After the markets closed yesterday funeral home and cemetery consolidator Carriage Services announced their results for the 3rd Quarter of 2018.  The company announced quarterly revenues of $64.2 million which was an increase of 5.2% over the same period of a year ago and a Net Income of $2.2 million – which is a decrease of 27.6% from the same period one year ago.  You can see the entire company press release here.

Mel Payne, the company’s CEO mentioned he had written a memo to leadership with the following comment, “. . .our many long term high performance winners were subsidizing too many businesses with underperformance trends.”

Payne also explained, “We have detailed plans of action for each underperforming business that are being executed weekly, a program that began on October 2 and will continue through the end of this year but will be essentially complete by the end of November.”

Funeral Director Daily take:  It is obvious by the tone of Mr. Payne’s messages that he is not happy with these results.  We will take some time to look into the numbers and listen to the earnings call before we make more in-depth comments, but here are some things that pop out to us immediately about these results.

• The cemetery side of the business seems to be doing pretty well with “Same Store” sales up 7.8% for the quarter and 6.3% for the year to date

• While total revenue for the funeral side of the business is up 4.7% for the year, it is actually down in Same Store comparable sales. For the year to date the funeral revenue drop is 1.2% and, somewhat alarmingly, the drop was 3.4% for the latest quarter.

• Case volume for the company was up to 8,672 for the quarter from 8,235 for the same quarter in 2017.  However, after accounting for “acquisition cases”, case volume from Same Store funeral homes was actually down to 6,968 from 7,220 for the 3rd quarter as compared to last year. . a drop of 3.5% (on par with the aforementioned revenue drop).

• We also noticed a statistic about case volume (referred to as “Contracts” by Carriage Services).  That is that of their 22,580 cases/contracts to date, 4,271 or 18.9% have been what they term “Preneed Contracts”.  We believe that is matured preneed contracts that have been used for funeral services.  If we are correct in that assumption, Carriage’s 18.9% of preneed services pales in comparison to Service Corporations approximately 36% rate.

• Carriage does, however, show a 14.3% increase in preneed commissions for the quarter.  Perhaps this is a renewed emphasis on the value of preneed

• Finally, while there is a slight uptick for the quarter, if you divide Carriage’s total funeral operating revenue for the year by the total funeral contracts you will come up with a “Revenue per case/contract” number that shows about a 1% drop for the year to date.  Our analysis shows that the Revenue per case was $5512 YTD2017 and is $5480 YTD2018.

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