Finance

StoneMor posts 2Q 2022 results. . . . what’s their plan?

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As we have previously reported, StoneMor Inc. is in the middle of a proposed take-private merger movement led by the companies largest shareholder, Axar Capital.  (Here is our article entitled “StoneMor agrees to Axar Capital Managment buyout”).  That merger continues to move forward with the offering price of $3.50 per share now moving into a phase of proxy material being disseminated to shareholders.

In the meantime the company continues to operate its mortuaries and funeral homes in public company fashion.  The 2nd Quarter of 2022 resulted in comparable numbers with the same quarter of 2021 in a general negative fashion.  Here are some of the comparable numbers for the quarter:

  • Total Revenues for 2Q 2022 came in at $80.0 million, about 3.7% lower than 2Q 2021’s number of about $83.0 million
  • Cemetery Revenues for 2Q 2022 came in at $70.45 million, about 2.4% lower than 2Q 2021’s number of about $72.12 million
  • Funeral Home Revenues for 2Q 2022 came in at $9.6 million, about 11.2% lower than 2Q 2021’s number of about $10.8 million
  • Company Costs and Expenses for 2Q 2022 came in at about $87.8 million, an increase of about 14.4% over the same period of one year ago.

Here’s what CEO Joe Redling said of the results in the StoneMor Inc. earnings call last week:

As a reminder both Cemetery and Funeral home revenues are largely driven by at-need and pre-need turned at-need production, both of which were negatively impacted by declining death rates. Revenues associated with pre-need cemetery merchandise and service sales, are largely deferred until the contract turns at-need, meaning that the positive impact from the growth in our pre-need sales production, is largely negated when we look at our GAAP financial statements.

Turning to expenses. We continue to experience supply chain and other cost challenges that contributed to a 14% increase in our total expenses or $11.1 million, when comparing the second quarter of 2022 to the second quarter of 2021. These increases, most notably those related to corporate overhead, were negatively impacted by cost and expenses associated with various corporate special projects, including those related to the proposed merger.

Additionally, we continue to reinvest into our properties with necessary repairs and maintenance. That planned increase in expenditures, coupled with material inflationary cost increases in operating supplies and an increase in selling expense, were the main contributors to the year-over-year uptick in cemetery expenses. This increase in expenses was the primary driver of the decline in operating income year-over-year.”

StoneMor 2Q 2022 Press Release

StoneMor 2Q 2022 Earnings Call Transcript

StoneMor 2Q 2022 Financial Results

Funeral Director Daily take:  StoneMor Inc. seems to have been in what has been termed a “transformational period” for quite some time now.  However, the “take-private” scenario seems to be emerging as the path the company will be taking.  Even at today’s reduced revenue volume, the company does over $300 million in revenue which is a very large operator in the death care space.  It will be interesting to see what happens to the company if they indeed succeed in going private.

Tom Anderson
Funeral Director Daily

One thing I’m guessing is that their corporate overhead will decrease without the reporting requirements that come with being a public company.  I also noticed that much of the 14% cost increases that is reported comes in two segments – Cemetery Expense and Corporate Overhead.  That’s all understandable when you realize that the contracting out of cemetery upkeep did not work out and StoneMor had to again take those costs in-house.  And, I’m fairly certain that the overhead costs of taking a company from public to private is involving measurable resources.

With that being said, with the company on the verge of being taken private, we may never get the full results of the efforts that have been put forth. . . because with being “private” they will no longer have the requirements of giving financial information to the public.

From the company’s recent press release they state that they operate 304 cemeteries and 72 funeral homes.

I’ve always looked at StoneMor as a cemetery company that owns funeral homes.  And, if you look at the revenue mix which works out to about 88% of this quarter’s revenue coming from the cemetery side, that’s probably a true statement.  If you look at the press release you will notice that the company states that for the first-half of 2022 they had an Operating Income of $13.4 million on the cemetery side and an Operating Income of only $1.2 million on the funeral home side.

One might speculate on what the goals of StoneMor going forward as a private company are.  Would it be to continue to operate. . and possibly even grow?  Could it be that the management thinks the parts are worth more than the whole and selective divestment of all properties would be in the works?  Could it be that the company wants to operate as a cemetery company and the funeral homes may be selectively divested?  All of these are possible options.

Whatever it is. . . the plan continues to move forward and we will just have to wait and see what happens.

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