Park Lawn Corporation

Q1 2024 revenue was roughly $76.4 million, down approximately 11.9% year over year, principally from the disposition of legacy assets. Net earnings increased approximately 14.7% to about $5.25 million versus $4.58 million in Q1 2023. Adjusted net earnings were approximately $7.57 million, or $0.215 per share, compared with $8.61 million, or $0.249 per share, in Q1 2023. Comparable funeral margins increased approximately 250 basis points, while overall comparable-op margins were relatively flat year over year. Corporate costs were roughly 10.25% of revenue, and the company said it had about $145 million outstanding on its credit facility, $13.3 million of other debt, $14.3 million of finance leases, and $17.7 million of cash on hand at March 31. Net debt excluding debentures was about $155 million, and leverage was about 2.15x under the credit facility terms or 3.03x including debentures. Management affirmed 2024 guidance with adjusted EBITDA midpoint of $75 million and adjusted EPS midpoint of $0.85, and said acquisitions are expected to be weighted toward the second half of the year.

Brad Green framed the quarter as evidence that Park Lawn’s post-divestiture operating model is starting to work. He emphasized better infrastructure, including FaCTS, the new sales and commission structure, and improved reporting, saying the company now has confidence it can scale. He was upbeat but measured, saying the team expects incremental operational improvement, modest same-store growth from efficiencies, and most of the year’s growth to come from acquisitions.

Dan Millett said revenue was in line with expectations and reiterated that the Q1 decline was largely the result of the legacy asset disposition, partially offset by acquisitions. He highlighted that comparable funeral margins improved about 250 basis points, corporate costs were about 10.25% of revenue, and the company had $17.7 million in cash, $145 million drawn on the credit facility, and net debt of about $155 million excluding debentures. He also said the company kept its 2024 outlook unchanged, with adjusted EBITDA midpoint $75 million and adjusted EPS midpoint $0.85, noting that mortality remains a headwind, rates are still high, and acquisitions are expected later in the year.

Analysts focused on cemetery revenue softness, margin expansion, acquisition pacing, buybacks, and the impact of the Canadian care and maintenance fund manager change. Management said cemetery performance was in line with expectations, that group sales are lumpy and should arrive throughout the year, and that lot development spending should remain around 50 to 100 basis points of revenue except for a larger Westminster Mausoleum project in Toronto later this year or early next year. On buybacks, Dan Millett said the first quarter had a short blackout window and that the company would likely continue its NCIB if the stock keeps trading at recent levels.