Carriage Services, Inc. (NYSE: CSV) today announced results for the
fourth quarter and year ended December 31, 2022.
Company Highlights:
- 2022 full year performance compared to pre-COVID 2019 resulted
in an impressive 10.5% compounded annual growth in total revenue
and 27.8% compounded annual growth in adjusted diluted earnings per
share;
- Our fourth quarter 2022 results exceeded internal expectations,
as trends in all segments improved over the prior quarter, in part
driven by a higher number of non-COVID-19 related deaths;
- We expect to close our transaction to acquire Greenlawn Funeral
Homes and Cemeteries in Bakersfield, CA, within the next couple of
weeks;
- Consistent with our High Performance and Credit Profile
Restoration Plan, which we announced on December 12, 2022, our
capital allocation priority for 2023 will be to pay down debt and
decrease our leverage to a range of 4.0-4.3 times by the end of
2024;
- Strong financial revenue of more than $22 million for 2022 was
highlighted by a positive return from our discretionary trust fund
portfolio, as compared to broadly negative full year market
comparables; and
- Moving forward, we will provide full year guidance at the
beginning of each year, beginning with our 2023 outlook.
Mel Payne, Chairman and CEO, stated, “We are
excited to report our 2022 full year results, as performance
exceeded our expectations, particularly against a unique 2021,
during which COVID related deaths hit a peak. We ended 2022 with an
impressive 27.8% compounded annual growth of our adjusted diluted
earnings per share when compared to 2019, which was the last full
year before the COVID impact. Net income is up nearly 25% as
compared to 2021 and we continue to see positive trends within both
our funeral and cemetery segments.
This strong performance positions us well as we
enter 2023 and continue to focus our capital allocation efforts on
paying down debt, while we integrate our recent acquisitions, and
build upon the momentum within our sales organization.
We have also been soliciting feedback from our
shareholders and have made some changes to how we report our
performance, beginning with this release. While we continue to
pride ourselves on being transparent, we believe this new format
will help simplify the communication of our performance.
Additionally, as we look to continuously improve the way we
communicate expectations, we will begin providing annual guidance
at the beginning of each year and update that guidance, if
necessary, on a quarterly basis.
While we held off on providing guidance during
the fourth quarter of 2022, to better assess the normalization of
the death rate, we are now comfortable announcing our 2023 full
year outlook. Our 2023 outlook is built in connection with
supporting the capital allocation priorities outlined in our High
Performance and Credit Profile Restoration Plan, which we announced
on December 12th. For 2023, we are forecasting total revenue in the
range of $375-$385 million, adjusted consolidated EBITDA in the
range of $110-$115 million, and adjusted diluted earnings per share
in the range of $2.25-$2.40.
Since 2018, we have been hard at work adding new
talent, particularly within our Senior Leadership Team,
implementing a new sales team, building best in class support, and
providing our leaders in the field with the tools necessary to
serve families at the highest level while also competing for every
call. As we enter 2023, we are excited to watch these strategic
investments continue to drive our performance forward while we
identify new opportunities to support and accelerate our growth,”
concluded Mr. Payne.
FINANCIAL HIGHLIGHTS
|
|
Three Months
Ended |
|
Years
Ended |
|
|
December 31, |
|
December 31, |
(000’s except margins) |
|
|
2021 |
|
|
2022 |
|
|
|
2021 |
|
|
2022 |
|
|
|
|
|
|
|
|
GAAP
Metrics: |
|
|
|
|
|
|
Total
revenue(1) |
|
$ |
95,931 |
|
$ |
93,916 |
|
|
$ |
375,886 |
|
$ |
370,174 |
|
Net
income |
|
$ |
13,347 |
|
$ |
8,220 |
|
|
$ |
33,159 |
|
$ |
41,381 |
|
Net income
margin |
|
|
13.9 |
% |
|
8.8 |
% |
|
|
8.8 |
% |
|
11.2 |
% |
Diluted
EPS |
|
$ |
0.77 |
|
$ |
0.53 |
|
|
$ |
1.81 |
|
$ |
2.63 |
|
Cash
provided by operating activities |
|
$ |
14,547 |
|
$ |
10,978 |
|
|
$ |
84,246 |
|
$ |
61,024 |
|
|
|
|
|
|
|
|
Non-GAAP Metrics: |
|
|
|
|
|
|
Adjusted
consolidated EBITDA |
|
$ |
30,395 |
|
$ |
28,659 |
|
|
$ |
126,161 |
|
$ |
109,312 |
|
Adjusted
consolidated EBITDA margin |
|
|
31.7 |
% |
|
30.5 |
% |
|
|
33.6 |
% |
|
29.5 |
% |
Adjusted
diluted EPS |
|
$ |
0.78 |
|
$ |
0.64 |
|
|
$ |
3.02 |
|
$ |
2.61 |
|
Adjusted free cash flow |
|
$ |
10,308 |
|
$ |
8,904 |
|
|
$ |
75,683 |
|
$ |
49,792 |
|
(1) Total revenue is comprised of funeral operating revenue,
cemetery operating revenue, divested revenue, ancillary revenue and
financial revenue. We present both GAAP and non-GAAP measures
to provide investors with additional information. We believe that
providing these non-GAAP measures along with GAAP measures allows
for increased comparability of our ongoing performance from period
to period. The most comparable GAAP measures to the Non-GAAP
measures presented in this table can be found in the Reconciliation
of Non-GAAP Financial Measures section of this press release.
Since our December announcement of entering a definitive
agreement to acquire Greenlawn Funeral Homes and Cemeteries in
Bakersfield, CA, we have been working closely with the Greenlawn
Team and expect to close that transaction, pending regulatory
approval, within the next couple of weeks. The addition of
Greenlawn, which is the market leader in Bakersfield, with a nearly
40% market share, continues our strategy of partnering with premier
businesses located in large, growing markets.
As of December 31, 2022, our bank covenant
compliance leverage ratio was 5.35 times. While we expect near term
fluctuations in our debt leverage ratio, we are committed to our
previously announced target and expect to reach a bank covenant
compliance leverage ratio of approximately 4.7 times by the end of
2023 and 4.0-4.3 times by the end of 2024.
OPERATIONS UPDATE
Funeral Operations
|
|
Three Months
Ended |
|
Years
Ended |
|
|
December 31, |
|
December 31, |
(000’s except contracts and margins) |
|
|
2021 |
|
|
2022 |
|
|
|
2021 |
|
|
2022 |
|
|
|
|
|
|
|
|
Funeral
contracts |
|
|
12,433 |
|
|
11,811 |
|
|
|
48,605 |
|
|
47,184 |
|
Funeral
operating revenue |
|
$ |
65,366 |
|
$ |
63,964 |
|
|
$ |
252,926 |
|
$ |
251,396 |
|
Funeral
operating EBITDA(1) |
|
$ |
28,017 |
|
$ |
26,874 |
|
|
$ |
109,204 |
|
$ |
101,951 |
|
Funeral operating EBITDA margin(1) |
|
|
42.9 |
% |
|
42.0 |
% |
|
|
43.2 |
% |
|
40.6 |
% |
(1)The most comparable GAAP measures to the Non-GAAP measures
presented in this table can be found in the Reconciliation of
Non-GAAP Financial Measures section of this press release.
Our funeral home segment exceeded our
expectations in the fourth quarter of 2022, demonstrating the
resilience of our decentralized business model even in challenging
times. Despite experiencing a modest 2.1% decline in funeral
operating revenue compared to the peak COVID-19 death impact in
2021, we are proud to report an impressive compounded annual growth
rate (“CAGR”) of 8.6% versus our pre-COVID baseline in 2019.
Although funeral contracts were down by 5.0% compared to the same
quarter in 2021, we are pleased to note that our fourth quarter
2022 average revenue per contract increased by 2.9% over the same
period in 2021. Funeral operating EBITDA also performed well, with
a decrease of 4.1%, or $1.1 million, and funeral operating EBITDA
margin was down 90 basis points to 42.0%. This is primarily due to
our proactive efforts to mitigate inflationary costs within our
control.
For the full year of 2022, we served 47,184
funeral contracts, representing a slight decrease of 2.9%. Despite
this, our funeral operating revenue was $251.4 million, a decrease
of 0.6%, and funeral operating EBITDA was $101.9 million, a
decrease of 6.6%. Based on our fourth quarter performance, we are
confident that we can continue driving organic growth and
integrating our latest acquisitions while taking proactive measures
to mitigate inflationary cost pressures. We are committed to
delivering high-quality funeral services to our client families
while providing exceptional value to our shareholders.
Cemetery Operations
|
|
Three Months
Ended |
|
Years
Ended |
|
|
December 31, |
|
December 31, |
(000’s except margins) |
|
|
2021 |
|
|
2022 |
|
|
|
2021 |
|
|
2022 |
|
|
|
|
|
|
|
|
Cemetery
preneed sales |
|
$ |
15,958 |
|
$ |
15,696 |
|
|
$ |
65,116 |
|
$ |
62,178 |
|
Cemetery
operating revenue |
|
$ |
22,461 |
|
$ |
23,169 |
|
|
$ |
91,330 |
|
$ |
90,033 |
|
Cemetery
operating EBITDA(1) |
|
$ |
10,019 |
|
$ |
9,910 |
|
|
$ |
42,158 |
|
$ |
37,509 |
|
Cemetery operating EBITDA margin(1) |
|
|
44.6 |
% |
|
42.8 |
% |
|
|
46.2 |
% |
|
41.7 |
% |
(1)The most comparable GAAP measures to the Non-GAAP measures
presented in this table can be found in the Reconciliation of
Non-GAAP Financial Measures section of this press release.
For the fourth quarter of 2022, our cemetery
operating revenue grew by 3.2% compared to last year. Even through
a challenging economic environment, our cemetery operating EBITDA
experienced a slight decline of 1.1% due to the proactive measures
taken by our field leaders to manage the impact of inflationary
costs, leading to a cemetery operating EBITDA margin decrease of
180 basis points to 42.8% compared to the same quarter of the
previous year, we remain confident in our ability to navigate these
headwinds. We recorded a $0.4 million increase in recognized
cemetery property revenue when compared to the same period in 2021,
despite preneed property sales decreasing by $0.5 million or
3.8%.
For the full year, cemetery operating revenue
ended at $90 million, down by 1.4% compared to 2021, and cemetery
operating EBITDA was $37.5 million, down by 11%. The decline in
cemetery operating EBITDA was driven primarily by inflationary
operating costs that started at the beginning of the second quarter
of 2022. However, we are encouraged by our fourth quarter
performance, which indicates that the measures we have taken should
continue to produce positive results.
Looking ahead, we anticipate that our preneed
sales organization will continue to mature, and we expect preneed
sales to grow by low double digits above 2022 levels. It is worth
noting that since 2019, when we positioned ourselves to build and
support our High Performance Sales Organization,
our cemetery operating revenue has experienced a CAGR of 22.2%. We
are optimistic about the future of our cemetery portfolio and are
confident that we will continue to grow and thrive in the years to
come.
TRUST FUND PERFORMANCE
|
|
YTD 2022 |
|
Annualized 2009 - 2022 |
CSV Discretionary portfolio |
|
0.6% |
|
13.3% |
S&P
500 |
|
(18.1)% |
|
13.1% |
DJIA |
|
(6.9)% |
|
12.7% |
NASDAQ |
|
(32.5)% |
|
15.8% |
HY Bond
index |
|
(11.2)% |
|
8.9% |
Our discretionary trust fund portfolio returned
10.0% in the fourth quarter of 2022, versus 7.5% for the S&P
500 and 4.2% for the High Yield Bond index. On a full year basis,
the portfolio had a positive return of 0.6%, while all four indices
posted negative returns. The allocation of our portfolio was
roughly 46% fixed income, 43% equities, and 11% cash as of December
31, 2022.
Since 2020, our portfolio has generated
approximately $46.5 million in net capital gains, including $13.0
million of gains recorded in 2022. Our total recurring annual
income is up nearly 19% to $20.8 million at the end of 2022 from
$17.5 million in the previous year, and represents an 8.4% yield on
the portfolio’s total market value of $246.3 million as of December
31, 2022.
While the markets ended 2022 on a negative note
as concerns about inflation, higher interest rates, and future
economic growth drove volatility throughout the year, the
performance of our portfolio outperformed as we maintained focus on
various income-driven investments as well as some non-income
investments in the energy sector.
OUTLOOK FOR 2023
(in
millions - except per share amounts) |
2023 Outlook |
Total
revenue |
$375 -
$385 |
Adjusted
consolidated EBITDA |
$110 -
$115 |
Adjusted
diluted earnings per share |
$2.25 -
$2.40 |
Adjusted
free cash flow |
$50 -
$60 |
A photo accompanying this announcement is
available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/81f0c2c3-8f07-4c48-934f-7d6c4aef7d7a
(1 |
) |
Includes
ten months of proforma EBITDA from the Greenlawn acquisition
expected to close in late February/early March 2023. Lower earnings
per share is primarily due to higher interest expense when compared
to 2022 and increased overhead costs related to our digital
transformation investments. |
|
|
|
CALL AND INVESTOR RELATIONS
CONTACT
Carriage Services has scheduled a conference
call for tomorrow, February 23, 2023 at 9:30 a.m. central time. To
participate live over the phone via audio conferencing click link
or live over the Internet via webcast click link. An audio archive
of the call will be available on demand via the Company’s website
at www.carriageservices.com. For any investor relations questions,
please email InvestorRelations@carriageservices.com.
CARRIAGE SERVICES, INC. |
CONDENSED OPERATING AND FINANCIAL TREND
REPORT |
(in thousands - except per share amounts) |
|
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2022 |
|
Funeral
operating revenue |
|
$ |
190,098 |
|
|
$ |
196,475 |
|
|
$ |
226,819 |
|
|
$ |
252,926 |
|
|
$ |
251,396 |
|
Cemetery
operating revenue |
|
|
44,588 |
|
|
|
49,317 |
|
|
|
69,083 |
|
|
|
91,330 |
|
|
|
90,033 |
|
Financial
revenue |
|
|
15,688 |
|
|
|
15,878 |
|
|
|
19,689 |
|
|
|
22,708 |
|
|
|
22,452 |
|
Ancillary
revenue |
|
|
— |
|
|
|
748 |
|
|
|
4,661 |
|
|
|
4,437 |
|
|
|
4,193 |
|
Divested/planned divested revenue |
|
|
17,618 |
|
|
|
11,689 |
|
|
|
9,196 |
|
|
|
4,485 |
|
|
|
2,100 |
|
Total revenue |
|
$ |
267,992 |
|
|
$ |
274,107 |
|
|
$ |
329,448 |
|
|
$ |
375,886 |
|
|
$ |
370,174 |
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
operating EBITDA |
|
$ |
71,727 |
|
|
$ |
75,553 |
|
|
$ |
93,480 |
|
|
$ |
109,204 |
|
|
$ |
101,951 |
|
Funeral
operating EBITDA margin |
|
|
37.7 |
% |
|
|
38.5 |
% |
|
|
41.2 |
% |
|
|
43.2 |
% |
|
|
40.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
Cemetery
operating EBITDA |
|
|
13,844 |
|
|
|
17,164 |
|
|
|
26,627 |
|
|
|
42,158 |
|
|
|
37,509 |
|
Cemetery
operating EBITDA margin |
|
|
31.0 |
% |
|
|
34.8 |
% |
|
|
38.5 |
% |
|
|
46.2 |
% |
|
|
41.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
Financial
EBITDA |
|
|
14,139 |
|
|
|
14,272 |
|
|
|
18,357 |
|
|
|
21,156 |
|
|
|
20,767 |
|
Financial
EBITDA margin |
|
|
90.1 |
% |
|
|
89.9 |
% |
|
|
93.2 |
% |
|
|
93.2 |
% |
|
|
92.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
Ancillary
EBITDA |
|
|
— |
|
|
|
298 |
|
|
|
1,186 |
|
|
|
1,006 |
|
|
|
841 |
|
Ancillary
EBITDA margin |
|
|
— |
% |
|
|
39.8 |
% |
|
|
25.4 |
% |
|
|
22.7 |
% |
|
|
20.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
Divested/planned divested EBITDA |
|
|
4,603 |
|
|
|
2,480 |
|
|
|
2,292 |
|
|
|
1,117 |
|
|
|
293 |
|
Divested/planned divested EBITDA margin |
|
|
26.1 |
% |
|
|
21.2 |
% |
|
|
24.9 |
% |
|
|
24.9 |
% |
|
|
14.0 |
% |
Total EBITDA |
|
$ |
104,313 |
|
|
$ |
109,767 |
|
|
$ |
141,942 |
|
|
$ |
174,641 |
|
|
$ |
161,361 |
|
Total EBITDA margin |
|
|
38.9 |
% |
|
|
40.0 |
% |
|
|
43.1 |
% |
|
|
46.5 |
% |
|
|
43.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total
overhead |
|
$ |
36,993 |
|
|
$ |
37,554 |
|
|
$ |
40,514 |
|
|
$ |
54,282 |
|
|
$ |
53,848 |
|
Overhead as a percentage of revenue |
|
|
13.8 |
% |
|
|
13.7 |
% |
|
|
12.3 |
% |
|
|
14.4 |
% |
|
|
14.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA |
|
$ |
67,320 |
|
|
$ |
72,213 |
|
|
$ |
101,428 |
|
|
$ |
120,359 |
|
|
$ |
107,513 |
|
Consolidated EBITDA margin |
|
|
25.1 |
% |
|
|
26.3 |
% |
|
|
30.8 |
% |
|
|
32.0 |
% |
|
|
29.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Other expenses and interest |
|
|
|
|
|
|
|
|
|
|
Depreciation
& amortization |
|
$ |
17,430 |
|
|
$ |
17,771 |
|
|
$ |
19,389 |
|
|
$ |
20,520 |
|
|
$ |
19,799 |
|
Non-cash
stock compensation |
|
|
6,583 |
|
|
|
2,153 |
|
|
|
3,370 |
|
|
|
5,513 |
|
|
|
5,959 |
|
Interest
expense |
|
|
21,109 |
|
|
|
25,522 |
|
|
|
32,515 |
|
|
|
25,445 |
|
|
|
25,895 |
|
Loss on
extinguishment of debt |
|
|
502 |
|
|
|
— |
|
|
|
6 |
|
|
|
23,807 |
|
|
|
190 |
|
Other |
|
|
3,430 |
|
|
|
4,351 |
|
|
|
21,506 |
|
|
|
770 |
|
|
|
(1,524 |
) |
Pretax income |
|
$ |
18,266 |
|
|
$ |
22,416 |
|
|
$ |
24,642 |
|
|
$ |
44,304 |
|
|
$ |
57,194 |
|
Net tax
expense |
|
|
6,621 |
|
|
|
7,883 |
|
|
|
8,552 |
|
|
|
11,145 |
|
|
|
15,813 |
|
Net
income |
|
$ |
11,645 |
|
|
$ |
14,533 |
|
|
$ |
16,090 |
|
|
$ |
33,159 |
|
|
$ |
41,381 |
|
Special
items(1) |
|
$ |
11,650 |
|
|
$ |
9,821 |
|
|
$ |
25,579 |
|
|
$ |
30,607 |
|
|
$ |
(200 |
) |
Tax effect
on special items |
|
|
1,729 |
|
|
|
1,822 |
|
|
|
7,986 |
|
|
|
8,503 |
|
|
|
95 |
|
Adjusted net income |
|
$ |
21,566 |
|
|
$ |
22,532 |
|
|
$ |
33,683 |
|
|
$ |
55,263 |
|
|
$ |
41,086 |
|
Adjusted net income margin |
|
|
8.0 |
% |
|
|
8.2 |
% |
|
|
10.2 |
% |
|
|
14.7 |
% |
|
|
11.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
Adjusted
basic earnings per share |
|
$ |
1.19 |
|
|
$ |
1.26 |
|
|
$ |
1.88 |
|
|
$ |
3.17 |
|
|
$ |
2.76 |
|
Adjusted
diluted earnings per share |
|
$ |
1.17 |
|
|
$ |
1.25 |
|
|
$ |
1.86 |
|
|
$ |
3.02 |
|
|
$ |
2.61 |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP basic
earnings per share |
|
$ |
0.64 |
|
|
$ |
0.81 |
|
|
$ |
0.90 |
|
|
$ |
1.90 |
|
|
$ |
2.78 |
|
GAAP diluted
earnings per share |
|
$ |
0.63 |
|
|
$ |
0.80 |
|
|
$ |
0.89 |
|
|
$ |
1.81 |
|
|
$ |
2.63 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares o/s - basic |
|
|
17,971 |
|
|
|
17,877 |
|
|
|
17,872 |
|
|
|
17,409 |
|
|
|
14,857 |
|
Weighted
average shares o/s - diluted |
|
|
18,374 |
|
|
|
18,005 |
|
|
|
18,077 |
|
|
|
18,266 |
|
|
|
15,710 |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Consolidated EBITDA to Adjusted
consolidated EBITDA |
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA |
|
$ |
67,320 |
|
|
$ |
72,213 |
|
|
$ |
101,428 |
|
|
$ |
120,359 |
|
|
$ |
107,513 |
|
Special
items(1) |
|
|
2,872 |
|
|
|
4,374 |
|
|
|
2,822 |
|
|
|
5,802 |
|
|
|
1,799 |
|
Adjusted consolidated EBITDA |
|
$ |
70,192 |
|
|
$ |
76,587 |
|
|
$ |
104,250 |
|
|
$ |
126,161 |
|
|
$ |
109,312 |
|
Adjusted consolidated EBITDA margin |
|
|
26.2 |
% |
|
|
27.9 |
% |
|
|
31.6 |
% |
|
|
33.6 |
% |
|
|
29.5 |
% |
(1) A detail of our Special items presented in this table can be
found in the Reconciliation of Non-GAAP Financial Measures section
of this press release.
CARRIAGE
SERVICES, INC. |
CONDENSED
CONSOLIDATED BALANCE SHEET |
(in
thousands) |
|
December 31, |
|
|
2021 |
|
|
|
2022 |
|
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
1,148 |
|
|
$ |
1,170 |
|
Accounts receivable, net |
|
25,314 |
|
|
|
24,458 |
|
Inventories |
|
7,346 |
|
|
|
7,613 |
|
Prepaid and other current assets |
|
6,404 |
|
|
|
4,733 |
|
Total current assets |
|
40,212 |
|
|
|
37,974 |
|
Preneed
cemetery trust investments |
|
100,903 |
|
|
|
95,065 |
|
Preneed
funeral trust investments |
|
113,658 |
|
|
|
104,553 |
|
Preneed
cemetery receivables, net |
|
23,150 |
|
|
|
26,672 |
|
Receivables
from funeral preneed trusts, net |
|
19,009 |
|
|
|
19,976 |
|
Property,
plant and equipment, net |
|
269,367 |
|
|
|
278,106 |
|
Cemetery
property, net |
|
100,701 |
|
|
|
104,170 |
|
Goodwill |
|
391,972 |
|
|
|
410,137 |
|
Intangible
and other non-current assets, net |
|
29,378 |
|
|
|
32,930 |
|
Operating
lease right-of-use assets |
|
17,881 |
|
|
|
17,060 |
|
Cemetery
perpetual care trust investments |
|
72,400 |
|
|
|
66,307 |
|
Total assets |
$ |
1,178,631 |
|
|
$ |
1,192,950 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Current portion of debt and lease obligations |
$ |
2,809 |
|
|
$ |
3,172 |
|
Accounts payable |
|
14,205 |
|
|
|
11,675 |
|
Accrued and other liabilities |
|
43,773 |
|
|
|
30,621 |
|
Total current liabilities |
|
60,787 |
|
|
|
45,468 |
|
Acquisition
debt, net of current portion |
|
3,979 |
|
|
|
3,438 |
|
Credit
facility |
|
153,857 |
|
|
|
188,836 |
|
Senior
notes |
|
394,610 |
|
|
|
395,243 |
|
Obligations
under finance leases, net of current portion |
|
5,157 |
|
|
|
4,743 |
|
Obligations
under operating leases, net of current portion |
|
18,520 |
|
|
|
17,315 |
|
Deferred
preneed cemetery revenue |
|
50,202 |
|
|
|
51,746 |
|
Deferred
preneed funeral revenue |
|
30,584 |
|
|
|
32,029 |
|
Deferred tax
liability |
|
45,784 |
|
|
|
48,820 |
|
Other
long-term liabilities |
|
1,419 |
|
|
|
3,065 |
|
Deferred
preneed cemetery receipts held in trust |
|
100,903 |
|
|
|
95,065 |
|
Deferred
preneed funeral receipts held in trust |
|
113,658 |
|
|
|
104,553 |
|
Care trusts’
corpus |
|
71,156 |
|
|
|
65,495 |
|
Total liabilities |
|
1,050,616 |
|
|
|
1,055,816 |
|
Commitments
and contingencies: |
|
|
|
Stockholders’ equity: |
|
|
|
Common stock |
|
263 |
|
|
|
264 |
|
Additional paid-in capital |
|
236,809 |
|
|
|
238,780 |
|
Retained earnings |
|
135,462 |
|
|
|
176,843 |
|
Treasury stock |
|
(244,519 |
) |
|
|
(278,753 |
) |
Total
stockholders’ equity |
|
128,015 |
|
|
|
137,134 |
|
Total liabilities and stockholders’ equity |
$ |
1,178,631 |
|
|
$ |
1,192,950 |
|
|
|
|
|
|
|
|
|
|
CARRIAGE
SERVICES, INC. |
CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in
thousands, except per share data) |
|
(unaudited) |
|
|
|
|
|
Three Months
Ended |
|
Years
Ended |
|
December 31, |
|
December 31, |
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
Service revenue |
$ |
46,486 |
|
|
$ |
45,992 |
|
|
$ |
180,572 |
|
|
$ |
181,271 |
|
Property and merchandise revenue |
|
42,176 |
|
|
|
41,475 |
|
|
|
167,721 |
|
|
|
161,970 |
|
Other revenue |
|
7,269 |
|
|
|
6,449 |
|
|
|
27,593 |
|
|
|
26,933 |
|
|
|
95,931 |
|
|
|
93,916 |
|
|
|
375,886 |
|
|
|
370,174 |
|
Field costs
and expenses: |
|
|
|
|
|
|
|
Cost of service |
|
21,322 |
|
|
|
21,517 |
|
|
|
82,395 |
|
|
|
87,322 |
|
Cost of merchandise |
|
29,199 |
|
|
|
29,149 |
|
|
|
113,871 |
|
|
|
116,453 |
|
Cemetery property amortization |
|
1,457 |
|
|
|
1,545 |
|
|
|
6,670 |
|
|
|
5,859 |
|
Field depreciation expense |
|
3,177 |
|
|
|
3,485 |
|
|
|
12,609 |
|
|
|
13,316 |
|
Regional and unallocated funeral and cemetery costs |
|
7,191 |
|
|
|
5,551 |
|
|
|
25,846 |
|
|
|
22,960 |
|
Other expenses |
|
1,221 |
|
|
|
1,231 |
|
|
|
4,979 |
|
|
|
5,038 |
|
|
|
63,567 |
|
|
|
62,478 |
|
|
|
246,370 |
|
|
|
250,948 |
|
Gross
profit |
|
32,364 |
|
|
|
31,438 |
|
|
|
129,516 |
|
|
|
119,226 |
|
|
|
|
|
|
|
|
|
Corporate
costs and expenses: |
|
|
|
|
|
|
|
General, administrative and other |
|
9,850 |
|
|
|
9,348 |
|
|
|
35,190 |
|
|
|
37,471 |
|
Net (gain)
loss on divestitures, disposals and impairment charges |
|
(711 |
) |
|
|
2,462 |
|
|
|
666 |
|
|
|
2,029 |
|
Operating
income |
|
23,225 |
|
|
|
19,628 |
|
|
|
93,660 |
|
|
|
79,726 |
|
|
|
|
|
|
|
|
|
Interest
expense |
|
(5,307 |
) |
|
|
(7,687 |
) |
|
|
(25,445 |
) |
|
|
(25,895 |
) |
Loss on
extinguishment of debt |
|
— |
|
|
|
(190 |
) |
|
|
(23,807 |
) |
|
|
(190 |
) |
Gain on
insurance reimbursements |
|
— |
|
|
|
196 |
|
|
|
— |
|
|
|
3,471 |
|
Other,
net |
|
3 |
|
|
|
4 |
|
|
|
(104 |
) |
|
|
82 |
|
Income
before income taxes |
|
17,921 |
|
|
|
11,951 |
|
|
|
44,304 |
|
|
|
57,194 |
|
Expense for
income taxes |
|
(4,850 |
) |
|
|
(3,665 |
) |
|
|
(12,316 |
) |
|
|
(16,243 |
) |
Tax
adjustment related to discrete items |
|
276 |
|
|
|
(66 |
) |
|
|
1,171 |
|
|
|
430 |
|
Total
expense for income taxes |
|
(4,574 |
) |
|
|
(3,731 |
) |
|
|
(11,145 |
) |
|
|
(15,813 |
) |
Net
income |
$ |
13,347 |
|
|
$ |
8,220 |
|
|
$ |
33,159 |
|
|
$ |
41,381 |
|
|
|
|
|
|
|
|
|
Basic
earnings per common share: |
$ |
0.82 |
|
|
$ |
0.56 |
|
|
$ |
1.90 |
|
|
$ |
2.78 |
|
Diluted
earnings per common share: |
$ |
0.77 |
|
|
$ |
0.53 |
|
|
$ |
1.81 |
|
|
$ |
2.63 |
|
|
|
|
|
|
|
|
|
Dividends
declared per common share: |
$ |
0.1125 |
|
|
$ |
0.1125 |
|
|
$ |
0.4125 |
|
|
$ |
0.4500 |
|
Weighted
average number of common and common equivalent shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
16,233 |
|
|
|
14,707 |
|
|
|
17,409 |
|
|
|
14,857 |
|
Diluted |
|
17,400 |
|
|
|
15,418 |
|
|
|
18,266 |
|
|
|
15,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CARRIAGE
SERVICES, INC. |
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(in
thousands) |
|
Years
Ended |
|
December 31, |
|
|
2021 |
|
|
|
2022 |
|
Cash flows
from operating activities: |
|
|
|
Net income |
$ |
33,159 |
|
|
$ |
41,381 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
Depreciation and amortization |
|
20,520 |
|
|
|
19,799 |
|
Provision for credit losses |
|
1,783 |
|
|
|
2,818 |
|
Stock-based compensation expense |
|
5,513 |
|
|
|
5,959 |
|
Deferred income tax expense (benefit) |
|
(692 |
) |
|
|
3,036 |
|
Amortization of intangibles |
|
1,285 |
|
|
|
1,286 |
|
Amortization of debt issuance costs |
|
576 |
|
|
|
552 |
|
Amortization and accretion of debt |
|
439 |
|
|
|
493 |
|
Loss on extinguishment of debt |
|
23,807 |
|
|
|
190 |
|
Net loss on divestitures, disposals and impairment charges |
|
847 |
|
|
|
2,029 |
|
Gain on insurance reimbursements |
|
— |
|
|
|
(3,471 |
) |
Other |
|
— |
|
|
|
(155 |
) |
Changes in
operating assets and liabilities that provided (used) cash: |
|
|
|
Accounts and preneed receivables |
|
(4,090 |
) |
|
|
(5,358 |
) |
Inventories, prepaid and other current assets |
|
(4,449 |
) |
|
|
2,295 |
|
Intangible and other non-current assets |
|
(1,181 |
) |
|
|
(1,917 |
) |
Preneed funeral and cemetery trust investments |
|
(31,349 |
) |
|
|
(17,679 |
) |
Accounts payable |
|
522 |
|
|
|
(101 |
) |
Accrued and other liabilities |
|
3,485 |
|
|
|
(9,120 |
) |
Deferred preneed funeral and cemetery revenue |
|
5,010 |
|
|
|
1,302 |
|
Deferred preneed funeral and cemetery receipts held in trust |
|
29,061 |
|
|
|
17,685 |
|
Net cash provided by operating activities |
|
84,246 |
|
|
|
61,024 |
|
|
|
|
|
Cash flows
from investing activities: |
|
|
|
Acquisitions of businesses and real estate |
|
(3,285 |
) |
|
|
(33,876 |
) |
Proceeds from divestitures and sale of other assets |
|
7,875 |
|
|
|
5,027 |
|
Proceeds from insurance reimbursements |
|
7,758 |
|
|
|
2,440 |
|
Capital expenditures |
|
(24,883 |
) |
|
|
(26,081 |
) |
Net cash used in investing activities |
|
(12,535 |
) |
|
|
(52,490 |
) |
|
|
|
|
Cash flows
from financing activities: |
|
|
|
Borrowings from the credit facility |
|
266,168 |
|
|
|
155,400 |
|
Payments against the credit facility |
|
(157,968 |
) |
|
|
(120,100 |
) |
Payment to redeem the senior notes due 2026 |
|
(400,000 |
) |
|
|
— |
|
Payment of call premium for redemption of the senior notes due
2026 |
|
(19,876 |
) |
|
|
— |
|
Proceeds from the issuance of the senior notes due 2029 |
|
395,500 |
|
|
|
— |
|
Payment of debt issuance costs related to the credit facility and
senior notes due 2029 |
|
(2,197 |
) |
|
|
(922 |
) |
Conversion and maturity of the convertible notes |
|
(3,980 |
) |
|
|
— |
|
Payments on acquisition debt and obligations under finance
leases |
|
(1,331 |
) |
|
|
(882 |
) |
Payments on contingent consideration recorded at acquisition
date |
|
(461 |
) |
|
|
— |
|
Proceeds from the exercise of stock options and employee stock
purchase |
|
2,644 |
|
|
|
1,745 |
|
Taxes paid on restricted stock vestings and exercise of stock
options |
|
(2,647 |
) |
|
|
(327 |
) |
Dividends paid on common stock |
|
(7,264 |
) |
|
|
(6,763 |
) |
Purchase of treasury stock |
|
(140,040 |
) |
|
|
(36,663 |
) |
Net cash used in financing activities |
|
(71,452 |
) |
|
|
(8,512 |
) |
|
|
|
|
Net increase
in cash and cash equivalents |
|
259 |
|
|
|
22 |
|
Cash and
cash equivalents at beginning of year |
|
889 |
|
|
|
1,148 |
|
Cash and
cash equivalents at end of year |
$ |
1,148 |
|
|
$ |
1,170 |
|
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 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. The change in
uncertain tax reserves and other was not tax effected. Special
items were taxed at the operating tax rate.
- 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 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 operating EBITDA is defined
as funeral gross profit, plus depreciation and amortization and
regional and unallocated costs, less financial EBITDA, ancillary
EBITDA and divested/planned divested EBITDA related to the Funeral
Home segment.
- Funeral operating EBITDA margin is
defined as funeral operating EBITDA as a percentage of funeral
operating revenue.
- Cemetery operating EBITDA is
defined as cemetery gross profit, plus depreciation and
amortization and regional and unallocated costs, less financial
EBITDA and divested/planned divested EBITDA related to the Cemetery
segment.
- Cemetery operating EBITDA margin is
defined as cemetery operating EBITDA as a percentage of cemetery
operating revenue.
- Preneed cemetery sales is defined
as cemetery property, merchandise and services sold prior to
death.
- Financial EBITDA is defined as
financial revenue, less the related expenses. Financial revenue and
the related expenses are presented within Other revenue and Other
expenses, respectively, on the Consolidated Statement of
Operations.
- Financial EBITDA margin is defined
as financial EBITDA as a percentage of 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 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 EBITDA is the sum of funeral
operating EBITDA, cemetery operating EBITDA, financial EBITDA,
ancillary EBITDA and divested/planned divested EBITDA.
- Total EBITDA margin is defined as
total 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 senior notes due 2029, acquisition debt,
finance leases and bank credit facility, including our letter of
credit.
- Proforma trailing twelve months of
adjusted consolidated EBITDA is defined as trailing twelve months
of adjusted consolidated EBITDA including proforma EBITDA for our
2022 acquisitions, as well as add backs for deferred purchase price
payments made during the last twelve months.
- Bank covenant compliance leverage
ratio is defined as total debt outstanding to proforma trailing
twelve months of adjusted consolidated EBITDA.
Funeral Operating EBITDA and Cemetery
Operating EBITDA
Our operations are reported in two business
segments: Funeral Home operations and Cemetery operations. Our
operating level results highlight trends in volumes, revenue,
operating EBITDA (the individual business’ cash earning
power/locally controllable business profit) and operating EBITDA
margin (the individual business’ controllable profit margin).
Funeral operating EBITDA and cemetery operating
EBITDA are defined above. Funeral and cemetery gross profit 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, and iii)
regional and unallocated funeral and cemetery costs. 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 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 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 operating EBITDA, cemetery operating EBITDA,
financial EBITDA, ancillary EBITDA and divested/planned divested
EBITDA are not consolidated measures of profitability.
Funeral and cemetery operating 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 gross profit, 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 to Consolidated EBITDA, Adjusted Consolidated EBITDA
(in thousands) and Adjusted Consolidated EBITDA margin for the
three months and years ended December 31, 2021 and
2022: |
|
|
Three Months
Ended |
|
Years
Ended |
|
|
December 31, |
|
December
31, |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
Net
income |
|
$ |
13,347 |
|
|
$ |
8,220 |
|
|
$ |
33,159 |
|
|
$ |
41,381 |
|
Total
expense for income taxes |
|
|
4,574 |
|
|
|
3,731 |
|
|
|
11,145 |
|
|
|
15,813 |
|
Income
before income taxes |
|
$ |
17,921 |
|
|
$ |
11,951 |
|
|
$ |
44,304 |
|
|
$ |
57,194 |
|
|
|
|
|
|
|
|
|
|
Depreciation
& amortization |
|
|
5,034 |
|
|
|
5,188 |
|
|
|
20,520 |
|
|
|
19,799 |
|
Non-cash
stock compensation |
|
|
1,681 |
|
|
|
1,381 |
|
|
|
5,513 |
|
|
|
5,959 |
|
Interest
expense |
|
|
5,307 |
|
|
|
7,687 |
|
|
|
25,445 |
|
|
|
25,895 |
|
Loss on
extinguishment of debt |
|
|
— |
|
|
|
190 |
|
|
|
23,807 |
|
|
|
190 |
|
Other |
|
|
(714 |
) |
|
|
2,262 |
|
|
|
770 |
|
|
|
(1,524 |
) |
Consolidated
EBITDA |
|
$ |
29,229 |
|
|
$ |
28,659 |
|
|
$ |
120,359 |
|
|
$ |
107,513 |
|
Adjusted
for: |
|
|
|
|
|
|
|
|
Special items |
|
|
1,166 |
|
|
|
— |
|
|
|
5,802 |
|
|
|
1,799 |
|
Adjusted
consolidated EBITDA |
|
$ |
30,395 |
|
|
$ |
28,659 |
|
|
$ |
126,161 |
|
|
$ |
109,312 |
|
|
|
|
|
|
|
|
|
|
Total
revenue |
|
$ |
95,931 |
|
|
$ |
93,916 |
|
|
$ |
375,886 |
|
|
$ |
370,174 |
|
|
|
|
|
|
|
|
|
|
Adjusted
consolidated EBITDA margin |
|
|
31.7 |
% |
|
|
30.5 |
% |
|
|
33.6 |
% |
|
|
29.5 |
% |
Reconciliation of Net Income to Consolidated EBITDA,
Adjusted Consolidated EBITDA (in thousands) and Adjusted
Consolidated EBITDA Margin for the years ended December 31, 2018,
2019 and 2020: |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2020 |
|
Net
income |
|
$ |
11,645 |
|
|
$ |
14,533 |
|
|
$ |
16,090 |
|
Total
expense for income taxes |
|
|
6,621 |
|
|
|
7,883 |
|
|
|
8,552 |
|
Income
before income taxes |
|
$ |
18,266 |
|
|
$ |
22,416 |
|
|
$ |
24,642 |
|
|
|
|
|
|
|
|
Depreciation
& amortization |
|
|
17,430 |
|
|
|
17,771 |
|
|
|
19,389 |
|
Non-cash
stock compensation |
|
|
6,583 |
|
|
|
2,153 |
|
|
|
3,370 |
|
Interest
expense |
|
|
21,109 |
|
|
|
25,522 |
|
|
|
32,515 |
|
Other |
|
|
3,932 |
|
|
|
4,351 |
|
|
|
21,512 |
|
Consolidated
EBITDA |
|
$ |
67,320 |
|
|
$ |
72,213 |
|
|
$ |
101,428 |
|
Adjusted
for: |
|
|
|
|
|
|
Special items |
|
|
2,872 |
|
|
|
4,374 |
|
|
|
2,822 |
|
Adjusted
consolidated EBITDA |
|
$ |
70,192 |
|
|
$ |
76,587 |
|
|
$ |
104,250 |
|
|
|
|
|
|
|
|
Total
revenue |
|
$ |
267,992 |
|
|
$ |
274,107 |
|
|
$ |
329,448 |
|
|
|
|
|
|
|
|
Adjusted
consolidated EBITDA margin |
|
|
26.2 |
% |
|
|
27.9 |
% |
|
|
31.6 |
% |
Special Items affecting Adjusted Net Income (in thousands)
for the years ended December 31, 2018, 2019, 2020, 2021 and
2022: |
|
|
2018 |
|
|
2019 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition expenses |
|
$ |
— |
|
$ |
2,083 |
|
|
$ |
(11 |
) |
|
$ |
— |
|
|
$ |
— |
|
Severance
and separation costs |
|
|
1,435 |
|
|
1,205 |
|
|
|
563 |
|
|
|
1,575 |
|
|
|
1,431 |
|
Performance
awards cancellation and exchange |
|
|
3,284 |
|
|
— |
|
|
|
288 |
|
|
|
— |
|
|
|
— |
|
Accretion of
discount on convert. sub, notes |
|
|
2,192 |
|
|
241 |
|
|
|
216 |
|
|
|
20 |
|
|
|
— |
|
Net loss on
extinguishment of debt |
|
|
502 |
|
|
— |
|
|
|
— |
|
|
|
23,807 |
|
|
|
190 |
|
Net (gain)
loss on divestitures |
|
|
556 |
|
|
4,217 |
|
|
|
6,864 |
|
|
|
(856 |
) |
|
|
(543 |
) |
Impairment
of goodwill, intangibles and PPE |
|
|
1,019 |
|
|
963 |
|
|
|
14,952 |
|
|
|
500 |
|
|
|
2,358 |
|
Litigation
reserve |
|
|
1,000 |
|
|
750 |
|
|
|
270 |
|
|
|
1,050 |
|
|
|
200 |
|
Tax expense
related to divested business |
|
|
— |
|
|
911 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net gain on
insurance reimbursements |
|
|
— |
|
|
(885 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3,471 |
) |
Disaster
recovery and pandemic costs |
|
|
437 |
|
|
— |
|
|
|
1,627 |
|
|
|
2,157 |
|
|
|
168 |
|
Change in
uncertain tax reserves and other |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(533 |
) |
Tax
adjustment related to certain discrete items |
|
|
1,225 |
|
|
— |
|
|
|
400 |
|
|
|
— |
|
|
|
— |
|
Other
special items |
|
|
— |
|
|
336 |
|
|
|
410 |
|
|
|
2,354 |
|
|
|
— |
|
Total |
|
$ |
11,650 |
|
$ |
9,821 |
|
|
$ |
25,579 |
|
|
$ |
30,607 |
|
|
$ |
(200 |
) |
Special Items affecting Adjusted Consolidated EBITDA (in
thousands) for the years ended December 31, 2018, 2019, 2020, 2021
and 2022: |
|
|
2018 |
|
2019 |
|
|
2020 |
|
|
2021 |
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
Acquisition expenses |
|
$ |
— |
|
$ |
2,083 |
|
$ |
(11 |
) |
|
$ |
— |
|
$ |
— |
Severance
and separation costs |
|
|
1,435 |
|
|
1,205 |
|
|
563 |
|
|
|
1,575 |
|
|
1,431 |
Litigation
reserve |
|
|
1,000 |
|
|
750 |
|
|
270 |
|
|
|
1,050 |
|
|
200 |
Disaster
recovery and pandemic costs |
|
|
437 |
|
|
— |
|
|
1,627 |
|
|
|
2,157 |
|
|
168 |
Other
special items |
|
|
— |
|
|
336 |
|
|
373 |
|
|
|
1,020 |
|
|
— |
Total |
|
$ |
2,872 |
|
$ |
4,374 |
|
$ |
2,822 |
|
|
$ |
5,802 |
|
$ |
1,799 |
Reconciliation
of Funeral and Cemetery Gross Profit to Funeral and Cemetery
Operating EBITDA (in thousands) for the three months and years
ended December 31, 2021 and 2022: |
|
|
Three Months
Ended |
|
Years
Ended |
|
|
December 31, |
|
December
31, |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
Funeral
gross profit (GAAP) |
|
$ |
22,377 |
|
|
$ |
21,962 |
|
|
$ |
89,027 |
|
|
$ |
83,067 |
|
Depreciation
& amortization |
|
|
2,766 |
|
|
|
3,035 |
|
|
|
11,062 |
|
|
|
11,591 |
|
Regional
& unallocated costs |
|
|
5,419 |
|
|
|
4,414 |
|
|
|
18,918 |
|
|
|
16,813 |
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
Funeral financial EBITDA |
|
|
(2,228 |
) |
|
|
(2,174 |
) |
|
|
(8,325 |
) |
|
|
(8,484 |
) |
Ancillary EBITDA |
|
|
(216 |
) |
|
|
(281 |
) |
|
|
(1,006 |
) |
|
|
(841 |
) |
Funeral divested/planned divested EBITDA |
|
|
(101 |
) |
|
|
(82 |
) |
|
|
(472 |
) |
|
|
(195 |
) |
Funeral
operating EBITDA |
|
$ |
28,017 |
|
|
$ |
26,874 |
|
|
$ |
109,204 |
|
|
$ |
101,951 |
|
|
|
|
|
|
|
|
|
|
Funeral
operating revenue |
|
$ |
65,366 |
|
|
$ |
63,964 |
|
|
$ |
252,926 |
|
|
$ |
251,396 |
|
|
|
|
|
|
|
|
|
|
Total
funeral revenue |
|
$ |
69,584 |
|
|
$ |
67,830 |
|
|
$ |
270,087 |
|
|
$ |
266,903 |
|
|
|
|
|
|
|
|
|
|
Funeral
operating EBITDA margin |
|
|
42.9 |
% |
|
|
42.0 |
% |
|
|
43.2 |
% |
|
|
40.6 |
% |
|
|
|
|
|
|
|
|
|
Funeral
gross profit margin |
|
|
32.2 |
% |
|
|
32.4 |
% |
|
|
33.0 |
% |
|
|
31.1 |
% |
|
|
Three Months
Ended |
|
Years
Ended |
|
|
December 31, |
|
December
31, |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
Cemetery
gross profit (GAAP) |
|
$ |
9,987 |
|
|
$ |
9,476 |
|
|
$ |
40,489 |
|
|
$ |
36,159 |
|
Depreciation
& amortization |
|
|
1,868 |
|
|
|
1,995 |
|
|
|
8,217 |
|
|
|
7,584 |
|
Regional
& unallocated costs |
|
|
1,772 |
|
|
|
1,137 |
|
|
|
6,928 |
|
|
|
6,147 |
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
Cemetery financial EBITDA |
|
|
(3,479 |
) |
|
|
(2,672 |
) |
|
|
(12,831 |
) |
|
|
(12,283 |
) |
Cemetery divested/planned divested EBITDA |
|
|
(129 |
) |
|
|
(26 |
) |
|
|
(645 |
) |
|
|
(98 |
) |
Cemetery
operating EBITDA |
|
$ |
10,019 |
|
|
$ |
9,910 |
|
|
$ |
42,158 |
|
|
$ |
37,509 |
|
|
|
|
|
|
|
|
|
|
Cemetery
operating revenue |
|
$ |
22,461 |
|
|
$ |
23,169 |
|
|
$ |
91,330 |
|
|
$ |
90,033 |
|
|
|
|
|
|
|
|
|
|
Total
cemetery revenue |
|
$ |
26,347 |
|
|
$ |
26,086 |
|
|
$ |
105,799 |
|
|
$ |
103,271 |
|
|
|
|
|
|
|
|
|
|
Cemetery
operating EBITDA margin |
|
|
44.6 |
% |
|
|
42.8 |
% |
|
|
46.2 |
% |
|
|
41.7 |
% |
|
|
|
|
|
|
|
|
|
Cemetery
gross profit margin |
|
|
37.9 |
% |
|
|
36.3 |
% |
|
|
38.3 |
% |
|
|
35.0 |
% |
Reconciliation
of GAAP Basic Earnings Per Share to Adjusted Basic Earnings Per
Share for the three months and years ended December 31, 2021 and
2022: |
|
|
Three Months
Ended |
|
Years
Ended |
|
|
December 31, |
|
December
31, |
|
|
2021 |
|
2022 |
|
2021 |
|
|
2022 |
|
GAAP basic earnings per share |
|
$ |
0.82 |
|
$ |
0.56 |
|
$ |
1.90 |
|
$ |
2.78 |
|
Special
items |
|
|
0.01 |
|
|
0.12 |
|
|
1.27 |
|
|
(0.02 |
) |
Adjusted
basic earnings per share |
|
$ |
0.83 |
|
$ |
0.68 |
|
$ |
3.17 |
|
$ |
2.76 |
|
Reconciliation of GAAP Basic Earnings Per Share to Adjusted
Basic Earnings Per Share for the years ended December 31, 2018,
2019 and 2020: |
|
|
2018 |
|
2019 |
|
2020 |
GAAP basic earnings per share |
|
$ |
0.64 |
|
$ |
0.81 |
|
$ |
0.90 |
Special
items |
|
|
0.55 |
|
|
0.45 |
|
|
0.98 |
Adjusted
basic earnings per share |
|
$ |
1.19 |
|
$ |
1.26 |
|
$ |
1.88 |
Reconciliation
of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per
Share for the three months and years ended December 31, 2021 and
2022: |
|
|
Three Months
Ended |
|
Years
Ended |
|
|
December 31, |
|
December
31, |
|
|
2021 |
|
2022 |
|
2021 |
|
|
2022 |
|
GAAP diluted earnings per share |
|
$ |
0.77 |
|
$ |
0.53 |
|
$ |
1.81 |
|
$ |
2.63 |
|
Special
items |
|
|
0.01 |
|
|
0.11 |
|
|
1.21 |
|
|
(0.02 |
) |
Adjusted
diluted earnings per share |
|
$ |
0.78 |
|
$ |
0.64 |
|
$ |
3.02 |
|
$ |
2.61 |
|
Reconciliation of GAAP Diluted Earnings Per Share to
Adjusted Diluted Earnings Per Share for the years ended December
31, 2018, 2019 and 2020: |
|
|
2018 |
|
2019 |
|
2020 |
GAAP diluted earnings per share |
|
$ |
0.63 |
|
$ |
0.80 |
|
$ |
0.89 |
Special
items |
|
|
0.54 |
|
|
0.45 |
|
|
0.97 |
Adjusted
diluted earnings per share |
|
$ |
1.17 |
|
$ |
1.25 |
|
$ |
1.86 |
Reconciliation
of Cash Provided by Operating Activities to Adjusted Free Cash Flow
(in thousands) for the three months and years ended December 31,
2021 and 2022: |
|
|
Three Months
Ended, |
|
Years
Ended |
|
|
December 31 |
|
December
31, |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
Cash
provided by operating activities |
|
$ |
14,547 |
|
|
$ |
10,978 |
|
|
$ |
84,246 |
|
|
$ |
61,024 |
|
Cash used
for maintenance capital expenditures |
|
|
(4,355 |
) |
|
|
(2,074 |
) |
|
|
(13,315 |
) |
|
|
(11,784 |
) |
Free cash
flow |
|
$ |
10,192 |
|
|
$ |
8,904 |
|
|
$ |
70,931 |
|
|
$ |
49,240 |
|
|
|
|
|
|
|
|
|
|
Plus:
incremental special items: |
|
|
|
|
|
|
|
|
Severance
and separation costs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,575 |
|
|
$ |
384 |
|
Disaster
recovery and pandemic costs |
|
|
116 |
|
|
|
— |
|
|
|
2,157 |
|
|
|
168 |
|
Other
special items |
|
|
— |
|
|
|
— |
|
|
|
1,020 |
|
|
|
— |
|
Adjusted
free cash flow |
|
$ |
10,308 |
|
|
$ |
8,904 |
|
|
$ |
75,683 |
|
|
$ |
49,792 |
|
Reconciliation of Estimated Year Ended December 31,
2023: |
|
Reconciliation of Net Income to Consolidated EBITDA,
Adjusted Consolidated EBITDA (in thousands) and Adjusted
Consolidated EBITDA Margin for the year ended December 31,
2023: |
|
|
2023E |
Net income |
|
$ |
36,300 |
|
Total
expense for income taxes |
|
|
14,450 |
|
Income
before income taxes |
|
$ |
50,750 |
|
|
|
|
Depreciation
& amortization |
|
|
21,300 |
|
Non-cash
stock compensation |
|
|
7,800 |
|
Interest
expense |
|
|
33,100 |
|
Other |
|
|
— |
|
Consolidated
EBITDA |
|
$ |
112,950 |
|
Adjusted
for: |
|
|
Special items |
|
|
— |
|
Adjusted
consolidated EBITDA |
|
$ |
112,950 |
|
|
|
|
Total
revenue |
|
$ |
380,000 |
|
|
|
|
Adjusted
consolidated EBITDA margin |
|
|
29.7 |
% |
Reconciliation of GAAP Diluted Earnings Per Share to
Adjusted Diluted Earnings Per Share for the year ended December 31,
2023: |
|
|
2023E |
GAAP diluted earnings per share |
|
$ |
2.31 |
Special
items |
|
|
— |
Adjusted
diluted earnings per share |
|
$ |
2.31 |
Reconciliation of Cash Provided by Operating Activities to
Adjusted Free Cash Flow (in thousands) for the year ended December
31, 2023: |
|
|
2023E |
Cash provided by operating activities |
|
$ |
65,000 |
|
Cash used
for maintenance capital expenditures |
|
|
(10,000 |
) |
Free cash
flow |
|
$ |
55,000 |
|
Special
items |
|
|
— |
|
Adjusted
free cash flow |
|
$ |
55,000 |
|
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, cash flow, investment returns, capital allocation, debt
levels, equity performance, death rates, market share growth,
overhead, including talent recruitment, 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, the ability to obtain credit or financing,
organizational performance, anticipated integration, performance
and other benefits of recently completed and anticipated
acquisitions, and cost and debt reductions; any statements of the
plans, timing and objectives of management for acquisition
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, except where specifically noted. 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 talent recruitment efforts, 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;
- our ability to execute and meet the objectives of our High
Performance and Credit Profile Restoration Plan, if at all;
- 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, product development and
optimization plans;
- the investment performance of our funeral and cemetery trust
funds;
- fluctuations in interest rates;
- the effects of inflation on our business and financial
condition and performance, including increased overall costs for
our goods and services, the impact on customer preferences as a
result of changes in discretionary income, and our ability, if at
all, to mitigate such effects;
- 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 goals to our updated full year outlook, 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, including new variants of COVID-19, such as
the Delta and Omicron variants, on customer preferences and on our
business;
- government, social, business and other actions that have been
and will be taken in response to pandemics, including potential
responses to new variants of COVID-19, such as the Delta and
Omicron variants;
- effects and expense of litigation;
- consolidation of the funeral and cemetery industry;
- 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, 2021, 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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