Business Context and Reporting Period
Company: Carriage Services, Inc. (CSV)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three months ended March 31, 2026
Operations: Provider of funeral and cemetery services in the U.S., operating 155 funeral homes in 24 states and 28 cemeteries in 9 states. Operations are divided into Funeral Home (approx. 68% of revenue) and Cemetery (approx. 32% of revenue) segments.
Key Financial Metrics
| Metric (in thousands, except per share) | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenue | $106,120 | $107,069 |
| Gross Profit | $38,640 | $37,842 |
| Operating Income | $25,277 | $31,564 |
| Net Income | $13,492 | $20,926 |
| Diluted EPS | $0.84 | $1.34 |
| Adjusted Operating Profit (Non-GAAP) | $48,434 | $48,227 |
| Operating Cash Flow | $14,898 | $13,792 |
| Long-term Debt | $522,281 | $528,335 |
| Cash and Equivalents | $2,908 | $4,643 |
Material Changes vs. Prior Period
- Revenue: Decreased 0.9% to $106.1 million, driven by a reduction in revenue from divested operations in the prior year, partially offset by growth from recent acquisitions.
- Net Income: Decreased 35.5% to $13.5 million. The decline is primarily attributable to a $5.9 million net gain on divestitures and a $2.0 million gain on the sale of real property recognized in Q1 2025, which did not recur in 2026.
- Segment Performance:
- Funeral Home: Comparable revenue decreased 4.2% due to a 5.8% drop in contract volume, though average revenue per contract increased 1.7%.
- Cemetery: Comparable revenue increased 6.0%, driven by a 15.3% increase in the average price per interment right sold, offset by a 7.1% decrease in units sold.
- Expenses: General, administrative, and other expenses increased $1.0 million year-over-year due to higher salaries and amortization related to digital transformation projects.
Guidance, Outlook, and Risks
- Capital Allocation: Management plans to prioritize strategic acquisitions, capital expenditures, debt repayments, and dividends. The company maintains $127.3 million in availability under its Credit Facility.
- ATM Program: On May 6, 2026, the company announced an At-The-Market (ATM) offering program to sell up to $100.0 million of common stock.
- Macroeconomic Factors: Management notes mixed consumer spending trends and elevated inflation but states these have not materially impacted the business to date.
- Risks: Key risks include the ability to retain skilled personnel, fluctuations in death rates, changes in consumer preferences, investment performance of trust funds, and potential dilution from the ATM program.
- Legal Proceedings: Two class action lawsuits are pending (wage/hour and consumer class action regarding cemetery maintenance). The company cannot currently estimate potential losses.
Investor Verification Checklist
- Divestiture Impact: Verify the extent to which Q1 2025 results were inflated by one-time gains on asset sales ($7.8 million total) to assess normalized earnings power.
- Volume vs. Price: Monitor the trend of declining funeral contract volumes (-5.8% comparable) versus rising average prices to determine if price increases can sustainably offset volume declines.
- Debt Covenants: Confirm continued compliance with Credit Facility covenants (Total Leverage Ratio ≤ 5.00x; Fixed Charge Coverage Ratio ≥ 1.20x).
- ATM Execution: Track the utilization of the new $100 million ATM program and its potential dilutive effect on existing shareholders.
- Trust Fund Performance: Review the market value of preneed and perpetual care trust investments, which totaled approximately $324 million, for any significant unrealized losses.