Mel Payne, Chairman and CEO of Carriage Services, Inc. (NYSE: CSV),
issued the following statement, “Today after the market closed, we
released my Shareholder Letter, along with filing a related Current
Report on Form 8-K with the Securities and Exchange Commission, as
my Shareholder Letter contains our Year to Date February 2021
Comparative Performance Highlights (shown below), as well as highly
transparent individual performance data on the four large
acquisitions we made during the last quarter of 2019/early 2020.
The Cover Theme for my 50 page Shareholder Letter is, “A Tale of
High Performance Transformation.”
YTD February 2021 compared to YTD February
2020
- Record Same Store Funeral Contracts
of 7,734, an increase of 29.2%;
- Record Total Revenue of $65.7
million, an increase of 26.9%;
- Record Total Field EBITDA of $32.2
million, an increase of 58.9%;
- Record Total Field EBITDA Margin of
49.0%, an increase of 980 basis points;
- Record Adjusted Consolidated EBITDA
of $25.2 million, an increase of 77.2%;
- Record Adjusted Consolidated EBITDA
Margin of 38.3%, an increase of 1,090 basis points;
- Record Adjusted Net Income of $11.7
million, an increase of 212.9%;
- Record Adjusted Diluted Earnings
Per Share of $0.64, an increase of 220.0%;
- Estimated Adjusted Free Cash Flow
of $13.8 million, an increase of 91.4%;
- Estimated Adjusted Free Cash Flow
Margin of 21.1%, an increase of 710 basis points;
- Estimated Total Net Debt
outstanding as of March 19, 2021 of $441.8 million; and
- Estimated Total Net Debt to Rolling
Twelve Month Adjusted Consolidated EBITDA of $115.2 million, equal
to 3.83 times.
When we report our record first quarter results
in late April, we will include an updated and increased “Two Year
Scenario” for 2021 and 2022 that reflects continued performance
momentum in all areas of our funeral and cemetery portfolios, as
well as continued rapid progress in deleveraging our balance sheet.
We also expect to be in a position to refinance our $400 million of
6 5/8% senior notes on what we expect will be substantially better
terms given the transformation in our credit profile over the last
fifteen months,” concluded Mr. Payne.
Carriage Services is a leading provider of
funeral and cemetery services and merchandise in the United States.
Carriage operates 174 funeral homes in 26 states and 32 cemeteries
in 12 states.
For more information, please contact Ben Brink
at 713-332-8441 or email
InvestorRelations@carriageservices.com.
Source: Carriage Services, Inc.
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 include “Special
Items”, “Adjusted Net Income”, “Consolidated EBITDA”, “Adjusted
Consolidated EBITDA”, “Adjusted Consolidated EBITDA Margin”,
“Adjusted Free Cash Flow”, “Funeral Field, Cemetery Field and
Financial EBITDA”, “Total Field EBITDA”, “Total Field EBITDA
Margin”, “Other Funeral Revenue”, “Other Funeral EBITDA”,
“Divested/Planned Divested Revenue”, “Divested/Planned Divested
EBITDA”, “Divested/Planned Divested EBITDA Margin”, “Adjusted Basic
Earnings Per Share”, “Adjusted Diluted Earnings Per Share”, "Total
Net Debt Outstanding" and “Total Net Debt to EBITDA Multiple” in
this press release. These financial measurements are defined
as similar GAAP items adjusted for Special Items and are reconciled
to GAAP in this press release. In addition, the Company’s
presentation of these measures may not be comparable to similarly
titled measures in other companies’ reports. The definitions used
by the Company for our internal management purposes and in this
press release are as follows:
- 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. Special Items are typically taxed at the federal
statutory rate of 21.0%, except for the Accretion of Discount on
Convertible Subordinated Notes, as this is a non-tax deductible
item.
- 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.
- 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.
- 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 revenue.
- Adjusted Free Cash Flow is defined as net cash provided by
operations, 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 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, Other EBITDA and Divested/Planned Divested EBITDA related
to the Funeral Home segment.
- 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.
- 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.
- 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.
- Total Field EBITDA is defined as funeral and cemetery operating
income, excluding field depreciation and cemetery property
amortization, regional and unallocated funeral and cemetery costs
and gain/loss on divestitures and impairment charges.
- Total Field EBITDA Margin is defined as Total Field EBITDA as a
percentage of revenue.
- Other Funeral Revenue is defined as revenues from our ancillary
businesses, which include a flower shop, pet cremation business and
online cremation business.
- Other Funeral EBITDA is defined as Other Funeral Revenue, less
expenses related to our ancillary businesses noted above.
- Divested/Planned Divested Revenue is defined as revenues from
certain funeral home and cemetery businesses we intend to
divest.
- Divested/Planned Divested EBITDA is defined as 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.
- Adjusted Basic Earnings Per Share is defined as GAAP basic
earnings per share, adjusted for Special Items.
- Adjusted Diluted Earnings Per Share is defined as GAAP diluted
earnings per share, adjusted for Special Items.
- Total Net Debt Outstanding is defined as indebtedness under our
bank credit facility, Convertible Subordinated Notes due 2021 and
Senior Notes due 2026, acquisition debt and finance leases, less
cash on hand.
- Total Net Debt to EBITDA Multiple is defined as Total Net 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 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 openly 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, Other Funeral 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 to Adjusted
Net Income (in thousands):
|
For the Two Months Ended February |
|
|
2020 |
|
|
2021 |
|
Net Income |
$ |
3,380 |
|
|
$ |
10,405 |
|
Special
Items, Net of Tax(1) |
|
|
|
Acquisition and Divestiture Expenses |
90 |
|
|
— |
|
Severance and Separation Costs |
228 |
|
|
726 |
|
Performance Awards Cancellation and Exchange |
— |
|
|
56 |
|
Accretion of Discount on Convertible Subordinated Notes(1) |
43 |
|
|
20 |
|
Natural Disaster and Pandemic Costs |
— |
|
|
497 |
|
Adjusted Net
Income |
$ |
3,741 |
|
|
$ |
11,704 |
|
|
|
|
|
(1) Special Items are typically taxed at the federal statutory
rate of 21.0%, except for the Accretion of Discount on Convertible
Subordinated Notes, as this is a non-tax deductible item. |
|
|
|
Reconciliation of Net Income to Consolidated EBITDA,
Adjusted Consolidated EBITDA (in thousands) and Adjusted
Consolidated EBITDA Margin:
|
For the Two Months Ended February |
|
|
2020 |
|
|
2021 |
|
Net Income |
$ |
3,380 |
|
|
$ |
10,405 |
|
Total
Expense for Income Taxes |
1,449 |
|
|
4,459 |
|
Income
Before Income Taxes |
$ |
4,829 |
|
|
$ |
14,864 |
|
Interest
Expense |
5,616 |
|
|
5,063 |
|
Accretion of
Discount on Convertible Subordinated Notes |
43 |
|
|
20 |
|
Non-Cash
Stock Compensation |
400 |
|
|
583 |
|
Depreciation
& Amortization |
2,905 |
|
|
3,075 |
|
Other,
Net |
(2 |
) |
|
(1 |
) |
Consolidated
EBITDA |
$ |
13,791 |
|
|
$ |
23,604 |
|
Adjusted
For: |
|
|
|
|
|
|
|
Acquisition and Divestiture Expenses |
114 |
|
|
— |
|
Severance and Separation Costs |
288 |
|
|
919 |
|
Natural Disaster and Pandemic Costs |
— |
|
|
629 |
|
Adjusted
Consolidated EBITDA |
$ |
14,193 |
|
|
$ |
25,152 |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
51,790 |
|
|
$ |
65,707 |
|
|
|
|
|
|
|
|
|
Adjusted
Consolidated EBITDA Margin |
|
27.4 |
% |
|
38.3 |
% |
|
|
|
|
|
|
|
Reconciliation of Funeral and Cemetery
Operating Income to Funeral and Cemetery Field EBITDA (in
thousands):
|
For the Two Months Ended February |
|
|
2020 |
|
|
2021 |
|
Funeral Operating Income (GAAP) |
$ |
12,622 |
|
|
$ |
19,135 |
|
Depreciation
& Amortization |
1,907 |
|
|
1,815 |
|
Regional
& Unallocated Costs |
2,011 |
|
|
2,997 |
|
Less: |
|
|
|
|
|
|
|
Funeral Financial EBITDA |
(1,367 |
) |
|
(1,511 |
) |
Other Funeral EBITDA |
(180 |
) |
|
(182 |
) |
Funeral Divested/Planned Divested EBITDA |
(457 |
) |
|
(196 |
) |
Funeral
Field EBITDA |
$ |
14,536 |
|
|
$ |
22,058 |
|
|
For the Two Months Ended February |
|
|
2020 |
|
|
2021 |
|
Cemetery Operating Income (GAAP) |
$ |
2,523 |
|
|
$ |
6,349 |
|
Depreciation
& Amortization |
757 |
|
|
1,067 |
|
Regional
& Unallocated Costs |
462 |
|
|
857 |
|
Less: |
|
|
|
|
|
|
|
Cemetery Financial EBITDA |
(1,239 |
) |
|
(1,882 |
) |
Cemetery Divested/Planned Divested EBITDA |
(1 |
) |
|
(15 |
) |
Cemetery
Field EBITDA |
$ |
2,502 |
|
|
$ |
6,376 |
|
Components of Total Field EBITDA (in
thousands):
|
For the Two Months Ended February |
|
2020 |
|
2021 |
Funeral Field EBITDA |
$ |
14,536 |
|
$ |
22,058 |
Cemetery
Field EBITDA |
2,502 |
|
6,376 |
Funeral
Financial EBITDA |
1,367 |
|
1,511 |
Cemetery
Financial EBITDA |
1,239 |
|
1,882 |
Other
Funeral EBITDA |
180 |
|
182 |
Divested/Planned Divested EBITDA |
458 |
|
211 |
Total Field
EBITDA |
$ |
20,282 |
|
$ |
32,220 |
Reconciliation of GAAP Basic Earnings
Per Share to Adjusted Basic Earnings Per Share:
|
For the Two Months Ended February |
|
2020 |
|
2021 |
GAAP Basic Earnings Per Share |
$ |
0.18 |
|
$ |
0.58 |
Special
Items |
0.02 |
|
0.07 |
Adjusted
Basic Earnings Per Share |
$ |
0.20 |
|
$ |
0.65 |
Reconciliation of GAAP Diluted Earnings
Per Share to Adjusted Diluted Earnings Per Share:
|
For the Two Months Ended February |
|
2020 |
|
2021 |
GAAP Diluted Earnings Per Share |
$ |
0.18 |
|
$ |
0.57 |
Special
Items |
0.02 |
|
0.07 |
Adjusted
Diluted Earnings Per Share |
$ |
0.20 |
|
$ |
0.64 |
Reconciliation of Cash Flow Provided by
Operations to Adjusted Free Cash Flow (in thousands) and Adjusted
Free Cash Flow Margin:
|
For the Two Months Ended February |
|
|
2020 |
|
|
2021 |
|
Cash Flow Provided by Operations |
$ |
7,859 |
|
|
$ |
13,761 |
|
Cash Used
for Maintenance Capital Expenditures |
(1,031 |
) |
|
(1,471 |
) |
Free Cash
Flow |
$ |
6,828 |
|
|
$ |
12,290 |
|
|
|
|
|
|
|
|
|
Plus:
Incremental Special Items: |
|
|
|
|
|
|
|
Acquisition
and Divestiture Costs |
114 |
|
|
— |
|
Severance
and Separation Costs |
288 |
|
|
919 |
|
Natural
Disaster and Pandemic Costs |
— |
|
|
629 |
|
Adjusted
Free Cash Flow |
$ |
7,230 |
|
|
$ |
13,838 |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
51,790 |
|
|
$ |
65,707 |
|
|
|
|
|
|
|
|
|
Adjusted
Free Cash Flow Margin |
14.0 |
% |
|
21.1 |
% |
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,
interest costs or other financial items; any statements of the
plans, strategies and objectives of management for future
operations or financing 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. Factors that could
cause actual results to differ materially from those made or
suggested by the forward-looking statements contained herein
include those identified in the Company’s Annual Report on Form
10-K for the year ended December 31, 2020, 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, except to
the extent required by law.
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