Carriage Services reports 1Q 2023. . .announces closing of Greenlawn acquisition



Carriage Services announced in this press release their operating results of the 1st Quarter of 2023.  Much like we mentioned in last week’s article on Service Corporation International (SCI), these numbers need to be looked at in the light of a reduced number of deaths in the United States for 1Q 2023 as compared to 1Q 2022.  In our opinion, that is simply a fact of the lessening deaths due to the course of the pandemic and is somewhat an indication that we are now living in the post-pandemic world.


When you take a wholistic viewpoint of Carriage Services’ financial report in light of the fact that the Center for Disease Control (CDC) has indicated, according to this report, that the quarter’s deaths (for the nation) are about 14.4% less than the same quarter in 2022 and then include the fact that Carriage Services, and the rest of us,  are now operating in a business environment which includes high inflation and rising interest rates, you have to conclude that the results from Carriage Services are pretty impressive.


Carriage self-reported in their report that they did do 8.1% less funeral contracts than they did in 1Q2022, but that is better than the 14.4% decline in deaths that the CDC reported.  So, in our opinion, much like SCI, Carriage Services performed better in death calls than statistical analyzation would indicate they would do.  We don’t really know the reason. . . it could have to do with the timing of the Greenlawn acquisition closing or it could be a factor of where their funeral homes are located geographically, or it could be a myriad of other issues.  But the fact is that they did 8.1% less contracts when the death numbers would indicate a 14.4% drop would be anticipated.  So, for a national company, I would argue that is a success.


As to the financial numbers, Carriage Services reported total revenue of $95.5 million for the quarter as compared to total revenue of $98.1 million for the same quarter in 2022.  That’s a drop of only 2.7%.  Interestingly, when you look closer at the numbers, their funeral revenue declined about 5.4% but their cemetery revenues actually went up about 0.5%.


We also noticed a couple of things that one might expect when you consider the business environment we are living in.  For instance, margins went down in both the cemetery and funeral numbers as well as overhead costs going up. . . which is certainly indicative of the environment where a business is absorbing inflationary costs during the course of their business operations.  Carriage Services was, however, able to blunt those margins slightly by being able to raise their revenue per contract price by 2.4%.


Finally, profitability faced another headwind as Carriage Services reported paying $3 million more in interest charges than they did in 1Q 2022.  Nothing surprising there as that is indicative of operating in an environment where the Federal Reserve is trying to quell inflationary costs by driving interest rates higher.


Finally, on the aquisition front, Carriage Services announced that at sometime during the 1st Quarter they closed their acquisition with the Greenlawn Funeral Homes and Cemeteries of Bakersfield, California.  The company mentions that this acquisition will add about $18 million in revenue to the company annually.  Carriage Services gives guidance that they will do somewhere between $375-385 million in revenue this year so you can see how strategic an acquisition of an $18 million company is for them. . . .that $18 million will represent close to a 5% increase in revenues annually.


Here’s what Carriage Services Chairman and CEO Melvin Payne said in the press release about the company performance and which alludes to the Greenlawn acquisition, “As we concluded the first quarter of the year, I am very excited with where we are at Carriage, especially with the recent strategic acquisition of Greenlawn Funeral Homes and Cemeteries.. . . .we had indicated that the first quarter of this year, compared to the same period the prior year, would generally be challenged by the all-time high financial performance driven by the impact of the COVID-19 pandemic in the first quarter of last year. However, we ended the quarter above our internal expectations.”


Funeral Director Daily take:  I think the results that we see here from Carriage Services should be important to those who own and operate family funeral homes.  While you might not operate in a national scope like Carriage Services or SCI and your actual numbers may not have the variability because of the up and down death rate of the pandemic, I think that there is a lot to learn about your operations by looking at this operation.


Tom Anderson
Funeral Director Daily

For instance, Carriage Services is operating in an environment with rising costs.  However, they did find a way to increase their average revenue per case.  I think that is an imperative for funeral homes going forward. . . and it needs to be done in a way that when you increase price you don’t drive consumers to a lower level of service.  That defeats the purpose.


Maybe you can increase revenues without increasing GPL price items.  For instance, can you offer more cremation memorialization items such as Thumbies, jewelry, memory glass and the like which would add incremental revenue without adding to the base costs of services?


And for holding down expenses, like interest expense. . . . do you routinely talk to your banker about extended length of term which might lower annual interest rates?  There are trade-offs when you do things like that, but sometimes it has to be done to rescue one from the consequences of higher interest rates that come with adjustable loan rates.


In any regard, I now believe that we are living in a post-pandemic business environment.  Whatever that may mean to your business you should think about how business will operate moving forward.


Disclaimer — The author of this article for Funeral Director Daily is a shareholder of Carriage Services.


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