Carriage Services 1st Quarter — Total Revenue Drops

Houston based funeral home and cemetery consolidator and operator Carriage Services reported its 1st Quarter 2019 results yesterday.  Their report somewhat parroted industry leader Service Corporation International’s report from a week ago in that “Same Unit” revenues dropped.  In Carriage’s case, however, even with new acquisition revenue added in, their 2019 revenues of $69.1 million was a 5.9% decrease in total revenue as compared to 2018’s 1st Quarter revenue of $73.3 million.

You can read the press release from Carriage Services here.

Here is some of what CEO Mel Payne said in the press release:  “While facing difficult comparisons because of the severe flu season and corresponding spike in the death rate during the first quarter of 2018, we have experienced broadly positive lift in both our funeral and cemetery portfolios from the recent operational leadership changes and reboot of our Standards Operating Model.  Overhead and non-cash stock compensation costs have also declined as anticipated from the previously announced leadership changes, cancellation of performance awards, and overall cost management.”

Here are a couple of highlights we noticed from the Carriage report:

  • Net income for the quarter was $6.5 million.  A decrease of 30.3%.
  • “Same Store” funeral contracts dropped from 10,112 services in 2018 to 9,881 services in 1Q 2019. . a drop of 2.3%
  • “Same Store” funeral operating revenue dropped from $49.1 million in 2018 to $45.5 million in 1Q 2019. . .a drop of 7.4%
  • “Same Store” Funeral EBITDA dropped from $20.3 million in 2018 to $17.9 million in 1Q 2019. . . a drop of over 11%

Our review of the press release and numbers did show what we would call a highlight in that Carriage Services Overhead costs was heading downward.  The company was able to reduce total overhead expenses about 11% in 1Q 2019 over 1Q 2018.  According to the press release and financial numbers they were able to reduce overhead in all areas — variable overhead, regional fixed overhead, and corporate fixed overhead.

Funeral Director Daily take:  A lot of what you are seeing and hearing in this report is very similar to the Service Corporation International report of about one week ago.  Evidently, the 2018 1st Quarter was affected by a large uptick in the death numbers and both CEOs mentioned that in their remarks.  Because of that fluctuation, which makes the comparable quarters somewhat difficult, investors will be looking to the 2nd Quarter reports with great anticipation to see if that is a true reflection of what has happened or if the trends of less funeral calls and less revenue per service continue to move downward for the large operators.

One thing we noticed in extrapolating the numbers for Carriage Services is that if you divide their “Same Store” funeral operating revenue by the number of services conducted in both 1Q 2018 and 1Q 2019 you will see that the “Average Revenue per Service” has dropped from $5456 in 2018 to $$5359 in 2019 — a drop of 1.8%.  To us, that number is indicative of the increasing number of cremation – and especially Direct Cremation No Services (DSNS) – calls that traditional funeral homes are receiving in today’s world.  For Carriage Services, and other operators, to really move forward they need to get a handle on how to be profitable on those types of death calls.

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