Carriage Services Earnings Call: Lots of cliches come to mind

I recently read the Carriage Services Earnings Call transcript from last week which pertained to the company’s 4th Quarter of 2024 as well as their financial year end for 2024.  It’s interesting that as I read the transcript, which you can access here from Seeking Alpha, several well-meaning cliches came to my mind. . . .

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First of all the transcript brought me back to the 1960’s and the advertising campaign from Avis in battling car rental leader Hertz.  That campaign which fed on the slogan “We’re #2, we try harder” is credited with cutting the market leadership of Hertz in half.  While they don’t implicitly say anything like that in the Earnings Call, you just get the feeling that Carriage Services management, because they are smaller than industry leader Service Corporation International (SCI), is simply “trying harder” to cut the gap.  (Here’s an archived article on the Avis campaing from the Denver Post.)

Secondly, while many people try to analyze the game of golf and improve with hundreds of little tips, I’ve broke down my golf game into only two criteria — Strategy and Execution.  I build a strategy for each shot and then try to execute that shot  —  of course, the strategy has to be within one’s ability and as your ability improves your strategy can get more complex. . . . From reading the transcript I get that feeling from Carriage Services also.  They are building a strategy for each shot — supplies, payments, preneed, organic growth — and then trying to execute that strategy. . . . and, as they successfully execute on that strategy their abilities will grow and the opportunities that growth brings will then bring bigger and more complex strategies in the future.

However, the cliche that really comes to the forefront for me is “Laser focused”.  The management team of Carlos Quezada and Steve Metzger took over about two years ago and their comments indicate that they are “Laser focused” on moving Carriage Services forward.  The jury is still out on how well they will do, but there is no denying that when you read the Earnings Call transcript you will more than likely agree that they are “Laser focused” on moving their company forward.

Funeral Director Daily will supply you some of the quotes we found most interesting and informative in the transcript.

Funeral Director Daily had noticed in earlier releases Matthews International, SCI, and Carriage Services all mentioned that their volume counts for the 4th Quarter of 2024 were down. . . Carriage Services CEO Carlos Quezada made the following comments on that issue: 

“We experienced an anticipated decline in funeral volumes . . . . .  The volume decrease is primarily linked to a shift in the flu season, which usually starts late in the fall and increases through the winter months.

Our January and February volume trends are positive, indicating that a late flu season may have shifted volume from the fourth quarter of last year to the first quarter of this year. . . . 

 . . . as we look into what happened, we did some research with CDC. It seems pretty clear that there is a shift of the flu season that came late this winter season and started really more into the end of December, beginning of January and, of course, continues as we speak today. And consequence of that, it is that today, we do have greater volume for both January and February that we had in Q1 of 2024.”

In answer to a question about divestitures (the sale of funeral homes or cemetery properties) and “right-sizing” the company, when asked how many funeral homes the company would have, President Steve Metzger answered as such:

“To confirm the number, this should result in core fewer funeral homes.”

In answer to a questions about spending and where cash-flow is going, CEO Carlos Quezada made the following comments:

. . . 2023 and 2024, our focus was to drive as much as we could organic revenue. We were pretty much in the backseat of acquisitions. Our last acquisition was in March of 2023 with Greenlawn. And then we focus on paying down our debt.

So part of that effort was to allocate capital to high-growth projects, which was basically preneed cemetery. . . . . The organic growth continues to be a focus at Carriage. However, this is the year that we’re able to go back to growth mode. We have been able to get the structure that we needed over the last 2 years, get the team in place, get the systems right. . . . “

In answer to a question about the financial impacts of the company’s divestitures in 2024, President Steve Metzger answered as such:

“.So for 2024, roughly, we sold about $5.5 million worth of revenue. which represented around $1.8 million of EBITDA. Proceeds were just over $12 million for the year. . . . anticipating 2025. As we look at 2025 right now, and some of this is what we’re targeting. We have a couple of things under contract that have not closed. But we’re looking at roughly, call it, $25 million worth of proceeds.”

Tom Anderson
Funeral Director Daily

Funeral Director Daily take:  That is only a sampling of some of the items discussed in the Earnings Call.  There’s more including potential deals with suppliers to save costs, more about Carriage Services’ “Project Trinity” which is a future consumer facing platform the company has high hopes for.

And there is always “data points” one can take from these discussions and apply to your own funeral home.  For instance, President Metzger mentioned that in 2024 they sold properties and the proceeds were “over $12 million”.  He also mentioned in the same breath that the revenues of those properties were $5.5 million and the EBITDA was about $1.8 million.  So, you can come up with simplistic data points of the aggregate which would give you the figure that the properties were sold for about 2.2 times revenue and/or about 6.7 times EBIDTA.

You have to be careful when using those multiples as an absolute because we are not given all criteria on the sales, but the comment does give a data point about sale prices.

Disclaimer — The author of this article for Funeral Director Daily is a shareholder of Carriage Services.

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