Carriage Services Inc (CSV) (Q1 2024) Earnings Call Transcript Highlights: Robust Growth and ...

• Total Revenue: $103.5 million, up $8 million or 8.4%.

• Funeral Home Operating Revenue: $66.6 million, up $1.2 million or 1.8%.

• Cemetery Operating Revenue: $27.6 million, up $6.3 million or 29.4%.

• Financial Revenue: $6.9 million, up $868,000 or 14.3%.

• Adjusted Consolidated EBITDA: $33.6 million, up $5.8 million or 20.9%.

• Funeral Field EBITDA Margin: 41.3%, up 100 basis points.

• Cemetery Field EBITDA Margin: 43.3%, up 430 basis points.

• Adjusted Diluted EPS: $0.75 per share, up $0.19 or 33.9%.

• Debt Payment: $25 million paid down this quarter.

• Cash Flow from Operations: Increased 17.1% to $22.1 million.

• Adjusted Free Cash Flow: Increased by $3.9 million (historical calculation).

• Outstanding Borrowings: Reduced to $154.1 million.

• Leverage Ratio: Below 5x, at 4.99x net debt-to-EBITDA.

• Warning! GuruFocus has detected 7 Warning Signs with CSV.

Release Date: May 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Carriage Services Inc reported a significant revenue increase to $103.5 million, marking an 8.4% rise and surpassing the $100 million mark for the first time in a single quarter.

• The company achieved a record first quarter in preneed cemetery sales, with a 29.4% increase in cemetery operating revenue to $27.6 million.

• Adjusted consolidated EBITDA rose by 20.9% to $33.6 million, reflecting effective cost management and higher average revenue per contract.

• Carriage Services Inc successfully integrated its recent acquisition, Greenland, contributing positively to the financial results.

• The company's strategic pricing initiatives led to a 4% increase in total funeral operating average per contract, enhancing profitability.

Negative Points

• Total funeral operating volume decreased by 1.9%, indicating a post-pandemic normalization which could signal a downward trend in service demand.

• Corporate overhead costs increased by $6.1 million, largely due to nonrecurring expenses related to executive separation agreements.

• Despite overall revenue growth, the funeral segment saw only a modest increase of 1.8% in operating revenue, coupled with a decline in contract volume.

• Interest rates remained high, impacting the cost of borrowing despite efforts to reduce debt levels.

• The company noted that seasonality and normalization post-pandemic may continue to impact service volumes in the near term, requiring careful monitoring and adjustment of business strategies.

Q & A Highlights

Q: What's the difference between the 1.9% and 2.6% decline in funeral contract volumes mentioned? A: Carlos R. Quezada, CEO & Vice Chairman of Carriage Services, explained that the 1.9% figure includes a consolidated view, while the 2.6% figure is post-divestitures, reflecting an operating revenue perspective.

Q: How does the increase in average revenue per funeral contract break out between traditional funeral and cremation? A: Carlos R. Quezada stated that there was a 3.2% increase in burial contracts and a 4.5% increase in cremation contracts, contributing to a total 4% improvement in pricing.

Q: Can you provide insights into the expected trend in funeral volumes for the rest of the year? A: Carlos R. Quezada mentioned that they anticipate a gradual decline in volume throughout the year, estimating a decrease to around 1% by December, while also focusing on market share gains to offset volume losses from post-COVID normalization.

Q: What are the financial impacts of the divestitures completed in the first quarter? A: L. Kian Granmayeh, Executive VP, CFO & Treasurer, confirmed that the impact was as expected, with $5.5 million less in revenue and $1.5 million less in EBITDA, which were already accounted for in the 2024 guidance.

Q: What is the status of the sales force for preneed sales, and do you expect further momentum? A: Carlos R. Quezada believes that sustainable momentum will continue, supported by strong leadership and strategic marketing efforts, despite seasonal fluctuations.

Q: What are the company's plans regarding real estate divestitures? A: Steven D. Metzger, President & Secretary, mentioned they occasionally evaluate valuable real estate for potential sale, with one significant transaction potentially yielding seven-figure proceeds.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.