Carriage Services Announces Record Fourth Quarter, 2020 Full Year Results
Carriage Services, Inc. (CSV) reported record financial results for Q4 and FY 2020, with revenues of $90.1 million and $329.4 million, respectively. Adjusted EBITDA reached $28.3 million for Q4 and $104.3 million for the full year, yielding a margin of 31.6%. The company achieved a record diluted EPS of $1.86, reflecting a 48.8% increase year-over-year. Despite a high leverage ratio of 4.4 times, CSV plans to refinance $400 million in senior notes to lower interest costs. The pandemic's impact spurred performance growth, and January 2021 showed continued strong metrics, signaling sustained operational momentum.
- Record Q4 revenue increased 26.6% year-over-year to $90.1 million.
- Adjusted Consolidated EBITDA for FY 2020 was $104.3 million, up 36.1%.
- Record Adjusted Diluted EPS of $1.86, a 48.8% increase from 2019.
- Elevated free cash flow of $70 million, marking an 80.3% increase.
- Debt reduced by $72.9 million, resulting in a leverage ratio decline from 6.0 to 4.4 times.
- Leverage ratio remains high at 4.4 times compared to the target of 4.0 times.
- Uncertainty around COVID-19 variants may impact future performance.
- Increases Two Year Roughly Right Scenario;
- Record Monthly January Performance / First Quarter 2021 Will Reflect Elevated Spike in COVID-19 Deaths;
- Preparations Begun for Balance Sheet Refinancing After June 1, 2021; and
- Carriage Services 2021 Theme: Accelerating High Performance Flywheel Effect!
Conference call on Thursday, February 18, 2021 at 9:30 a.m. central time.
HOUSTON, Feb. 17, 2021 (GLOBE NEWSWIRE) -- Carriage Services, Inc. (NYSE: CSV) today announced record results for the fourth quarter and full year ended December 31, 2020 as shown below:
- Record Fourth Quarter and Full Year Revenue of
$90.1 million and$329.4 million , respectively; - Record Adjusted Consolidated EBITDA of
$28.3 million and$104.3 million , respectively; - Record Full Year Adjusted Consolidated EBITDA Margin of
31.6% ; - Record Full Year Adjusted Free Cash Flow of
$70.0 million ; - Record Adjusted Diluted EPS of
$0.57 and$1.86 , respectively; - Record EBITDA increase/debt reduction decrease of
$72.9 million drove decline in leverage ratio from 6.0 to 4.4 times and; - Recent recognition by FORBES as one of America’s Top 100 small companies.
Mel Payne, Chairman and CEO, stated, “On February 19, 2020, we announced our annual theme for 2020 as TRANSFORMATIVE HIGH PERFORMANCE and the beginning of the five year timeframe of Carriage’s Good To Great Journey Part II. We also introduced our MILESTONE THREE YEAR SCENARIO reflecting Carriage’s performance transformation by year through 2022. At the top of page two in the February 19th release I summarized the three year transformation process achievements ending 2022 as follows: ‘Reflecting back …. on (performance and balance sheet achievements 2019 through 2022), our company will have executed what we believe in hindsight will be viewed as a complete Carriage Leadership, Portfolio High Performance, Balance Sheet, Earnings and Free Cash Flow Transformation as a Value Creation Platform.’
Then the Coronavirus Pandemic came to America and spread across our portfolio with accompanying government lockdown restrictions about how we conduct our business, severely impacting the very social nature of our work. None of us could have imagined during the last two weeks of March and first two weeks of April that our leadership and employees, both in our funeral home and cemetery operating businesses as well as on our support teams in the field and Houston Support Center, would quickly adapt to the COVID Crisis environment and produce courageous, even heroic, service to their client families and communities, becoming role models for what Being The Best leadership in times of crisis is all about. The last two sections of this release beginning on Page 15 is the last paragraph of my annual theme letter at the beginning of 2020 followed on Page 16 by my year end message to all our employees, “must reads” for any investor or high quality independent business owner in our industry, as they express clearly and profoundly “who and what really matters” in our company culture.
Moreover, our courageous “warrior leaders” and their winning teams of employees on the front lines of the COVID-19 battlefield were able to achieve almost all of the high performance financial milestones in 2020 that had been forecast on February 19th, 2020 for full year 2022. Application to
The only three year milestone achievement exception was leverage ratio, as our actual Total Debt to Adjusted Consolidated EBITDA Ratio was 4.4 times at December 31, 2020 versus 3.8 - 4.0 times originally forecast for the year ending December 31, 2022. We expect to achieve the balance sheet transformation to a moderate leverage policy of about 4 times within the next few months from a combination of a strong first quarter 2021 performance with Free Cash Flow and divestiture proceeds applied to a meaningful reduction in debt, at which time we plan to refinance
Shown below and on the following pages are comparative 2020 and 2019 financial performance highlights for the fourth quarter and full year, comparative January 2021 performance highlights, the Five Quarter Trend Report ending December 31, 2020 and our updated and increased Two Year Roughly Right Scenario ending December 31, 2022.
Fourth Quarter Ended December 31, 2020 versus Fourth Quarter Ended December 31, 2019
- Record Total Revenue of
$90.1 million compared to$71.1 million , an increase of26.6% ; - Record Total Field EBITDA of
$41.3 million compared to$28.6 million , an increase of44.4% ; - Record Total Field EBITDA Margin of
45.9% compared to40.2% , an increase of 570 basis points; - Record Adjusted Consolidated EBITDA of
$28.3 million compared to$19.2 million , an increase of47.5% ; - Adjusted Consolidated EBITDA Margin of
31.4% compared to27.0% , an increase of 440 basis points; - Record Adjusted Diluted EPS of
$0.57 compared to$0.28 , an increase of103.6% ; - Adjusted Free Cash Flow of
$11.9 million compared to$7.2 million , an increase of64.5% ; - Adjusted Free Cash Flow Margin of
13.2% compared to10.1% , an increase of 310 basis points; - Total Debt reduction during the fourth quarter of
$9.9 million to$461.1 million ; - Net Income of
$8.4 million , an increase of$5.8 million equal to225.6% ; and - GAAP Diluted EPS of
$0.46 , an increase of$0.32 per share equal to228.6% .
Year Ended December 31, 2020 versus Year Ended December 31, 2019
- Record Total Revenue of
$329.4 million compared to$274.1 million , an increase of20.2% ; - Record Total Field EBITDA of
$141.9 million compared to$109.8 million , an increase of29.3% ; - Record Total Field EBITDA Margin of
43.1% compared to40.0% , an increase of 310 basis points; - Record Adjusted Consolidated EBITDA of
$104.3 million compared to$76.6 million , an increase of36.1% ; - Record Adjusted Consolidated EBITDA Margin of
31.6% compared to27.9% , an increase of 370 basis points; - Record Adjusted Diluted EPS of
$1.86 compared to$1.25 , an increase of48.8% ; - Record Adjusted Free Cash Flow of
$70.0 million compared to$38.8 million , an increase of80.3% ; - Record Adjusted Free Cash Flow Margin of
21.2% compared to14.2% , an increase of 700 basis points; - Record Total Debt reduction of
$72.9 million equal to13.7% from$534 million on January 3, 2020 (peak debt after Oakmont acquisition) to$461.1 million on December 31, 2020. - Total Debt of
$461.1 million at December 31 to 2020 Adjusted Consolidated EBITDA of$104.3 million equal to 4.4 times compared to Total Peak Debt of$534 million at January 3rd, 2020 to Trailing Four Quarter EBITDA (proforma for three acquisitions in fourth quarter 2019 and one on January 3, 2020) of$89.0 million at December 31, 2019 equal to 6.0 times, a decline of 1.6 turns of leverage during 2020; - Net Income of
$16.1 million , an increase of$1.6 million equal to10.7% ; and - GAAP Diluted EPS of
$0.89 , an increase of$0.09 per share equal to11.3% .
We previously presented extensive explanations in our first, second and third quarter earnings releases as to why our High Performance Teams have been able to perform at such an extraordinary level in the face of the Coronavirus Pandemic, which are incorporated by reference herein and will not be repeated in this release. The primary takeaways from our 2020 Full Year TRANSFORMATIVE HIGH PERFORMANCE that will also explain the primary drivers of the continuation of high and sustainable performance in the future are as follows:
- Leadership Teams at all levels are aligned and incentivized for outstanding execution of Carriage’s Three Core Models to produce a sustainable and powerful performance “FLYWHEEL EFFECT”;
- Coronavirus accelerated adaptation, entrepreneurialism and innovation across our portfolio by our Managing Partners and Sales Managers, who created high value uniquely customized personal services and sales in hugely adverse local environments;
- Innovation in business practices and rapid and broad acceptance of technological and digital tools to meet and communicate with client families served as an accelerator of Transformative High Performance;
- COVID performance lift in volumes, revenues and margins was material, especially so beginning in December 2020 and continuing to spike thus far into 2021, yet we are confident that the combined performance from our five core operating and financial profit centers will sustain the high performance trend in 2021 and thereafter;
- Strong Same Store Funeral Performance reflects broad market share gains and substantial revenue growth in line with 2019 updated performance standards and 2020 updated incentives for Managing Partners related to achieving three-year Being The Best Compounded Revenue Growth Standards with strong financial incentives for also achieving Being The Best Field EBITDA Margin Range Standards;
- Acquisition integration of the four large acquisitions (three in fourth quarter of 2019, one on January 3, 2020) is accelerating with much more upside in both the funeral and cemetery segments through 2022 and thereafter;
- Same Store and Acquisition Cemetery portfolio contributed record revenue at record high Field EBITDA Margins during our record performance in the third and fourth quarters of 2020, yet has substantial preneed property sales and margin upside through 2022 and thereafter, which is covered in a separate cemetery portfolio “High Performance Culture Sales Organization” section in this release;
- High Performance Talent Acquisition Program has led to much broader and deeper topgrading of Managing Partners, Sales Managers and Directors of Support with A Player Leadership Talent over the last two and one half years, which comprise the three field leadership roles that are sustaining our high operating and financial performance in all areas and is covered in a separate section of this release on “First Who, Then What”;
- Prepared for and executed a major trust fund repositioning strategy during and after the Coronavirus market crash, substantially increasing recognized and reported Financial Revenue, EBITDA, Free Cash Flow and EPS, thereby raising Consolidated EBITDA Margins to a milestone plateau above
30% and Free Cash Flow Margins to a milestone plateau above20% after our expected senior notes refinancing in mid-2021; - Deleveraging the balance sheet is accelerating from higher Free Cash Flow and divestiture proceeds ahead of planned senior notes refinancing after first call date of June 1, 2021; and
- Carriage Consolidation, Operating and Value Creation Platform Financial Leveraging Dynamics are positioned for superior long term value creation and compounded shareholder returns through flexible, savvy and disciplined capital allocation in the second half of 2021 and thereafter. Our conviction on becoming a superior long term value creation platform is covered in the section on Page 13 related to the Five Year Good To Great II Shareholder Value Creation Incentive Plan.
January 2021 Comparative Results
- Record Same Store Funeral Contracts of 4,195, an increase of
33.8% ; - Record Total Revenue of
$34.7 million , an increase of30.4% ; - Record Total Field EBITDA of
$17.3 million , an increase of74.4% ; - Record Total Field EBITDA Margin of
49.8% , an increase of 1,260 basis points; - Record Adjusted Consolidated EBITDA of
$13.6 million , an increase of99.1% ; - Record Adjusted Consolidated EBITDA Margin of
39.2% , an increase of 1,350 basis points; - Record Adjusted Net Income of
$6.5 million , an increase of297.9% ; - Record Adjusted Diluted Earnings Per Share of
$0.35 , an increase of288.9% ; - Estimated Adjusted Free Cash Flow of
$12.3 million , an increase of118.7% ; and - Estimated Adjusted Free Cash Flow Margin of
35.4% , an increase of 1,430 basis points.
Never in my wildest imagination could I have imagined that we would ever achieve a month of comparative performance from our existing portfolio of operating businesses (no new acquisitions) during which record milestone performances included Total Revenue up
Beginning in December 2020 we experienced a spike in deaths broadly across our portfolio of funeral homes and cemeteries in 26 states, but the epicenter of the much higher COVID-19 outbreak of infections and deaths has been and continues to be in California, as has been reported by the national media. Given our large portfolio of first class businesses in both Northern and Southern California, the tragic outbreak of COVID-19 deaths in California is producing a material increase in our overall performance. But while the California impact is extreme, our Central and Eastern Region businesses are also experiencing substantially and broadly higher volumes, revenues and margins as reflected in the incredulous
Our peak seasonal period for deaths has historically been the December to March flu season with varying degrees of severity depending on the strain of flu and effectiveness of the flu vaccine created and modified annually as a health defense to that year’s flu strain. We have no reports of flu impacting the current spike in deaths, and at this point in the COVID-19 Pandemic, it is difficult to know how the various vaccines will impact the much higher death rates we are experiencing across most of our portfolio. We also don’t yet know how effective the MODERNA, PFIZER, JOHNSON & JOHNSON, etc., vaccines will be against the highly contagious and potentially more deadly Coronavirus variants from the U.K., South Africa and Brazil which are now spreading rapidly in the U.S., and when or whether death rates will return to normal seasonal patterns and long term trends during 2021 and thereafter.
Our updated and increased Roughly Right Two Year Scenario section on Page 7 that includes 2021 and 2022 is therefore a little wider in Roughly Right Ranges of Performance compared to our normal ranges to accommodate for the short and long term unknowns related to the COVID-19 Pandemic that at this point are simply unknowable. But our company has enough known drivers of high performance in 2021 and thereafter that we can control to make us confident in our ability to achieve and sustain record high financial performance through the five year Good To Great II timeframe ending on December 31, 2024.
Five Quarter Trend Report
We report our performance results publicly using the same highly transparent Non-GAAP “Trend Reports” that we use internally and which have been explained in previous shareholder letters, including Five Year and Five Quarter Trend Reports that reflect long and short term trends in our core operating, financial and overhead sectors over time. Shown on the next page are highlights from our Five Quarter Trend Report that clearly reflect the accelerating transformative performance process that has occurred at Carriage from September 30, 2019 to December 31, 2020. Never before in our history, prior to our record third quarter 2020 performance, have all five operating and financial segments achieved Field EBITDA Margins of over
| FIVE QUARTER OPERATING AND FINANCIAL TREND REPORT HIGHLIGHTS | ||||||||||||
| (000’s except for volume, averages & margins) | 4TH QTR 2019 | 1ST QTR 2020 | 2ND QTR 2020 | 3RD QTR 2020 | 4TH QTR 2020 | |||||||
| Funeral Same Store Contracts | 8,156 | 8,625 | 8,647 | 8,874 | 9,669 | |||||||
| Average Revenue Per Contract (1) | ||||||||||||
| Funeral Same Store Burial Contracts | 3,038 | 3,165 | 3,121 | 3,132 | 3,566 | |||||||
| Funeral Same Store Burial Rate | ||||||||||||
| Average Revenue Per Burial Contract | ||||||||||||
| Funeral Same Store Cremation Contracts | 4,471 | 4,771 | 4,977 | 5,114 | 5,451 | |||||||
| Funeral Same Store Cremation Rate | ||||||||||||
| Average Revenue Per Cremation Contract | ||||||||||||
| Funeral Same Store Preneed Ratio | ||||||||||||
| Funeral Same Store Revenue | ||||||||||||
| Funeral Same Store EBITDA | ||||||||||||
| Funeral Same Store EBITDA Margin | ||||||||||||
| Funeral Acquisition Revenue | ||||||||||||
| Funeral Acquisition EBITDA | ||||||||||||
| Funeral Acquisition EBITDA Margin | ||||||||||||
| Cemetery Same Store Revenue | ||||||||||||
| Cemetery Same Store EBITDA | ||||||||||||
| Cemetery Same Store EBITDA Margin | ||||||||||||
| Cemetery Acquisition Revenue | ||||||||||||
| Cemetery Acquisition EBITDA | ||||||||||||
| Cemetery Acquisition EBITDA Margin | ||||||||||||
| Total Financial Revenue | ||||||||||||
| Total Financial EBITDA | ||||||||||||
| Total Financial EBITDA Margin | ||||||||||||
| Total Revenue | ||||||||||||
| Total Field EBITDA | ||||||||||||
| Total Field EBITDA Margin | ||||||||||||
| Adjusted Consolidated EBITDA | ||||||||||||
| Adjusted Consolidated EBITDA Margin | ||||||||||||
| Adjusted Diluted EPS | ||||||||||||
| Adjusted Free Cash Flow | ||||||||||||
| Adjusted Free Cash Flow Margin | ||||||||||||
| (1) Excludes Preneed Funeral interest earnings reflected in Total Financial Revenue. | ||||||||||||
We added more detailed contract data to the Funeral Same Store Section for highly relevant additional transparency over this fifteen month period that shows the initial shock and impact from the Coronavirus Pandemic to our funeral revenue averages in March, then the peak negative impact on revenue averages in the second quarter with a trend toward normalization of revenue averages reflected in the third quarter. The fourth quarter reflects a huge spike in deaths beginning in December 2020 that contributed 1,016 (up
Even as the COVID-19 Pandemic has recently caused a new and higher spike in deaths along with renewed mandated social restrictions, our Funeral Managing Partners and their teams of employees performed an increasing number of traditional funerals both in absolute terms and as a percentage of total funerals. The ability by our funeral Managing Partners to adapt quickly and effectively in the fourth quarter to rapidly changing local conditions was a function of learning how best to safely innovate during the early months of the pandemic, reflecting the entrepreneurial leadership skills that produced a same store average revenue per funeral contract of
Maybe even more impressive was that our Cemetery Same Store EBITDA Margin of
Nevertheless, our Cemetery Same Store Preneed Property Revenue in the fourth quarter of 2020 was amazingly
From an operational and financial perspective, when our Executive Team saw that our Total Field EBITDA Margin in the fourth quarter was
Updated Milestone Two Year Scenario
Ben Brink, Chief Financial Officer, stated, “We are excited to announce an updated Milestone Two Year Scenario that shows significantly higher performance expectations through 2022 compared to our previous third quarter earnings release on October 27, 2020. We believe it is important to provide the investment community with our best ‘Roughly Right Ranges’ view of our future performance regardless of the uncertainty that may exist in the world around us, as we wear as a badge of high performance honor that we never withdrew our Three Year Scenario during the initial peak period of Coronavirus Pandemic uncertainty. After initially lowering the 2020 ranges after our first quarter earnings release on May 19, 2020, we began to raise the performance ranges but not fast enough to catch up with our increasing record 2020 performance metrics, during the balance of the year, which exceeded those for 2022 in our initial forecast and led to Carriage raising its dividend twice during the pandemic (May and October).
The updated two year scenario on the next page does not include any new acquisitions but does include the impact of our planned divestitures and the completion of a planned refinancing transaction of our high yield notes in June 2021. The major takeaways from the updated Milestone Two Year Scenario are:
Improved operating and financial performance expectations through 2022 driven by:
- Continuation of Same Store Funeral market share gains with improvement in our average revenue per contract, particularly cremations;
- Higher growth rates in preneed cemetery property sales beginning in 2021 and accelerating in 2022 at higher Cemetery Field EBITDA Margins;
- Successful integration of the four recent strategic acquisitions leading to improved performance expectations compared to our initial expectations;
- Full impact of our trust fund repositioning strategy resulting in a significant and sustainable increase in Financial Revenue and EBITDA; and
- Substantially lower cash interest costs from our planned senior notes refinancing during the second half of 2021 and full year 2022.
After the planned refinancing of our senior notes as soon as June 1, 2021, we will have completely transformed all parts of our company into a sustainable and predictable shareholder value creation platform for the future by savvy, flexible and wise capital allocation to optimize the intrinsic value of each CSV share over time. One year from now at the beginning of 2022, hopefully after the tragedy of COVID-19 is behind our country and the world, we will produce another Three Year Roughly Right Scenario for the 2022-2024 timeframe. This time we will also include multiple scenarios relating to various capital allocation assumptions and the application of benchmark valuation methodologies to our increasing performance metrics which will reflect a range of CSV share price levels over the three year period that closely align with the higher
Updated Two Year Scenario
| Performance Metric | 2019A | 2020A | 2021 | 2022 | 3 Year Midpoint CAGR |
| Total Revenue | |||||
| Total Field EBITDA | |||||
| Total Field EBITDA Margin | |||||
| Adjusted Consolidated EBITDA | |||||
| Adjusted Consolidated EBITDA Margin | |||||
| Adjusted Diluted EPS | |||||
| Adjusted Free Cash Flow | |||||
| Adjusted FCF Margin | |||||
| Total Debt Outstanding (1) | (13.5)% | ||||
| Total Debt to EBITDA Multiple | 7.0(1) | 4.4 | 3.8 - 4.0 | 3.2 – 3.4 | N/A |
(1) Includes 2020 EBITDA for acquisitions.
(2) Jan 3, 2020 Acquisition of Oakmont and peak debt.
(3) Doesn’t include approximately
Free Cash Flow and Leverage
Our record operating results in 2020 led to a record
We introduced the new Adjusted Free Cash Flow Margin financial metric in our first quarter earnings press release dated May 19, 2020 to further illustrate the growing percentage of each dollar of revenue that is available as internally generated cash capital for allocation into high return investments to optimize the growth in intrinsic value per share of Carriage. We will continue to report this important differentiating metric in our future performance releases and expect continued expansion on an annual basis after completion of our senior note refinancing transaction.
Our record Adjusted Free Cash also benefited from a minimal amount of cash taxes being paid in 2020 due to previously implemented internal tax methodology changes and benefits from the CARES Act. In addition, we received a tax refund of approximately
The record Adjusted Free Cash Flow allowed Carriage to make remarkably fast progress on our commitment to reduce debt and improve our leverage profile in 2020. For the year our leverage ratio improved 1.6 turns to 4.4 times from a high of 6.0 times, as our Total Debt declined
We closed on
Senior Note Refinancing & Capital Allocation
As we have outlined in previous earnings releases, we intend to execute a capital markets transaction to refinance our
We view the approximately
Post the completion of our senior notes refinancing, Carriage would have the financial flexibility to allocate our capital strategically to optimize the intrinsic value of each share. We believe Carriage has entered a capital allocation and value creation ‘sweet spot’ for the next 5-10 years, meaning numerous attractive investment opportunities with higher long term organic growth potential and consequently higher rates of return on invested capital than ever before in our history. Savvy and flexible capital allocation will primarily be funded with our own recurring and growing Free Cash Flow, allowing Carriage to maintain a more moderate Debt to Adjusted EBITDA leverage profile and policy than in the past. Higher return capital allocation in combination with our lower cost of capital from the refinancing transaction should lead to significant increases in Carriage’s overall return on invested capital in the years ahead.
After completion of the refinancing transaction our capital allocation decisions will be focused on the following five areas:
- Acquisitions. Partnering with the best remaining independent funeral homes and cemeteries in America based on our updated Strategic Acquisition Model. Due to the operational challenges that our industry has experienced due to the Coronavirus Pandemic, we have seen the acquisition market for high quality independent businesses in large strategic markets be close to non-existent over the past year, as independent owners focused on the challenges of the pandemic rather than succession planning. We expect this dynamic to change in the latter half of this year and into 2022 and believe Carriage will be uniquely positioned to continue to be a preferred choice for leading independent owners who are looking for the best long term succession planning solution for their businesses, employees and communities they serve.
- Internal Growth Capital Expenditures. We believe the best businesses are ones that have superior growth opportunities, enabling us to allocate more capital over time at higher and increasing rates of return on invested capital. We are excited about the opportunities we have across our portfolio to allocate capital at high rates of return as part of our expectation for higher organic Funeral Home and Cemetery Revenue and Field EBITDA growth rates in the future.
- Share Repurchases. We will allocate capital opportunistically to repurchase Carriage shares if we believe they trade at a significant discount to intrinsic value. We will also evaluate potential share repurchase activity in relation to any near term large scale acquisition opportunities, as we are much more focused on increasing the long term compounding rate for each of our ownership shares than on just getting bigger by adding revenue from acquisitions.
- Dividend Increases. We were pleased to increase our annual dividend to shareholders by
33% in 2020 with two increases of $.05 each in the second and fourth quarter. Our current annual dividend is $.40 per CSV share and represents a current dividend equity yield of about1.1% . In the future, we intend to have our annual dividend per share at a level that approximates a1% dividend equity yield, while the total amount of dividends paid would approximate no more than10% of our annual Adjusted Free Cash Flow. - Debt Repayment. We made amazingly fast progress on our debt reduction plan in 2020 that led to acceleration of the improvement in our credit profile. Once we have completed the refinancing transaction, we intend to operate at a more moderate leverage policy of about 4 times Debt to Adjusted Consolidated EBITDA in order to maintain the maximum financial flexibility to support our future capital allocation. We also believe equity investors would support this policy as less risky, which could have the impact of increasing our valuation multiples.
Preneed Trust Fund Portfolio & Financial Revenue
| CSV Discretionary Preneed Trust Holdings (in millions) | ||||||||||||||||||
| At December 31, 2019 | Cost | % Total | Market | % Total | Unrealized Gain/Loss | Annual Income | ||||||||||||
| Fixed Income | $ | 114,519 | $ | 118,668 | $ | 4,148 | $ | 7,532 | ||||||||||
| Equity | $ | 77,815 | $ | 78,957 | $ | 1,142 | $ | 2,568 | ||||||||||
| Cash & Cash Equivalents | $ | 15,518 | $ | 15,518 | $ | - | $ | 70 | ||||||||||
| Total | $ | 207,852 | 100% | $ | 213,143 | 100% | $ | 5,290 | $ | 10,170 | ||||||||
| At March 6, 2020 | Cost | % Total | Market | % Total | Unrealized Gain/Loss | Annual Income | ||||||||||||
| Fixed Income | $ | 88,371 | $ | 89,039 | $ | 668 | $ | 6,957 | ||||||||||
| Equity | $ | 76,951 | $ | 63,239 | $ | (13,711 | ) | $ | 2,345 | |||||||||
| Cash & Cash Equivalents | $ | 53,876 | $ | 53,876 | $ | - | $ | 85 | ||||||||||
| Total | $ | 219,198 | 100% | $ | 206,154 | 100% | $ | (13,043 | ) | $ | 9,387 | |||||||
| At March 23, 2020 | Cost | % Total | Market | % Total | Unrealized Gain/Loss | Annual Income | ||||||||||||
| Fixed Income | $ | 100,801 | $ | 80,113 | $ | (20,688 | ) | $ | 8,305 | |||||||||
| Equity | $ | 107,303 | $ | 67,927 | $ | (39,376 | ) | $ | 3,791 | |||||||||
| Cash & Cash Equivalents | $ | 10,286 | $ | 10,286 | $ | - | $ | 65 | ||||||||||
| Total | $ | 218,390 | 100% | $ | 158,326 | 100% | $ | (60,064 | ) | $ | 12,161 | |||||||
| At December 31, 2020 | Cost | % Total | Market | % Total | Unrealized Gain/Loss | Annual Income | ||||||||||||
| Fixed Income | $ | 138,548 | $ | 150,722 | $ | 12,174 | $ | 12,247 | ||||||||||
| Equity | $ | 82,332 | $ | 85,401 | $ | 3,069 | $ | 3,673 | ||||||||||
| Cash & Cash Equivalents | $ | 4,667 | $ | 4,667 | $ | - | $ | - | ||||||||||
| Total | $ | 225,547 | 100% | $ | 240,790 | 100% | $ | 15,243 | $ | 15,920 | ||||||||
| At February 8, 2021 | Cost | % Total | Market | % Total | Unrealized Gain/Loss | Annual Income | ||||||||||||
| Fixed Income | $ | 138,491 | $ | 154,135 | $ | 15,644 | $ | 12,229 | ||||||||||
| Equity | $ | 78,050 | $ | 95,306 | $ | 17,256 | $ | 3,720 | ||||||||||
| Cash & Cash Equivalents | $ | 4,052 | $ | 4,052 | $ | - | $ | - | ||||||||||
| Total | $ | 220,593 | 100% | $ | 253,493 | 100% | $ | 32,900 | $ | 15,949 | ||||||||
| Investment Performance 2020 | |||||
| Time Frame | Investment Performance | Index Performance | |||
| 1 year ended 12/31/2020 | Discretionary | Total Trust | S&P 500 | High Yield Bond Index | 70/30 Index Benchmark |
Carriage’s Discretionary Preneed Trust Fund Portfolio had a total return of
We have described in-depth in our previous three quarterly earnings releases the successful execution of our Trust Fund Repositioning Strategy beginning at the height of the Coronavirus Market Crisis in March 2020 when we quickly deployed
- The
$90 million of new capital deployed increased recurring annual income in our trust fund portfolio by approximately$8.3 million or108% , which increased the total recurring annual income to$16 million . - The
$90 million of new capital deployed has generated$36.3 million of realized and unrealized capital gains, of which about$33.7 million remain unrealized at this time. - The
$90 million of new capital deployed was allocated$37.8 million (42% ) into equities at a yield to cost of7.2% which currently have$23 million in unrealized gains, and$52.1 million (58% ) into fixed income securities at a yield to cost of10.6% which currently have$10.7 million in unrealized gains. - Execution of the Repositioning Strategy coupled with existing long term core holdings has positioned our Preneed Trust Funds for additional long term capital appreciation and the ability to maintain the current high level of recurring income.
- Primarily driven by the increase in recurring investment income earned by our Cemetery Perpetual Care Trusts, our recognized and reported Financial Revenue increased
24.6% to$19.7 million while Financial EBITDA increased29.3% to$18.4 million in 2020 compared to 2019. This increase while substantial only included the benefits to Financial Revenue and EBITDA from our Repositioning Strategy for 7 months from June through December. - Financial Revenue is expected to increase to approximately
$22 -$23 million in 2021, while Financial EBITDA is forecast to grow to$21 -$22 million at a94% -95% Financial EBITDA Margin in 2021. We view this amount of Financial Revenue and EBITDA as sustainable over the next 3-5 years based on the current dividend profile of our equity positions and maturity and quality profile of our fixed income portfolio. - Upside drivers to our current ‘Roughly Right Ranges’ of Financial Revenue and EBITDA forecasts are higher value of maturing preneed funeral and cemetery contracts from currently unrealized capital gains that are recognized over the next 3-5 years and accrued to the underlying preneed contracts, as well as higher Cemetery Finance Charges from substantially higher increases in cemetery preneed property sales.
For additional detail regarding the execution of our Trust Fund Repositioning Strategy I would encourage investors to refer to our three previous 2020 quarterly earnings press releases,” concluded Mr. Brink.
Cemetery High Performance Culture Sales Organization
Mr. Payne continued, “In June 2020 Carlos Quezada joined our Executive Team to lead Cemetery Sales and Marketing and I introduced him to the public in our second quarter earnings release on July 28th as follows:
“While in the past we have had spurts of high property sales performance in our ten largest cemeteries, we have never been able to sustain such performance over the long term under our decentralized decision making business model designed originally for our standalone funeral business portfolio.
Carlos will have the primary responsibility of building high performance sales teams and standardized sales systems across our portfolio of cemeteries. We believe that his leadership and past success at building high performance winning teams will finally unleash the broad and sustainable performance power within our cemetery portfolio.”
It has been only six and one half months since my introduction of Carlos in the July 28th second quarter earnings release, yet he has made amazing progress designing and implementing the foundational elements and initial phases of a two year plan to achieve his mission as stated above. Perhaps the most important achievement thus far is that he and the team he has assembled has instilled a sense of “high performance belief and excitement” not only among the leaders in our cemetery portfolio but also among leaders in the funeral portfolio, Houston Support Center and especially the Executive Team about “what’s possible” related to the substantial incremental cemetery portfolio contribution to our future revenue, earnings and free cash flow.
While it would be difficult to define the impact Carlos and his team have had on our record Cemetery Preneed Property Revenue and Field EBITDA Dollars and Margins as reflected in the third and fourth quarters of our Five Quarter Trend Report ending December 31, 2020, we believe the impact was material yet remarkably achieved under the harshest and most restrictive preneed sales environment in the history of our company. But as Carlos and his new team constantly say, “This is only the beginning, the best is yet to come and ‘It’s A Great Time To Be At Carriage’!”
Carlos and his team have collaborated seamlessly with all other members of our operations leadership teams as well as with Ben Brink and our other Executive Team members to build an initial financial forecast for our same store and acquisition cemetery portfolio which for the first time has been included in our updated and increased Two Year Roughly Right Scenario for 2021 and 2022. Carlos will be on our conference call tomorrow morning to share more of his exciting plans for our cemetery portfolio and how those plans will impact the future of Carriage.
High Performance Talent Acquisition Program: First Who, Then What
Jim Collins published his famous book Good To Great in 2001, yet we did not believe we were good (enough) to launch our first Five Year Good To Great Journey until the end of 2011. Since then we have focused relentlessly on the simple high performance culture concept of First Who, Then What to get the Right Who’s on the Carriage Good To Great Journey Bus, get the Wrong Who’s off the Bus, and then get the Right Who’s in the Right Seats on the Bus: BEFORE stepping on the gas and heading toward our Good To Great Journey Destination.
As we learned the hard way in 2017 and 2018, writing the above concept down is easy, but getting it mostly right most of the time is extraordinarily difficult to sustain over many years. But it works magic when you do get it right, the most recent example being the Tom Brady led Tampa Bay Buccaneers winning the Super Bowl over the Kansas City Chiefs and their
When I had to step back into leading operations in September 2018, I found that the operating leaders whom I had promoted had lost the high performance followship of our winning leaders and teams across our portfolio, and had therefore lost the winning mindset and cultural edge and alignment needed to produce broadly higher and sustainable performance in our portfolio. First Who, Then What works just as powerfully in a negative direction when you have the Wrong Who’s responsible for leading a group of Right Who’s. It was my First Who, Then What mistake that let our people become demoralized, so it was my duty to make it right with the help of many aligned leaders and employees. Losing was unacceptable, failure was not an option and becoming a Carriage Being the Best TEAM of WINNING TEAMS again across our portfolio was the only option.
So when we turned for help in finding a large number of Right Who A Player operating leaders at all levels of the company to replace the Wrong Who’s from their seats on the Carriage Good To Great Journey Bus, Jason Buchbinder stepped up big time as head of our High Performance Talent Acquisition Program. Jason had joined Carriage only six months earlier on March 12, 2018 after twelve years of broad operating experience in our industry with another consolidation company.
What Jason has achieved in collaboration with our Operating Leaders and Executive Team Members since September 2018 has itself been transformative to the very nature of our definition of Carriage as a high performance culture company that just happens to be in the funeral and cemetery industry. He has mastered the art of getting the high performance culture concept of First Who, Then What to be The RIGHT WHO A PLAYER with almost every opportunity for High Performance Talent Acquisition that he handles, especially Directors of Support, Managing Partners, Sales Managers, Funeral Arrangers and Preneed Sales Counselors. It is an honor indeed to have him as one of the 47 key leader participants in our Good To Great II Five Year Shareholder Value Creation Incentive Plan and a guest Carriage High Performance Culture Leader participant on our call tomorrow.
Good To Great II Five Year Shareholder Value Creation Incentive Plan
We have received a lot of positive feedback from institutional investors about what I labeled on Page 7 of our first quarter release dated May 19, 2020 as a pure form of shareholder aligned “Pay For Long Term High Performance”, i.e. incentive awards paid in appreciated CSV shares in early 2025 to 47 key leaders of Carriage conditioned on achieving one of five CSV share price CAGR categories (
As I have learned from being a long time student of the awesomely simple but wonderful investment ideas of Warren Buffett and Charlie Munger, patience is a “competitive advantage virtue” not only in investing but also in building a good and valuable company over time based on the Good To Great high performance concepts of “First Who, Then What”, especially related to that company finally evolving after almost thirty years into a unique superior long term investment opportunity. Given the thousands of investment choices available in markets across the world, I realized that Mr. Market crashing almost
As the largest individual shareholder owning about
We pride ourselves for having created and evolved the most generous annual Being The Best and five year Good To Great Incentive Programs for our Managing Partners (owners) in the sixty year history of consolidation of our industry. Our annual funeral Being The Best incentive concept is simple: The higher the annual Standards Achievement between
For example, we had a record 61 funeral businesses (excluding our four newest acquisitions) achieve between
The five year Good To Great Incentive Plan for Managing Partners requires at least a minimum
All other things being equal, a
Therefore, the Five Year Good To Great II Shareholder Value Creation Incentive Plan for 37 critical leaders who aren’t Managing Partners of one of our businesses aligns perfectly with the annual and five year incentive plans for our Managing Partners, which in combination serves as a “superglue” for high performance culture A Player talent at all levels to execute their roles individually and in teams at the highest possible level. At the end of 2020 our Executive Team and other leaders within the Houston Support Center began to brainstorm the critical components and sequential elements of the “Carriage Flywheel” for purposes of educating all of our people both in the field and Houston Support Center on why Carriage has become a high performance culture company that just happens to be in the funeral and cemetery business, which then led to our 2021 theme of Carriage Services 2021: Accelerating High Performance Flywheel Effect!
I have explained to all of these wonderful leaders and employees that few people in their careers are at the right company in the right industry at the right time so that their financial dreams and aspirations can come true while at the same time finding great meaning and joy in their work. We are all committed to the passionate belief that the right company is Carriage and the right time is NOW, and that we have control over our own performance destiny based on HIGH PERFORMANCE CULTURE EXECUTION, EXECUTION, EXECUTION!
Observations About 2020, the Evolution of our Standards Operating Model, and the Future
After the shock of a once in a lifetime worldwide Coronavirus Pandemic during which death and the fear of death and the unknown becomes part of daily life (or the lack of normal daily life as we had known it), it has been a time for reflection on what really matters both personally and professionally. Within Carriage, we are blessed that the nature of the noble work that our wonderful people do means that there is little distinction between personal and professional, as Carriage has become like family to most of us who are committed to a Good To Great Journey that never ends.
For those of you interested in Carriage but maybe new to our almost thirty years of history, I will repeat verbatim the entire last section in my 2016 Shareholder Letter (Pages 38 and 39), which covered the first 25 years of Carriage and was titled, “The Evolution of Our Learning Journey.” As you reflect upon our amazing milestone year of Transformative High Performance in 2020 during the tragedy of a Coronavirus Pandemic, I believe you will find the content in this section more profoundly valid today in the era of the COVID-19 Pandemic than when it was written four years ago in early 2017.
Final Observations About The Past and Present
To conclude this Shareholder Letter, I will share a few observations and conclusions about human nature and the nature of our markets as well as what I believe to be the current state of the nature of Carriage.
- It is very difficult for most people (even some very smart ones) to think about something in a completely new, unorthodox, counterintuitive and unconventional way – which makes the uniqueness of Carriage as it has evolved pretty cool for those who “get to the other side!”
- Our small market capitalization size is a large hurdle to overcome with many institutional investors who perceive our small size as riskier and/or need to invest much larger pools of capital than the liquidity of our outstanding shares can accommodate, but we have learned to live with this frustration and focus only on maximizing the compounding of the intrinsic value of each of our shares over five to ten year timeframes into a “coulda, woulda, shoulda bought that” share price!
- Our organizational framework is designed around the idea of partnership. Our three models and high performance culture ideas and concepts as they have evolved over the last thirteen years have turned the classic methodology of consolidation upside down and made the most important jobs in the company those of our Managing Partners at the local business level rather than up the chain of command.
- The high performance culture ideas and concepts of Carriage as they have been implemented and evolved have dramatically flattened our organization structure; eliminated numerous bureaucratic layers and the associated politics, perks and meaningless titles; simplified and eliminated in many cases the complexity of burdensome reporting, policies and procedures; and eliminated endless corporate process oriented initiatives – all characteristics that creep into most companies as they grow through a succession of enterprise leaders over time.
- Our High Performance Culture Framework is more cost effective organizationally, as the corporate organizational overhead does not “eat up” a substantial amount of the incremental financial performance of our field businesses, especially as we leverage our consolidation platform with growth by highly selective acquisitions, enabling more of the value creation to be shared with both those who create it locally and with public shareholders.
- The best remaining family owned funeral home and cemetery business franchises in the best markets will absolutely get better over time after full integration into our Being The Best framework of operations support.
- The innovation, evolution and application of our Standards Operating Model and High Performance Culture Framework for operating and consolidating the funeral and cemetery industry is akin to intellectual property that was developed over the last thirteen years which forms a “protective cultural moat” around Carriage’s earnings power.
- Curious and disappointed why no one has challenged our contention that Carriage’s
29.7% Adjusted Consolidated EBITDA Margin in 2016 is not only a company but an industry milestone that has never been achieved. But even more profoundly, “What Does It Mean?” - Intrigued why no one has had the curiosity to ask us about the book Beyond Budgeting co-authored and published in 2003 by Robin Frazer and Jeremy Hope or about their article “Who Needs Budgets” published in the February 2003 edition of Harvard Business Review. But really fascinated that the ideas and concepts they researched on a “radically decentralized” business model have gone nowhere fast in “Corporate America” over the last fourteen years.
- Fascinated to learn about and read The Evolution of Cooperation, authored by Robert Axelrod and published in 1984, from a recommendation in Mark Leonard’s 2014 Constellation Software Shareholder Letter, a book he said changed his thinking on many important matters. After reading this book and a subsequent one titled Harnessing Complexity with the subtitle Organizational Implications of a Scientific Frontier, co-authored by Robert Axelrod and Michael D. Cohen in 2000, I would postulate (maybe not so humbly) that Carriage has evolved into a rather advanced state of “harnessing the complexity” of successfully operating and consolidating the highly fragmented funeral and cemetery industry for the huge benefit over time of long term shareowners.”
Who and What Really Matters
The very best part of my job is letting our wonderful leaders and employees know what those of us here in the Houston Support Center and our Board think of them and the noble work they do no matter the harshness of the environment or local conditions in which they are called to service. Shown below is the last paragraph of my 2020 annual theme letter to Managing Partners, Sales Managers and Houston Support Center Leaders at the beginning of the year dated February 18, 2020, followed by my verbatim year end message to all employees dated December 29, 2020, which together serve as the beginning and ending bookends to a year that profoundly changed our country and the world:
Last Paragraph of 2020 Theme Letter Dated February 18, 2020
“I will end this theme letter the same way I have ended many others since we launched the first five year Good To Great Journey on January 1, 2012, with a quote from the book Good To Great by Jim Collins:
“Greatness is not a matter of circumstance. Greatness, it turns out, is a matter of conscious choice!”
As I have always done and can never do otherwise, I choose Greatness because the challenges and difficulties that must be overcome by special people bound together by a common cause of Being The Best at their noble profession is simply the most meaningful and wonderful journey in business and life that anyone could hope for or indeed imagine.
Mel”
Year End 2020 Message to All Employees Dated December 29, 2020
“We entered this year with high hopes of 2020 being a breakout year of TRANSFORMATIVE HIGH PERFORMANCE for each of our operating businesses and for Carriage as a Being The Best Company in the funeral and cemetery industry. And then the world, our country, our industry and our company were all shocked to the core by the Coronavirus Pandemic Crisis which began in March and is now reaching new peaks of infections and deaths during what has typically been our peak flu season.
Yet our wonderful Managing Partners, Sales Managers and their teams of high performance employees in each of our businesses adapted quickly to the many fears and initial unknowns related to the COVID-19 Pandemic and became role models for their communities and client families for what courageous leadership in times of crisis is all about. And the wonderful support teams comprised of our Directors of Support and Sales across the country along with the leaders and employees in the various Houston Support Center departments have been in your foxhole since day one of the pandemic supporting each of you through the battle against not only the Coronavirus but the endless mandated restrictions and frequently with a shortage of staff for serving your client families effectively when they needed it most.
In a normal environment the leaders and employees of our funeral homes and cemeteries have the heavy fiduciary responsibility of performing the noble work of caring for client families who have lost a loved one to death or are planning in advance for that inevitability. Even amidst a once in a lifetime Coronavirus Pandemic, client families have not been immune to the need for a special ritual to grieve and/or celebrate the life of a loved one or friend who has died, a uniquely human need dating back thousands of years to the beginning of time.
So I am honored and proud to express the gratefulness and pride that our Leadership Team feels toward each of you and what you have achieved through your courageous service to your client families and communities throughout this year of the Coronavirus Pandemic.
Each one of you are nothing less than an inspirational hero to each member of our Leadership Team and Board of Directors and we thank you from the bottom of our hearts.
And you did achieve a breakout year of TRANSFORMATIVE HIGH PERFORMANCE! THANK YOU FOR THE BLESSING OF YOU!
May you and those near and dear to your heart have a SAFE, HEALTHY AND HAPPY NEW YEAR!,” concluded Mr. Payne.
CONFERENCE CALL AND INVESTOR RELATIONS CONTACT
Carriage Services has scheduled a conference call for tomorrow, February 18, 2021 at 9:30 a.m. Central time. To participate in the call, please dial 866-516-3867 (conference ID-8569439) and ask for the Carriage Services conference call. A replay of the conference call will be available through February 23, 2021 and may be accessed by dialing 855-859-2056 (conference ID-8569439). The conference call will also be available at www.carriageservices.com. For any investor relations questions, please contact Ben Brink at 713-332-8441 or email InvestorRelations@carriageservices.com.
| CARRIAGE SERVICES, INC. | |||||||||||||||||
| OPERATING AND FINANCIAL TREND REPORT | |||||||||||||||||
| (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) | |||||||||||||||||
| Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||||
| 2019 | 2020 | % Change | 2019 | 2020 | % Change | ||||||||||||
| Same Store Contracts | |||||||||||||||||
| Atneed Contracts | 6,695 | 7,990 | 19.3 | % | 26,037 | 29,660 | 13.9 | % | |||||||||
| Preneed Contracts | 1,461 | 1,679 | 14.9 | % | 5,692 | 6,155 | 8.1 | % | |||||||||
| Total Same Store Funeral Contracts | 8,156 | 9,669 | 18.6 | % | 31,729 | 35,815 | 12.9 | % | |||||||||
| Acquisition Contracts | |||||||||||||||||
| Atneed Contracts | 1,535 | 2,212 | 44.1 | % | 4,046 | 8,291 | 104.9 | % | |||||||||
| Preneed Contracts | 136 | 216 | 58.8 | % | 513 | 818 | 59.5 | % | |||||||||
| Total Acquisition Funeral Contracts | 1,671 | 2,428 | 45.3 | % | 4,559 | 9,109 | 99.8 | % | |||||||||
| Total Funeral Contracts | 9,827 | 12,097 | 23.1 | % | 36,288 | 44,924 | 23.8 | % | |||||||||
| Funeral Operating Revenue | |||||||||||||||||
| Same Store Revenue | $ | 42,827 | $ | 49,484 | 15.5 | % | $ | 168,884 | $ | 179,779 | 6.5 | % | |||||
| Acquisition Revenue | 8,414 | 12,336 | 46.6 | % | 27,547 | 46,897 | 70.2 | % | |||||||||
| Total Funeral Operating Revenue | $ | 51,241 | $ | 61,820 | 20.6 | % | $ | 196,431 | $ | 226,676 | 15.4 | % | |||||
| Cemetery Operating Revenue | |||||||||||||||||
| Same Store Revenue | $ | 12,061 | $ | 14,784 | 22.6 | % | $ | 49,218 | $ | 51,694 | 5.0 | % | |||||
| Acquisition Revenue | 295 | 5,509 | 1,767.5 | % | 295 | 17,583 | 5,860.3 | % | |||||||||
| Total Cemetery Operating Revenue | $ | 12,356 | $ | 20,293 | 64.2 | % | $ | 49,513 | $ | 69,277 | 39.9 | % | |||||
| Total Financial Revenue | $ | 4,116 | $ | 5,226 | 27.0 | % | $ | 15,839 | $ | 19,735 | 24.6 | % | |||||
| Other Revenue | $ | 748 | $ | 1,197 | 60.0 | % | $ | 748 | $ | 4,661 | 523.1 | % | |||||
| Total Divested/Planned Divested Revenue | $ | 2,688 | $ | 1,552 | (42.3 | %) | $ | 11,576 | $ | 9,099 | (21.4 | %) | |||||
| Total Revenue | $ | 71,149 | $ | 90,088 | 26.6 | % | $ | 274,107 | $ | 329,448 | 20.2 | % | |||||
| Field EBITDA | |||||||||||||||||
| Same Store Funeral EBITDA | $ | 16,723 | $ | 21,780 | 30.2 | % | $ | 65,109 | $ | 74,817 | 14.9 | % | |||||
| Same Store Funeral EBITDA Margin | 39.0 | % | 44.0 | % | 500 bp | 38.6 | % | 41.6 | % | 300 bp | |||||||
| Acquisition Funeral EBITDA | 3,119 | 5,018 | 60.9 | % | 10,579 | 18,617 | 76.0 | % | |||||||||
| Acquisition Funeral EBITDA Margin | 37.1 | % | 40.7 | % | 360 bp | 38.4 | % | 39.7 | % | 130 bp | |||||||
| Total Funeral EBITDA | $ | 19,842 | $ | 26,798 | 35.1 | % | $ | 75,688 | $ | 93,434 | 23.4 | % | |||||
| Total Funeral EBITDA Margin | 38.7 | % | 43.3 | % | 460 bp | 38.5 | % | 41.2 | % | 270 bp | |||||||
| Same Store Cemetery EBITDA | $ | 4,158 | $ | 6,471 | 55.6 | % | $ | 17,118 | $ | 19,469 | 13.7 | % | |||||
| Same Store Cemetery EBITDA Margin | 34.5 | % | 43.8 | % | 930 bp | 34.8 | % | 37.7 | % | 290 bp | |||||||
| Acquisition Cemetery EBITDA | 73 | 2,532 | 3,368.5 | % | 73 | 7,128 | 9,664.4 | % | |||||||||
| Acquisition Cemetery EBITDA Margin | 24.7 | % | 46.0 | % | 2,130 bp | 24.7 | % | 40.5 | % | 1,580 bp | |||||||
| Total Cemetery EBITDA | $ | 4,231 | $ | 9,003 | 112.8 | % | $ | 17,191 | $ | 26,597 | 54.7 | % | |||||
| Total Cemetery EBITDA Margin | 34.2 | % | 44.4 | % | 1,020 bp | 34.7 | % | 38.4 | % | 370 bp | |||||||
| Total Financial EBITDA | $ | 3,709 | $ | 4,887 | 31.8 | % | $ | 14,235 | $ | 18,404 | 29.3 | % | |||||
| Total Financial EBITDA Margin | 90.1 | % | 93.5 | % | 340 bp | 89.9 | % | 93.3 | % | 340 bp | |||||||
| Other EBITDA | $ | 298 | $ | 278 | (6.7 | %) | $ | 298 | $ | 1,186 | 298.0 | % | |||||
| Other EBITDA Margin | 39.8 | % | 23.2 | % | (1,660 bp | ) | 39.8 | % | 25.4 | % | (1,440 bp | ) | |||||
| Total Divested/Planned Divested EBITDA | $ | 533 | $ | 352 | (34.0 | %) | $ | 2,355 | $ | 2,321 | (1.4 | %) | |||||
| Total Divested/Planned Divested EBITDA Margin | 19.8 | % | 22.7 | % | 290 bp | 20.3 | % | 25.5 | % | 520 bp | |||||||
| Total Field EBITDA | $ | 28,613 | $ | 41,318 | 44.4 | % | $ | 109,767 | $ | 141,942 | 29.3 | % | |||||
| Total Field EBITDA Margin | 40.2 | % | 45.9 | % | 570 bp | 40.0 | % | 43.1 | % | 310 bp | |||||||
| OPERATING AND FINANCIAL TREND REPORT | |||||||||||||||||
| (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) | |||||||||||||||||
| Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||||
| 2019 | 2020 | % Change | 2019 | 2020 | % Change | ||||||||||||
| Overhead | |||||||||||||||||
| Total Variable Overhead | $ | 6,285 | $ | 6,740 | 7.2 | % | $ | 14,117 | $ | 16,190 | 14.7 | % | |||||
| Total Regional Fixed Overhead | 961 | 1,203 | 25.2 | % | 4,052 | 4,133 | 2.0 | % | |||||||||
| Total Corporate Fixed Overhead | 4,857 | 5,220 | 7.5 | % | 19,385 | 20,191 | 4.2 | % | |||||||||
| Total Overhead | $ | 12,103 | $ | 13,163 | 8.8 | % | $ | 37,554 | $ | 40,514 | 7.9 | % | |||||
| Overhead as a percentage of Revenue | 17.0 | % | 14.6 | % | (240 bp | ) | 13.7 | % | 12.3 | % | (140 bp | ) | |||||
| Consolidated EBITDA | $ | 16,510 | $ | 28,155 | 70.5 | % | $ | 72,213 | $ | 101,428 | 40.5 | % | |||||
| Consolidated EBITDA Margin | 23.2 | % | 31.3 | % | 810 bp | 26.3 | % | 30.8 | % | 450 bp | |||||||
| Other Expenses and Interest | |||||||||||||||||
| Depreciation & Amortization | $ | 4,416 | $ | 5,109 | $ | 17,771 | $ | 19,389 | |||||||||
| Non-Cash Stock Compensation | 537 | 897 | 2,153 | 3,370 | |||||||||||||
| Interest Expense | 6,615 | 7,728 | 25,522 | 32,515 | |||||||||||||
| Accretion of Discount on Convertible Subordinated Notes | 63 | 16 | 241 | 216 | |||||||||||||
| Loss on Extinguishment of Debt | — | — | — | 6 | |||||||||||||
| Net Loss on Divestitures | 8 | 1,832 | 3,883 | 6,749 | |||||||||||||
| Impairment of Goodwill and Other Intangibles | 233 | — | 963 | 14,693 | |||||||||||||
| Other, Net | (45 | ) | (186 | ) | (736 | ) | (152 | ) | |||||||||
| Pre-Tax Income | $ | 4,683 | $ | 12,759 | $ | 22,416 | $ | 24,642 | |||||||||
| Net Tax Expense | $ | 2,114 | $ | 4,394 | $ | 7,883 | $ | 8,552 | |||||||||
| GAAP Net Income | $ | 2,569 | $ | 8,365 | 225.6 | % | $ | 14,533 | $ | 16,090 | 10.7 | % | |||||
| Special Items, Net of Tax, except for ** | |||||||||||||||||
| Acquisition and Divestiture Expenses | $ | 1,646 | $ | (135 | ) | $ | 1,646 | $ | (9 | ) | |||||||
| Severance and Separation Costs | 62 | — | 951 | 445 | |||||||||||||
| Performance Awards Cancellation and Exchange | — | 84 | — | 224 | |||||||||||||
| Accretion of Discount on Convertible Subordinated Notes ** | 63 | 16 | 241 | 216 | |||||||||||||
| Net Loss on Divestitures and Other Costs | 188 | 1,317 | 3,331 | 4,562 | |||||||||||||
| Net Impact of Impairment of Goodwill and Other Intangibles | 184 | 124 | 761 | 9,932 | |||||||||||||
| Litigation Reserve | 138 | — | 592 | 213 | |||||||||||||
| Tax Expense Related to Divested Business** | 51 | — | 911 | — | |||||||||||||
| Gain on Insurance Reimbursements | (195 | ) | — | (699 | ) | — | |||||||||||
| Natural Disaster and Pandemic Costs | — | 250 | — | 1,286 | |||||||||||||
| Other Special Items | 265 | — | 265 | 324 | |||||||||||||
| Tax Adjustment Related to Certain Discrete Items** | — | 400 | — | 400 | |||||||||||||
| Adjusted Net Income | $ | 4,971 | $ | 10,421 | 109.6 | % | $ | 22,532 | $ | 33,683 | 49.5 | % | |||||
| Adjusted Net Profit Margin | 7.0 | % | 11.6 | % | 460 bp | 8.2 | % | 10.2 | % | 200 bp | |||||||
| Adjusted Basic Earnings Per Share | $ | 0.28 | $ | 0.58 | 107.1 | % | $ | 1.26 | $ | 1.88 | 49.2 | % | |||||
| Adjusted Diluted Earnings Per Share | $ | 0.28 | $ | 0.57 | 103.6 | % | $ | 1.25 | $ | 1.86 | 48.8 | % | |||||
| GAAP Basic Earnings Per Share | $ | 0.14 | $ | 0.47 | 235.7 | % | $ | 0.81 | $ | 0.90 | 11.1 | % | |||||
| GAAP Diluted Earnings Per Share | $ | 0.14 | $ | 0.46 | 228.6 | % | $ | 0.80 | $ | 0.89 | 11.3 | % | |||||
| Weighted Average Basic Shares Outstanding | 17,760 | 17,927 | 17,877 | 17,872 | |||||||||||||
| Weighted Average Diluted Shares Outstanding | 17,901 | 18,147 | 18,005 | 18,077 | |||||||||||||
| Reconciliation to Adjusted Consolidated EBITDA | |||||||||||||||||
| Consolidated EBITDA | $ | 16,510 | $ | 28,155 | 70.5 | % | $ | 72,213 | $ | 101,428 | 40.5 | % | |||||
| Acquisition and Divestiture Expenses | 2,083 | (170 | ) | 2,083 | (11 | ) | |||||||||||
| Severance and Separation Costs | 79 | — | 1,205 | 563 | |||||||||||||
| Litigation Reserve | 175 | — | 750 | 270 | |||||||||||||
| Natural Disaster and Pandemic Costs | — | 315 | — | 1,627 | |||||||||||||
| Other Special Items | 336 | — | 336 | 373 | |||||||||||||
| Adjusted Consolidated EBITDA | $ | 19,183 | $ | 28,300 | 47.5 | % | $ | 76,587 | $ | 104,250 | 36.1 | % | |||||
| Adjusted Consolidated EBITDA Margin | 27.0 | % | 31.4 | % | 440 bp | 27.9 | % | 31.6 | % | 370 bp | |||||||
CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
| December 31, | |||||||
| 2019 | 2020 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 716 | $ | 889 | |||
| Accounts receivable, net | 21,478 | 25,103 | |||||
| Inventories | 6,989 | 7,259 | |||||
| Prepaid and other current assets | 10,667 | 2,076 | |||||
| Total current assets | 39,850 | 35,327 | |||||
| Preneed cemetery trust investments | 72,382 | 86,604 | |||||
| Preneed funeral trust investments | 96,335 | 101,235 | |||||
| Preneed cemetery receivables, net | 20,173 | 21,081 | |||||
| Receivables from preneed trusts, net | 18,024 | 16,844 | |||||
| Property, plant and equipment, net | 279,200 | 269,051 | |||||
| Cemetery property, net | 87,032 | 101,134 | |||||
| Goodwill | 398,292 | 392,978 | |||||
| Intangible and other non-current assets, net | 32,116 | 29,542 | |||||
| Operating lease right-of-use assets | 22,304 | 21,201 | |||||
| Cemetery perpetual care trust investments | 64,047 | 70,828 | |||||
| Total assets | $ | 1,129,755 | $ | 1,145,825 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Current portion of debt and lease obligations | $ | 3,150 | $ | 3,432 | |||
| Accounts payable | 8,413 | 11,259 | |||||
| Accrued and other liabilities | 24,026 | 31,138 | |||||
| Convertible subordinated notes due 2021 | — | 2,538 | |||||
| Total current liabilities | 35,589 | 48,367 | |||||
| Acquisition debt, net of current portion | 5,658 | 4,482 | |||||
| Credit facility | 82,182 | 46,064 | |||||
| Convertible subordinated notes due 2021 | 5,971 | — | |||||
| Senior notes due 2026 | 395,447 | 395,968 | |||||
| Obligations under finance leases, net of current portion | 5,854 | 5,531 | |||||
| Obligations under operating leases, net of current portion | 21,533 | 20,302 | |||||
| Deferred preneed cemetery revenue | 46,569 | 47,846 | |||||
| Deferred preneed funeral revenue | 29,145 | 27,992 | |||||
| Deferred tax liability | 41,368 | 46,477 | |||||
| Other long-term liabilities | 1,737 | 4,748 | |||||
| Deferred preneed cemetery receipts held in trust | 72,382 | 86,604 | |||||
| Deferred preneed funeral receipts held in trust | 96,335 | 101,235 | |||||
| Care trusts’ corpus | 63,416 | 69,707 | |||||
| Total liabilities | 903,186 | 905,323 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity: | |||||||
| Common stock | 259 | 260 | |||||
| Additional paid-in capital | 242,147 | 239,989 | |||||
| Retained earnings | 86,213 | 102,303 | |||||
| Treasury stock | (102,050 | ) | (102,050 | ) | |||
| Total stockholders’ equity | 226,569 | 240,502 | |||||
| Total liabilities and stockholders’ equity | $ | 1,129,755 | $ | 1,145,825 | |||
CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| (unaudited) | |||||||||||||||
| Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
| 2019 | 2020 | 2019 | 2020 | ||||||||||||
| Revenue: | |||||||||||||||
| Service revenue | $ | 37,110 | $ | 44,154 | $ | 142,554 | $ | 164,984 | |||||||
| Property and merchandise revenue | 29,056 | 39,419 | 114,514 | 139,630 | |||||||||||
| Other revenue | 4,983 | 6,515 | 17,039 | 24,834 | |||||||||||
| 71,149 | 90,088 | 274,107 | 329,448 | ||||||||||||
| Field costs and expenses: | |||||||||||||||
| Cost of service | 18,928 | 20,010 | 72,991 | 79,634 | |||||||||||
| Cost of merchandise | 22,750 | 27,503 | 89,294 | 103,064 | |||||||||||
| Cemetery property amortization | 995 | 1,511 | 3,985 | 4,956 | |||||||||||
| Field depreciation expense | 3,120 | 3,236 | 12,370 | 13,006 | |||||||||||
| Regional and unallocated funeral and cemetery costs | 3,819 | 6,853 | 13,827 | 18,057 | |||||||||||
| Other expenses | 858 | 1,257 | 2,055 | 4,808 | |||||||||||
| 50,470 | 60,370 | 194,522 | 223,525 | ||||||||||||
| Gross profit | 20,679 | 29,718 | 79,585 | 105,923 | |||||||||||
| Corporate costs and expenses: | |||||||||||||||
| General, administrative and other | 8,821 | 7,207 | 25,880 | 25,827 | |||||||||||
| Home office depreciation and amortization | 301 | 362 | 1,416 | 1,427 | |||||||||||
| Net loss on divestitures and impairment charges | 241 | 1,832 | 4,846 | 21,442 | |||||||||||
| Operating income | 11,316 | 20,317 | 47,443 | 57,227 | |||||||||||
| Interest expense | (6,615 | ) | (7,728 | ) | (25,522 | ) | (32,515 | ) | |||||||
| Accretion of discount on convertible subordinated notes | (63 | ) | (16 | ) | (241 | ) | (216 | ) | |||||||
| Loss on early extinguishment of debt | — | — | — | (6 | ) | ||||||||||
| Other, net | 45 | 186 | 736 | 152 | |||||||||||
| Income before income taxes | 4,683 | 12,759 | 22,416 | 24,642 | |||||||||||
| Expense for income taxes | (1,845 | ) | (3,971 | ) | (7,395 | ) | (7,985 | ) | |||||||
| Tax adjustment related to discrete items | (269 | ) | (423 | ) | (488 | ) | (567 | ) | |||||||
| Total expense for income taxes | $ | (2,114 | ) | $ | (4,394 | ) | $ | (7,883 | ) | $ | (8,552 | ) | |||
| Net income | $ | 2,569 | $ | 8,365 | $ | 14,533 | $ | 16,090 | |||||||
| Basic earnings per common share: | $ | 0.14 | $ | 0.47 | $ | 0.81 | $ | 0.90 | |||||||
| Diluted earnings per common share: | $ | 0.14 | $ | 0.46 | $ | 0.80 | $ | 0.89 | |||||||
| Dividends declared per common share: | $ | 0.0750 | $ | 0.1000 | $ | 0.3000 | $ | 0.3375 | |||||||
| Weighted average number of common and common equivalent shares outstanding: | |||||||||||||||
| Basic | 17,760 | 17,927 | 17,877 | 17,872 | |||||||||||
| Diluted | 17,901 | 18,147 | 18,005 | 18,077 | |||||||||||
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Years Ended December 31, | |||||||
| 2019 | 2020 | ||||||
| Cash flows from operating activities: | |||||||
| Net income | $ | 14,533 | $ | 16,090 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 17,771 | 19,389 | |||||
| Provision for bad debt and credit losses | 1,618 | 2,318 | |||||
| Stock-based compensation expense | 2,153 | 3,370 | |||||
| Deferred income tax expense | 10,117 | 4,597 | |||||
| Amortization of deferred financing costs | 392 | 782 | |||||
| Amortization of capitalized commissions and non-compete agreements | 1,231 | 1,299 | |||||
| Accretion of discount on convertible subordinated notes | 241 | 216 | |||||
| Accretion of discount, net of debt premium on senior notes | 492 | 307 | |||||
| Net loss on divestitures and impairment charges | 4,846 | 21,442 | |||||
| Net loss on sale of other assets | 213 | 251 | |||||
| Gain on insurance reimbursements | (879 | ) | (97 | ) | |||
| Loss on extinguishment of debt | — | 6 | |||||
| Other | 121 | 19 | |||||
| Changes in operating assets and liabilities that provided (required) cash: | |||||||
| Accounts and preneed receivables | (5,801 | ) | (4,279 | ) | |||
| Inventories, prepaid and other current assets | (2,762 | ) | 3,516 | ||||
| Intangible and other non-current assets | (924 | ) | (1,015 | ) | |||
| Preneed funeral and cemetery trust investments | (6,500 | ) | (5,043 | ) | |||
| Accounts payable | (580 | ) | 2,702 | ||||
| Accrued and other liabilities | 1,271 | 10,784 | |||||
| Deferred preneed funeral and cemetery revenue | 168 | 528 | |||||
| Deferred preneed funeral and cemetery receipts held in trust | 5,495 | 5,733 | |||||
| Net cash provided by operating activities | 43,216 | 82,915 | |||||
| Cash flows from investing activities: | |||||||
| Acquisitions | (140,907 | ) | (28,011 | ) | |||
| Deposit on pending acquisition | (5,000 | ) | — | ||||
| Proceeds from insurance reimbursements | 1,433 | 248 | |||||
| Proceeds from divestitures and sale of other assets | 967 | 8,541 | |||||
| Capital expenditures | (15,379 | ) | (15,198 | ) | |||
| Net cash used in investing activities | (158,886 | ) | (34,420 | ) | |||
| Cash flows from financing activities: | |||||||
| Borrowings from the credit facility | 174,961 | 109,500 | |||||
| Payments against the credit facility | (118,261 | ) | (146,100 | ) | |||
| Payment of debt issuance costs related to the long-term debt | (891 | ) | — | ||||
| Redemption of the | (27 | ) | (4,563 | ) | |||
| Payment of transaction costs related to the redemption of the | — | (12 | ) | ||||
| Proceeds from the issuance of the | 76,688 | — | |||||
| Payment of debt issuance costs related to the | (980 | ) | (66 | ) | |||
| Payments on acquisition debt and obligations under finance leases | (2,287 | ) | (1,745 | ) | |||
| Payments on contingent consideration recorded at acquisition date | (162 | ) | (169 | ) | |||
| Proceeds from the exercise of stock options and employee stock purchase plan contributions | 1,445 | 1,229 | |||||
| Taxes paid on restricted stock vestings and exercises of non-qualified options | (194 | ) | (348 | ) | |||
| Dividends paid on common stock | (5,398 | ) | (6,048 | ) | |||
| Purchase of treasury stock | (9,152 | ) | — | ||||
| Net cash used in financing activities | 115,742 | (48,322 | ) | ||||
| Net increase in cash and cash equivalents | 72 | 173 | |||||
| Cash and cash equivalents at beginning of year | 644 | 716 | |||||
| Cash and cash equivalents at end of year | $ | 716 | $ | 889 | |||
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.
The Company’s GAAP financial statements accompany this press release. Reconciliations of the Non-GAAP financial measures to GAAP measures are also provided in this press release.
The Non-GAAP financial measures include “Special Items”, “Adjusted Net Income”, “Consolidated EBITDA”, “Adjusted Consolidated EBITDA”, “Adjusted Consolidated EBITDA Margin”, “Adjusted Free Cash Flow”, “Funeral, Cemetery and Financial EBITDA”, “Total Field EBITDA”, “Total Field EBITDA Margin”, “Other Funeral Revenue”, “Other Funeral EBITDA”, “Divested/Planned Divested Revenue”, “Divested/Planned Divested EBITDA”, “Divested/Planned Divested EBITDA Margin”, “Adjusted Basic Earnings Per Share”, “Adjusted Diluted Earnings Per Share”, and “Total Debt to EBITDA Multiple” in this press release. These financial measurements are defined as similar GAAP items adjusted for Special Items and are reconciled to GAAP in this press release. In addition, the Company’s presentation of these measures may not be comparable to similarly titled measures in other companies’ reports. The definitions used by the Company for our internal management purposes and in this press release are as follows:
- Special Items are defined as charges or credits included in our GAAP financial statements that can vary from period to period and are not reflective of costs incurred in the ordinary course of our operations. Special Items are typically taxed at the federal statutory rate of
21.0% , except for the Accretion of Discount on Convertible Subordinated Notes, as this is a non-tax deductible item, the Tax Expense Related to Divested Business, the Net Loss on Divestitures and Other Costs and the Net Impact of Impairment of Goodwill and Other Intangibles. The Net Loss on Divestitures and Other Costs Special Item and the Net Impact of Impairment of Goodwill and Other Intangibles Special Item are net of the federal statutory rate of21.0% in 2019 and are net of the operating tax rate of32.4% in 2020. - Adjusted Net Income is defined as net income plus adjustments for Special Items and other expenses or gains that we believe do not directly reflect our core operations and may not be indicative of our normal business operations.
- Consolidated EBITDA is defined as net income before income taxes, interest expenses, non-cash stock compensation, depreciation and amortization, and interest income and other, net.
- Adjusted Consolidated EBITDA is defined as Consolidated EBITDA plus adjustments for Special Items and other expenses or gains that we believe do not directly reflect our core operations and may not be indicative of our normal business operations.
- Adjusted Consolidated EBITDA Margin is defined as Adjusted Consolidated EBITDA as a percentage of revenue.
- Adjusted Free Cash Flow is defined as net cash provided by operations, adjusted by Special Items as deemed necessary, less cash for maintenance capital expenditures.
- Adjusted Free Cash Flow Margin is defined as Adjusted Free Cash Flow as a percentage of revenue.
- Funeral Field EBITDA is defined as Funeral Gross Profit, excluding depreciation and amortization, regional and unallocated costs, Financial EBITDA related to the Funeral Home segment, Other Funeral EBITDA and Divested/Planned Divested EBITDA
- Cemetery Field EBITDA is defined as Cemetery Gross Profit, excluding depreciation and amortization, regional and unallocated costs and Cemetery Financial EBITDA related to the Cemetery segment.
- Funeral Financial EBITDA is defined as Funeral Financial Revenue less Funeral Financial Expenses. Funeral Financial Revenue and Funeral Financial Expenses are presented within Other Revenue and Other Expenses, respectively, on the Condensed Consolidated Statement of Operations.
- Cemetery Financial EBITDA is defined as Cemetery Financial Revenue less Cemetery Financial Expenses. Cemetery Financial Revenue and Cemetery Financial Expenses are presented within Other Revenue and Other Expenses, respectively, on the Condensed Consolidated Statement of Operations.
- Total Field EBITDA is defined as Gross Profit, excluding field depreciation, cemetery property amortization and regional and unallocated funeral and cemetery costs.
- Total Field EBITDA Margin is defined as Total Field EBITDA as a percentage of revenue.
- Other Funeral Revenue is defined as revenues from our ancillary businesses, which include a flower shop, pet cremation business and online cremation business.
- Other Funeral EBITDA is defined as Other Funeral Revenue, less expenses related to our ancillary businesses noted above.
- Divested/Planned Divested Revenue is defined as revenues from eight funeral home businesses that we divested as of December 31, 2020 and five funeral home businesses that we divested as of December 31, 2019 and certain funeral home businesses we intend to divest.
- Divested/Planned Divested EBITDA is defined as Divested Revenue, less field level and financial expenses related to the divested/planned divested businesses noted above.
- Divested/Planned Divested EBITDA Margin is defined as Divested/Planned Divested EBITDA as a percentage of Divested/Planned Divested Revenue.
- Adjusted Basic Earnings Per Share is defined as GAAP Basic Earnings Per Share, adjusted for Special Items.
- Adjusted Diluted Earnings Per Share is defined as GAAP Diluted Earnings Per Share, adjusted for Special Items.
- Total Debt Outstanding is defined as indebtedness under our bank credit facility, Convertible Subordinated Notes due 2021 and Senior Notes due 2026, acquisition debt and finance leases.
- Total Debt to EBITDA Multiple is defined as Total Debt Outstanding to Adjusted Consolidated EBITDA.
Funeral Field EBITDA and Cemetery Field EBITDA
Our operations are reported in two business segments: Funeral Home Operations and Cemetery Operations. Our Field level results highlight trends in volumes, Revenue, Field EBITDA (the individual business’ cash earning power/locally controllable business profit) and Field EBITDA Margin (the individual business’ controllable profit margin).
Funeral Field EBITDA and Cemetery Field EBITDA are defined above. 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 openly or indirectly “push down” any of these expenses to the individual business’ field level margins.
We believe that our “Regional and unallocated funeral and cemetery costs” are necessary to support our decentralized, high performance culture operating framework, and as such, are included in Consolidated EBITDA and Adjusted Consolidated EBITDA, which more accurately reflects the cash earning power of the Company as an operating and consolidation platform.
Consolidated EBITDA and Adjusted Consolidated EBITDA
Consolidated EBITDA and Adjusted Consolidated EBITDA are defined above. Our Adjusted Consolidated EBITDA include adjustments for Special Items and other expenses or gains 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 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, 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 they exclude items that may not be indicative of our ongoing operating performance.
Limitations of the Usefulness of These Measures
Our 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 and Cemetery Field EBITDA are not consolidated measures of profitability.
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 of Field EBITDA 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 of Consolidated EBITDA to Net Income, the most directly comparable GAAP measure, is set forth below.
Therefore, these measures may not provide a complete understanding of our performance and should be reviewed in conjunction with our GAAP financial measures. Carriage Services strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.
Reconciliation of Non-GAAP Financial Measures:
This press release includes the use of certain financial measures that are not GAAP measures. The Non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures, all of which are reflected in the tables below.
Reconciliation of Net Income (Loss) to Adjusted Net Income for the five quarter period (in thousands):
| 4TH QTR 2019 | 1ST QTR 2020 | 2ND QTR 2020 | 3RD QTR 2020 | 4TH QTR 2020 | ||||||||||||||||
| Net Income (Loss) | $ | 2,569 | $ | (4,197 | ) | $ | 6,397 | $ | 5,525 | $ | 8,365 | |||||||||
| Special Items, Net of Tax(1) | ||||||||||||||||||||
| Acquisition and Divestiture Expenses | 1,646 | 90 | 36 | — | (135 | ) | ||||||||||||||
| Severance and Separation Costs | 62 | 228 | 217 | — | — | |||||||||||||||
| Performance Awards Cancellation and Exchange | — | — | 56 | 84 | 84 | |||||||||||||||
| Accretion of Discount on Convertible Subordinated Notes(1) | 63 | 65 | 66 | 69 | 16 | |||||||||||||||
| Net Loss on Divestitures and Other Costs(2) | 188 | — | — | 3,245 | 1,317 | |||||||||||||||
| Net Impact of Impairment of Goodwill and Other Intangibles(2) | 184 | 9,757 | 51 | — | 124 | |||||||||||||||
| Litigation Reserve | 138 | 59 | 154 | — | — | |||||||||||||||
| Tax Expense Related to Divested Business(1) | 51 | — | — | — | — | |||||||||||||||
| Gain on Insurance Reimbursements | (195 | ) | — | — | — | — | ||||||||||||||
| Natural Disaster and Pandemic Costs | — | 111 | 657 | 268 | 250 | |||||||||||||||
| Other Special Items | 265 | — | 371 | (47 | ) | — | ||||||||||||||
| Tax Adjustment Related to Certain Discrete Items(1) | — | — | — | — | 400 | |||||||||||||||
| Adjusted Net Income | $ | 4,971 | $ | 6,113 | $ | 8,005 | $ | 9,144 | $ | 10,421 | ||||||||||
| (1 | ) | Special Items are typically taxed at the federal statutory rate of |
| (2 | ) | The Net Loss on Divestitures and Other Costs Special Item and the Net Impact of Impairment of Goodwill and Other Intangibles Special Item are net of the federal statutory rate of |
Reconciliation of Net Income to Adjusted Net Income for the years ended December 31, 2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):
| For the Years Ended December 31, | For the One Month Ended January 31, | ||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||
| Net Income | $ | 14,533 | $ | 16,090 | $ | 1,513 | $ | 6,064 | |||||||
| Special Items, Net of Tax(1) | |||||||||||||||
| Acquisition and Divestiture Expenses | 1,646 | (9 | ) | 90 | — | ||||||||||
| Severance and Separation Costs | 951 | 445 | — | — | |||||||||||
| Performance Awards Cancellation and Exchange | — | 224 | — | 28 | |||||||||||
| Accretion of Discount on Convertible Subordinated Notes(1) | 241 | 216 | 21 | 10 | |||||||||||
| Net Loss on Divestitures and Other Costs(2) | 3,331 | 4,562 | — | — | |||||||||||
| Net Impact of Impairment of Goodwill and Other Intangibles(2) | 761 | 9,932 | — | — | |||||||||||
| Litigation Reserve | 592 | 213 | — | — | |||||||||||
| Tax Expense Related to Divested Business(1) | 911 | — | — | — | |||||||||||
| Gain on Insurance Reimbursements | (699 | ) | — | — | — | ||||||||||
| Natural Disaster and Pandemic Costs | — | 1,286 | — | 360 | |||||||||||
| Other Special Items | 265 | 324 | — | — | |||||||||||
| Tax Adjustment Related to Certain Discrete Items(1) | — | 400 | — | — | |||||||||||
| Adjusted Net Income | $ | 22,532 | $ | 33,683 | $ | 1,624 | $ | 6,462 | |||||||
| (1 | ) | Special Items are typically taxed at the federal statutory rate of |
| (2 | ) | The Net Loss on Divestitures and Other Costs Special Item and the Net Impact of Impairment of Goodwill and Other Intangibles Special Item are net of the federal statutory rate of |
Reconciliation of Net Income (Loss) to Consolidated EBITDA, Adjusted Consolidated EBITDA and Adjusted Consolidated EBITDA Margin for the five quarter period (in thousands):
| 4TH QTR 2019 | 1ST QTR 2020 | 2ND QTR 2020 | 3RD QTR 2020 | 4TH QTR 2020 | ||||||||||||||||
| Net Income (Loss) | $ | 2,569 | $ | (4,197 | ) | $ | 6,397 | $ | 5,525 | $ | 8,365 | |||||||||
| Total Expense (Benefit) for Income Taxes | 2,114 | (2,150 | ) | 3,449 | 2,859 | 4,394 | ||||||||||||||
| Income (Loss) Before Income Taxes | $ | 4,683 | $ | (6,347 | ) | $ | 9,846 | $ | 8,384 | $ | 12,759 | |||||||||
| Interest Expense | 6,615 | 8,428 | 8,352 | 8,007 | 7,728 | |||||||||||||||
| Accretion of Discount on Convertible Subordinated Notes | 63 | 65 | 66 | 69 | 16 | |||||||||||||||
| Loss on Early Extinguishment of Debt | — | — | — | 6 | — | |||||||||||||||
| Non-Cash Stock Compensation | 537 | 831 | 715 | 927 | 897 | |||||||||||||||
| Depreciation & Amortization | 4,416 | 4,549 | 4,698 | 5,033 | 5,109 | |||||||||||||||
| Net Loss on Divestitures | 8 | — | — | 4,917 | 1,832 | |||||||||||||||
| Impairment of Goodwill and Other Intangibles | 233 | 14,693 | — | — | — | |||||||||||||||
| Other, Net | (45 | ) | 4 | 2 | 28 | (186 | ) | |||||||||||||
| Consolidated EBITDA | $ | 16,510 | $ | 22,223 | $ | 23,679 | $ | 27,371 | $ | 28,155 | ||||||||||
| Adjusted For: | ||||||||||||||||||||
| Acquisition and Divestiture Expenses | 2,083 | 114 | 45 | — | (170 | ) | ||||||||||||||
| Severance and Separation Costs | 79 | 288 | 275 | — | — | |||||||||||||||
| Litigation Reserve | 175 | 75 | 195 | — | — | |||||||||||||||
| Natural Disaster and Pandemic Costs | — | 140 | 832 | 340 | 315 | |||||||||||||||
| Other Special Items | 336 | — | 418 | (45 | ) | — | ||||||||||||||
| Adjusted Consolidated EBITDA | $ | 19,183 | $ | 22,840 | $ | 25,444 | $ | 27,666 | $ | 28,300 | ||||||||||
| Revenue | $ | 71,149 | $ | 77,490 | $ | 77,477 | $ | 84,393 | $ | 90,088 | ||||||||||
| Adjusted Consolidated EBITDA Margin | 27.0 | % | 29.5 | % | 32.8 | % | 32.8 | % | 31.4 | % | ||||||||||
Reconciliation of Net Income to Consolidated EBITDA, Adjusted Consolidated EBITDA and Adjusted Consolidated EBITDA Margin for the years ended December 31, 2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):
| For the Years Ended December 31, | For the One Month Ended January 31, | ||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||
| Net Income | $ | 14,533 | $ | 16,090 | $ | 1,513 | $ | 6,064 | |||||||
| Total Expense for Income Taxes | 7,883 | 8,552 | 649 | 2,599 | |||||||||||
| Income Before Income Taxes | $ | 22,416 | $ | 24,642 | $ | 2,162 | $ | 8,663 | |||||||
| Interest Expense | 25,522 | 32,515 | 2,846 | 2,552 | |||||||||||
| Accretion of Discount on Convertible Subordinated Notes | 241 | 216 | 21 | 10 | |||||||||||
| Loss on Early Extinguishment of Debt | — | 6 | — | — | |||||||||||
| Non-Cash Stock Compensation | 2,153 | 3,370 | 228 | 326 | |||||||||||
| Depreciation & Amortization | 17,771 | 19,389 | 1,468 | 1,591 | |||||||||||
| Net Loss on Divestitures | 3,883 | 6,749 | — | — | |||||||||||
| Impairment of Goodwill and Other Intangibles | 963 | 14,693 | — | — | |||||||||||
| Other, Net | (736 | ) | (152 | ) | (8 | ) | — | ||||||||
| Consolidated EBITDA | $ | 72,213 | $ | 101,428 | $ | 6,717 | $ | 13,142 | |||||||
| Adjusted For: | |||||||||||||||
| Acquisition and Divestiture Expenses | 2,083 | (11 | ) | 114 | — | ||||||||||
| Severance and Separation Costs | 1,205 | 563 | — | — | |||||||||||
| Litigation Reserve | 750 | 270 | — | — | |||||||||||
| Natural Disaster and Pandemic Costs | — | 1,627 | — | 456 | |||||||||||
| Other Special Items | 336 | 373 | — | — | |||||||||||
| Adjusted Consolidated EBITDA | $ | 76,587 | $ | 104,250 | $ | 6,831 | $ | 13,598 | |||||||
| Revenue | $ | 274,107 | $ | 329,448 | $ | 26,604 | $ | 34,693 | |||||||
| Adjusted Consolidated EBITDA Margin | 27.9 | % | 31.6 | % | 25.7 | % | 39.2 | % | |||||||
Reconciliation of Funeral and Cemetery Gross Profit to Funeral and Cemetery Field EBITDA for the five quarter period (in thousands):
| 4TH QTR 2019 | 1ST QTR 2020 | 2ND QTR 2020 | 3RD QTR 2020 | 4TH QTR 2020 | ||||||||||||||||
| Funeral Gross Profit (GAAP) | $ | 16,778 | $ | 19,004 | $ | 19,869 | $ | 18,892 | $ | 21,299 | ||||||||||
| Depreciation & Amortization | 2,806 | 2,944 | 2,895 | 2,885 | 2,862 | |||||||||||||||
| Regional & Unallocated Costs | 2,919 | 2,326 | 2,788 | 3,859 | 5,375 | |||||||||||||||
| Less: | ||||||||||||||||||||
| Funeral Financial EBITDA | (1,841 | ) | (1,996 | ) | (1,921 | ) | (2,119 | ) | (2,150 | ) | ||||||||||
| Other Funeral EBITDA | (298 | ) | (295 | ) | (321 | ) | (292 | ) | (278 | ) | ||||||||||
| Funeral Divested/Planned Divested EBITDA | (522 | ) | (674 | ) | (830 | ) | (378 | ) | (310 | ) | ||||||||||
| Funeral Field EBITDA | $ | 19,842 | $ | 21,309 | $ | 22,480 | $ | 22,847 | $ | 26,798 | ||||||||||
| 4TH QTR 2019 | 1ST QTR 2020 | 2ND QTR 2020 | 3RD QTR 2020 | 4TH QTR 2020 | ||||||||||||||||
| Cemetery Gross Profit (GAAP) | $ | 3,901 | $ | 4,167 | $ | 5,291 | $ | 8,982 | $ | 8,419 | ||||||||||
| Depreciation & Amortization | 1,309 | 1,223 | 1,449 | 1,819 | 1,885 | |||||||||||||||
| Regional & Unallocated Costs | 900 | 430 | 929 | 872 | 1,478 | |||||||||||||||
| Less: | ||||||||||||||||||||
| Cemetery Financial EBITDA | (1,868 | ) | (1,823 | ) | (2,535 | ) | (3,123 | ) | (2,737 | ) | ||||||||||
| Cemetery Divested/Planned Divested EBITDA | (11 | ) | (3 | ) | (44 | ) | (40 | ) | (42 | ) | ||||||||||
| Cemetery Field EBITDA | $ | 4,231 | $ | 3,994 | $ | 5,090 | $ | 8,510 | $ | 9,003 | ||||||||||
Reconciliation of Funeral and Cemetery Gross Profit to Funeral and Cemetery Field EBITDA for the years ended December 31, 2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):
| For the Years Ended December 31, | For the One Month Ended January 31, | ||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||
| Funeral Gross Profit (GAAP) | $ | 63,602 | $ | 79,064 | $ | 6,195 | $ | 10,796 | |||||||
| Depreciation & Amortization | 11,128 | 11,586 | 965 | 953 | |||||||||||
| Regional & Unallocated Costs | 11,007 | 14,348 | 1,004 | 1,728 | |||||||||||
| Less: | |||||||||||||||
| Funeral Financial EBITDA | (7,409 | ) | (8,186 | ) | (733 | ) | (790 | ) | |||||||
| Other Funeral EBITDA | (298 | ) | (1,186 | ) | (49 | ) | (118 | ) | |||||||
| Funeral Divested/Planned Divested EBITDA | (2,342 | ) | (2,192 | ) | (222 | ) | (144 | ) | |||||||
| Funeral Field EBITDA | $ | 75,688 | $ | 93,434 | $ | 7,160 | $ | 12,425 | |||||||
| For the Years Ended December 31, | For the One Month Ended January 31, | ||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||
| Cemetery Gross Profit (GAAP) | $ | 15,983 | $ | 26,859 | $ | 1,130 | $ | 2,800 | |||||||
| Depreciation & Amortization | 5,227 | 6,376 | 377 | 533 | |||||||||||
| Regional & Unallocated Costs | 2,820 | 3,709 | 227 | 456 | |||||||||||
| Less: | |||||||||||||||
| Cemetery Financial EBITDA | (6,826 | ) | (10,218 | ) | (640 | ) | (978 | ) | |||||||
| Cemetery Divested/Planned Divested EBITDA | (13 | ) | (129 | ) | 1 | (10 | ) | ||||||||
| Cemetery Field EBITDA | $ | 17,191 | $ | 26,597 | $ | 1,095 | $ | 2,801 | |||||||
Components of Total Field EBITDA for the five quarter period (in thousands):
| 4TH QTR 2019 | 1ST QTR 2020 | 2ND QTR 2020 | 3RD QTR 2020 | 4TH QTR 2020 | ||||||||||||||||
| Funeral Field EBITDA | $ | 19,842 | $ | 21,309 | $ | 22,480 | $ | 22,847 | $ | 26,798 | ||||||||||
| Cemetery Field EBITDA | 4,231 | 3,994 | 5,090 | 8,510 | 9,003 | |||||||||||||||
| Funeral Financial EBITDA | 1,841 | 1,996 | 1,921 | 2,119 | 2,150 | |||||||||||||||
| Cemetery Financial EBITDA | 1,868 | 1,823 | 2,535 | 3,123 | 2,737 | |||||||||||||||
| Other Funeral EBITDA | 298 | 295 | 321 | 292 | 278 | |||||||||||||||
| Divested/Planned Divested EBITDA | 533 | 677 | 874 | 418 | 352 | |||||||||||||||
| Total Field EBITDA | $ | 28,613 | $ | 30,094 | $ | 33,221 | $ | 37,309 | $ | 41,318 | ||||||||||
Components of Total Field EBITDA for the years ended December 31, 2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):
| For the Years Ended December 31, | For the One Month Ended January 31, | ||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||
| Funeral Field EBITDA | $ | 75,688 | $ | 93,434 | $ | 7,160 | $ | 12,425 | |||||||
| Cemetery Field EBITDA | 17,191 | 26,597 | 1,095 | 2,801 | |||||||||||
| Funeral Financial EBITDA | 7,409 | 8,186 | 733 | 790 | |||||||||||
| Cemetery Financial EBITDA | 6,826 | 10,218 | 640 | 978 | |||||||||||
| Other Funeral EBITDA | 298 | 1,186 | 49 | 118 | |||||||||||
| Divested/Planned Divested EBITDA | 2,355 | 2,321 | 221 | 154 | |||||||||||
| Total Field EBITDA | $ | 109,767 | $ | 141,942 | $ | 9,898 | $ | 17,266 | |||||||
Reconciliation of GAAP Basic Earnings (Loss) Per Share to Adjusted Basic Earnings Per Share for the five quarter period:
| 4TH QTR 2019 | 1ST QTR 2020 | 2ND QTR 2020 | 3RD QTR 2020 | 4TH QTR 2020 | ||||||||||||||||
| GAAP Basic Earnings (Loss) Per Share | $ | 0.14 | $ | (0.23 | ) | $ | 0.36 | $ | 0.31 | $ | 0.47 | |||||||||
| Special Items | 0.14 | 0.58 | 0.09 | 0.20 | 0.11 | |||||||||||||||
| Adjusted Basic Earnings Per Share | $ | 0.28 | $ | 0.35 | $ | 0.45 | $ | 0.51 | $ | 0.58 | ||||||||||
Reconciliation of GAAP Basic Earnings Per Share to Adjusted Basic Earnings Per Share for the years ended December 31, 2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):
| For the Years Ended December 31, | For the One Month Ended January 31, | ||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||
| GAAP Basic Earnings Per Share | $ | 0.81 | $ | 0.90 | $ | 0.08 | $ | 0.34 | |||||||
| Special Items | 0.45 | 0.98 | 0.01 | 0.02 | |||||||||||
| Adjusted Basic Earnings Per Share | $ | 1.26 | $ | 1.88 | $ | 0.09 | $ | 0.36 | |||||||
Reconciliation of GAAP Diluted Earnings (Loss) Per Share to Adjusted Diluted Earnings Per Share for the five quarter period:
| 4TH QTR 2019 | 1ST QTR 2020 | 2ND QTR 2020 | 3RD QTR 2020 | 4TH QTR 2020 | ||||||||||||||||
| GAAP Diluted (Loss) Earnings Per Share | $ | 0.14 | $ | (0.23 | ) | $ | 0.36 | $ | 0.31 | $ | 0.46 | |||||||||
| Special Items | 0.14 | 0.58 | 0.09 | 0.20 | 0.11 | |||||||||||||||
| Adjusted Diluted Earnings Per Share | $ | 0.28 | $ | 0.35 | $ | 0.45 | $ | 0.51 | $ | 0.57 | ||||||||||
Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the years ended December 31, 2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):
| For the Years Ended December 31, | For the One Month Ended January 31, | ||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||
| GAAP Diluted Earnings Per Share | $ | 0.80 | $ | 0.89 | $ | 0.08 | $ | 0.33 | |||||||
| Special Items | 0.45 | 0.97 | 0.01 | 0.02 | |||||||||||
| Adjusted Diluted Earnings Per Share | $ | 1.25 | $ | 1.86 | $ | 0.09 | $ | 0.35 | |||||||
Reconciliation of Cash Flow Provided by Operations to Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin for the five quarter period (in thousands):
| 4TH QTR 2019 | 1ST QTR 2020 | 2ND QTR 2020 | 3RD QTR 2020 | 4TH QTR 2020 | ||||||||||||||||
| Cash Flow Provided by Operations | $ | 7,155 | $ | 13,546 | $ | 17,455 | $ | 36,821 | $ | 15,093 | ||||||||||
| Cash Used for Maintenance Capital Expenditures | (2,614 | ) | (1,556 | ) | (1,342 | ) | (2,496 | ) | (3,368 | ) | ||||||||||
| Free Cash Flow | $ | 4,541 | $ | 11,990 | $ | 16,113 | $ | 34,325 | $ | 11,725 | ||||||||||
| Plus: Incremental Special Items: | ||||||||||||||||||||
| Federal Tax Refund | — | — | — | (7,012 | ) | — | ||||||||||||||
| Acquisition and Divestiture Costs | 2,083 | 114 | 45 | — | (170 | ) | ||||||||||||||
| Severance and Separation Costs | 79 | 288 | 275 | — | — | |||||||||||||||
| Litigation Reserve | 175 | 75 | 195 | — | — | |||||||||||||||
| Natural Disaster and Pandemic Costs | — | 140 | 832 | 340 | 315 | |||||||||||||||
| Other Special Items | 336 | — | 418 | (45 | ) | — | ||||||||||||||
| Adjusted Free Cash Flow | $ | 7,214 | $ | 12,607 | $ | 17,878 | $ | 27,608 | $ | 11,870 | ||||||||||
| Revenue | $ | 71,149 | $ | 77,490 | $ | 77,477 | $ | 84,393 | $ | 90,088 | ||||||||||
| Adjusted Free Cash Flow Margin | 10.1 | % | 16.3 | % | 23.1 | % | 32.7 | % | 13.2 | % | ||||||||||
Reconciliation of Cash Flow Provided by Operations to Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin for the years ended December 31, 2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):
| For the Years Ended December 31, | For the One Month Ended January 31, | ||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||
| Cash Flow Provided by Operations | $ | 43,216 | $ | 82,915 | $ | 6,002 | $ | 12,506 | |||||||
| Cash Used for Maintenance Capital Expenditures | (8,795 | ) | (8,762 | ) | (497 | ) | (676 | ) | |||||||
| Free Cash Flow | $ | 34,421 | $ | 74,153 | $ | 5,505 | $ | 11,830 | |||||||
| Plus: Incremental Special Items: | |||||||||||||||
| Federal Tax Refund | — | (7,012 | ) | — | — | ||||||||||
| Acquisition and Divestiture Costs | 2,083 | (11 | ) | 114 | — | ||||||||||
| Severance and Separation Costs | 1,205 | 563 | — | — | |||||||||||
| Litigation Reserve | 750 | 270 | — | — | |||||||||||
| Natural Disaster and Pandemic Costs | — | 1,627 | — | 456 | |||||||||||
| Other Special Items | 336 | 373 | — | — | |||||||||||
| Adjusted Free Cash Flow | $ | 38,795 | $ | 69,963 | $ | 5,619 | $ | 12,286 | |||||||
| Revenue | $ | 274,107 | $ | 329,488 | $ | 26,604 | $ | 34,693 | |||||||
| Adjusted Free Cash Flow Margin | 14.2 | % | 21.2 | % | 21.1 | % | 35.4 | % | |||||||
Reconciliation of Performance Outlook Scenario
Earlier in this press release, we present the Performance Outlook 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 unless we have a signed Letter of Intent with a high likelihood of a closing within 90 days. This Performance Outlook 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 at the approximate midpoint of the range in this Performance Outlook Scenario.
Reconciliation of Net Income to Consolidated EBITDA, Total Field EBITDA and Total Field EBITDA Margin for the Years Ended December 31, 2019 and 2020 and the Estimated Years Ending December 31, 2021 and 2022 (in thousands):
| Years Ending December 31, | |||||||||||||||
| Actual 2019 | Actual 2020 | 2021E | 2022E | ||||||||||||
| Net Income | $ | 14,533 | $ | 16,090 | $ | 41,000 | $ | 46,900 | |||||||
| Total Tax Expense | 7,883 | 8,552 | 17,000 | 19,000 | |||||||||||
| Pretax Income | $ | 22,416 | $ | 24,642 | $ | 58,000 | $ | 65,900 | |||||||
| Net Interest Expense, including Accretion of Discount on Convertible Subordinated Notes | 25,763 | 32,731 | 24,700 | 19,500 | |||||||||||
| Depreciation & Amortization, Non-cash Stock Compensation and Other, Net | 19,188 | 22,613 | 24,300 | 25,000 | |||||||||||
| Net Loss on Divestitures and Impairment Charges | 4,846 | 21,442 | — | — | |||||||||||
| Consolidated EBITDA | $ | 72,213 | $ | 101,428 | $ | 107,000 | $ | 110,400 | |||||||
| Overhead Expenses | 37,554 | 40,514 | 39,500 | 40,500 | |||||||||||
| Total Field EBITDA | $ | 109,767 | $ | 141,942 | $ | 146,500 | $ | 150,900 | |||||||
| Revenue | $ | 274,107 | $ | 329,448 | $ | 334,000 | $ | 340,000 | |||||||
| Total Field EBITDA Margin | 40.0 | % | 43.1 | % | 43.9 | % | 44.4 | % | |||||||
Reconciliation of Consolidated EBITDA to Adjusted Consolidated EBITDA and Adjusted Consolidated EBITDA Margin for Years Ended December 31, 2019 and 2020 and the Estimated Years Ending December 31, 2021 and 2022 (in thousands):
| Years Ending December 31, | |||||||||||||||
| Actual 2019 | Actual 2020 | 2021E | 2022E | ||||||||||||
| Consolidated EBITDA | $ | 72,213 | $ | 101,428 | $ | 107,000 | $ | 110,400 | |||||||
| Special Items | 4,374 | 2,822 | — | — | |||||||||||
| Adjusted Consolidated EBITDA | $ | 76,587 | $ | 104,250 | $ | 107,000 | $ | 110,400 | |||||||
| Revenue | $ | 274,107 | $ | 329,448 | $ | 334,000 | $ | 340,000 | |||||||
| Adjusted Consolidated EBITDA Margin | 27.9 | % | 31.6 | % | 32.0 | % | 32.5 | % | |||||||
Reconciliation of Net Income to Adjusted Net Income for the Years Ended December 31, 2019 and 2020 and the Estimated Years Ending December 31, 2021 and 2022 (in thousands):
| Years Ending December 31, | |||||||||||||||
| Actual 2019 | Actual 2020 | 2021E | 2022E | ||||||||||||
| Net Income | $ | 14,533 | $ | 16,090 | $ | 41,000 | $ | 46,900 | |||||||
| Special Items | 7,999 | 17,593 | — | — | |||||||||||
| Adjusted Net Income | $ | 22,532 | $ | 33,683 | $ | 41,000 | $ | 46,900 | |||||||
Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the Years Ended December 31, 2019 and 2020 and the Estimated Years Ending December 31, 2021 and 2022 (in thousands):
| Years Ending December 31, | |||||||||||||||
| Actual 2019 | Actual 2020 | 2021E | 2022E | ||||||||||||
| GAAP Diluted Earnings Per Share | $ | 0.80 | $ | 0.89 | $ | 2.28 | $ | 2.60 | |||||||
| Special Items | 0.45 | 0.97 | — | — | |||||||||||
| Adjusted Diluted Earnings Per Share | $ | 1.25 | $ | 1.86 | $ | 2.28 | $ | 2.60 | |||||||
Reconciliation of Cash Flow Provided by Operations to Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin for the Years Ended December 31, 2019 and 2020 and the Estimated Years Ending December 31, 2021 and 2022 (in thousands):
| Years Ending December 31, | |||||||||||||||
| Actual 2019 | Actual 2020 | 2021E | 2022E | ||||||||||||
| Cash Flow Provided by Operations | $ | 43,216 | $ | 82,915 | $ | 75,000 | $ | 80,000 | |||||||
| Cash Used for Maintenance Capital Expenditures | (8,795 | ) | (8,762 | ) | (10,000 | ) | (11,000 | ) | |||||||
| Special Items | 4,374 | (4,190 | ) | — | — | ||||||||||
| Adjusted Free Cash Flow | $ | 38,795 | $ | 69,963 | $ | 65,000 | $ | 69,000 | |||||||
| Revenue | $ | 274,107 | $ | 329,448 | $ | 334,000 | $ | 340,000 | |||||||
| Adjusted Free Cash Flow Margin | 14.2 | % | 21.2 | % | 19.5 | % | 20.3 | % | |||||||
Supplemental Information:
Funeral homes and cemeteries purchased after December 31, 2015 are referred to as “Acquired” in our Trend Report. This classification of acquisitions has been important to management and investors in monitoring the results of these businesses and to gauge the leveraging performance contribution that a selective acquisition program can have on total company performance.
The presentation below highlights the impact of our 2015 Acquired Portfolio that moved from Acquired to Same Store beginning January 1, 2020 (in thousands):
| For the Three Months Ended December 31, 2019 | For the Year Ended December 31, 2019 | ||||||||||||||
| Revenue | EBITDA | Revenue | EBITDA | ||||||||||||
| 2015 Acquired Portfolio | $ | 1,204 | $ | 541 | $ | 4,612 | $ | 1,826 | |||||||
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition to historical information, this Press Release contains certain statements and information that may constitute forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical information, should be deemed to be forward-looking statements. These statements include, but are not limited to, statements regarding any projections of earnings, revenue, asset sales, cash flow, capital allocation, debt levels or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future developments and their potential effect on us. The words “may”, “will”, “estimate”, “intend”, “believe”, “expect”, “seek”, “project”, “forecast”, “foresee”, “should”, “would”, “could”, “plan”, “anticipate” and other similar words or expressions are intended to identify forward-looking statements, which are generally not historical in nature. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenue and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:
- our ability to find and retain skilled personnel;
- the effects of our incentive and compensation plans and programs, including such effects on our Standards Operating Model and the Company’s operational and financial performance;
- our ability to execute our growth strategy;
- the execution of our Standards Operating, 4E Leadership and Standard Acquisition Models;
- the effects of competition;
- changes in the number of deaths in our markets;
- changes in consumer preferences and our ability to adapt to or meet those changes;
- our ability to generate preneed sales, including implementing our cemetery portfolio sales strategy;
- the investment performance of our funeral and cemetery trust funds;
- fluctuations in interest rates;
- our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
- our ability to meet the timing, objectives and cost saving expectations related to anticipated financing activities, including our deleveraging program, forecasts and planned uses of free cash flow, expected plans and projections for refinancing our senior notes, and future capital allocation, including potential acquisitions, share repurchases, dividend increases, or debt repayment plans;
- our ability to meet the projected financial performance metrics to our updated two-year scenario, if at all;
- the timely and full payment of death benefits related to preneed funeral contracts funded through life insurance contracts;
- the financial condition of third-party insurance companies that fund our preneed funeral contracts;
- increased or unanticipated costs, such as insurance or taxes;
- our level of indebtedness and the cash required to service our indebtedness;
- changes in federal income tax laws and regulations and the implementation and interpretation of these laws and regulations by the Internal Revenue Service;
- effects of the application of other applicable laws and regulations, including changes in such regulations or the interpretation thereof;
- the potential impact of epidemics and pandemics, including the COVID-19 coronavirus (“COVID-19”), on customer preferences and on our business;
- effects of litigation and burial practice claims;
- consolidation of the funeral and cemetery industry;
- our ability to consummate the divestiture of low performing businesses as currently expected, if at all, including expected use of proceeds related thereto;
- our ability to integrate acquired businesses with our existing businesses, including expected performance and financial improvements related thereto; 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, 2019, our Quarterly Reports on Form 10-Q, and other public filings and press releases, available at www.carriageservices.com.
Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.
FAQ
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What plans does Carriage Services have for refinancing?
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