When Joe Redling was appointed CEO of StoneMor, Inc. the company was in fast decline, revenues were washing away, and losses were mounting. That was June of 2018, only two years ago, and now, although far from being in the clear and a profit machine, there is hope at the end of the tunnel.
StoneMor, Inc. reported its 2nd Quarter 2020 financial results last week and the comparable revenues for businesses operations have pretty much leveled off from a downward trend. While the company reported six-month total revenues for 2020 of $142.0 million as compared to $150.00 in 2019, the “comparable” revenues came in at $140.5 million for 2020 as compared to $141.8 million in 2019.
Stemming the loss of revenue was one lane of getting StoneMor, Inc. back on track and then lowering expenses is another lane that Redling has monitored positively. According to the 2nd Quarter Report that you can see here, expenses have been reduced across the board, including a $4.4 million reduction in corporate overhead expenses.
StoneMor, Inc. also held a conference earnings call of which you can see the transcript here. Here are some topics CEO Redling commented on.
On Sales/Revenue production: “On a comparable location basis, our cemetery sales production for the second quarter increased 6%, compared to the second quarter of 2019 despite declines in April driven by the pandemic. I am very encouraged to see our trends improve month after month as we continue to build sales momentum into the third quarter. To illustrate this reversal, April sales production experienced a decrease of 7% in April versus prior year, driven by the disruption caused by COVID-19. In May this year, we reversed that decline and increased 7% over May of 2019, and in June we doubled that growth by increasing total sales production 15% over June 2019.”
On the Funeral side of the business: “As with most in the industry, Funeral Home activity was not quite as rosy of a picture, but as a reminder it only represents approximately 15% of our total revenue. On a comparable location basis, total funeral home revenues were effectively flat during the quarter. Call volume increased 6% on a comparable basis, but we experienced a corresponding decrease in average value per call. Looking ahead to the remainder of 2020, I am strongly encouraged by the recent trends . . . .”
On Controlling Expenses: “Looking at our financial statements this quarter, we are starting to see the impact of our initiatives on our income statement. As total expenses have declined more than $14 million or 17% for the three-month end of June 30th, 2020 compared to the three months ended of June 30th, 2019. . . . .Specifically, our cemetery expense line item which now includes our maintenance and landscaping agreement with Moon Landscaping has seen a $3.7 million decrease. . . . .Our corporate overhead is down $4.4 million in the quarter or 33% compared to the second quarter of 2019.”
On New Initiatives to come: “Just recently, we launched Coupa, our new procurement software; it was a remarkable example of cross-functional collaboration by our team as many of our systems and processes needed to be significantly re-engineered to accommodate the launch. We’re expecting to see significant savings in our procurement process as we consolidate vendors and drive improved procurement and governance practices.”
According to the Quarterly Earnings press release StoneMor, Inc. owns 318 cemeteries and 87 funeral homes at the present time.
Funeral Director Daily take: As we have said in previous quarters, the business of StoneMor, Inc. is not out of woods yet. However, their decisive action in liquidating some properties and curtailing some expenses while at the same time trying to stem the loss of revenues seems to be working. We do believe, however, that the 2nd Quarter may have had some “pull forward” revenues because of COVID-19 which will be hard to duplicate as our country gets a better handle on the pandemic.
We are also aware that some of the budgetary restraints that StoneMor, Inc. has imposed may have some negative effects with the same consumers that they are trying to please. It is a delicate dance, but to this date, StoneMor, Inc. seems to be making the right moves.
We are also aware of the offer from the company’s largest shareholder, Axar Capital, to take the company private in a buyout of the public stock. Redling commented on the earnings call on that situation by saying, “At this point, the special committee is continuing to discuss the proposal with Axar, and if and when there’s an update we’ll make an announcement, but we have nothing to report at the time as those discussions continue.”
At that point a question from a Mr. Rick Elkin, who was defined as being “with Opco” made the following comment, “Okay. I mean the only thing I would say is that it would be a shame after being a patient shareholder for all these years at this point to have the company bought because it looks like to me your performance is markedly improving every quarter, which means that the value of the company is increasing every quarter. So I don’t know if there’s a way to pass this one to the Board of Directors, but I think there’s probably a lot of long time shareholders that would feel that way.”