 | |||||
Carriage Services Announces First Quarter 2023 Results
Conference call on Thursday, May 4, 2023 at 9:30 a.m. central time.
HOUSTON - May 3, 2023 - (GLOBE NEWSWIRE) Carriage Services, Inc. (NYSE: CSV) today announced its financial results for the first quarter ended March 31, 2023.
Company Highlights:
•Outperformed first quarter 2023 financial expectations amid uncertainty against an elevated COVID-19 first quarter 2022 comparable;
•Cemetery operating revenue increased to $21.6 million, or ~6%, driven by growth in preneed sales;
•Closed the acquisition of Greenlawn Funeral Homes and Cemeteries (2022 revenue of ~$18 million), gaining access to ~40% of market share in Bakersfield, California by adding three funeral homes, two cemeteries, and a cremation focused business;
•Appointed Kian Granmayeh as Executive Vice President, Chief Financial Officer and Treasurer; and
•Reaffirms full-year 2023 outlook of $375-$385 million in total revenue, adjusted consolidated EBITDA of $110-$115 million, adjusted diluted earnings per share of $2.25-$2.40 and adjusted free cash flow of $50-60 million.
Mel Payne, Chairman and CEO, stated, “As we concluded the first quarter of the year, I am very excited with where we are at Carriage, especially with the recent strategic acquisition of Greenlawn Funeral Homes and Cemeteries. Moreover, our capital allocation efforts on paying down debt through the execution of our High Performance and Credit Profile Restoration Plan (“HPCPRP”), successful integration of recent acquisitions, increased momentum within our High Performance sales organization, and the addition of Kian to our senior executive team as the final member of our Strategic Vision and Principles Group, brings tremendous excitement about the High Performance Possibilities to come this year and beyond. As communicated previously, we had indicated that the first quarter of this year, compared to the same period the prior year, would generally be challenged by the all-time high financial performance driven by the impact of the COVID-19 pandemic in the first quarter of last year. However, we ended the quarter above our internal expectations. With all the critical strategic pieces in place, we believe we are poised to deliver long-term value and High Performance, and we are confident that we will meet or exceed our previously disclosed full-year 2023 outlook, and 2024 HPCPRP performance metrics,” concluded Mr. Payne.
FINANCIAL HIGHLIGHTS
| Three Months Ended March 31, | ||||||||||||||
(000’s except margins and EPS) | 2022 | 2023 | ||||||||||||
| GAAP Metrics: | ||||||||||||||
| Total revenue | $ | 98,161 | $ | 95,514 | ||||||||||
| Net income | $ | 16,402 | $ | 8,844 | ||||||||||
| Net income margin | 16.7% | 9.3% | ||||||||||||
| Diluted EPS | $ | 1.00 | $ | 0.57 | ||||||||||
| Cash provided by operating activities | $ | 15,801 | $ | 25,869 | ||||||||||
Non-GAAP Metrics(1): | ||||||||||||||
| Adjusted consolidated EBITDA | $ | 32,476 | $ | 27,785 | ||||||||||
| Adjusted consolidated EBITDA margin | 33.1% | 29.1% | ||||||||||||
| Adjusted diluted EPS | $ | 0.92 | $ | 0.56 | ||||||||||
| Adjusted free cash flow | $ | 12,357 | $ | 17,025 | ||||||||||
| (1) | We present both GAAP and non-GAAP measures to provide investors with additional information. We believe that providing these non-GAAP measures along with GAAP measures allows for increased comparability of our ongoing performance from period to period. The most comparable GAAP measures to the Non-GAAP measures presented in this table can be found in the Reconciliation of Non-GAAP Financial Measures section of this press release. | |||||||||||||
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•Revenue for the three months ended March 31, 2023 decreased $2.6 million compared to the three months ended March 31, 2022, as we experienced an 8.1% decrease in funeral contract volume, which was partially offset by a 2.4% increase in the average revenue per funeral contract and a 5.3% increase in the number of preneed interment rights (property) sold, while the average price per interment right sold remained flat.
•Net income for the three months ended March 31, 2023 decreased $7.6 million compared to the three months ended March 31, 2022, primarily due to the following: (1) a $3.4 million decrease in gross profit, (2) a $3.0 million increase in interest expense, (3) a $1.6 million increase in general and administrative expenses, (4) a $1.2 million impact from divestitures, disposals and insurance reimbursements, offset by (5) a $1.6 million decrease in income tax expense.
CALL AND INVESTOR RELATIONS CONTACT
Carriage Services has scheduled a conference call for tomorrow, May 4, 2023 at 9:30 a.m. central time. To participate live over the phone via audio conferencing click link or live over the Internet via webcast click link. An audio archive of the call will be available on demand via the Company's website at www.carriageservices.com. For any investor relations questions, please email InvestorRelations@carriageservices.com.
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| CARRIAGE SERVICES, INC. | ||||||||||||||
| CONDENSED OPERATING AND FINANCIAL TREND REPORT | ||||||||||||||
| (in thousands - except per share amounts) | ||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2023 | |||||||||||||
Funeral operating revenue | $ | 70,212 | $ | 66,463 | ||||||||||
Cemetery operating revenue | 20,475 | 21,605 | ||||||||||||
Financial revenue | 5,663 | 6,221 | ||||||||||||
Ancillary revenue | 1,070 | 1,057 | ||||||||||||
Divested/planned divested revenue | 741 | 168 | ||||||||||||
Total revenue | $ | 98,161 | $ | 95,514 | ||||||||||
| Funeral operating EBITDA | $ | 31,273 | $ | 26,628 | ||||||||||
| Funeral operating EBITDA margin | 44.5% | 40.1% | ||||||||||||
| Cemetery operating EBITDA | 8,595 | 8,393 | ||||||||||||
| Cemetery operating EBITDA margin | 42.0% | 38.8% | ||||||||||||
| Financial EBITDA | 5,234 | 5,881 | ||||||||||||
| Financial EBITDA margin | 92.4% | 94.5% | ||||||||||||
| Ancillary EBITDA | 221 | 146 | ||||||||||||
| Ancillary EBITDA margin | 20.7% | 13.8% | ||||||||||||
Divested/planned divested EBITDA | 131 | 2 | ||||||||||||
Divested/planned divested EBITDA margin | 17.7% | 1.2% | ||||||||||||
Total field EBITDA | $ | 45,454 | $ | 41,050 | ||||||||||
Total field EBITDA margin | 46.3% | 43.0% | ||||||||||||
Total overhead | $ | 13,146 | $ | 13,265 | ||||||||||
Overhead as a percentage of revenue | 13.4% | 13.9% | ||||||||||||
Consolidated EBITDA | $ | 32,308 | $ | 27,785 | ||||||||||
Consolidated EBITDA margin | 32.9% | 29.1% | ||||||||||||
| Other expenses and interest | ||||||||||||||
| Depreciation & amortization | $ | 4,783 | $ | 4,769 | ||||||||||
| Non-cash stock compensation | 1,607 | 2,141 | ||||||||||||
| Interest expense | 5,542 | 8,539 | ||||||||||||
| Net loss on divestitures | 703 | 82 | ||||||||||||
| Net (gain) loss on insurance reimbursements | (1,899) | 271 | ||||||||||||
| Other, net | 88 | (363) | ||||||||||||
| Pretax income | $ | 21,484 | $ | 12,346 | ||||||||||
| Net tax expense | 5,082 | 3,502 | ||||||||||||
| Net income | $ | 16,402 | $ | 8,844 | ||||||||||
Special items(1) | $ | (1,561) | $ | (177) | ||||||||||
| Tax effect on special items | (273) | (51) | ||||||||||||
| Adjusted net income | $ | 15,114 | $ | 8,718 | ||||||||||
| Adjusted net income margin | 15.4% | 9.1% | ||||||||||||
| Adjusted basic earnings per share | $ | 0.99 | $ | 0.58 | ||||||||||
| Adjusted diluted earnings per share | $ | 0.92 | $ | 0.56 | ||||||||||
| GAAP basic earnings per share | $ | 1.07 | $ | 0.59 | ||||||||||
| GAAP diluted earnings per share | $ | 1.00 | $ | 0.57 | ||||||||||
| Weighted average shares o/s - basic | 15,244 | 14,758 | ||||||||||||
| Weighted average shares o/s - diluted | 16,369 | 15,468 | ||||||||||||
| Reconciliation of Consolidated EBITDA to Adjusted consolidated EBITDA | ||||||||||||||
| Consolidated EBITDA | $ | 32,308 | $ | 27,785 | ||||||||||
| Disaster recovery and pandemic costs | 168 | — | ||||||||||||
| Adjusted consolidated EBITDA | $ | 32,476 | $ | 27,785 | ||||||||||
| Adjusted consolidated EBITDA margin | 33.1% | 29.1% | ||||||||||||
| (1) | A detail of our Special items presented in this table can be found in the Reconciliation of Non-GAAP Financial Measures section of this press release. | |||||||||||||
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CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
| December 31, 2022 | March 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,170 | $ | 1,293 | |||||||
| Accounts receivable, net | 24,458 | 23,887 | |||||||||
| Inventories | 7,613 | 9,533 | |||||||||
| Prepaid and other current assets | 4,733 | 8,988 | |||||||||
| Total current assets | 37,974 | 43,701 | |||||||||
| Preneed cemetery trust investments | 95,065 | 86,459 | |||||||||
| Preneed funeral trust investments | 104,553 | 101,366 | |||||||||
| Preneed cemetery receivables, net | 26,672 | 26,690 | |||||||||
| Receivables from funeral preneed trusts, net | 19,976 | 20,346 | |||||||||
| Property, plant and equipment, net | 278,106 | 289,313 | |||||||||
| Cemetery property, net | 104,170 | 113,298 | |||||||||
| Goodwill | 410,137 | 423,749 | |||||||||
| Intangible and other non-current assets, net | 32,930 | 37,254 | |||||||||
| Operating lease right-of-use assets | 17,060 | 17,486 | |||||||||
| Cemetery perpetual care trust investments | 66,307 | 65,322 | |||||||||
| Total assets | $ | 1,192,950 | $ | 1,224,984 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of debt and lease obligations | $ | 3,172 | $ | 3,455 | |||||||
| Accounts payable | 11,675 | 11,429 | |||||||||
| Accrued and other liabilities | 30,621 | 34,910 | |||||||||
| Total current liabilities | 45,468 | 49,794 | |||||||||
| Acquisition debt, net of current portion | 3,438 | 3,404 | |||||||||
| Credit facility | 188,836 | 211,880 | |||||||||
| Senior notes | 395,243 | 395,406 | |||||||||
| Obligations under finance leases, net of current portion | 4,743 | 4,641 | |||||||||
| Obligations under operating leases, net of current portion | 17,315 | 17,395 | |||||||||
| Deferred preneed cemetery revenue | 51,746 | 61,297 | |||||||||
| Deferred preneed funeral revenue | 32,029 | 32,248 | |||||||||
| Deferred tax liability | 48,820 | 48,642 | |||||||||
| Other long-term liabilities | 3,065 | 938 | |||||||||
| Deferred preneed cemetery receipts held in trust | 95,065 | 86,459 | |||||||||
| Deferred preneed funeral receipts held in trust | 104,553 | 101,366 | |||||||||
| Care trusts’ corpus | 65,495 | 64,352 | |||||||||
| Total liabilities | 1,055,816 | 1,077,822 | |||||||||
| Commitments and contingencies: | |||||||||||
| Stockholders’ equity: | |||||||||||
| Common stock | 264 | 266 | |||||||||
| Additional paid-in capital | 238,780 | 239,962 | |||||||||
| Retained earnings | 176,843 | 185,687 | |||||||||
| Treasury stock | (278,753) | (278,753) | |||||||||
| Total stockholders’ equity | 137,134 | 147,162 | |||||||||
| Total liabilities and stockholders’ equity | $ | 1,192,950 | $ | 1,224,984 | |||||||
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CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share data)
| Three Months Ended March 31, | |||||||||||
| 2022 | 2023 | ||||||||||
| Revenue: | |||||||||||
| Service revenue | $ | 49,737 | $ | 48,207 | |||||||
| Property and merchandise revenue | 41,612 | 40,011 | |||||||||
| Other revenue | 6,812 | 7,296 | |||||||||
| 98,161 | 95,514 | ||||||||||
| Field costs and expenses: | |||||||||||
| Cost of service | 22,104 | 23,477 | |||||||||
| Cost of merchandise | 29,325 | 29,734 | |||||||||
| Cemetery property amortization | 1,332 | 1,201 | |||||||||
| Field depreciation expense | 3,297 | 3,357 | |||||||||
| Regional and unallocated funeral and cemetery costs | 6,347 | 5,437 | |||||||||
| Other expenses | 1,278 | 1,253 | |||||||||
| 63,683 | 64,459 | ||||||||||
| Gross profit | 34,478 | 31,055 | |||||||||
| Corporate costs and expenses: | |||||||||||
| General, administrative and other | 8,560 | 10,180 | |||||||||
| Net loss on divestitures, disposals and impairment charges | 767 | 241 | |||||||||
| Operating income | 25,151 | 20,634 | |||||||||
| Interest expense | 5,542 | 8,539 | |||||||||
| (Gain) loss on insurance reimbursements | (1,899) | 271 | |||||||||
| Other, net | 24 | (522) | |||||||||
| Income before income taxes | 21,484 | 12,346 | |||||||||
| Expense for income taxes | 5,704 | 3,568 | |||||||||
| Tax adjustment related to discrete items | (622) | (66) | |||||||||
| Total expense for income taxes | 5,082 | 3,502 | |||||||||
| Net income | $ | 16,402 | $ | 8,844 | |||||||
| Basic earnings per common share: | $ | 1.07 | $ | 0.59 | |||||||
| Diluted earnings per common share: | $ | 1.00 | $ | 0.57 | |||||||
| Dividends declared per common share: | $ | 0.1125 | $ | 0.1125 | |||||||
| Weighted average number of common and common equivalent shares outstanding: | |||||||||||
| Basic | 15,244 | 14,758 | |||||||||
| Diluted | 16,369 | 15,468 | |||||||||
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CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
| Three Months Ended March 31, | |||||||||||
| 2022 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 16,402 | $ | 8,844 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 4,783 | 4,769 | |||||||||
| Provision for credit losses | 837 | 699 | |||||||||
| Stock-based compensation expense | 1,607 | 2,141 | |||||||||
| Deferred income tax expense (benefit) | 76 | (178) | |||||||||
| Amortization of intangibles | 318 | 321 | |||||||||
| Amortization of debt issuance costs | 122 | 174 | |||||||||
| Amortization and accretion of debt | 121 | 127 | |||||||||
| Net loss on divestitures, disposals and impairment charges | 767 | 241 | |||||||||
| (Gain) loss on insurance reimbursements | (1,899) | 271 | |||||||||
| Gain on sale of real property | — | (530) | |||||||||
| Changes in operating assets and liabilities that provided (used) cash: | |||||||||||
| Accounts and preneed receivables | (504) | 120 | |||||||||
| Inventories, prepaid and other current assets | 2,913 | 884 | |||||||||
| Intangible and other non-current assets | (340) | (1,277) | |||||||||
| Preneed funeral and cemetery trust investments | (201) | 5,356 | |||||||||
| Accounts payable | (987) | (246) | |||||||||
| Accrued and other liabilities | (9,999) | 1,924 | |||||||||
| Deferred preneed funeral and cemetery revenue | 628 | 8,132 | |||||||||
| Deferred preneed funeral and cemetery receipts held in trust | 1,157 | (5,903) | |||||||||
| Net cash provided by operating activities | 15,801 | 25,869 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisitions of businesses and real property | (2,575) | (44,000) | |||||||||
| Proceeds from divestitures and sale of other assets | 1,026 | 1,275 | |||||||||
| Proceeds from insurance reimbursements | 676 | 421 | |||||||||
| Capital expenditures | (6,883) | (4,982) | |||||||||
| Net cash used in investing activities | (7,756) | (47,286) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Borrowings from the credit facility | 70,700 | 51,700 | |||||||||
| Payments against the credit facility | (51,900) | (28,800) | |||||||||
| Payments on acquisition debt and obligations under finance leases | (100) | (127) | |||||||||
| Proceeds from the exercise of stock options and employee stock purchase plan contributions | 663 | 526 | |||||||||
| Taxes paid on restricted stock vestings and exercise of stock options | (289) | (98) | |||||||||
| Dividends paid on common stock | (1,725) | (1,661) | |||||||||
| Purchase of treasury stock | (25,655) | — | |||||||||
| Net cash provided by (used in) financing activities | (8,306) | 21,540 | |||||||||
| Net increase (decrease) in cash and cash equivalents | (261) | 123 | |||||||||
| Cash and cash equivalents at beginning of period | 1,148 | 1,170 | |||||||||
| Cash and cash equivalents at end of period | $ | 887 | $ | 1,293 | |||||||
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NON-GAAP FINANCIAL MEASURES
This press release uses Non-GAAP financial measures to present the financial performance of the Company. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP. We believe the Non-GAAP results are useful to investors to compare our results to previous periods, to provide insight into the underlying long-term performance trends in our business and to provide the opportunity to differentiate ourselves as the best consolidation platform in the industry against the performance of other funeral and cemetery companies.
Reconciliations of the Non-GAAP financial measures to GAAP measures are also provided in this press release.
The Non-GAAP financial measures used in this press release and the definitions of them used by the Company for our internal management purposes in this press release are described below.
•Special items are defined as charges or credits included in our GAAP financial statements that can vary from period to period and are not reflective of costs incurred in the ordinary course of our operations. The change in uncertain tax reserves and other was not tax effected. Special items were taxed at the operating tax rate.
•Adjusted net income is defined as net income after adjustments for special items that we believe do not directly reflect our core operations and may not be indicative of our normal business operations. Adjusted net income margin is defined as adjusted net income as a percentage of total revenue.
•Consolidated EBITDA is defined as net income before income taxes, interest expenses, non-cash stock compensation, depreciation and amortization, interest income and other, net. Consolidated EBITDA margin is defined as consolidated EBITDA as a percentage of total revenue.
•Adjusted consolidated EBITDA is defined as consolidated EBITDA after adjustments for special items that we believe do not directly reflect our core operations and may not be indicative of our normal business operations. Adjusted consolidated EBITDA margin is defined as adjusted consolidated EBITDA as a percentage of total revenue.
•Adjusted free cash flow is defined as cash provided by operating activities, adjusted by special items as deemed necessary, less cash for maintenance capital expenditures, which include facility repairs and improvements, equipment, furniture and vehicle purchases and information technology infrastructure improvements. Adjusted free cash flow margin is defined as adjusted free cash flow as a percentage of total revenue.
•Funeral operating EBITDA is defined as funeral gross profit, plus depreciation and amortization and regional and unallocated costs, less financial EBITDA, ancillary EBITDA and divested/planned divested EBITDA related to the Funeral Home segment. Funeral operating EBITDA margin is defined as funeral operating EBITDA as a percentage of funeral operating revenue.
•Cemetery operating EBITDA is defined as cemetery gross profit, plus depreciation and amortization and regional and unallocated costs, less financial EBITDA and divested/planned divested EBITDA related to the Cemetery segment. Cemetery operating EBITDA margin is defined as cemetery operating EBITDA as a percentage of cemetery operating revenue.
•Preneed cemetery sales is defined as cemetery property, merchandise and services sold prior to death.
•Financial EBITDA is defined as financial revenue, less the related expenses. Financial revenue and the related expenses are presented within Other revenue and Other expenses, respectively, on the Consolidated Statement of Operations. Financial EBITDA margin is defined as financial EBITDA as a percentage of financial revenue.
•Ancillary revenue is defined as revenues from our ancillary businesses, which include a flower shop, pet cremation business and online cremation business. Ancillary revenue and the related expenses are presented within Other revenue and Other expenses, respectively, on the Consolidated Statement of Operations.
•Ancillary EBITDA is defined as ancillary revenue, less expenses related to our ancillary businesses noted above. Ancillary EBITDA margin is defined as ancillary EBITDA as a percentage of ancillary revenue.
•Divested/planned divested revenue is defined as revenues from certain funeral home and cemetery businesses that we have divested and intend to divest.
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•Divested/planned divested EBITDA is defined as divested/planned divested revenue, less field level and financial expenses related to the divested/planned divested businesses noted above. Divested/planned divested EBITDA margin is defined as divested/planned divested EBITDA as a percentage of divested/planned divested revenue.
•Adjusted basic earnings per share (EPS) is defined as GAAP basic earnings per share, adjusted for special items.
•Adjusted diluted earnings per share (EPS) is defined as GAAP diluted earnings per share, adjusted for special items.
Funeral Operating EBITDA and Cemetery Operating EBITDA
Our operations are reported in two business segments: Funeral Home operations and Cemetery operations. Our operating level results highlight trends in volumes, revenue, operating EBITDA (the individual business’ cash earning power/locally controllable business profit) and operating EBITDA margin (the individual business’ controllable profit margin).
Funeral operating EBITDA and cemetery operating EBITDA are defined above. Funeral and cemetery gross profit is defined as revenue less “field costs and expenses” — a line item encompassing these areas of costs: i) funeral and cemetery field costs, ii) field depreciation and amortization expense, and iii) regional and unallocated funeral and cemetery costs. Funeral and cemetery field costs include cost of service, funeral and cemetery merchandise costs, operating expenses, labor and other related expenses incurred at the business level.
Regional and unallocated funeral and cemetery costs presented in our GAAP statement consist primarily of salaries and benefits of our regional leadership, incentive compensation opportunity to our field employees and other related costs for field infrastructure. These costs, while necessary to operate our businesses as currently operated within our unique, decentralized platform, are not controllable operating expenses at the field level as the composition, structure and function of these costs are determined by executive leadership in the Houston Support Center. These costs are components of our overall overhead platform presented within consolidated EBITDA and adjusted consolidated EBITDA. We do not directly or indirectly “push down” any of these expenses to the individual business’ field level margins.
We believe that our “regional and unallocated funeral and cemetery costs” are necessary to support our decentralized, high performance culture operating framework, and as such, are included in consolidated EBITDA and adjusted consolidated EBITDA, which more accurately reflects the cash earning power of the Company as an operating and consolidation platform.
Usefulness and Limitations of These Measures
When used in conjunction with GAAP financial measures, our total EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are supplemental measures of operating performance that we believe are useful measures to facilitate comparisons to our historical consolidated and business level performance and operating results.
We believe our presentation of adjusted consolidated EBITDA, a key metric used internally by our management, provides investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because it excludes items that may not be indicative of our ongoing operating performance.
Our total field EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are not necessarily comparable to similarly titled measures used by other companies due to different methods of calculation. Our presentation is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Funeral operating EBITDA, cemetery operating EBITDA, financial EBITDA, ancillary EBITDA and divested/planned divested EBITDA are not consolidated measures of profitability.
Our total field EBITDA excludes certain costs presented in our GAAP statement that we do not allocate to the individual business’ field level margins, as noted above. A reconciliation to gross profit, the most directly comparable GAAP measure, is set forth below.
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Consolidated EBITDA excludes certain items that we believe do not directly reflect our core operations and may not be indicative of our normal business operations. A reconciliation to net income, the most directly comparable GAAP measure, is set forth below.
Therefore, these measures may not provide a complete understanding of our performance and should be reviewed in conjunction with our GAAP financial measures. Carriage Services strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
The Non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures, all of which are reflected in the tables below.
Reconciliation of Net Income to Consolidated EBITDA, Adjusted Consolidated EBITDA (in thousands) and Adjusted Consolidated EBITDA margin for the three months ended March 31, 2022 and 2023:
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2023 | |||||||||||||
| Net income | $ | 16,402 | $ | 8,844 | ||||||||||
| Total expense for income taxes | 5,082 | 3,502 | ||||||||||||
| Income before income taxes | $ | 21,484 | $ | 12,346 | ||||||||||
| Depreciation & amortization | 4,783 | 4,769 | ||||||||||||
| Non-cash stock compensation | 1,607 | 2,141 | ||||||||||||
| Interest expense | 5,542 | 8,539 | ||||||||||||
| Net loss on divestitures | 703 | 82 | ||||||||||||
| Net (gain) loss on insurance reimbursements | (1,899) | 271 | ||||||||||||
| Other, net | 88 | (363) | ||||||||||||
| Consolidated EBITDA | $ | 32,308 | $ | 27,785 | ||||||||||
| Adjusted for: | ||||||||||||||
| Disaster recovery and pandemic costs | 168 | — | ||||||||||||
| Adjusted consolidated EBITDA | $ | 32,476 | $ | 27,785 | ||||||||||
| Total revenue | $ | 98,161 | $ | 95,514 | ||||||||||
| Adjusted consolidated EBITDA margin | 33.1% | 29.1% | ||||||||||||
Special Items affecting Adjusted Net Income (in thousands) for the three months ended March 31, 2022 and 2023:
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2023 | |||||||||||||
| Net (gain) loss on divestitures and other costs | $ | 703 | $ | (448) | ||||||||||
| Net (gain) loss on insurance reimbursements | (1,899) | 271 | ||||||||||||
| Disaster recovery and pandemic costs | 168 | — | ||||||||||||
| Change in uncertain tax reserves and other | (533) | — | ||||||||||||
| Total | $ | (1,561) | $ | (177) | ||||||||||
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Reconciliation of Gross Profit to Total Field EBITDA (in thousands) for the three months ended March 31, 2022 and 2023:
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2023 | |||||||||||||
| Gross profit (GAAP) | $ | 34,478 | $ | 31,055 | ||||||||||
| Cemetery property amortization | 1,332 | 1,201 | ||||||||||||
| Field depreciation expense | 3,297 | 3,357 | ||||||||||||
| Regional and unallocated funeral and cemetery costs | 6,347 | 5,437 | ||||||||||||
| Total field EBITDA | $ | 45,454 | $ | 41,050 | ||||||||||
| Total revenue | 98,161 | 95,514 | ||||||||||||
| Total field EBITDA margin | 46.3% | 43.0% | ||||||||||||
| Gross profit margin | 35.1% | 32.5% | ||||||||||||
Reconciliation of GAAP Basic Earnings Per Share to Adjusted Basic Earnings Per Share for the three months ended March 31, 2022 and 2023:
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2023 | |||||||||||||
| GAAP basic earnings per share | $ | 1.07 | $ | 0.59 | ||||||||||
| Special items | (0.08) | (0.01) | ||||||||||||
| Adjusted basic earnings per share | $ | 0.99 | $ | 0.58 | ||||||||||
Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the three months ended March 31, 2022 and 2023:
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2023 | |||||||||||||
| GAAP diluted earnings per share | $ | 1.00 | $ | 0.57 | ||||||||||
| Special items | (0.08) | (0.01) | ||||||||||||
| Adjusted diluted earnings per share | $ | 0.92 | $ | 0.56 | ||||||||||
Reconciliation of Cash Provided by Operating Activities to Adjusted Free Cash Flow (in thousands) for the three months ended March 31, 2022 and 2023:
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2023 | |||||||||||||
| Cash provided by operating activities | $ | 15,801 | $ | 25,869 | ||||||||||
| Cash used for maintenance capital expenditures | (3,612) | (1,842) | ||||||||||||
| Free cash flow | $ | 12,189 | $ | 24,027 | ||||||||||
| Plus: incremental special items: | ||||||||||||||
Withdrawal from preneed cemetery trust investments(1) | $ | — | $ | (7,002) | ||||||||||
| Disaster recovery and pandemic costs | 168 | — | ||||||||||||
| Adjusted free cash flow | $ | 12,357 | $ | 17,025 | ||||||||||
| (1) | During Q1 2023, we withdrew $7.0 million of realized capital gains and earnings from our preneed cemetery trust investments. In certain states, we are allowed to withdraw these funds prior to the delivery of preneed merchandise and service contracts. While the realized capital gains and earnings are not recognized as revenue, they increase our cash flow from operations. | |||||||||||||
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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This earnings release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and contains certain statements and information that may constitute forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements made herein or elsewhere by us, or on our behalf, other than statements of historical information, should be deemed to be forward-looking statements, which include, but are not limited to, statements regarding any projections of earnings, revenue, cash flow, investment returns, capital allocation, debt levels, equity performance, death rates, market share growth, overhead, or other financial items; any statements of the plans, strategies and objectives of management for future operations or financing activities, including, but not limited to, capital allocation, the ability to obtain credit or financing, organizational performance, anticipated integration, performance and other benefits of recently completed and anticipated acquisitions, and cost and debt reductions; any statements of the plans, timing and objectives of management for acquisition activities; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future developments and their potential effect on us. Words such as “may”, “will”, “estimate”, “intend”, “believe”, “expect”, “seek”, “project”, “forecast”, “foresee”, “should”, “would”, “could”, “plan”, “anticipate” and other similar words may be used to identify forward-looking statements; however, the absence of these words does not mean that the statements are not forward-looking. While we believe these assumptions concerning future events are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenue and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions, except where specifically noted. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include but are not limited to: our ability to find and retain skilled personnel; the effects of our talent recruitment efforts, incentive and compensation plans and programs, including such effects on our Standards Operating Model and the Company’s operational and financial performance; our ability to execute our growth strategy; our ability to execute and meet the objectives of our High Performance and Credit Profile Restoration Plan, if at all; the execution of our Standards Operating, 4E Leadership and Strategic Acquisition Models; the effects of competition; changes in the number of deaths in our markets; changes in consumer preferences and our ability to adapt to or meet those changes; our ability to generate preneed sales, including implementing our cemetery portfolio sales strategy, product development and optimization plans; the investment performance of our funeral and cemetery trust funds; fluctuations in interest rates; the effects of inflation on our operational and financial performance, including the increased overall costs for our goods and services, the impact on customer preferences as a result of changes in discretionary income, and our ability, if at all, to mitigate such effects; our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness; our ability to meet the timing, objectives and expectations related to our capital allocation framework, including our forecasted rates of return, planned uses of free cash flow and future capital allocation, including share repurchases, potential strategic acquisitions, internal growth projects, dividend increases, or debt repayment plans; our ability to meet the projected financial and equity performance goals to our updated full year outlook, if at all; the timely and full payment of death benefits related to preneed funeral contracts funded through life insurance contracts; the financial condition of third-party insurance companies that fund our preneed funeral contracts; increased or unanticipated costs, such as merchandise, goods, insurance or taxes, and our ability to mitigate or minimize such costs, if at all; our level of indebtedness and the cash required to service our indebtedness; changes in federal income tax laws and regulations and the implementation and interpretation of these laws and regulations by the Internal Revenue Service; effects of the application of other applicable laws and regulations, including changes in such regulations or the interpretation thereof; the potential impact of epidemics and pandemics, such as the COVID-19 coronavirus, including any new or emerging public health threats, on customer preferences and on our business; government, social, business and other actions that have been and will be taken in response to pandemics, such as the COVID-19 coronavirus, including potential responses to any new or emerging public health threats; effects and expense of litigation; consolidation of the funeral and cemetery industry; our ability to identify and consummate strategic acquisitions, if at all, and successfully integrate acquired businesses
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with our existing businesses, including expected performance and financial improvements related thereto; economic, financial and stock market fluctuations; interruptions or security lapses of our information technology, including any cybersecurity or ransomware incidents; acts of war or terrorists acts and the governmental or military response to such acts; our failure to maintain effective control over financial reporting; and other factors and uncertainties inherent in the funeral and cemetery industry.
For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, and in other filings with the SEC, available at www.carriageservices.com. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the applicable communication and we undertake no obligation to publicly update or revise any forward-looking statements except to the extent required by applicable law.
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