StoneMor Inc. (NYSE: STON) ("StoneMor" or the "Company"), a leading owner and operator of cemeteries and funeral homes, today reported operating and financial results for the third quarter ended September 30, 2021. Investors are encouraged to read the Company's quarterly report on Form 10-Q when it is filed with the Securities and Exchange Commission (the "SEC"), which will contain additional details, and will be posted at www.stonemor.com.
THIRD QUARTER FINANCIAL PERFORMANCE
-- Revenues for the third quarter were $82.3 million compared to $72.7 million in in the third quarter in the prior year. Nine-month revenues were $243.6 million compared to $204.4 million in the prior year period.
-- Cemetery segment operating income for the third quarter was $14.0 million compared to $11.5 million in the third quarter in the prior year, representing an increase of $2.6 million. Nine-month cemetery segment operating income was $40.4 million compared to $24.1 million in the prior year period, representing an increase of $16.2 million.
-- Funeral home segment operating income for the third quarter was $1.0 million compared to $1.1 million in the third quarter in the prior year, representing a decrease of $0.1 million. Nine-month funeral home segment operating income was $3.8 million compared to $3.5 million in the prior year period, representing an increase of $0.3 million.
-- Corporate overhead expense increased to $10.0 million in the third quarter compared to $9.8 million in the third quarter in the prior year. Nine-month corporate overhead expense increased to $29.1 million compared to $27.0 million in the prior year period.
-- Third quarter operating income was $4.3 million compared to $2.6 million in the third quarter in the prior year.
-- Third quarter net loss from continuing operations was $4.7 million compared to $8.1 million in the third quarter in the prior year.
-- Third quarter adjusted EBITDA was $38.5 million compared to $24.3 million in the third quarter in the prior year.
Joe Redling, StoneMor's President and Chief Executive Officer said, "The third quarter continued to build on the positive performance trends of the past year and half, with top-line revenue growth of 13.2% and 19.2% for the three and nine months ended September 30, 2021, respectively, when compared with the same periods in 2020. Year-to-date, we have driven a $52.2 million improvement in our adjusted EBITDA year-over-year. We continue to deliver strong, sustainable cemetery sales production results, with a 9% growth in pre-need cemetery sales production for the third quarter."
As of September 30, 2021, the Company had $115.9 million of cash, including $16.4 million of restricted cash, and $391.4 million of total debt.
"We have made great progress towards our previously announced guidance targets for organic growth in our trusts and unlevered free cash flow," said Jeff DiGiovanni, StoneMor's Senior Vice President and Chief Financial Officer. "For the nine-months ended September 30, 2021, we generated nearly $70 million in trust growth and more than $36 million in unlevered free cash flow, against $50 million and $40 million annual targets, respectively. This is a testament to the success of our transformation plan and the hard-work of every member of the StoneMor team."
Redling added, "We are focused on the next phase of our transformation strategy - a commitment to strategic growth. We have $100 million in cash on our balance sheet and access to additional capital, if necessary. That capital, coupled with the operational transformation completed to date, places StoneMor in the right position to execute on this strategy as we move forward."
CONFERENCE CALL INFORMATION
StoneMor will conduct a conference call to discuss this news release today, November 11, 2021 at 4:30 p.m. Eastern Time. The conference call can be accessed by calling (877) 256-3243. No reservation number is necessary; however, due to the on-going pandemic, it is advised that interested parties access the call-in number 5 to 10 minutes prior to the scheduled start time to avoid delays. StoneMor will also host a live webcast of this conference call. Investors may access the live webcast via the Investors page of the StoneMor website www.stonemor.com under Events & Presentations.
About StoneMor Inc.
StoneMor Inc., headquartered in Bensalem, Pennsylvania, is an owner and operator of cemeteries and funeral homes in the United States, with 300 cemeteries and 69 funeral homes in 24 states and Puerto Rico. StoneMor's cemetery products and services, which are sold on both a pre-need (before death) and at-need (at death) basis, include: burial lots, lawn and mausoleum crypts, burial vaults, caskets, memorials, and all services which provide for the installation of this merchandise. For additional information about StoneMor Inc. please visit StoneMor's website, and the investors section, at http://www.stonemor.com.
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in this press release, including, but not limited to, information regarding continued implementation of the Company's transformation, are forward-looking statements. Generally, the words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "project," "expect," "predict" and similar expressions identify these forward-looking statements. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on management's current expectations and estimates. These statements are neither promises nor guarantees and are made subject to certain risks and uncertainties that could cause actual results to differ materially from the results stated or implied in this press release. StoneMor's major risks are related to uncertainties associated with current business and economic disruptions resulting from the ongoing coronavirus pandemic, including the effect of government regulations issued in connection therewith, its ability to identify, and negotiate acceptable agreements with, sellers of additional properties, uncertainties associated with the cash flow from pre-need and at-need sales, trusts and financings, which may impact StoneMor's ability to meet its financial projections and service its debt, as well as with StoneMor's ability to maintain an effective system of internal control over financial reporting and disclosure controls and procedures.
When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements set forth in StoneMor's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and the other reports that StoneMor files with the Securities and Exchange Commission, from time to time. Except as required under applicable law, StoneMor assumes no obligation to update or revise any forward-looking statements made herein or any other forward-looking statements made by it, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
This release includes certain non-GAAP financial measures, including adjusted EBITDA, Field EBITDA and unlevered free cash flow, which are intended as supplemental measures of the Company's performance that are not required by or presented in accordance with GAAP. All business results presented in this release are not prepared in accordance with Article 11 of Regulation S-X.
Management uses these non-GAAP measures internally to evaluate and manage the Company's operations and to better understand its business because they facilitate a comparative assessment of the Company's operating performance relative to its performance based on results calculated under GAAP. These non-GAAP measures also isolate the effects of some items that vary from period to period without any correlation to core operating performance and eliminate certain charges that management believes do not reflect the Company's operations and underlying operational performance. The Compensation, Nominating and Governance Committee of the Company's board of directors also uses certain of these measures to evaluate management's performance and set its compensation. The Company believes that these non-GAAP measures also provide useful information to investors regarding certain financial and business trends relating to the Company's financial condition and operating results and facilitate an evaluation of the financial performance of the Company and its operations on a consistent basis. Providing this information therefore allows investors to make independent assessments of the Company's financial performance, results of operation and trends while viewing the information through the eyes of management.
These non-GAAP measures are subject to limitations. The non-GAAP measures presented in this release may not be comparable to similarly titled measures used by other companies because other companies may not calculate one or more in the same manner. Additionally, the non-GAAP performance measures exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements; do not reflect changes in, or cash requirements for, working capital needs; and do not reflect interest expense, or the requirements necessary to service interest or principal payments on debt. Further, our historical adjusted results are not intended to project our adjusted results of operations or financial position for any future period. To compensate for these limitations, management presents and considers these non-GAAP measures in conjunction with the Company's GAAP results; no non-GAAP measure should be considered in isolation from or as an alternative to net income, earnings per share or any other measure determined in accordance with GAAP. Readers should review the reconciliations included below, and should not rely on any single financial measure to evaluate the Company's business.
A reconciliation of each non-GAAP measure to the most directly comparable GAAP measure is set forth below (in thousands):
EBITDA AND ADJUSTED EBITDA
Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net loss from continuing operations $ (4,747 ) $ (8,150 ) $ (46,205 ) $ (31,720 ) Income tax benefit (240 ) (1,129 ) (11,652 ) (3,333 ) Interest expense 9,256 11,870 29,706 34,952 Depreciation and amortization 1,989 2,244 6,118 6,851 Non-cash stock compensation 512 353 1,525 1,080 Loss on debt extinguishment -- -- 40,128 -- Loss on sale of business and other impairments 70 -- 2,290 -- Other losses, net 605 -- 536 -- Cost of lots sold 1,495 1,503 5,146 4,346 EBITDA 8,940 6,691 27,592 12,176 Change in deferred revenues 31,866 19,575 77,518 39,238 Change in deferred selling and obtaining costs (2,257 ) (2,006 ) (6,486 ) (4,974 ) Adjusted EBITDA $ 38,549 $ 24,260 $ 98,624 $ 46,440
Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 EBITDA $ 8,940 $ 6,691 $ 27,592 $ 12,176 Corporate overhead 9,983 9,762 29,058 27,019 Less: non-cash stock compensation 512 353 1,525 1,080 Field EBITDA $ 18,411 $ 16,100 $ 55,125 $ 38,115
UNLEVERED CASH PROVIDED BY OPERATING ACTIVITIES AND UNLEVERED FREE CASH FLOW
Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net cash provided by operating activities $ 11,994 $ 2,584 $ 10,427 $ 3,785 Cash interest payments 118 6,686 31,259 20,361 Unlevered cash provided by operating activities 12,112 9,270 41,686 24,146 Less: cash paid for capital expenditures 2,314 993 5,675 4,784 Unlevered free cash flow $ 9,798 $ 8,277 $ 36,011 $ 19,362
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share data)
September 30, December 31, 2021 2020 Assets Current assets: Cash and cash equivalents, excluding restricted cash $ 99,509 $ 39,244 Restricted cash 16,415 20,846 Accounts receivable, net of allowance 60,066 57,869 Prepaid expenses 9,387 5,290 Assets held for sale -- 28,575 Other current assets 14,963 16,884 Total current assets 200,340 168,708 Long-term accounts receivable, net of allowance 76,051 75,301 Cemetery property 296,250 299,526 Property and equipment, net of accumulated depreciation 80,055 83,496 Merchandise trusts, restricted, at fair value 548,541 501,453 Perpetual care trusts, restricted, at fair value 335,076 312,228 Deferred selling and obtaining costs 122,488 116,900 Deferred tax assets -- 9 Intangible assets, net 54,291 55,094 Other assets 23,819 22,248 Total assets $ 1,736,911 $ 1,634,963 Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 45,311 $ 51,718 Liabilities held for sale -- 23,406 Accrued interest 13,222 95 Current portion, long-term debt 1,769 317 Total current liabilities 60,302 75,536 Long-term debt, net of deferred financing costs 389,672 320,715 Deferred revenues 1,027,565 949,164 Deferred tax liabilities 17,823 29,652 Perpetual care trust corpus 335,076 312,228 Other long-term liabilities 42,219 40,081 Total liabilities 1,872,657 1,727,376 Commitments and contingencies Stockholders' equity: Common stock, par value $0.01 per share, 200,000,000 shares authorized, 118,011,766 and 117,871,141 shares issued and outstanding, respectively 1,180 1,178 Paid-in capital in excess of par value (83,709 ) (85,232 ) Accumulated deficit (53,217 ) (8,359 ) Total stockholders' equity (135,746 ) (92,413 ) Total liabilities and stockholders' equity $ 1,736,911 $ 1,634,963
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenues: Cemetery: Interments $ 21,954 $ 20,316 $ 65,379 $ 51,542 Merchandise 16,935 15,949 51,004 44,918 Services 17,240 16,078 52,219 47,656 Investment and other 14,685 9,677 41,320 29,564 Funeral home: Merchandise 6,120 5,793 17,542 16,004 Services 5,361 4,900 16,125 14,732 Total revenues 82,295 72,713 243,589 204,416 Costs and Expenses: Cost of goods sold 11,023 9,624 34,642 28,307 Cemetery expense 19,286 16,198 55,537 50,375 Selling expense 14,451 13,119 43,434 37,376 General and administrative expense 10,534 10,027 31,377 28,672 Corporate overhead 9,983 9,762 29,058 27,019 Depreciation and amortization 1,989 2,244 6,118 6,851 Funeral home expenses: Merchandise 1,668 1,539 4,807 4,239 Services 4,874 4,775 14,012 13,594 Other 3,543 2,834 9,801 8,084 Total costs and expenses 77,351 70,122 228,786 204,517 Loss on sale of business and other impairments (70 ) -- (2,290 ) -- Other losses, net (605 ) -- (536 ) -- Operating income (loss) 4,269 2,591 11,977 (101 ) Interest expense (9,256 ) (11,870 ) (29,706 ) (34,952 ) Loss on debt extinguishment -- -- (40,128 ) -- Loss from continuing operations before income taxes (4,987 ) (9,279 ) (57,857 ) (35,053 ) Income tax benefit 240 1,129 11,652 3,333 Net loss from continuing operations (4,747 ) (8,150 ) (46,205 ) (31,720 ) Discontinued operations (Note 2): (Loss) Income from operations of discontinued businesses (102 ) 293 1,347 28,952 Income tax expense -- -- -- -- Net (loss) income from discontinued operations (102 ) 293 1,347 28,952 Net loss $ (4,849 ) $ (7,857 ) $ (44,858 ) $ (2,768 ) Net loss from continuing operations per common share (basic) $ (0.04 ) $ (0.07 ) $ (0.39 ) $ (0.31 ) Net (loss) income from discontinued operations per common share (basic) (0.00 ) 0.00 0.01 0.28 Net loss per common share (basic) $ (0.04 ) $ (0.07 ) $ (0.38 ) $ (0.03 ) Net loss from continuing operations per common share (diluted) $ (0.04 ) $ (0.07 ) $ (0.39 ) $ (0.31 ) Net (loss) income from discontinued operations per common share (diluted) (0.00 ) 0.00 0.01 0.28 Net loss per common share (diluted) $ (0.04 ) $ (0.07 ) $ (0.38 ) $ (0.03 ) Weighted average number of common shares outstanding - basic 118,003 117,819 117,956 103,341 Weighted average number of common shares outstanding - diluted 118,003 117,819 117,956 103,341
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, 2021 2020 Cash Flows From Operating Activities: Net loss $ (44,858 ) $ (2,768 ) Adjustments to reconcile net loss to net cash provided by operating activities: Cost of lots sold 5,146 4,346 Depreciation and amortization 6,158 7,078 Provision for bad debt 5,074 4,529 Non-cash compensation expense 1,525 1,080 Loss on debt extinguishment 40,128 -- Non-cash interest expense 3,740 16,159 Loss (gain) on sale of businesses 1,525 (31,120 ) Other losses, net 536 2,169 Changes in assets and liabilities: Payment of paid-in-kind interest (18,440 ) -- Accounts receivable, net of allowance (16,205 ) (16,180 ) Merchandise trust fund (37,542 ) (12,284 ) Other assets (4,846 ) 3,799 Deferred selling and obtaining costs (6,486 ) (4,974 ) Deferred revenues 77,518 39,238 Deferred taxes, net (11,821 ) (3,490 ) Payables and other liabilities 9,275 (3,797 ) Net cash provided by operating activities 10,427 3,785 Cash Flows From Investing Activities: Cash paid for capital expenditures (5,675 ) (4,784 ) Proceeds from divestitures 6,462 48,336 Net cash provided by investing activities 787 43,552 Cash Flows From Financing Activities: Proceeds from issuance of Series A Preferred Stock -- 8,800 Proceeds from issuance of Common Stock -- 8,200 Proceeds from borrowings 406,235 3,672 Repayments of debt (331,197 ) (54,782 ) Principal payment on finance leases (1,097 ) (1,061 ) Early redemption premium (18,478 ) -- Cost of financing activities (10,843 ) (4,294 ) Shares repurchased related to share-based compensation -- (35 ) Net cash provided by (used in) financing activities 44,620 (39,500 ) Net increase in cash, cash equivalents and restricted cash 55,834 7,837 Cash, cash equivalents and restricted cash--Beginning of period 60,090 56,767 Cash, cash equivalents and restricted cash--End of period $ 115,924 $ 64,604 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 31,259 $ 20,361 Cash paid during the period for income taxes 2,727 1,077 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,446 $ 2,372 Operating cash flows from finance leases 253 328 Financing cash flows from finance leases 1,097 1,061 Non-cash investing and financing activities: Accrued paid-in-kind interest on 2024 Notes $ -- $ 10,572