Carriage Services reports First Quarter 2020

A short time ago Carriage Services, the Houston, Texas, based funeral home and cemetery operator announced they would delay their First Quarter 2020 financial results so that they could also report cornavirus related April results and May trends.  It is interesting to note that their First Quarter report that you can access here is titled, “First Quarter and April 2020 Results”.

Here is what President and Chief Operating Officer Bill Goetz did say about the first quarter.   “Our performance through mid-March was on track to deliver a traditionally very strong first quarter performance despite just getting initial momentum in March with our four large acquisitions from the fourth quarter. The last two weeks of March were a sudden shock to our operations while we dealt with the mandated shut down and stay at home orders that spread across the country. The result was significantly lower funeral revenue averages and cemetery preneed property sales in March that were not offset by higher volumes or cost reductions . . . . . .”

Carriage Services did report that their Total Revenue for 1Q 2020 was $77.49 million as compared to $69.08 million for the same period in 2019.  That would be an increase of about $8.4 million.  However, as you may know, Carriage made four acquisitions during the 4th Quarter of 2019 and those revenues would not have been included in the 1Q 2019 numbers.  When we put the numbers together from what Carriage lists as “Acquisition Revenue” we believe that the vast majority of that $8.4 million increase would have came from these four acquisitions.

As a matter of fact, in the “Operating and Financial Trend Report” Carriage shows “Same Store” Funeral Operating Revenue down from $45.018 million in 1Q 2019 to $44.866 million in 1Q 2020 and that “Same Store” Cemetery Operating Revenue was also down in 1Q 2020 as compared to 1Q 2019.

While those numbers are down, they are probably consistent with Mr. Goetz’ statement about “significantly lower funeral averages. . . in March”.  The Carriage report shows a good sign in that “Same Store” at need contracts were up 6.7% for the quarter.  . from 6,821 in 1Q 2019 to 7,278 in 1Q 2020.  However, when you take the “Same Store” funeral revenue and divide it by the number of at need contracts serviced, you come up with a “Revenue per call/contract” amount.  That amount dropped over 6% from $6,599 per contract in 1Q 2019 to $6,164 per contract in 1Q 2020. —  That is the “significantly lower funeral average” and one wonders if all of that can be attributed to the last two weeks of March and the “no large gathering” rules which altered consumer choices because of COVID-19.

As you read the Earnings Call Transcript which can be found here, company CFO Ben Brink explains that in April  “Same Store” funeral revenue continues to decline and revenue per case falls even further, however, expense management, acquisition portfolio improvement, and an increase in funeral contract volume help the company.  Here is what CFO Brink says, “In April, our operating and financial performance was tremendous and demonstrated the strength of Carriage and its operating model when faced with the challenges presented across our entire portfolio as a result of the coronavirus crisis. The leadership and innovation of our managing partners and their high performance teams and continue to serve their communities is a testament to our commitment and the right tool in each local business, and our belief in the power of the decentralized decision making. Same store funeral revenue declined 2.3%, a 14% decrease in average revenue per funeral contract driven by the restrictions on gathering was offset by similar increase in funeral home contracts in April. The increase in funeral contract volume was primarily attributed to businesses located in areas of the country that experienced the greatest impact from the coronavirus crisis, such as New York, New Jersey, Connecticut, Massachusetts and New Orleans.”

Carriage Services also announced that they will raise their annual dividend paid to $0.35 per share from the current $0.30 per share, mentioned that they have seven properties under letter of intent to sell, and mentioned that they are monitoring closely their credit arrangements and cash.  In other words, reading the 1Q 2020 report and earnings call will  give you lots of information on the company.

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