our shareholders’ capital as new and
exciting opportunities present themselves,” concluded Mr.
Metzger.
THE DATA DON’T LIE – A TALE TOLD
WITH HIGH PERFORMANCE DATA
Ben Brink, Executive Vice President and Chief
Financial Officer, stated, “Our 2021 Annual Theme is:
CARRIAGE SERVICES 2021: ACCELERATING HIGH PERFORMANCE
FLYWHEEL EFFECT! The performance trend data shown below
detailing the incredible transformation in our performance since
the end of 2018 is a testament to the dedication and passion of our
Managing Partners and their teams across Carriage and demonstrates
clearly that Carriage’s High Performance Flywheel only continues to
Accelerate!
CARRIAGE HIGH PERFORMANCE TRANSFORMATION |
Income Category |
(Millions except Per Share) |
|
2018 - 12 Months 9/30/21 |
|
|
2018 |
|
|
2019 |
|
|
2020 |
|
12 Months Ending
9/30/2021 (1)
|
|
|
$ Change |
% Change |
Total Revenue |
$ |
268.0 |
|
$ |
274.1 |
|
$ |
329.4 |
|
$ |
370.0 |
|
|
$ |
102 |
38.1 |
% |
Total Field EBITDA |
$ |
104.3 |
|
$ |
109.8 |
|
$ |
141.9 |
|
$ |
171.8 |
|
|
$ |
67.5 |
64.7 |
% |
Total
Field EBITDA Margin % |
|
38.9 |
% |
|
40.0 |
% |
|
43.1 |
% |
|
46.4 |
% |
|
750 bp |
19.3 |
% |
|
|
|
|
|
|
|
|
Adjusted Consolidated
EBITDA |
$ |
70.2 |
|
$ |
76.6 |
|
$ |
104.3 |
|
$ |
124.1 |
|
|
$ |
53.9 |
76.8 |
% |
Adjusted Consolidated EBITDA Margin % |
|
26.2 |
% |
|
27.9 |
% |
|
31.6 |
% |
|
33.5 |
% |
|
730 bp |
27.9 |
% |
|
|
|
|
|
|
|
|
Adjusted FCF |
$ |
42.6 |
|
$ |
38.8 |
|
$ |
70.0 |
|
$ |
77.2 |
|
|
$ |
34.6 |
81.2 |
% |
Adjusted FCF Margin % |
|
15.9 |
% |
|
14.2 |
% |
|
21.2 |
% |
|
20.9 |
% |
|
500 bp |
31.4 |
% |
|
|
|
|
|
|
|
|
Adjusted Diluted EPS |
$ |
1.17 |
|
$ |
1.25 |
|
$ |
1.86 |
|
$ |
2.84 |
|
|
$ |
1.67 |
142.7 |
% |
Adjusted Diluted Proforma EPS (1) |
$ |
1.17 |
|
NA |
|
NA |
|
$ |
3.36 |
|
|
$ |
2.19 |
187.2 |
% |
|
|
|
|
|
|
|
|
GAAP Net Income |
$ |
11.6 |
|
$ |
14.5 |
|
$ |
16.1 |
|
$ |
28.2 |
|
|
$ |
16.6 |
143.1 |
% |
GAAP
Diluted EPS |
$ |
0.63 |
|
$ |
0.80 |
|
$ |
0.89 |
|
$ |
1.55 |
|
|
$ |
0.92 |
146.0 |
% |
(1) |
Diluted EPS for the most recent 12 months ending 09/30/2021 is
adjusted for lower annual interest cost of $6.4 million (pre-tax)
from recent refinancing as if new $400 million 4.25% senior notes
issued May 2021 was effective on September 30, 2020 and Proforma
Diluted Shares outstanding of 16.885 million as of September 30,
2021. |
CEMETERY PORTFOLIO HIGH PERFORMANCE
TRANSFORMATION |
Data/Income Category |
(Millions except Interments & Average) |
|
2018 - 12 Months
9/30/21 |
|
|
2018 |
|
|
2019 |
|
|
2020 |
|
12 Months Ending
9/30/2021 |
|
$ Change |
% Change |
Number of Interments Sold – Preneed |
|
6,360 |
|
|
7,156 |
|
|
9,457 |
|
|
11,368 |
|
|
|
5,008 |
78.7 |
% |
Preneed Property Average |
$ |
3,605 |
|
$ |
3,673 |
|
$ |
4,049 |
|
$ |
4,649 |
|
|
$ |
1,044 |
29.0 |
% |
Net Preneed Property
Revenue |
$ |
22,927 |
|
$ |
26,287 |
|
$ |
38,293 |
|
$ |
52,851 |
|
|
|
29,924 |
130.5 |
% |
Total Preneed M&S
Revenue |
$ |
5,532 |
|
$ |
5,653 |
|
$ |
9,205 |
|
$ |
11,379 |
|
|
$ |
5,847 |
105.7 |
% |
Total
Preneed Sales Revenue |
$ |
28,459 |
|
$ |
31,941 |
|
$ |
47,498 |
|
$ |
64,230 |
|
|
$ |
35,771 |
125.7 |
% |
|
|
|
|
|
|
|
|
Total Cemetery Operating
Revenue |
$ |
44,918 |
|
$ |
49,553 |
|
$ |
69,351 |
|
$ |
89,723 |
|
|
$ |
44,805 |
99.7 |
% |
Total Cemetery Field
EBITDA |
$ |
13,840 |
|
$ |
17,101 |
|
$ |
26,627 |
|
$ |
41,491 |
|
|
$ |
27,651 |
199.8 |
% |
Total
Cemetery Field EBITDA Margin |
|
30.8 |
% |
|
34.5 |
% |
|
38.4 |
% |
|
46.2 |
% |
|
1,540 bp |
50.0 |
% |
|
|
|
|
|
|
|
|
GAAP
Cemetery Operating Income |
$ |
14,717 |
|
$ |
15,983 |
|
$ |
26,859 |
|
$ |
38,881 |
|
|
$ |
24,164 |
164.2 |
% |
UPDATED ROLLING FOUR QUARTER OUTLOOK AND TWO YEAR
SCENARIO
Given the current strong operating momentum and
expectation for continued organic growth across our entire
portfolio, we are once again increasing our Rolling Four Quarter
Outlook and Roughly Right Range Two Year Scenario ending December
31, 2022. The increases in our range of performance metrics
have increased significantly since our update in the second
quarter, which continues our policy of adjusting our outlook and
scenario higher when we believe such significant increases in our
performance valuation metrics are sustainable into the
future. We have previously outlined performance drivers
within our control that we believed would lead to sustained higher
organic growth rates irrespective of the path of COVID-19 and its
impact on short term death rates.
All five of these performance drivers were
evident in our third quarter and year to date results and provide
the basis for our higher expected operational and financial
performance as outlined in the updated Roughly Right Range
Scenario:
- Increased Cemetery Preneed Property Sales leading to higher
Cemetery Revenue growth rates at Record and Sustainable Cemetery
Field EBITDA Margins;
- Continuation of local market share gains across our funeral
home portfolio;
- Growth in Average Revenue per Funeral Contract, particularly
Cremation contracts;
- Incremental Growth of Financial Revenue and Financial EBITDA;
and
- Higher Returns on Invested Capital from continued disciplined
capital allocation combined with a lower Cost of Capital from lower
interest expense due to senior note refinancing completed in the
second quarter.
The updated and increased Rolling Four Quarter
Outlook and Roughly Right Range Two Year Scenario represent our
best and realistic expectations of our performance through the end
of next year. The increased expectations for future
performance include the full effect of lower annual interest costs
($9.5 million) from our senior note refinancing and a continuation
of our share repurchase program equal to about 75% of our Adjusted
Free Cash Flow through the end of 2022 conditioned on the market
price of our shares remaining highly discounted to our opinion of
intrinsic value per share. As part of our year end 2021
earnings release early next year, we intend to provide an updated
Roughly Right Range Three Year Scenario ending in 2024 with three
different Capital Allocation Scenarios and associated Roughly Right
Ranges for our opinion of CSV’s Intrinsic Value Per Share in each
of the three Capital Allocation Scenarios for each of the three
years ending 2024.
UPDATED ROLLING FOUR QUARTER OUTLOOK / TWO YEAR ROUGHLY
RIGHT SCENARIO |
Performance Metric |
2019A |
2020A |
LTM |
2021 |
RFQO |
2022 |
3 Year
Midpoint
CAGR |
Total Revenue |
$274.1 |
$329.4 |
$370.0 |
$370 - $375 |
$375 - $385 |
$380 - $390 |
12.0% |
Total Field EBITDA |
$109.8 |
$141.9 |
$171.8 |
$172 - $177 |
$178 - $184 |
$180 - $186 |
18.6% |
Total Field EBITDA Margin |
40.0% |
43.1% |
46.4% |
46% - 47% |
46.5% - 47.5% |
46.5% - 47.5% |
5.5% |
Adjusted Consolidated EBITDA |
$76.6 |
$104.3 |
$124.1 |
$124 - $127 |
$126 - $132 |
$128 - $134 |
19.6% |
Adj. Consol. EBITDA Margin |
27.9% |
31.6% |
33.5% |
33.5% - 34.0% |
33.5% - 34.5% |
33.5% - 34.5% |
6.8% |
Adjusted Diluted EPS |
$1.25 |
$1.86 |
$2.84 |
$3.03 - $3.08 $3.08 |
$3.30 - $3.40 |
$3.50 - $3.60 |
41.6% |
Diluted Shares Outstanding |
18.0 |
18.1 |
18.4 |
18.1 |
17.0 |
16.5 |
(2.9%) |
Adjusted Proforma(1) Diluted EPS |
N/A |
N/A |
$3.36 |
$3.45 - $3.55 |
$3.55 - $3.65 |
$3.75 - $3.85 |
44.9% |
Proforma(1) Diluted Shares Outstanding |
N/A |
N/A |
16.885 |
16.3 |
16.0 |
15.5 |
(4.9%) |
Adjusted Free Cash Flow |
$38.8 |
$70.0 |
$77.2 |
$77 - $82 |
$80 - $85 |
$82 - $87 |
29.6% |
Adjusted FCF Margin |
14.2% |
21.2% |
20.9% |
20.5% - 21.5% |
20.5% - 21.5% |
21% - 22% |
14.8% |
Total Debt Outstanding |
$534(2) |
$461.1 |
$497.6 |
$520 - $530 |
$530 - $540 |
$540 - $550 |
0.9% |
Total Debt to EBITDA Multiple |
7.0(3) |
4.4 |
4.0 |
3.9 - 4.1 |
3.9 - 4.1 |
3.9 - 4.1 |
N/A |
(1) |
Proforma lower interest impact of recent refinancing effective as
of January 1, 2021 (pre-tax lower interest cost of $4.0 million for
the first half 2021) and Non-GAAP Proforma Diluted Shares
Outstanding of 16.885 million as of September 30, 2021.
Non-GAAP Diluted Shares Outstanding includes 16.65 Basic Shares
Outstanding plus .235 million vested equity options and excludes
.512 million shares from in the money and vested shares related to
Carriage’s Five Year Good To Great Shareholder Value Creation
Incentive Plan. |
(2) |
January
3, 2020 acquisition of Oakmont Memorial Park & Mortuary and
peak debt. |
(3) |
Does not
include proforma EBITDA for acquisitions. |
INCREASED ROUGHLY RIGHT RANGE OF INTRINSIC VALUE PER
SHARE
Beginning with our press release announcing the
completion of our $400 million senior note refinancing transaction
on May 13 and again in our second quarter press release on
July 27, we have introduced and subsequently updated our opinion of
the Roughly Right Range of the Intrinsic Value Per CSV share using
a valuation methodology of Free Cash Flow Equity Yield. We
view Free Cash Flow Yield as the most appropriate valuation
methodology given our ability to produce and sustain a high amount
of Free Cash Flow per every dollar of Revenue (21% Adjusted Free
Cash Flow Margin) and our ability to invest that Free Cash Flow at
high rates of return on invested capital to accelerate the growth
in our intrinsic value.
With the completion of our senior note
refinancing in May 2021, our weighted average cost of capital was
reduced by 100 basis points from 7.4% to 6.4% due to the 237.5
basis point decrease in the interest rate on our new senior notes
to 4.25% annually. To calculate our Roughly Right Range basis
for Intrinsic Value we have used a Free Cash Flow Equity Yield
using 6.4% - 7.4% discount rates which we view as appropriate given
our recurring and growing Free Cash Flow and the persistent low
interest rate environment globally.
To calculate our updated Roughly Right Range of
Intrinsic Value Per CSV Share we used the 16.885 million Proforma
Diluted Shares Outstanding as of September 30 which includes
the full impact of our year to date share repurchases (1.53
million) and the in the money and vested options (235,000), but
excludes the vested but not available to participants shares of our
Five Year Good To Great II Shareholder Value Creation Incentive
Plan (511,614) ending in 2024 with shares to be delivered in early
2025 to participants still employed at least in their current
roles.
Using our $81.2 million of ProForma Adjusted
Free Cash Flow we produced over the past twelve months and applying
our Free Cash Flow Equity Yield discount rate range of 6.4% to 7.4%
which equals an equity market capitalization range of $1,097.3
million to $1,268.8 million. Dividing this equity market
capitalization by our Proforma Diluted Shares Outstanding equals an
Intrinsic Value Per Share Range of $64.99 - $75.14 on a trailing
twelve month basis.
However we believe the most appropriate way to
calculate our Roughly Right Range of Intrinsic Value is to use the
mid-point of our Roughly Right Range Outlook for 2022 Adjusted Free
Cash Flow of $84.5 million. Applying our Free Cash Flow
Equity Yield Range of 6.4% - 7.4% discount rate would equal an
equity market capitalization range of $1,141.9 million to $1,320.3
million. Dividing this equity market capitalization by our Proforma
Diluted Shares of 16.885 million would equal an Intrinsic Value Per
Share Range of $67.63 - $78.19. We are therefore increasing
our Roughly Right Intrinsic Value Per Share Range to $65 - $75
which is a $10 or 16.7% increase from the second quarter and a $15
or 27.3% increase since we first introduced the Roughly Right
Intrinsic Value Per CSV Share a little over five months
ago.
We will continue to update this Roughly Right
Range of Intrinsic Value Per CSV Share on a quarterly basis and
will use it as an important part of our capital allocation strategy
decision making process when weighing accretive share repurchases
versus our other options.
CAPITAL ALLOCATION
FRAMEWORK
In our second quarter release we outlined a more
detailed capital allocation framework so investors could have a
clear roadmap for how we intend to allocate our growing and
recurring Free Cash Flow to grow the per share intrinsic value of
CSV shares. Outlined below is our capital allocation
framework with updates on each category on our progress in the
third quarter and year to date:
- Share Repurchases: We expect to prioritize
open market share repurchases when our stock trades at a material
discount of 10% or more compared to the bottom of the share price
range of our publicly stated opinion of intrinsic value.
Share repurchases will also be weighted versus near term larger
strategic acquisition opportunities and our Net Debt to Adjusted
Consolidated EBITDA Leverage Ratio Policy.
During the third quarter we repurchased 1,203,493 shares for $53.2
million equaling an average purchase price of $44.24 which brought
our year to date share repurchase totals to 1,528,197 shares for
$65.5 million at an average purchase price of $42.89. The
1,528,197 shares repurchased year to date represent approximately
8.5% of the shares outstanding prior to the start of our repurchase
program earlier this year. As Mel previously discussed in his
comments, the full impact of our year to date share repurchases and
the reduction in actual shares available will be recognized in our
reported GAAP diluted shares outstanding at the beginning of next
year.
The $42.89 average purchase price on shares repurchased year to
date represents a 38.7% discount to the mid-point of our updated
intrinsic value per CSV share of $70. Given the large and
persistent discount of our market price, to our updated opinion of
intrinsic value per share, we continue to view the repurchase of
our shares as the highest and best use of our capital at this
time.
We are therefore excited to announce the authorization by our Board
of an additional $75 million to our share repurchase program which,
along with previously approved and available amounts, brings our
total availability to approximately $85.1 million. The total
availability under our share repurchase authorization is equal to
approximately 11.0% of our current equity market
capitalization.
- Strategic Acquisitions: We plan to prioritize
acquisitions of the best remaining independent funeral homes and
cemetery businesses in large strategic growth markets conditioned
on the return on invested capital substantially exceeding our cost
of capital in the early years of integration and thereafter growing
over the intermediate and long term. Our four large and
transformative strategic acquisitions at the end of 2019 set a new
and much higher standard for capital allocation and strategic
growth criteria required for an acquisition candidate to join our
portfolio of Being The Best businesses.
As Steve mentioned in his comments, we believe that Carriage has
never been better positioned to partner with the best remaining
independent funeral homes and cemeteries in the country, and that
over the next 3-5 years we will have a significant number of high
quality opportunities to grow through selective acquisitions.
We intend to remain highly disciplined and strategic in our
allocation of capital towards acquisitions in order to ensure a
long term annual ROIC of 15% or more on acquired
businesses.
- Internal Growth Projects: Our internal growth
capital expenditures will be focused on differentiated cemetery
inventory development, targeted funeral home remodels and selective
construction of new funeral homes in high growth markets to expand
strong local brands of existing Carriage businesses.
We have allocated $15.3 million towards capital expenditures in
2021 split between $9.0 million of maintenance capital expenditures
and $6.3 million of growth capital expenditures. The majority
of our growth capital expenditures have been cemetery inventory
development projects as well as selective funeral home
remodels. We continue to be excited about the number of
organic growth opportunities across our entire portfolio and will
continue to focus on those projects that deliver the highest ROIC
over the long term.
- Dividends: Annual dividend to approximate 10%
of Adjusted Free Cash Flow and a 1% dividend equity yield on CSV
shares. We are pleased to announce that our Board has authorized a
$0.05 per share increase to our annual dividend to bring our total
annual dividend amount to $0.45 per CSV share. This increase
aligns perfectly to our previously announce dividend policy and
represents our commitment to a balanced approach to capital
allocation strategy that will drive superior long term shareholder
returns.
Relatedly, on October 27, 2021, our Board declared a quarterly cash
dividend of $0.1125 per share of common stock, reflecting this most
recent dividend increase, payable on December 1, 2021 to
stockholders of record as of close of business on November 9,
2021.
- Debt Repayment: We expect to maintain a
moderate Net Debt to Adjusted Consolidated EBITDA Leverage Ratio of
4 times or less, most likely meaning that our total debt will
remain relatively flat while Free Cash Flow is allocated to higher
ROIC growth opportunities to accelerate intrinsic value per
share.
While total debt increased approximately $26.2 million in the third
quarter due to the execution of our share repurchase program, our
Bank Covenant Compliance Leverage Ratio remained essentially flat
at 3.98 times in line with our previously announced Leverage Ratio
target of approximately 4 times or below due to accelerating
operational and financial high performance across our operating
portfolio in the quarter.
ADJUSTED FREE CASH FLOW AND LEVERAGE RATIO
|
Nine Months Ended September 30, |
|
2020
|
|
|
2021 |
Cash Flow Provided by Operating Activities |
$ |
67,822 |
|
|
$ |
69,699 |
|
Cash used for Maintenance
Capital Expenditures |
(5,394 |
) |
|
(8,960 |
) |
Free Cash Flow |
$ |
62,428 |
|
|
$ |
60,739 |
|
|
|
|
|
Plus: Incremental Special
Items: |
|
|
|
Federal Tax Refund |
(7,012 |
) |
|
— |
|
Acquisition Expenses |
159 |
|
|
— |
|
Severance and Separation
Costs |
563 |
|
|
1,575 |
|
Litigation Reserve |
270 |
|
|
— |
|
Disaster Recovery and Pandemic
Costs |
1,312 |
|
|
2,041 |
|
Other Special Items |
373 |
|
|
1,020 |
|
Adjusted Free Cash Flow |
$ |
58,093 |
|
|
$ |
65,375 |
|
|
|
|
|
Revenue |
$ |
239,360 |
|
|
$ |
279,955 |
|
|
|
|
|
Adjusted Free Cash Flow
Margin |
|
24.3 |
% |
|
|
23.4 |
% |
Adjusted Free Cash Flow for the nine months ending September 30,
2021 increased 12.5% to $65.4 million and the Adjusted Free Cash
Flow Margin decreased 90 basis points to 23.4%. The Adjusted
Free Cash Flow Margin represents the amount of cash generated for
every dollar of Revenue that is available for shareholder value
creation capital allocation. We believe it is an important
metric for investors to gauge the accelerating Free Cash Flow
earnings power of Carriage.
For the last twelve months Adjusted Free Cash
Flow totaled $77.2 million and Adjusted Free Cash Flow Margin was
20.9%. Third quarter Adjusted Free Cash Flow declined $1.7
million or 6.1% to $25.9 million compared to third quarter 2020
primarily due to higher spending on maintenance capital
expenditures in the quarter.
Bank Covenant Compliance Leverage Ratio was 3.98
times at the end of the third quarter compared to 3.92 times at the
end of the second quarter. The continuation of our strong
operating performance in the third quarter allowed us to keep our
Leverage Ratio essentially flat, while investing $50.0 million to
repurchase Carriage shares at a significant discount to the updated
intrinsic value per share range. The ability to execute on a
highly accretive share repurchase program and maintain a more
moderate Bank Covenant Compliance Leverage Ratio is a perfect
example of the greater financial flexibility Carriage has after the
senior note refinancing transaction we completed in the second
quarter. We intend to maintain the necessary financial
flexibility with a moderate Leverage Ratio of approximately 4 times
or below while allocating capital opportunistically and with
discipline going forward.
TRUST FUND INVESTMENT
PERFORMANCE
|
|
YTD 2021 |
|
12 months
Ended Q3 2021 |
|
Annualized
2009 - Q3 2021 |
CSV Discretionary
Portfolio |
|
13.8% |
|
31.7% |
|
14.2% |
S&P 500 |
|
15.9% |
|
30.0% |
|
15.4% |
DJIA |
|
12.1% |
|
24.2% |
|
14.0% |
NASDAQ |
|
12.7% |
|
30.3% |
|
20.4% |
HY Bond Index |
|
4.5% |
|
11.3% |
|
10.7% |
70/30
HY/S&P Bond |
|
7.9% |
|
16.9% |
|
12.4% |
Through the third quarter our year to date
return for our discretionary trust portfolio was 13.8% versus 15.9%
for the S&P 500 and 7.9% for our 70/30 HY Bond/S&P 500
benchmark. For the last twelve months our total return for
our discretionary trust portfolio was 31.7% compared to 30.0% for
the S&P 500 and 16.9% for our 70/30 HY Bond/S&P 500
benchmark.
Our discretionary trust fund portfolio continued
to benefit from the repositioning strategy we executed in the
middle of the COVID-19 Market Crisis last year. Since we
executed on our repositioning strategy we have realized
approximately $30 million of capital gains and increased the
recurring annual interest and dividend income in the portfolio by
$8 million to $17.4 million. Given the recurring amount of
annual income and the high amount of capital gains that have
accrued to underlying preneed contracts we believe we have
positioned our discretionary trust fund portfolio to contribute
incremental increases to Financial Revenue and Financial EBITDA for
many years to come through higher realized values of maturing
preneed funeral and cemetery contracts combined with high amounts
of annual income earned through our cemetery perpetual care
trusts,” concluded Mr. Brink.
CONFERENCE CALL AND INVESTOR
RELATIONS CONTACT
Carriage Services has scheduled a conference
call for tomorrow, October 28, 2021 at 9:30 a.m. Central time. To
participate in the call, please dial 866-516-3867 (conference
ID-1229337) and ask for the Carriage Services conference call. A
replay of the conference call will be available through November 2,
2021 and may be accessed by dialing 855-859-2056 (conference
ID-1229337). The conference call will also be available at
www.carriageservices.com. For any investor relations questions,
please contact Ben Brink at 713-332-8441 or email InvestorRelations@carriageservices.com.
|
CARRIAGE SERVICES, INC. |
OPERATING AND FINANCIAL TREND REPORT |
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) |
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2020 |
|
2021 |
|
% Change |
|
2020 |
|
2021 |
|
% Change |
|
|
|
|
|
|
|
|
Same Store
Contracts |
|
|
|
|
|
|
|
Atneed Contracts |
7,828 |
|
9,130 |
|
16.6 |
% |
|
22,935 |
|
26,159 |
|
14.1 |
% |
Preneed Contracts |
1,614 |
|
1,534 |
|
(5.0 |
%) |
|
4,668 |
|
4,634 |
|
(0.7 |
%) |
Total Same Store Funeral
Contracts |
9,442 |
|
10,664 |
|
12.9 |
% |
|
27,603 |
|
30,793 |
|
11.6 |
% |
Acquisition
Contracts |
|
|
|
|
|
|
|
Atneed Contracts |
1,470 |
|
1,619 |
|
10.1 |
% |
|
4,864 |
|
4,985 |
|
2.5 |
% |
Preneed Contracts |
149 |
|
120 |
|
(19.5 |
%) |
|
429 |
|
381 |
|
(11.2 |
%) |
Total Acquisition Funeral
Contracts |
1,619 |
|
1,739 |
|
7.4 |
% |
|
5,293 |
|
5,366 |
|
1.4 |
% |
Total Funeral
Contracts |
11,061 |
|
12,403 |
|
12.1 |
% |
|
32,896 |
|
36,159 |
|
9.9 |
% |
|
|
|
|
|
|
|
|
Funeral Operating
Revenue |
|
|
|
|
|
|
|
Same Store Revenue |
$ |
47,865 |
|
$ |
55,502 |
|
16.0 |
% |
|
$ |
139,126 |
|
$ |
159,728 |
|
14.8 |
% |
Acquisition Revenue |
8,205 |
|
9,354 |
|
14.0 |
% |
|
26,113 |
|
28,050 |
|
7.4 |
% |
Total Funeral
Operating Revenue |
$ |
56,070 |
|
$ |
64,856 |
|
15.7 |
% |
|
$ |
165,239 |
|
$ |
187,778 |
|
13.6 |
% |
|
|
|
|
|
|
|
|
Cemetery Operating
Revenue |
|
|
|
|
|
|
|
Same Store Revenue |
$ |
14,391 |
|
$ |
16,342 |
|
13.6 |
% |
|
$ |
36,952 |
|
$ |
47,883 |
|
29.6 |
% |
Acquisition Revenue |
5,220 |
|
6,362 |
|
21.9 |
% |
|
12,075 |
|
21,517 |
|
78.2 |
% |
Total Cemetery
Operating Revenue |
$ |
19,611 |
|
$ |
22,704 |
|
15.8 |
% |
|
$ |
49,027 |
|
$ |
69,400 |
|
41.6 |
% |
|
|
|
|
|
|
|
|
Total Financial
Revenue |
$ |
5,631 |
|
$ |
5,639 |
|
0.1 |
% |
|
$ |
14,626 |
|
$ |
16,750 |
|
14.5 |
% |
|
|
|
|
|
|
|
|
Ancillary
Revenue |
$ |
1,196 |
|
$ |
1,096 |
|
(8.4 |
%) |
|
$ |
3,464 |
|
$ |
3,391 |
|
(2.1 |
%) |
|
|
|
|
|
|
|
|
Total Divested/Planned
Divested Revenue |
$ |
1,885 |
|
$ |
746 |
|
(60.4 |
%) |
|
$ |
7,004 |
|
$ |
2,636 |
|
(62.4 |
%) |
|
|
|
|
|
|
|
|
Total
Revenue |
$ |
84,393 |
|
$ |
95,041 |
|
12.6 |
% |
|
$ |
239,360 |
|
$ |
279,955 |
|
17.0 |
% |
|
|
|
|
|
|
|
|
Field
EBITDA |
|
|
|
|
|
|
|
Same Store Funeral Field EBITDA |
$ |
19,903 |
|
$ |
24,960 |
|
25.4 |
% |
|
$ |
56,687 |
|
$ |
69,454 |
|
22.5 |
% |
Same Store Funeral Field EBITDA Margin |
41.6 |
% |
45.0 |
% |
340 bp |
|
40.7 |
% |
43.5 |
% |
280 bp |
Acquisition Funeral Field EBITDA |
2,942 |
|
3,974 |
|
35.1 |
% |
|
9,944 |
|
11,702 |
|
17.7 |
% |
Acquisition Funeral Field EBITDA Margin |
35.9 |
% |
42.5 |
% |
660 bp |
|
38.1 |
% |
41.7 |
% |
360 bp |
Total Funeral Field
EBITDA |
$ |
22,845 |
|
$ |
28,934 |
|
26.7 |
% |
|
$ |
66,631 |
|
$ |
81,156 |
|
21.8 |
% |
Total Funeral Field
EBITDA Margin |
40.7 |
% |
44.6 |
% |
390 bp |
|
40.3 |
% |
43.2 |
% |
290 bp |
Same Store Cemetery Field EBITDA |
$ |
6,161 |
|
$ |
6,465 |
|
4.9 |
% |
|
$ |
13,002 |
|
$ |
20,076 |
|
54.4 |
% |
Same Store Cemetery Field EBITDA Margin |
42.8 |
% |
39.6 |
% |
(320 bp) |
|
35.2 |
% |
41.9 |
% |
670 bp |
Acquisition Cemetery Field EBITDA |
2,335 |
|
3,547 |
|
51.9 |
% |
|
4,597 |
|
12,386 |
|
169.4 |
% |
Acquisition Cemetery Field EBITDA Margin |
44.7 |
% |
55.8 |
% |
1,110 bp |
|
38.1 |
% |
57.6 |
% |
1,950 bp |
Total Cemetery Field
EBITDA |
$ |
8,496 |
|
$ |
10,012 |
|
17.8 |
% |
|
$ |
17,599 |
|
$ |
32,462 |
|
84.5 |
% |
Total Cemetery Field
EBITDA Margin |
43.3 |
% |
44.1 |
% |
80 bp |
|
35.9 |
% |
46.8 |
% |
1,090 bp |
|
|
|
|
|
|
|
|
Total Financial
EBITDA |
$ |
5,282 |
|
$ |
5,225 |
|
(1.1 |
%) |
|
$ |
13,634 |
|
$ |
15,588 |
|
14.3 |
% |
Total Financial EBITDA
Margin |
93.8 |
% |
92.7 |
% |
(110 bp) |
|
93.2 |
% |
93.1 |
% |
(10 bp) |
|
|
|
|
|
|
|
|
Ancillary
EBITDA |
$ |
292 |
|
$ |
274 |
|
(6.2 |
%) |
|
$ |
908 |
|
$ |
790 |
|
(13.0 |
%) |
Ancillary EBITDA
Margin |
24.4 |
% |
25.0 |
% |
60 bp |
|
26.2 |
% |
23.3 |
% |
(290 bp) |
|
|
|
|
|
|
|
|
Total Divested/Planned
Divested EBITDA |
$ |
394 |
|
$ |
206 |
|
(47.7 |
%) |
|
$ |
1,852 |
|
$ |
456 |
|
(75.4 |
%) |
Total Divested/Planned
Divested EBITDA Margin |
20.9 |
% |
27.6 |
% |
670 bp |
|
26.4 |
% |
17.3 |
% |
(910 bp) |
|
|
|
|
|
|
|
|
Total Field
EBITDA |
$ |
37,309 |
|
$ |
44,651 |
|
19.7 |
% |
|
$ |
100,624 |
|
$ |
130,452 |
|
29.6 |
% |
Total Field EBITDA
Margin |
44.2 |
% |
47.0 |
% |
280 bp |
|
42.0 |
% |
46.6 |
% |
460 bp |
|
|
|
|
|
|
|
|
OPERATING AND FINANCIAL TREND REPORT |
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) |
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2020 |
|
2021 |
|
% Change |
|
2020 |
|
2021 |
|
% Change |
|
|
|
|
|
|
|
|
Overhead |
|
|
|
|
|
|
|
Total Variable Overhead |
$ |
4,077 |
|
$ |
7,103 |
|
74.2 |
% |
|
$ |
9,450 |
|
$ |
18,548 |
|
96.3 |
% |
Total Regional Fixed Overhead |
1,020 |
|
1,326 |
|
30.0 |
% |
|
2,930 |
|
3,881 |
|
32.5 |
% |
Total Corporate Fixed Overhead |
4,841 |
|
5,855 |
|
20.9 |
% |
|
14,971 |
|
16,893 |
|
12.8 |
% |
Total
Overhead |
$ |
9,938 |
|
$ |
14,284 |
|
43.7 |
% |
|
$ |
27,351 |
|
$ |
39,322 |
|
43.8 |
% |
Overhead as a
percentage of Revenue |
11.8 |
% |
15.0 |
% |
320 bp |
|
11.4 |
% |
14.0 |
% |
260 bp |
|
|
|
|
|
|
|
|
Consolidated
EBITDA |
$ |
27,371 |
|
$ |
30,367 |
|
10.9 |
% |
|
$ |
73,273 |
|
$ |
91,130 |
|
24.4 |
% |
Consolidated EBITDA
Margin |
32.4 |
% |
32.0 |
% |
(40 bp) |
|
30.6 |
% |
32.6 |
% |
200 bp |
|
|
|
|
|
|
|
|
Other Expenses and
Interest |
|
|
|
|
|
|
|
Depreciation & Amortization |
$ |
5,033 |
|
$ |
4,950 |
|
|
|
$ |
14,280 |
|
$ |
15,486 |
|
|
Non-Cash Stock Compensation |
927 |
|
1,294 |
|
|
|
2,473 |
|
3,832 |
|
|
Interest Expense |
8,007 |
|
5,076 |
|
|
|
24,787 |
|
20,138 |
|
|
Accretion of Discount on Convertible Sub. Notes |
69 |
|
— |
|
|
|
200 |
|
20 |
|
|
Loss on Extinguishment of Debt |
6 |
|
— |
|
|
|
6 |
|
23,807 |
|
|
Net Loss on Divestitures |
4,917 |
|
282 |
|
|
|
4,917 |
|
179 |
|
|
Impairment of Goodwill and Other |
— |
|
500 |
|
|
|
14,693 |
|
500 |
|
|
Net Loss on Disposal of Fixed Assets |
— |
|
76 |
|
|
|
— |
|
698 |
|
|
Other, Net |
28 |
|
21 |
|
|
|
34 |
|
87 |
|
|
Pre-Tax
Income |
$ |
8,384 |
|
$ |
18,168 |
|
|
|
$ |
11,883 |
|
$ |
26,383 |
|
|
Net Tax
Expense |
2,859 |
|
5,122 |
|
|
|
4,158 |
|
6,571 |
|
|
GAAP Net
Income |
$ |
5,525 |
|
$ |
13,046 |
|
136.1 |
% |
|
$ |
7,725 |
|
$ |
19,812 |
|
156.5 |
% |
|
|
|
|
|
|
|
|
Special
Items |
|
|
|
|
|
|
|
Acquisition Expenses |
$ |
— |
|
$ |
— |
|
|
|
$ |
159 |
|
$ |
— |
|
|
Severance and Separation Costs |
— |
|
— |
|
|
|
563 |
|
1,575 |
|
|
Performance Awards Cancellation and Exchange |
108 |
|
— |
|
|
|
180 |
|
— |
|
|
Accretion of Discount on Convertible Sub. Notes |
69 |
|
— |
|
|
|
200 |
|
20 |
|
|
Net Loss on Divestitures and Other Costs |
4,917 |
|
282 |
|
|
|
4,917 |
|
179 |
|
|
Net Impact of Impairment of Goodwill and Other |
— |
|
500 |
|
|
|
14,769 |
|
500 |
|
|
Litigation Reserve |
— |
|
— |
|
|
|
270 |
|
— |
|
|
Loss on Extinguishment of Debt |
— |
|
— |
|
|
|
— |
|
23,807 |
|
|
Disaster Recovery and Pandemic Costs |
340 |
|
1,002 |
|
|
|
1,312 |
|
2,041 |
|
|
Other Special Items |
(60 |
) |
1,020 |
|
|
|
410 |
|
2,354 |
|
|
Sum of Special Items |
$ |
5,374 |
|
$ |
2,804 |
|
|
|
$ |
22,780 |
|
$ |
30,476 |
|
|
Tax Effect on Special Items |
1,755 |
|
738 |
|
|
|
7,243 |
|
8,619 |
|
|
Adjusted Net
Income |
$ |
9,144 |
|
$ |
15,112 |
|
65.3 |
% |
|
$ |
23,262 |
|
$ |
41,669 |
|
79.1 |
% |
Adjusted Net Income
Margin |
10.8 |
% |
15.9 |
% |
510 bp |
|
9.7 |
% |
14.9 |
% |
520 bp |
|
|
|
|
|
|
|
|
Adjusted Basic Earnings Per
Share |
$ |
0.51 |
|
$ |
0.86 |
|
68.6 |
% |
|
$ |
1.30 |
|
$ |
2.34 |
|
80.0 |
% |
Adjusted Diluted Earnings Per
Share |
$ |
0.51 |
|
$ |
0.82 |
|
60.8 |
% |
|
$ |
1.30 |
|
$ |
2.27 |
|
74.6 |
% |
|
|
|
|
|
|
|
|
GAAP Basic Earnings Per
Share |
$ |
0.31 |
|
$ |
0.74 |
|
138.7 |
% |
|
$ |
0.43 |
|
$ |
1.11 |
|
158.1 |
% |
GAAP Diluted Earnings Per
Share |
$ |
0.31 |
|
$ |
0.71 |
|
129.0 |
% |
|
$ |
0.43 |
|
$ |
1.08 |
|
151.2 |
% |
|
|
|
|
|
|
|
|
Weighted Average Basic Shares
Outstanding |
17,895 |
|
17,499 |
|
|
|
17,853 |
|
17,804 |
|
|
Weighted Average Diluted
Shares Outstanding |
17,932 |
|
18,246 |
|
|
|
17,893 |
|
18,360 |
|
|
|
|
|
|
|
|
|
|
Reconciliation to
Adjusted Consolidated EBITDA |
|
|
|
|
|
|
|
Consolidated
EBITDA |
$ |
27,371 |
|
$ |
30,367 |
|
10.9 |
% |
|
$ |
73,273 |
|
$ |
91,130 |
|
24.4 |
% |
Acquisition Expenses |
— |
|
— |
|
|
|
159 |
|
— |
|
|
Severance and Separation Costs |
— |
|
— |
|
|
|
563 |
|
1,575 |
|
|
Litigation Reserve |
— |
|
— |
|
|
|
270 |
|
— |
|
|
Disaster Recovery and Pandemic Costs |
340 |
|
1,002 |
|
|
|
1,312 |
|
2,041 |
|
|
Other Special Items |
(45 |
) |
1,020 |
|
|
|
373 |
|
1,020 |
|
|
Adjusted Consolidated
EBITDA |
$ |
27,666 |
|
$ |
32,389 |
|
17.1 |
% |
|
$ |
75,950 |
|
$ |
95,766 |
|
26.1 |
% |
Adjusted Consolidated
EBITDA Margin |
32.8 |
% |
34.1 |
% |
130 bp |
|
31.7 |
% |
34.2 |
% |
250 bp |
|
|
|
|
|
|
|
|
|
|
|
|
CARRIAGE SERVICES, INC. |
CONDENSED CONSOLIDATED BALANCE SHEET |
(in thousands) |
|
|
|
|
(unaudited) |
|
December 31, 2020 |
|
September 30, 2021 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
889 |
|
|
|
$ |
1,088 |
|
|
Accounts receivable, net |
25,103 |
|
|
|
26,213 |
|
|
Inventories |
7,259 |
|
|
|
7,376 |
|
|
Prepaid and other current assets |
2,076 |
|
|
|
2,191 |
|
|
Total current assets |
35,327 |
|
|
|
36,868 |
|
|
Preneed cemetery trust
investments |
86,604 |
|
|
|
97,489 |
|
|
Preneed funeral trust
investments |
101,235 |
|
|
|
108,404 |
|
|
Preneed cemetery receivables,
net |
21,081 |
|
|
|
22,932 |
|
|
Receivables from funeral
preneed trusts, net |
16,844 |
|
|
|
18,665 |
|
|
Property, plant and equipment,
net |
269,051 |
|
|
|
267,756 |
|
|
Cemetery property, net |
101,134 |
|
|
|
100,505 |
|
|
Goodwill |
392,978 |
|
|
|
391,972 |
|
|
Intangible and other
non-current assets, net |
29,542 |
|
|
|
29,437 |
|
|
Operating lease right-of-use
assets |
21,201 |
|
|
|
18,307 |
|
|
Cemetery perpetual care trust
investments |
70,828 |
|
|
|
71,640 |
|
|
Total assets |
$ |
1,145,825 |
|
|
|
$ |
1,163,975 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Current portion of debt and lease obligations |
$ |
3,432 |
|
|
|
$ |
3,041 |
|
|
Accounts payable |
11,259 |
|
|
|
14,510 |
|
|
Accrued and other liabilities |
31,138 |
|
|
|
43,147 |
|
|
Convertible subordinated notes due 2021 |
2,538 |
|
|
|
— |
|
|
Total current liabilities |
48,367 |
|
|
|
60,698 |
|
|
Acquisition debt, net of
current portion |
4,482 |
|
|
|
4,359 |
|
|
Credit facility |
46,064 |
|
|
|
85,418 |
|
|
Senior notes |
395,968 |
|
|
|
394,456 |
|
|
Obligations under finance
leases, net of current portion |
5,531 |
|
|
|
5,258 |
|
|
Obligations under operating
leases, net of current portion |
20,302 |
|
|
|
18,951 |
|
|
Deferred preneed cemetery
revenue |
47,846 |
|
|
|
49,480 |
|
|
Deferred preneed funeral
revenue |
27,992 |
|
|
|
29,945 |
|
|
Deferred tax liability |
46,477 |
|
|
|
43,044 |
|
|
Other long-term
liabilities |
4,748 |
|
|
|
3,045 |
|
|
Deferred preneed cemetery
receipts held in trust |
86,604 |
|
|
|
97,489 |
|
|
Deferred preneed funeral
receipts held in trust |
101,235 |
|
|
|
108,404 |
|
|
Care trusts’ corpus |
69,707 |
|
|
|
70,960 |
|
|
Total liabilities |
905,323 |
|
|
|
971,507 |
|
|
Commitments and
contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Common stock |
260 |
|
|
|
262 |
|
|
Additional paid-in capital |
239,989 |
|
|
|
237,681 |
|
|
Retained earnings |
102,303 |
|
|
|
122,115 |
|
|
Treasury stock |
(102,050 |
) |
|
|
(167,590 |
) |
|
Total stockholders’ equity |
|
240,502 |
|
|
|
|
192,468 |
|
|
Total liabilities and stockholders’ equity |
$ |
1,145,825 |
|
|
|
$ |
1,163,975 |
|
|
|
|
|
|
|
|
CARRIAGE SERVICES, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(unaudited and in thousands, except per share
data) |
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2020 |
|
2021 |
|
2020 |
|
2021 |
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
Service revenue |
$ |
41,218 |
|
|
|
$ |
46,210 |
|
|
|
$ |
120,830 |
|
|
|
$ |
134,086 |
|
|
Property and merchandise revenue |
36,298 |
|
|
|
42,043 |
|
|
|
100,211 |
|
|
|
125,545 |
|
|
Other revenue |
6,877 |
|
|
|
6,788 |
|
|
|
18,319 |
|
|
|
20,324 |
|
|
|
84,393 |
|
|
|
95,041 |
|
|
|
239,360 |
|
|
|
279,955 |
|
|
Field costs and expenses: |
|
|
|
|
|
|
|
Cost of service |
19,945 |
|
|
|
20,523 |
|
|
|
59,624 |
|
|
|
61,073 |
|
|
Cost of merchandise |
25,886 |
|
|
|
28,632 |
|
|
|
75,561 |
|
|
|
84,672 |
|
|
Cemetery property amortization |
1,471 |
|
|
|
1,521 |
|
|
|
3,445 |
|
|
|
5,213 |
|
|
Field depreciation expense |
3,233 |
|
|
|
3,154 |
|
|
|
9,770 |
|
|
|
9,432 |
|
|
Regional and unallocated funeral and cemetery costs |
4,731 |
|
|
|
6,812 |
|
|
|
11,204 |
|
|
|
18,655 |
|
|
Other expenses |
1,253 |
|
|
|
1,235 |
|
|
|
3,551 |
|
|
|
3,758 |
|
|
|
56,519 |
|
|
|
61,877 |
|
|
|
163,155 |
|
|
|
182,803 |
|
|
Gross profit |
27,874 |
|
|
|
33,164 |
|
|
|
76,205 |
|
|
|
97,152 |
|
|
|
|
|
|
|
|
|
|
Corporate costs and
expenses: |
|
|
|
|
|
|
|
General, administrative and other |
6,134 |
|
|
|
8,766 |
|
|
|
18,620 |
|
|
|
24,499 |
|
|
Home office depreciation and amortization |
329 |
|
|
|
275 |
|
|
|
1,065 |
|
|
|
841 |
|
|
Net loss on divestitures,
disposals and impairment charges |
4,917 |
|
|
|
858 |
|
|
|
19,610 |
|
|
|
1,377 |
|
|
Operating income |
16,494 |
|
|
|
23,265 |
|
|
|
36,910 |
|
|
|
70,435 |
|
|
|
|
|
|
|
|
|
|
Interest expense |
(8,007 |
) |
|
|
(5,076 |
) |
|
|
(24,787 |
) |
|
|
(20,138 |
) |
|
Accretion of discount on
convertible subordinated notes |
(69 |
) |
|
|
— |
|
|
|
(200 |
) |
|
|
(20 |
) |
|
Loss on extinguishment of
debt |
(6 |
) |
|
|
— |
|
|
|
(6 |
) |
|
|
(23,807 |
) |
|
Other, net |
(28 |
) |
|
|
(21 |
) |
|
|
(34 |
) |
|
|
(87 |
) |
|
Income before income
taxes |
8,384 |
|
|
|
18,168 |
|
|
|
11,883 |
|
|
|
26,383 |
|
|
Expense for income taxes |
(2,851 |
) |
|
|
(5,125 |
) |
|
|
(4,014 |
) |
|
|
(7,466 |
) |
|
Tax adjustment related to
certain discrete items |
(8 |
) |
|
|
3 |
|
|
|
(144 |
) |
|
|
895 |
|
|
Total expense for income
taxes |
(2,859 |
) |
|
|
(5,122 |
) |
|
|
(4,158 |
) |
|
|
(6,571 |
) |
|
Net income |
$ |
5,525 |
|
|
|
$ |
13,046 |
|
|
|
$ |
7,725 |
|
|
|
$ |
19,812 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per common
share: |
$ |
0.31 |
|
|
|
$ |
0.74 |
|
|
|
$ |
0.43 |
|
|
|
$ |
1.11 |
|
|
Diluted earnings per common
share: |
$ |
0.31 |
|
|
|
$ |
0.71 |
|
|
|
$ |
0.43 |
|
|
|
$ |
1.08 |
|
|
|
|
|
|
|
|
|
|
Dividends declared per common
share: |
$ |
0.0875 |
|
|
|
$ |
0.1000 |
|
|
|
$ |
0.2375 |
|
|
|
$ |
0.3000 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common and common equivalent shares outstanding: |
|
|
|
|
|
|
|
Basic |
17,895 |
|
|
|
17,499 |
|
|
|
17,853 |
|
|
|
17,804 |
|
|
Diluted |
17,932 |
|
|
|
18,246 |
|
|
|
17,893 |
|
|
|
18,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CARRIAGE SERVICES, INC. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(unaudited and in thousands) |
|
|
|
Nine Months Ended September 30, |
|
|
2020 |
|
2021 |
Cash flows from operating
activities: |
|
|
|
|
Net income |
|
$ |
7,725 |
|
|
|
$ |
19,812 |
|
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
Depreciation and amortization |
|
14,280 |
|
|
|
15,486 |
|
|
Provision for credit losses |
|
1,837 |
|
|
|
1,426 |
|
|
Stock-based compensation expense |
|
2,473 |
|
|
|
3,832 |
|
|
Deferred income tax expense (benefit) |
|
4,750 |
|
|
|
(3,433 |
) |
|
Amortization of intangibles |
|
981 |
|
|
|
968 |
|
|
Amortization of debt issuance costs |
|
592 |
|
|
|
459 |
|
|
Amortization and accretion of debt |
|
428 |
|
|
|
319 |
|
|
Loss on extinguishment of debt |
|
6 |
|
|
|
23,807 |
|
|
Net loss on divestitures, disposals and impairment charges |
|
19,855 |
|
|
|
1,558 |
|
|
Gain on insurance reimbursements |
|
(54 |
) |
|
|
— |
|
|
Other |
|
19 |
|
|
|
— |
|
|
Changes in operating assets
and liabilities that provided (required) cash: |
|
|
|
|
Accounts and preneed receivables |
|
(436 |
) |
|
|
(4,387 |
) |
|
Inventories, prepaid and other current assets |
|
3,241 |
|
|
|
(266 |
) |
|
Intangible and other non-current assets |
|
(776 |
) |
|
|
(887 |
) |
|
Preneed funeral and cemetery trust investments |
|
(2,781 |
) |
|
|
(23,355 |
) |
|
Accounts payable |
|
1,155 |
|
|
|
(845 |
) |
|
Accrued and other liabilities |
|
9,770 |
|
|
|
9,643 |
|
|
Deferred preneed funeral and cemetery revenue |
|
1,319 |
|
|
|
3,587 |
|
|
Deferred preneed funeral and cemetery receipts held in trust |
|
3,438 |
|
|
|
21,975 |
|
|
Net cash provided by operating activities |
|
67,822 |
|
|
|
69,699 |
|
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
Acquisition of businesses and real estate |
|
(28,011 |
) |
|
|
(3,285 |
) |
|
Proceeds from divestitures and sale of other assets |
|
7,416 |
|
|
|
4,375 |
|
|
Proceeds from insurance reimbursements |
|
97 |
|
|
|
2,946 |
|
|
Capital expenditures |
|
(10,034 |
) |
|
|
(15,252 |
) |
|
Net cash used in investing activities |
|
(30,532 |
) |
|
|
(11,216 |
) |
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
Borrowings from the credit facility |
|
89,300 |
|
|
|
154,968 |
|
|
Payments against the credit facility |
|
(117,100 |
) |
|
|
(115,268 |
) |
|
Payment of call premium for the redemption of the senior notes due
2026 |
|
— |
|
|
|
(19,876 |
) |
|
Payment of debt issuance and transaction costs |
|
(78 |
) |
|
|
(6,554 |
) |
|
Conversions and maturity of the convertible subordinated notes due
2021 |
|
(4,563 |
) |
|
|
(3,980 |
) |
|
Payments on acquisition debt and obligations under finance
leases |
|
(1,060 |
) |
|
|
(658 |
) |
|
Payments on contingent consideration recorded at acquisition
date |
|
(169 |
) |
|
|
(461 |
) |
|
Proceeds from the exercise of stock options and employee stock
purchase plan contributions |
|
921 |
|
|
|
2,107 |
|
|
Taxes paid on restricted stock vestings and exercises of stock
options |
|
(281 |
) |
|
|
(1,433 |
) |
|
Dividends paid on common stock |
|
(4,251 |
) |
|
|
(5,390 |
) |
|
Purchase of treasury stock |
|
— |
|
|
|
(61,739 |
) |
|
Net cash used in financing activities |
|
(37,281 |
) |
|
|
(58,284 |
) |
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
9 |
|
|
|
199 |
|
|
Cash and cash equivalents at
beginning of year |
|
716 |
|
|
|
889 |
|
|
Cash and cash equivalents at
end of year |
|
$ |
725 |
|
|
|
$ |
1,088 |
|
|
NON-GAAP FINANCIAL
MEASURES
This press release uses Non-GAAP financial
measures to present the financial performance of the Company. Our
non-GAAP reporting provides a transparent framework of our
operating and financial performance that reflects the earning power
of the Company as an operating and consolidation platform.
Non-GAAP financial measures should be viewed in
addition to, and not as an alternative for, the Company’s reported
operating results or cash flow from operations or any other measure
of performance as determined in accordance with GAAP. We believe
the Non-GAAP results are useful to investors to compare our results
to previous periods, to provide insight into the underlying
long-term performance trends in our business and to provide the
opportunity to differentiate ourselves as the best consolidation
platform in the industry against the performance of other funeral
and cemetery companies.
Reconciliations of the Non-GAAP financial
measures to GAAP measures are also provided in this press
release.
The term “same store” refers to funeral homes
and cemeteries acquired prior to January 1, 2017 and owned and
operated for the entirety of each period being presented, excluding
certain funeral home and cemetery businesses that we intend to
divest. The term “acquired” or “acquisition” refers to funeral
homes and cemeteries purchased after December 31, 2016, excluding
any funeral home and cemetery businesses that we intend to
divest.
The Non-GAAP financial measures used in this
press release and the definitions of them used by the Company for
our internal management purposes in this press release are
described below.
- Special Items are
defined as charges or credits included in our GAAP financial
statements that can vary from period to period and are not
reflective of costs incurred in the ordinary course of our
operations. In 2020, Special Items are taxed at the federal
statutory rate of 21.0%, except the Net (Gain) Loss on Divestitures
and Other Costs and the Net Impact of Impairment of Goodwill and
Other, which are taxed at the operating tax rate in the respective
quarter. In Q1 2021, Special Items are taxed at the federal
statutory rate of 21.0%, except the Net (Gain) Loss on Divestitures
and Other Costs, which are taxed at the operating tax rate. In Q2
and Q3 2021, all Special Items are taxed at the operating tax rate
and include adjustments to reflect prior quarter Special Items at
the operating tax rate on year-to-date basis. The Accretion of
Discount on Convertible Subordinated Notes and the Tax Adjustment
Related to Certain Discrete Items are not tax effected.
- Adjusted Net Income
is defined as net income after adjustments for Special Items that
we believe do not directly reflect our core operations and may not
be indicative of our normal business operations.
- Adjusted Net Income
Margin is defined as Adjusted Net Income as a percentage of total
revenue.
- Consolidated EBITDA
is defined as net income before income taxes, interest expenses,
non-cash stock compensation, depreciation and amortization, and
interest income and other, net.
- Consolidated EBITDA
Margin is defined as Consolidated EBITDA as a percentage of total
revenue.
- Adjusted
Consolidated EBITDA is defined as Consolidated EBITDA after
adjustments for Special Items that we believe do not directly
reflect our core operations and may not be indicative of our normal
business operations.
- Adjusted
Consolidated EBITDA Margin is defined as Adjusted Consolidated
EBITDA as a percentage of total revenue.
- Adjusted Free Cash
Flow is defined as cash flow provided by operating activities,
adjusted by Special Items as deemed necessary, less cash for
maintenance capital expenditures.
- Adjusted Free Cash
Flow Margin is defined as Adjusted Free Cash Flow as a percentage
of total revenue.
- Funeral Field
EBITDA is defined as funeral operating income, excluding
depreciation and amortization, regional and unallocated costs,
gain/loss on divestitures and impairment charges, Financial EBITDA,
Ancillary EBITDA and Divested/Planned Divested EBITDA related to
the Funeral Home segment.
- Funeral Field
EBITDA Margin is defined as Funeral Field EBITDA as a percentage of
total funeral operating revenue.
- Cemetery Field
EBITDA is defined as cemetery operating income, excluding
depreciation and amortization, regional and unallocated costs,
gain/loss on divestitures and impairment charges, Financial EBITDA
and Divested/Planned Divested EBITDA related to the Cemetery
segment.
- Cemetery Field
EBITDA Margin is defined as Cemetery Field EBITDA as a percentage
of total cemetery operating revenue.
- Preneed Cemetery
Property Sales is defined as cemetery property sold prior to
death.
- Cemetery Sales
Production is defined as all cemetery property, including
merchandise and services, sold prior to death and at the time of
death.
- Funeral Financial
EBITDA is defined as Funeral Financial Revenue (preneed funeral
insurance commissions and preneed funeral trust and insurance) less
the related expenses. Funeral Financial Revenue and the related
expenses are presented within Other Revenue and Other
Expenses, respectively, on the Condensed Consolidated
Statement of Operations.
- Funeral Financial
EBITDA Margin is defined as Funeral Financial EBITDA as a
percentage of Funeral Financial Revenue.
- Cemetery Financial
EBITDA is defined as Cemetery Financial Revenue (preneed cemetery
trust earnings and preneed cemetery finance charges) less the
related expenses. Cemetery Financial Revenue and the related
expenses are presented within Other Revenue and Other
Expenses, respectively, on the Condensed Consolidated
Statement of Operations.
- Cemetery Financial
EBITDA Margin is defined as Cemetery Financial EBITDA as a
percentage of Cemetery Financial Revenue.
- Total Financial
Revenue is the sum of Funeral Financial Revenue (preneed funeral
insurance commissions and preneed funeral trust and insurance) and
Cemetery Financial Revenue (preneed cemetery trust earnings and
preneed cemetery finance charges).
- Total Financial
EBITDA is the sum of Funeral Financial EBITDA and Cemetery
Financial EBITDA.
- Total Financial
EBITDA Margin is defined as Total Financial EBITDA as a percentage
of Funeral Financial Revenue and Cemetery Financial Revenue.
- Ancillary Revenue
is defined as revenues from our ancillary businesses, which include
a flower shop, pet cremation business and online cremation
business. Ancillary Revenue and the related expenses are presented
within Other Revenue and Other Expenses,
respectively, on the Condensed Consolidated Statement of
Operations.
- Ancillary EBITDA is
defined as Ancillary Revenue, less expenses related to our
ancillary businesses noted above.
- Ancillary EBITDA
Margin is defined as Ancillary EBITDA as a percentage of Ancillary
Revenue.
- Divested/Planned
Divested Revenue is defined as revenues from certain funeral home
and cemetery businesses that we have divested and intend to
divest.
- Divested/Planned
Divested EBITDA is defined as Divested/Planned Divested Revenue,
less field level and financial expenses related to the
divested/planned divested businesses noted above.
- Divested/Planned
Divested EBITDA Margin is defined as Divested/Planned Divested
EBITDA as a percentage of Divested/Planned Divested Revenue.
- Total Field EBITDA
is the sum of Funeral Field EBITDA, Cemetery Field EBITDA, Total
Financial EBITDA, Ancillary EBITDA and Divested/Planned Divested
EBITDA.
- Total Field EBITDA
Margin is defined as Total Field EBITDA as a percentage of total
revenue.
- Adjusted Basic
Earnings Per Share (EPS) is defined as GAAP basic earnings per
share, adjusted for Special Items.
- Adjusted Diluted
Earnings Per Share (EPS) is defined as GAAP diluted earnings per
share, adjusted for Special Items.
- Total Debt
Outstanding is defined as indebtedness under our bank credit
facility, Senior Notes due 2029, acquisition debt and finance
leases.
- Total Debt to
EBITDA Multiple/Ratio is defined as Total Debt Outstanding to
Adjusted Consolidated EBITDA.
Funeral Field EBITDA and Cemetery Field
EBITDA
Our operations are reported in two business
segments: Funeral Home Operations and Cemetery Operations. Our
Field level results highlight trends in volumes, Revenue, Field
EBITDA (the individual business’ cash earning power/locally
controllable business profit) and Field EBITDA Margin (the
individual business’ controllable profit margin).
Funeral Field EBITDA and Cemetery Field EBITDA
are defined above. Funeral and Cemetery Operating Income is defined
as Revenue less “Field costs and expenses” — a line item
encompassing these areas of costs: i) Funeral and cemetery field
costs, ii) Field depreciation and amortization expense, iii)
Regional and unallocated funeral and cemetery costs, and iv)
Gain/loss on divestitures, disposals and impairment charges.
Funeral and cemetery field costs include cost of service, funeral
and cemetery merchandise costs, operating expenses, labor and other
related expenses incurred at the business level.
Regional and unallocated funeral and cemetery
costs presented in our GAAP statement consist primarily of salaries
and benefits of our Regional leadership, incentive compensation
opportunity to our Field employees and other related costs for
field infrastructure. These costs, while necessary to operate our
businesses as currently operated within our unique, decentralized
platform, are not controllable operating expenses at the Field
level as the composition, structure and function of these costs are
determined by executive leadership in the Houston Support Center.
These costs are components of our overall overhead platform
presented within Consolidated EBITDA and Adjusted Consolidated
EBITDA. We do not directly or indirectly “push down” any of these
expenses to the individual business’ field level margins.
We believe that our “Regional and unallocated
funeral and cemetery costs” are necessary to support our
decentralized, high performance culture operating framework, and as
such, are included in Consolidated EBITDA and Adjusted Consolidated
EBITDA, which more accurately reflects the cash earning power of
the Company as an operating and consolidation platform.
Consolidated EBITDA and Adjusted Consolidated
EBITDA
Consolidated EBITDA and Adjusted Consolidated
EBITDA are defined above. Our Adjusted Consolidated EBITDA include
adjustments for Special Items that we believe do not directly
reflect our core operations and may not be indicative of our normal
business operations.
How These Measures Are Useful
When used in conjunction with GAAP financial
measures, our Total Field EBITDA, Consolidated EBITDA and Adjusted
Consolidated EBITDA are supplemental measures of operating
performance that we believe are useful measures to facilitate
comparisons to our historical consolidated and business level
performance and operating results.
We believe our presentation of Adjusted
Consolidated EBITDA, a key metric used internally by our
management, provides investors with a supplemental view of our
operating performance that facilitates analysis and comparisons of
our ongoing business operations because it excludes items that may
not be indicative of our ongoing operating performance.
Limitations of the Usefulness of These
Measures
Our Total Field EBITDA, Consolidated EBITDA and
Adjusted Consolidated EBITDA are not necessarily comparable to
similarly titled measures used by other companies due to different
methods of calculation. Our presentation is not intended to be
considered in isolation or as a substitute for, or superior to, the
financial information prepared and presented in accordance with
GAAP. Funeral Field EBITDA, Cemetery Field EBITDA, Funeral
Financial EBITDA, Cemetery Financial EBITDA, Ancillary EBITDA and
Divested/Planned Divested EBITDA are not consolidated measures of
profitability.
Funeral and Cemetery Field EBITDA excludes
certain costs presented in our GAAP statement that we do not
allocate to the individual business’ field level margins, as noted
above. A reconciliation to Funeral and Cemetery Operating Income,
the most directly comparable GAAP measure, is set forth below.
Consolidated EBITDA excludes certain items that
we believe do not directly reflect our core operations and may not
be indicative of our normal business operations. A reconciliation
to Net Income, the most directly comparable GAAP measure, is set
forth below.
Therefore, these measures may not provide a
complete understanding of our performance and should be reviewed in
conjunction with our GAAP financial measures. Carriage Services
strongly encourages investors to review the Company's consolidated
financial statements and publicly filed reports in their entirety
and not rely on any single financial measure.
Reconciliation of Non-GAAP Financial
Measures:
This press release includes the use of certain
financial measures that are not GAAP measures. The Non-GAAP
financial measures are presented for additional information and are
reconciled to their most comparable GAAP measures, all of which are
reflected in the tables below.
Reconciliation of Net Income (Loss)
to Adjusted Net Income (in thousands):
|
|
3RD QTR
2020 |
|
4TH QTR
2020 |
|
1ST QTR
2021 |
|
2ND QTR
2021 |
|
3RD QTR
2021 |
Net Income (Loss) |
|
$ |
5,525 |
|
|
|
$ |
8,365 |
|
|
|
$ |
12,933 |
|
|
|
$ |
(6,167 |
) |
|
|
$ |
13,046 |
|
Special Items |
|
|
|
|
|
|
|
|
|
|
Acquisition Expenses |
|
— |
|
|
|
(170 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Severance and Separation Costs |
|
— |
|
|
|
— |
|
|
|
1,575 |
|
|
|
— |
|
|
|
— |
|
Performance Awards Cancellation and Exchange |
|
108 |
|
|
|
108 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Accretion of Discount on Convertible Subordinated
Notes(1) |
|
69 |
|
|
|
16 |
|
|
|
20 |
|
|
|
— |
|
|
|
— |
|
Loss on Extinguishment of Debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,807 |
|
|
|
— |
|
Net (Gain) Loss on Divestitures and Other Costs |
|
4,917 |
|
|
|
1,947 |
|
|
|
(308 |
) |
|
|
205 |
|
|
|
282 |
|
Net Impact of Impairment of Goodwill and Other |
|
— |
|
|
|
183 |
|
|
|
— |
|
|
|
— |
|
|
|
500 |
|
Disaster Recovery and Pandemic Costs |
|
340 |
|
|
|
315 |
|
|
|
894 |
|
|
|
145 |
|
|
|
1,002 |
|
Other Special Items |
|
(60 |
) |
|
|
— |
|
|
|
— |
|
|
|
1,334 |
|
|
|
1,020 |
|
Tax Adjustment Related to Certain Discrete Items
(1) |
|
— |
|
|
|
400 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Sum of Special Items |
|
5,374 |
|
|
|
2,799 |
|
|
|
2,181 |
|
|
|
25,491 |
|
|
|
2,804 |
|
Tax Effect on Special Items (2) |
|
1,755 |
|
|
|
743 |
|
|
|
424 |
|
|
|
7,457 |
|
|
|
738 |
|
Adjusted Net Income |
|
$ |
9,144 |
|
|
|
$ |
10,421 |
|
|
|
$ |
14,690 |
|
|
|
$ |
11,867 |
|
|
|
$ |
15,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The
Accretion of Discount on Convertible Subordinated Notes and the Tax
Adjustment Related to Certain Discrete Items are not tax
effected. |
(2) In 2020,
Special Items are taxed at the federal statutory rate of 21.0%,
except the Net (Gain) Loss on Divestitures and Other Costs and the
Net Impact of Impairment of Goodwill and Other, which are taxed at
the operating tax rate in the respective quarter. In Q1 2021,
Special Items are taxed at the federal statutory rate of 21.0%,
except the Net (Gain) Loss on Divestitures and Other Costs, which
are taxed at the operating tax rate. In Q2 and Q3 2021, all Special
Items are taxed at the operating tax rate and include adjustments
to reflect prior quarter Special Items at the operating tax rate on
year-to-date basis. |
Reconciliation of Net Income (Loss) to Consolidated
EBITDA, Adjusted Consolidated EBITDA (in thousands) and Adjusted
Consolidated EBITDA Margin:
|
|
3RD QTR
2020 |
|
4TH QTR
2020 |
|
1ST QTR
2021 |
|
2ND QTR
2021 |
|
3RD QTR
2021 |
Net Income (Loss) |
|
$ |
5,525 |
|
|
|
$ |
8,365 |
|
|
|
$ |
12,933 |
|
|
|
$ |
(6,167 |
) |
|
|
$ |
13,046 |
|
Total Expense (Benefit) for
Income Taxes |
|
2,859 |
|
|
|
4,394 |
|
|
|
5,641 |
|
|
|
(4,192 |
) |
|
|
5,122 |
|
Income (Loss) Before Income
Taxes |
|
$ |
8,384 |
|
|
|
$ |
12,759 |
|
|
|
$ |
18,574 |
|
|
|
$ |
(10,359 |
) |
|
|
$ |
18,168 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
8,007 |
|
|
|
7,728 |
|
|
|
7,584 |
|
|
|
7,478 |
|
|
|
5,076 |
|
Accretion of Discount on
Convertible Subordinated Notes |
|
69 |
|
|
|
16 |
|
|
|
20 |
|
|
|
— |
|
|
|
— |
|
Non-Cash Stock
Compensation |
|
927 |
|
|
|
897 |
|
|
|
1,308 |
|
|
|
1,230 |
|
|
|
1,294 |
|
Depreciation &
Amortization |
|
5,033 |
|
|
|
5,109 |
|
|
|
4,942 |
|
|
|
5,594 |
|
|
|
4,950 |
|
Loss on Extinguishment of
Debt |
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
23,807 |
|
|
|
— |
|
Net (Gain) Loss on
Divestitures |
|
4,917 |
|
|
|
1,832 |
|
|
|
(308 |
) |
|
|
205 |
|
|
|
282 |
|
Impairment of Goodwill and
Other |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
500 |
|
Net Loss on Disposal of Fixed
Assets |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
622 |
|
|
|
76 |
|
Other, Net |
|
28 |
|
|
|
(186 |
) |
|
|
68 |
|
|
|
(2 |
) |
|
|
21 |
|
Consolidated EBITDA |
|
$ |
27,371 |
|
|
|
$ |
28,155 |
|
|
|
$ |
32,188 |
|
|
|
$ |
28,575 |
|
|
|
$ |
30,367 |
|
Adjusted For: |
|
|
|
|
|
|
|
|
|
|
Acquisition Expenses |
|
— |
|
|
|
(170 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Severance and Separation Costs |
|
— |
|
|
|
— |
|
|
|
1,575 |
|
|
|
— |
|
|
|
— |
|
Disaster Recovery and Pandemic Costs |
|
340 |
|
|
|
315 |
|
|
|
894 |
|
|
|
145 |
|
|
|
1,002 |
|
Other Special Items |
|
(45 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,020 |
|
Adjusted Consolidated
EBITDA |
|
$ |
27,666 |
|
|
|
$ |
28,300 |
|
|
|
$ |
34,657 |
|
|
|
$ |
28,720 |
|
|
|
$ |
32,389 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
84,393 |
|
|
|
$ |
90,088 |
|
|
|
$ |
96,637 |
|
|
|
$ |
88,277 |
|
|
|
$ |
95,041 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Consolidated EBITDA Margin |
|
|
32.8% |
|
|
|
|
31.4% |
|
|
|
|
35.9% |
|
|
|
|
32.5% |
|
|
|
|
34.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Funeral and
Cemetery Operating Income to Funeral and Cemetery Field EBITDA (in
thousands):
|
|
3RD QTR
2020 |
|
4TH QTR
2020 |
|
1ST QTR
2021 |
|
2ND QTR
2021 |
|
3RD QTR
2021 |
Funeral Operating Income (GAAP) |
|
$ |
13,975 |
|
|
|
$ |
19,467 |
|
|
|
$ |
25,876 |
|
|
|
$ |
16,604 |
|
|
|
$ |
22,924 |
|
|
Depreciation &
Amortization |
|
2,885 |
|
|
|
2,862 |
|
|
|
2,769 |
|
|
|
2,766 |
|
|
|
2,761 |
|
|
Regional & Unallocated
Costs |
|
3,859 |
|
|
|
5,375 |
|
|
|
4,569 |
|
|
|
4,023 |
|
|
|
4,907 |
|
|
Net (Gain) Loss on
Divestitures, Disposals and Impairment Charges |
|
4,917 |
|
|
|
1,832 |
|
|
|
(308 |
) |
|
|
791 |
|
|
|
763 |
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
Funeral Financial EBITDA |
|
(2,130 |
) |
|
|
(2,171 |
) |
|
|
(2,261 |
) |
|
|
(1,888 |
) |
|
|
(1,960 |
) |
|
Ancillary EBITDA |
|
(292 |
) |
|
|
(278 |
) |
|
|
(242 |
) |
|
|
(274 |
) |
|
|
(274 |
) |
|
Funeral Divested/Planned Divested EBITDA |
|
(369 |
) |
|
|
(240 |
) |
|
|
(107 |
) |
|
|
(96 |
) |
|
|
(187 |
) |
|
Funeral Field EBITDA |
|
$ |
22,845 |
|
|
|
$ |
26,847 |
|
|
|
$ |
30,296 |
|
|
|
$ |
21,926 |
|
|
|
$ |
28,934 |
|
|
|
|
3RD QTR
2020 |
|
4TH QTR
2020 |
|
1ST QTR
2021 |
|
2ND QTR
2021 |
|
3RD QTR
2021 |
Cemetery Operating Income (GAAP) |
|
$ |
8,982 |
|
|
|
$ |
8,419 |
|
|
|
$ |
9,493 |
|
|
|
$ |
11,498 |
|
|
|
$ |
9,471 |
|
|
Depreciation &
Amortization |
|
1,819 |
|
|
|
1,885 |
|
|
|
1,884 |
|
|
|
2,551 |
|
|
|
1,914 |
|
|
Regional & Unallocated
Costs |
|
872 |
|
|
|
1,478 |
|
|
|
1,504 |
|
|
|
1,747 |
|
|
|
1,905 |
|
|
Net Loss on Divestitures,
Disposals and Impairment Charges |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
34 |
|
|
|
6 |
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
Cemetery Financial EBITDA |
|
(3,152 |
) |
|
|
(2,752 |
) |
|
|
(3,044 |
) |
|
|
(3,170 |
) |
|
|
(3,265 |
) |
|
Cemetery Divested/Planned Divested EBITDA |
|
(25 |
) |
|
|
(1 |
) |
|
|
(31 |
) |
|
|
(16 |
) |
|
|
(19 |
) |
|
Cemetery Field EBITDA |
|
$ |
8,496 |
|
|
|
$ |
9,029 |
|
|
|
$ |
9,806 |
|
|
|
$ |
12,644 |
|
|
|
$ |
10,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Total Field EBITDA (in
thousands):
|
|
3RD QTR
2020 |
|
4TH QTR
2020 |
|
1ST QTR
2021 |
|
2ND QTR
2021 |
|
3RD QTR
2021 |
Funeral Field EBITDA |
|
$ |
22,845 |
|
|
$ |
26,847 |
|
|
$ |
30,296 |
|
|
$ |
21,926 |
|
|
$ |
28,934 |
|
Cemetery Field EBITDA |
|
8,496 |
|
|
9,029 |
|
|
9,806 |
|
|
12,644 |
|
|
10,012 |
|
Funeral Financial EBITDA |
|
2,130 |
|
|
2,171 |
|
|
2,261 |
|
|
1,888 |
|
|
1,960 |
|
Cemetery Financial EBITDA |
|
3,152 |
|
|
2,752 |
|
|
3,044 |
|
|
3,170 |
|
|
3,265 |
|
Ancillary EBITDA |
|
292 |
|
|
278 |
|
|
242 |
|
|
274 |
|
|
274 |
|
Funeral Divested/Planned
Divested EBITDA |
|
369 |
|
|
240 |
|
|
107 |
|
|
96 |
|
|
187 |
|
Cemetery Divested/Planned
Divested EBITDA |
|
25 |
|
|
1 |
|
|
31 |
|
|
16 |
|
|
19 |
|
Total Field EBITDA |
|
$ |
37,309 |
|
|
$ |
41,318 |
|
|
$ |
45,787 |
|
|
$ |
40,014 |
|
|
$ |
44,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Funeral and
Cemetery Operating Income to Funeral and Cemetery Field EBITDA (in
thousands):
|
Nine Months Ended September 30, |
|
2020 |
|
2021 |
Funeral Operating Income (GAAP) |
$ |
38,155 |
|
|
|
$ |
65,404 |
|
|
Depreciation &
Amortization |
8,724 |
|
|
|
8,296 |
|
|
Regional & Unallocated
Costs |
8,973 |
|
|
|
13,499 |
|
|
Net (Gain) Loss on
Divestitures, Disposals and Impairment Charges |
19,610 |
|
|
|
1,246 |
|
|
Less: |
|
|
|
Funeral Financial EBITDA |
(6,094 |
) |
|
|
(6,109 |
) |
|
Ancillary EBITDA |
(908 |
) |
|
|
(790 |
) |
|
Funeral Divested/Planned Divested EBITDA |
(1,829 |
) |
|
|
(390 |
) |
|
Funeral Field EBITDA |
$ |
66,631 |
|
|
|
$ |
81,156 |
|
|
|
Nine Months Ended September 30, |
|
2020 |
|
2021 |
Cemetery Operating Income (GAAP) |
$ |
18,440 |
|
|
|
$ |
30,462 |
|
|
Depreciation &
Amortization |
4,491 |
|
|
|
6,349 |
|
|
Regional & Unallocated
Costs |
2,231 |
|
|
|
5,156 |
|
|
Net Loss on Divestitures,
Disposals and Impairment Charges |
— |
|
|
|
40 |
|
|
Less: |
|
|
|
Cemetery Financial EBITDA |
(7,540 |
) |
|
|
(9,479 |
) |
|
Cemetery Divested/Planned Divested EBITDA |
(23 |
) |
|
|
(66 |
) |
|
Cemetery Field EBITDA |
$ |
17,599 |
|
|
|
$ |
32,462 |
|
|
|
|
|
|
|
|
|
|
|
|
Components of Total Field EBITDA (in
thousands):
|
Nine Months Ended September 30, |
|
2020 |
|
2021 |
Funeral Field EBITDA |
$ |
66,631 |
|
|
$ |
81,156 |
|
Cemetery Field EBITDA |
17,599 |
|
|
32,462 |
|
Funeral Financial EBITDA |
6,094 |
|
|
6,109 |
|
Cemetery Financial EBITDA |
7,540 |
|
|
9,479 |
|
Ancillary EBITDA |
908 |
|
|
790 |
|
Funeral Divested/Planned
Divested EBITDA |
1,829 |
|
|
390 |
|
Cemetery Divested/Planned
Divested EBITDA |
23 |
|
|
66 |
|
Total Field EBITDA |
$ |
100,624 |
|
|
$ |
130,452 |
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Diluted
Earnings (Loss) Per Share to Adjusted Diluted Earnings Per
Share:
|
|
3RD QTR
2020 |
|
4TH QTR
2020 |
|
1ST QTR
2021 |
|
2ND QTR
2021 |
|
3RD QTR
2021 |
GAAP Diluted Earnings (Loss) Per Share |
|
$ |
0.31 |
|
|
$ |
0.46 |
|
|
$ |
0.71 |
|
|
$ |
(0.33 |
) |
|
|
$ |
0.71 |
|
Special Items |
|
0.20 |
|
|
0.11 |
|
|
0.10 |
|
|
0.97 |
|
|
|
0.11 |
|
Adjusted Diluted Earnings Per
Share |
|
$ |
0.51 |
|
|
$ |
0.57 |
|
|
$ |
0.81 |
|
|
$ |
0.64 |
|
|
|
$ |
0.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Cash flow provided
by operations to Adjusted Free Cash Flow (in thousands) and
Adjusted Free Cash Flow Margin:
|
|
3RD QTR
2020 |
|
4TH QTR
2020 |
|
1ST QTR
2021 |
|
2ND QTR
2021 |
|
3RD QTR
2021 |
Cash Flow Provided by Operating Activities |
|
$ |
36,821 |
|
|
|
$ |
15,093 |
|
|
|
$ |
26,811 |
|
|
|
$ |
14,630 |
|
|
|
$ |
28,258 |
|
|
Cash used for Maintenance
Capital Expenditures |
|
(2,496 |
) |
|
|
(3,368 |
) |
|
|
(2,140 |
) |
|
|
(2,462 |
) |
|
|
(4,358 |
) |
|
Free Cash Flow |
|
$ |
34,325 |
|
|
|
$ |
11,725 |
|
|
|
$ |
24,671 |
|
|
|
$ |
12,168 |
|
|
|
$ |
23,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Incremental Special
Items: |
|
|
|
|
|
|
|
|
|
|
Federal Tax Refund |
|
(7,012 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Acquisition Expenses |
|
— |
|
|
|
(170 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Severance and Separation
Costs |
|
— |
|
|
|
— |
|
|
|
1,575 |
|
|
|
— |
|
|
|
— |
|
|
Litigation Reserve |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Disaster Recovery and Pandemic
Costs |
|
340 |
|
|
|
315 |
|
|
|
894 |
|
|
|
145 |
|
|
|
1,002 |
|
|
Other Special Items |
|
(45 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,020 |
|
|
Adjusted Free Cash Flow |
|
$ |
27,608 |
|
|
|
$ |
11,870 |
|
|
|
$ |
27,140 |
|
|
|
$ |
12,313 |
|
|
|
$ |
25,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
84,393 |
|
|
|
$ |
90,088 |
|
|
|
$ |
96,637 |
|
|
|
$ |
88,277 |
|
|
|
$ |
95,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow
Margin |
|
|
32.7% |
|
|
|
|
13.2% |
|
|
|
|
28.1% |
|
|
|
|
13.9% |
|
|
|
|
27.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Actual Results
(years ended December 31, 2018, 2019 and 2020), Last Twelve Months
ended September 30, 2021, Estimated year ended December 31, 2021,
Rolling Four Quarter Outlook ended September 30, 2022 and Estimated
year ended December 31, 2022.
Earlier in this press release, we present the
Two Year Performance Scenario and the Rolling Four Quarter Outlook
which reflects management’s opinion on the performance of the
portfolio of existing businesses, including performance of existing
trusts, and excludes size and timing of acquisitions unless we have
a signed Letter of Intent with a high likelihood of a closing
within 90 days. These are not intended to be management estimates
or forecasts of our future performance, as we believe precise
estimates will be precisely wrong all the time. The following
reconciliations are presented within the ranges provided in the
Performance Outlook Scenario and Rolling Four Quarter Outlook.
Reconciliation of Net Income to
Consolidated EBITDA, Total Field EBITDA (in thousands) and Total
Field EBITDA Margin:
|
2018A |
|
2019A |
|
2020A |
|
LTM |
|
2021E |
|
RFQO |
|
2022E |
Net Income |
$ |
11,645 |
|
|
$ |
14,533 |
|
|
$ |
16,090 |
|
|
$ |
28,177 |
|
|
$ |
33,500 |
|
|
$ |
57,000 |
|
|
$ |
58,600 |
|
Total Tax Expense |
6,621 |
|
|
7,883 |
|
|
8,552 |
|
|
10,965 |
|
|
11,700 |
|
|
22,500 |
|
|
23,000 |
|
Pretax Income |
$ |
18,266 |
|
|
$ |
22,416 |
|
|
$ |
24,642 |
|
|
$ |
39,142 |
|
|
$ |
45,200 |
|
|
$ |
79,500 |
|
|
$ |
81,600 |
|
Net Interest Expense,
including Accretion of Discount on Convertible Subordinated
Notes |
23,301 |
|
|
25,763 |
|
|
32,731 |
|
|
27,902 |
|
|
25,500 |
|
|
21,500 |
|
|
21,500 |
|
Depreciation &
Amortization, including Non-cash Stock Compensation and Other,
Net |
24,056 |
|
|
19,188 |
|
|
22,607 |
|
|
25,225 |
|
|
27,000 |
|
|
27,200 |
|
|
27,400 |
|
Net Loss on Divestitures,
Disposals, Impairment Charges |
1,195 |
|
|
4,846 |
|
|
21,442 |
|
|
3,209 |
|
|
500 |
|
|
— |
|
|
— |
|
Net Loss on Extinguishment of
Debt |
502 |
|
|
— |
|
|
6 |
|
|
23,807 |
|
|
23,800 |
|
|
— |
|
|
— |
|
Consolidated EBITDA |
$ |
67,320 |
|
|
$ |
72,213 |
|
|
$ |
101,428 |
|
|
$ |
119,285 |
|
|
$ |
122,000 |
|
|
$ |
128,200 |
|
|
$ |
130,500 |
|
Overhead |
36,993 |
|
|
37,554 |
|
|
40,514 |
|
|
52,485 |
|
|
53,500 |
|
|
53,700 |
|
|
53,300 |
|
Total Field EBITDA |
$ |
104,313 |
|
|
$ |
109,767 |
|
|
$ |
141,942 |
|
|
$ |
171,770 |
|
|
$ |
175,500 |
|
|
$ |
181,900 |
|
|
$ |
183,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
267,992 |
|
|
$ |
274,107 |
|
|
$ |
329,448 |
|
|
$ |
370,043 |
|
|
$ |
375,000 |
|
|
$ |
383,000 |
|
|
$ |
387,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Field EBITDA Margin |
38.9% |
|
|
40.0% |
|
|
43.1% |
|
|
46.4% |
|
|
46.8% |
|
|
47.5% |
|
|
47.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Cemetery Operating
Income to Cemetery Field EBITDA (in thousands):
|
|
2018A |
|
2019A |
|
2020A |
|
LTM |
Cemetery Operating Income (GAAP) |
|
$ |
14,717 |
|
|
|
$ |
15,983 |
|
|
|
$ |
26,859 |
|
|
|
$ |
38,881 |
|
|
Depreciation &
Amortization |
|
4,891 |
|
|
|
5,227 |
|
|
|
6,376 |
|
|
|
8,234 |
|
|
Regional & Unallocated
Costs |
|
2,202 |
|
|
|
2,820 |
|
|
|
3,709 |
|
|
|
6,634 |
|
|
Net Loss on Divestitures,
Disposals and Impairment Charges |
|
349 |
|
|
|
— |
|
|
|
— |
|
|
|
40 |
|
|
Less: |
|
|
|
|
|
|
|
|
Cemetery Financial EBITDA |
|
(6,840 |
) |
|
|
(6,853 |
) |
|
|
(10,290 |
) |
|
|
(12,231 |
) |
|
Cemetery Divested/Planned Divested EBITDA |
|
(1,479 |
) |
|
|
(76 |
) |
|
|
(27 |
) |
|
|
(67 |
) |
|
Cemetery Field EBITDA |
|
$ |
13,840 |
|
|
|
$ |
17,101 |
|
|
|
$ |
26,627 |
|
|
|
$ |
41,491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Consolidated
EBITDA to Adjusted Consolidated EBITDA (in thousands) and Adjusted
Consolidated EBITDA Margin:
|
2018A |
|
2019A |
|
2020A |
|
LTM |
|
2021E |
|
RFQO |
|
2022E |
Consolidated EBITDA |
$ |
67,320 |
|
|
$ |
72,213 |
|
|
$ |
101,428 |
|
|
$ |
119,285 |
|
|
$ |
122,000 |
|
|
$ |
128,200 |
|
|
$ |
130,500 |
|
Special Items |
2,872 |
|
|
4,374 |
|
|
2,822 |
|
|
4,781 |
|
|
5,000 |
|
|
— |
|
|
— |
|
Adjusted Consolidated
EBITDA |
$ |
70,192 |
|
|
$ |
76,587 |
|
|
$ |
104,250 |
|
|
$ |
124,066 |
|
|
$ |
127,000 |
|
|
$ |
128,200 |
|
|
$ |
130,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
267,992 |
|
|
$ |
274,107 |
|
|
$ |
329,448 |
|
|
$ |
370,043 |
|
|
$ |
375,000 |
|
|
$ |
383,000 |
|
|
$ |
387,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Consolidated EBITDA
Margin |
26.2% |
|
|
27.9% |
|
|
31.6% |
|
|
33.5% |
|
|
33.9% |
|
|
33.5% |
|
|
33.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income to
Adjusted Net Income (in thousands):
|
2018A |
|
2019A |
|
2020A |
|
LTM |
|
2021E |
|
RFQO |
|
2022E |
Net Income |
$ |
11,645 |
|
|
$ |
14,533 |
|
|
$ |
16,090 |
|
|
$ |
28,177 |
|
|
$ |
33,500 |
|
|
$ |
57,000 |
|
|
$ |
58,600 |
|
Special Items |
9,921 |
|
|
7,999 |
|
|
17,593 |
|
|
23,913 |
|
|
22,000 |
|
|
— |
|
|
— |
|
Adjusted Net Income |
$ |
21,566 |
|
|
$ |
22,532 |
|
|
$ |
33,683 |
|
|
$ |
52,090 |
|
|
$ |
55,500 |
|
|
$ |
57,000 |
|
|
$ |
58,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Diluted Earnings Per Share to
Adjusted Diluted Earnings Per Share:
|
2018A |
|
2019A |
|
2020A |
|
LTM |
|
2021E |
|
RFQO |
|
2022E |
GAAP Diluted Earnings Per Share |
$ |
0.63 |
|
|
$ |
0.80 |
|
|
$ |
0.89 |
|
|
$ |
1.55 |
|
|
$ |
1.85 |
|
|
$ |
3.35 |
|
|
$ |
3.55 |
|
Special Items |
0.54 |
|
|
0.45 |
|
|
0.97 |
|
|
1.29 |
|
|
1.22 |
|
|
— |
|
|
— |
|
Adjusted Diluted Earnings Per
Share |
$ |
1.17 |
|
|
$ |
1.25 |
|
|
$ |
1.86 |
|
|
$ |
2.84 |
|
|
$ |
3.07 |
|
|
$ |
3.35 |
|
|
$ |
3.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Cash Flow Provided
by Operating Activities to Adjusted Free Cash Flow (in thousands)
and Adjusted Free Cash Flow Margin:
|
2018A |
|
2019A |
|
2020A |
|
LTM |
|
2021E |
|
RFQO |
|
2022E |
Cash Flow Provided by Operating Activities |
$ |
48,994 |
|
|
$ |
43,216 |
|
|
$ |
82,915 |
|
|
$ |
84,792 |
|
|
$ |
86,000 |
|
|
$ |
93,000 |
|
|
$ |
95,000 |
|
Cash used for Maintenance
Capital Expenditures |
(9,266 |
) |
|
(8,795 |
) |
|
(8,762 |
) |
|
(12,328 |
) |
|
(11,000 |
) |
|
(11,000 |
) |
|
(11,000 |
) |
Special Items |
2,872 |
|
|
4,374 |
|
|
(4,190 |
) |
|
4,781 |
|
|
5,000 |
|
|
— |
|
|
— |
|
Adjusted Free Cash Flow |
$ |
42,600 |
|
|
$ |
38,795 |
|
|
$ |
69,963 |
|
|
$ |
77,245 |
|
|
$ |
80,000 |
|
|
$ |
82,000 |
|
|
$ |
84,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
267,992 |
|
|
$ |
274,107 |
|
|
$ |
329,448 |
|
|
$ |
370,043 |
|
|
$ |
375,000 |
|
|
$ |
383,000 |
|
|
$ |
387,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow
Margin |
|
15.9% |
|
|
|
14.2% |
|
|
|
21.2% |
|
|
|
20.9% |
|
|
|
21.3% |
|
|
|
21.4% |
|
|
|
21.7% |
|
CAUTIONARY STATEMENT ON FORWARD-LOOKING
STATEMENTS
Certain statements made herein or elsewhere by,
or on behalf of, the Company that are not historical facts are
intended to be forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. In addition
to historical information, this Press Release contains certain
statements and information that may constitute forward-looking
statements within the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. All statements, other
than statements of historical information, should be deemed to be
forward-looking statements. These statements include, but are not
limited to, statements regarding any projections of earnings,
revenue, asset sales, cash flow, capital allocation, debt levels,
equity performance, overhead, including field and corporate
incentive compensation, or other financial items; any statements of
the plans, strategies and objectives of management for future
operations, or financing activities, including, but not limited, to
capital allocation; any statements of the plans, timing and
objectives of management for acquisition and divestiture
activities; any statements regarding future economic conditions or
performance; any statements of belief; and any statements of
assumptions underlying any of the foregoing and are based on our
current expectations and beliefs concerning future developments and
their potential effect on us. The words “may”, “will”, “estimate”,
“intend”, “believe”, “expect”, “seek”, “project”, “forecast”,
“foresee”, “should”, “would”, “could”, “plan”, “anticipate” and
other similar words or expressions are intended to identify
forward-looking statements, which are generally not historical in
nature. While management believes that these forward-looking
statements are reasonable as and when made, there can be no
assurance that future developments affecting us will be those that
we anticipate. All comments concerning our expectations for future
revenue and operating results are based on our forecasts for our
existing operations and do not include the potential impact of any
future acquisitions. Our forward-looking statements involve
significant risks and uncertainties (some of which are beyond our
control) and assumptions that could cause actual results to differ
materially from our historical experience and our present
expectations or projections. Important factors that could cause
actual results to differ materially from those in the
forward-looking statements include, but are not limited to, those
summarized below:
- our ability to find and retain
skilled personnel;
- the effects of our incentive and
compensation plans and programs, including such effects on our
Standards Operating Model and the Company’s operational and
financial performance;
- our ability to execute our growth
strategy;
- the execution of our Standards
Operating, 4E Leadership and Standard Acquisition Models;
- the effects of competition;
- changes in the number of deaths in
our markets;
- changes in consumer preferences and
our ability to adapt to or meet those changes;
- our ability to generate preneed
sales, including implementing our cemetery portfolio sales
strategy;
- the investment performance of our
funeral and cemetery trust funds;
- fluctuations in interest
rates;
- our ability to obtain debt or
equity financing on satisfactory terms to fund additional
acquisitions, expansion projects, working capital requirements and
the repayment or refinancing of indebtedness;
- our ability to meet the timing,
objectives and expectations related to our capital allocation
framework, including our forecasted rates of return, planned uses
of free cash flow and future capital allocation, including share
repurchases, potential strategic acquisitions, internal growth
projects, dividend increases, or debt repayment plans;
- our ability to meet the projected
financial and equity performance metrics to our updated rolling
four quarter outlook, two-year scenario and intrinsic value per
share range, if at all;
- the timely and full payment of
death benefits related to preneed funeral contracts funded through
life insurance contracts;
- the financial condition of
third-party insurance companies that fund our preneed funeral
contracts;
- increased or unanticipated costs,
such as insurance or taxes;
- our level of indebtedness and the
cash required to service our indebtedness;
- changes in federal income tax laws
and regulations and the implementation and interpretation of these
laws and regulations by the Internal Revenue Service;
- effects of the application of other
applicable laws and regulations, including changes in such
regulations or the interpretation thereof;
- the potential impact of epidemics
and pandemics, including the COVID-19 coronavirus, on customer
preferences and on our business;
- effects of litigation;
- consolidation of the funeral and
cemetery industry;
- our ability to consummate the
divestiture of low performing businesses as currently expected, if
at all, including expected use of proceeds related thereto;
- our ability to identify and
consummate strategic acquisitions, if at all, and successfully
integrate acquired businesses with our existing businesses,
including expected performance and financial improvements related
thereto;
- economic, financial and stock
market fluctuations,
- interruptions or security lapses of
our information technology, including any cybersecurity or
ransomware incidents,
- our failure to maintain effective
control over financial reporting; and
- other factors and uncertainties
inherent in the funeral and cemetery industry.
For additional information regarding known
material factors that could cause our actual results to differ from
our projected results, please see “Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2020, our
Quarterly Reports on Form 10-Q, and other public filings and press
releases, available at www.carriageservices.com.
Investors are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the
date hereof. We undertake no obligation to publicly update or
revise any forward-looking statements after the date they are made,
whether as a result of new information, future events or
otherwise.
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