Park Lawn 3rd Quarter sounds familiar

November 15, 2023/Finance/

Last week Park Lawn Corporation reported their 3rd Quarter 2023 financial results. Much like we found with Carriage Services, we found that Park Lawn Corporation (PLC) was able to increase total revenues but struggled to turn those increased revenues into greater Net Income for the quarter.

PLC reported a quarterly revenue increase of 8.2% for 3Q2023 as compared to 3Q2022 but also reported that Net Earnings for 3Q2023 came in at $3.2 million as compared to $ 5.3 million for the same period in 2022. . . .that’s a drop of about 38%.

Park Lawn CEO J. Bradley Green made this comment in his prepared remarks on the 3Q 2023 press release which you can access here, “We had a solid operational performance in the third quarter. While the death rate continued to pull back, resulting in an overall decrease in call volume as compared to the third quarter of 2022, our operations were able to largely offset this trend through sustained growth in market share and modestly increasing our average revenue per contract on the funeral side and growing pre-need sales on the cemetery side.”

Here is the transcript of the Park Lawn Corporation’s Earnings Call transcript from last week.

Tom Anderson
Funeral Director Daily

Funeral Director Daily take: Now that all three of the “Big Three” continental public companies have reported their 3rd Quarter of 2023 results it is somewhat interesting to sit back and take a look at the “Big Picture” that they seem to show.

From my point of view, these three companies seemed to be telling the same story and I think that is information that the smaller funeral home owner/manager can put to good use. Here are some thoughts that I had in common about these three companies — Service Corporation International, Carriage Services, and Park Lawn Corporation after I read each of their financial reports and earnings call transcripts:

All of the companies had “Increased revenue per funeral as compared to a year ago” for the 3rd Quarter
All of the companies had “Increased total revenue as compared to a year ago” for the 3rd Quarter
All of the companies reported “Less funeral call volume” as compared to the same quarter of a year ago
All of the companies reported “Increased Interest Expenses” for the quarter and they all mentioned something to the effect that that caused a “Headwind for profitability”
All of the companies mentioned the “Pull-Forward” effect of pandemic deaths and prognosticated that it was not done yet
All of the companies mentioned something about “Aquisitions” and Carriage Services and Park Lawn also gave me the impression that they were really looking at the “Focus and Scope” of their desired locations going forward.

Here’s something each of these companies said in their earnings call about acquisitions, locations, size, or opportunity going forward:

Service Corporation International — Thomas Ryan CEO – “I think the pipeline is really good. So we feel very positive as we look forward over the next, call it, 12 months, the deals that are out there.”

Carriage Services — Steven Metzger, President, Chief Administrative officer and General Counsel — “So if you look at the acquisitions that we’ve completed over the past 4 years, it’s a pretty specific profile, bigger businesses, larger markets, growing markets, more cemeteries. And that’s where our focus is as we look at growth in the future.”

Park Lawn Corporation — J. Bradley Green, CEO – “On the transactional front, this year has been another significant year for Park Lawn. We have announced over $120 million of transactions, acquiring 16 Funeral Homes and two cemeteries and recently announcing the divestiture of 72 cemeteries and 11 Funeral Homes in Michigan, Kentucky, North Carolina and South Carolina.

The decision to divest these businesses was not an easy one, as the team’s operating these businesses were not only aligned with our vision and mission, but they are also outstanding professionals in our industry. And I believe their professionalism, skill and operating acumen will be a benefit to Everstory.

These businesses, however, did not fit with Park Lawn’s long-term growth strategy, and we believe the capital generated from this divestiture will ultimately be accretive to the company’s earnings per share and cash flow.”

So, from my point of view here at Funeral Director Daily, I viewed the 3rd Quarter reports this year more than ever as focused on the companies telling us “Who they want to be and how they want to get there”. It appears to me that each of them has a strategy for getting from here to there and only time will tell if it is the correct strategy.

I think they have realized that there was a small period of “boom time” in the pandemic days with larger than average profits, but now with interest rates high and as the inflationary tide ebbs, raising prices will be more difficult to do. For that reason it is my opinion that the “Three Big Guys” of public funeral homes in North America are going to be very cautionary moving forward.

And, in this cautionary acquisition environment it apears that these three public players are really narrowing their focus of “who they want to acquire”. I’m wondering if the “strategic alternatives” of selling some assets is a bellwether that these firms are going to be concentrating on larger than average volume firms going forward and those other firms that they can strategically “bolt-on” to their existing operations and work for an efficiency and synergy of operations with.

In other words, I think the acquisition profile for the public companies may have moved to a point where they are really only looking at bigger players with larger than average metropolitan or regional demographic growth potential. It is my opinion that going forward it will not be “numbers of locations” that they own that is important. . . . it will be efficiently operating the locations that they own that will matter.

That doesn’t necessarily mean that death care owner/operators who want to move on from ownership will be squeezed. . .It may open up more opportunities for the larger regional firms and “want to be” regional firms to get in the game and move forward with more acquisition of “not so strategically” located firms.

At least in my book . . . .it is an interesting time.

Disclaimer — The author of this article for Funeral Director Daily is a shareholder of Service Corporation International and Park Lawn Corporation.

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