Carriage Services reported their much anticipated 2nd Quarter of 2020 results on Tuesday. You can get a copy of their press release here.
The company, as well as other companies in the death care index are reporting their 2nd Quarters as their first full three month period of dealing with deaths and memorializations in the COVID-19 period. For that reason, many are interested in seeing how their results were affected due to the issues around COVID-19 and funeral service.
Those issues deal both with the idea of potentially a greater number of deaths, but also the idea that grieving families will spend less because of some of the social distancing rules that are in place.
Carriage Services, the Houston based operator of funeral homes and cemeteries, reported 2Q 2020 total revenue of $77.4 million as compared to $67.5 million for the same period in 2019. That’s an increase of over 14%. And, while that number includes acquisition revenue that was not part of the business in 2019, even same store sales for funerals was up 2.3%. Same store cemetery sales, however, slumped from $13.2 million in the 2nd Quarter of 2019 to $11.69 million in 2Q 2020.
According to the press release here are some other items that were touched upon:
- On COO Bill Goetz leaving Carriage after only about 7 months of employment: “After Bill and I (CEO Mel Payne) thoroughly discussed the CEO succession timeframe disparity we each felt strongly about, Bill made a personal decision on June 25th to resign on good terms with me and his Carriage teammates and will now seek to become the CEO of a public company during his next career phase.”
- On the hiring of Carlos Quezada to a cemetery sales leadership position: “So with great opportunities at Carriage including three large combination businesses acquired in the fourth quarter of 2019 and early January 2020, we successfully recruited Carlos Quezada who left SCI with his immense cemetery sales leadership and joined Carriage’s Good To Great Journey Part II as the tenth member of our Executive Team. . . . . . Carlos will have the primary responsibility of building high performance sales teams and standardized sales systems across our portfolio of cemeteries, as 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, especially our largest cemeteries that now include three top quality combination businesses acquired in the fourth quarter of 2019 and early January 2020.”
- On Capital plans over the next three years: “With an improved credit profile and lower cost capital structure after our senior notes refinancing, we will have the necessary financial flexibility to make select high quality acquisitions and/or opportunistically repurchase CSV common shares . . . . .We believe the successful acquisition and integration of Fairfax, Rest Haven, Oakmont and Lombardo only enhance our reputation as the succession planning solution for the best remaining independent funeral home and cemetery operations in the U.S.”
Funeral Director Daily take: We believe that Carriage Services should be rightly proud of reaching record revenues for the 2nd Quarter and also for their 6th month operating performance. . . .The company’s 6-month revenue performance came in at $154.9 million as compared to last year’s $136.8 million during the same period. According to the press release that is a 13.3% increase and another record for Carriage Services.
Kudos should also be given to Carriage Services for a 12% increase in Same Store funeral services as compared to 2Q 2019 and an increase of 8.7% in funeral services for the 6-month period as compared to 2019. It is hard for us to tell if this increase is because of COVID deaths or simply Carriage Services taking more market share. Of Carriage’s funeral homes, we don’t see them located in great numbers in COVID “hotspots”, so we do believe the great number of services may be from increased market share.
The company should also be commended for bringing their four large acquisitions into the fold and producing over 4500 funeral contracts and over $29 million in funeral home and cemetery revenue for the first six months of 2020.
Where we do see a little leak in the boat, however, is where many experienced funeral management people expected as a result of COVID-19 services. While we see, as we said, increased numbers of services at Same Stores, we don’t see a corresponding percentage increase in revenues to go along with those numbers. For instance, Same Store services have increased 12.0%, but Same Store funeral revenues have increased only 2.3%.
If you take the numbers presented for the 2nd Quarter in both 2019 and 2020 as to Same Store Funeral Contracts and the Same Store Funeral Revenue, you will see a drop of about 8.6% in “Revenue per Service”. That equates to a drop of about $458 per service and is in line with what most funeral professionals thought would happen due to the “No Large Gatherings” rule of COVID-19 social distancing.
And, while “Acquisition Cemetery Revenue” has added about $6.8 million to revenues in the first 6 months of 2020, cemetery revenue from “Same Store” cemeteries had dropped by 7.7% or almost $2 million in the first six months of 2020 as compared to 2019. We believe that is due to either possible choices of cremation over funeral services or, possibly, just delayed purchases of monuments and the like in cemeteries.
These numbers may be temporary, but they are real and funeral providers have to find a way to deal with it as long as we will have COVID-19 and social distancing rules in effect. Technology may also play a part in stemming some of these revenue shortages.
All in all, we believe that Carriage Services have done a good job in working through some of the challenges of COVID-19. The early returns on revenue indicate that their acquisitions at the end of 2019 should help with profitability even though their interest payments will be higher on the expense side of the ledger.
These numbers make us interested to see how Service Corporation International and Park Lawn Corporation report.