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Investor PresentationMarch 2020
Honesty | Integrity | Quality in All That We Do
2
Cautionary Statement on Forward Looking Statements and Disclosure of Non-GAAP Performance Measures
Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward‐looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements are based on assumptions that the Company believes are reasonable; however, many important factors, as discussed under “Risk Factors” and
“Forward‐Looking Statements” in the Company’s Annual Report on Form 10‐K for the year ended December 31, 2018 and the Quarterly Reports on Form 10-Q
could cause the Company’s results in the future to differ materially from the forward‐looking statements made herein and in any other documents or oral
presentations made by, or on behalf of, the Company.
Forward-looking statements contained herein regarding acquisitions include assumptions about the pricing, timing, terms and conditions of such acquisitions,
our ability to close such acquisitions, and the anticipated benefits, impacts and synergies of the acquisitions. We can provide no assurances that our growth
strategy will be successfully implemented. In particular, we can provide no assurances that we will find additional attractive acquisition targets in the future, that
we will succeed in negotiating the terms and conditions reflected in the model, or that we will execute any acquisitions during the next five years. Forward-
looking statements contained herein regarding the performance of our acquisition and same store businesses include assumptions related to future revenue
growth. We can provide no assurances that our acquisition and same store businesses will generate the revenue growth set forth herein, or any revenue growth
at all. The Company assumes no obligation to update or publicly release any revisions to forward-looking statements made herein or any other forward‐looking
statements made by, or on behalf of, the Company.
This presentation uses Non-GAAP financial measures to present the financial performance of the Company. Non-GAAP financial measures should be viewed in
addition to, and not as an alternative for, the Company’s reported operating results or cash flow from operations or any other measure of performance as
determined in accordance with GAAP. We believe the Non-GAAP results are useful to investors because such results help investors compare our results to
previous periods and provide insights into underlying trends in our business. In addition, the Company’s presentation of these measures may not be comparable
to similarly titled measures of other companies. Pursuant to the requirements of Regulation G, the Company has provided quantitative reconciliations within the
most current press release and on our Investor Relations page of the website of the non-GAAP financial measures to the most directly comparable GAAP
financial measures.
A copy of the Company’s Annual Report, Form 10‐K ended December 31st, 2019, and other Carriage Services information and news releases, are available atwww.carriageservices.com
3
I. Carriage Services Overview
Carriage Services is a leading owner and operator of funeral homes and cemeteries in the United States and one of the largest consolidators in our industry.
Long Term Organic Revenue Growth at High EBITDA Margins
supported by Favorable Demographic Trends
The Most Attractive Succession Planning Solution for Leading
Independent Businesses
Industry leading Operating Results driven by Execution of our
Standards Operating Model
Favorable Consolidation Landscape in a Highly Fragmented Industry
Entrepreneurial Decentralized High-Performance Culture Attracts
and Retains Top Industry Talent
4
5
Who is Carriage Services?
• Carriage Services currently operates 219 funeral homes & cemeteries in 29 states
• Founded in 1991; 2nd longest tenured consolidator in our industry
• High Performance Culture company in the funeral & cemetery industry
Committed to “Being The Best”:• Funeral Home & Cemetery Operating Company• Consolidator of Independent Family Businesses • Shareholder Value Creation Platform
Driven by our Five Guiding Principles:• Honesty, Integrity, & Quality in All That We Do • Growth of the Company is Driven by Decentralization & Partnership• Belief in the Power of People through Individual Initiative & Teamwork• Outstanding Service & profitability Go Hand-In-Hand• Hard work, Pride of Accomplishment, & Shared Success Through Employee Ownership
Carriage’s corporate strategy is defined by our three core models:1. Standards Operating Model2. 4E Leadership Model 3. Strategic Acquisition Model
6
Our Leadership Team
High Performance Culture Framework
7
8
$0
$5
$10
$15
$20
$25
$30
Implemented Innovative Funeral Standards Operating
Model — Abandoned “Budget & Control” model of operating
funeral homes/cemeteries
Industry leading Adjusted Consolidated
EBITDA Margin
Created Strategic Acquisition Model & began to grow
selectively
Conviction that Carriage had to become a good
operating company before being a good
consolidation company
Carriage Services 2020: Transformative High Performance – Good To Great Journey – Part II
Operational Leadership
transformation
1991 1996 1999 2003 2004 2008 2009 2011 2012
2018
2007
$28.78$28.44
$1.19
$10.89
$1.41
Launched First Five-Year Carriage Good To Great Journey: A New Beginning
Industry market crash in 1999 forced a
multi year deleveraging process-last industry
equity raise August 1999 by STEI
Founded as an acquisition company to consolidate fragmented
Funeral & Cemetery industry
Assumed control of preneed trusts investment
strategy and execution
Ceased Acquisitions and instead
acquired 15% CSV shares outstanding
for $10 million
IPO, August ‘96, participated in
EPS driven acquisition mania fueled by cheap
equity/debt
Our Learning Journey
2016
$20.83
2020
9
Carriage Services Overview
Operating Segment Overview (Proforma 2020)1
Track Record of Long-Term Revenue Growth
Revenue/ Field Level EBITDA2
Funeral75%
Cemetery 25%
$168 $177 $178 $185 $191 $204 $213 $226 $243 $248 $258 $268 $274 $317 $322 $330
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Note: Figures shown in millions.1 Includes Cemetery and Funeral same store and acquisition revenue / EBITDA
2 Excludes variable overhead, regional fixed overhead, and corporate fixed overhead costs
2007-2019 Revenue CAGR: 4.2%
Stock Valuation
Ticker CSV
Market Capitalization (Feb 28, 2020) 378M
Forward P / E 13.1x
Forward EV / EBITDA 9.4x
Diverse National Footprint
MA12
RI4
CT10
NJ5
MD1
10
187 Funeral Homes in 29 States32 Cemeteries in 12 states
San Jose/ Oakland19%
Washington/N. Virginia
10%NY City Metro
6%
Bristol/Springfield 6%
LA Metro 5%
New Orleans
5%
Houston Metro
4%
2019 Revenue by Large Strategic Market
11
II. Recent Highlights
12
Operational & Financial Highlights
Year Ended December 31, 2019 versus Year Ended December 31, 2018
• Total Revenue increased $11.0 million or 4.2% to $273.3 million;
• Total Field EBITDA increased $7.4 million or 7.2% to $110.3 million;
• Total Field EBITDA Margin increased 120 basis points to 40.4%;
• Consolidated EBITDA increased $8.2 million or 12.0% to $76.5 million;
• Consolidated EBITDA Margin increased 200 basis points to 28.0%; and
• Diluted Earnings Per Share increased $0.27 or 29.0% to $1.20.
Pro Forma Adjusted Final Results
2019 Operational Highlights
• Completed 4 large strategic acquisitions in Q4 2019; including Fairfax Memorial Park & Funeral Home; largest in CSV history
• Appointment of Bill Goetz as President, Chief Operating Officer, and member of the Board in Q4 2019
• Updated 2019 Standards Operating Model & Execution led to Record Consolidated EBITDA & Cemetery segment performance
• Field Margin improvement in all categories led to 200 bps increase in Consolidated EBITDA versus 2018
• Completed Acquisition Financing Transactions: $75 million add-on to existing 6.625% Senior Notes @ $104/Credit Facility Amendment
$60
$65
$70
$75
$80
2018 2019
$0.4
$0.8
$1.2
$1.6
2018 2019
Consolidated EBITDA
Diluted Earnings Per Share
13
Strategic Acquisitions Overview Q4 2019
Funeral home and large cemetery based in Lafayette, CA
Family-owned funeral and cemetery business based in Rockwall, TX
Family-owned best-in-class funeral service provider in Buffalo, NY
Purchased from Stonemor Offers cremation and burial services, including ancillary services and businesses
Largest funeral home business in Western New York, serving approx. 2,000 families annually
Description
Strategic RationaleSolidifies footprint in strategic Bay Area. Growing affluent area w/high barriers to entry. Opportunities to improve funeral operation & cemetery sales under CSV leadership.
Large combination business in growing area with several unique to CSV ancillary businesses. Opportunity for CSV to grow in strategic Dallas market.
Large and fast-growing funeral home business with additional opportunities to expand in Greater Buffalo market.
14
Description Strategic Rationale
• One of the largest privately owned combination business (funeral home & cemetery) remaining in the U.S.
• Based in Fairfax, VA
• Large acquisition in demographically attractive area with high barriers to entry.
• Multiple years of accretive organic growth opportunities.
• Once full integration in 2020, Fairfax will improve CSV Field EBITDA Margin and Organic Revenue CAGR
• Fairfax Memorial Park and Funeral Home represents the crown jewel of our Washington D.C./N. Virginia geographic capital allocation strategy. It currently performs about 850 cemetery interments and 900 funerals annually; whose combined revenue represents the largest single business acquired in the 28-year history of Carriage.
• Fairfax offers the highly unusual opportunity of having such a “Best in Class” reputation, strong competitive standing and demographic profile that the business should grow much larger over the long term
Strategic Acquisitions Overview Q4 2019
15
Carriage 3 Year ‘Roughly Right’ Scenario
$20
$50
$80
$110
2016 2017 2018 2019 Est. 2020 Est. 2021 Est. 2022
Performance Outlook Scenario 2020 2021 2022
Total Revenue $315 - $319 $320 - $324 $328 - $332
Total Field EBITDA $127 - $131 $133 - $137 $139 - $144
Adjusted Consolidated EBITDA $92 - $96 $97 - $101 $102 - $106
Adjusted Consolidated EBITDA Margin 29% - 30% 30% - 31% 31% - 32%
Adjusted Diluted EPS $1.55 - $1.65 $1.92 - $2.10 $2.25 - $2.40
Adjusted Free Cash Flow $42 - $45 $53 - $56 $60 - $63
Total Debt Outstanding $480 - $490 $440 - $450 $390 - $440
Total Debt to Proforma EBITDA Multiple 5.0 - 5.2 4.3 - 4.5 3.8 - 4.0
Estimated CAGR: + 8% 2019 - 2022
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
2016 2017 2018 2019 Est. 2020Est. 2021Est. 2022
Estimated CAGR: +17% 2019 - 2022
Adjusted Diluted EPSAdjusted Consolidated EBITDA
16
Capital Structure
*Proforma EBITDA is defined by credit facility calculation.
Pro Forma Capital Structure ( in millions)
6.625% Senior Notes (2025) $400
2.75% Convertible Notes (2021) $6
Revolver/Capital Leases/ Acquisition Debt Outstanding
$97
Total Debt Outstanding $503
Cash & Cash Equivalents (Q4 2019) $0.7
Revolver Availability (undrawn) $103
Shareholder Equity (Q4 2019) $227
4.4x
5.0x 5.0x4.9x
5.5x
5.1x
5.7x
4.5x
4.0x
4.4x
4.8x
5.2x
5.6x
6.0x
$0
$100
$200
$300
$400
$500
2013 2014 2015 2016 2017 2018 2019 Est 2022L
everage R
atio
Net
Deb
t (m
illio
ns)
Q4 2019 Updates:
Acquisitions financed through $75 million add-on to existing unsecured notes- Priced @ $104 to; yield 5.5%; high interest from current bond holders
Credit facility amended increase to $190 million; $100 million available liquidity
- Amended for higher maximum leverage ratio in 2020Pause M&A activity next 12 months to focus on integration and leverage reduction.
Future:
Senior Notes callable @ $104.969 in June 2021 potential for significantinterest cost savings/ ~$7 million based on current trading levelsAbility to rapidly reduce leverage (.5x per year) through growing & recurring Free Cash FlowLeverage below 4.5x in less than 2 years greater financial flexibility
17
III. CSV Core Models
Standards Operating Model“Being The Best” Funeral and Cemetery Operating Company
18
• Updated Q4 2019 for improved High-Performance Standards Execution in 2020 and beyond.
• Focus on Long Term Compound Revenue Growth
• Eight Funeral and four Cemetery operating standards that when achieved lead to high and sustainable financial performance.
• Decentralized Entrepreneurial Operating Model places operational control with local Managing Partner.
• Incentive Compensation for Managing Partners and their teams based on Standards Achievement.
New 2020 Funeral StandardsMarket Share Metrics — 60% (long term)
35% - 3 yr. Compound Revenue Growth (0-3+%)
15% - Annual Contract Volume Growth
10% - Service & Guest Experience
Financial Metrics — 40% (short term)
5% - Cremation Average Revenue Per Contract
5% - Gross Margin Range % of Revenue
10% - Salaries & Benefits Range % of Revenue
5% - Bad Debt % of Revenue
15% - EBITDAR Margin Range % Revenue
100% - Standards Achievement Total (50% Minimum)
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BEING THE BEST STANDARDS OPERATING MODEL
Funeral Home
Groupings
Group B C B C B C B C
Funeral Contracts 125 - 250 251 - 400 125 - 250 251 - 400 125 - 250 251 - 400 125 - 250 251 - 400
Group 1 2 3 4
ARPC <$4,500 $4,500 - $6,000 $6,001 - $7,500 >$7,500
Funeral Home
Standards
Gross Margin % 87 - 89% 87 - 89% 86 - 88% 86 - 88% 85 - 87% 85 - 87% 85 - 87% 85 - 87%
Salaries & Benefits % 29 - 31% 27 - 29% 26 - 28% 26 - 28% 26 - 28% 26 - 28% 26 - 28% 26 - 28%
Bad Debt % 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6%
Field EBITDAR % 36-40% 38 - 42% 37- 41% 39 - 43% 38 - 42% 40 - 44% 39 - 43% 40 – 44%
Operational Discipline
• All Funeral businesses are grouped on operational characteristics (e.g. Average Revenue per Contract & No. of Contracts).
• Standards are designed for flexible decentralized decision-making by our Managing Partners.
• Standards are Not designed for unsustainable maximum short term profitability i.e. 100% Standards Achievement.
• Goal of organic growth in Market Share and Revenue at sustainable high profit margins.
• Volume Growth driven by Market Share gains primary driver of local operating leverage.
• New Service & Guest Experience Standard focused on differentiated high value personal service at each Carriage funeral home.
Standards Operating Model“Being The Best” Funeral and Cemetery Operating Company
Strategic Acquisition ModelGrowth by Buying and Building a Portfolio
20
Carriage is an attractive succession planning option for owners
of funeral homes and cemeteries due to the following:
• The decentralized Standards Operating Model,
• The Operational Support Center (Legal, HR, IT, Business
Analysis and Planning, Regulatory), and
• The significant improvement in operating performance
displayed in acquired businesses after integrating into the
Operational Support Framework (needs rewording)
The Model is used to assess strategic acquisition candidates
based on specific criteria including: market size, demographic
trends, client family revenue profile, institutional brand
strength, 10 year contract volume and 3 year revenue per
contract trends.
Strategic Ranking Criteria are highly predictive of future long
term revenue growth.
Final valuation of acquired businesses ensure Return on
Invested Capital is greater than our Cost of Capital in early years
and increases over time.
Weighting
1 Seller Motivation Alignment 5%
2 Large Strategic Market 15%
3 Large Strategic Business 15%
4 10 Years SS Volumes 15%
5 Average Revenue Per Contract 15%
6 Competitive Standing Trend 10%
7 Burial/Cremation Mix Trend 10%
8 Demographics Trends 5%
9 Institutional Brand Strength 5%
10 Barriers to Entry 5%
TOTAL 100%
Qualitative Strategic Ranking Criteria
Recent Acquisition History
21
Conner-Westbury
Funeral Home
Mar 2012
James Terry
Funeral Home
Feb 2012
Gray Funeral Home
Lawton Ritter Gray Funeral Home
Sunset Memorial
June 2012
Schmidt Funeral Home
Sep 2012
Havenbrook
Funeral Home
Cumby Funeral
Homes
Crespo & Jirrels
Dec 2012
Everly Community
Everly Wheatley
Garden of Memories
Greenwood Funeral Home
Jacob Shoen & Son Funeral Home
Tharp-Sontheimer Funeral Home
May 2014
Heritage
Funeral Home
Nov 2013 Neal-Tarpley-Parchman
Funeral Home Feb 2015
Bright Funeral Home
Nov 2015
Jay Chapel
Sep 2016
Bradshaw-Carter Funeral Home
Cypress-Fairbanks Funeral Home
May 2016
Becker-Ritter Funeral Home
Rich & Thompson
Nov 2016
Thomas F. Dalton Funeral Homes
Dec 2017
Presley Funeral Home
Poole Funeral Home
Aug 2018
Carroll-Lewellen
Funeral Home
Viegut Funeral Home
Nov 2017
Covenant Funeral Services
Jun 2018
Lombardo Funeral Homes
Resthaven Funeral
Homes & Cemetery
Oct 2019
2012 2013 2014 2015 2016 2017 2018 2019 2020
Fairfax Memorial
Park & Funeral Home
Dec 2019
Oakmont Funeral
Home & Cemetery
Jan 2020
22
IV. Historical Financial Results
Recurring & Growing Free Cash Flowallows Carriage to fund most acquisition activity, in addition to other investment activity that generate returns for shareholders (e.g. debt reduction, internal growth capital expenditures, share repurchases, dividends).
$22.9
$36.2$38.6
$45.2$47.6
$37.4
$42.7
$37.4
0.0%
10.0%
20.0%
30.0%
40.0%
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
2012 2013 2014 2015 2016 2017 2018 2019
Proforma Adjusted Free Cash Flow
Proforma Adjusted Free Cash Flow As a % of Revenue
23
A Value Creation Investment Platform
24
Long Term track record of Revenue Growth at industry
leading Consolidated EBITDA Margins
A Value Creation Investment Platform
Note 1: Adjusted to exclude Non-GAAP Withdrawable Trust Income from Jan. 1, 2013 for comparative consistency with new reporting policy beginning in 2016.
$198$213
$226
$243 $248$258
$268 $273
$53 $56 $62$71 $74 $69 $70 $77
$0.80
$0.98
$1.34
$1.48
$1.62
$1.39
$1.17
$1.20
26.7% 26.3% 27.4% 29.3% 29.7% 26.6% 26.2% 27.9%
$0.00
$0.30
$0.60
$0.90
$1.20
$1.50
$1.80
$0
$50
$100
$150
$200
$250
2012 2013 2014 2015 2016 2017 2018 2019
Historical Financial Results
Total Revenue Proforma Adj. Consolidated EBITDA
Adjusted Diluted EPS Proforma Adj. Consolidated EBITDA Margin %
1
1
Declining Overhead as a % of Revenueensures Revenue grows at a significantly faster rate than Total Overhead so that the majority of Acquired and incremental Same Store Field EBITDA falls to Adjusted Consolidated EBITDA.
*2018 and Sep 2019 TTM Overhead excludes $3.3 million of non-recurring severance, litigation & natural disaster expenses
25
$30.3
$33.0 $34.1
$34.7
$35.9 $36.4
$33.7 $34.3
15.3%15.5%
15.1%
14.3%14.5%
14.1%
12.6% 12.5%
11.0%
11.5%
12.0%
12.5%
13.0%
13.5%
14.0%
14.5%
15.0%
15.5%
16.0%
25.0
27.0
29.0
31.0
33.0
35.0
37.0
39.0
2012 2013 2014 2015 2016 2017 *2018 *2019
Leveraged Consolidation Platform
Overhead Overhead as a % of Revenue
A Value Creation Investment Platform
Standards Operating Model and High-Performance Culture make Carriage the most attractive succession planning solution for independent funeral and cemetery owners
Why Choose Carriage?
Decentralized, Entrepreneurial Standards Operating Model with linked incentive compensation make Carriage the best destination for top industry talent
Recurring Free Cash Flow facilitates majority of shareholder value creation through self-financed, disciplined capital allocation
Long term track record of leveraging mid single digit Revenue growth, into higher Adjusted Consolidated EBITDA growth, and even higher Adjusted Diluted EPS growth
Dedicated and tenured management team committed to long term shareholder value creation through differentiated performance because of our mission, purpose, principles and culture
26
713-332-8400
InvestorRelations@CarriageServices.com
3040 Post Oak Blvd. Suite 300 Houston, TX 77056
www.CarriageServices.com
Honesty | Integrity | Quality in All That We Do
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