Carriage Services, Inc. (NYSE: CSV) today announced results for the
first quarter ended March 31, 2021. Mel Payne, Chairman and CEO,
stated, “We had a record first quarter performance in four of five
operating and financial reporting segments to start 2021, as Total
Revenue increased $19.1 million or 24.7% to $96.6 million, Field
EBITDA increased $15.7 million or 52.1% to $45.8 million, Adjusted
Consolidated EBITDA increased $11.8 million or 51.7% to $34.7
million, Adjusted Free Cash Flow increased $14.5 million or 115.3%
to $27.1 million, and Adjusted Diluted EPS increased $0.46 or
131.4% to $0.81 compared to $0.35 in 2020. Our Field Margins in all
five segments continued to be extraordinarily high compared to
2020, reflected by a Total Field EBITDA Margin of 47.4%, up 860
basis points, Adjusted Consolidated EBITDA Margin of 35.9%, up 640
basis points, and Adjusted Free Cash Flow Margin of 28.1%, up 1,180
basis points.
Our credit profile continued to rapidly improve
as reflected by a reduction in our Total Debt to EBITDA Ratio from
4.4 times at December 31, 2020 (Total Debt of $461.1 million /
EBITDA of $104.3 million) to 3.8 times (Total Debt of $439.4
million / Rolling Four Quarter EBITDA of $116.1 million). We have
achieved a reduction in our Total Debt to EBITDA Leverage Ratio of
2.2 times in only 15 months (from 6.0 times at January 3, 2020 to
3.8 times at March 31, 2021), a truly remarkable achievement whose
story was fully told and explained in my recent 50 page 2020
Shareholder Letter with the cover theme, “A TALE OF HIGH
PERFORMANCE TRANSFORMATION.”
The balance of this 2021 first quarter earnings
release will be equivalent to an extension of my 2020 Shareholder
Letter, i.e. a journey through “highly transparent” high
performance data sequentially shown on the following pages as
follows:
- First Quarter 2021 Comparative Performance Highlights;
- Five Quarter Trend Report ending March 31, 2021;
- Same Store Funeral Revenue Monthly Trends and Drivers Six
Months Ending March 2021;
- First Quarter 2021 versus 2020 Variable Overhead/Incentive
Compensation Comparison; and
- Rolling Four Quarter Outlook ending March 31, 2022 and Updated
and Increased Two Year Scenario 2021/2022.
FIRST QUARTER 2021 COMPARATIVE
PERFORMANCE HIGHLIGHTS
- Total Revenue of $96.6 million compared to $77.5 million, an
increase of 24.7%;
- Total Field EBITDA of $45.8 million compared to $30.1 million,
an increase of 52.1%;
- Total Field EBITDA Margin of 47.4% compared to 38.8%, an
increase of 860 basis points;
- Adjusted Consolidated EBITDA of $34.7 million compared to $22.8
million, an increase of 51.7%;
- Adjusted Consolidated EBITDA Margin of 35.9% compared to 29.5%,
an increase of 640 basis points;
- Adjusted Diluted EPS of $0.81 compared to $0.35, an increase of
131.4%;
- Adjusted Free Cash Flow of $27.1 million compared to $12.6
million, an increase of 115.3%;
- Adjusted Free Cash Flow Margin of 28.1% compared to 16.3%, an
increase of 1,180 basis points;
- Total Debt reduction during the first quarter of $21.7 million
(4.7%) to $439.4 million;
- Net Income of $12.9 million, an increase of $17.1 million equal
to 408.1%; and
- GAAP Diluted EPS of $0.71, an increase of $.94 per share equal
to 408.7%.
FIVE QUARTER TREND REPORT
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 below are highlights from our
Five Quarter Trend Report that clearly reflect the accelerating
transformative performance process that has occurred at Carriage
over the last 15 months.
FIVE QUARTER OPERATING AND FINANCIAL TREND REPORT
HIGHLIGHTS |
(000’s except for volume, averages &
margins) |
|
1ST QTR 2020 |
|
2ND QTR 2020 |
|
3RD QTR 2020 |
|
4TH QTR 2020 |
|
1ST QTR 2021 |
Funeral Same Store
Contracts |
|
|
9,058 |
|
|
|
9,056 |
|
|
|
9,420 |
|
|
|
10,172 |
|
|
|
11,028 |
|
Average Revenue Per Contract
(1) |
|
$ |
5,155 |
|
|
$ |
4,891 |
|
|
$ |
5,069 |
|
|
$ |
5,158 |
|
|
$ |
5,140 |
|
Funeral Same Store Burial
Contracts |
|
|
3,339 |
|
|
|
3,273 |
|
|
|
3,370 |
|
|
|
3,777 |
|
|
|
4,038 |
|
Funeral Same Store Burial
Rate |
|
|
36.9 |
% |
|
|
36.1 |
% |
|
|
35.8 |
% |
|
|
37.1 |
% |
|
|
36.6 |
% |
Average Revenue Per Burial
Contract |
|
$ |
9,069 |
|
|
$ |
8,688 |
|
|
$ |
8,984 |
|
|
$ |
9,013 |
|
|
$ |
8,987 |
|
Funeral Same Store Cremation
Contracts |
|
|
4,985 |
|
|
|
5,199 |
|
|
|
5,382 |
|
|
|
5,697 |
|
|
|
6,285 |
|
Funeral Same Store Cremation
Rate |
|
|
55.0 |
% |
|
|
57.4 |
% |
|
|
57.1 |
% |
|
|
56.0 |
% |
|
|
57.0 |
% |
Average
Revenue Per Cremation Contract |
|
$ |
3,299 |
|
|
$ |
3,075 |
|
|
$ |
3,285 |
|
|
$ |
3,251 |
|
|
$ |
3,294 |
|
Funeral Same Store
Revenue |
|
$ |
46,696 |
|
|
$ |
44,297 |
|
|
$ |
47,750 |
|
|
$ |
52,472 |
|
|
$ |
56,683 |
|
Funeral Same Store EBITDA |
|
$ |
18,062 |
|
|
$ |
18,726 |
|
|
$ |
19,906 |
|
|
$ |
23,115 |
|
|
$ |
25,812 |
|
Funeral
Same Store EBITDA Margin |
|
|
38.7 |
% |
|
|
42.3 |
% |
|
|
41.7 |
% |
|
|
44.1 |
% |
|
|
45.5 |
% |
Funeral Acquisition
Revenue |
|
$ |
8,885 |
|
|
$ |
9,023 |
|
|
$ |
8,204 |
|
|
$ |
9,348 |
|
|
$ |
10,139 |
|
Funeral Acquisition
EBITDA |
|
$ |
3,247 |
|
|
$ |
3,754 |
|
|
$ |
2,941 |
|
|
$ |
3,683 |
|
|
$ |
4,467 |
|
Funeral
Acquisition EBITDA Margin |
|
|
36.5 |
% |
|
|
41.6 |
% |
|
|
35.8 |
% |
|
|
39.4 |
% |
|
|
44.1 |
% |
Cemetery Same Store Preneed
Property Contracts Sold |
|
|
817 |
|
|
|
931 |
|
|
|
1,073 |
|
|
|
1,039 |
|
|
|
1,167 |
|
Cemetery Same Store Preneed
Sales Revenue |
|
$ |
6,967 |
|
|
$ |
8,286 |
|
|
$ |
8,319 |
|
|
$ |
9,230 |
|
|
$ |
9,302 |
|
Cemetery Same Store
Revenue |
|
$ |
10,907 |
|
|
$ |
11,611 |
|
|
$ |
14,393 |
|
|
$ |
14,784 |
|
|
$ |
14,621 |
|
Cemetery Same Store
EBITDA |
|
$ |
3,167 |
|
|
$ |
3,656 |
|
|
$ |
6,175 |
|
|
$ |
6,471 |
|
|
$ |
5,711 |
|
Cemetery Same Store EBITDA Margin |
|
|
29.0 |
% |
|
|
31.5 |
% |
|
|
42.9 |
% |
|
|
43.8 |
% |
|
|
39.1 |
% |
Cemetery Acquired Preneed
Property Contracts Sold |
|
|
175 |
|
|
|
295 |
|
|
|
304 |
|
|
|
345 |
|
|
|
338 |
|
Cemetery Acquired Preneed
Sales Revenue |
|
$ |
2,137 |
|
|
$ |
3,079 |
|
|
$ |
4,073 |
|
|
$ |
5,394 |
|
|
$ |
5,089 |
|
Cemetery Acquisition
Revenue |
|
$ |
2,799 |
|
|
$ |
4,055 |
|
|
$ |
5,220 |
|
|
$ |
5,509 |
|
|
$ |
6,980 |
|
Cemetery Acquisition
EBITDA |
|
$ |
827 |
|
|
$ |
1,434 |
|
|
$ |
2,335 |
|
|
$ |
2,532 |
|
|
$ |
4,102 |
|
Cemetery Acquisition EBITDA Margin |
|
|
29.5 |
% |
|
|
35.4 |
% |
|
|
44.7 |
% |
|
|
46.0 |
% |
|
|
58.8 |
% |
Total Financial Revenue |
|
$ |
4,237 |
|
|
$ |
4,682 |
|
|
$ |
5,591 |
|
|
$ |
5,226 |
|
|
$ |
5,682 |
|
Total Financial EBITDA |
|
$ |
3,820 |
|
|
$ |
4,456 |
|
|
$ |
5,242 |
|
|
$ |
4,887 |
|
|
$ |
5,281 |
|
Total
Financial EBITDA Margin |
|
|
90.2 |
% |
|
|
95.2 |
% |
|
|
93.8 |
% |
|
|
93.5 |
% |
|
|
92.9 |
% |
Total Revenue |
|
$ |
77,490 |
|
|
$ |
77,477 |
|
|
$ |
84,393 |
|
|
$ |
90,088 |
|
|
$ |
96,637 |
|
Total Field EBITDA |
|
$ |
30,094 |
|
|
$ |
33,221 |
|
|
$ |
37,309 |
|
|
$ |
41,318 |
|
|
$ |
45,787 |
|
Total Field EBITDA Margin |
|
|
38.8 |
% |
|
|
42.9 |
% |
|
|
44.2 |
% |
|
|
45.9 |
% |
|
|
47.4 |
% |
Adjusted Consolidated
EBITDA |
|
$ |
22,840 |
|
|
$ |
25,444 |
|
|
$ |
27,666 |
|
|
$ |
28,300 |
|
|
$ |
34,657 |
|
Adjusted Consolidated EBITDA
Margin |
|
|
29.5 |
% |
|
|
32.8 |
% |
|
|
32.8 |
% |
|
|
31.4 |
% |
|
|
35.9 |
% |
Adjusted Diluted EPS |
|
$ |
0.35 |
|
|
$ |
0.45 |
|
|
$ |
0.51 |
|
|
$ |
0.57 |
|
|
$ |
0.81 |
|
Adjusted Free Cash Flow |
|
$ |
12,607 |
|
|
$ |
17,878 |
|
|
$ |
27,608 |
|
|
$ |
11,870 |
|
|
$ |
27,140 |
|
Adjusted Free Cash Flow Margin |
|
|
16.3 |
% |
|
|
23.1 |
% |
|
|
32.7 |
% |
|
|
13.2 |
% |
|
|
28.1 |
% |
(1) Excludes Preneed Funeral interest earnings
reflected in Total Financial Revenue.
Since we included comparative YTD February 2021
performance highlights along with commentary in my recent
Shareholder Letter, the primary takeaway from the Five Quarter
Trend Report other than the spectacular record Same Store Funeral
performance in the first quarter (monthly trends covered below in
the next section of this release) is the continuing broad preneed
property sales momentum in our cemetery portfolio. As our cemetery
atneed performance is highly correlated with our funeral volumes
and revenues and might subside along with funeral volumes in a more
normalized death rate environment, our preneed property sales
momentum should build throughout the balance of the year to a
sustainable level much higher than ever before, particularly within
our Cemetery Acquisition Portfolio, which I comprehensively covered
on pages 29-33 of my Shareholder Letter.
SAME STORE FUNERAL MONTHLY REVENUE TRENDS/DRIVERS SIX
MONTHS ENDING MARCH 2021 |
(000’s except for volume, averages) |
|
2020 versus 2019 |
|
2021 versus 2020 |
Same Store Funeral |
|
OCT |
NOV |
DEC |
|
JAN |
FEB |
MAR |
APR EST. |
Contracts (volume)
2020/2021 |
|
3,061 |
|
|
3,060 |
|
|
4,051 |
|
|
|
4,195 |
|
|
3,539 |
|
|
3,294 |
|
3,050 |
|
|
Contracts (volume) 2019/2020 |
|
2,865 |
|
|
2,734 |
|
|
2,991 |
|
|
|
3,136 |
|
|
2,849 |
|
|
3,073 |
|
3,185 |
|
|
Volume Variance |
|
196 |
|
|
326 |
|
|
1,060 |
|
|
|
1,059 |
|
|
690 |
|
|
221 |
|
(135 |
) |
|
Average Revenue Per Contract 2020/2021(1) |
|
$ |
5,268 |
|
|
$ |
5,156 |
|
|
$ |
5,077 |
|
|
|
$ |
5,167 |
|
|
$ |
5,031 |
|
|
$ |
5,222 |
|
$ |
5,250 |
|
|
Average
Revenue Per Contract 2019/2020(1) |
|
$ |
5,330 |
|
|
$ |
5,179 |
|
|
$ |
5,369 |
|
|
|
$ |
5,263 |
|
|
$ |
5,245 |
|
|
$ |
4,962 |
|
$ |
4,621 |
|
|
Average Revenue Per Contract Variance |
|
$ |
(62 |
) |
|
$ |
(23 |
) |
|
$ |
(292 |
) |
|
|
$ |
(96 |
) |
|
$ |
(214 |
) |
|
$ |
260 |
|
$ |
629 |
|
|
Operating Revenue
2020/2021(1) |
|
$ |
16,126 |
|
|
$ |
15,778 |
|
|
$ |
20,568 |
|
|
|
$ |
21,677 |
|
|
$ |
17,806 |
|
|
$ |
17,200 |
|
$ |
16,012 |
|
|
Operating Revenue 2019/2020(1) |
|
$ |
15,272 |
|
|
$ |
14,161 |
|
|
$ |
16,059 |
|
|
|
$ |
16,506 |
|
|
$ |
14,942 |
|
|
$ |
15,249 |
|
$ |
14,719 |
|
|
Operating Revenue Variance |
|
$ |
854 |
|
|
$ |
1,617 |
|
|
$ |
4,509 |
|
|
|
$ |
5,171 |
|
|
$ |
2,864 |
|
|
$ |
1,951 |
|
$ |
1,293 |
|
|
Net Revenue Volume
Variance |
|
$ |
1,045 |
|
|
$ |
1,688 |
|
|
$ |
5,691 |
|
|
|
$ |
5,574 |
|
|
$ |
3,619 |
|
|
$ |
1,096 |
|
$ |
(624 |
) |
|
Net
Revenue Average Variance |
|
$ |
(191 |
) |
|
$ |
(71 |
) |
|
$ |
(1,182 |
) |
|
|
$ |
(403 |
) |
|
$ |
(755 |
) |
|
$ |
855 |
|
$ |
1,917 |
|
|
Net Revenue Variance |
|
$ |
854 |
|
|
$ |
1,617 |
|
|
$ |
4,509 |
|
|
|
$ |
5,171 |
|
|
$ |
2,864 |
|
|
$ |
1,951 |
|
$ |
1,293 |
|
|
(1) Excludes Preneed Funeral interest earnings
reflected in Total Financial Revenue.
As the above table shows, the primary driver of
our huge increase in Same Store Funeral Revenue (and Field EBITDA
Dollars and Margins) in the fourth quarter of 2020 and first
quarter of 2021 was the peak spike in COVID deaths in December,
January and February, offset somewhat by lower revenue
averages. Some of the volume increase during this period and
all during this past year of the pandemic has been market share
gains throughout our funeral portfolio, as covered in my
Shareholder Letter.
As shown above for March and forecast April 2021
Same Store Funeral Revenue, we are now experiencing a more normal
pre-COVID level of funeral volumes yet continuing to have higher
revenues year over year because of much higher revenue averages
compared to the peak lows in the initial phase of the Coronavirus
Pandemic shock in March/April 2020. We should experience a
net increase in same store revenues for April as our forecast for
the last two weeks of April reflects a continuing rapid increase in
both our burial and cremation revenue averages that are more than
compensating for the normalization of volumes.
FIRST QUARTER 2021 VERSUS 2020 VARIABLE
OVERHEAD/INCENTIVE COMPENSATION COMPARISON
Our public Five Year, Five Quarter and internal
Monthly, Quarterly and Year-To-Date Trend Reports are broken into
five separate operating and financial segments that reflect
Revenue, Field EBITDA and Field EBITDA Margin “trends over
time.” Our High Performance Standards for defining success in
both our funeral and cemetery portfolios are designed and heavily
weighted around these revenue and margin “trend metrics” with
EBITDA (dollars) one of two primary determinants for our
Being The Best Annual Incentive Program, and the
other being compound annual revenue growth and margin range (more
compound annual revenue growth and higher margin range pays
increasingly more with no limit).
Our five field reporting segments do not conform
to GAAP or SEC segment requirements, as we do not allocate any
corporate overhead to our individual business units whose Managing
Partners are judged only by what they control locally, i.e. their
important share of one of the four operating segments in our Trend
Reports (Same Store and Acquisition Funeral, Same Store and
Acquisition Cemetery). The Total Field Revenue, EBITDA and
EBITDA Margin are therefore the consolidated performance of our
individual funeral home and cemetery businesses plus the financial
revenue that has been recognized primarily from our three preneed
trusts (funeral merchandise and service, cemetery merchandise and
service, cemetery perpetual care).
Our Overhead segment is shown below Total Field
EBITDA in our Trend Reports and is broken into three categories:
Total Regional Overhead (mostly fixed with four segments comprised
of three Regional Partners and one National Sales and Marketing
Partner, plus seven Directors of Support-Operations and three
Directors of Support-Sales); Total Corporate Overhead (mostly fixed
comprised of eight different departments in our Houston Support
Center); and Total Variable Overhead consisting of two major
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 costs (floods, hurricanes, Pandemic,
etc.).
As covered in my Shareholder Letter, we have had
a series of significant nonrecurring items related to the two and a
half year process of High Performance
Transformation since September 12, 2018. After we
complete the planned refinancing of our balance sheet, our Total
Overhead Margin as a percentage of Total Revenue should normalize
over the Two Year Scenario ending 2022 (before any new
acquisitions) within a range of 11% to 12%, with Variable Overhead
comprised of mostly incentive compensation representing about
one-third of Total Overhead.
This past year of COVID-19 Pandemic created a
lot of distortion at certain points in our Variable Overhead
reporting as shown below in the comparison of first quarter 2021 to
first quarter 2020.
FIRST QUARTER COMPARISON (000's) |
OVERHEAD |
|
|
2020 |
|
|
|
2021 |
|
|
Variance $ |
|
Variance % |
Total Variable |
|
$ |
1,636 |
|
|
$ |
6,900 |
|
|
$ |
5,264 |
|
321.8 |
% |
Total Regional |
|
|
1,038 |
|
|
|
1,199 |
|
|
|
161 |
|
15.5 |
% |
Total
Corporate |
|
|
5,197 |
|
|
|
5,500 |
|
|
|
303 |
|
5.8 |
% |
Total
Overhead |
|
$ |
7,871 |
|
|
$ |
13,599 |
|
|
$ |
5,728 |
|
72.8 |
% |
% Total Revenue |
|
|
10.2 |
% |
|
|
14.1 |
% |
|
|
390 bp |
|
38.2 |
% |
|
|
|
|
|
|
|
|
|
Corporate Incentive
Compensation |
|
$ |
— |
|
|
$ |
1,100 |
|
|
$ |
1,100 |
|
N/A |
|
Field Incentive
Compensation |
|
|
794 |
|
|
|
3,026 |
|
|
|
2,232 |
|
281.1 |
% |
Separation Expenses |
|
|
484 |
|
|
|
1,588 |
|
|
|
1,104 |
|
228.1 |
% |
Pandemic Costs |
|
|
103 |
|
|
|
854 |
|
|
|
751 |
|
729.1 |
% |
Acquisition/Divestiture
Expenses |
|
|
171 |
|
|
|
185 |
|
|
|
14 |
|
8.2 |
% |
Other
Variable |
|
|
84 |
|
|
|
147 |
|
|
|
63 |
|
75.0 |
% |
Total Variable
Overhead |
|
$ |
1,636 |
|
|
$ |
6,900 |
|
|
$ |
5,264 |
|
321.8 |
% |
% Total
Revenue |
|
|
2.1 |
% |
|
|
7.1 |
% |
|
|
500 bp |
|
238.1 |
% |
As shown in the table of the first quarter 2020
to 2021 overhead comparisons, the initial shock of the Coronavirus
pandemic in mid-March of 2020 caused us to plan for the worst and
control/reduce all costs until we could have more certainty about
the impact on our business and financial flexibility. Our
Executive and Senior Leadership Teams immediately took salary
reductions and we eliminated all corporate incentive
compensation. After adapting quickly beginning in mid-April,
our performance trended higher month by month and accelerated
during the second half of the year.
Once the Field Revenue, EBITDA and EBITDA Margin
Trends became our friend in the second quarter of 2020, we
eliminated the salary reductions and began to add increasingly high
amounts of corporate and field incentive compensation to Variable
Overhead starting in June. Our Variable Overhead increased
from $1.6 million in first quarter 2020 to $3.7 million in the
second, $4.1 million in the third and then $6.7 million in the
fourth as December exploded with broadly higher Revenue and EBITDA
Margin performance across our funeral and cemetery portfolios.
If not for a huge increase in our annual
Being The Best and five year Good To
Great field and corporate incentive accruals in December
2020, our fourth quarter performance would have been much higher
than Adjusted Consolidated EBITDA of $28.3 million, Adjusted
Consolidated EBITDA Margin of 31.4% (compared to 32.8% in second
and third quarter of 2020 and 35.9% in first quarter 2021) and EPS
of $0.57 (compared to $0.45 in second quarter 2020, $0.51 in third
quarter 2020, and $0.81 in first quarter 2021).
We had two members of our previously ten member
Executive Team resign at the beginning of February 2021 (one to
retire, the other to pursue a career opportunity elsewhere).
Both left Carriage on good terms with strong bench strength in
their respective Houston Support Center Teams and therefore won’t
be replaced by anyone from outside of Carriage, which should result
in a decrease in normalized corporate overhead for the balance of
2021.
Last year amidst such uncertainty we were
somewhat cautious of over-accruing for incentive compensation, so
we were constantly behind and often surprised at our own deep,
broad and sustainable High Performance
Transformation, especially in the second half of the
year. Yet even after a record first quarter in 2021 that
would be difficult to sustain, we remain confident about 2021 being
another record annual performance and therefore have aggressively
added to our field and corporate incentive compensation accruals to
“Pay All High Performers” for their continuing High
Performance.
The really great news for our shareholders is
that even after paying the most generous one and five year
performance incentives to our High Performance Hero Managing
Partners in the sixty year history of deathcare consolidation, the
remaining share of the High Performance retained for value creation
should drive market beating compounded shareholder returns for the
entire second five year timeframe of Carriage’s Good To
Great II Journey ending in 2024, a concept which I
explained in section XI on page 42 of my shareholder letter titled,
“Observations about 2020 and The Evolution of our Standards
Operating Model,” concluded Mr. Payne.
ACTUAL RESULTS, UPDATED TWO YEAR SCENARIO AND ROLLING
FOUR QUARTER OUTLOOK
Ben Brink, Chief Financial Officer stated, “We
are excited to once again increase our Roughly Right Scenario for
2021 and 2022. The increase in our performance expectation through
2022 is reflective of the continued High Performance execution we
have witnessed across our portfolio as well as our expectations
that the following drivers will only accelerate High Performance
over the coming years:
- Increased
Cemetery Preneed Sales leading to higher Cemetery Revenue growth
rates with higher sustained 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;
- Sustained higher
plateau of Financial Revenue and Financial EBITDA; and
- Higher Returns on
Invested Capital from continued disciplined capital allocation
combined with a lower Cost of Capital.
We are introducing an updated Rolling Four
Quarter Outlook that captures almost a full year of anticipated
lower interest costs post a potential senior note refinancing
transaction. The Roughly Right Ranges of performance outcomes
through 2022 represent realistic estimates for our performance by
taking into account the current momentum in operating performance
trends while remaining conservative due to the relative unknown
trajectory of the Coronavirus Pandemic and the impact of the
current vaccination campaign on the death rate in the short
term. Despite the near to intermediate term unknowns,
Carriage has numerous known drivers of future High Performance
that, when combined with continued execution by our Managing
Partners and their employee teams, provide us with multiple
opportunities to achieve even higher results than outlined
below:
Performance Metric |
2019A |
2020A |
LTM |
2021 |
RFQO |
2022 |
3 Year Midpoint CAGR |
Total Revenue |
$274.1 |
$329.4 |
$348.6 |
$340 - $350 |
$340 - $350 |
$345 - $355 |
8.5% |
Total Field EBITDA |
$109.8 |
$141.9 |
$157.6 |
$150 - $155 |
$150 - $155 |
$155 - $160 |
12.8% |
Total Field EBITDA Margin |
40% |
43% |
45.2% |
44% - 45% |
44% - 45% |
44.5% - 45.5% |
4.0% |
Adjusted Consolidated EBITDA |
$76.6 |
$104.3 |
$116.1 |
$112 - $118 |
$112 - $118 |
$116 - $122 |
15.8% |
Adjusted Consolidated EBITDA Margin |
27.9% |
31.6% |
33.3% |
32% - 33% |
32% - 33% |
32.5% - 33.5% |
5.7% |
Adjusted Diluted EPS |
$1.25 |
$1.86 |
$2.34 |
$2.45 - $2.55 |
$2.45 - $2.55 |
$2.60 - $2.80 |
29.2% |
Adjusted Free Cash Flow |
$38.8 |
$70.0 |
$84.5 |
$65 - $69 |
$70 - $74 |
$72 - $76 |
24.0% |
Adjusted FCF Margin |
14.2% |
21.2% |
24.2% |
19% - 20% |
19.5% - 20.5% |
20% - 21% |
13.0% |
Total Debt Outstanding |
$534(1) |
$461.1 |
$439.4 |
$425 - $435 |
$400 - $412 |
$370 - $380 |
(11.1)% |
Total Debt to EBITDA Multiple |
7.0(2) |
4.4 |
3.8 |
3.8 - 4.0 |
3.5 - 3.7 |
3.2 - 3.4 |
N/A |
(1) January 3, 2020 acquisition of Oakmont and peak
debt. (2) Does not include proforma EBITDA for
acquisitions.
ADJUSTED FREE CASH FLOW AND LEVERAGE
RATIO
|
Three Months Ended March 31, |
|
2020 |
|
2021 |
Cash Flow Provided by Operating Activities |
$ |
13,546 |
|
|
|
$ |
26,811 |
|
|
Cash used for Maintenance
Capital Expenditures |
(1,556 |
) |
|
|
(2,140 |
) |
|
Free Cash Flow |
$ |
11,990 |
|
|
|
$ |
24,671 |
|
|
|
|
|
|
Plus: Incremental Special
Items: |
|
|
|
Acquisition Expenses |
114 |
|
|
|
— |
|
|
Severance and Separation
Costs |
288 |
|
|
|
1,575 |
|
|
Litigation Reserve |
75 |
|
|
|
— |
|
|
Natural Disaster and Pandemic
Costs |
140 |
|
|
|
894 |
|
|
Adjusted Free Cash Flow |
$ |
12,607 |
|
|
|
$ |
27,140 |
|
|
Our Adjusted Free Cash Flow in the first quarter
increased 115.3% to $27.1 million and our Adjusted Free Cash Flow
Margin, which is the amount of Free Cash Flow Carriage generates
for every dollar of Revenue, increased an incredible 1,180 basis
points to 28.1%. For the last twelve months our Adjusted Free
Cash Flow totaled $84.5 million and our Adjusted Free Cash Flow
Margin expanded to 24.2%.
When we made the decisions to acquire the four
large, high quality businesses at the end of 2019 and early 2020,
which increased our proforma Total Debt to Adjusted Consolidated
EBITDA Leverage Ratio to 6.0 times, we made a commitment to use our
internally generated Free Cash Flow to quickly reduce leverage and
eliminate the perceived ‘riskiness’ of Carriage's highly levered
balance sheet. Driven by our record operating performance
including Adjusted Consolidated EBITDA growth from $76.6 million in
2019 to $116.1 million over the past twelve months, we have rapidly
and hugely exceeded all of our original deleveraging
expectations.
Our Adjusted Consolidated EBITDA to Total Debt
Leverage Ratio fell to 3.8 times at the end of the first quarter, a
2.2 times decrease from January 3, 2020 and a 0.6 times decrease
since the end of 2020. The rapid and significant reduction in
our leverage ratio and total debt outstanding has increased our
financial flexibility and will enable Carriage to enter into what
we strongly believe will be a long term ‘sweet spot’ for
shareholder value creation capital allocation opportunities with
increasing returns on invested capital. With our high and
growing amount of Adjusted Free Cash Flow and commitment to remain
disciplined with our capital allocation decisions we expect the
majority of our capital allocation will be self-funded by our own
internally generated Free Cash Flow consistent with a policy of
maintaining a normalized Leverage Ratio of 4.0 times or below.
TRUST FUND INVESTMENT
PERFORMANCE
|
|
Q1 2021 |
|
12 months ended Q1 2021 |
|
Annualized 2009 - Q1 2021 |
CSV Discretionary Portfolio |
|
8.3 |
% |
|
62.0 |
% |
|
14.4 |
% |
S&P 500 |
|
6.2 |
% |
|
56.3 |
% |
|
15.2 |
% |
DJIA |
|
8.3 |
% |
|
53.8 |
% |
|
14.3 |
% |
NASDAQ |
|
3.0 |
% |
|
73.5 |
% |
|
20.4 |
% |
HY Bond Index |
|
0.8 |
% |
|
23.7 |
% |
|
10.9 |
% |
70/30
HY/S&P Bond |
|
2.4 |
% |
|
33.5 |
% |
|
12.4 |
% |
We have provided extensive detail of our Trust
Fund Portfolio Repositioning Strategy that we executed beginning
March 6, 2020 through our 2020 earnings press releases and Mel’s
recently released Shareholder Letter. The key components of
this Repositioning Strategy was to position the portfolio for
increased capital appreciation that would accrue to our underlying
preneed funeral and cemetery contracts during a long period of
time, and significantly increase the amount of recurring income
generated by the portfolio which would primarily benefit the
current earnings from our cemetery perpetual care trusts.
Most importantly the execution of this strategy was not a one year
or one time event, but rather to position our portfolio of three
trusts to generate a higher, recurring amount of Financial Revenue
and Financial EBITDA to Carriage over the next 3-5 years.
Our first quarter discretionary trust fund
portfolio performance was 8.3% compared to 6.2% for the S&P
500. Over the last year, which encompasses the entire period
since we began to execute our strategy, our total return was 62%
versus 56.3% for the S&P 500 and 33.5% for our 70/30 HY
Bond/S&P 500 benchmark. This performance in our trust
funds translated into a $1.45 million or 34.1% gain in Financial
Revenue and a $1.46 million or 38.2% increase in our Financial
EBITDA in the first quarter. The $5.7 million of Financial
Revenue in the first quarter should remain consistent throughout
2021, which aligns with our previously stated proforma estimates of
$22.0 - $23.0 million of Financial Revenue at a 94% - 95% Financial
EBITDA Margin,” concluded Mr. Brink.
Mr. Payne continued, “My Shareholder Letter
titled “A TALE OF HIGH PERFORMANCE TRANSFORMATION”
took 50 pages to describe the amazing story of Carriage’s
transformation from September 12, 2018 until now, including during
a “once in a lifetime” Coronavirus Pandemic that began in March
2020 and is continuing. The way we think about our individual
businesses and our company is the same as how we report our
performance results each quarter and year:
- A Ten Year Being The Best Vision with a Five
Year Strategy with “Roughly Right Ranges” of outcomes for each of
our five operating and financial reporting segments, plus our
Overhead segment;
- A continuously updated (quarterly) Rolling Four Quarter Outlook
and actual Rolling Four Quarter, Five Quarter and Five Year Trend
Reports that reflect how we are “trending over time” in each of our
major performance categories toward the Five Year “Roughly Right
Ranges” of Five Year Strategy Outcomes as we execute our three core
models (Standards Operating, 4E Leadership and Strategic
Acquisition).
All of these high performance ideas and concepts
are captured in the table on the previous page that shows
performance highlights from actual 2019, 2020 and Rolling Four
Quarters ending March 2021, together with our updated Four Quarter
Outlook ending March 2022 and Two Year Scenario for 2021 and
2022. As comprehensively covered in my Shareholder Letter,
Carriage has indeed reached the critical mass of Revenue, Adjusted
Consolidated EBITDA, Free Cash Flow and EPS that should only get
better over time,” concluded Mr. Payne.
CONFERENCE CALL AND INVESTOR RELATIONS
CONTACT
Carriage Services has scheduled a conference
call for tomorrow, April 22, 2021 at 9:30 a.m. Central time. To
participate in the call, please dial 866-516-3867 (conference
ID-8534109) and ask for the Carriage Services conference call. A
replay of the conference call will be available through April 27,
2021 and may be accessed by dialing 855-859-2056 (conference
ID-8534109). 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 March 31, |
|
2020 |
|
2021 |
|
% Change |
|
|
|
|
Same Store
Contracts |
|
|
|
Atneed Contracts |
7,539 |
|
9,295 |
|
23.3 |
% |
Preneed Contracts |
1,519 |
|
1,733 |
|
14.1 |
% |
Total Same Store Funeral
Contracts |
9,058 |
|
11,028 |
|
21.7 |
% |
Acquisition
Contracts |
|
|
|
Atneed Contracts |
1,606 |
|
1,861 |
|
15.9 |
% |
Preneed Contracts |
127 |
|
141 |
|
11.0 |
% |
Total Acquisition Funeral
Contracts |
1,733 |
|
2,002 |
|
15.5 |
% |
Total Funeral
Contracts |
10,791 |
|
13,030 |
|
20.7 |
% |
|
|
|
|
Funeral Operating
Revenue |
|
|
|
Same Store Revenue |
$ |
46,696 |
|
$ |
56,683 |
|
21.4 |
% |
Acquisition Revenue |
8,885 |
|
10,139 |
|
14.1 |
% |
Total Funeral
Operating Revenue |
$ |
55,581 |
|
$ |
66,822 |
|
20.2 |
% |
|
|
|
|
Cemetery Operating
Revenue |
|
|
|
Same Store Revenue |
$ |
10,907 |
|
$ |
14,621 |
|
34.1 |
% |
Acquisition Revenue |
2,799 |
|
6,980 |
|
149.4 |
% |
Total Cemetery
Operating Revenue |
$ |
13,706 |
|
$ |
21,601 |
|
57.6 |
% |
|
|
|
|
Total Financial
Revenue |
$ |
4,237 |
|
$ |
5,682 |
|
34.1 |
% |
|
|
|
|
Ancillary
Revenue |
$ |
1,151 |
|
$ |
1,207 |
|
4.9 |
% |
|
|
|
|
Total Divested/Planned
Divested Revenue |
$ |
2,815 |
|
$ |
1,325 |
|
(52.9 |
%) |
|
|
|
|
Total
Revenue |
$ |
77,490 |
|
$ |
96,637 |
|
24.7 |
% |
|
|
|
|
Field
EBITDA |
|
|
|
Same Store Funeral Field EBITDA |
$ |
18,062 |
|
$ |
25,812 |
|
42.9 |
% |
Same Store Funeral Field EBITDA Margin |
38.7 |
% |
45.5 |
% |
680 bp |
Acquisition Funeral Field EBITDA |
3,247 |
|
4,467 |
|
37.6 |
% |
Acquisition Funeral Field EBITDA Margin |
36.5 |
% |
44.1 |
% |
760 bp |
Total Funeral
Field EBITDA |
$ |
21,309 |
|
$ |
30,279 |
|
42.1 |
% |
Total Funeral
Field EBITDA Margin |
38.3 |
% |
45.3 |
% |
700 bp |
|
|
|
|
Same Store Cemetery Field EBITDA |
$ |
3,167 |
|
$ |
5,711 |
|
80.3 |
% |
Same Store Cemetery Field EBITDA Margin |
29.0 |
% |
39.1 |
% |
1,010 bp |
Acquisition Cemetery Field EBITDA |
827 |
|
4,102 |
|
396.0 |
% |
Acquisition Cemetery Field EBITDA Margin |
29.5 |
% |
58.8 |
% |
2,930 bp |
Total Cemetery
Field EBITDA |
$ |
3,994 |
|
$ |
9,813 |
|
145.7 |
% |
Total Cemetery
Field EBITDA Margin |
29.1 |
% |
45.4 |
% |
1,630 bp |
|
|
|
|
Total Financial
EBITDA |
$ |
3,820 |
|
$ |
5,281 |
|
38.2 |
% |
Total Financial EBITDA
Margin |
90.2 |
% |
92.9 |
% |
270 bp |
|
|
|
|
Ancillary
EBITDA |
$ |
295 |
|
$ |
242 |
|
(18.0 |
%) |
Ancillary EBITDA
Margin |
25.6 |
% |
20.0 |
% |
(560 bp) |
|
|
|
|
Total Divested/Planned
Divested EBITDA |
$ |
676 |
|
$ |
172 |
|
(74.6 |
%) |
Total Divested/Planned
Divested EBITDA Margin |
24.0 |
% |
13.0 |
% |
(1,100 bp) |
|
|
|
|
Total Field
EBITDA |
$ |
30,094 |
|
$ |
45,787 |
|
52.1 |
% |
Total Field EBITDA
Margin |
38.8 |
% |
47.4 |
% |
860 bp |
|
OPERATING AND FINANCIAL TREND REPORT |
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) |
|
|
|
|
|
Three Months Ended March 31, |
|
2020 |
|
2021 |
|
% Change |
|
|
|
|
Overhead |
|
|
|
Total Variable Overhead |
$ |
1,636 |
|
$ |
6,900 |
|
321.8 |
% |
Total Regional Fixed Overhead |
1,038 |
|
1,199 |
|
15.5 |
% |
Total Corporate Fixed Overhead |
5,197 |
|
5,500 |
|
5.8 |
% |
Total
Overhead |
$ |
7,871 |
|
$ |
13,599 |
|
72.8 |
% |
Overhead as a
percentage of Revenue |
10.2 |
% |
14.1 |
% |
390 bp |
|
|
|
|
Consolidated
EBITDA |
$ |
22,223 |
|
$ |
32,188 |
|
44.8 |
% |
Consolidated EBITDA
Margin |
28.7 |
% |
33.3 |
% |
460 bp |
|
|
|
|
Other Expenses and
Interest |
|
|
|
Depreciation & Amortization |
$ |
4,549 |
|
$ |
4,942 |
|
|
Non-Cash Stock Compensation |
831 |
|
1,308 |
|
|
Interest Expense |
8,428 |
|
7,584 |
|
|
Accretion of Discount on Convertible Subordinated Notes |
65 |
|
20 |
|
|
Gain on Divestitures |
— |
|
(308 |
) |
|
Impairment of Goodwill and Other Intangibles |
14,693 |
|
— |
|
|
Other, Net |
4 |
|
68 |
|
|
Pre-Tax Income
(Loss) |
$ |
(6,347 |
) |
$ |
18,574 |
|
|
Net Tax Expense
(Benefit) |
$ |
(2,150 |
) |
$ |
5,641 |
|
|
GAAP Net Income
(Loss) |
$ |
(4,197 |
) |
$ |
12,933 |
|
(408.1 |
%) |
|
|
|
|
Special Items, Net of
Tax, except for ** |
|
|
|
Acquisition Expenses |
$ |
90 |
|
$ |
— |
|
|
Severance and Separation Costs |
228 |
|
1,244 |
|
|
Accretion of Discount on Convertible Subordinated Notes ** |
65 |
|
20 |
|
|
Gain on Divestitures |
— |
|
(213 |
) |
|
Net Impact of Impairment of Goodwill and Other Intangibles |
9,757 |
|
— |
|
|
Litigation Reserve |
59 |
|
— |
|
|
Natural Disaster and Pandemic Costs |
111 |
|
706 |
|
|
Adjusted Net
Income |
$ |
6,113 |
|
$ |
14,690 |
|
140.3 |
% |
Adjusted Net Income
Margin |
7.9 |
% |
15.2 |
% |
730 bp |
|
|
|
|
Adjusted Basic Earnings Per
Share |
$ |
0.35 |
|
$ |
0.82 |
|
134.3 |
% |
Adjusted Diluted Earnings Per
Share |
$ |
0.35 |
|
$ |
0.81 |
|
131.4 |
% |
|
|
|
|
GAAP Basic Earnings (Loss) Per
Share |
$ |
(0.23 |
) |
$ |
0.72 |
|
413.0 |
% |
GAAP Diluted Earnings (Loss)
Per Share |
$ |
(0.23 |
) |
$ |
0.71 |
|
408.7 |
% |
|
|
|
|
Weighted Average Basic Shares
Outstanding |
17,805 |
|
17,965 |
|
|
Weighted Average Diluted
Shares Outstanding |
17,805 |
|
18,199 |
|
|
|
|
|
|
Reconciliation to
Adjusted Consolidated EBITDA |
|
|
|
Consolidated
EBITDA |
$ |
22,223 |
|
$ |
32,188 |
|
44.8 |
% |
Acquisition Expenses |
114 |
|
— |
|
|
Severance and Separation Costs |
288 |
|
1,575 |
|
|
Litigation Reserve |
75 |
|
— |
|
|
Natural Disaster and Pandemic Costs |
140 |
|
894 |
|
|
Adjusted Consolidated
EBITDA |
$ |
22,840 |
|
$ |
34,657 |
|
51.7 |
% |
Adjusted Consolidated
EBITDA Margin |
29.5 |
% |
35.9 |
% |
640 bp |
CARRIAGE SERVICES,
INC.CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
|
|
|
(unaudited) |
|
December 31, 2020 |
|
March 31, 2021 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
889 |
|
|
|
$ |
406 |
|
|
Accounts receivable, net |
25,103 |
|
|
|
25,585 |
|
|
Inventories |
7,259 |
|
|
|
7,386 |
|
|
Prepaid and other current assets |
2,076 |
|
|
|
2,076 |
|
|
Total current assets |
35,327 |
|
|
|
35,453 |
|
|
Preneed cemetery trust
investments |
86,604 |
|
|
|
92,363 |
|
|
Preneed funeral trust
investments |
101,235 |
|
|
|
105,201 |
|
|
Preneed cemetery receivables,
net |
21,081 |
|
|
|
21,533 |
|
|
Receivables from preneed
trusts, net |
16,844 |
|
|
|
16,976 |
|
|
Property, plant and equipment,
net |
269,051 |
|
|
|
267,055 |
|
|
Cemetery property, net |
101,134 |
|
|
|
101,109 |
|
|
Goodwill |
392,978 |
|
|
|
391,972 |
|
|
Intangible and other
non-current assets, net |
29,542 |
|
|
|
29,502 |
|
|
Operating lease right-of-use
assets |
21,201 |
|
|
|
20,747 |
|
|
Cemetery perpetual care trust
investments |
70,828 |
|
|
|
75,815 |
|
|
Total assets |
$ |
1,145,825 |
|
|
|
$ |
1,157,726 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Current portion of debt and lease obligations |
$ |
3,432 |
|
|
|
$ |
3,301 |
|
|
Accounts payable |
11,259 |
|
|
|
9,543 |
|
|
Accrued and other liabilities |
31,138 |
|
|
|
39,599 |
|
|
Convertible subordinated notes due 2021 |
2,538 |
|
|
|
— |
|
|
Total current liabilities |
48,367 |
|
|
|
52,443 |
|
|
Acquisition debt, net of
current portion |
4,482 |
|
|
|
4,442 |
|
|
Credit facility |
46,064 |
|
|
|
27,282 |
|
|
Senior notes due 2026 |
395,968 |
|
|
|
396,122 |
|
|
Obligations under finance
leases, net of current portion |
5,531 |
|
|
|
5,445 |
|
|
Obligations under operating
leases, net of current portion |
20,302 |
|
|
|
19,876 |
|
|
Deferred preneed cemetery
revenue |
47,846 |
|
|
|
48,840 |
|
|
Deferred preneed funeral
revenue |
27,992 |
|
|
|
28,181 |
|
|
Deferred tax liability |
46,477 |
|
|
|
47,991 |
|
|
Other long-term
liabilities |
4,748 |
|
|
|
2,677 |
|
|
Deferred preneed cemetery
receipts held in trust |
86,604 |
|
|
|
92,363 |
|
|
Deferred preneed funeral
receipts held in trust |
101,235 |
|
|
|
105,201 |
|
|
Care trusts’ corpus |
69,707 |
|
|
|
75,360 |
|
|
Total liabilities |
905,323 |
|
|
|
906,223 |
|
|
Commitments and
contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Common stock |
260 |
|
|
|
261 |
|
|
Additional paid-in capital |
239,989 |
|
|
|
238,056 |
|
|
Retained earnings |
102,303 |
|
|
|
115,236 |
|
|
Treasury stock |
(102,050 |
) |
|
|
(102,050 |
) |
|
Total stockholders’ equity |
|
240,502 |
|
|
|
|
251,503 |
|
|
Total liabilities and stockholders’ equity |
$ |
1,145,825 |
|
|
|
$ |
1,157,726 |
|
|
CARRIAGE SERVICES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(unaudited and in thousands, except per
share data)
|
Three Months Ended March 31, |
|
2020 |
|
2021 |
|
|
|
|
Revenue: |
|
|
|
Service revenue |
$ |
40,732 |
|
|
|
$ |
47,757 |
|
|
Property and merchandise revenue |
31,271 |
|
|
|
41,896 |
|
|
Other revenue |
5,487 |
|
|
|
6,984 |
|
|
|
77,490 |
|
|
|
96,637 |
|
|
Field costs and expenses: |
|
|
|
Cost of service |
21,057 |
|
|
|
20,967 |
|
|
Cost of merchandise |
25,063 |
|
|
|
28,520 |
|
|
Cemetery property amortization |
877 |
|
|
|
1,517 |
|
|
Field depreciation expense |
3,290 |
|
|
|
3,136 |
|
|
Regional and unallocated funeral and cemetery costs |
2,756 |
|
|
|
6,073 |
|
|
Other expenses |
1,276 |
|
|
|
1,363 |
|
|
|
54,319 |
|
|
|
61,576 |
|
|
Gross profit |
23,171 |
|
|
|
35,061 |
|
|
|
|
|
|
Corporate costs and
expenses: |
|
|
|
General, administrative and other |
5,946 |
|
|
|
8,834 |
|
|
Home office depreciation and amortization |
382 |
|
|
|
289 |
|
|
Net loss (gain) on divestitures
and impairment charges |
14,693 |
|
|
|
(308 |
) |
|
Operating income |
2,150 |
|
|
|
26,246 |
|
|
|
|
|
|
Interest expense |
(8,428 |
) |
|
|
(7,584 |
) |
|
Accretion of discount on
convertible subordinated notes |
(65 |
) |
|
|
(20 |
) |
|
Other, net |
(4 |
) |
|
|
(68 |
) |
|
Income (loss) before income
taxes |
(6,347 |
) |
|
|
18,574 |
|
|
Expense (benefit) for income
taxes |
2,136 |
|
|
|
(5,758 |
) |
|
Tax adjustment related to certain
discrete items |
14 |
|
|
|
117 |
|
|
Total expense (benefit) for
income taxes |
2,150 |
|
|
|
(5,641 |
) |
|
Net income (loss) |
$ |
(4,197 |
) |
|
|
$ |
12,933 |
|
|
|
|
|
|
Basic earnings (loss) per
common share: |
$ |
(0.23 |
) |
|
|
$ |
0.72 |
|
|
Diluted earnings (loss) per
common share: |
$ |
(0.23 |
) |
|
|
$ |
0.71 |
|
|
|
|
|
|
Dividends declared per common
share: |
$ |
0.075 |
|
|
|
$ |
0.1000 |
|
|
Weighted average number of
common and common equivalent shares outstanding: |
|
|
|
Basic |
17,805 |
|
|
|
17,965 |
|
|
Diluted |
17,805 |
|
|
|
18,199 |
|
|
CARRIAGE SERVICES,
INC.CONSOLIDATED STATEMENTS OF CASH
FLOWS(unaudited and in thousands)
|
Three Months Ended March 31, |
|
2020 |
|
2021 |
Cash flows from operating
activities: |
|
|
|
Net income (loss) |
$ |
(4,197 |
) |
|
|
$ |
12,933 |
|
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Depreciation and amortization |
4,549 |
|
|
|
4,942 |
|
|
Provision for bad debt and credit losses |
690 |
|
|
|
588 |
|
|
Stock-based compensation expense |
831 |
|
|
|
1,307 |
|
|
Deferred income tax expense |
3,596 |
|
|
|
1,514 |
|
|
Amortization of deferred financing costs |
200 |
|
|
|
194 |
|
|
Amortization of capitalized commissions and non-compete
agreements |
328 |
|
|
|
320 |
|
|
Accretion of discount on convertible subordinated notes |
65 |
|
|
|
20 |
|
|
Accretion of discount, net of debt premium on senior notes |
75 |
|
|
|
80 |
|
|
Net loss (gain) on divestitures and impairment charges |
14,693 |
|
|
|
(308 |
) |
|
Net loss on disposal of other assets |
60 |
|
|
|
328 |
|
|
Other |
19 |
|
|
|
— |
|
|
Changes in operating assets and
liabilities that provided (required) cash: |
|
|
|
Accounts and preneed receivables |
2,179 |
|
|
|
(1,521 |
) |
|
Inventories, prepaid and other current assets |
(8,748 |
) |
|
|
(153 |
) |
|
Intangible and other non-current assets |
(290 |
) |
|
|
(291 |
) |
|
Preneed funeral and cemetery trust investments |
(2,890 |
) |
|
|
(2,952 |
) |
|
Accounts payable |
(2,133 |
) |
|
|
(1,712 |
) |
|
Accrued and other liabilities |
(114 |
) |
|
|
6,853 |
|
|
Deferred preneed funeral and cemetery revenue |
1,080 |
|
|
|
1,183 |
|
|
Deferred preneed funeral and cemetery receipts held in trust |
3,553 |
|
|
|
3,486 |
|
|
Net cash provided by operating activities |
13,546 |
|
|
|
26,811 |
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
Acquisition of businesses |
(28,000 |
) |
|
|
— |
|
|
Acquisition of real estate |
— |
|
|
|
(350 |
) |
|
Proceeds from divestitures and sale of other assets |
78 |
|
|
|
2,800 |
|
|
Capital expenditures |
(2,738 |
) |
|
|
(4,347 |
) |
|
Net cash used in investing activities |
(30,660 |
) |
|
|
(1,897 |
) |
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
Borrowings from the credit facility |
63,200 |
|
|
|
15,168 |
|
|
Payments against the credit facility |
(33,000 |
) |
|
|
(34,068 |
) |
|
Repurchase of the convertible subordinated notes due 2021 |
— |
|
|
|
(3,980 |
) |
|
Payment of debt issuance and transaction costs |
(14 |
) |
|
|
(7 |
) |
|
Payments on acquisition debt and obligations under finance
leases |
(487 |
) |
|
|
(233 |
) |
|
Payments on contingent consideration recorded at acquisition
date |
(169 |
) |
|
|
(461 |
) |
|
Proceeds from the exercise of stock options and employee stock
purchase plan contributions |
361 |
|
|
|
625 |
|
|
Taxes paid on restricted stock vestings and exercises of stock
options |
(234 |
) |
|
|
(642 |
) |
|
Dividends paid on common stock |
(1,339 |
) |
|
|
(1,799 |
) |
|
Net cash provided (used in) by financing activities |
28,318 |
|
|
|
(25,397 |
) |
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
11,204 |
|
|
|
(483 |
) |
|
Cash and cash equivalents at
beginning of year |
716 |
|
|
|
889 |
|
|
Cash and cash equivalents at end
of year |
$ |
11,920 |
|
|
|
$ |
406 |
|
|
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. Special Items are typically taxed at the federal
statutory rate of 21.0%, except for the tax adjustment related to
certain discrete items and the accretion of discount on Convertible
Subordinated Notes, as this is a non-tax deductible item. The net
loss (gain) on divestitures and other costs and the net impact of
impairment of goodwill and other intangibles are net of the
operating tax rate in the respective quarter.
- 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.
- 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, Convertible Subordinated Notes due 2021 and
Senior Notes due 2026, acquisition debt and finance leases.
- Total Debt to EBITDA Multiple 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 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):
|
|
1ST QTR 2020 |
|
2ND QTR 2020 |
|
3RD QTR 2020 |
|
4TH QTR 2020 |
|
1ST QTR 2021 |
Net Income (Loss) |
|
$ |
(4,197 |
) |
|
|
$ |
6,397 |
|
|
$ |
5,525 |
|
|
|
$ |
8,365 |
|
|
|
$ |
12,933 |
|
|
Special Items, Net of
Tax(1) |
|
|
|
|
|
|
|
|
|
|
Acquisition Expenses |
|
90 |
|
|
|
36 |
|
|
— |
|
|
|
(135 |
) |
|
|
— |
|
|
Severance and Separation Costs |
|
228 |
|
|
|
217 |
|
|
— |
|
|
|
— |
|
|
|
1,244 |
|
|
Performance Awards Cancellation and Exchange |
|
— |
|
|
|
56 |
|
|
84 |
|
|
|
84 |
|
|
|
— |
|
|
Accretion of Discount on Convertible Subordinated Notes(1) |
|
65 |
|
|
|
66 |
|
|
69 |
|
|
|
16 |
|
|
|
20 |
|
|
Net Loss (Gain) on Divestitures and Other Costs(2) |
|
— |
|
|
|
— |
|
|
3,245 |
|
|
|
1,317 |
|
|
|
(213 |
) |
|
Net Impact of Impairment of Goodwill and Other Intangibles(2) |
|
9,757 |
|
|
|
51 |
|
|
— |
|
|
|
124 |
|
|
|
— |
|
|
Litigation Reserve |
|
59 |
|
|
|
154 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Natural Disaster and Pandemic Costs |
|
111 |
|
|
|
657 |
|
|
268 |
|
|
|
250 |
|
|
|
706 |
|
|
Other Special Items |
|
— |
|
|
|
371 |
|
|
(47 |
) |
|
|
— |
|
|
|
— |
|
|
Tax Adjustment Related to Certain Discrete Items (1) |
|
— |
|
|
|
— |
|
|
— |
|
|
|
400 |
|
|
|
— |
|
|
Adjusted Net Income |
|
$ |
6,113 |
|
|
|
$ |
8,005 |
|
|
$ |
9,144 |
|
|
|
$ |
10,421 |
|
|
|
$ |
14,690 |
|
|
(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, the Tax
Adjustment Related to Certain Discrete Items, the Net Loss (Gain)
on Divestitures and Other Costs and the Net Impact of Impairment of
Goodwill and Other Intangibles (discussed below). |
(2 |
) |
The Net Loss (Gain) on Divestitures and Other Costs Special Item
and the Net Impact of Impairment of Goodwill and Other Intangibles
Special Item are net of the operating tax rate in the respective
quarter. |
Reconciliation of Net Income (Loss) to
Consolidated EBITDA, Adjusted Consolidated EBITDA (in thousands)
and Adjusted Consolidated EBITDA Margin:
|
|
1ST QTR 2020 |
|
2ND QTR 2020 |
|
3RD QTR 2020 |
|
4TH QTR 2020 |
|
1ST QTR 2021 |
Net Income (Loss) |
|
$ |
(4,197 |
) |
|
|
$ |
6,397 |
|
|
$ |
5,525 |
|
|
|
$ |
8,365 |
|
|
|
$ |
12,933 |
|
|
Total Expense (Benefit) for
Income Taxes |
|
(2,150 |
) |
|
|
3,449 |
|
|
2,859 |
|
|
|
4,394 |
|
|
|
5,641 |
|
|
Income (Loss) Before Income
Taxes |
|
$ |
(6,347 |
) |
|
|
$ |
9,846 |
|
|
$ |
8,384 |
|
|
|
$ |
12,759 |
|
|
|
$ |
18,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
8,428 |
|
|
|
8,352 |
|
|
8,007 |
|
|
|
7,728 |
|
|
|
7,584 |
|
|
Accretion of Discount on
Convertible Subordinated Notes |
|
65 |
|
|
|
66 |
|
|
69 |
|
|
|
16 |
|
|
|
20 |
|
|
Non-Cash Stock
Compensation |
|
831 |
|
|
|
715 |
|
|
927 |
|
|
|
897 |
|
|
|
1,308 |
|
|
Depreciation &
Amortization |
|
4,549 |
|
|
|
4,698 |
|
|
5,033 |
|
|
|
5,109 |
|
|
|
4,942 |
|
|
Net Loss (Gain) on
Divestitures |
|
— |
|
|
|
— |
|
|
4,917 |
|
|
|
1,832 |
|
|
|
(308 |
) |
|
Impairment of Goodwill and
Other Intangibles |
|
14,693 |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Other, Net |
|
4 |
|
|
|
2 |
|
|
34 |
|
|
|
(186 |
) |
|
|
68 |
|
|
Consolidated EBITDA |
|
$ |
22,223 |
|
|
|
$ |
23,679 |
|
|
$ |
27,371 |
|
|
|
$ |
28,155 |
|
|
|
$ |
32,188 |
|
|
Adjusted For: |
|
|
|
|
|
|
|
|
|
|
Acquisition Expenses |
|
114 |
|
|
|
45 |
|
|
— |
|
|
|
(170 |
) |
|
|
— |
|
|
Severance and Separation Costs |
|
288 |
|
|
|
275 |
|
|
— |
|
|
|
— |
|
|
|
1,575 |
|
|
Litigation Reserve |
|
75 |
|
|
|
195 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Natural Disaster and Pandemic Costs |
|
140 |
|
|
|
832 |
|
|
340 |
|
|
|
315 |
|
|
|
894 |
|
|
Other Special Items |
|
— |
|
|
|
418 |
|
|
(45 |
) |
|
|
— |
|
|
|
— |
|
|
Adjusted Consolidated
EBITDA |
|
$ |
22,840 |
|
|
|
$ |
25,444 |
|
|
$ |
27,666 |
|
|
|
$ |
28,300 |
|
|
|
$ |
34,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
77,490 |
|
|
|
$ |
77,477 |
|
|
$ |
84,393 |
|
|
|
$ |
90,088 |
|
|
|
$ |
96,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Consolidated EBITDA
Margin |
|
|
29.5 |
% |
|
|
32.8 |
% |
|
|
32.8 |
% |
|
|
|
31.4 |
% |
|
|
|
35.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Funeral and Cemetery
Operating Income to Funeral and Cemetery Field EBITDA (in
thousands):
|
|
1ST QTR 2020 |
|
2ND QTR 2020 |
|
3RD QTR 2020 |
|
4TH QTR 2020 |
|
1ST QTR 2021 |
Funeral Operating Income (GAAP) |
|
$ |
4,311 |
|
|
|
$ |
19,869 |
|
|
|
$ |
13,975 |
|
|
|
$ |
19,467 |
|
|
|
$ |
25,876 |
|
|
Depreciation &
Amortization |
|
2,944 |
|
|
|
2,895 |
|
|
|
2,885 |
|
|
|
2,862 |
|
|
|
2,769 |
|
|
Regional & Unallocated
Costs |
|
2,326 |
|
|
|
2,788 |
|
|
|
3,859 |
|
|
|
5,375 |
|
|
|
4,569 |
|
|
Impairment of Goodwill and
Other Intangibles |
|
14,693 |
|
|
|
— |
|
|
|
4,917 |
|
|
|
1,832 |
|
|
|
(308 |
) |
|
Less: |
|
|
|
|
|
|
|
|
|
|
Funeral Financial EBITDA |
|
(1,997 |
) |
|
|
(1,921 |
) |
|
|
(2,119 |
) |
|
|
(2,150 |
) |
|
|
(2,251 |
) |
|
Ancillary EBITDA |
|
(295 |
) |
|
|
(321 |
) |
|
|
(292 |
) |
|
|
(278 |
) |
|
|
(242 |
) |
|
Funeral Divested/Planned Divested EBITDA |
|
(673 |
) |
|
|
(830 |
) |
|
|
(378 |
) |
|
|
(310 |
) |
|
|
(134 |
) |
|
Funeral Field EBITDA |
|
$ |
21,309 |
|
|
|
$ |
22,480 |
|
|
|
$ |
22,847 |
|
|
|
$ |
26,798 |
|
|
|
$ |
30,279 |
|
|
|
|
1ST QTR 2020 |
|
2ND QTR 2020 |
|
3RD QTR 2020 |
|
4TH QTR 2020 |
|
1ST QTR 2021 |
Cemetery Operating Income (GAAP) |
|
$ |
4,167 |
|
|
|
$ |
5,291 |
|
|
|
$ |
8,982 |
|
|
|
$ |
8,419 |
|
|
|
$ |
9,493 |
|
|
Depreciation &
Amortization |
|
1,223 |
|
|
|
1,449 |
|
|
|
1,819 |
|
|
|
1,885 |
|
|
|
1,884 |
|
|
Regional & Unallocated
Costs |
|
430 |
|
|
|
929 |
|
|
|
872 |
|
|
|
1,478 |
|
|
|
1,504 |
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
Cemetery Financial EBITDA |
|
(1,823 |
) |
|
|
(2,535 |
) |
|
|
(3,123 |
) |
|
|
(2,737 |
) |
|
|
(3,030 |
) |
|
Cemetery Divested/Planned Divested EBITDA |
|
(3 |
) |
|
|
(44 |
) |
|
|
(40 |
) |
|
|
(42 |
) |
|
|
(38 |
) |
|
Cemetery Field EBITDA |
|
$ |
3,994 |
|
|
|
$ |
5,090 |
|
|
|
$ |
8,510 |
|
|
|
$ |
9,003 |
|
|
|
$ |
9,813 |
|
|
Components of Total Field EBITDA (in
thousands):
|
|
1ST QTR 2020 |
|
2ND QTR 2020 |
|
3RD QTR 2020 |
|
4TH QTR 2020 |
|
1ST QTR 2021 |
Funeral Field EBITDA |
|
$ |
21,309 |
|
|
$ |
22,480 |
|
|
$ |
22,847 |
|
|
$ |
26,798 |
|
|
$ |
30,279 |
|
Cemetery Field EBITDA |
|
3,994 |
|
|
5,090 |
|
|
8,510 |
|
|
9,003 |
|
|
9,813 |
|
Funeral Financial EBITDA |
|
1,997 |
|
|
1,921 |
|
|
2,119 |
|
|
2,150 |
|
|
2,251 |
|
Cemetery Financial EBITDA |
|
1,823 |
|
|
2,535 |
|
|
3,123 |
|
|
2,737 |
|
|
3,030 |
|
Ancillary EBITDA |
|
295 |
|
|
321 |
|
|
292 |
|
|
278 |
|
|
242 |
|
Divested/Planned Divested
EBITDA |
|
676 |
|
|
874 |
|
|
418 |
|
|
352 |
|
|
172 |
|
Total Field EBITDA |
|
$ |
30,094 |
|
|
$ |
33,221 |
|
|
$ |
37,309 |
|
|
$ |
41,318 |
|
|
$ |
45,787 |
|
Reconciliation of GAAP
Basic Earnings (Loss) Per Share to Adjusted Basic Earnings Per
Share:
|
|
1ST QTR 2020 |
|
2ND QTR 2020 |
|
3RD QTR 2020 |
|
4TH QTR 2020 |
|
1ST QTR 2021 |
GAAP Basic Earnings (Loss) Per Share |
|
$ |
(0.23 |
) |
|
|
$ |
0.36 |
|
|
$ |
0.31 |
|
|
$ |
0.47 |
|
|
$ |
0.72 |
|
Special Items |
|
0.58 |
|
|
|
0.09 |
|
|
0.20 |
|
|
0.11 |
|
|
0.10 |
|
Adjusted Basic Earnings Per
Share |
|
$ |
0.35 |
|
|
|
$ |
0.45 |
|
|
$ |
0.51 |
|
|
$ |
0.58 |
|
|
$ |
0.82 |
|
Reconciliation of GAAP Diluted Earnings
(Loss) Per Share to Adjusted Diluted Earnings Per
Share:
|
|
1ST QTR 2020 |
|
2ND QTR 2020 |
|
3RD QTR 2020 |
|
4TH QTR 2020 |
|
1ST QTR 2021 |
GAAP Diluted Earnings (Loss) Per Share |
|
$ |
(0.23 |
) |
|
|
$ |
0.36 |
|
|
$ |
0.31 |
|
|
$ |
0.46 |
|
|
$ |
0.71 |
|
Special Items |
|
0.58 |
|
|
|
0.09 |
|
|
0.20 |
|
|
0.11 |
|
|
0.10 |
|
Adjusted Diluted Earnings Per
Share |
|
$ |
0.35 |
|
|
|
$ |
0.45 |
|
|
$ |
0.51 |
|
|
$ |
0.57 |
|
|
$ |
0.81 |
|
Reconciliation of Cash flow provided by
operations to Adjusted Free Cash Flow (in thousands) and Adjusted
Free Cash Flow Margin:
|
|
1ST QTR 2020 |
|
2ND QTR 2020 |
|
3RD QTR 2020 |
|
4TH QTR 2020 |
|
1ST QTR 2021 |
Cash Flow Provided by Operating Activities |
|
$ |
13,546 |
|
|
|
$ |
17,455 |
|
|
|
$ |
36,821 |
|
|
|
$ |
15,093 |
|
|
|
$ |
26,811 |
|
|
Cash used for Maintenance
Capital Expenditures |
|
(1,556 |
) |
|
|
(1,342 |
) |
|
|
(2,496 |
) |
|
|
(3,368 |
) |
|
|
(2,140 |
) |
|
Free Cash Flow |
|
$ |
11,990 |
|
|
|
$ |
16,113 |
|
|
|
$ |
34,325 |
|
|
|
$ |
11,725 |
|
|
|
$ |
24,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Incremental Special
Items: |
|
|
|
|
|
|
|
|
|
|
Federal Tax Refund |
|
— |
|
|
|
— |
|
|
|
(7,012 |
) |
|
|
— |
|
|
|
— |
|
|
Acquisition Expenses |
|
114 |
|
|
|
45 |
|
|
|
— |
|
|
|
(170 |
) |
|
|
— |
|
|
Severance and Separation
Costs |
|
288 |
|
|
|
275 |
|
|
|
— |
|
|
|
— |
|
|
|
1,575 |
|
|
Litigation Reserve |
|
75 |
|
|
|
195 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Natural Disaster and Pandemic
Costs |
|
140 |
|
|
|
832 |
|
|
|
340 |
|
|
|
315 |
|
|
|
894 |
|
|
Other Special Items |
|
|
|
418 |
|
|
|
(45 |
) |
|
|
— |
|
|
|
— |
|
|
Adjusted Free Cash Flow |
|
$ |
12,607 |
|
|
|
$ |
17,878 |
|
|
|
$ |
27,608 |
|
|
|
$ |
11,870 |
|
|
|
$ |
27,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
77,490 |
|
|
|
$ |
77,477 |
|
|
|
$ |
84,393 |
|
|
|
$ |
90,088 |
|
|
|
$ |
96,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow
Margin |
|
|
16.3 |
% |
|
|
|
23.1 |
% |
|
|
|
32.7 |
% |
|
|
|
13.2 |
% |
|
|
|
28.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Actual Results (years
ended December 31, 2019 and 2020), Two Year Performance Scenario
(estimated years ended December 31, 2021 and 2022), Last Twelve
Months (ended March 31, 2021) and Rolling Four Quarter Outlook
(ended March 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:
|
2019A |
|
2020A |
|
LTM |
|
2021E |
|
RFQO |
|
2022E |
Net Income |
$ |
14,533 |
|
|
$ |
16,090 |
|
|
$ |
33,220 |
|
|
$ |
45,000 |
|
|
$ |
45,000 |
|
|
$ |
50,000 |
|
Total Tax Expense |
7,883 |
|
|
8,552 |
|
|
16,343 |
|
|
19,000 |
|
|
19,000 |
|
|
21,000 |
|
Pretax Income |
$ |
22,416 |
|
|
$ |
24,642 |
|
|
$ |
49,563 |
|
|
$ |
64,000 |
|
|
$ |
64,000 |
|
|
$ |
71,000 |
|
Net Interest Expense,
including Accretion of Discount on Convertible Subordinated
Notes |
25,763 |
|
|
32,731 |
|
|
31,842 |
|
|
24,000 |
|
|
24,000 |
|
|
19,800 |
|
Depreciation &
Amortization, including Non-cash Stock Compensation and Other,
Net |
19,188 |
|
|
22,613 |
|
|
23,536 |
|
|
24,000 |
|
|
24,000 |
|
|
25,200 |
|
Net Loss on Divestitures and
Impairment Charges |
4,846 |
|
|
21,442 |
|
|
6,452 |
|
|
— |
|
|
— |
|
|
— |
|
Consolidated EBITDA |
$ |
72,213 |
|
|
$ |
101,428 |
|
|
$ |
111,393 |
|
|
$ |
112,000 |
|
|
$ |
112,000 |
|
|
$ |
116,000 |
|
Overhead |
37,554 |
|
|
40,514 |
|
|
46,242 |
|
|
43,000 |
|
|
43,000 |
|
|
44,000 |
|
Total Field EBITDA |
$ |
109,767 |
|
|
$ |
141,942 |
|
|
$ |
157,635 |
|
|
$ |
155,000 |
|
|
$ |
155,000 |
|
|
$ |
160,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
274,107 |
|
|
$ |
329,448 |
|
|
$ |
348,595 |
|
|
$ |
345,000 |
|
|
$ |
345,000 |
|
|
$ |
352,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Field EBITDA Margin |
40.0 |
% |
|
43.1 |
% |
|
45.2 |
% |
|
44.9 |
% |
|
44.9 |
% |
|
45.5 |
% |
Reconciliation of Consolidated EBITDA to
Adjusted Consolidated EBITDA (in thousands) and Adjusted
Consolidated EBITDA Margin:
|
2019A |
|
2020A |
|
LTM |
|
2021E |
|
RFQO |
|
2022E |
Consolidated EBITDA |
$ |
72,213 |
|
|
$ |
101,428 |
|
|
$ |
111,393 |
|
|
$ |
112,000 |
|
|
$ |
112,000 |
|
|
$ |
116,000 |
|
Special Items |
4,374 |
|
|
2,822 |
|
|
4,674 |
|
|
2,469 |
|
|
2,500 |
|
|
— |
|
Adjusted Consolidated
EBITDA |
$ |
76,587 |
|
|
$ |
104,250 |
|
|
$ |
116,067 |
|
|
$ |
114,469 |
|
|
$ |
114,500 |
|
|
$ |
116,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
274,107 |
|
|
$ |
329,448 |
|
|
$ |
348,595 |
|
|
$ |
345,000 |
|
|
$ |
345,000 |
|
|
$ |
352,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Consolidated EBITDA
Margin |
27.9 |
% |
|
31.6 |
% |
|
33.3 |
% |
|
33.2 |
% |
|
33.2 |
% |
|
33.0 |
% |
Reconciliation of Net Income to Adjusted
Net Income (in thousands):
|
2019A |
|
2020A |
|
LTM |
|
2021E |
|
RFQO |
|
2022E |
Net Income |
$ |
14,533 |
|
|
$ |
16,090 |
|
|
$ |
33,220 |
|
|
$ |
45,000 |
|
|
$ |
45,000 |
|
|
$ |
50,000 |
|
Special Items |
7,999 |
|
|
17,593 |
|
|
9,040 |
|
|
1,757 |
|
|
1,850 |
|
|
— |
|
Adjusted Net Income |
$ |
22,532 |
|
|
$ |
33,683 |
|
|
$ |
42,260 |
|
|
$ |
46,757 |
|
|
$ |
46,850 |
|
|
$ |
50,000 |
|
Reconciliation of GAAP Diluted Earnings Per Share to
Adjusted Diluted Earnings Per Share:
|
2019A |
|
2020A |
|
LTM |
|
2021E |
|
RFQO |
|
2022E |
GAAP Diluted Earnings Per Share |
$ |
0.80 |
|
|
$ |
0.89 |
|
|
$ |
1.84 |
|
|
$ |
2.43 |
|
|
$ |
2.43 |
|
|
$ |
2.70 |
|
Special Items |
0.45 |
|
|
0.97 |
|
|
0.50 |
|
|
0.10 |
|
|
0.10 |
|
|
— |
|
Adjusted Diluted Earnings Per
Share |
$ |
1.25 |
|
|
$ |
1.86 |
|
|
$ |
2.34 |
|
|
$ |
2.53 |
|
|
$ |
2.53 |
|
|
$ |
2.70 |
|
Reconciliation of Cash Flow Provided by
Operating Activities to Adjusted Free Cash Flow (in thousands) and
Adjusted Free Cash Flow Margin:
|
2019A |
|
2020A |
|
LTM |
|
2021E |
|
RFQO |
|
2022E |
Cash Flow Provided by Operating Activities |
$ |
43,216 |
|
|
|
$ |
82,915 |
|
|
|
$ |
96,180 |
|
|
|
$ |
75,000 |
|
|
|
$ |
78,000 |
|
|
|
$ |
85,000 |
|
|
Cash used for Maintenance
Capital Expenditures |
(8,795 |
) |
|
|
(8,762 |
) |
|
|
(9,346 |
) |
|
|
(10,000 |
) |
|
|
(10,000 |
) |
|
|
(11,000 |
) |
|
Special Items |
4,374 |
|
|
|
(4,190 |
) |
|
|
(2,338 |
) |
|
|
2,469 |
|
|
|
2,500 |
|
|
|
— |
|
|
Adjusted Free Cash Flow |
$ |
38,795 |
|
|
|
$ |
69,963 |
|
|
|
$ |
84,496 |
|
|
|
$ |
67,469 |
|
|
|
$ |
70,500 |
|
|
|
$ |
74,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
274,107 |
|
|
|
$ |
329,448 |
|
|
|
$ |
348,595 |
|
|
|
$ |
345,000 |
|
|
|
$ |
345,000 |
|
|
|
$ |
352,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow
Margin |
|
14.2 |
% |
|
|
|
21.2 |
% |
|
|
|
24.2 |
% |
|
|
|
19.6 |
% |
|
|
|
20.4 |
% |
|
|
|
21.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
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; 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 cost saving
expectations related to anticipated financing activities, including
our deleveraging program, forecasts and planned uses of free cash
flow, expected plans and projections for refinancing our senior
notes, and future capital allocation, including potential
acquisitions, share repurchases, dividend increases, or debt
repayment plans;
- our ability to meet the projected financial performance metrics
to our updated two-year scenario, 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 (“COVID-19”), 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 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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