Carriage Services Q2 Earnings Call Highlights

Key Points

• Second-quarter results improved despite lower funeral volumes: Revenue rose 0.8% to $102.9 million, while adjusted EBITDA increased 3.1% to $33.3 million and adjusted EPS climbed 5.4% to $0.78. Pricing gains, higher insurance-funded preneed sales, financial revenue and cost controls offset a 3.5% decline in comparable funeral volume.
• Cash flow and leverage showed mixed trends: Operating cash flow increased to $22.5 million in the first half, but adjusted free cash flow fell to $13.8 million because of higher capital spending. The bank leverage ratio improved to 4.0 times, while overhead expenses declined as a share of revenue.
• Carriage lowered its 2026 outlook primarily because of acquisition timing and softer mortality trends: The company now expects $435 million-$445 million of revenue, $135 million-$140 million of adjusted EBITDA and $3.35-$3.55 of adjusted EPS. Management said acquisition activity remains active, with more contribution expected later in the year, and noted that funeral volume turned positive in July.

Carriage Services NYSE: CSV reported higher second-quarter adjusted earnings and EBITDA despite lower funeral volumes, as the company cited pricing gains, growth in insurance-funded preneed contracts and cost discipline. Management also updated its 2026 outlook to reflect softer-than-expected mortality trends in the first half and later timing for anticipated acquisitions.

Total revenue for the second quarter rose 0.8% from a year earlier to $102.9 million. Adjusted consolidated EBITDA increased 3.1% to $33.3 million, producing an adjusted EBITDA margin of 32.3%, up 70 basis points from the prior-year period. Adjusted diluted earnings per share rose 5.4% to $0.78.

Funeral volume declines weighed on revenue

Chief Executive Officer Carlos Quezada said mortality trends weakened across much of the country beginning in January and remained below the company’s historical expectations through the first half. Comparable funeral volume declined 3.5% in the second quarter and 4.7% for the six months ended June 30, both compared with the prior-year periods.

Comparable funeral revenue declined 2.4% to $55.7 million, from $57 million a year earlier. Quezada said the lower volume reflected reduced mortality, a demand factor the company cannot control, but said operating initiatives helped mitigate much of the pressure.

Funeral home comparable average revenue per contract increased 3.7% year over year. During the question-and-answer session, Quezada said the company’s cremation rate was 60.6% in the quarter, compared with 61.2% a year earlier, and that the full-year rate was essentially flat. He attributed the higher average revenue per contract to package offerings and a program designed to present direct-cremation families with additional merchandise and service options.

Quezada said Florida represented the most significant state-level decline in volume. He noted that the state has a high cremation rate and a growing number of direct-cremation providers, while adding that the company does not believe it has lost market share.

Management said funeral volume turned positive in July, following year-over-year declines in each month from January through June. Quezada characterized July’s volume growth as “strong low single digit,” while cautioning that one month does not establish a longer-term trend.

Preneed sales and financial revenue supported results

Comparable cemetery revenue was essentially flat at $33.2 million, compared with $33.3 million in the prior-year quarter. Consolidated preneed cemetery sales production increased 5%, helped by a 17.3% increase in the average price per preneed interment right sold.

Management said the increase in sales production did not translate immediately into revenue and EBITDA because of the timing of preneed revenue recognition. Quezada said some production will be recognized in future periods.

Financial revenue increased 14% year over year to $9.3 million. Chief Financial Officer John Enwright said financial income, including funeral trust income and commissions from pre-arranged funeral contracts, along with cost management, contributed about $2.1 million of EBITDA improvement. The volume decline at comparable funeral locations reduced EBITDA by approximately $1.4 million, he said.

Insurance-funded preneed funeral contracts sold increased 21.1% during the quarter, according to Quezada.

Cash flow, capital spending and leverage

Cash from operating activities totaled $22.5 million in the first half, up from $21.9 million in the first half of 2025. Adjusted free cash flow declined to $13.8 million from $20.3 million, primarily because of $3.2 million in additional planned capital expenditures.

Second-quarter capital expenditures totaled $5.3 million, up from $2.8 million a year earlier. Maintenance capital accounted for $2.1 million, while growth capital was $3.2 million. Enwright said the higher spending reflected cemetery development intended to support preneed growth and previously deferred maintenance projects.

The company’s bank leverage ratio was 4.0 times at quarter-end, compared with 4.2 times at the end of the second quarter of 2025. Enwright said the lower leverage and an average credit-facility borrowing rate roughly 80 basis points below the prior-year period reduced interest expense by about $350,000.

Overhead expenses declined to $12.1 million, or 11.8% of revenue, from $12.5 million, or 12.5% of revenue, a year earlier. Enwright cited cost management and adjustments to incentive-compensation accruals, while noting that certain costs are expected to shift into the third and fourth quarters.

Outlook reflects acquisition timing and demand assumptions

Carriage updated its full-year 2026 outlook, projecting:

• Revenue of $435 million to $445 million;
• Adjusted consolidated EBITDA of $135 million to $140 million;
• Adjusted EBITDA margin of 31% to 31.5%;
• Adjusted diluted EPS of $3.35 to $3.55;
• Adjusted free cash flow of $40 million to $50 million; and
• An ending leverage ratio of 3.9 times to 4.0 times.

Enwright said the reduction in revenue expectations was primarily tied to the timing of acquisitions, with the company shifting its anticipated acquisition contribution from a prior range of $5 million to $10 million to a range of $0 million to $5 million. Management expects the fourth quarter to contribute more revenue than the third quarter, consistent with historical seasonality and potential acquisition-related revenue.

President and Chief Operating Officer Steve Metzger said acquisition activity remains active, though discussions are focused on valuation and ensuring deals meet the company’s return and growth criteria. He said Carriage expects some current discussions to advance over the next five months.

The company completed the McCammon acquisition in late May in the Knoxville, Tennessee, area. Metzger said the business handles just under 300 calls annually and that Carriage sees opportunities to increase pricing and market share in the growing Knoxville market.

Enwright also said Carriage expanded the pilot of its Trinity initiative to 15 additional locations on July 1, bringing the pilot to 17 locations. The company is evaluating data from the pilot before determining the broader rollout approach.

About Carriage Services (NYSE:CSV)

Carriage Services, Inc operates as a leading provider of funeral, cemetery and cremation services in the United States. The company owns and operates a network of funeral homes, cemeteries, crematories and related service facilities, offering a comprehensive suite of end-of-life services. Its portfolio encompasses traditional funeral services, memorials, graveside burials, mausoleum entombment and direct cremation options, alongside personalized tributes and reception arrangements.

In addition to standard funeral and cemetery offerings, Carriage Services provides pre-arrangement planning and financing solutions designed to ease the administrative and financial burden on grieving families.

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