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Carriage Services Announces First Quarter and April 2020 Results; Updated 2020 and Confirm 2021/2022 Outlook; Dividend Increase; and New Five Year Good To Great Shareholder Value Creation Incentive Plan

Conference call on Wednesday, May 20, 2020 at 9:30 a.m. central time

HOUSTON, May 19, 2020 (GLOBE NEWSWIRE) -- Carriage Services, Inc. (CSV) today announced results for the first quarter ended March 31, 2020.

Mel Payne, Chairman and Chief Executive Officer, stated, “This First Quarter earnings release will be a continuation of my recent 2019 Shareholder Letter, which is incorporated herein by reference, as well as a much more comprehensive explanation about the present and future performance expectations of our company during and after the Coronavirus Crisis which has devastated our country and economy over the last two months. The greatest takeaway from this release will be the verbatim paragraph from Page 5 of my 2019 Shareholder Letter, as follows:

“Reflecting back on Carriage’s performance decline in 2018, the performance turnaround we have already achieved, and the performance milestones we will achieve over the next three years, our company will have executed what we believe in hindsight will be viewed as a complete Carriage Leadership, Portfolio High Performance, Balance Sheet, Earnings and Free Cash Flow Transformation as a Value Creation Platform.”

We view the current harsh conditions under which our industry and company are operating as a huge opportunity to step up to the unprecedented challenges and show anyone who might be interested in our company that even a once in a lifetime Coronavirus Pandemic Crisis will not deter our leadership and wonderful people in all areas, but especially our operating businesses, from proving every word of the above paragraph to be profoundly true.

Shown below are summary comparative results from our First Quarter followed by our April 2020 comparative results, an updated Rolling Four Quarter Outlook and THREE YEAR SCENARIO with Roughly Right Performance Ranges, plus other sections critical for a comprehensive understanding of the present and future value creation potential of our company,” concluded Mr. Payne.

First Quarter 2020 Comparative Results

Three Months Ended March 31, 2020 compared to Three Months Ended March 31, 2019

• Total Revenue of $77.5 million, an increase of 12.2%;
• Total Field EBITDA of $30.1 million, an increase of 6.3%;
• Total Field EBITDA Margin down 220 basis points to 38.8%;
• Adjusted Consolidated EBITDA of $22.8 million, an increase of 9.5%;
• Adjusted Consolidated EBITDA Margin down 70 basis points to 29.5%;
• Adjusted Net Income of $6.1 million, a decrease of 10.8%;
• Adjusted Diluted Earnings Per Share of $0.35, a decrease of 7.9%;
• Adjusted Free Cash Flow of $12.6 million, an increase of 30.7%;
• Net Loss of $4.2 million, a decrease of 164.3%; and
• GAAP Diluted Loss Per Share of $0.23, a decrease of 163.9%.

Bill Goetz, President and Chief Operating Officer, stated, “Our performance through mid-March was on track to deliver a traditionally very strong first quarter performance despite just getting initial momentum in March with our four large acquisitions from the fourth quarter. The last two weeks of March were a sudden shock to our operations while we dealt with the mandated shut down and stay at home orders that spread across the country. The result was significantly lower funeral revenue averages and cemetery preneed property sales in March that were not offset by higher volumes or cost reductions, which led to lower year over year Field EBITDA Margins and Consolidated EBITDA Margins not only in March but for the entire first quarter.

The huge performance highlight of the quarter was an increase of 30.7% in Free Cash Flow to $12.6 million, which was 16.3% of revenue representing a new value creation metric titled Adjusted Free Cash Flow Margin. This metric over time is expected to fully reflect better than any other our transformation as a value creation platform during our milestone three year scenario ending in 2022.

April Comparative 2020 Results

• Total Revenue of $25.4 million, an increase of 3.6%;
• Total Field EBITDA of $11.1 million, an increase of 1.3%;
• Total Field EBITDA Margin down 100 basis points to 43.5%;
• Adjusted Consolidated EBITDA of $8.8 million, an increase of 7.2%;
• Adjusted Consolidated EBITDA Margin of 34.6%, an increase of 120 basis points;
• Adjusted Net Income of $2.9 million, a decrease of 3.2%;
• Adjusted Diluted Earnings Per Share of $0.17, flat year over year;
• Estimated Free Cash Flow of $8.2 million, an increase of 41.1%; and
• Estimated Free Cash Flow Margin of 32.3%.

Our Executive Team reacted quickly during March to enact cost reduction measures to bring down our overhead costs for the duration of the Coronavirus Crisis. Moreover, our operations teams across the portfolio quickly adopted operating strategies during the last two weeks of March to adapt our service and financial performance to the harsh local conditions and fear of the unknown within our client family communities. Each week during April we gained funeral and cemetery revenue momentum and finished the month strong, and early revenue trends in May are highly encouraging, especially with our funeral revenue averages trending up near normalized averages prior to the Coronavirus Crisis.

Our April financial performance was simply amazing, as a 3.6% increase in Total Revenue produced a 7.2% increase in Adjusted Consolidated EBITDA and 41.1% increase in Adjusted Free Cash Flow. The Adjusted Consolidated EBITDA Margin was a record high 34.6% for one month and Adjusted Free Cash Flow was $8.2 million equal to 93% of Adjusted Consolidated EBITDA of $8.8 million because of low cash interest in April and a clampdown on capital expenditures. The Adjusted Free Cash Flow Margin of 32.3% was also a record high and enabled us to build cash and liquidity throughout the month of April at the peak of the Coronavirus Crisis harsh operating environment across much of our portfolio.

While we are fully aware that such an outperformance for one month in the midst of crisis is not sustainable, April validates the power of our unique Standards Operating Model and our passionate focus on decentralized decision making and entrepreneurialism by highly talented and aligned Managing Partners and their teams of employees. April performance also serves as an important data reference point as to what is possible as we execute our three core models and strategic plan over the next five years.

Acquisition Integration

In our previous earnings press release on February 19, 2020, we outlined a Milestone Three Year Scenario that included three distinct time periods: 6 months of integration and transition through June 30, 2020; 12 months of normalized earnings, Adjusted Free Cash Flow and deleveraging of our balance sheet as we substantially improve our credit profile ahead of a planned high yield bond refinancing in the middle to latter part of 2021; and finally, an 18 month period of optimized performance with the existing portfolio of businesses leading to increased Free Cash Flow and shareholder value creation capital deployment opportunities in 2022 and thereafter.

We have continued to execute on the integration plans for each of the four acquisitions we closed during the fourth quarter of 2019 and, as a group, the operating and financial performance has improved every month so far in 2020, even in the midst of the current Coronavirus Crisis. The performance of these acquired businesses during this unprecedentedly harsh operating environment demonstrates the strength of each local franchise, led by talented Managing Partners who have embraced Carriage’s decentralized Standards Operating Model and are appreciative of being able to operate and grow their business with Carriage's first class operating and back office support. The progress of integration over the last several months also highlights Carriage’s ability to successfully integrate a number of large businesses concurrently, which is another testament to the talent of our leadership teams in all areas.

Acquisition Funeral Home EBITDA Margin was 38.9% and Acquisition Cemetery Field EBITDA Margin was 42.7% in April, both of which were significant trend improvements compared to first quarter results. Once fully integrated, our four latest acquisitions and in particular Fairfax Memorial Park and Funeral Home will lead to a more predictable earnings and Free Cash Flow growth profile for Carriage,” concluded Mr. Goetz.

Updated Three Year Roughly Right Scenario

Ben Brink, Chief Financial Officer, stated, "We previously announced a delay in our earnings release which gave us the opportunity to finalize our April operating and financial results and observe two full weeks of funeral home and cemetery revenue trends in May in order to provide an updated ‘roughly right’ scenario for the balance of 2020, particularly given the short term negative impact of the Coronavirus Crisis on normalized revenue. Our updated 2020 Post Covid-19 Roughly Right Ranges of performance are our best estimates of how Carriage returns to a relative state of normal operations and financial performance over the course of the year as state and local restrictions on gatherings and related orders gradually come to an end. We expect Free Cash Flow for 2020 to be in line with our previously published outlook for 2020 which shows the resilient cash flow nature of the funeral and cemetery industry as well as the strength and flexibility of our operating model.

We are also pleased to reaffirm our Roughly Right Ranges of performance for 2021 and 2022 as shown below. The performance and response from the entire Carriage Team of High Performance Teams represent the gold standard for Leadership in Times of Crisis and confirms our conviction in our ability to achieve the financial and operational performance milestone goals in our Three Year Scenario.

MILESTONE THREE YEAR SCENARIO

        Roughly Right Ranges    
        Years Ending December 31 (millions)    
    Actual
2019
  Pre-COVID
2020
  Post-COVID
2020
  2021   2022   Midpoint
Three Year
CAGR
Total Revenue   $274.1   $315 - $319   $300 - $306   $320 - $324   $328 - $332   6.4%
Total Field EBITDA   $109.8   $127 - $131   $116 - $120   $133 - $137   $139 - $144   8.8%
Total Field EBITDA Margin   40.0%   40% - 41%   39% - 40%   41% - 42%   42% - 43%   2.0%
Adjusted Consolidated EBITDA   $76.6   $92 - $96   $87 - $91   $97 - $101   $102 - $106   10.7%
Adjusted Consolidated EBITDA Margin   27.9%   29% - 30%   29% - 30%   30% - 31%   31% - 32%   4.1%
Adjusted Diluted EPS   $1.25   $1.55 - $1.65   $1.36 - $1.42   $1.92 - $2.10   $2.25 - $2.40   23.0%
Adjusted Free Cash Flow   $37.4   $42 - $45   $43 - $45   $53 - $56   $60 - $63   18.0%
Adjusted Free Cash Flow Margin   13.6%   13.5% - 14.0%   14.4% - 14.9%   16.6% - 17.1%   18.3% - 18.8%   10.9%
Total Debt Outstanding   $502.9   $480 - $490   $480 - $490   $440 - $450   $390 - $440   (6.2)%
Total Debt to EBITDA Multiple   6.6*   5.0 - 5.2   5.4 - 5.5   4.3 - 4.5   3.8 - 4.0    
* Doesn’t include Proforma for Acquisitions

The most relevant and powerful metric that best defines Carriage’s transformation into a superior shareholder value creation platform by 2022 is the Adjusted Free Cash Flow Margin, which trends up rapidly from 13.6% in 2019 to a range of 18.3%-18.8% in 2022 after the final transformative step of refinancing $400 million of 6 5/8% senior notes sometime in the middle to latter half of 2021.

Liquidity, Leverage, Free Cash Flow, Senior Note Refinancing Outlook

We produced Adjusted Free Cash Flow from operations for the three months ended March 31, 2020 of $12.6 million compared to Adjusted Free Cash Flow from operations of $9.6 million for the corresponding period in 2019. A reconciliation of Cash Flow Provided by Operations to Adjusted Free Cash Flow for the three months ended March 31, 2019 and 2020 is shown below as follows (in thousands):

  For the Years Ended
March 31,
  2019   2020
Cash flow provided by operations $ 10,994     $ 13,546  
Cash used for maintenance capital expenditures (1,693 )   (1,556 )
Free Cash Flow $ 9,301     $ 11,990  
       
Plus: Incremental Special Items:      
Acquisition and Divestiture Costs     114  
Severance and Retirement Costs 217     288  
Litigation Reserve 125     75  
Natural Disaster Costs     140  
Adjusted Free Cash Flow $ 9,643     $ 12,607  

Adjusted Free Cash Flow through the first four months in 2020 increased 35% to about $21 million on Total Revenue of $102.9 million, representing an Adjusted Free Cash flow Margin of 20.4%. Such a high percentage of recurring Free Cash Flow on our revenue provides for our daily liquidity needs, supports our ability to cover large semiannual bond interest payments in June and December and to substantially reduce principal amounts outstanding on our debt. We will focus on accelerating our deleveraging plan over the next year in preparation for a senior note refinancing, which would then accelerate our return to a steady state policy total leverage ratio of about 4 to 1, enabling us to again allocate Free Cash Flow more flexibly to maximize the intrinsic value of CSV per share.

Our Adjusted Free Cash Flow for the rest of 2020 will benefit from a reduction in cash taxes and a decrease in planned capital expenditures. This increasing amount of recurring Free Cash Flow, driven by improving performance of our operating businesses over the next 12 months, will position Carriage to pursue a Senior Note refinancing with an improved credit profile during the middle to latter half of next year.

We believe the current historically low interest rate environment will continue for the foreseeable future and, should that prove true, we should be able to refinance our high yield notes at a materially lower rate than the current 6.625%, which priced in May of 2018 at 368 basis points spread over the 10 year Treasury yield, 3.0% at the time and now 0.66%. The realistic potential for a much stronger company credit profile producing a much smaller basis point spread over a much lower 10 year treasury yield means that we could realize lower cash interest of $8 million to $10 million within a twelve to eighteen month period, greatly accelerating Free Cash Flow growth from our existing portfolio in 2021 and 2022.

Capital Allocation Over Next Three Years; DIVIDEND INCREASE

The steady growth of Free Cash Flow will provide Carriage greater financial flexibility to execute on an expanded number of shareholder value creation opportunities over the next five years of our Good To Great Journey Part II. Our immediate focus is on operational improvement, integration of recent acquisitions and a reduction of our total debt through internally generated Free Cash Flow and proceeds from divestitures of certain underperforming businesses.

We are pleased to announce the decision by our Board of Directors to increase our annual dividend $0.05 to $0.35 annually beginning with the next dividend declaration in the third quarter. This represents a current annual dividend yield of 2.5% on CSV shares and demonstrates our confidence in the growing cash earning power of Carriage and a commitment to a balanced shareholder value creation capital allocation program.

Trust Fund Market Crash Preparation and Capital Deployment / Results

Shown below are consolidated performance metrics for the discretionary preneed trust fund portfolios (preneed funeral, preneed cemetery and cemetery perpetual care) at key dates since December 31, 2019.

CSV Discretionary Preneed Trust Holdings (in millions)
At December 31, 2019   Cost   % Total   Market   % Total   Unrealized
Gain/Loss
  Estimated
Annual
Income
Fixed Income   $ 114,519     55.1 %   $ 118,668     55.7 %   $ 4,148     $ 7,532  
Equity   77,815     37.4 %   78,957     37.0 %   1,142     2,568  
Cash & Cash Equivalents   15,518     7.5 %   15,518     7.3 %       70  
Total   $ 207,852     100.0 %   $ 213,143     100.0 %   $ 5,290     $ 10,170  
                         
At February 19, 2020   Cost   % Total   Market   % Total   Unrealized
Gain/Loss
  Estimated
Annual
Income
Fixed Income   $ 88,411     40.6 %   $ 91,938     41.3 %   $ 3,527     $ 6,969  
Equity   88,219     40.6 %   89,955     40.4 %   1,736     2,652  
Cash & Cash Equivalents   40,934     18.8 %   40,934     18.3 %       477  
Total   $ 217,564     100.0 %   $ 222,827     100.0 %   $ 5,263     $ 10,098  
                         
At March 6, 2020   Cost   % Total   Market   % Total   Unrealized
Gain/Loss
  Estimated
Annual
Income
Fixed Income   $ 88,371     40.3 %   $ 89,039     43.2 %   $ 668     $ 6,957  
Equity   76,951     35.1 %   63,239     30.7 %   (13,711 )   2,345  
Cash & Cash Equivalents   53,876     24.6 %   53,876     26.1 %       85  
Total   $ 219,198     100.0 %   $ 206,154     100.0 %   $ (13,043 )   $ 9,387  
                         
At May 15, 2020   Cost   % Total   Market   % Total   Unrealized
Gain/Loss
  Estimated
Annual
Income
Fixed Income   $ 119,708     54.5 %   $ 109,162     57.4 %   $ (10,546 )   $ 10,442  
Equity   91,312     41.5 %   72,281     38.0 %   (19,031 )   2,551  
Cash & Cash Equivalents   8,776     4.0 %   8,776     4.6 %       10  
Total   $ 219,796     100.0 %   $ 190,219     100.0 %   $ (29,577 )   $ 13,003  

Early in the year we began to be more cautious in our preneed trust fund portfolio as equity markets made all time highs on February 19th. By March 9th when 10 Year Treasury Yields had culminated a historic decline from 1.92% on December 31, 2019 to 0.54%, while oil prices had plummeted about 50% since December 31, 2019 with the collapse of the OPEC+ supply agreement between Saudi Arabia and Russia, we had raised our cash level to about 25% with an allocation of 40% to fixed income and only 35% to equities.

Over the course of the past 11 weeks we have executed an extensive trust fund portfolio repositioning strategy using the over $50 million in cash we raised from existing portfolio positions and from new preneed trust assets that were a part of the acquisitions closed in the fourth quarter. We put most of our deployed capital to work during the two week period from Monday, March 9th to Monday, March 23rd when the VIX Index was highly elevated above 50, hitting an all time high of 82.69 on March 16th.

In our equity portfolio we focused on either adding to existing core positions or establishing new positions in companies that we believe will weather the Coronavirus Crisis economic damage and emerge in either a stronger industry position or at the very least with an enterprise whose earnings and Free Cash Flow have not been permanently diminished or diluted by high cost survival financings during the economic shut down and likely slow recovery and whose cost basis in the shares purchased are a huge discount to intrinsic value in a more normalized economic environment.

We also focused on the goal of substantially increasing recurring annual income in our portfolio by adding quality companies to our equity dividend portfolio that have the financial flexibility and capacity to continue to pay their dividends at pre-Coronavirus levels going forward and are committed to doing so. In our fixed income portfolio we took advantage of severe price dislocation because of the lack of liquidity in the high yield over the counter market in March to add to a number of our existing holdings that we know well at significant price discounts to par and selectively added new companies to the portfolio that based on our credit analysis have the ability to make it to the other side of this economic crisis while continuing to pay their interest and principal when due without a major debt restructuring or bankruptcy.

The results of this initial phase of our trust fund repositioning strategy will provide significant benefits to Carriage’s reported Financial Revenue, EBITDA, EPS and Free Cash Flow in both the short and long term. The $4.5 million equal to a 53% increase in recurring annual income in our trust fund portfolio as of May 15th from approximately $52 million in a new capital deployment since March 6th will improve the cash earnings from our cemetery perpetual care accounts immediately and provide an increased earnings stream to be allocated to long life preneed contracts. Added capital gains appreciation expected over a longer term will additionally benefit preneed funeral and cemetery contracts and has the potential to provide upside to our Milestone Three Year Scenario," concluded Mr. Brink.

Good To Great II Five Year Shareholder Value Creation Incentive Plan

Mr. Payne further stated, “Since the Black Monday market crash on October 19, 1987, I have learned by studying the investment masters of the last thirty years that patience is a great virtue in producing superior long-term investment returns. As the co-founder and only CEO of Carriage, as well as its largest shareholder with an approximate 10% ownership stake including holdings of my son and daughter, I believe the last almost 29 years of patience while building Carriage is finally going to be rewarded. All the pieces that are necessary for Carriage to become a superior stockholder value creation investment platform are now in place. I strongly recommend that anyone interested in Carriage as a long-term investment holding of any size read carefully and reflect upon the qualitative descriptions of our High Performance Culture Framework contained in our recent proxy statement.

I am highly honored, but even more excited, to briefly describe the new GTG II Plan for 47 of our senior leaders, including for the first time the 10 Standards Council Members. This plan for our senior leadership teams above the individual business unit level syncs up perfectly with our annual Being the Best Pinnacle and Five Year Good to Great value creation Awards for the Managing Partners at each business, which are the most generous “pay for high performance” incentive awards in the history of deathcare consolidation over the last 60 years. The Coronavirus Pandemic Crisis was the first external shock since Carriage was founded to materially impact funeral and cemetery operations in our industry and thus provides a unique opportunity for our leadership teams comprising the 47 participants to validate the near and long term performance power of the unorthodox ideas and concepts that define our three core business models.

The GTG II Plan enables us to clean up as well as broaden and simplify the fragmented nature of our first two incentive programs (now cancelled) based on five year compounded share price increases that were approved in early 2019 and more recently on February 19, 2020, the peak of the bull market that began on March 6/9, 2009. We realize that GTG II is highly unorthodox to fit the rare set of circumstances in the current environment and for that reason will not be needed or repeated in the future. We are highly convinced that the 47 participants in GTG II are the “Right People in the Right Seats on the Carriage Bus at the Right Time” and that the next five year timeframe of Carriage’s Good To Great Journey that began on January 1, 2020 will produce market beating investment returns much like during the first five year timeframe from 2012 to 2016.

The concept of GTG II is simple: the 47 participant leaders must exceptionally execute the three core business models of Carriage to produce higher and sustainable operating and financial performance over the five year timeframe ending in 2024, including especially wise and savvy allocation of capital primarily in the form of increasing Free Cash Flow, to maximize the intrinsic value of each outstanding common share during the five year vesting period. Starting with a recent reference base price of $14.38 per share, GTG II Incentive Awards would be earned by the CSV share price compounding to exceed five different categories over five years of 20%, 25%, 30%, 35% and 40%, as shown in the table below:

    Five Year CSV Share Price CAGR

 
   
    20%   25%   30%   35%   40%
Vesting Share Price by 2024   $ 35.78     $ 43.88     $ 53.39     $ 64.48     $ 77.34  
Beginning Reference Price   14.38     14.38     14.38     14.38     14.38  
CSV Share Price Increase   $ 21.40     $ 29.50     $ 39.01     $ 50.10     $ 62.96  
Shareholder Value Increase @ 18m Shares (in millions)   $ 385.2     $ 531.0     $ 702.2     $ 901.8     $ 1,100.0  
                     
Total CSV Share Awards (in thousands)   382.9     605.1     823.2     1,000.0     1,100.0  
Total Value of Share Awards @ Vesting Price (in millions)   $ 13.7     $ 26.6     $ 44.0     $ 64.6     $ 88.5  
Percent of Shareholder Value Created   3.56 %   5.00 %   6.26 %   7.16 %   7.81 %

 

As reflected above, the 47 members of Carriage who are leading and supporting the creation of long term shareholder value would share in a larger percentage of the incremental value created in five CAGR categories from 20% to 40%, but earn no award unless our share price reaches a minimum of $35.78 (20% CAGR) by the end of 2024. Highly relevant to existing shareholders, any of the CAGR categories achieved is a desirable event because the Incentive Awards are paid after five years in appreciated shares. The GTG II Program is therefore a pure form of shareholder aligned “Pay For Long Term Performance.”

If we only achieve a share price of $35 - $36 per share by 2024 and no GTG II incentive awards earned, I would personally benefit from having the highest net worth in my life but would also be more extremely upset than at any time in my life because the wonderful and deserving other 46 members received nothing. While no one can predict future market conditions or uncontrollable events, especially after the recent Gold Standard of a Black Swan Event called Coronavirus, I have complete confidence that our incredibly talented leadership teams led by Bill Goetz will be deep in the GTG II Incentive Award Money by the end of 2024!,” concluded Mr. Payne.

CONFERENCE CALL AND INVESTOR RELATIONS CONTACT

Carriage Services has scheduled a conference call for tomorrow, May 20, 2020 at 9:30 a.m. Central time. To participate in the call, please dial 866-516-3867 (ID-2275039) and ask for the Carriage Services conference call. A replay of the conference call will be available through May 25, 2020 and may be accessed by dialing 855-859-2056 (ID-2275039). The conference call will also be available at www.carriageservices.com. For any investor relations questions, please contact Viki Blinderman at 713-332-8568 or Ben Brink at 713-332-8441 or email InvestorRelations@carriageservices.com.



 
CARRIAGE SERVICES, INC.
OPERATING AND FINANCIAL TREND REPORT
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
   
  Three Months Ended March 31,
  2019 2020 % Change
       
Same Store Contracts      
Atneed Contracts 6,821   7,278   6.7%  
Preneed Contracts 1,468   1,484   1.1%  
Total Same Store Funeral Contracts 8,289   8,762   5.7%  
Acquisition Contracts      
Atneed Contracts 910   2,020   122.0%  
Preneed Contracts 140   188   34.3%  
Total Acquisition Funeral Contracts 1,050   2,208   110.3%  
Total Funeral Contracts 9,339   10,970   17.5%  
       
Funeral Operating Revenue      
Same Store Revenue $ 45,018   $ 44,866   (0.3%)  
Acquisition Revenue 6,953   11,714   68.5%  
Total Funeral Operating Revenue $ 51,971   $ 56,580   8.9%  
       
Cemetery Operating Revenue      
Same Store Revenue $ 11,289   $ 10,945   (3.0%)  
Acquisition Revenue   2,799      
Total Cemetery Operating Revenue $ 11,289   $ 13,744   21.7%  
       
Total Financial Revenue $ 3,794   $ 4,293   13.2%  
       
Other Revenue $   $ 1,151    
       
Total Divested/Planned Divested Revenue $ 2,027   $ 1,722   (15.0%)  
       
Total Revenue $ 69,081   $ 77,490   12.2%  
       
Field EBITDA      
Same Store Funeral EBITDA $ 18,071   $ 17,236   (4.6%)  
Same Store Funeral EBITDA Margin 40.1 % 38.4 % (170 bp)  
Acquisition Funeral EBITDA 2,739   4,245   55.0%  
Acquisition Funeral EBITDA Margin 39.4 % 36.2 % (320 bp)  
Total Funeral EBITDA $ 20,810   $ 21,481   3.2%  
Total Funeral EBITDA Margin 40.0 % 38.0 % (200 bp)  
         
Same Store Cemetery EBITDA $ 3,661   $ 3,151   (13.9%)  
Same Store Cemetery EBITDA Margin 32.4 % 28.8 % (360 bp)  
Acquisition Cemetery EBITDA   827      
Acquisition Cemetery EBITDA Margin % 29.5 % 2,950 bp  
Total Cemetery EBITDA $ 3,661   $ 3,978   8.7%  
Total Cemetery EBITDA Margin 32.4 % 28.9 % (350 bp)  
       
Total Financial EBITDA $ 3,393   $ 3,874   14.2%  
Total Financial EBITDA Margin 89.4 % 90.2 % 80 bp  
         
Other EBITDA   $ 295      
Other EBITDA Margin % 25.6 %    
         
Total Divested/Planned Divested EBITDA $ 459   $ 466   1.5%  
Total Divested/Planned Divested EBITDA Margin 22.6 % 27.1 % 450 bp  
         
Total Field EBITDA $ 28,323   $ 30,094   6.3%  
Total Field EBITDA Margin 41.0 % 38.8 % (220 bp)  
       
       
       
       
OPERATING AND FINANCIAL TREND REPORT
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
       
  Three Months Ended March 31,
  2019 2020 % Change
       
Overhead      
Total Variable Overhead $ 1,938   $ 1,636   (15.6%)  
Total Regional Fixed Overhead 1,001   1,038   3.7%  
Total Corporate Fixed Overhead 4,877   5,197   6.6%  
Total Overhead $ 7,816   $ 7,871   0.7%  
Overhead as a percentage of Revenue 11.3 % 10.2 % (110 bp)  
         
Consolidated EBITDA $ 20,507   $ 22,223   8.4%  
Consolidated EBITDA Margin 29.7 % 28.7 % (100 bp)  
         
Other Expenses and Interest        
Depreciation & Amortization $ 4,323   $ 4,549   5.2%  
Non-Cash Stock Compensation 585   831   42.1%  
Interest Expense 6,328   8,428   33.2%  
Accretion of Discount on Convertible Subordinated Notes 57   65   14.0%  
Impairment of Goodwill and Other Intangibles   14,693      
Other, Net 13   4      
Pre-Tax Income (Loss) $ 9,201   $ (6,347 ) (169.0%)  
Expense (Benefit) for Income Taxes 2,577   (2,136 )    
Tax Adjustment Related to Certain Discrete Items 99   (14 )    
Net Tax Expense (Benefit) 2,676   (2,150 )    
GAAP Net Income (Loss) $ 6,525   $ (4,197 ) (164.3%)  
       
Special Items, Net of Tax, except for **      
Acquisition and Divestiture Expenses $   $ 90    
Severance and Retirement Costs 171   228    
Accretion of Discount on Convertible Subordinated Notes ** 57   65    
Net Impact of Impairment of Goodwill and Other Intangibles   9,757    
Litigation Reserve 99   59    
Natural Disaster Costs   111    
       
Adjusted Net Income $ 6,852   $ 6,113   (10.8%)  
Adjusted Net Profit Margin 9.9 % 7.9 % (200 bp)  
         
Adjusted Basic Earnings Per Share $ 0.38   $ 0.35   (7.9%)  
Adjusted Diluted Earnings Per Share $ 0.38   $ 0.35   (7.9%)  
         
GAAP Basic Earnings (Loss) Per Share $ 0.36   $ (0.23 ) (163.9%)  
GAAP Diluted Earnings (Loss) Per Share $ 0.36   $ (0.23 ) (163.9%)  
         
Weighted Average Basic Shares Outstanding 18,057   17,805      
Weighted Average Diluted Shares Outstanding 18,097   17,805      
         
Reconciliation to Adjusted Consolidated EBITDA        
Consolidated EBITDA $ 20,507   $ 22,223   8.4%  
Acquisition and Divestiture Expenses   114      
Severance and Retirement Costs 217   288      
Litigation Reserve 125   75      
Natural Disaster Costs   140      
Adjusted Consolidated EBITDA $ 20,849   $ 22,840   9.5%  
Adjusted Consolidated EBITDA Margin 30.2 % 29.5 % (70 bp)  
             



CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)

      (unaudited)
  December 31, 2019   March 31, 2020
ASSETS      
Current assets:      
Cash and cash equivalents $ 716     $ 11,920  
Accounts receivable, net 21,478     20,845  
Inventories 6,989     7,188  
Prepaid and other current assets 10,667     14,447  
   Total current assets 39,850     54,400  
Preneed cemetery trust investments 72,382     60,776  
Preneed funeral trust investments 96,335     81,377  
Preneed cemetery receivables, net 20,173     20,402  
Receivables from preneed trusts 18,024     18,089  
Property, plant and equipment, net 279,200     278,995  
Cemetery property, net 87,032     101,797  
Goodwill 398,292     396,696  
Intangible and other non-current assets, net 32,116     33,457  
Operating lease right-of-use assets 22,304     21,891  
Cemetery perpetual care trust investments 64,047     52,677  
       Total assets $ 1,129,755     $ 1,120,557  
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Current portion of debt and lease obligations $ 3,150     $ 3,219  
Accounts payable 8,413     6,425  
Accrued and other liabilities 24,026     23,788  
Convertible subordinated notes due 2021     6,042  
   Total current liabilities 35,589     39,474  
Long-term debt, net of current portion 5,658     5,462  
Credit facility 82,182     112,509  
Convertible subordinated notes due 2021 5,971      
Senior notes due 2026 395,447     395,575  
Obligations under finance leases, net of current portion 5,854     5,776  
Obligations under operating leases, net of current portion 21,533     21,106  
Deferred preneed cemetery revenue 46,569     46,980  
Deferred preneed funeral revenue 29,145     29,363  
Deferred tax liability 41,368     45,491  
Other long-term liabilities 1,737     1,435  
Deferred preneed cemetery receipts held in trust 72,382     60,776  
Deferred preneed funeral receipts held in trust 96,335     81,377  
Care trusts’ corpus 63,416     52,774  
   Total liabilities 903,186     898,098  
Commitments and contingencies      
Stockholders’ equity:      
Common stock 259     259  
Additional paid-in capital 242,147     242,234  
Retained earnings 86,213     82,016  
Treasury stock (102,050 )   (102,050 )
   Total stockholders’ equity 226,569     222,459  
       Total liabilities and stockholders’ equity $ 1,129,755     $ 1,120,557  
               



CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

...
  (unaudited)
  Three Months Ended March 31,
  2019   2020
       
Revenue:      
Service revenue $ 36,652     $ 40,732  
Property and merchandise revenue 28,579     31,271  
Other revenue 3,850     5,487  
  69,081     77,490  
Field costs and expenses:      
Cost of service 18,097     21,057  
Cost of merchandise 22,261     25,063  
Cemetery property amortization