StoneMor increases revenue in 2021, starts making acquisitions in 2022

April 4, 2022/Finance/

StoneMor Inc. has been on a journey of what they term “Transformation” for the past few years. That road has followed management changes, sales philosophy changes, property changes, work relation chnages(employees to contracted services in some instances), funeral home divestments, and now seems to be on the final stage of strategy. . . what appears to be strategic growth.

According to this press release from last week which memorializes StoneMor’s 2021 4th Quarter and 2021 Year End results, the company increased their annual sales by 15.4% over their results of 2020. The press release indicates that total revenues for StoneMor in 2021 came in at $322.8 million as compared to a total of $279.5 million in 2020.

StoneMor also announced in the press release that they not only accelerated capital expense spending on existing locations to, hopefully, drive future revenue increases, but they spent $18 million on the purchase of 4 cemeteries and three funeral homes in the 1st Quarter of 2022. The properties were located in Virginia, West Virginia, and Florida.

Here are some other items of interest from the Financial Report and the company’s Earnings Call with members of the financial world:

Cemetery Operating Income for FY 2021 was $43.8 million, an increase of 25% over the Cemetery Operating Income of $35.0 million in 2020.
Funeral Home Operating Income for FY 2021 was $3.7 million, a decrease of about 26% compared to the Funeral Home Operating Income of $5.0 million in FY 2020.
StoneMor’s recent 2022 acquisitions represent the first acquisitions for the company since 2016.
The company targeted a goal of $40 million of Free Cash Flow (FCF) for the year and finished FY 2021 with $39.3 million of FRF.

StoneMor’s outsourcing of cemetery landscaping and maintenance services went south with the company who was awarded the contract going into bankruptcy. Here’s what CEO Joe Redling said of that situation, “Unfortunately, it became clear over the term that while the fundamentals of the program were sound, our partner was not, eventually experiencing challenges in scaling and maintaining the business to our contracted standards and in managing overall liquidity, which eventually culminated in that partner filing bankruptcy. As a result of those issues, we have now taken back all locations and associated employees with the last of those locations being taken back in January of this year. . . . .with these services now back under StoneMor’s direct management, we expect to retain the operational success that we learned from the process while retaining the more efficient, lower cost basis.”

Cemetery revenue accounted for 86% of StoneMor’s revenue. Funeral home services accounted for 14% in FY 2021.
StoneMor now operates 304 cemeteries and 72 funeral homes. Here is a map of their locations.

You can read the Earnings Call transcript here. Following are selected comments from CEO Joe Redling and SVP and Chief Financial Officer Jeff DiGiovanni.

On Sales and Preneed Growth – CEO Joe Redling: “A portion of this growth has been attributed to the increased death rates that we’ve experienced throughout the country. But even with that increased at-need activity, the team was able to grow our pre-need sales production by more than 14% for the full year of 2021.”

On Future Sales – CEO Joe Redling: “. . . .we intend to mitigate that (an anticipated smaller Covid death effect) with a variety of tactics, including new inventory offerings, particularly targeting cremation memorialization and a combination of increases in pricing, decreases in discounts and a continued focus on driving pre-need sales production growth. With the first quarter nearly complete, we are already seeing encouraging signs that 2022 is heading in the right direction with sales production coming in ahead of expectations.”

On Cemetery sales and operational costs – CFO Jeff DiGiovanni: “For the full year 2021, we experienced a $9.3 million or 18.7% growth in cemetery selling expense.”

“Cemetery general and administrative expense increased $1.3 million or 14.4% for the quarter ended December 31, 2021. For the full year 2021, we experienced a $4.0 million or 10.7% increase compared to the full year 2020. This increase was partially driven by increased insurance premiums and increase in credit card processing fees that is tied back to the sales increases. . . .”

On growing funeral home operational expenses – CFO Jeff DiGiovanni: “For the full year period, our funeral homes expenses grew 10.8% year-over-year compared with 5.4% growth in funeral home revenues for the same periods.”

Disclaimer — The author of this article holds a stock position in StoneMor Inc.

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