Carriage Services reports 2020 year. . . shows the trends

In a press release that you can read here you can find out that Houston, Texas, based funeral home and cemetery consolidator Carriage Services recorded record results not only for the 4th Quarter of 2020 but for the full year of 2020 as well.  Not only did Carriage Services record these record financial results, they exceeded the 2022 plan that they had set in their five year milestones only a year ago. In essence they passed that 2022 goal two full years ahead of time.

Of course, when those goals were set, we had not yet dreamed of the COVID-19 pandemic affecting funeral home operations and results.  Interestingly enough, as California spiked in deaths during the 4th Quarter 2020 the large volume operations that Carriage Services has in California helped the 4Q2020 results grow to $90.1 million in revenue, up over 26% from the 4Q2019 company results.  For the year, Carriage Services accumulated $329.4 million in revenue as compared to 2019’s revenue of $274.1 million. . . an increase of over 20%.

That high revenue also increased the company’s bottom line as Carriage Services showed an Operating Income for 2020 of $105.9 million as compared to $79.5 million in 2019. . . an increase of 33%.

We also found the following “Five Quarter Operating and Financial Trend Report” in the press release.  It is interesting to note the high number of “Funeral Same Store Contracts” in 4Q2020 as compared to the other preceding quarters.  Here’s what the Carriage Services report says about that increase:

“Beginning in December 2020 we experienced a spike in deaths broadly across our portfolio of funeral homes and cemeteries in 26 states, but the epicenter of the much higher COVID-19 outbreak of infections and deaths has been and continues to be in California, as has been reported by the national media. Given our large portfolio of first class businesses in both Northern and Southern California, the tragic outbreak of COVID-19 deaths in California is producing a material increase in our overall performance. But while the California impact is extreme, our Central and Eastern Region businesses are also experiencing substantially and broadly higher volumes, revenues and margins . . . .”

There are a couple of other items of interest that Funeral Director Daily noticed in this trend chart.

  • You can notice that the “Average Revenue Per Contract” dips as the COVID-19 pandemic starts in early 2020.  However, by the 4th Quarter you are seeing that that revenue per service is increasing to the point that the difference from 4Q2020 to 4Q2019 is only a negative 2.5%. . . . and that is when Carriage self confesses the large number of deaths in California where the social distance rules are as stringent as anywhere.  That rebound tells us that Carriage Services figured out a way to get revenue out of the death calls they were entrusted with.  In our opinion, not all funeral homes were able to recover that revenue as the pandemic waged on.


  • It is also interesting to note that the “Same Store Cremation Rate” rose as the pandemic started, however, it moved down to, what we believe, is a more constant rate of annual growth by the 4th Quarter of 2020.  That may be indicative that Carriage Services was able to provide for some type of visitations (or other options) for those who preferred casketed deaths, whereas early on in the pandemic they were not able to fully function and offer full services as easily.
(000’s except for volume, averages & margins) 4TH QTR 2019 1ST QTR 2020 2ND QTR 2020 3RD QTR 2020 4TH QTR 2020
Funeral Same Store Contracts 8,156 8,625 8,647 8,874 9,669
Average Revenue Per Contract (1) $5,251 $5,108 $4,855 $4,987 $5,118
Funeral Same Store Burial Contracts 3,038 3,165 3,121 3,132 3,566
Funeral Same Store Burial Rate 37.2% 36.7% 36.1% 35.3% 36.9%
Average Revenue Per Burial Contract $9,179 $9,032 $8,656 $8,913 $8,981
Funeral Same Store Cremation Contracts 4,471 4,771 4,977 5,114 5,451
Funeral Same Store Cremation Rate 54.8% 55.3% 57.6% 57.6% 56.4%
Average Revenue Per Cremation Contract $3,324 $3,257 $3,036 $3,234 $3,223

Finally, in their press release, Carriage Services noted that they will be re-financing some of their Senior Debt that is at a higher interest rate than they believe the new financing will be at.  They expect approximately $9-10 million of annual savings following this refinancing.  In a very transparent way they also indicated their five areas where they intend to deploy that savings along with the expected positive cash-flow generated by the operating company.  Here’s what they say on that topic:

. . .Our capital allocation decisions will be focused on the following five areas:

  1. Acquisitions. Partnering with the best remaining independent funeral homes and cemeteries in America based on our updated Strategic Acquisition Model. Due to the operational challenges that our industry has experienced due to the Coronavirus Pandemic, we have seen the acquisition market for high quality independent businesses in large strategic markets be close to non-existent over the past year, as independent owners focused on the challenges of the pandemic rather than succession planning. We expect this dynamic to change in the latter half of this year and into 2022 and believe Carriage will be uniquely positioned to continue to be a preferred choice for leading independent owners who are looking for the best long term succession planning solution for their businesses, employees and communities they serve.
  2. Internal Growth Capital Expenditures. We believe the best businesses are ones that have superior growth opportunities, enabling us to allocate more capital over time at higher and increasing rates of return on invested capital. We are excited about the opportunities we have across our portfolio to allocate capital at high rates of return as part of our expectation for higher organic Funeral Home and Cemetery Revenue and Field EBITDA growth rates in the future.
  3. Share Repurchases. We will allocate capital opportunistically to repurchase Carriage shares if we believe they trade at a significant discount to intrinsic value. We will also evaluate potential share repurchase activity in relation to any near term large scale acquisition opportunities, as we are much more focused on increasing the long term compounding rate for each of our ownership shares than on just getting bigger by adding revenue from acquisitions.
  4. Dividend Increases. We were pleased to increase our annual dividend to shareholders by 33% in 2020 with two increases of $.05 each in the second and fourth quarter. Our current annual dividend is $.40 per CSV share and represents a current dividend equity yield of about 1.1%. In the future, we intend to have our annual dividend per share at a level that approximates a 1% dividend equity yield, while the total amount of dividends paid would approximate no more than 10% of our annual Adjusted Free Cash Flow.
  5. Debt Repayment. We made amazingly fast progress on our debt reduction plan in 2020 that led to acceleration of the improvement in our credit profile. Once we have completed the refinancing transaction, we intend to operate at a more moderate leverage policy of about 4 times Debt to Adjusted Consolidated EBITDA in order to maintain the maximum financial flexibility to support our future capital allocation. We also believe equity investors would support this policy as less risky, which could have the impact of increasing our valuation multiple.

We expect to report more in detail on Carriage Services once we have read the earnings call transcript.

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