Carriage Services Announces Record Fourth Quarter and Full Year 2021 Results
Conference call on Thursday, February 24, 2022 at 9:30 a.m. central time
HOUSTON, Feb. 23, 2022 (GLOBE NEWSWIRE) -- Carriage Services, Inc. (NYSE: CSV) today announced results for the fourth quarter and year ended December 31, 2021.
· Full Year Performance Release Represents 2021 Shareholder Letter;
· Carlos Quezada promoted to President and Chief Operating Officer;
· Fourth Quarter Revenue of $95.9 million, GAAP Diluted EPS of $0.77 and Adjusted Diluted EPS of $0.78;
· Full Year Revenue of $375.9 million, GAAP Diluted EPS of $1.81 and Adjusted Diluted EPS of $3.02;
· Full Year Adjusted Free Cash Flow of $75.7 million; Net Operating Cash Flow of $84.2 million;
· Issues new Three Year Roughly Right Ranges Performance Scenario through 2024 with a likely Capital Allocation Scenario and Share Price Valuation Ranges for each year;
· Invested $142.5 million since May 13, 2021 to repurchase 2.9 million shares (16.0% of outstanding at $49.01 per share);
· Board approved a new $75 million authorization for Stock Repurchase Program; and
· Increase of $5 per share in Intrinsic Value Roughly Right Range to $70 to $80 per share.Mel Payne, Chairman and CEO, stated, “Our funeral and cemetery portfolio revenue and earnings momentum continued through the fourth quarter of 2021 with record revenue of $95.9 million (up 6.5%) and record Adjusted Diluted EPS of $0.78 (up 36.8%) despite a tough comparison with our fourth quarter of last year because of a spike in COVID-19 deaths, especially in California beginning in December 2020 through January 2021. The other good news is that our GAAP Diluted EPS for the fourth quarter of $0.77 was essentially equal to our Adjusted Diluted EPS after the “noisy Non-GAAP addbacks” during the last several years, which should continue to be the case in most quarters in the future. Our full year revenue was a record $375.9 million (up 14.1%) while Adjusted Diluted EPS increased 62.4% from $1.86 per share in 2020 to $3.02 per share in 2021 (GAAP Diluted EPS of $1.81, up 68.6%), which like night follows day led to our share price more than doubling from $31.32 at year-end 2020 to $64.44 at year-end 2021. In other words, our 2021 performance during the continuing COVID-19 Pandemic was in perfect alignment with our annual theme of:
*CARRIAGE SERVICES 2021: ACCELERATING HIGH PERFORMANCE FLYWHEEL EFFECT!*
After we raised our Roughly Right Range of Intrinsic Value by $10 per share to $65 to $75 per share in our third quarter earnings release dated October 27, 2021, we continued to aggressively buy our shares into the end of the year. Since our senior notes refinancing on May 13, 2021, we have repurchased a little over 2.9 million shares (16.0% of total outstanding) for about $142.5 million or $49.01 per share, $26 per share or 34.7% below the $75 per share midpoint of our increased Intrinsic Value Per Share Roughly Right Range of $70 to $80 per share. So long as Mr. Market Rodney Dangerfield continues to significantly undervalue the ownership and future prospects of our company, we will continue to prioritize share repurchases within the Capital Allocation Framework of High Return On Invested Capital uses of our increasing Free Cash Flow.
As I have previously stated often externally and “at all times” internally, Carriage is defined by our unique Standards Operating Model and High Performance Culture Framework for operating and consolidating the highly fragmented funeral and cemetery industry. Our success as a consolidation platform is driven by a customized data-based language of High Performance Standards whose relevance and oversight for each funeral and cemetery business in our portfolio is provided by the “Best of the Best” Managing Partners who currently serve on our eleven-member Standards Council.
When executed to a high degree of “Standards Achievement” by most of our Managing Partners most of the time, our Funeral and Cemetery Standards deliver high and sustainable operating and financial performance over both the short term (one year) and long term (five years) while requiring continuous improvement to drive market share growth, as we always update our Rolling Four Quarter Performance Outlook each quarter and our Five Year Roughly Right Ranges Performance Scenario at the beginning of each year. Moreover, all our leaders in both our individual businesses and field and Houston Support Center roles are 100% aligned with one-year and five-year high performance financial and recognition incentives that also align perfectly with superior long term compounded returns for our shareholders.
In my 2016 Shareholder Letter titled *1991-2016: The Evolution of Our Learning Journey*, it took forty-four pages for me to cover the first twenty-five years of Carriage and the evolution of the idea of a Funeral Standards Operating Model beginning in August 2003. In my 2020 Shareholder Letter titled *A Tale of* *High Performance Transformation*, it took fifty-one pages for me to cover the amazing transformation of Carriage since I had to once again step back into the role of Chief Operating Officer in September 2018. This full year 2021 earnings release will also for the first time represent our 2021 Shareholder Letter, covering the remarkable *High Performance Transformation* in our cemetery portfolio, funeral portfolio, realignment of short and long term incentives with sustained high operating and financial performance standards, as well as transformation and cultural alignment of our Houston Support Center Departments and Teams from 2018 to 2021. I will begin by sharing the highlights of our 2021 year and record performance in all areas of our company.
The greatest strategic achievement of this past year was that I formally established on June 2, 2021 a succession plan format for the future Executive Leaders of Carriage when I am no longer here, although I have no plans or health reasons to not be here serving as Chairman and CEO over the next five to ten years of optimum value creation. On June 2, 2021 (extensive press release on their individual backgrounds and qualifications), I promoted Carlos Quezada to Executive Vice President and Chief Operating Officer, Steve Metzger to Executive Vice President and Chief Administrative Officer, and Ben Brink to Executive Vice President and Principal Financial Officer in addition to their other responsibilities and roles, and to membership in our new Strategic Vision and Principles Group (SVPG) chaired by me.
Based on his amazing achievements and contributions that Carlos has made to Carriage since joining our *Good To Great Journey* on June 26, 2020, I am very honored to announce that he has also been promoted to President and Chief Operating Officer effective today. I got the biggest promotion with these succession plan moves, as I can now allocate my time to its highest and best use, which I view as developing Carlos, Steve and Ben to be the future Executive Leaders of Carriage, as well as mentoring them on optimizing long term shareholder value creation through wise, savvy, flexible and highly disciplined Capital Allocation as covered so brilliantly in the 2012 book *The Outsiders* by Will Thorndike.
After co-founding Carriage at 48 years young on June 1, 1991, the company has finally evolved after more than thirty years into a *Being The Best* *Mission/Vision Company* in our industry. Yet only now do I believe that as an equity investment “*The Best Is Yet To Come*.” Accordingly, I will begin this 2021 Shareholder Letter with the analogy of Carriage on February 23, 2022 to that of London at the height of the British Empire in the timeframe 1775-1792, as depicted by Charles Dickens in his famous 1859 novel of historical fiction “*A Tale of Two Cities*,” whose vivid descriptions are shown below (as compared to Paris and France in the timeframe).
*1775-1792 *
*London* *2020-2030 *
*Carriage*
Best of Times
Age of Wisdom
Epoch of Belief
Season of Light
Spring of Hope
Everything Before Us
Center of Learning High Performance CSV
Center of Commerce CSV Good To Great Journey
British Empire Peak CSV Premium High Valuation CSV Built To Last FutureCarriage’s future is perfectly captured by the vivid descriptions of London, as our leaders are passionately committed to an *“Epoch of Belief in Themselves, Belief in Each Other *and* Belief in the Power of People Through Individual Initiative and Teamwork.” *Which together has created an *“UNBREAKABLE UNION OF BELIEF”* throughout Carriage that after thirty years of innovative business model and organizational development evolution, we have entered the *“Best of Times with Everything Before Us!”*
The balance of this 2021 Shareholder Letter has been a collaboration between myself, Carlos, Steve and Ben as the four members of SVPG, putting *TRUTH* to my earlier assertion that I got the biggest promotion. Much of the content in certain specific and highly relevant areas and reporting sections covered in this letter has never been shown publicly in such transparent detail, particularly as trends over five full years including Pre-COVID years, which is intended along with “takeaway insights” by SVPG members to provide a greater understanding of our past, present and likely future performance.
But more profoundly important and rare in this Shareholder Letter is that we will also present total consolidated performance ranges of what our *High Performance Transformation* is expected to look like over the next three years under a likely Capital Allocation Scenario, and for the first time what our shares could potentially be worth each year with continued outstanding execution of our three core models. The Table of Contents for this Shareholder Letter is shown below sequentially in sections covered by each SVPG member:
*TABLE OF CONTENTS*
*Mel Payne: * Page Numbers
1. Fourth Quarter and Full Year Comparative Performance Highlights; 4-5
2. Two Major Strategic Achievements in 2021/Public Deathcare Sector 2022 Versus 1990’s; 5-6
3. Three Year Roughly Right Ranges Performance Scenario with likely Capital Allocation Scenario; 6-9
4. Good To Great II Update and Conceptual Value Creation Performance Alignment; 10
5. Some Final Thoughts About Carriage and The Nature of Being A Public Company. 11-12
*Carlos Quezada: * Page Numbers
6. Five Quarter Trend Report Ending December 31, 2021; 12-14
7. Same Store Funeral Revenue Monthly Trends and Drivers Seven Months Ending January 2022; 15
8. Five Year Same Store Cemetery Detailed Trend Report and Summary Cemetery Acquisition Data; 16-17
9. Operating Organization Structure/Talent and Conceptual Vision Update. 18-21
*Steve Metzger:* Page Numbers
10. Update on Strategic Acquisition Activity Growth Outlook; 21
11. Five Year Same Store Funeral Performance/Incentive Compensation and Recognition Alignment Trends; 21-26
12. Support Center Organization Structure/Talent and Conceptual Vision Update. 26-27
*Ben Brink:* Page Numbers
13. Free Cash Flow and Leverage Update; 28-29
14. Capital Allocation Priority Update; 29-30
15. Trust Fund Performance/Impact on Financial Revenue and Earnings; 30-33
16. Finance Organization Structure/Talent And Conceptual Vision Update; 34
17. Updated and Increased Intrinsic Value Per Share Range; 35
18. Final Thoughts About “Getting To The Other Side”; 35
19. 2021 One Year *Being The Best Pinnacle*/Five Year *Good To Great* Winners. 36-38
*
*
*F**OURTH QUARTER AND FULL YEAR COMPARATIVE PERFORMANCE HIGHLIGHTS*
*Fourth Quarter 2021 Comparative Performance Highlights*
· Total Revenue^(1) of $95.9 million, an increase of $5.8 million or 6.5%;· GAAP Funeral Operating Income of $23.2 million, an increase of $3.7 million or 19.1%;
· GAAP Funeral Operating Income Margin of 33.3%, an increase of 420 basis points;
· GAAP Cemetery Operating Income of $9.9 million, an increase of $1.5 million or 17.5%;
· GAAP Cemetery Operating Income Margin of 37.5%, an increase of 130 basis points;
· GAAP Net Income of $13.3 million, an increase of $5.0 million or 59.6%;
· GAAP Net Income Margin of 13.9%, an increase of 460 basis points;
· GAAP Diluted EPS of $0.77, an increase of $0.31 or 67.4%;
· GAAP Net Cash Provided by Operating Activities of $14.5 million, a decrease of 3.6%; and
· GAAP Net Cash Provided by Operating Activities as a percentage of Total Revenue of 15.2%, a decrease of 160 basis points.· Same Store Funeral Revenue of $55.3 million, an increase of $2.7 million or 5.1%;
· Acquisition Funeral Revenue of $10.0 million, an increase of $0.6 million or 6.8%;
· Same Store Cemetery Revenue of $16.3 million, an increase of $1.5 million or 9.9%;
· Acquisition Cemetery Revenue of $6.3 million, an increase of $0.8 million or 14.6%;
· Financial Revenue of $6.2 million, an increase of $0.9 million or 17.1%;· Total Field EBITDA of $44.2 million, an increase of $2.9 million or 6.9%;
· Total Field EBITDA Margin of 46.1%, an increase of 20 basis points;
· Adjusted Consolidated EBITDA of $30.4 million, an increase of $2.1 million or 7.4%;
· Adjusted Consolidated EBITDA Margin of 31.7%, an increase of 30 basis points;· Adjusted Diluted EPS of $0.78, an increase of $0.21 or 36.8%;
· Adjusted Free Cash Flow of $10.3 million, a decrease of $1.6 million or 13.2%; and
· Adjusted Free Cash Flow Margin of 10.7%, a decrease of 250 basis points.*Full Year 2021 Comparative Performance Highlights*
· Total Revenue^(1) of $375.9 million, an increase of $46.4 million or 14.1%;· GAAP Funeral Operating Income of $88.6 million, an increase of $31.0 million or 53.7%;
· GAAP Funeral Operating Income Margin of 32.8%, an increase of 970 basis points;
· GAAP Cemetery Operating Income of $40.4 million, an increase of $13.5 million or 50.2%;
· GAAP Cemetery Operating Income Margin of 38.1%, an increase of 470 basis points;
· GAAP Net Income of $33.2 million, an increase of $17.1 million or 106.1%;
· GAAP Net Income Margin of 8.8%, an increase of 390 basis points;
· GAAP Diluted EPS of $1.81, an increase of $0.92 or 103.4%;
· GAAP Net Cash Provided by Operating Activities of $84.2 million, an increase of 1.6%; and
· GAAP Net Cash Provided by Operating Activities as a percentage of Total Revenue of 22.4%, a decrease of 280 basis points.· Same Store Funeral Contracts of 41,307, an increase of 3,505 or 9.3%;
· Same Store Funeral Revenue of $215.0 million, an increase of $23.3 million or 12.1%;
· Same Store Funeral Field EBITDA of $93.0 million, an increase of $13.2 million or 16.5%;
· Same Store Funeral Field EBITDA Margin of 43.3%, an increase of 170 basis points;
· Acquisition Funeral Revenue of $38.0 million, an increase of $2.6 million or 7.2%;
· Acquisition Funeral Field EBITDA of $16.0 million, an increase of $2.4 million or 17.5%;
· Acquisition Funeral Field EBITDA Margin of 42.1%, an increase of 370 basis points;· Same Store Cemetery Revenue of $64.2 million, an increase of $12.4 million or 24.0%;
· Same Store Cemetery Field EBITDA of $27.0 million, an increase of $7.5 million or 38.5%;
· Same Store Cemetery Field EBITDA Margin of 42.1%, an increase of 440 basis points;
· Acquisition Cemetery Revenue of $27.8 million, an increase of $10.2 million or 58.3%;
· Acquisition Cemetery Field EBITDA of $15.5 million, an increase of $8.4 million or 117.8%;
· Acquisition Cemetery Field EBITDA Margin of 55.8%, an increase of 1,530 basis points;· Financial Revenue of $22.9 million, an increase of $3.0 million or 15.2%;
· Financial Field EBITDA of $21.4 million, an increase of $2.8 million or 15.1%;
· Financial Field EBITDA Margin of 93.2%, a decrease of 10 basis points;· Total Field EBITDA of $174.6 million, an increase of $32.7 million or 23.0%;
· Total Field EBITDA Margin of 46.5%, an increase of 340 basis points;
· Adjusted Consolidated EBITDA of $126.2 million, an increase of $21.9 million or 21.0%;
· Adjusted Consolidated EBITDA Margin of 33.6%, an increase of 200 basis points;· Adjusted Diluted EPS of $3.02, an increase of $1.16 or 62.4%;
· Adjusted Free Cash Flow of $75.7 million, an increase of $5.7 million or 8.2%;
· Adjusted Free Cash Flow Margin of 20.1%, a decrease of 110 basis points;
· Adjusted Proforma Free Cash Flow of $79.7 million, an increase of $9.7 million or 13.9%;
· Adjusted Proforma Free Cash Flow Margin of 21.2%, the same as 2020; and· Total Debt Outstanding to Adjusted Consolidated EBITDA Ratio of 4.5 times at 12/31/21, 4.38 times at February 23, 2022.^(1) Total Revenue is comprised of Same Store Funeral Revenue, Acquisition Funeral Revenue, Same Store Cemetery Revenue, Acquisition Cemetery Revenue, Divested Revenue, Ancillary Revenue and Financial Revenue. 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.
After navigating through the uncertainty, fear and extraordinary challenges of the first year of the COVID-19 Pandemic in 2020 to a record performance, our Operating and Field Support Teams together with our Managing Partners, Sales Managers and their *Being The Best* Employee Teams, supported as always by our Houston Support Center Teams “come hell or high water,” adapted and thrived through subsequent COVID Variants and delivered a second record performance during 2021 in all five Field Reporting Segments. Our revenue and profit momentum from our third quarter of 2021 carried through the end of the year and actually accelerated in December 2021 and into January 2022 against what we expected would be almost impossibly high performance comparisons to December 2020 and January 2021, which will be covered in detail later in this release.
*TWO MAJOR STRATEGIC ACHIEVEMENTS/ PUBLIC DEATHCARE SECTOR 2022 VERSUS 1990’S *
There were two major strategic achievements in 2021 that position Carriage for continued, even extraordinary success over the next seven years as a superior operating, consolidation and especially shareholder value creation platform in the highly fragmented funeral and cemetery industry. The first major strategic achievement was the formation of SVPG on June 2, 2021 as my Founder’s Vision succession plan. The second major strategic achievement was completion of a refinancing on May 13, 2021 of $400 million of 6.625% eight-year senior notes due 2026 with a new $400 million of 4.25% eight-year senior notes due May 2029, which along with our amended and restated $150 million five-year bank revolving credit facility provides Carriage with a long term, low rate capital structure that was the last piece of a complete transformation of Carriage into a *Free Cash Flow Machine*.
Carriage now has the Free Cash Flow sustainable earnings power, forecast to be about $82 million to $86 million in 2022, to self-finance a meaningful highly selective acquisition growth strategy without becoming over-leveraged, as we have proven since the beginning of 2020 that we can deleverage our balance sheet rapidly even in adverse environments.
I know of no other sector (can’t think of any but curious to know a sector and company name) where over the last twenty years the number of domestic public deathcare consolidation companies have shrunk from five to two (SCI and CSV), and both of us have materially shrunk our outstanding share count (SCI by over 50%, CSV by 41%) while growing steadily and sometimes in spurts financed mostly by Free Cash Flow (SCI consolidated Alderwoods in 2006, Keystone in 2010 and Stewart Enterprises in 2013; CSV made four large strategic, transformative acquisitions at the end of 2019). Our credit profiles have substantially improved throughout this timeframe and are second to none in the high yield category (Junk label is a Joke!), as the last time an investor lost money on deathcare debt because of a payment default was when Loewen Group out of Canada filed for bankruptcy in June 1999.
Both SCI and Carriage have become excellent Free Cash Flow operators and consolidators over the last twenty years at a time when all those revenue elements not under our control such as death rates, cremation/burial mix changes (cremation market share easier to take from competition), customer value perception of funeral ritual and of preplanning funeral and cemetery details, value perception of cremations with personalized services, etc., have switched from being secular revenue winds in our face and turned decidedly to revenue trends that are in our favor. Consequently, the outlook for long-term organic revenue growth for Carriage both in our funeral and cemetery portfolio has never been better or higher.
When Stewart Enterprises was acquired by SCI for $1.17 billion ($13.25 per share) plus assumption of debt in 2013, it had about 88 million fully diluted shares outstanding, $526.9 million in Revenue and $115.5 million in Adjusted Consolidated EBITDA equal to an Adjusted Consolidated EBITDA Margin of 21.9%. After repurchasing approximately 2.9 million shares in 2021, Carriage currently has 16.5 million fully diluted GAAP shares outstanding, Total Revenue of about $376 million in 2021, Adjusted Consolidated EBITDA of $126.2 million (Adjusted Consolidated EBITDA Margin of 33.6%), and Proforma Free Cash Flow of $79.7 million. Our Proforma Free Cash Flow Margin of 21.2% in 2021 was almost equal to the Adjusted Consolidated EBITDA Margin of Stewart Enterprises when it sold to SCI in 2013. Now that’s the definition of a *CSV Free Cash Flow Machine!*
During the 1990’s, all five domestic deathcare consolidation companies needed (lots of) external bank debt and secondary equity offerings (No FCF For Nobody At No Time!) to execute an aggressive growth by acquisition consolidation mania that crashed in early 1999 (No Capital For Nobody At No Time!). Carriage now produces each year from Free Cash Flow the equivalent of an $80 million plus secondary equity offering, the “Cash Capital Proceeds” of which are allocated to optimize Intrinsic Value Per Share. Whereas the last secondary common equity offering in our domestic sector was by Stewart Enterprises in February 1999 when they issued $219.1 million at about $16.75 per share (13.6 million shares) to save the company from bankruptcy. In other words, Stewart Enterprises issued almost as many shares in one offering for desperation defense than we currently have outstanding!
After the milestone high performance achievements of the last three years, Carriage for the first time in our 30 year history is in a *“Value Creation Sweetspot”* with an accelerating offense from Free Cash Flow and a Capital Allocation Strategy that produces balanced and highly profitable revenue growth over a base of fewer common shares outstanding, which in turn should create higher compounded rates of growth in Intrinsic Value Per Share for many years into the future. Now that’s the definition of a *CSV High Performance Value Creation Transformation!*
*THREE YEAR ROUGHLY RIGHT RANGES PERFORMANCE SCENARIO 2020 - 2022 COMPARED TO 2022 - 2024*
After partially turning around performance trends in our funeral portfolio during 2019, we made four large strategic acquisitions at the end of 2019 and beginning of 2020, three of which were large funeral/cemetery combination businesses. In our year-end 2019 earnings release on February 19, 2020, I made the following statements shown below:
“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.
Shown below is an expanded Milestone Three Year Roughly Right Scenario for 2020 to 2022 demonstrating the shareholder value creation opportunity.”
*INITIAL THREE YEAR ROUGHLY RIGHT RANGES SCENARIO DATED FEBRUARY 19, 2020 (MILLIONS)**Performance Outlook Scenario* *Years Ending December 31*
*(Actual Performance in Parentheses)* *2022 Performance Range* *2019(A)* *2020(A)* *2021(A)* *2022 - 2/19/20* *2022 - 2/23/22*
Total Revenue $274.1 $315 - $319 ($329.4) $320 - $324 ($375.9) $328 - $332 $380 - $390
Total Field EBITDA $109.8 $127 - $131 ($141.9) $133 - $137 ($174.6) $139 - $144 $178 - $184
Total Field EBITDA Margin 40.0% 40% - 41% (43.1%) 41% - 42% (46.5%) 42% - 43% 46% - 47%
Adj. Consol. EBITDA $76.6 $92 - $96 ($104.3) $97 - $101 ($126.2) $102 - $106 $128 - $133
Adj. Consol. EBITDA Margin 27.9% 29% - 30% (31.6%) 30% - 31% (33.6%) 31% - 32% 33.5% - 34.5%
Adjusted Diluted EPS $1.25 $1.55 - $1.65 ($1.86) $1.92 - $2.10 ($3.02) $2.25 - $2.40 $3.55 - $3.65
Shares Outstanding 18.0 18.1 18.3 - 16.2
Adjusted Free Cash Flow $38.8 $42 - $45 ($70.0) $53 - $56 ($75.7) $60 - $63 $82 - $86
Total Debt Outstanding $534.0^(1) $480 - $490 ($461.1) $440 - $450 ($565.4) $390 - $440 $560 - $570
Total Debt to EBITDA Multiple 7.0^(^2^) 5.0 - 5.2 (4.4) 4.3 - 4.5 (4.5) 3.8 - 4.0 4.1 - 4.4
^(1) January 3, 2020 acquisition of Oakmont Memorial Park & Mortuary and peak debt.
^(^2^) Does not include Proforma EBITDA for acquisitions.
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.
Shown below is our new Three Year Roughly Right Ranges Performance Scenario dated February 23, 2022 (new 2022 shown in table above as comparison to old) with a likely Capital Allocation Scenario together with potential Share Price Ranges for each year using three different valuation methodologies. Because our company is already performing at such a high level in every “meter moving performance metric,” and we have already repurchased over 16% of CSV ownership since May 13, 2021, we have biased this likely Base Case Capital Allocation Strategy toward selective acquisitions in the second half of 2022 and thereafter in 2023 and 2024, as outlined below:*FREE CASH FLOW CAPITAL ALLOCATION BY CATEGORY BY YEAR*
*Category Percentage Free Cash Flow (%)* *2022* *2023* *2024*
Free Cash Flow Range (Millions) $82 - $86 $86 - $90 $94 - $100
Growth Capex
13% 15% 15%
• Funeral 3% 3% 3%
• Cemetery 10% 12% 12%
Acquisition 38% 76% 76%
• Funeral 23% 46% 46%
• Cemetery 15% 30% 30%
Share Repurchase 40% - -
Dividends 9% 9% 9%
Debt Repayment - - -
Total % Free Cash Flow 100% 100% 100%Shown below are tables reflecting our new Three Year Roughly Right Ranges Performance Scenario as of February 23, 2022, with our likely Capital Allocation Scenario by year from the prior page and share price ranges for each year using reasonable benchmark valuation multiples for our industry.
*THREE YEAR ROUGHLY RIGHT RANGES PERFORMANCE SCENARIO 2022 THROUGH 2024*
*Performance Outlook Ranges* *Actual Performance* *Three Year Scenario*
Yrs. Ending 12/31 (Millions) *2019A* *2020A* *2021A* *2022* *2023* *2024* *CAGR*
Total Revenue $274.1 $329.4 $375.9 $380 - $390 $410 - $420 $450 - $460 10.7%
Total Field EBITDA $109.8 $141.9 $174.6 $178 - $184 $190 - $200 $210 - $220 14.4%
Total Field EBITDA Margin 40.0% 43.1% 46.5% 46% - 47% 46.5% - 47.5% 47% - 48% 3.5%
Adj. Consol. EBITDA $76.6 $104.3 $126.2 $128 - $133 $140 - $145 $155 - $160 15.5%
Adj. Consol. EBITDA Margin 27.9% 31.6% 33.6% 33.5% - 34.5% 33.5% - 34.5% 34% - 35% 4.3%
Adjusted Diluted EPS $1.25 $1.86 $3.02 $3.55 - $3.65 $3.90 - $4.00 $4.40 - $4.50 28.9%
Diluted Shares Outstanding 18.0 18.1 18.3 16.2 16.5 16.7 (1.5%)
Adjusted Free Cash Flow $38.8 $70.0 $75.7 $82 - $86 $86 - $90 $94 - $100 20.1%
Adj. Free Cash Flow Margin 14.2% 21.2% 20.1% 21.0% - 22.0% 21.0% - 22.0% 21.0% - 22.0% 8.7%
Total Debt Outstanding $534.0^(1) $461.1 $565.4 $560 - $570 $560 - $580 $570 - $590 1.7%
Total Debt to EBITDA Ratio 7.0^(^2^) 4.4 4.5 4.1 - 4.4 3.8 - 4.2 3.8 - 4.2 (10.6%)
^(1) January 3, 2020 acquisition of Oakmont Memorial Park & Mortuary and peak debt.
^(2) Does not include Proforma EBITDA for acquisitions.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.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.
*SHARE PRICE VALUATION METHODOLOGIES – POTENTIAL SHARE PRICE RANGES*
*5 Year Enterprise*
*Valuation Methodologies* *Potential Performance at*
*Valuation Multiples * *Three Year Scenario* *2020**
* *2021* *2022* *2023* *2024* *CAGR*
EV / EBITDA Multiple 11 $38.09 $44.65 $53.45 $61.92 $71.04 16.9%
EV / EBITDA Multiple 12 $43.88 $51.54 $61.46 $70.66 $80.54 16.4%
EV / EBITDA Multiple 13 $49.67 $58.43 $69.47 $79.40 $90.05 16.0%
EV / EBITDA Multiple 14 $55.47 $65.32 $77.48 $88.13 $99.55 15.7%
EV / EBITDA Multiple 15 $61.26 $72.20 $85.49 $96.87 $109.05 15.5%
*5 Year P/E Valuation Matrix* *Potential Performance at*
*Valuation Multiples* *Three Year Scenario* *2020**
* *2021**
* *2022* *2023* *2024* *CAGR*
P/E Multiple 15 $27.59 $45.12 $53.75 $59.10 $66.63 24.7%
P/E Multiple 20 $36.79 $60.17 $71.66 $78.81 $88.84 24.7%
P/E Multiple 25 $45.99 $75.21 $89.58 $98.51 $111.06 24.7%
*5 Year FCF Valuation Matrix* *Potential Performance at*
*Valuation Multiples* *Three Year Scenario* *2020**
* *2021**
* *2022* *2023* *2024* *CAGR*
Free Cash Flow Equity Yield 8 % $48.61 $51.41 $66.86
$67.29
$74.88 11.4%
Free Cash Flow Equity Yield 7 % $55.56 $58.75 $76.42 $76.91
$85.58 11.4%
Free Cash Flow Equity Yield 6 % $64.81 $68.55 $89.15
$89.72 $99.84 11.4%
Free Cash Flow Equity Yield 5 % $77.78 $82.26 $106.98 $107.67 $119.81 11.4%
*Actual Share Price Range* *Actual Share Price Range* *Three Year Scenario*
Carriage Services (CSV) N/A $13.80-$31.40 $30.97-$65.91 *?* *?* *?* I am truly amazed at the wide spread of 52-week high and low common share prices each year for most public companies, which is often in a range of 20% - 40% and frequently much more each year, often when nothing material has changed fundamentally in the company’s performance or outlook. This phenomenon is apparent in the CSV share price potential ranges shown on the previous page for 2020 and 2021 using actual performance metrics and various degrees of valuation multiples each year. Our share price had wild swings in both 2020 (way, way down in the COVID market crash, then way up to above $30 per share for the first time) and 2021 (up 105.7% mostly in the last quarter). Yet our share price only got close to our opinion of the Roughly Right Range of Intrinsic Value Per Share at the time ($65 to $75) late in 2021 before declining over 20% to under $50 per share in the highly volatile downward market since the beginning of 2022.
Which is why in our May 13, 2021 press release on our senior notes refinancing at a rate of 4.25%, I referred to our bond pricing as Tom Brady Pricing whereas our equity pricing was akin to Rodney Dangerfield Pricing, both then and now. Our FCF Equity Yield was 10.8% then, is 9.8% now using 2021 Proforma Free Cash Flow of $79.7 million and 16.5 million fully diluted shares, and will be about 10.4% at today’s share price of $49 using the $84 million midpoint of the 2022 Roughly Right Range of Free Cash Flow.
As the tables reflect, our share price potential upside over the next three years is huge with the possibility that we could double our current price by the end of 2024 as we continue to execute at a very high level of operating and financial performance, and Mr. Market begins to price our high performance and future prospects into today’s share price through an expansion of our (lowest in class) valuation multiples. As the saying goes, “Beauty (and valuation multiples) are in the eyes of the beholder!”
Of course we cannot predict what external factors might impact domestic and international equity and debt markets including valuation multiples given the continuing economic uncertainty relating to the COVID-19 Pandemic, rapidly rising inflation and interest rates, geopolitical minefields (Russia and Ukraine, China and Taiwan, etc.) that seem to be popping up across the world, new Black Swan Events (Don’t Look Up!), etc. But speaking as a 10% owner of Carriage with my wife and two adult children, CSV is looking downright “Gorgeous!”
However, if Mr. Market assigns a substantially discounted price to our opinion of Intrinsic Value Per Share relative to sector benchmark peers for external reasons that aren’t linked to and therefore don’t materially impact the upward trend and sustainability of the Roughly Right Ranges of Performance Metrics in our Three Year Scenario through 2024, then we will simply increase the amount of Capital Allocation for share repurchases, knowing that Mr. Market Rodney Dangerfield is back on the job offering us a deal to increase our ownership in CSV on the cheap!
The last three years of *Transformative High Performance* at Carriage have been absolutely “*PROOF OF CONCEPT*” years for the counterintuitive ideas and concepts that we have been evolving since 2003 centered around “Radical Decentralization and Partnership” of how best to operate and consolidate a highly fragmented industry. We have a sense of pride and achievement that our company is positioned for future success like never before, anchored heavily by experience and learning from mistakes. But especially the wisdom that *Being The Best* and staying that way requires continuous improvement in the face of unrelenting change, together with necessary and frequent recalibration of High Performance Standards and Leadership on a *Good To Great Journey* that never ends.
*GOOD TO GREAT II SHAREHOLDER VALUE CREATION INCENTIVE PLAN*
I had no superior “future performance predictive powers” when we presented our first Three Year Roughly Right Ranges Performance Scenario on February 19, 2020. Yet I knew when our shares plummeted to as low as $13.54 on April 16, 2020 during the “bottom quickly fell out” COVID market crash that “Freaked Out Mr. Market” had likely served up an opportunity of a lifetime for all of our leaders who were critical to executing our plan of transformation in 2020, 2021 and 2022, as well as thereafter.
So I began to play around with various “back of the envelope” compound share price returns over a full five years ending December 31, 2024, and settled on five different compound annual growth rates (CAGR) using $14.38 as the base price, starting with 20% and increasing in 5% increments to 40%. Our shares had never reached $30 in our twenty-four year history as a public company, so starting with a 20% CAGR for five years got our price to $35.78, an easy “Minimum Standard” below which “Nobody Got Nothing!” Whereas a 40% CAGR would get our share price to $77.34 and would mean we would have to get a lot better as a company (especially me!) in all areas of the company over the five-year timeframe and be consistent and disciplined at doing “smart stuff” while avoiding like the plague (or COVID) doing “stupid stuff!” Achieving the 40% CAGR Tier over the second five year timeframe, after achieving a CSV share price CAGR of 38.6% ($5.60 to $28.64) in the first five year *Good To Great Journey* timeframe from 2012 through 2016, would totally align with the name of the incentive program and be a more than acceptable *Being The Best* */ Good To Great Journey Standard*.
Needless to say, the forty-eight *Good To Great II* participating leaders who have now already vested in the 30% CAGR Tier at $53.39 after only two years (20%, 25% and 30% Tiers *ALL* vested during 2021!) are focused like never before on doing only “Shareholder Value Creation Smart Stuff” over the next three years, and at some point before year-end 2024 moving past the 40% Top Tier price of $77.34. Even better, many if not most are wondering about how to retain as many of their performance shares as possible upon receipt at the beginning of 2025 (taxes and other “Marshmallow Test” reasons!), and then riding them as long-term owners to an even loftier *Good To Great Journey Valuation Destination* in the years ahead.
Such an “out of the box” long term shareholder value creation returns plan in perfect alignment with the many “meter moving” leaders of Carriage would not have been possible at any prior point in the company’s history. All the pieces of the value creation platform puzzle had not yet been put in place, especially the most challenging piece of getting the “*First Who, Then What*” Leadership Concept advanced to have all the right people in the right seats at the right time on the *Good To Great Journey Bus*. Yet very few equity investors noticed or took *Good To Great II* seriously at the time we announced this long-term alignment incentive program in our 2020 second quarter release dated July 28, 2020, or even thereafter until we began to use a five-year schematic of *Good To Great II* as an early page in our Investor Presentation.
*SOME FINAL THOUGHTS ABOUT CARRIAGE AND THE NATURE OF BEING A PUBLIC COMPANY*
We have greatly appreciated the new and outstanding equity analyst coverage this past two years from top regional equity sell side firms as well as continued outstanding equity coverage from longtime supporters who have introduced our company and its bright future prospects to many new institutional investors. Our commitment to our equity analysts is to make them look smart if not timely brilliant, and to investors who became or will become long term share owners of our company to do our best as fiduciaries of your capital so that you never have any regrets.
While your equity investment in CSV might or might not have wide price swings in 2022 and future years, we are confident that the value of your investment will trend up substantially over time. Mr. Market can occasionally have irrational or contradictory traits during (sometimes prolonged) bouts of time when the price of a company’s common shares becomes “unmoored” from the reality of the company’s current fundamentals and future prospects. I covered the famous allegory of Mr. Market (and its application to Carriage), created and first introduced by Benjamin Graham in his 1949 book, *The Intelligent Investor*, in our May 13, 2021 press release on our bond refinancing. I also referenced its most famous practitioner, Warren Buffett, which reminds me of a line relevant to Carriage now in one of Warren’s Shareholder Letters many years ago on “Some Thoughts About Investing: Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard.”
Warren closed out his “Some Thoughts About Investing” with this final thought, “It’s vital, however, that we recognize the perimeter of our ‘Circle of Competence’ and stay well inside of it. Even then we will make some mistakes both with stocks and businesses. But they will not be the disasters that occur, for example, when a long-rising market induces purchases that are based on anticipated price behavior and a desire to be where the action is.”
I sensed toward the end of last year after our record third quarter earnings release on October 27^th (CSV closing price of $43.96 per share), after which our shares spiked 46.6% into year-end to close at $64.44, that Carriage’s common shares had become one place “where the anticipated price behavior action is!” As a long time student of stock markets, companies, the price/volume dynamics of many company specific stock charts, etc., but especially of human nature and psychology-based tendencies and behaviors specifically related to individual company stocks and markets, I saw all the signs:
1. Carriage had achieved #1 Ranking in Investor’s Business Daily (“IBD”) Industry Group Sector of “Funeral Services and Related” with the highest possible Composite Rating of 99;
2. IBD Group Sector “Funeral Services and Related” had moved up to #6 out of 197 Industry Group Sectors based on the combined “price behavior” of those companies in our sector relative to the other 196 sectors;
3. A personal zoom interview we had with an IBD journalist about our recent sector outperformance and the temporary or permanent impact of COVID on our industry after the “Funeral Services and Related” Group Sector had moved to #6 from #66 in only six weeks;
4. Forbes “promoted” Carriage to 50^th in their annual rating of the Top 100 Small Companies in America in 2021 from 97^th in 2020 based on relative stock “price behavior” performance;
5. Finally and most confirming that CSV had become a strong candidate for the winner of the “Cinderella Ball Price Behavior Beauty Contest,” I began to be sent articles touting Carriage as a top “anticipated price behavior” stock pick (Seeking Alpha, Zack’s Investment Research, Motley Fool, various magazine articles, investment newsletters, etc.), not from investment professionals but by Managing Partner Standards Council Members, other Carriage leaders, Board members and even my wonderful brother and his equally wonderful wife!!The 2021 year-end spike in CSV “price behavior” was briefly exciting for those of us in Carriage, primarily because it represented recognition from those outside of Carriage that our noble work and unique high performance ideas and concepts for our industry had begun to have high equity value to investors as well. Yet we have no goal or desire to be a “fashion of the moment” momentum stock or company at any time now or in the future. We only have a passionate drive to get continually better so that we always fundamentally earn more than the price that others place on our ownership.
As a *Being The Best* *High Performance Culture Team of Teams*, we commit to all our shareholders, bond holders, investment analysts, banks, suppliers and Board Members, but especially to our leaders, employees, client families and communities that our funeral homes and cemeteries are honored to serve, to ignore and not be distracted by the irrational behavior and noise related to Mr. Market whenever and for whatever reason(s) unrelated to Carriage, including any impact on the “price behavior” of our shares! And to always be laser focused on having the best players on all of our teams prepared to make game winning plays on their respective playing fields when it matters most to those experiencing the profound challenges of losing a loved one on the journey of life and death,” concluded Mr. Payne.
*FIVE QUARTER TREND REPORT ENDING DECEMBER 31, 2021*
Carlos Quezada, President and Chief Operating Officer, stated, “We report our performance results publicly using the same highly transparent Non-GAAP “Trend Reports” that we use internally and which have been explained in previous shareholder letters, including Five Year and Five Quarter Trend Reports that reflect long and short term trends in our core operating, financial and overhead sectors over time as shown on the following pages.
*FIVE QUARTER OPERATING AND FINANCIAL TREND REPORT HIGHLIGHTS*
*(000’s except for volume, averages & margins)* *4*^*TH** QTR 2020* *1*^*ST** QTR 2021* *2*^*ND** QTR 2021* *3*^*RD** QTR 2021* *4*^*TH** QTR 2021*
Funeral Same Store Contracts 10,396 11,303 9,259 10,848 10,716
Average Revenue Per Contract ^(1) $5,226 $5,218 $5,294 $5,273 $5,346
Funeral Same Store Burial Contracts 3,914 4,202 3,304 3,705 3,808
Funeral Same Store Burial Rate 37.6% 37.2% 35.7% 34.2% 35.5%
Average Revenue Per Burial Contract $9,062 $9,053 $9,306 $9,489 $9,429
Funeral Same Store Cremation Contracts 5,776 6,389 5,236 6,203 6,057
Funeral Same Store Cremation Rate 55.6% 56.5% 56.6% 57.2% 56.5%
Average Revenue Per Cremation Contract $3,281 $3,325 $3,466 $3,482 $3,498
Funeral Same Store Revenue $52,642 $56,829 $47,397 $55,502 $55,311
Funeral Same Store Field EBITDA $23,172 $25,829 $18,666 $24,961 $23,569
Funeral Same Store Field EBITDA Margin 44.0% 45.5% 39.4% 45.0% 42.6%
Funeral Acquisition Revenue $9,348 $10,139 $8,557 $9,354 $9,981
Funeral Acquisition Field EBITDA $3,684 $4,467 $3,261 $3,974 $4,315
Funeral Acquisition Field EBITDA Margin 39.4% 44.1% 38.1% 42.5% 43.2%
Cemetery Same Store Preneed Property Contracts Sold 1,033 1,161 1,211 1,280 1,120
Cemetery Same Store Preneed Sales Revenue $9,231 $9,718 $11,445 $11,366 $10,926
Cemetery Same Store Revenue $14,815 $14,635 $16,906 $16,342 $16,288
Cemetery Same Store Field EBITDA $6,499 $5,704 $7,907 $6,465 $6,939
Cemetery Same Store Field EBITDA Margin 43.9% 39.0% 46.8% 39.6% 42.6%
Cemetery Acquisition Preneed Property Contracts Sold 345 338 475 294 361
Cemetery Acquisition Preneed Sales Revenue $5,394 $5,089 $6,839 $5,148 $5,045
Cemetery Acquisition Revenue $5,509 $6,980 $8,175 $6,362 $6,312
Cemetery Acquisition Field EBITDA $2,531 $4,102 $4,737 $3,547 $3,140
Cemetery Acquisition Field EBITDA Margin 45.9% 58.8% 57.9% 55.8% 49.7%
Total Financial Revenue $5,265 $5,706 $5,405 $5,639 $6,167
Total Financial Field EBITDA $4,926 $5,305 $5,058 $5,225 $5,777
Total Financial Field EBITDA Margin 93.6% 93.0% 93.6% 92.7% 93.7%
Total Revenue $90,088 $96,637 $88,277 $95,041 $95,931
Total Field EBITDA $41,318 $45,787 $40,014 $44,651 $44,189
Total Field EBITDA Margin 45.9% 47.4% 45.3% 47.0% 46.1%
Adjusted Consolidated EBITDA $28,300 $34,657 $28,720 $32,389 $30,395
Adjusted Consolidated EBITDA Margin 31.4% 35.9% 32.5% 34.1% 31.7%
Adjusted Diluted EPS $0.57 $0.81 $0.64 $0.82 $0.78
Adjusted Free Cash Flow $11,870 $27,140 $12,313 $25,922 $10,308
Adjusted Free Cash Flow Margin 13.2% 28.1% 13.9% 27.3% 10.7%
GAAP Net Income (Loss) $8,365 $12,933 $(6,167) $13,046 $13,347
GAAP Net Income (Loss) Margin 9.3% 13.4% (7.0)% 13.7% 13.9%
GAAP Diluted (Loss) EPS $0.46 $0.71 $(0.33) $0.71 $0.77
^(1) Excludes Preneed Funeral interest earnings reflected in Total Financial Revenue.
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.
As shown above, we have had consistent *High Performance* in each of the five revenue segments over the last five quarters with a five quarter average of $93.2 million and the last two quarters of 2021 above $95 million. Our all-time quarterly revenue high was the first quarter of 2021 at $96.6 million with January being the main driver for this result due to a COVID-19 spike centered in our large California portfolio. Our second quarter revenue of $88.3 million was the lowest revenue quarter, but we were still able to produce a Field EBITDA Margin of 45.3%, also the lowest of the last five quarters. The consistency in quarterly revenue from every segment also converted into consistency in high Total Field EBITDA Margins ranging from 45.3% to 47.4% over the five quarters. The high level of consistency in Total Field EBITDA Margins is reflective of the cash earning power in our five reporting segments that has emerged since the beginning of our portfolio performance transformation in 2018, as previously, the all-time high Field EBITDA Margin for a full year was 42.1% in 2016.
Our positive outlook is based on what we know is happening at Carriage. While other companies inside and outside our sector are concerned about the post-COVID effect (pull-forward), we cannot predict what the new normalized death rate will be post-COVID, as COVID could become endemic and there is too much noise and unreliable information for us to even try to predict precisely what the impact will be in the future. Instead, we think long-term and focus on what we can control and what we do best, pursuing our *Being the Best Mission and Vision.* Even under a pandemic environment with restriction mandates, social distance, remote work, overworked heroes and any other uncertainty or speculation about the future (no crystal ball at CSV), we will always strive to be the best we can be, a byproduct of which is that we say yes when other competitors say no. We say we can when others say we can’t.
The resiliency, creativity, innovation, and passion for service excellence of our amazing Managing Partners and their “best in class” teams of employees have built brand loyalty and top of mind reputation in their respective communities. Most importantly, our customers have responded by making huge deposits in the *Goodwill Value Creation* bank of our most critical asset: the *TRUST* of the families we serve. Moreover, whenever and whatever the normalized death rate percentage turns out to be, our “Best of the Best” team of teams stand ready to capture the biggest share of the local death rate across our portfolio of businesses.
*SAME STORE FUNERAL REVENUE MONTHLY TRENDS AND DRIVERS SEVEN MONTHS ENDING JANUARY 2022*
*(000’s except for volume, averages)* *2021/2020* * * *2022/2021*
*Same Store Funeral* *JUL* *AUG* *SEP* *OCT* *NOV* *DEC* * * *JAN *
Contracts (volume) 2021 (January 2022) 3,081 3,647 3,936 3,662 3,278 3,574 4,128
Contracts (volume) 2020 (January 2021) 3,163 3,210 3,069 3,068 3,072 4,061 4,201
*Volume Variance* *(82* *)* *437 * *867 * *594 * *206 * *(487* *)* *(73* *)*
Average Revenue Per Contract 2021 (January 2022)^(1) $5,294 $5,101 $5,231 $5,190 $5,312 $5,287 $5,290
Average Revenue Per Contract 2020 (January 2021)^(1) $4,927 $5,148 $5,135 $5,268 $5,157 $5,082 $5,171
*Average Revenue Per Contract Variance* *$**367 * *($**47* *)* *$**96 * *($**78* *)* *$**155 * *$**205 * *$**119 *
Operating Revenue 2021 (January 2022)^(1) $16,313 $18,603 $20,588 $19,005 $17,413 $18,894 $21,837
Operating Revenue 2020 (January 2021)^(1) $15,585 $16,524 $15,758 $16,162 $15,842 $20,638 $21,722
*Operating Revenue Variance* *$**728 * *$**2,079 * *$**4,830 * *$**2,843 * *$**1,571 * *($**1,744* *)* *$**115 *
Net Revenue Volume Variance ($404 ) $2,249 $4,452 $3,129 $1,063 ($2,475 ) ($377 )
Net Revenue Average Variance $1,132 ($170 ) $378 ($286 ) $508 $731 $492
*Net Revenue Variance * *$**728 * *$**2,079 * *$**4,830 * *$**2,843 * *$**1,571 * *($**1,744* *)* *$**115 *
^(1) Excludes Preneed Funeral interest earnings reflected in Total Financial Revenue.
We can observe that with the exception of a high comparable in December of 2020 at the spike of COVID-19, (which Steve will cover in more detail later in this release), our Same Store Funeral Trends in the table above, reflect that December of 2021 was the only month with a negative Operating Revenue Variance. The large negative Operating Revenue Variance related to volumes being down in December was partially offset by about 29% by a positive variance from our higher ARPC, netting the $1.7 million negative Net Revenue Variance.
Every month with that exception in this seven-month trend shows a positive Operating Revenue Variance with January of 2021 as our all-time high revenue month with $21.7 million, now the second place to January of 2022 which ended at $21.8 million, and higher by $115 thousand. Even more relevant is that from the beginning of COVID in February 2020 and through January of 2022, the only two additional months with a negative Net Revenue Variance were March and April of 2020 at the beginning of the harsh lockdowns and social gathering mandates, reflective of the ability of our entrepreneurial Managing Partners and their teams of employees to pivot and adapt to a new and unknown (at the time) pandemic environment.
Our Average Revenue Per Contract (ARPC) is consistently ranging between $5,101 and $5,294 with a positive variance of $193 dollars between the highest and lowest over the seven-month trend ending January of 2022, confirming that our Managing Partners and their teams are offering all of the options to all of the families all of the time.
*FIVE YEAR SAME-STORE CEMETERY DETAILED TREND REPORT AND SUMMARY CEMETERY ACQUISITION DATA*
*FIVE YEAR CEMETERY SAME STORE TREND REPORT*
*(000's except for volume, averages & margins)* *2017* *2018* *2019* *2020* *2021* *2018 / 2021
Variance $* *2018 / 2021
Variance %*
Preneed Interments Sold 6,159 6,360 7,096 7,104 8,330 1,970 31.0%
Preneed Total Sales Average $4,237 $4,475 $4,472 $4,619 $5,217 $742 16.6%
Preneed Total Sales Production $26,095 $28,459 $31,733 $32,815 $43,456 $14,997 52.7%
Preneed Recognized Revenue $24,548 $26,227 $30,026 $31,376 $39,129 $12,902 49.2%
Preneed Margin ($) $12,278 $13,483 $16,140 $17,300 $21,778 $8,295 61.5%
Preneed Margin (%) 50.0% 51.4% 53.8% 55.1% 55.7% N/A 425 bp
Atneed and Preneed Matured Interments 7,294 7,025 6,817 7,613 8,310 1,285 18.3%
Atneed Revenue $18,373 $18,595 $19,108 $20,360 $24,881 $6,286 33.8%
Atneed Margin ($) $14,572 $14,598 $14,935 $16,055 $19,374 $4,776 32.7%
Atneed Margin (%) 79.3% 78.5% 78.2% 78.9% 77.9% N/A -64 bp
Total Operating Revenue $42,921 $44,823 $49,134 $51,737 $64,010 $19,187 42.8%
Total Preneed/Atneed Margin ($) $26,850 $28,081 $31,075 $33,354 $41,152 $13,071 46.5%
Total Preneed/Atneed Margin (%) 62.6% 62.6% 63.2% 64.5% 64.3% N/A 164 bp
Total Controllable Costs of Revenue $14,468 $15,365 $15,633 $15,449 $16,688 $1,323 8.6%
Total Controllable Costs of Revenue (%) 33.7% 34.3% 31.8% 29.9% 26.1% N/A -820 bp
Total Non-controllable Costs $1,810 $1,996 $2,126 $1,958 $2,280 $284 14.2%
Total Non-controllable Costs (%) 4.2% 4.5% 4.3% 3.8% 3.6% N/A -89 bp
Total Operating Margin ($) $10,572 $10,719 $13,316 $15,947 $22,184 $11,464 106.9%
Total Operating Margin (%) 24.6% 23.9% 27.1% 30.8% 34.7% N/A 1,074 bp
Other (Addbacks, rent, and other items). $2,796 $3,117 $3,712 $3,554 $4,831 $1,711 54.8%
Cemetery Field EBITDA $13,372 $13,840 $17,028 $19,501 $27,015 $13,175 95.2%
Cemetery Field EBITDA Margin 31.1% 30.8% 34.6% 37.7% 42.1% N/A 1,130 bp
Total Financial Revenue $6,954 $6,556 $6,636 $7,782 $9,936 $3,380 51.6%
Total Operating and Financial Revenue $49,875 $51,379 $55,770 $59,519 $73,946 $22,567 43.9%
Cemetery Field & Financial EBITDA $20,326 $20,396 $23,664 $27,283 $36,951 $16,555 81.2%
Cemetery Field & Financial EBITDA Margin 40.7% 39.7% 42.4% 45.8% 50.0% N/A 1,028 bp
*
Optimization of Cemetery Same Store Portfolio*
Our Same-Store Portfolio of both funeral homes and cemeteries have been owned, fully integrated into our *Standards Operating Model*, and operated for at least five full years compared to only one year for other multi-store companies in most industries. Because of the uniqueness of our Standards Operating Model for both funeral homes and cemeteries, it often takes several years after a business joins our portfolio for full integration and optimization of the performance to be achieved and sustained. It is also no coincidence why our *Good To Great* incentive trip is a five-year reward program earned based on consistency in *Standards Achievement* over the five years; Steve will also cover our rewards programs in more detail, including our *Being The Best* one year and *Good To Great* five year profit-sharing incentives.
While our entire company has been through a *High Performance* *Transformation *since September 2018, as detailed in our 2020 Shareholder Letter, the most profound transformation has been in our cemetery portfolio. In 2017 our cemetery portfolio was only 19.1% of total company revenue. We had not successfully built a *High Performance Sales Organization* that could broadly grow our Same Store preneed property sales over the mostly fixed operating costs throughout our diverse portfolio of 31 cemeteries (in size and geography) to optimize the inherent operating leverage in each business. However, our Total Operating Margin Cemetery Same Store Trend Report (Financial Revenue broken out separately) show that 2021 is as much as 1,100 basis points higher than the 24.6% in 2017. This post-transformation resulted in our cemetery portfolio delivering 26.7% of total company revenue in 2021.
The even better *Good To Great* news is that since the initiation of our *High Performance Sales Plan*, which began in July of 2020 and continues to be executed in phases across our cemetery portfolio, our opportunity to optimize our Cemetery Same Store Portfolio remains under blue skies.
Preneed Recognized Revenue finished at $39.1 million for the full year of 2021, higher by $12.9 million or 49.2% when compared to 2018 (the beginning of our transformation), while our Atneed Revenue ended at $24.9 million and higher than 2018 by $6.3 million or 33.8%. Our Total Controllable Cost of Revenue decreased to 26.1% in 2021 from 34.3% in 2018, and Total Non-controllable Costs decreased by 90 basis points from 4.5% in 2018 to 3.6% in 2021, reflective of the powerful operating leverage that can be a huge *FLYWHEEL EFFECT ACCELERATOR* of earnings when preneed property sales are growing over time at a CAGR that can be sustained for five to ten years into the future.
Our Cemetery Same Store Field EBITDA Margin of 42.1% in 2021 was an all-time record high and 1,130 basis points higher than the 30.8% in 2018, and now on par with our Funeral Field EBITDA Margins in the low 40% range. The growth of our cemetery trust funds due to our *High Performance *preneed sales, led to an additional $3.4 million or 51.6% when compared to 2018. Our combined 2021 Cemetery Field & Financial EBITDA finished at $36.9 million, higher by $16.6 million or 81.2% than 2018. Our Cemetery Same Store Portfolio of businesses have never looked as attractive as they look today, and the transformation of our Cemetery portfolio to optimum sustainable performance is not complete. In 2022 we will continue to implement other phases of our plan to optimize our Same Store portfolio performance by maximizing every opportunity with every family, every time.
*CEMETERY ACQUISITION SUMMARY*
*(000's except for margins)*
*2019*
*2020*
*2021*
* 2021/2020 * * 2021/2020 *
* Variance $ * * Variance % *
Total Operating Net Revenue $295 $17,721 $27,825 $10,104 57.0%
Operating Margin (Excludes Rent) $65 $6,343 $13,729 $7,386 116.4%
Operating Margin (%) 22.0% 35.8% 49.6% NA 1,355 bp
Other (Addbacks and other items) $9 $787 $1,725 $938 119.2%
Cemetery Field EBITDA $73 $7,128 $15,526 $8,396 117.8%
Cemetery Field EBITDA Margin 24.7% 40.5% 55.8% NA 1,530 bp
Total Financial Revenue $10 $2,358 $2,865 $507 21.5%
Total Operating & Financial Revenue $305 $20,079 $30,690 $10,611 52.8%
Cemetery Field & Financial EBITDA Margin 27.2% 47.2% 59.9% NA 1,268 bp Our three Cemetery Acquisitions continued their integration journey into our *Standards Operating Model* in 2021 with an acceleration of *High Performance,* as Acquisition Cemetery Revenue was $27.8 million, higher than 2020 by $10.2 million or 58.3%. Acquisition Cemetery Field EBITDA grew to $15.5 million, higher than 2020 by $8.4 million or 117.8%, boosted by Acquisition Field EBITDA Margin of 55.8%, higher than 2020 by 1,530 basis points. Our Acquisition Cemetery portfolio future is very bright at all three businesses, but exceedingly so at Fairfax Memorial Park and Funeral Home since the arrival of Victor Holland as the new Managing Partner. Victor will bring to Fairfax the *Right Who* factor because of his *4E* *Leadership* characteristics and operational experience in high volume, high potential funeral homes and cemeteries. Welcome to the Carriage Family, Victor.
*ORGANIZATION STRUCTURE/TALENT AND CONCEPTUAL VISION UPDATE *
Our *Good to Great High Performance Flywheel* shown below is a fragment from our *High Performance Culture Framework,* included in our *Value Creation Financial Dynamics*. The *High Performance Flywheel* focuses on our three core *Being The Best* operator, *Being The Best *consolidator, and *Being The Best* value creator vision company that happens to be in the Deathcare industry.
The flywheel helps define who we are, what we do, and how we do it. The innovative ideas and sophisticated concepts are the foundation at Carriage and will never change; however, our *Good To Great Journey* that never ends and our *Being The Best Vision* demands that everyone at Carriage put their heart and mind to continuous improvement every day and in everything we do. With that thought in mind, we are very excited to share the following operations update:
An image accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/1917474b-ac1f-4490-abf2-497388715dde
*CAREdge Forum Sales: *On January 17–19, 2022, we had our first EVER *CAREdge Forum* for our *High Performance* Cemetery Sales Manager-Leaders and their Managing Partners at The Eliza Jane hotel in New Orleans. Our *CAREdge Forum* is a two full-day exposure to high energy, high expectations, and creative and innovative ideas that lead to a journey of discovery of what is possible in the world of preneed sales. It is also an opportunity to meet fantastic talent from our cemetery portfolio across the country and share thoughts and success ideas. Over these two days of the meeting of the minds, the team learned about our recently launched Microsoft Dynamics 365 CRM, which we call *SalesEdge*. We believe that this fantastic tool provides our sales teams with the edge they need to provide a higher level of service excellence and customer experience to the families that we serve while delivering *High Performance* *Sales* for years to come. The attendees to our *CAREdge Forum* also learned about our high-end personalization and exclusive Private Memorials® offerings, among other tools and sales skills that wi