StoneMor reports 3rd Quarter: Turnaround continues to move forward

November 19, 2020/Finance/

A couple of years ago I looked at StoneMor and their operations and told readers that they should, if they had a StoneMor competitor in their market, look at a possible acquisition of that competitor. Quite frankly, I was of the opinion that the way StoneMor was moving would probably lead to a liquidation and some of those businesses might be able to be purchased at the right price.

However, while there has been some pain and some selected liquidation of properties, it appears that StoneMor is moving forward on their plan to be a profitable operating company. They have made moves such as reducing corporate overhead, contracting much of the cemetery labor instead of having all employees, and most recently totally liquidating their West Coast properties to be a company with a geographical footprint limited to the eastern half of the United States.

From the 3rd Quarter financial report that you can read here, these moves seem to be moving the company towards the black. In doing so, they have remained a primary cemetery company as their release states that they now own and operate 318 cemeteries and 86 funeral homes.

Here are some highlights from their 3rd Quarter financial report:

Same store revenues, excluding divested properties, show 3Q 2020 revenues of $ 76.8 million compared to 3Q 2019 revenues of $69.2 million.
Same store revenues, excluding divested properties, show 9 month 2020 revenues of $217.3 million compared to 9 month 2019 revenues of $211.0 million.
Cemetery operating income for 9 month 2020 is at $24.3 million as compared to $11.8 million for the 9 months of 2019.
Funeral home operating income for 9 month 2020 is at $4.9 million as compared to $4.5 million for the 9 months of 2019.

Here’s what StoneMor CEO Joe Redling said of the 3Q 2020 report, “The third quarter continued the trend of growth established in the first half of 2020, particularly as it relates to our cemetery sales production¹ and expense management initiatives. We delivered record levels of cemetery sales production during the third quarter of 2020, including a 27% year-over-year increase. The upward trajectory was largely driven by 32% growth in same-store pre-need sales production and included increases in both contract volume and average pricing. This sales production growth was generated while reducing our expenses across the board and driving increased Field EBITDA² levels.”

Redling also made these comments in the earnings call: “I’m extremely proud of our sales and marketing team. It’s been a major focus of ours and we’re seeing a brand-new culture take hold, one that’s focused on performance and overachievement. In both our pre-need and at-need sales production, we’ve increased the number of contracts signed up approximately 28% year-over-year for pre-need and 12% for at-need. Similarly, we’ve seen an increase in contract value in both pre-need and at-need, combined 6.5% increase, as all of our locations have and continue to undergo regular pricing reviews. Again – and I like to emphasize this point, this is comparable location growth. There was no benefit from new acquisitions. In fact, we have achieved this remarkable growth despite the disruptions generated from divestiture activity . . . ”

Here is a copy of the StoneMor Earnings call transcript.

Funeral Director Daily take: It’s probably fair to say that while I think StoneMor has accomplished a lot in the last couple of years, I am not as excited as the CEO in his comments. I’m impressed so far, but cautious as to my thinking about the sales increases — are they real or COVID driven?

Finally, I’ve always been somewhat impressed by the StoneMor cemetery sales culture. It seems like the have always been able to make sales. In my opinion, it is the operations part of the company that has dragged them down. I’m hopeful, however, that the new management led by CEO Redling, will improve on that metric going forward.

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