Carriage Services Announces First Quarter Results
- Record Quarterly Revenue of
$98 .2 million, GAAP Diluted EPS of$1.00 and Adjusted Diluted EPS of$0.92 ; - Invested
$168.5 million sinceMay 13, 2021 to repurchase 3.4 million shares (19% of outstanding) at$49.60 per share; - Capital Allocation now focused on internal growth (mostly cemetery property development) and high quality acquisitions;
- Updated Rolling Four Quarter Outlook and Three Year Roughly Right Ranges Performance Scenario Through 2024;
- Discretionary Trust Fund Positive Total Return of 4.3%; and
- Management’s Opinion of
Intrinsic Value Roughly Right Range remains at$70 to$80 per share.
After writing extensively and comprehensively about the High Performance Transformation of Carriage since the end of 2018 during a once in a lifetime COVID-19 Pandemic that has become endemic but hopefully manageable, we will no longer include in each quarterly release as much highly detailed and transparent performance data along with narrative interpretation by each member of SVPG. However, we will be very active in our “in-person” investor relations program in the future with investors both new and old to the Carriage story, in addition to Zoom one-on-one calls during virtual conferences that were necessitated over the last two years and undoubtedly have been highly productive and efficient and therefore will be selectively continued.
We believe that Carriage is entering a long term “shareholder value creation sweet spot” from outstanding execution of our three core models and savvy yet flexible capital allocation with the next few years particularly focused on high quality acquisitions. A more normalized post-pandemic crisis industry landscape is offering up both quantity and quality acquisition candidates in new strategic markets that we haven’t experienced since the end of 2019, which was itself unique in our over thirty-year history of consolidation of the funeral and cemetery industries.
The First Quarter of 2022 is the beginning of the Third Five Year Timeframe of our Good To Great Journey that never ends, which I first began to write about in our first quarter 2012 earnings release. I don’t remember anything about our performance in that quarter ten years ago, or much about any one of the thirty-nine quarters since then, but I remember well that our share price closed at
When
We started our new five-year timeframe with a record first-quarter performance even after a very high comparable performance last year influenced by the peak of COVID-19 cases in January of 2021. Total Revenue was
The balance of this 2022 first quarter earnings release will be shown on the following pages as follows:
- First Quarter 2022 Comparative Performance Highlights;
- Five Quarter Trend Report ending
March 31, 2022 ; - Same Store Funeral Revenue Monthly Trends and Drivers Six Months Ending
March 2022 ; - Cemetery Segment;
- Operations Update;
- Update On Growth Through Acquisition Outlook;
- Three years Roughly Right Ranges Scenario/Rolling Four Quarter Outlook;
- Capital Allocation/Share Repurchase update;
- Adjusted Free Cash Flow;
- Trust Fund Investment Portfolio; and
- Intrinsic Value.
FIRST QUARTER 2022 COMPARATIVE PERFORMANCE HIGHLIGHTS
- Total Revenue(1) of $98.2 million, an increase of $1.5 million or 1.6%;
- GAAP Funeral Operating Income of
$25.5 million , a decrease of$0.4 million or 1.6%; - GAAP Funeral Operating Income Margin of 34.2%, a decrease of 190 basis points;
- GAAP Cemetery Operating Income of
$8.2 million , a decrease of$1.3 million or 13.4%; - GAAP Cemetery Operating Income Margin of 34.5%, a decrease of 370 basis points;
- GAAP Net Income of
$16.4 million , an increase of$3.5 million or 26.8%; - GAAP Net Income Margin of 16.7%, an increase of 330 basis points;
- GAAP Diluted EPS of
$1.00 , an increase of$0.29 or 40.8%; - GAAP Net Cash Provided by Operating Activities of
$15.8 million , a decrease of 41.1%; and - GAAP Net Cash Provided by Operating Activities as a percentage of Total Revenue of 16.1%, a decrease of 1,165 basis points.
- Same Store Funeral Contracts of 11,675, an increase of 372 or 3.3%;
- Same Store Funeral Revenue of $61.6 million, an increase of $2.6 million or 4.5%;
- Same Store Funeral EBITDA of $27.5 million, an increase of $0.9 million or 3.2%;
- Same Store Funeral EBITDA Margin of 44.6%, a decrease of 60 basis points;
- Acquisition Funeral Revenue of $8.6 million, an increase of $0.6 million or 7.8%;
- Acquisition Funeral EBITDA of $3.7 million, an increase of $0.1 million or 2.9%;
- Acquisition Funeral EBITDA Margin of 43.6%, a decrease of 200 basis points;
- Same Store Cemetery Revenue of
$14.2 million , a decrease of$0.4 million or 2.6%; - Acquisition Cemetery Revenue of
$6.3 million , a decrease of$0.7 million or 9.8%; - Financial Revenue remained flat at
$5.7 million ;
- Total Field EBITDA of
$45.5 million , a decrease of$0.3 million or 0.7%; - Total Field EBITDA Margin of 46.3%, a decrease of 110 basis points;
- Adjusted Consolidated EBITDA of
$32.5 million , a decrease of$2.2 million or 6.3%; - Adjusted Consolidated EBITDA Margin of 33.1%, a decrease of 280 basis points; and
- Adjusted Diluted EPS of
$0.92 , an increase of$0.11 or 13.6%.
(1) Total Revenue is comprised of Same Store Funeral Revenue, Acquisition Funeral Revenue, Same Store Cemetery Revenue, Acquisition Cemetery Revenue, Divested Revenue, Ancillary Revenue and Financial Revenue. 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.
Five Quarter Trend Report Ending
We report acquisitions for both funeral homes and cemeteries separately for five years to highlight their High Performance nature after integration into Carriage Services Standards Operating Model. Upon completion of the fifth year, the acquired business transfers to same store reporting. We have updated our Five Quarter Operating and Financial Trend Report tables to reflect five businesses that recently moved into same store from acquisition.
| FIVE QUARTER OPERATING AND FINANCIAL TREND REPORT | ||||||||||||||||||||
| (000’s except for volume, averages & margins) | 1ST QTR 2021 | 2ND QTR 2021 | 3RD QTR 2021 | 4TH QTR 2021 | 1ST QTR 2022 | |||||||||||||||
| Funeral Same Store Contracts | 11,303 | 9,259 | 10,848 | 10,716 | 11,675 | |||||||||||||||
| Average Revenue Per Contract (1) | $ | 5,218 | $ | 5,294 | $ | 5,273 | $ | 5,346 | $ | 5,279 | ||||||||||
| Funeral Same Store Burial Contracts | 4,202 | 3,304 | 3,705 | 3,808 | 4,087 | |||||||||||||||
| Funeral Same Store Burial Rate | 37.2 | % | 35.7 | % | 34.2 | % | 35.5 | % | 35.0 | % | ||||||||||
| Average Revenue Per Burial Contract | $ | 9,053 | $ | 9,306 | $ | 9,489 | $ | 9,429 | $ | 9,381 | ||||||||||
| Funeral Same Store Cremation Contracts | 6,389 | 5,236 | 6,203 | 6,057 | 6,647 | |||||||||||||||
| Funeral Same Store Cremation Rate | 56.5 | % | 56.6 | % | 57.2 | % | 56.5 | % | 56.9 | % | ||||||||||
| Average Revenue Per Cremation Contract | $ | 3,325 | $ | 3,466 | $ | 3,482 | $ | 3,498 | $ | 3,450 | ||||||||||
| Funeral Same Store Revenue | $ | 58,983 | $ | 49,015 | $ | 57,205 | $ | 57,285 | $ | 61,632 | ||||||||||
| Funeral Same Store EBITDA | $ | 26,652 | $ | 19,158 | $ | 25,562 | $ | 24,306 | $ | 27,510 | ||||||||||
| Funeral Same Store EBITDA Margin | 45.2 | % | 39.1 | % | 44.7 | % | 42.4 | % | 44.6 | % | ||||||||||
| Funeral Acquisition Revenue | $ | 7,985 | $ | 6,939 | $ | 7,651 | $ | 8,007 | $ | 8,610 | ||||||||||
| Funeral Acquisition EBITDA | $ | 3,644 | $ | 2,769 | $ | 3,373 | $ | 3,578 | $ | 3,750 | ||||||||||
| Funeral Acquisition EBITDA Margin | 45.6 | % | 39.9 | % | 44.1 | % | 44.7 | % | 43.6 | % | ||||||||||
| Cemetery Same Store Preneed Property Contracts Sold | 1,161 | 1,211 | 1,280 | 1,120 | 1,068 | |||||||||||||||
| Cemetery Same Store Preneed Sales Revenue | $ | 9,718 | $ | 11,445 | $ | 11,366 | $ | 10,926 | $ | 9,011 | ||||||||||
| Cemetery Same Store Revenue | $ | 14,635 | $ | 16,906 | $ | 16,342 | $ | 16,288 | $ | 14,251 | ||||||||||
| Cemetery Same Store EBITDA | $ | 5,704 | $ | 7,907 | $ | 6,465 | $ | 6,939 | $ | 5,300 | ||||||||||
| Cemetery Same Store EBITDA Margin | 39.0 | % | 46.8 | % | 39.6 | % | 42.6 | % | 37.2 | % | ||||||||||
| Cemetery Acquisition Preneed Property Contracts Sold | 338 | 475 | 294 | 361 | 299 | |||||||||||||||
| Cemetery Acquisition Preneed Sales Revenue | $ | 5,089 | $ | 6,839 | $ | 5,148 | $ | 5,045 | $ | 4,298 | ||||||||||
| Cemetery Acquisition Revenue | $ | 6,980 | $ | 8,175 | $ | 6,362 | $ | 6,312 | $ | 6,297 | ||||||||||
| Cemetery Acquisition EBITDA | $ | 4,102 | $ | 4,737 | $ | 3,547 | $ | 3,140 | $ | 3,299 | ||||||||||
| Cemetery Acquisition EBITDA Margin | 58.8 | % | 57.9 | % | 55.8 | % | 49.7 | % | 52.4 | % | ||||||||||
| Total Financial Revenue | $ | 5,706 | $ | 5,405 | $ | 5,639 | $ | 6,167 | $ | 5,692 | ||||||||||
| Total Financial EBITDA | $ | 5,305 | $ | 5,058 | $ | 5,225 | $ | 5,777 | $ | 5,263 | ||||||||||
| Total Financial EBITDA Margin | 93.0 | % | 93.6 | % | 92.7 | % | 93.7 | % | 92.5 | % | ||||||||||
| Total Revenue | $ | 96,637 | $ | 88,277 | $ | 95,041 | $ | 95,931 | $ | 98,161 | ||||||||||
| Total Field EBITDA | $ | 45,787 | $ | 40,014 | $ | 44,651 | $ | 44,189 | $ | 45,454 | ||||||||||
| Total Field EBITDA Margin | 47.4 | % | 45.3 | % | 47.0 | % | 46.1 | % | 46.3 | % | ||||||||||
| Adjusted Consolidated EBITDA | $ | 34,657 | $ | 28,720 | $ | 32,389 | $ | 30,395 | $ | 32,476 | ||||||||||
| Adjusted Consolidated EBITDA Margin | 35.9 | % | 32.5 | % | 34.1 | % | 31.7 | % | 33.1 | % | ||||||||||
| Adjusted Diluted EPS | $ | 0.81 | $ | 0.64 | $ | 0.82 | $ | 0.78 | $ | 0.92 | ||||||||||
| Adjusted Free Cash Flow | $ | 27,140 | $ | 12,313 | $ | 25,922 | $ | 10,308 | $ | 12,357 | ||||||||||
| Adjusted Free Cash Flow Margin | 28.1 | % | 13.9 | % | 27.3 | % | 10.7 | % | 12.6 | % | ||||||||||
| GAAP Net Income (Loss) | $ | 12,933 | $ | (6,167 | ) | $ | 13,046 | $ | 13,347 | $ | 16,402 | |||||||||
| GAAP Net Income (Loss) Margin | 13.4 | % | (7.0 | )% | 13.7 | % | 13.9 | % | 16.7 | % | ||||||||||
| GAAP Diluted Earnings (Loss) Per Share | $ | 0.71 | $ | (0.33 | ) | $ | 0.71 | $ | 0.77 | $ | 1.00 | |||||||||
| (1) Excludes Preneed Funeral interest earnings reflected in Total Financial Revenue. | ||||||||||||||||||||
| 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. | ||||||||||||||||||||
We continue to observe sustained performance in our funeral same store portfolio, where the contract volume of 11,675 hit a record in the first quarter of 2022 compared to the previous four quarters. Similarly, funeral same store average revenue per contract (ARPC) increased to
| SAME STORE FUNERAL REVENUE MONTHLY TRENDS AND DRIVERS SIX MONTHS ENDING |
||||||||||||||||||
| (000’s except for volume, averages) | 2021 / 2020 | 2022 / 2021 | ||||||||||||||||
| Same Store Funeral | OCT | NOV | DEC | JAN | FEB | MAR | ||||||||||||
| Contracts (volume) 2021 /2022 | 3,727 | 3,343 | 3,646 | 4,218 | 3,934 | 3,523 | ||||||||||||
| Contracts (volume) 2020 / 2021 | 3,128 | 3,125 | 4,143 | 4,293 | 3,629 | 3,381 | ||||||||||||
| Volume Variance | 599 | 218 | (497 | ) | (75 | ) | 305 | 142 | ||||||||||
| Average Revenue Per Contract 2021 / 2022(1) | $ | 5,269 | $ | 5,406 | $ | 5,370 | $ | 5,370 | $ | 5,248 | $ | 5,205 | ||||||
| Average Revenue Per Contract 2020 / 2021(1) | $ | 5,341 | $ | 5,207 | $ | 5,153 | $ | 5,231 | $ | 5,116 | $ | 5,312 | ||||||
| Average Revenue Per Contract Variance (ARPC) | $ | (72 | ) | $ | 199 | $ | 217 | $ | 139 | $ | 132 | $ | (107 | ) | ||||
| Operating Revenue 2021 / 2022(1) | $ | 19,636 | $ | 18,070 | $ | 19,580 | $ | 22,650 | $ | 20,644 | $ | 18,339 | ||||||
| Operating Revenue 2020 /2021(1) | $ | 16,708 | $ | 16,271 | $ | 21,351 | $ | 22,458 | $ | 18,565 | $ | 17,961 | ||||||
| Operating Revenue Variance | $ | 2,928 | $ | 1,799 | $ | (1,771 | ) | $ | 192 | $ | 2,079 | $ | 378 | |||||
| Net Revenue Volume Variance | $ | 3,199 | $ | 1,135 | $ | (2,561 | ) | $ | (393 | ) | $ | 1,560 | $ | 754 | ||||
| Net Revenue Average Variance | $ | (271 | ) | $ | 664 | $ | 790 | $ | 585 | $ | 519 | $ | (376 | ) | ||||
| Net Revenue Variance | $ | 2,928 | $ | 1,799 | $ | (1,771 | ) | $ | 192 | $ | 2,079 | $ | 378 | |||||
| (1) Excludes Preneed Funeral interest earnings reflected in Total Financial Revenue. | ||||||||||||||||||
Funeral same store six-month trends show positive trends leading to sustained volumes and increased averages.
CEMETERY SEGMENT
We ended the quarter on our Cemetery Same Store Revenue with
We are excited to announce that
OPERATIONS UPDATE
We had our first ever
The forum had three goals. Number one was to inspire High Performance in every attendee through John “Gucci” Foley’s message on execution excellence and a Glad To Be Here® Attitude. John is a former lead solo pilot of the Blue Angels, a top rated Keynote Speaker, ‘Gratitude Guru’ and expert in the “how” of high performance teams. Number two was to have all of our leaders experience first-class service excellence firsthand and become enthused by the worldwide recognized service standards and excellence of the Ritz Carlton hotels imparted by the
Our new marketing department led by
Alfred and his team are poised to deliver exciting products and services that will catapult our opportunities and new possibilities as we continue to gain market share and build an excellent reputation within Carriage’s portfolio of businesses.
ROB FRANCH JOINS CARRIAGE AS NEW CHIEF INFORMATION OFFICER
We are very excited to announce that
As
FIVE REASONS WHY THE BEST IS YET TO COME
A lot is going on at Carriage, and our prospects for the future are higher than ever before. To share the excitement that we have about our future, I will give you these five reasons:
1) We will continue to develop our preneed cemetery sales teams across our portfolio of cemeteries with an emphasis on growing our sales force while selecting the Right Who salespeople, expanding their sales skills, and generating engagement that will deliver growth in new preneed property sales.
2) Our CAREdge forum inspired all of our
3) Our digital marketing strategy has started to deliver results in the pilot businesses with an ambitious plan to replicate success through the collaboration and teamwork of our
4) Our business development efforts are generating significant activity towards adding new businesses, new partnerships and new revenue for Carriage (Steve will elaborate on this point later in this release).
5) At Carriage, we are proud to say that we focus on people as the primary driver of our
These are just five of the many reasons for our passion for our “The Best Is Yet To Come” motto at Carriage. When paired with our one-year plan, five-year strategy, and 10-year Being The Best Vision of the future, we know why the beginning of the motto is: “It’s a Great Time To Be At Carriage,” concluded
UPDATE ON GROWTH THROUGH ACQUISITION OUTLOOK
In his book, The Outsiders,
As Mel mentioned, the level of activity involving high quality businesses is as strong as we have seen in more than two years. We believe our patience will begin to pay off, as we are now well positioned to partner with the best remaining independent funeral home and cemetery businesses at a time when more of the best businesses seem keenly aware of the succession plan and support benefits of Carriage’s unique High Performance Culture Framework.
As previously mentioned, we will have more details to share during the second half of the year. With that said, we are excited to announce that we recently signed a letter of intent with a fantastic business in a growing area of
As we have learned throughout our 30 year history, and the reason we do not project annual acquisition spend targets, you never know when the right businesses will be ready to move forward with a succession plan. While we remain patient and thoughtful in our approach, we will continue to build relationships with high quality candidates, do our homework and remain prepared for the “no brainers” when those businesses and owners are ready. We look forward to sharing more details regarding additions to the Carriage Family in the months to come,” concluded
THREE YEAR ROUGHLY RIGHT RANGES SCENARIO/ROLLING FOUR QUARTER OUTLOOK
| THREE YEAR ROUGHLY RIGHT RANGES PERFORMANCE SCENARIO 2022 THROUGH 2024 | ||||||||||||||
| Performance Outlook Ranges | Actual Performance | Three Year Scenario | ||||||||||||
| Yrs. Ending 12/31 (Millions) | 2019A | 2020A | 2021A | 2022 | 2023 | 2024 | CAGR | |||||||
| Total Revenue | $ | 274.1 | $ | 329.4 | $ | 375.9 | 10.7 | % | ||||||
| Total Field EBITDA | $ | 109.8 | $ | 141.9 | $ | 174.6 | 14.4 | % | ||||||
| Total Field EBITDA Margin | 40.0 | % | 43.1 | % | 46.5 | % | 46% - 47% | 46.5% - 47.5% | 47% - 48% | 3.5 | % | |||
| Adj. Consol. EBITDA | $ | 76.6 | $ | 104.3 | $ | 126.2 | 15.5 | % | ||||||
| Adj. Consol. EBITDA Margin | 27.9 | % | 31.6 | % | 33.6 | % | 33.5% - 34.5% | 33.5% - 34.5% | 34% - 35% | 4.3 | % | |||
| Adjusted Diluted EPS | $ | 1.25 | $ | 1.86 | $ | 3.02 | 28.9 | % | ||||||
| Diluted Shares Outstanding | 18.0 | 18.1 | 18.3 | 16.0 | 16.4 | 16.7 | (1.5 | %) | ||||||
| Adjusted Free Cash Flow | $ | 38.8 | $ | 70.0 | $ | 75.7 | 20.1 | % | ||||||
| Adj. Free Cash Flow Margin | 14.2 | % | 21.2 | % | 20.1 | % | 20.5% - 21.5% | 21.0% - 22.0% | 21.0% - 22.0% | 8.7 | % | |||
| Total Debt Outstanding | $ | 461.1 | $ | 565.4 | 1.7 | % | ||||||||
| Total Debt to EBITDA Ratio | 7.0(2) | 4.4 | 4.5 | 4.3 - 4.6 | 3.8 - 4.2 | 3.8 - 4.2 | (10.6 | %) | ||||||
| (1) |
||||||||||||||
| (2) Does not include Proforma EBITDA for acquisitions. | ||||||||||||||
| 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. | ||||||||||||||
We are updating our Rolling Four Quarter Outlook for operating and financial performance through the end of the first quarter 2023. Unlike our Three Year Roughly Right Ranges Scenario, our updated Rolling Four Quarter Outlook will only include capital allocation expectations for acquisitions that we currently have under letter of intent that are on track to close within the next 90 days. As Steve has previously mentioned in his comments, we currently have one acquisition under letter of intent and have included conservative projections of initial performance within the Rolling Four Quarter Outlook below:
Revenue:
Adjusted Consolidated EBITDA:
Adjusted Consolidated EBITDA Margin: 33.5% - 34.5%
Adjusted Diluted Earnings Per Share:
Adjusted Free Cash Flow:
Adjusted Free Cash Flow Margin: 21.5% - 22.5%
Our goal with the Rolling Four Quarter Outlook is to provide investors with the most up to date view of our performance over the next 12 months including our ability to execute on our Strategic Acquisition Model and the initial accretion from any acquisitions completed to our operating and financial performance.
CAPITAL ALLOCATION/SHARE REPURCHASE UPDATE
During the first quarter we invested
Considering the full impact of the 490,000 shares we repurchased in the first quarter, our basic shares outstanding are approximately 14.9 million and our diluted shares outstanding are approximately 16.0 million.
As we outlined in our 2021 Shareholder Letter, we intend to focus most of our capital allocation for the remainder of 2022 towards acquisitions of the best remaining independent funeral home and cemetery businesses while continuing to make investments across our portfolio in high return on invested capital growth projects. We intend to fund all of our anticipated capital allocation for the remainder of 2022 through internally generated Free Cash Flow which will in turn will allow us to maintain our Proforma Debt Leverage Ratio at or below 4.5x by year-end, compared to 4.7x at the end of the first quarter.
ADJUSTED FREE CASH FLOW
| Three Months Ended |
|||||||
| 2021 | 2022 | ||||||
| Cash Flow Provided by Operating Activities | $ | 26,811 | $ | 15,801 | |||
| Cash used for Maintenance Capital Expenditures | (2,140 | ) | (3,612 | ) | |||
| Free Cash Flow | $ | 24,671 | $ | 12,189 | |||
| Plus: Incremental Special Items: | |||||||
| Severance and Separation Costs | 1,575 | — | |||||
| Disaster Recovery and Pandemic Costs | 894 | 168 | |||||
| Adjusted Free Cash Flow | $ | 27,140 | $ | 12,357 | |||
| Revenue | $ | 96,637 | $ | 98,161 | |||
| Adjusted Free Cash Flow Margin | 28.1 | % | 12.6 | % | |||
For the first quarter our Adjusted Free Cash Flow declined
In our 2021 Shareholder Letter Steve detailed the increase in both our one year Being The Best, and five year Good To Great incentive programs based on the High Performance results achieved by our
Last year was the tenth year that we have had the Good To Great incentive program and was by far our largest group of winners at thirty-four. The group of thirty-four Good To Great award winners had a compound annual growth rate of revenue of 5.4% from 2017-2021. The award is paid half in cash and half in appreciated Carriage shares (2021 was a proof of concept year) during the first quarter of the following year in which it was earned. This amount had been accrued for over the past five years and represented the largest amount of cash incentive payments in our history.
We expect Adjusted Free Cash Flow to be materially higher during the remainder of the year given the timing of the large incentive compensation cash outflows in the first quarter, normalized maintenance capital expenditures and lower cash interest payment on our 4.25% Senior Notes that is paid in the second quarter.
TRUST FUND INVESTMENT PORTFOLIO
| Q1 2022 | Annualized 2009 – Q1 2022 |
|||||
| CSV Discretionary Portfolio | 4.3 | % | 14.4 | % | ||
| S&P 500 | -4.6 | % | 15.2 | % | ||
| DJIA | -4.1 | % | 13.7 | % | ||
| NASDAQ | -8.9 | % | 19.4 | % | ||
| HY Bond Index | -4.8 | % | 10.0 | % | ||
| 70/30 HY/S&P Bond | -4.8 | % | 11.9 | % | ||
As we outlined in our 2021 Shareholder Letter, we believed we had positioned our Discretionary Trust Fund Portfolio for continued outperformance even in a market environment of high inflation, rising interest rates and, as it turned out, significant geopolitical turmoil with the invasion of
The 1580 basis point outperformance of our equity portfolio compared to the S&P 500 in the first quarter is a great example of Mel’s investment philosophy that:
“Great investment returns are produced by those fearless yet analytical souls who go where everyone else has fled and find a fundamental reason to stay.”
During the depths of the Coronavirus Market Crisis and subsequently, we built our equity portfolio based on companies that have strong balance sheets, pay sustainable and growing dividends, and have opportunities to continue to grow their businesses over the long-term, while maintaining pricing power to offset the accelerating inflationary trends that we expected from the trillions of monetary and fiscal stimulus deployed repeatedly by the Fed and
We began selling our entire group of high-tech growth stocks (Apple, Advanced Micro Devices, Resmed, Align Technology,
In the first quarter and year-to-date some of our leading performers included refiners (Phillips 66, Valero), energy master limited partnerships (Enterprise Products, Williams Companies, Westlake Chemical Partners,
Another large equity position that almost doubled in the first quarter was the offshore petroleum supply boat services company Tidewater. Prior to the COVID-19 pandemic we joined with an activist industry specific investment group to make a large investment in Tidewater after it had emerged from bankruptcy with a strong balance sheet and “best in-class” assets. The investment thesis was that there would be a comeback in offshore oil and gas exploration activity and Tidewater would be a major beneficiary of more activity, improved pricing and further consolidation.
You might say we got lucky again, but betting against the groupthink ESG Funds that had "fled energy pipeline and natural gas companies" to "stop climate change" is not exactly rocket science!!
The continued performance of our discretionary preneed trust fund portfolio will drive incremental growth of our reported Financial Revenue and Financial EBITDA through increased earnings on matured preneed contracts and recurring income earned through our cemetery perpetual care trusts. Since the execution of our Trust Fund Repositioning Strategy during the depths of the Coronavirus Market Crisis, we have recognized approximately
INTRINSIC VALUE
We are reaffirming our opinion of the
CONFERENCE CALL AND INVESTOR RELATIONS CONTACT
| OPERATING AND FINANCIAL TREND REPORT | ||||||||
| (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) | ||||||||
| Three Months Ended |
||||||||
| 2021 | 2022 | % Change | ||||||
| Same Store Contracts | ||||||||
| Atneed Contracts | 9,548 | 9,987 | 4.6% | |||||
| Preneed Contracts | 1,755 | 1,688 | (3.8%) | |||||
| Total Same Store Funeral Contracts | 11,303 | 11,675 | 3.3% | |||||
| Acquisition Contracts | ||||||||
| Atneed Contracts | 1,624 | 1,514 | (6.8%) | |||||
| Preneed Contracts | 124 | 192 | 54.8% | |||||
| Total Acquisition Funeral Contracts | 1,748 | 1,706 | (2.4%) | |||||
| Total Funeral Contracts | 13,051 | 13,381 | 2.5% | |||||
| Funeral Operating Revenue | ||||||||
| Same Store Revenue | $ | 58,983 | $ | 61,632 | 4.5% | |||
| Acquisition Revenue | 7,985 | 8,610 | 7.8% | |||||
| Total Funeral Operating Revenue | $ | 66,968 | $ | 70,242 | 4.9% | |||
| Cemetery Operating Revenue | ||||||||
| Same Store Revenue | $ | 14,635 | $ | 14,251 | (2.6%) | |||
| Acquisition Revenue | 6,980 | 6,297 | (9.8%) | |||||
| Total Cemetery Operating Revenue | $ | 21,615 | $ | 20,548 | (4.9%) | |||
| Total Financial Revenue | $ | 5,706 | $ | 5,692 | (0.2%) | |||
| Ancillary Revenue | $ | 1,207 | $ | 1,070 | (11.4%) | |||
| Total Divested/Planned Divested Revenue | $ | 1,141 | $ | 609 | (46.6%) | |||
| Total Revenue | $ | 96,637 | $ | 98,161 | 1.6% | |||
| Field EBITDA | ||||||||
| Same Store Funeral Field EBITDA | $ | 26,652 | $ | 27,510 | 3.2% | |||
| Same Store Funeral Field EBITDA Margin | 45.2 | % | 44.6 | % | (60 bp) | |||
| Acquisition Funeral Field EBITDA | 3,644 | 3,750 | 2.9% | |||||
| Acquisition Funeral Field EBITDA Margin | 45.6 | % | 43.6 | % | (200 bp) | |||
| Total Funeral Field EBITDA | $ | 30,296 | $ | 31,260 | 3.2% | |||
| Total Funeral Field EBITDA Margin | 45.2 | % | 44.5 | % | (70 bp) | |||
| Same Store Cemetery Field EBITDA | $ | 5,704 | $ | 5,300 | (7.1%) | |||
| Same Store Cemetery Field EBITDA Margin | 39.0 | % | 37.2 | % | (180 bp) | |||
| Acquisition Cemetery Field EBITDA | 4,102 | 3,299 | (19.6%) | |||||
| Acquisition Cemetery Field EBITDA Margin | 58.8 | % | 52.4 | % | (640 bp) | |||
| Total Cemetery Field EBITDA | $ | 9,806 | $ | 8,599 | (12.3%) | |||
| Total Cemetery Field EBITDA Margin | 45.4 | % | 41.8 | % | (360 bp) | |||
| Total Financial Field EBITDA | $ | 5,305 | $ | 5,263 | (0.8%) | |||
| Total Financial Field EBITDA Margin | 93.0 | % | 92.5 | % | (50 bp) | |||
| Ancillary EBITDA | $ | 242 | $ | 221 | (8.7%) | |||
| Ancillary EBITDA Margin | 20.0 | % | 20.7 | % | 70 bp | |||
| Total Divested/Planned Divested EBITDA | $ | 138 | $ | 111 | (19.6%) | |||
| Total Divested/Planned Divested EBITDA Margin | 12.1 | % | 18.2 | % | 610 bp | |||
| Total Field EBITDA | $ | 45,787 | $ | 45,454 | (0.7%) | |||
| Total Field EBITDA Margin | 47.4 | % | 46.3 | % | (110 bp) | |||
| OPERATING AND FINANCIAL TREND REPORT | ||||||||
| (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) | ||||||||
| Three Months Ended |
||||||||
| 2021 | 2022 | % Change | ||||||
| Overhead | ||||||||
| Total Variable Overhead | $ | 6,900 | $ | 5,175 | (25.0%) | |||
| Total Regional Fixed Overhead | 1,199 | 1,340 | 11.8% | |||||
| Total Corporate Fixed Overhead | 5,500 | 6,631 | 20.6% | |||||
| Total Overhead | $ | 13,599 | $ | 13,146 | (3.3%) | |||
| Overhead as a percentage of Revenue | 14.1 | % | 13.4 | % | (70 bp) | |||
| Consolidated EBITDA | $ | 32,188 | $ | 32,308 | 0.4% | |||
| Consolidated EBITDA Margin | 33.3 | % | 32.9 | % | (40 bp) | |||
| Other Expenses and Interest | ||||||||
| Depreciation & Amortization | $ | 4,942 | $ | 4,783 | ||||
| Non-Cash Stock Compensation | 1,308 | 1,607 | ||||||
| Interest Expense | 7,584 | 5,542 | ||||||
| Accretion of Discount on Convertible Sub. Notes | 20 | — | ||||||
| Net (Gain) Loss on Divestitures | (308 | ) | 703 | |||||
| — | (1,899 | ) | ||||||
| Net Loss on Disposal of Fixed Assets | — | 64 | ||||||
| Other, Net | 68 | 24 | ||||||
| Pre-Tax Income | $ | 18,574 | $ | 21,484 | ||||
| Net Tax Expense | 5,641 | 5,082 | ||||||
| GAAP Net Income | $ | 12,933 | $ | 16,402 | 26.8% | |||
| Special Items | ||||||||
| Severance and Separation Costs | 1,575 | — | ||||||
| Accretion of Discount on Convertible Sub. Notes | 20 | — | ||||||
| Net (Gain) Loss on Divestitures and Other Costs | (308 | ) | 703 | |||||
| — | (1,899 | ) | ||||||
| Disaster Recovery and Pandemic Costs | 894 | 168 | ||||||
| Change in Uncertain Tax Reserves and Other | — | (533 | ) | |||||
| Sum of Special Items | $ | 2,181 | $ | (1,561 | ) | |||
| Tax Effect on Special Items | 424 | (273 | ) | |||||
| Adjusted Net Income | $ | 14,690 | $ | 15,114 | 2.9% | |||
| Adjusted Net Income Margin | 15.2 | % | 15.4 | % | 20 bp | |||
| Adjusted Basic Earnings Per Share | $ | 0.82 | $ | 0.99 | 20.7% | |||
| Adjusted Diluted Earnings Per Share | $ | 0.81 | $ | 0.92 | 13.6% | |||
| GAAP Basic Earnings Per Share | $ | 0.72 | $ | 1.07 | 48.6% | |||
| GAAP Diluted Earnings Per Share | $ | 0.71 | $ | 1.00 | 40.8% | |||
| Weighted Average Basic Shares Outstanding | 17,965 | 15,244 | ||||||
| Weighted Average Diluted Shares Outstanding | 18,199 | 16,369 | ||||||
| Reconciliation to Adjusted Consolidated EBITDA | ||||||||
| Consolidated EBITDA | $ | 32,188 | $ | 32,308 | 0.4% | |||
| Severance and Separation Costs | 1,575 | — | ||||||
| Disaster Recovery and Pandemic Costs | 894 | 168 | ||||||
| Adjusted Consolidated EBITDA | $ | 34,657 | $ | 32,476 | (6.3%) | |||
| Adjusted Consolidated EBITDA Margin | 35.9 | % | 33.1 | % | (280 bp) | |||
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited and in thousands)
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 1,148 | $ | 887 | |||
| Accounts receivable, net | 25,314 | 25,570 | |||||
| Inventories | 7,346 | 7,645 | |||||
| Prepaid and other current assets | 6,404 | 4,005 | |||||
| Total current assets | 40,212 | 38,107 | |||||
| Preneed cemetery trust investments | 100,903 | 102,533 | |||||
| Preneed funeral trust investments | 113,658 | 113,332 | |||||
| Preneed cemetery receivables, net | 23,150 | 22,561 | |||||
| Receivables from funeral preneed trusts, net | 19,009 | 19,160 | |||||
| Property, plant and equipment, net | 269,367 | 271,175 | |||||
| Cemetery property, net | 100,701 | 101,646 | |||||
| 391,972 | 391,071 | ||||||
| Intangible and other non-current assets, net | 29,378 | 29,617 | |||||
| Operating lease right-of-use assets | 17,881 | 17,622 | |||||
| Cemetery perpetual care trust investments | 72,400 | 73,525 | |||||
| Total assets | $ | 1,178,631 | $ | 1,180,349 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Current portion of debt and lease obligations | $ | 2,809 | $ | 2,895 | |||
| Accounts payable | 14,205 | 13,573 | |||||
| Accrued and other liabilities | 43,773 | 31,345 | |||||
| Total current liabilities | 60,787 | 47,813 | |||||
| Acquisition debt, net of current portion | 3,979 | 3,935 | |||||
| Credit facility | 153,857 | 172,746 | |||||
| Senior notes | 394,610 | 394,765 | |||||
| Obligations under finance leases, net of current portion | 5,157 | 5,052 | |||||
| Obligations under operating leases, net of current portion | 18,520 | 18,181 | |||||
| Deferred preneed cemetery revenue | 50,202 | 51,064 | |||||
| Deferred preneed funeral revenue | 30,584 | 30,891 | |||||
| Deferred tax liability | 45,784 | 45,860 | |||||
| Other long-term liabilities | 1,419 | 1,309 | |||||
| Deferred preneed cemetery receipts held in trust | 100,903 | 102,533 | |||||
| Deferred preneed funeral receipts held in trust | 113,658 | 113,332 | |||||
| Care trusts’ corpus | 71,156 | 72,847 | |||||
| Total liabilities | 1,050,616 | 1,060,328 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity: | |||||||
| Common stock | 263 | 263 | |||||
| Additional paid-in capital | 236,809 | 238,423 | |||||
| Retained earnings | 135,462 | 151,864 | |||||
| (244,519 | ) | (270,529 | ) | ||||
| Total stockholders’ equity | 128,015 | 120,021 | |||||
| Total liabilities and stockholders’ equity | $ | 1,178,631 | $ | 1,180,349 | |||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share data)
| Three Months Ended |
|||||||
| 2021 | 2022 | ||||||
| Revenue: | |||||||
| Service revenue | $ | 47,757 | $ | 49,737 | |||
| Property and merchandise revenue | 41,896 | 41,612 | |||||
| Other revenue | 6,984 | 6,812 | |||||
| 96,637 | 98,161 | ||||||
| Field costs and expenses: | |||||||
| Cost of service | 20,967 | 22,104 | |||||
| Cost of merchandise | 28,520 | 29,325 | |||||
| Cemetery property amortization | 1,517 | 1,332 | |||||
| Field depreciation expense | 3,136 | 3,297 | |||||
| Regional and unallocated funeral and cemetery costs | 6,073 | 6,347 | |||||
| Other expenses | 1,363 | 1,278 | |||||
| 61,576 | 63,683 | ||||||
| Gross profit | 35,061 | 34,478 | |||||
| Corporate costs and expenses: | |||||||
| General, administrative and other | 9,123 | 8,560 | |||||
| Net (gain) loss on divestitures, disposals and impairment charges | (308 | ) | 767 | ||||
| Operating income | 26,246 | 25,151 | |||||
| Interest expense | (7,584 | ) | (5,542 | ) | |||
| Accretion of discount on convertible subordinated notes | (20 | ) | — | ||||
| Gain on insurance reimbursements | — | 1,899 | |||||
| Other, net | (68 | ) | (24 | ) | |||
| Income before income taxes | 18,574 | 21,484 | |||||
| Expense for income taxes | (5,758 | ) | (5,704 | ) | |||
| Tax adjustment related to certain discrete items | 117 | 622 | |||||
| Total expense for income taxes | (5,641 | ) | (5,082 | ) | |||
| Net income | $ | 12,933 | $ | 16,402 | |||
| Basic earnings per common share: | $ | 0.72 | $ | 1.07 | |||
| Diluted earnings per common share: | $ | 0.71 | $ | 1.00 | |||
| Dividends declared per common share: | $ | 0.1000 | $ | 0.1125 | |||
| Weighted average number of common and common equivalent shares outstanding: | |||||||
| Basic | 17,965 | 15,244 | |||||
| Diluted | 18,199 | 16,369 | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
| Three Months Ended |
|||||||
| 2021 | 2022 | ||||||
| Cash flows from operating activities: | |||||||
| Net income | $ | 12,933 | $ | 16,402 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 4,942 | 4,783 | |||||
| Provision for credit losses | 588 | 837 | |||||
| Stock-based compensation expense | 1,307 | 1,607 | |||||
| Deferred income tax expense | 1,514 | 76 | |||||
| Amortization of intangibles | 320 | 318 | |||||
| Amortization of debt issuance costs | 193 | 122 | |||||
| Amortization and accretion of debt | 100 | 121 | |||||
| Net loss on divestitures, disposals and impairment charges | 21 | 767 | |||||
| Gain on insurance reimbursements | — | (1,899 | ) | ||||
| Changes in operating assets and liabilities that provided (used) cash: | |||||||
| Accounts and preneed receivables | (1,521 | ) | (504 | ) | |||
| Inventories, prepaid and other current assets | (153 | ) | 2,913 | ||||
| Intangible and other non-current assets | (291 | ) | (340 | ) | |||
| Preneed funeral and cemetery trust investments | (2,952 | ) | (201 | ) | |||
| Accounts payable | (1,712 | ) | (987 | ) | |||
| Accrued and other liabilities | 6,853 | (9,999 | ) | ||||
| Deferred preneed funeral and cemetery revenue | 1,183 | 628 | |||||
| Deferred preneed funeral and cemetery receipts held in trust | 3,486 | 1,157 | |||||
| Net cash provided by operating activities | 26,811 | 15,801 | |||||
| Cash flows from investing activities: | |||||||
| Acquisitions of real estate | (350 | ) | (2,575 | ) | |||
| Proceeds from divestitures and sale of other assets | 2,800 | 1,026 | |||||
| Proceeds from insurance reimbursements | — | 676 | |||||
| Capital expenditures | (4,347 | ) | (6,883 | ) | |||
| Net cash used in investing activities | (1,897 | ) | (7,756 | ) | |||
| Cash flows from financing activities: | |||||||
| Borrowings from the credit facility | 15,168 | 70,700 | |||||
| Payments against the credit facility | (34,068 | ) | (51,900 | ) | |||
| Conversions and maturity of the convertible notes | (3,980 | ) | — | ||||
| Payments on acquisition debt and obligations under finance leases | (233 | ) | (100 | ) | |||
| Payments on contingent consideration recorded at acquisition date | (461 | ) | — | ||||
| Proceeds from the exercise of stock options and employee stock purchase plan contributions | 625 | 663 | |||||
| Taxes paid on restricted stock vestings and exercises of stock options | (642 | ) | (289 | ) | |||
| Dividends paid on common stock | (1,799 | ) | (1,725 | ) | |||
| Purchase of treasury stock | — | (25,655 | ) | ||||
| Other financing costs | (7 | ) | — | ||||
| Net cash used in financing activities | (25,397 | ) | (8,306 | ) | |||
| Net decrease in cash and cash equivalents | (483 | ) | (261 | ) | |||
| Cash and cash equivalents at beginning of period | 889 | 1,148 | |||||
| Cash and cash equivalents at end of period | $ | 406 | $ | 887 | |||
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
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 Accretion of Discount on Convertible Subordinated Notes and the Change in Uncertain Tax Reserves and Other were not tax effected. In Q1 2021, Special Items were taxed at the federal statutory rate of 21.0%, except the Net (Gain) Loss on Divestitures and Other Costs, which was taxed at the operating tax rate. In Q1 2022, all Special Items were taxed at the operating tax rate.
- Adjusted Net Income is defined as net income after adjustments for Special Items that we believe do not directly reflect our core operations and may not be indicative of our normal business operations.
- Adjusted Net Income Margin is defined as Adjusted Net Income as a percentage of total revenue.
- Consolidated EBITDA is defined as net income before income taxes, interest expenses, non-cash stock compensation, depreciation and amortization, and interest income and other, net.
- Consolidated EBITDA Margin is defined as Consolidated EBITDA as a percentage of total revenue.
- Adjusted Consolidated EBITDA is defined as Consolidated EBITDA after adjustments for Special Items that we believe do not directly reflect our core operations and may not be indicative of our normal business operations.
- Adjusted Consolidated EBITDA Margin is defined as Adjusted Consolidated EBITDA as a percentage of total revenue.
- Adjusted Free Cash Flow is defined as net cash provided by operating activities, adjusted by Special Items as deemed necessary, less cash for maintenance capital expenditures.
- Adjusted Free Cash Flow Margin is defined as Adjusted Free Cash Flow as a percentage of total revenue.
- Funeral Field EBITDA is defined as funeral operating income, excluding depreciation and amortization, regional and unallocated costs, gain/loss on divestitures and fixed assets and impairment charges, Financial Field 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 fixed assets and impairment charges, Financial Field EBITDA and Divested/Planned Divested EBITDA related to the Cemetery segment.
- Cemetery Field EBITDA Margin is defined as Cemetery Field EBITDA as a percentage of total cemetery operating revenue.
- Preneed Cemetery Property Sales is defined as cemetery property sold prior to death.
- Funeral Financial Field 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 Consolidated Statement of Operations.
- Funeral Financial Field EBITDA Margin is defined as Funeral Financial Field EBITDA as a percentage of Funeral Financial Revenue.
- Cemetery Financial Field 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 Consolidated Statement of Operations.
- Cemetery Financial Field EBITDA Margin is defined as Cemetery Financial Field 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 Field EBITDA is the sum of Funeral Financial Field EBITDA and Cemetery Financial Field EBITDA.
- Total Financial Field EBITDA Margin is defined as Total Financial Field EBITDA as a percentage of Total Financial Revenue.
- Ancillary Revenue is defined as revenues from our ancillary businesses, which include a flower shop, pet cremation business and online cremation business. Ancillary Revenue and the related expenses are presented within Other Revenue and Other Expenses, respectively, on the Consolidated Statement of Operations.
- Ancillary EBITDA is defined as Ancillary Revenue, less expenses related to our ancillary businesses noted above.
- Ancillary EBITDA Margin is defined as Ancillary EBITDA as a percentage of Ancillary Revenue.
- Divested/Planned Divested Revenue is defined as revenues from certain funeral home and cemetery businesses that we have divested and intend to divest.
- Divested/Planned Divested EBITDA is defined as Divested/Planned Divested Revenue, less field level and financial expenses related to the divested/planned divested businesses noted above.
- Divested/Planned Divested EBITDA Margin is defined as Divested/Planned Divested EBITDA as a percentage of Divested/Planned Divested Revenue.
- Total Field EBITDA is the sum of Funeral Field EBITDA, Cemetery Field EBITDA, Total Financial Field EBITDA, Ancillary EBITDA and Divested/Planned Divested EBITDA.
- Total Field EBITDA Margin is defined as Total Field EBITDA as a percentage of total revenue.
- Adjusted Basic Earnings Per Share (EPS) is defined as GAAP basic earnings per share, adjusted for Special Items.
- Adjusted Diluted Earnings Per Share (EPS) is defined as GAAP diluted earnings per share, adjusted for Special Items.
- Total Debt Outstanding is defined as indebtedness under our bank credit facility, Senior Notes due 2029, acquisition debt and finance leases.
- Total Debt to EBITDA Multiple/Ratio is defined as Total Debt Outstanding to Adjusted Consolidated EBITDA.
Funeral Field EBITDA and Cemetery Field EBITDA
Our operations are reported in two business segments: Funeral Home Operations and Cemetery Operations. Our Field level results highlight trends in volumes, Revenue, Field EBITDA (the individual business’ cash earning power/locally controllable business profit) and Field EBITDA Margin (the individual business’ controllable profit margin).
Funeral Field EBITDA and Cemetery Field EBITDA are defined above. Funeral and Cemetery Operating Income is defined as Revenue less “Field costs and expenses” — a line item encompassing these areas of costs: i) Funeral and cemetery field costs, ii) Field depreciation and amortization expense, iii) Regional and unallocated funeral and cemetery costs, and iv) Gain/loss on divestitures, disposals and impairment charges. Funeral and cemetery field costs include cost of service, funeral and cemetery merchandise costs, operating expenses, labor and other related expenses incurred at the business level.
Regional and unallocated funeral and cemetery costs presented in our GAAP statement consist primarily of salaries and benefits of our Regional leadership, incentive compensation opportunity to our Field employees and other related costs for field infrastructure. These costs, while necessary to operate our businesses as currently operated within our unique, decentralized platform, are not controllable operating expenses at the Field level as the composition, structure and function of these costs are determined by executive leadership in the Houston Support Center. These costs are components of our overall overhead platform presented within Consolidated EBITDA and Adjusted Consolidated EBITDA. We do not directly or indirectly “push down” any of these expenses to the individual business’ field level margins.
We believe that our “Regional and unallocated funeral and cemetery costs” are necessary to support our decentralized, high performance culture operating framework, and as such, are included in Consolidated EBITDA and Adjusted Consolidated EBITDA, which more accurately reflects the cash earning power of the Company as an operating and consolidation platform.
Consolidated EBITDA and Adjusted Consolidated EBITDA
Consolidated EBITDA and Adjusted Consolidated EBITDA are defined above. Our Adjusted Consolidated EBITDA include adjustments for Special Items that we believe do not directly reflect our core operations and may not be indicative of our normal business operations.
How These Measures Are Useful
When used in conjunction with GAAP financial measures, our Total Field EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA are supplemental measures of operating performance that we believe are useful measures to facilitate comparisons to our historical consolidated and business level performance and operating results.
We believe our presentation of Adjusted Consolidated EBITDA, a key metric used internally by our management, provides investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because it excludes items that may not be indicative of our ongoing operating performance.
Limitations of the Usefulness of These Measures
Our Total Field EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA are not necessarily comparable to similarly titled measures used by other companies due to different methods of calculation. Our presentation is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Funeral Field EBITDA, Cemetery Field EBITDA, Funeral Financial Field EBITDA, Cemetery Financial Field 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.
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):
| 1STQTR 2021 | 2NDQTR 2021 | 3RDQTR 2021 | 4THQTR 2021 | 1STQTR 2022 | |||||||||||||||
| Net Income (Loss) | $ | 12,933 | $ | (6,167 | ) | $ | 13,046 | $ | 13,347 | $ | 16,402 | ||||||||
| Special Items | |||||||||||||||||||
| Severance and Separation Costs | 1,575 | — | — | — | — | ||||||||||||||
| Accretion of Discount on Convertible Subordinated Notes(1) | 20 | — | — | — | — | ||||||||||||||
| Loss on Extinguishment of Debt | — | 23,807 | — | — | — | ||||||||||||||
| Net (Gain) Loss on Divestitures and Other Costs | (308 | ) | 205 | 282 | (1,035 | ) | 703 | ||||||||||||
| — | — | 500 | — | — | |||||||||||||||
| — | — | — | — | (1,899 | ) | ||||||||||||||
| Litigation Reserve | — | — | — | 1,050 | — | ||||||||||||||
| Disaster Recovery and Pandemic Costs | 894 | 145 | 1,002 | 116 | 168 | ||||||||||||||
| Other Special Items | — | 1,334 | 1,020 | — | — | ||||||||||||||
| Change in Uncertain Tax Reserves and Other(1) | — | — | — | — | (533 | ) | |||||||||||||
| Sum of Special Items | $ | 2,181 | $ | 25,491 | $ | 2,804 | $ | 131 | $ | (1,561 | ) | ||||||||
| Tax Effect on Special Items(2) | 424 | 7,457 | 738 | (116 | ) | (273 | ) | ||||||||||||
| Adjusted Net Income | $ | 14,690 | $ | 11,867 | $ | 15,112 | $ | 13,594 | $ | 15,114 | |||||||||
| (1) The Accretion of Discount on Convertible Subordinated Notes and the Change in Uncertain Tax Reserves are not tax effected. | |||||||||||||||||||
| (2) In Q1 2021, Special Items were taxed at the federal statutory rate of 21.0%, except the Net (Gain) Loss on Divestitures and Other Costs, which was taxed at the operating tax rate. In Q1 2022, all Special Items were taxed at the operating tax rate. | |||||||||||||||||||
Reconciliation of Net Income (Loss) to Consolidated EBITDA, Adjusted Consolidated EBITDA (in thousands) and Adjusted Consolidated EBITDA Margin:
| 1STQTR 2021 | 2NDQTR 2021 | 3RDQTR 2021 | 4THQTR 2021 | 1STQTR 2022 | ||||||||||||||||
| Net Income (Loss) | $ | 12,933 | $ | (6,167 | ) | $ | 13,046 | $ | 13,347 | $ | 16,402 | |||||||||
| Total Expense (Benefit) for Income Taxes | 5,641 | (4,192 | ) | 5,122 | 4,574 | 5,082 | ||||||||||||||
| Income (Loss) Before Income Taxes | $ | 18,574 | $ | (10,359 | ) | $ | 18,168 | $ | 17,921 | $ | 21,484 | |||||||||
| Interest Expense | 7,584 | 7,478 | 5,076 | 5,307 | 5,542 | |||||||||||||||
| Accretion of Discount on Convertible Subordinated Notes | 20 | — | — | — | — | |||||||||||||||
| Non-Cash Stock Compensation | 1,308 | 1,230 | 1,294 | 1,681 | 1,607 | |||||||||||||||
| Depreciation & Amortization | 4,942 | 5,594 | 4,950 | 5,034 | 4,783 | |||||||||||||||
| Loss on Extinguishment of Debt | — | 23,807 | — | — | — | |||||||||||||||
| Net (Gain) Loss on Divestitures | (308 | ) | 205 | 282 | (1,035 | ) | 703 | |||||||||||||
| Impairment of |
— | — | 500 | — | — | |||||||||||||||
| — | — | — | — | (1,899 | ) | |||||||||||||||
| Net Loss on Disposal of Fixed Assets | — | 622 | 76 | 324 | 64 | |||||||||||||||
| Other, Net | 68 | (2 | ) | 21 | (3 | ) | 24 | |||||||||||||
| Consolidated EBITDA | $ | 32,188 | $ | 28,575 | $ | 30,367 | $ | 29,229 | $ | 32,308 | ||||||||||
| Adjusted For: | ||||||||||||||||||||
| Severance and Separation Costs | 1,575 | — | — | — | — | |||||||||||||||
| Litigation Reserve | — | — | — | 1,050 | — | |||||||||||||||
| Disaster Recovery and Pandemic Costs | 894 | 145 | 1,002 | 116 | 168 | |||||||||||||||
| Other Special Items | — | — | 1,020 | — | — | |||||||||||||||
| Adjusted Consolidated EBITDA | $ | 34,657 | $ | 28,720 | $ | 32,389 | $ | 30,395 | $ | 32,476 | ||||||||||
| Total Revenue | $ | 96,637 | $ | 88,277 | $ | 95,041 | $ | 95,931 | $ | 98,161 | ||||||||||
| Adjusted Consolidated EBITDA Margin | 35.9 | % | 32.5 | % | 34.1 | % | 31.7 | % | 33.1 | % | ||||||||||
| Net Income (Loss) Margin | 13.4 | % | (7.0) | % | 13.7 | % | 13.9 | % | 16.7 | % | ||||||||||
Components of Total Revenue (in thousands):
| 1STQTR 2021 | 2NDQTR 2021 | 3RDQTR 2021 | 4THQTR 2021 | 1STQTR 2022 | |||||||||||||||
| Same Store Funeral Revenue | $ | 58,983 | $ | 49,015 | $ | 57,205 | $ | 57,285 | $ | 61,632 | |||||||||
| Acquisition Funeral Revenue | 7,985 | 6,939 | 7,651 | 8,007 | 8,610 | ||||||||||||||
| Same Store Cemetery Revenue | 14,635 | 16,906 | 16,342 | 16,288 | 14,251 | ||||||||||||||
| Acquisition Cemetery Revenue | 6,980 | 8,175 | 6,362 | 6,312 | 6,297 | ||||||||||||||
| Funeral Financial Revenue | 2,538 | 2,111 | 2,251 | 2,506 | 2,434 | ||||||||||||||
| Cemetery Financial Revenue | 3,168 | 3,294 | 3,388 | 3,661 | 3,258 | ||||||||||||||
| Ancillary Revenue | 1,207 | 1,088 | 1,096 | 1,046 | 1,070 | ||||||||||||||
| Divested/Planned Divested Funeral Revenue | 1,061 | 679 | 694 | 740 | 609 | ||||||||||||||
| Divested Cemetery Revenue | 80 | 70 | 52 | 86 | — | ||||||||||||||
| Total Revenue | $ | 96,637 | $ | 88,277 | $ | 95,041 | $ | 95,931 | $ | 98,161 | |||||||||
Reconciliation of Funeral and Cemetery Operating Income to Funeral and Cemetery Field EBITDA (in thousands):
| 1STQTR 2021 | 2NDQTR 2021 | 3RDQTR 2021 | 4THQTR 2021 | 1STQTR 2022 | ||||||||||||||||
| Funeral Operating Income (GAAP) | $ | 25,876 | $ | 16,604 | $ | 22,924 | $ | 23,187 | $ | 25,463 | ||||||||||
| Depreciation & Amortization | 2,769 | 2,766 | 2,761 | 2,766 | 2,871 | |||||||||||||||
| Regional & Unallocated Costs | 4,569 | 4,023 | 4,907 | 5,419 | 4,634 | |||||||||||||||
| Net (Gain) Loss on Divestitures, Disposals and Impairment Charges | (308 | ) | 791 | 763 | (810 | ) | 767 | |||||||||||||
| Less: | ||||||||||||||||||||
| Funeral Financial EBITDA | (2,261 | ) | (1,888 | ) | (1,960 | ) | (2,245 | ) | (2,143 | ) | ||||||||||
| Ancillary EBITDA | (242 | ) | (274 | ) | (274 | ) | (216 | ) | (221 | ) | ||||||||||
| Funeral Divested/Planned Divested EBITDA | (107 | ) | (95 | ) | (186 | ) | (217 | ) | (111 | ) | ||||||||||
| Funeral Field EBITDA | $ | 30,296 | $ | 21,927 | $ | 28,935 | $ | 27,884 | $ | 31,260 | ||||||||||
| Funeral Revenue | $ | 71,774 | $ | 59,832 | $ | 68,897 | $ | 69,584 | $ | 74,355 | ||||||||||
| Funeral Operating Income Margin | 36.1 | % | 27.8 | % | 33.3 | % | 33.3 | % | 34.2 | % | ||||||||||
| 1STQTR 2021 | 2NDQTR 2021 | 3RDQTR 2021 | 4THQTR 2021 | 1STQTR 2022 | ||||||||||||||||
| Cemetery Operating Income (GAAP) | $ | 9,493 | $ | 11,498 | $ | 9,471 | $ | 9,891 | $ | 8,248 | ||||||||||
| Depreciation & Amortization | 1,884 | 2,551 | 1,914 | 1,868 | 1,758 | |||||||||||||||
| Regional & Unallocated Costs | 1,504 | 1,747 | 1,905 | 1,772 | 1,713 | |||||||||||||||
| Net Loss on Divestitures, Disposals and Impairment Charges | — | 34 | 6 | 96 | — | |||||||||||||||
| Less: | ||||||||||||||||||||
| Cemetery Financial EBITDA | (3,044 | ) | (3,170 | ) | (3,265 | ) | (3,532 | ) | (3,120 | ) | ||||||||||
| Cemetery Divested EBITDA | (31 | ) | (16 | ) | (19 | ) | (16 | ) | — | |||||||||||
| Cemetery Field EBITDA | $ | 9,806 | $ | 12,644 | $ | 10,012 | $ | 10,079 | $ | 8,599 | ||||||||||
| Cemetery Revenue | $ | 24,863 | $ | 28,445 | $ | 26,144 | $ | 26,347 | $ | 23,806 | ||||||||||
| Cemetery Operating Income Margin | 38.2 | % | 40.4 | % | 36.2 | % | 37.5 | % | 34.6 | % | ||||||||||
Components of Total Field EBITDA (in thousands):
| 1STQTR 2021 | 2NDQTR 2021 | 3RDQTR 2021 | 4THQTR 2021 | 1STQTR 2022 | ||||||||||||||||
| Funeral Field EBITDA | $ | 30,296 | $ | 21,927 | $ | 28,935 | $ | 27,884 | $ | 31,260 | ||||||||||
| Cemetery Field EBITDA | 9,806 | 12,644 | 10,012 | 10,079 | 8,599 | |||||||||||||||
| Funeral Financial EBITDA | 2,261 | 1,888 | 1,960 | 2,245 | 2,143 | |||||||||||||||
| Cemetery Financial EBITDA | 3,044 | 3,170 | 3,265 | 3,532 | 3,120 | |||||||||||||||
| Ancillary EBITDA | 242 | 274 | 274 | 216 | 221 | |||||||||||||||
| Funeral Divested/Planned Divested EBITDA | 107 | 95 | 186 | 217 | 111 | |||||||||||||||
| Cemetery Divested EBITDA | 31 | 16 | 19 | 16 | — | |||||||||||||||
| Total Field EBITDA | $ | 45,787 | $ | 40,014 | $ | 44,651 | $ | 44,189 | $ | 45,454 | ||||||||||
Reconciliation of GAAP Basic Earnings (Loss) Per Share to Adjusted Basic Earnings Per Share:
| 1STQTR 2021 | 2NDQTR 2021 | 3RDQTR 2021 | 4THQTR 2021 | 1STQTR 2022 | ||||||||||||||||
| GAAP Basic Earnings (Loss) Per Share | $ | 0.72 | $ | (0.34 | ) | $ | 0.74 | $ | 0.82 | $ | 1.07 | |||||||||
| Special Items | 0.10 | 1.00 | 0.12 | 0.01 | (0.08 | ) | ||||||||||||||
| Adjusted Basic Earnings Per Share | $ | 0.82 | $ | 0.66 | $ | 0.86 | $ | 0.83 | $ | 0.99 | ||||||||||
Reconciliation of GAAP Diluted Earnings (Loss) Per Share to Adjusted Diluted Earnings Per Share:
| 1STQTR 2021 | 2NDQTR 2021 | 3RDQTR 2021 | 4THQTR 2021 | 1STQTR 2022 | ||||||||||||||||
| GAAP Diluted Earnings (Loss) Per Share | $ | 0.71 | $ | (0.33 | ) | $ | 0.71 | $ | 0.77 | $ | 1.00 | |||||||||
| Special Items | 0.10 | 0.97 | 0.11 | 0.01 | (0.08 | ) | ||||||||||||||
| Adjusted Diluted Earnings Per Share | $ | 0.81 | $ | 0.64 | $ | 0.82 | $ | 0.78 | $ | 0.92 | ||||||||||
Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow (in thousands) and Adjusted Free Cash Flow Margin:
| 1STQTR 2021 | 2NDQTR 2021 | 3RDQTR 2021 | 4THQTR 2021 | 1STQTR 2022 | ||||||||||||||||
| Cash Flow Provided by Operating Activities | $ | 26,811 | $ | 14,630 | $ | 28,258 | $ | 14,547 | $ | 15,801 | ||||||||||
| Cash used for Maintenance Capital Expenditures | (2,140 | ) | (2,462 | ) | (4,358 | ) | (4,355 | ) | (3,612 | ) | ||||||||||
| Free Cash Flow | $ | 24,671 | $ | 12,168 | $ | 23,900 | $ | 10,192 | $ | 12,189 | ||||||||||
| Plus: Incremental Special Items: | ||||||||||||||||||||
| Severance and Separation Costs | 1,575 | — | — | — | — | |||||||||||||||
| Disaster Recovery and Pandemic Costs | 894 | 145 | 1,002 | 116 | 168 | |||||||||||||||
| Other Special Items | — | — | 1,020 | — | — | |||||||||||||||
| Adjusted Free Cash Flow | $ | 27,140 | $ | 12,313 | $ | 25,922 | $ | 10,308 | $ | 12,357 | ||||||||||
| Total Revenue | $ | 96,637 | $ | 88,277 | $ | 95,041 | $ | 95,931 | $ | 98,161 | ||||||||||
| Adjusted Free Cash Flow Margin | 28.1 | % | 13.9 | % | 27.3 | % | 10.7 | % | 12.6 | % | ||||||||||
| Net Cash Provided by Operating Activities as a Percentage of Total Revenue | 27.7 | % | 16.6 | % | 29.7 | % | 15.2 | % | 16.1 | % | ||||||||||
Components of Total Revenue (in thousands):
| 2019A | 2020A | 2021A | |||||||||
| Same Store Funeral Revenue | $ | 188,026 | $ | 199,294 | $ | 222,488 | |||||
| Acquisition Funeral Revenue | 8,834 | 27,924 | 30,582 | ||||||||
| Same Store Cemetery Revenue | 49,258 | 51,767 | 64,171 | ||||||||
| Acquisition Cemetery Revenue | 295 | 17,584 | 27,829 | ||||||||
| Funeral Financial Revenue | 8,510 | 9,177 | 9,406 | ||||||||
| Cemetery Financial Revenue | 7,440 | 10,713 | 13,511 | ||||||||
| Ancillary Revenue | 748 | 4,661 | 4,437 | ||||||||
| Divested/Planned Divested Funeral Revenue | 10,750 | 8,082 | 3,174 | ||||||||
| Divested Cemetery Revenue | 246 | 246 | 288 | ||||||||
| Total Revenue | $ | 274,107 | $ | 329,448 | $ | 375,886 | |||||
Reconciliation of Funeral Operating Income to Funeral Field EBITDA (in thousands) and Funeral Operating Income Margin:
| 2019A | 2020A | 2021A | |||||||||
| Funeral Operating Income (GAAP) | $ | 58,756 | $ | 57,622 | $ | 88,591 | |||||
| Depreciation & Amortization | 11,128 | 11,586 | 11,062 | ||||||||
| Regional & Unallocated Costs | 11,007 | 14,348 | 18,918 | ||||||||
| Net (Gain) Loss on Divestitures, Disposals and Impairment Charges | 4,846 | 21,442 | 436 | ||||||||
| Less: | |||||||||||
| Funeral Financial Field EBITDA | (7,491 | ) | (8,267 | ) | (8,354 | ) | |||||
| Ancillary EBITDA | (298 | ) | (1,186 | ) | (1,006 | ) | |||||
| Divested/Planned Divested Funeral EBITDA | (2,261 | ) | (2,068 | ) | (605 | ) | |||||
| Funeral Field EBITDA | $ | 75,687 | $ | 93,477 | $ | 109,042 | |||||
| Funeral Revenue | $ | 216,868 | $ | 249,138 | $ | 270,087 | |||||
| Funeral Operating Income Margin | 27.1 | % | 23.1 | % | 32.8 | % | |||||
Reconciliation of Cemetery Operating Income to Cemetery Field EBITDA (in thousands) and Cemetery Operating Income Margin:
| 2019A | 2020A | 2021A | |||||||||
| Cemetery Operating Income (GAAP) | $ | 15,983 | $ | 26,859 | $ | 40,353 | |||||
| Depreciation & Amortization | 5,227 | 6,376 | 8,217 | ||||||||
| Regional & Unallocated Costs | 2,820 | 3,709 | 6,928 | ||||||||
| Net Loss on Divestitures, Disposals and Impairment Charges | — | — | 136 | ||||||||
| Less: | |||||||||||
| Cemetery Financial Field EBITDA | (6,853 | ) | (10,292 | ) | (13,011 | ) | |||||
| Divested Cemetery EBITDA | (76 | ) | (23 | ) | (82 | ) | |||||
| Cemetery Field EBITDA | $ | 17,101 | $ | 26,629 | $ | 42,541 | |||||
| Cemetery Revenue | $ | 57,239 | $ | 80,310 | $ | 105,799 | |||||
| Cemetery Operating Income Margin | 27.9 | % | 33.4 | % | 38.1 | % | |||||
Components of Total Field EBITDA (in thousands):
| 2019A | 2020A | 2021A | |||||||||
| Funeral Field EBITDA | $ | 75,687 | $ | 93,477 | $ | 109,042 | |||||
| Cemetery Field EBITDA | 17,101 | 26,629 | 42,541 | ||||||||
| Funeral Financial Field EBITDA | 7,491 | 8,267 | 8,354 | ||||||||
| Cemetery Financial Field EBITDA | 6,853 | 10,292 | 13,011 | ||||||||
| Ancillary EBITDA | 298 | 1,186 | 1,006 | ||||||||
| Divested/Planned Divested Funeral EBITDA | 2,261 | 2,068 | 605 | ||||||||
| Divested Cemetery EBITDA | 76 | 23 | 82 | ||||||||
| Total Field EBITDA | $ | 109,767 | $ | 141,942 | $ | 174,641 | |||||
Reconciliation of Actual Results for years ended
Earlier in this press release, we present the Three Year Roughly Right Ranges Performance Scenario 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. This Performance Scenario is 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 in this Performance Scenario.
Reconciliation of Net Income to Consolidated EBITDA, Total Field EBITDA (in thousands) and Total Field EBITDA Margin:
| 2019A | 2020A | 2021A | 2022E | 2023E | 2024E | ||||||||||||||||||
| Net Income | $ | 14,533 | $ | 16,090 | $ | 33,159 | $ | 57,500 | $ | 65,000 | $ | 74,000 | |||||||||||
| Total Tax Expense | 7,883 | 8,552 | 11,145 | 21,500 | 24,000 | 29,000 | |||||||||||||||||
| Pretax Income | $ | 22,416 | $ | 24,642 | $ | 44,304 | $ | 79,000 | $ | 89,000 | $ | 103,000 | |||||||||||
| Net Interest Expense, including Accretion of Discount on Convertible Subordinated Notes | 25,763 | 32,731 | 25,465 | 22,000 | 24,500 | 24,600 | |||||||||||||||||
| Depreciation & Amortization, including Non-cash Stock Compensation, Gain on Insurance Reimbursements and Other, Net | 19,188 | 22,607 | 26,117 | 28,000 | 29,000 | 31,000 | |||||||||||||||||
| Net Loss on Divestitures, Disposals, Impairment Charges | 4,846 | 21,442 | 666 | — | — | — | |||||||||||||||||
| Net Loss on Extinguishment of Debt | — | 6 | 23,807 | — | — | — | |||||||||||||||||
| Consolidated EBITDA | $ | 72,213 | $ | 101,428 | $ | 120,359 | $ | 129,000 | $ | 142,500 | $ | 158,600 | |||||||||||
| Overhead | 37,554 | 40,514 | 54,282 | 52,000 | 54,000 | 58,000 | |||||||||||||||||
| Total Field EBITDA | $ | 109,767 | $ | 141,942 | $ | 174,641 | $ | 181,000 | $ | 196,500 | $ | 216,600 | |||||||||||
| Total Revenue | $ | 274,107 | $ | 329,448 | $ | 375,886 | $ | 387,000 | $ | 414,000 | $ | 455,000 | |||||||||||
| Total Field EBITDA Margin | 40.0 | % | 43.1 | % | 46.5 | % | 46.8 | % | 47.5 | % | 47.6 | % | |||||||||||
Reconciliation of Consolidated EBITDA to Adjusted Consolidated EBITDA (in thousands) and Adjusted Consolidated EBITDA Margin:
| 2019A | 2020A | 2021A | 2022E | 2023E | 2024E | ||||||||||||||||||
| Consolidated EBITDA | $ | 72,213 | $ | 101,428 | $ | 120,359 | $ | 129,000 | $ | 142,500 | $ | 158,600 | |||||||||||
| Special Items | 4,374 | 2,822 | 5,802 | — | — | — | |||||||||||||||||
| Adjusted Consolidated EBITDA | $ | 76,587 | $ | 104,250 | $ | 126,161 | $ | 129,000 | $ | 142,500 | $ | 158,600 | |||||||||||
| Total Revenue | $ | 274,107 | $ | 329,448 | $ | 375,886 | $ | 387,000 | $ | 414,000 | $ | 455,000 | |||||||||||
| Adjusted Consolidated EBITDA Margin | 27.9 | % | 31.6 | % | 33.6 | % | 33.3 | % | 34.4 | % | 34.9 | % | |||||||||||
Reconciliation of Net Income to Adjusted Net Income (in thousands):
| 2019A | 2020A | 2021A | 2022E | 2023E | 2024E | ||||||||||||||||||
| Net Income | $ | 14,533 | $ | 16,090 | $ | 33,159 | $ | 57,500 | $ | 65,000 | $ | 74,000 | |||||||||||
| Special Items | 7,999 | 17,593 | 22,104 | — | — | — | |||||||||||||||||
| Adjusted Net Income | $ | 22,532 | $ | 33,683 | $ | 55,263 | $ | 57,500 | $ | 65,000 | $ | 74,000 | |||||||||||
Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share:
| 2019A | 2020A | 2021A | 2022E | 2023E | 2024E | ||||||||||||||||||
| GAAP Diluted Earnings Per Share | $ | 0.80 | $ | 0.89 | $ | 1.81 | $ | 3.55 | $ | 3.94 | $ | 4.43 | |||||||||||
| Special Items | 0.45 | 0.97 | 1.21 | — | — | — | |||||||||||||||||
| Adjusted Diluted Earnings Per Share | $ | 1.25 | $ | 1.86 | $ | 3.02 | $ | 3.55 | $ | 3.94 | $ | 4.43 | |||||||||||
Reconciliation of Cash Flow Provided by Operating Activities to Adjusted Free Cash Flow (in thousands) and Adjusted Free Cash Flow Margin:
| 2019A | 2020A | 2021A | 2022E | 2023E | 2024E | ||||||||||||||||||
| Cash Flow Provided by Operating Activities | $ | 43,216 | $ | 82,915 | $ | 84,246 | $ | 94,000 | $ | 100,500 | $ | 110,000 | |||||||||||
| Cash used for Maintenance Capital Expenditures | (8,795 | ) | (8,762 | ) | (13,315 | ) | (12,000 | ) | (12,500 | ) | (13,000 | ) | |||||||||||
| Special Items | 4,374 | (4,190 | ) | 4,752 | — | — | — | ||||||||||||||||
| Adjusted Free Cash Flow | $ | 38,795 | $ | 69,963 | $ | 75,683 | $ | 82,000 | $ | 88,000 | $ | 97,000 | |||||||||||
| Total Revenue | $ | 274,107 | $ | 329,448 | $ | 375,886 | $ | 387,000 | $ | 414,000 | $ | 455,000 | |||||||||||
| Adjusted Free Cash Flow Margin | 14.2 | % | 21.2 | % | 20.1 | % | 21.2 | % | 21.3 | % | 21.3 | % | |||||||||||
| Net Cash Provided by Operating Activities as a Percentage of Total Revenue | 15.8 | % | 25.2 | % | 22.4 | % | 24.3 | % | 24.3 | % | 24.2 | % | |||||||||||
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition to historical information, this Press Release contains certain statements and information that may constitute forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical information, should be deemed to be forward-looking statements. These statements include, but are not limited to, statements regarding any projections of earnings, revenue, cash flow, capital allocation, debt levels, equity performance, market share growth, overhead, including field and corporate incentive compensation, or other financial items; any statements of the plans, strategies and objectives of management for future operations or financing activities, including, but not limited, to capital allocation and organizational performance; any statements of the plans, timing and objectives of management for acquisition activities; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future developments and their potential effect on us. The words “may”, “will”, “estimate”, “intend”, “believe”, “expect”, “seek”, “project”, “forecast”, “foresee”, “should”, “would”, “could”, “plan”, “anticipate” and other similar words or expressions are intended to identify forward-looking statements, which are generally not historical in nature. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenue and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. 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 and optimization plan;
- the investment performance of our funeral and cemetery trust funds;
- fluctuations in interest rates;
- our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
- our ability to meet the timing, objectives and expectations related to our capital allocation framework, including our forecasted rates of return, planned uses of free cash flow and future capital allocation, including share repurchases, potential strategic acquisitions, internal growth projects, dividend increases, or debt repayment plans;
- our ability to meet the projected financial and equity performance metrics to our updated three-year roughly right range and performance scenario, our rolling four quarter outlook, and intrinsic value per share range, if at all;
- the timely and full payment of death benefits related to preneed funeral contracts funded through life insurance contracts;
- the financial condition of third-party insurance companies that fund our preneed funeral contracts;
- increased or unanticipated costs, such as insurance or taxes;
- our level of indebtedness and the cash required to service our indebtedness;
- changes in federal income tax laws and regulations and the implementation and interpretation of these laws and regulations by the
Internal Revenue Service ; - effects of the application of other applicable laws and regulations, including changes in such regulations or the interpretation thereof;
- the potential impact of epidemics and pandemics, including the COVID-19 coronavirus, including new variants of COVID-19, such as the Delta and Omicron variants, on customer preferences and on our business;
- government, social, business and other actions that have been and will be taken in response to pandemics, including potential responses to new variants of COVID-19, such as the Delta and Omicron variants;
- effects and expense of litigation;
- consolidation of the funeral and cemetery industry;
- our ability to identify and consummate strategic acquisitions, if at all, and successfully integrate acquired businesses with our existing businesses, including expected performance and financial improvements related thereto;
- economic, financial and stock market fluctuations,
- interruptions or security lapses of our information technology, including any cybersecurity or ransomware incidents,
- our failure to maintain effective control over financial reporting; and
- other factors and uncertainties inherent in the funeral and cemetery industry.
For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see “Risk Factors” in our Annual Report on Form 10-K for the year ended
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.
Carriage Services, Inc.