Toronto based Park Lawn Corporation (PLC) reported its 2nd Quarter 2020 financial situation last week.  In it they reported great success on revenue growth and Adjusted Net Earnings.  CEO Brad Green commented on the financial report in saying, “We have grown together as an organization and are poised to continue with our projected growth targets.”  

In the quarterly report that you can read here you will find that growth-oriented Park Lawn’s revenues grew from $58.6 million in 2Q 2019 to $84.7 million in 2Q 2020 (all dollars reported in Canadian dollars).  That is an increase of 44.6%.

The company also reported that they strengthened their Balance Sheet as a result of the recently completed $86.3 million Senior Unsecured Debenture Financing.  The results of that financing, according to the quarterly financial report,  were that PLC could pay down some credit facility debt and yet have capital to pursue its growth objectives.

Park Lawn also held an earnings call with investment advisors and you can access the transcript of that call here.  In it, Park Lawn executives addressed various issues which we will highlight here.

CFO Joe Leeder addressed the 2Q Financial Report and “Comparable Sales”:  “. . . . .revenue growth from comparable business units in the second quarter was 7.3% over the second quarter of 2019, unadjusted for currency fluctuations that growth would have been 9.1%.

The increase in revenue from comparable business operations during the quarter was the result of both our cemetery and our funeral businesses in the United States. The company’s businesses located in markets such as New Jersey, Colorado and Michigan, experienced an overall increase in at-need services associated with COVID-19 cases. 

At the same time, our pre-need cemetery revenue was down in the quarter, as many regions faced the stay-at-home legislation that limited our ability to meet the families and close sales. However, we saw an improvement later in the quarter, as many jurisdictions relax the guidelines and our counselors were able to meet with families under restricted circumstances.

In Canada, the company’s cemetery business was not impacted to the same extent by the pandemic and we were able to maintain our pre-need sales activity during the quarter. Comparable funeral revenue in the U.S. market also increased during the quarter as a result of COVID-related services. Although, the number of services was higher, the effect of social distancing brought on by the pandemic resulted in a smaller memorial services which limited ancillary selling opportunities and negatively impacted the average revenue per call.

In Canada, our funeral business was similarly impacted although the number of services did not offset the decline in average revenue per call and revenue was down approximately 2% quarter-over-quarter.”

CFO Joe Leeder on PLC’s Balance Sheet strength:  “. . . .In late June, the market provided us with an opportunity to raise additional capital in the form of senior unsecured debentures. And in mid-July we closed a bought deal financing of $86.3 million, netting the company approximately $83 million.

After using this cash to pay down our credit facility, we reduced our leverage ratio to 1.5 times and increased our liquidity to approximately $175 million. . . . we believe this debenture financing provides us with the financial flexibility to support our operations through the uncertainties ahead. And also gives us the dry powder to take advantage of any acquisition opportunities that may come our way, in the coming months.”

CEO Brad Green on Park Lawn’s 2nd Quarter:  “. . .in May, I mentioned several factors that we believe could impact our business and those factors did in fact continue to tell the story of the rest of the quarter.

First, we saw a drop in cemetery pre-need sales. Then we saw a stabilization, and then we saw a very strong recovery, which we’re still experiencing. . . . . I mean, that the pre-need sales almost fully recovered to be equal quarter-over-quarter by the end of June.

Second, we saw a decrease in the average funeral sale which remained a constant through the quarter mainly due to size of service restrictions imposed by regulatory mandates. . . . . 

The third factor I mentioned in mid-May was that, we were seeing significant increase in our at-need volume in our New Jersey Colorado and Michigan businesses or so-called hotspots in the U.S. As the quarter progressed, however, there were other markets that saw an increase in at-need services that may or may not have been related to COVID-19.

This increase in volume occurred in both the funeral and cemetery side of our businesses. Interestingly, the cemetery at-need average actually increased to the point that, it basically offset the decrease in the average funeral sale.”

CEO Brad Green on Revenues per Call:  “. . .we’re laser-focused on that, right? Because that’s something that will impact what we do and how we perform. And as best we can tell that is related to — directly related to the stay-at-home orders in places where it’s been locked down. . . . .you can’t predict how this is going to ultimately impact the consumer, but people tend to get back to the norm. It’s a very stable industry. And I would think that the size restrictions on the services, as they are continually relaxed, you’re going to see a — that at-need average return to normal. “

CEO Brad Green on Acquisition questions: “. . . .I would look at anything that would add size or volume in any of the businesses where — or any of the locations where we have a large footprint always makes sense. But Colorado, South Carolina, North Carolina, Mississippi to Sunbelt, I mean that’s definitely places that we would like to continue to see growth, because of the averages and the mix between cremation and traditional funeral services. But we look at — if we have a big footprint and someone wants to join our company, we’ll look at that in any market.. . . 

. . .there were acquisition targets that we put — that we specifically put on hold in March.. . . .I’ve seen — or we have seen an uptick from the brokers. They’re bringing new businesses to us, and we’re starting to get phone calls that we hadn’t . . . . .The frequency of phone calls to people that want to join our company are probably a lot higher than you would think, and we say no a lot. . . . . So the answer is we’re back on the acquisition trail with the ones that we were looking at pre-pandemic.  And as new ones come in the door, we’re looking at those as well. . . .

. . . So I’ll answer that this way. I think that there are owners that — and I’m starting to see this and this was a challenge to operate a death care company in a pandemic. . . . If you’re that single funeral home owner or own a couple of them that puts you on an island. I mean, sure you have people that you can rely on, but I can only imagine the difficulty of going through that. And so we’re seeing some people already that were going to be — that saw that they were going to look for an exit strategy in three to five years start thinking about that now. “

Disclaimer – The editor of this article for Funeral Director Daily holds a position in Park Lawn Corporation stock.

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