Business Context and Reporting Period
Company: Carriage Services, Inc. (CSV)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and six months ended June 30, 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. 66% of revenue) and Cemetery (approx. 34% of revenue) segments.
Key Financial Metrics
| Metric (in thousands) | 3 Months Ended June 30, 2026 |
6 Months Ended June 30, 2026 |
|---|---|---|
| Total Revenue | $102,949 | $209,069 |
| Gross Profit | $35,044 | $73,684 |
| Operating Income | $23,953 | $49,230 |
| Net Income | $12,272 | $25,764 |
| Diluted EPS | $0.77 | $1.61 |
| Adjusted Operating Profit (Non-GAAP) | $45,182 | $93,616 |
| Cash and Cash Equivalents | $2,550 | $2,550 |
| Long-Term Debt | $526,016 | $526,016 |
| Net Cash Provided by Operating Activities | N/A | $22,450 |
Material Changes vs. Prior Period
- Revenue: Total revenue for the six months ended June 30, 2026, was flat ($209.1M) compared to the prior year ($209.2M). The quarter showed a slight increase of 0.8% ($102.9M vs. $102.1M).
- Net Income: Net income for the six months decreased 21.1% to $25.8M from $32.7M in the prior year. This decline is primarily attributed to a $7.7M net gain on divestitures and sale of real property recorded in the prior year, which did not recur in 2026.
- Funeral Segment: Comparable contract volume decreased 6.0% year-over-year for the six-month period, partially offset by a 3.8% increase in average revenue per contract. Preneed insurance contracts sold increased 14.9%.
- Cemetery Segment: Comparable revenue increased 2.5% for the six months, driven by a 16.5% increase in the average price per interment right sold, despite a 12.7% decline in the volume of rights sold.
- Divestitures: In the current period, the company sold one funeral home for $0.3M. In the prior year, the company sold two funeral homes and three cemeteries for $15.8M, resulting in a significant gain.
Guidance, Outlook, and Risks
- Capital Allocation: Management plans to prioritize capital allocation for strategic acquisitions, capital expenditures, debt repayments, and dividends. The company maintains a $250M Credit Facility with $123.8M availability as of June 30, 2026.
- ATM Program: On May 6, 2026, the company entered into an At-The-Market (ATM) equity offering program to sell up to $100M of common stock. No shares have been sold under this program to date.
- Acquisitions: The company acquired one funeral home for $4.5M in May 2026. In late 2025, it acquired six funeral homes, one cemetery, and a cremation business in Orlando, FL, and two funeral homes in Pensacola, FL.
- Risks: Key risks include the ability to find and retain skilled personnel, fluctuations in death rates, changes in consumer preferences, inflationary pressures on costs, and the financial condition of third-party insurance companies funding preneed contracts.
- Legal Proceedings: The company is involved in two class action lawsuits (one regarding wage/hour issues and one regarding cemetery maintenance) where the potential loss cannot be reasonably estimated.
Investor Verification Checklist
- Divestiture Impact: Verify the sustainability of earnings by excluding the one-time $7.7M gain from divestitures recorded in the prior year (2025) which inflated prior-year net income.
- Volume vs. Price: Monitor the trend of declining funeral contract volumes (down 6.0% YTD) versus rising average revenue per contract to assess if price increases are masking underlying demand weakness.
- Debt Covenants: Confirm continued compliance with Credit Facility covenants, specifically the Total Leverage Ratio (max 5.00:1) and Fixed Charge Coverage Ratio (min 1.20:1).
- Trust Fund Performance: Review the performance of preneed and perpetual care trust investments, as market fluctuations impact "Other, net" income and the ability to fulfill future obligations.
- ATM Program Utilization: Track future sales under the $100M ATM program for potential dilution to existing shareholders.