Release Details

Carriage Services Announces Second Quarter 2023 Results

August 2, 2023 at 4:25 PM EDT
Conference call on Thursday, August 3, 2023 at 9:30 a.m. central time.

HOUSTON, Aug. 02, 2023 (GLOBE NEWSWIRE) -- Carriage Services, Inc. (NYSE: CSV) today announced its financial results for the second quarter ended June 30, 2023.

Company Highlights:

  • Total revenue increased $7.1 million over the prior year quarter, or 7.8%, driven by strong 16.1% growth in cemetery and 4.6% growth in funeral;
  • Adjusted consolidated EBITDA increased $3.4 million over the prior year quarter, or 13.3% and adjusted consolidated EBITDA margin increased 150 basis points to 29.4%;
  • Outperformed second quarter 2023 financial expectations with adjusted diluted EPS of $0.53;
  • Executed on Board of Directors diversity focus and refreshment plan with the addition of three new Directors; and
  • Reaffirm full-year 2023 outlook of $375-$385 million in total revenue, adjusted consolidated EBITDA of $110-$115 million, adjusted diluted earnings per share of $2.25-$2.40 and adjusted free cash flow of $50-$60 million.

Carlos Quezada, Vice Chairman and CEO, stated, “We are excited to announce our robust second quarter results, which reflect the successful implementation of our strategic plan. This quarter’s 7.8% growth in total revenue is predominantly attributed to increased preneed cemetery sales, which led to a significant 16.1% growth in our total cemetery operating revenue. This outcome is a direct consequence of our concerted efforts in enhancing our sales teams and leveraging advanced technology, enabling us to cultivate a substantial pipeline of sales opportunities. We are confident these efforts will serve as a strong foundation for sustained growth in the years ahead. Furthermore, we have made considerable strides in integrating recent acquisitions of premier businesses operating in large thriving markets such as Bakersfield (CA), Charlotte (NC), and Orlando (FL). This integration opens exceptional growth prospects both in the short and long run. Our commitment to financial discipline and the effective execution of our capital allocation strategy, as outlined in our High Performance and Credit Profile Restoration Plan, has yielded continuous improvements in our financial performance, highlighted by overhead expenses this quarter falling below our targeted goal of 13% of total revenue by 2024. Moreover, as communicated in our 2022 shareholder letter regarding our planned Board refreshment focus, we are pleased to welcome the addition of three distinguished, accomplished, and independent members to our Board of Directors who bring the right combination of diversity, experience, and critical thinking to our Good To Great Journey. As we continue to witness the successful realization of our strategic plan, we are confident in our ability to deliver sustained High Performance and create long-term value for our shareholders,” concluded Mr. Quezada.

FINANCIAL HIGHLIGHTS

    Three Months Ended June 30,   Six Months Ended June 30,
(000’s except margins and EPS)     2022       2023       2022       2023  
                 
GAAP Metrics:                
Total revenue   $ 90,600     $ 97,678     $ 188,761     $ 193,192  
Net income   $ 10,899     $ 8,286     $ 27,301     $ 17,130  
Net income margin     12.0 %     8.5 %     14.5 %     8.9 %
Diluted EPS   $ 0.69     $ 0.53     $ 1.70     $ 1.10  
Cash provided by operating activities   $ 14,376     $ 13,318     $ 30,177     $ 39,187  
                 
Non-GAAP Metrics(1):                
Adjusted consolidated EBITDA   $ 25,322     $ 28,693     $ 57,798     $ 56,478  
Adjusted consolidated EBITDA margin     27.9 %     29.4 %     30.6 %     29.2 %
Adjusted diluted EPS   $ 0.58     $ 0.53     $ 1.51     $ 1.09  
Adjusted free cash flow   $ 12,006     $ 3,840     $ 24,363     $ 20,865  
(1) We present both GAAP and non-GAAP measures to provide investors with additional information and to allow for the increased comparability of our ongoing performance from period to period. The most comparable GAAP measures to the Non-GAAP measures presented in this table can be found in the Reconciliation of Non-GAAP Financial Measures section of this press release.
  • Revenue for the three months ended June 30, 2023 increased $7.1 million compared to the three months ended June 30, 2022, as we experienced a 3.9% increase in funeral contract volume, while the average revenue per funeral contract remained flat, and a 20.8% increase in the average price per interment right sold, slightly offset by a 3.4% decrease in the number of preneed interment rights (property) sold.
  • Revenue for the six months ended June 30, 2023 increased $4.4 million compared to the six months ended June 30, 2022, as we experienced a 1.3% increase in the average revenue per funeral contract, while funeral contract volume decreased 2.8%, and an 11.9% increase in the average price per interment right sold, while the number of preneed interment rights (property) sold remained flat.
  • Net income for the three months ended June 30, 2023 decreased $2.6 million compared to the three months ended June 30, 2022, primarily due to a $3.4 million increase in interest expense, offset by an $0.8 million decrease in income tax expense.
  • Net income for the six months ended June 30, 2023 decreased $10.2 million compared to the six months ended June 30, 2022, primarily due to a $6.4 million increase in interest expense and a $3.5 million impact from divestitures, disposals and insurance reimbursements.

CALL AND INVESTOR RELATIONS CONTACT

Carriage Services has scheduled a conference call for tomorrow, August 3, 2023 at 9:30 a.m. central time. To participate live over the phone via audio conferencing click link or live over the Internet via webcast click link. An audio archive of the call will be available on demand via the Company's website at www.carriageservices.com. For any investor relations questions, please email InvestorRelations@carriageservices.com.

 
CARRIAGE SERVICES, INC.
CONDENSED OPERATING AND FINANCIAL TREND REPORT
(in thousands - except per share amounts)
               
  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2023       2022       2023  
Funeral operating revenue $ 58,108     $ 60,800     $ 128,127     $ 127,044  
Cemetery operating revenue   25,104       29,142       45,579       50,747  
Financial revenue   5,743       6,294       11,406       12,515  
Ancillary revenue   980       1,232       2,050       2,289  
Divested/planned divested revenue   665       210       1,599       597  
Total revenue $ 90,600     $ 97,678     $ 188,761     $ 193,192  
               
Funeral operating EBITDA $ 21,999     $ 21,891     $ 53,183     $ 48,416  
Funeral operating EBITDA margin   37.9 %     36.0 %     41.5 %     38.1 %
               
Cemetery operating EBITDA   11,136       12,940       19,731       21,333  
Cemetery operating EBITDA margin   44.4 %     44.4 %     43.3 %     42.0 %
               
Financial EBITDA   5,302       5,846       10,535       11,727  
Financial EBITDA margin   92.3 %     92.9 %     92.4 %     93.7 %
               
Ancillary EBITDA   151       73       372       219  
Ancillary EBITDA margin   15.4 %     5.9 %     18.1 %     9.6 %
               
Divested/planned divested EBITDA   47       30       268       135  
Divested/planned divested EBITDA margin   7.1 %     14.3 %     16.8 %     22.6 %
Total field EBITDA $ 38,635     $ 40,780     $ 84,089     $ 81,830  
Total field EBITDA margin   42.6 %     41.7 %     44.5 %     42.4 %
               
Total overhead $ 13,513     $ 12,087     $ 26,659     $ 25,352  
Overhead as a percentage of revenue   14.9 %     12.4 %     14.1 %     13.1 %
               
Consolidated EBITDA $ 25,122     $ 28,693     $ 57,430     $ 56,478  
Consolidated EBITDA margin   27.7 %     29.4 %     30.4 %     29.2 %
               
Other expenses and interest              
Depreciation & amortization $ 5,112     $ 5,668     $ 9,895     $ 10,437  
Non-cash stock compensation   1,478       2,022       3,085       4,163  
Interest expense   5,988       9,396       11,530       17,935  
Net gain on divestitures and sale of real property   (1,278 )     (126     (575 )     (574
Net (gain) loss on property damage, net of insurance claims   (1,376 )     (235 )     (3,275 )     36  
Impairment of goodwill, intangibles and PPE         243             243  
Other, net   78       23       166       190  
Pretax income $ 15,120     $ 11,702     $ 36,604     $ 24,048  
Net tax expense   4,221       3,416       9,303       6,918  
Net income $ 10,899     $ 8,286     $ 27,301     $ 17,130  
Special items(1) $ (2,454 )   $ (118 )   $ (4,015 )   $ (295 )
Tax on special items   (653 )     (33 )     (926 )     (84 )
Adjusted net income $ 9,098     $ 8,201     $ 24,212     $ 16,919  
Adjusted net income margin   10.0 %     8.4 %     12.8 %     8.8 %
               
Adjusted basic earnings per share $ 0.61     $ 0.55     $ 1.61     $ 1.13  
Adjusted diluted earnings per share $ 0.58     $ 0.53     $ 1.51     $ 1.09  
               
GAAP basic earnings per share $ 0.74     $ 0.55     $ 1.82     $ 1.14  
GAAP diluted earnings per share $ 0.69     $ 0.53     $ 1.70     $ 1.10  
               
Weighted average shares o/s - basic   14,798       14,793       15,020       14,776  
Weighted average shares o/s - diluted   15,712       15,454       16,033       15,461  
               
Reconciliation of Consolidated EBITDA to Adjusted consolidated EBITDA              
Consolidated EBITDA $ 25,122     $ 28,693     $ 57,430     $ 56,478  
Litigation reserve   200             200        
Disaster recovery and pandemic costs               168        
Adjusted consolidated EBITDA $ 25,322     $ 28,693     $ 57,798     $ 56,478  
Adjusted consolidated EBITDA margin   27.9 %     29.4 %     30.6 %     29.2 %
(1) A detail of our Special items presented in this table can be found in the Reconciliation of Non-GAAP Financial Measures section of this press release.

 

CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited and in thousands)
 
  December 31, 2022   June 30, 2023
ASSETS      
Current assets:      
Cash and cash equivalents $ 1,170     $ 970  
Accounts receivable, net   24,458       24,639  
Inventories   7,613       8,448  
Prepaid and other current assets   4,733       3,610  
Total current assets   37,974       37,667  
Preneed cemetery trust investments   95,065       89,874  
Preneed funeral trust investments   104,553       103,317  
Preneed cemetery receivables, net   26,672       33,274  
Receivables from preneed funeral trusts, net   19,976       21,080  
Property, plant and equipment, net   278,106       287,582  
Cemetery property, net   104,170       112,830  
Goodwill   410,137       423,643  
Intangible and other non-current assets, net   32,930       37,333  
Operating lease right-of-use assets   17,060       17,123  
Cemetery perpetual care trust investments   66,307       78,363  
Total assets $ 1,192,950     $ 1,242,086  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Current portion of debt and lease obligations $ 3,172     $ 3,568  
Accounts payable   11,675       9,402  
Accrued and other liabilities   30,621       29,564  
Total current liabilities   45,468       42,534  
Acquisition debt, net of current portion   3,438       3,370  
Credit facility   188,836       202,418  
Senior notes   395,243       395,571  
Obligations under finance leases, net of current portion   4,743       4,537  
Obligations under operating leases, net of current portion   17,315       16,860  
Deferred preneed cemetery revenue   51,746       59,941  
Deferred preneed funeral revenue   32,029       39,782  
Deferred tax liability   48,820       48,827  
Other long-term liabilities   3,065       1,299  
Deferred preneed cemetery receipts held in trust   95,065       89,874  
Deferred preneed funeral receipts held in trust   104,553       103,317  
Care trusts’ corpus   65,495       77,589  
Total liabilities   1,055,816       1,085,919  
Commitments and contingencies:      
Stockholders’ equity:      
Common stock   264       266  
Additional paid-in capital   238,780       240,681  
Retained earnings   176,843       193,973  
Treasury stock   (278,753 )     (278,753 )
Total stockholders’ equity   137,134       156,167  
Total liabilities and stockholders’ equity $ 1,192,950     $ 1,242,086  

 

CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share data)
 
  Three months ended June 30,   Six months ended June 30,
    2022       2023       2022       2023  
               
Revenue:              
Service revenue $ 42,550     $ 44,522     $ 92,287     $ 92,729  
Property and merchandise revenue   41,276       45,630       82,888       85,641  
Other revenue   6,774       7,526       13,586       14,822  
    90,600       97,678       188,761       193,192  
Field costs and expenses:              
Cost of service   21,389       23,075       43,488       46,552  
Cost of merchandise   29,306       32,219       58,636       61,953  
Cemetery property amortization   1,704       1,892       3,036       3,093  
Field depreciation expense   3,253       3,555       6,550       6,912  
Regional and unallocated funeral and cemetery costs   5,966       4,131       12,313       9,568  
Other expenses   1,270       1,604       2,548       2,857  
    62,888       66,476       126,571       130,935  
Gross profit   27,712       31,202       62,190       62,257  
               
Corporate costs and expenses:              
General, administrative and other   9,180       10,199       17,740       20,379  
Net (gain) loss on divestitures, disposals and impairments charges   (1,193 )     265       (426 )     506  
Operating income   19,725       20,738       44,876       41,372  
               
Interest expense   5,988       9,396       11,530       17,935  
Net (gain) loss on property damage, net of insurance claims   (1,376 )     (235 )     (3,275 )     36  
Other, net   (7 )     (125 )     17       (647 )
Income before income taxes   15,120       11,702       36,604       24,048  
Expense for income taxes   4,234       3,273       9,938       6,841  
Tax adjustment related to discrete items   (13 )     143       (635 )     77  
Total expense for income taxes   4,221       3,416       9,303       6,918  
Net income $ 10,899     $ 8,286     $ 27,301     $ 17,130  
               
Basic earnings per common share: $ 0.74     $ 0.55     $ 1.82     $ 1.14  
Diluted earnings per common share: $ 0.69     $ 0.53     $ 1.70     $ 1.10  
               
Dividends declared per common share: $ 0.1125     $ 0.1125     $ 0.2250     $ 0.2250  
               
Weighted average number of common and common equivalent shares outstanding:              
Basic   14,798       14,793       15,020       14,776  
Diluted   15,712       15,454       16,033       15,461  

 

CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
 
  Six Months Ended June 30,
    2022       2023  
Cash flows from operating activities:      
Net income $ 27,301     $ 17,130  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization   9,895       10,437  
Provision for credit losses   1,657       1,344  
Stock-based compensation expense   3,085       4,163  
Deferred income tax expense   1,711       7  
Amortization of intangibles   634       647  
Amortization of debt issuance costs   253       349  
Amortization and accretion of debt   243       255  
Net (gain) loss on divestitures, disposals and impairment charges   (426 )     506  
Net (gain) loss on property damage, net of insurance claims   (3,275 )     36  
Gain on sale of real property         (658 )
Other   (6 )      
       
Changes in operating assets and liabilities that provided (used) cash:      
Accounts and preneed receivables   (3,200 )     (1,694 )
Inventories, prepaid and other current assets   2,967       1,011  
Intangible and other non-current assets   (747 )     (1,767 )
Preneed funeral and cemetery trust investments   (11,100 )     5,341  
Accounts payable   (2,712 )     (2,272 )
Accrued and other liabilities   (10,242 )     (3,328 )
Incentive payment from vendor         6,000  
Deferred preneed funeral and cemetery revenue   2,633       8,106  
Deferred preneed funeral and cemetery receipts held in trust   11,506       (6,426 )
Net cash provided by operating activities   30,177       39,187  
       
Cash flows from investing activities:      
Acquisitions of businesses and real property   (2,601 )     (44,000 )
Proceeds from divestitures and sale of other assets   3,720       1,973  
Proceeds from insurance claims   2,167       1,092  
Capital expenditures   (13,468 )     (8,960 )
Net cash used in investing activities   (10,182 )     (49,895 )
       
Cash flows from financing activities:      
Borrowings from the credit facility   97,900       64,700  
Payments against the credit facility   (78,100 )     (51,400 )
Payment of debt issuance costs for the credit facility and senior notes   (339 )      
Payments on acquisition debt and obligations under finance leases   (202 )     (256 )
Proceeds from the exercise of stock options and employee stock purchase plan contributions   1,060       923  
Taxes paid on restricted stock vestings and exercise of stock options   (286 )     (119 )
Dividends paid on common stock   (3,455 )     (3,340 )
Purchase of treasury stock   (36,663 )      
Net cash provided by (used in) financing activities   (20,085 )     10,508  
       
Net decrease in cash and cash equivalents   (90 )     (200 )
Cash and cash equivalents at beginning of period   1,148       1,170  
Cash and cash equivalents at end of period $ 1,058     $ 970  
               

NON-GAAP FINANCIAL MEASURES

This press release uses Non-GAAP financial measures to present the financial performance of the Company. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP. We believe the Non-GAAP results are useful to investors to compare our results to previous periods, to provide insight into the underlying long-term performance trends in our business and to provide the opportunity to differentiate ourselves as the best consolidation platform in the industry against the performance of other funeral and cemetery companies.

Reconciliations of the Non-GAAP financial measures to GAAP measures are also provided in this press release.

The Non-GAAP financial measures used in this press release and the definitions of them used by the Company for our internal management purposes in this press release are described below.

  • Special items are defined as charges or credits included in our GAAP financial statements that can vary from period to period and are not reflective of costs incurred in the ordinary course of our operations. The change in uncertain tax reserves was not tax effected. Special items were taxed at the operating tax rate.
  • Adjusted net income is defined as net income after adjustments for special items that we believe do not directly reflect our core operations and may not be indicative of our normal business operations. Adjusted net income margin is defined as adjusted net income as a percentage of total revenue.
  • Consolidated EBITDA is defined as net income before income taxes, interest expense, non-cash stock compensation, depreciation and amortization, net gain on divestitures and sale of real property, net (gain) loss on property damage, net of insurance claims, impairment of goodwill, intangibles and PPE, 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 litigation reserves and disaster recovery and pandemic costs. Adjusted consolidated EBITDA margin is defined as adjusted consolidated EBITDA as a percentage of total revenue.
  • Adjusted free cash flow is defined as cash provided by operating activities, adjusted by special items as deemed necessary, less cash for maintenance capital expenditures, which include facility repairs and improvements, equipment, furniture and vehicle purchases and information technology infrastructure improvements. Adjusted free cash flow margin is defined as adjusted free cash flow as a percentage of total revenue.
  • Funeral operating EBITDA is defined as funeral gross profit, plus depreciation and amortization and regional and unallocated costs, less financial EBITDA, ancillary EBITDA and divested/planned divested EBITDA related to the Funeral Home segment. Funeral operating EBITDA margin is defined as funeral operating EBITDA as a percentage of funeral operating revenue.
  • Cemetery operating EBITDA is defined as cemetery gross profit, plus depreciation and amortization and regional and unallocated costs, less financial EBITDA and divested/planned divested EBITDA related to the Cemetery segment. Cemetery operating EBITDA margin is defined as cemetery operating EBITDA as a percentage of cemetery operating revenue.
  • Preneed cemetery sales is defined as cemetery property, merchandise and services sold prior to death.
  • Financial EBITDA is defined as financial revenue, less the related expenses. Financial revenue and the related expenses are presented within Other revenue and Other expenses, respectively, on the Consolidated Statement of Operations. Financial EBITDA margin is defined as financial EBITDA as a percentage of financial revenue.
  • Ancillary revenue is defined as revenues from our ancillary businesses, which include a flower shop, a monument company, a pet cremation business and our online cremation businesses. Ancillary revenue and the related expenses are presented within Other revenue and Other expenses, respectively, on the Consolidated Statement of Operations.
  • Ancillary EBITDA is defined as ancillary revenue, less expenses related to our ancillary businesses noted above. Ancillary EBITDA margin is defined as ancillary EBITDA as a percentage of ancillary revenue.
  • Divested/planned divested revenue is defined as revenues from certain funeral home and cemetery businesses that we have divested and intend to divest.
  • Divested/planned divested EBITDA is defined as divested/planned divested revenue, less field level and financial expenses related to the divested/planned divested businesses noted above. Divested/planned divested EBITDA margin is defined as divested/planned divested EBITDA as a percentage of divested/planned divested revenue.
  • Overhead expenses are defined as regional and unallocated funeral and cemetery costs and general, administrative and other costs, excluding home office depreciation and non-cash stock compensation.
  • 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.

Funeral Operating EBITDA and Cemetery Operating EBITDA

Our operations are reported in two business segments: Funeral Home operations and Cemetery operations. Our operating level results highlight trends in volumes, revenue, operating EBITDA (the individual business’ cash earning power/locally controllable business profit) and operating EBITDA margin (the individual business’ controllable profit margin).

Funeral operating EBITDA and cemetery operating EBITDA are defined above. Funeral and cemetery gross profit is defined as revenue less “field costs and expenses” — a line item encompassing these areas of costs: i) funeral and cemetery field costs, ii) field depreciation and amortization expense, and iii) regional and unallocated funeral and cemetery costs. Funeral and cemetery field costs include cost of service, funeral and cemetery merchandise costs, operating expenses, labor and other related expenses incurred at the business level.

Regional and unallocated funeral and cemetery costs presented in our GAAP statement consist primarily of salaries and benefits of our regional leadership, incentive compensation opportunity to our field employees and other related costs for field infrastructure. These costs, while necessary to operate our businesses as currently operated within our unique, decentralized platform, are not controllable operating expenses at the field level as the composition, structure and function of these costs are determined by executive leadership in the Houston Support Center. These costs are components of our overall overhead platform presented within consolidated EBITDA and adjusted consolidated EBITDA. We do not directly or indirectly “push down” any of these expenses to the individual business’ field level margins.

We believe that our “regional and unallocated funeral and cemetery costs” are necessary to support our decentralized, high performance culture operating framework, and as such, are included in consolidated EBITDA and adjusted consolidated EBITDA, which more accurately reflects the cash earning power of the Company as an operating and consolidation platform.

Usefulness and Limitations of These Measures

When used in conjunction with GAAP financial measures, our total EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are supplemental measures of operating performance that we believe are useful measures to facilitate comparisons to our historical consolidated and business level performance and operating results.

We believe our presentation of adjusted consolidated EBITDA, a key metric used internally by our management, provides investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because it excludes items that may not be indicative of our ongoing operating performance.

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 operating EBITDA, cemetery operating EBITDA, financial EBITDA, ancillary EBITDA and divested/planned divested EBITDA are not consolidated measures of profitability.

Our total 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 gross profit, the most directly comparable GAAP measure, is set forth below.

Consolidated EBITDA excludes certain items that we believe do not directly reflect our core operations and may not be indicative of our normal business operations. A reconciliation to net income, the most directly comparable GAAP measure, is set forth below.

Therefore, these measures may not provide a complete understanding of our performance and should be reviewed in conjunction with our GAAP financial measures. We strongly encourage 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

The Non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures, all of which are reflected in the tables below.

Reconciliation of Net Income to Consolidated EBITDA, Adjusted Consolidated EBITDA (in thousands) and Adjusted Consolidated EBITDA margin for the three and six months ended June 30, 2022 and 2023:

  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2023       2022       2023  
Net income $ 10,899     $ 8,286     $ 27,301     $ 17,130  
Total expense for income taxes   4,221       3,416       9,303       6,918  
Income before income taxes $ 15,120     $ 11,702     $ 36,604     $ 24,048  
               
Depreciation & amortization   5,112       5,668       9,895       10,437  
Non-cash stock compensation   1,478       2,022       3,085       4,163  
Interest expense   5,988       9,396       11,530       17,935  
Net gain on divestitures and sale of real property   (1,278 )     (126 )     (575 )     (574
Net (gain) loss on property damage, net of insurance claims   (1,376 )     (235 )     (3,275 )     36  
Impairment of goodwill, intangibles and PPE         243             243  
Other, net   78       23       166       190  
Consolidated EBITDA $ 25,122     $ 28,693     $ 57,430     $ 56,478  
Adjusted for:              
Litigation reserve   200             200        
Disaster recovery and pandemic costs               168        
Adjusted consolidated EBITDA $ 25,322     $ 28,693     $ 57,798     $ 56,478  
               
Total revenue $ 90,600     $ 97,678     $ 188,761     $ 193,192  
               
Adjusted consolidated EBITDA margin   27.9 %     29.4 %     30.6 %     29.2 %
                               

Special Items affecting Adjusted Net Income (in thousands) for the three and six months ended June 30, 2022 and 2023:

  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2023       2022       2023  
Net gain on divestitures and sale of real property $ (1,278 )   $ (126 )   $ (575 )   $ (574 )
Impairment of goodwill, intangibles and PPE         243             243  
Litigation reserve   200             200        
Net (gain) loss on property damage, net of insurance claims   (1,376 )     (235 )     (3,275 )     36  
Disaster recovery and pandemic costs               168        
Change in uncertain tax reserves               (533 )      
Total $ (2,454 )   $ (118 )   $ (4,015 )   $ (295 )
               

Reconciliation of Gross Profit to Total Field EBITDA (in thousands) and Total Field EBITDA margin for the three and six months ended June 30, 2022 and 2023:

  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2023       2022       2023  
Gross profit (GAAP) $ 27,712     $ 31,202     $ 62,190     $ 62,257  
Cemetery property amortization   1,704       1,892       3,036       3,093  
Field depreciation expense   3,253       3,555       6,550       6,912  
Regional and unallocated funeral and cemetery costs   5,966       4,131       12,313       9,568  
Total field EBITDA $ 38,635     $ 40,780     $ 84,089     $ 81,830  
               
Total revenue $ 90,600     $ 97,678     $ 188,761     $ 193,192  
               
Total field EBITDA margin   42.6 %     41.7 %     44.5 %     42.4 %
               
Gross profit margin   30.6 %     31.9 %     32.9 %     32.2 %
                               

Reconciliation of GAAP Basic Earnings Per Share to Adjusted Basic Earnings Per Share for the three and six months ended June 30, 2022 and 2023:

  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2023     2022       2023  
GAAP basic earnings per share $ 0.74     $ 0.55   $ 1.82     $ 1.14  
Special items   (0.13 )         (0.21 )     (0.01 )
Adjusted basic earnings per share $ 0.61     $ 0.55   $ 1.61     $ 1.13  
                             

Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the three and six months ended June 30, 2022 and 2023:

  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2023     2022       2023  
GAAP diluted earnings per share $ 0.69     $ 0.53   $ 1.70     $ 1.10  
Special items   (0.11 )         (0.19 )     (0.01 )
Adjusted diluted earnings per share $ 0.58     $ 0.53   $ 1.51     $ 1.09  
                             

Reconciliation of Cash Provided by Operating Activities to Adjusted Free Cash Flow (in thousands) for the three and six months ended June 30, 2022 and 2023:

  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2023       2022       2023  
Cash provided by operating activities $ 14,376     $ 13,318     $ 30,177     $ 39,187  
Cash used for maintenance capital expenditures   (2,370 )     (1,881 )     (5,982 )     (3,723 )
Free cash flow $ 12,006     $ 11,437     $ 24,195     $ 35,464  
               
Plus: incremental special items:              
Withdrawal from preneed funeral and cemetery trust investments(1) $     $ (1,597 )   $     $ (8,599 )
Vendor incentive payment(2)         (6,000 )           (6,000 )
Disaster recovery and pandemic costs               168        
Adjusted free cash flow $ 12,006     $ 3,840     $ 24,363     $ 20,865  
 
(1) During the six months ended June 30, 2023, we withdrew $8.6 million of realized capital gains and earnings from our preneed funeral and cemetery trust investments. In certain states, we are allowed to withdraw these funds prior to the delivery of preneed merchandise and service contracts. While the realized capital gains and earnings are not recognized as revenue, they increase our cash flow from operations.
(2) During the six months ended June 30, 2023, we received a $6.0 million incentive payment from a vendor for entering into a strategic partnership agreement to market and sell prearranged funeral services in the future. While the incentive payment was not recognized as revenue, it increased our cash flow from operations.
 

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This earnings release contains 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, and 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 made herein or elsewhere by us, or on our behalf, other than statements of historical information, should be deemed to be forward-looking statements, which include, but are not limited to, statements regarding any expectations and projections of earnings, revenue, cash flow, investment returns, capital allocation, debt levels, equity performance, death rates, market share growth, overhead, preneed sales or other financial items; any statements of the plans, strategies, objectives, and expectations of management for future operations or financing activities, including, but not limited to, capital allocation, organizational performance, execution of our strategic growth plan, anticipated integration, performance and other benefits of recently completed acquisitions, and cost and debt reductions; any statements of the plans, strategies and objectives related to governance improvement plans and related expectations, including, but not limited to, recruitment of new board of director members; 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. Words such as “may”, “will”, “estimate”, “intend”, “believe”, “expect”, “seek”, “project”, “forecast”, “foresee”, “should”, “would”, “could”, “plan”, “anticipate” and other similar words may be used to identify forward-looking statements; however, the absence of these words does not mean that the statements are not forward-looking. While we believe these assumptions concerning future events are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenue and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions, except where specifically noted. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include but are not limited to: our ability to find and retain skilled personnel; the effects of our talent recruitment efforts, incentive and compensation plans and programs, including such effects on our Standards Operating Model and the Company’s operational and financial performance; our ability to execute our growth strategy, if at all; our ability to execute and meet the objectives of our High Performance and Credit Profile Restoration Plan, if at all; the execution of our Standards Operating, 4E Leadership and Strategic Acquisition Models; the effects of competition; changes in the number of deaths in our markets; changes in consumer preferences and our ability to adapt to or meet those changes; our ability to generate preneed sales, including implementing our cemetery portfolio sales strategy, product development and optimization plans; the investment performance of our funeral and cemetery trust funds; fluctuations in interest rates; the effects of inflation on our operational and financial performance, including the increased overall costs for our goods and services, the impact on customer preferences as a result of changes in discretionary income, and our ability, if at all, to mitigate such effects; our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness; our ability to meet the timing, objectives and expectations related to our capital allocation framework, including our forecasted rates of return, planned uses of free cash flow and future capital allocation, including share repurchases, potential strategic acquisitions, internal growth projects, dividend increases, or debt repayment plans; our ability to meet the projected financial and equity performance goals to our updated full year outlook, if at all; the timely and full payment of death benefits related to preneed funeral contracts funded through life insurance contracts; the financial condition of third-party insurance companies that fund our preneed funeral contracts; increased or unanticipated costs, such as merchandise, goods, insurance or taxes, and our ability to mitigate or minimize such costs, if at all; 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, such as the COVID-19 coronavirus, including any new or emerging public health threats, on customer preferences and on our business; government, social, business and other actions that have been and will be taken in response to pandemics, such as the COVID-19 coronavirus, including potential responses to any new or emerging public health threats; effects and expense of litigation; consolidation of the funeral and cemetery industry; our ability to identify and consummate strategic acquisitions, if at all, and successfully integrate acquired businesses with our existing businesses, including expected performance and financial improvements related thereto; economic, financial and stock market fluctuations; interruptions or security lapses of our information technology, including any cybersecurity or ransomware incidents; acts of war or terrorists acts and the governmental or military response to such acts; 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, 2022, and in other filings with the SEC, available at www.carriageservices.com. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the applicable communication and we undertake no obligation to publicly update or revise any forward-looking statements except to the extent required by applicable law.


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Source: Carriage Services, Inc.