Full Transcript: Carriage Servs Q2 2026 Earnings Call

Carriage Servs (NYSE: CSV ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This content is powered APIs. 4% due to lower mortality rates, but cemetery sales and pricing improvements partially offset this decline.

3%, driven by cost management and productivity improvements despite lower funeral volumes. 1% increase in insurance-funded pre-need funeral contracts, continue to support long-term growth. Management remains optimistic with a revenue guidance of $435-$445 million for 2026, despite adjusting expectations slightly due to acquisition timing and lower-than-anticipated first-half results. 3% increase in average price per pre-need interment rights and the successful integration of new acquisitions like McCammon, which expands into new markets.

Full Transcript OPERATOR Good day and thank you for standing by. Welcome to the Carriage Servs Q2 2026 earnings call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sam Mazzu, III, Vice President, General Counsel and Secretary.

Please go ahead, sir. Sam Mazzu, III — Vice President, General Counsel & Secretary Good morning, everyone, and thank you for joining us to discuss our second quarter results for 2026. , Chief Executive Officer and Vice Chairman of the Board of Directors, Steve Metzger, President and Chief Operating Officer, and John Enright, Chief Financial Officer. On the Carriage Servs website you can find our earnings press release which was issued yesterday after the market closed.

Our press release is intended to supplement our remarks this morning and includes supplemental financial information including the reconciliation of differences between GAAP and non-GAAP financial measures. Today's call will begin with formal remarks from Carlos and John and will be followed by a question and answer period. Before we begin, I'd like to remind everyone that during this call we'll make some forward-looking statements, including comments about our business projections and plans. Forward-looking statements inherently involve risks and uncertainties and only reflect our views as of today.

These risks and uncertainties include, but are not limited to, factors identified in our earnings release as well as those in our SEC filings, all of which can be found on our website. Thank you all for joining us this morning. And now I'd like to turn the call over to Carlos. , Chief Executive Officer and Vice Chairman Thank you, Sam.

Welcome to everyone joining today's second quarter earnings call. Before discussing our financial performance, I want to begin by thanking the Carriage Servs team. Every day they serve families during some of the most difficult moments in their lives with compassion, professionalism, and genuine care. Their commitment to delivering premier experiences is what defines Carriage Servs, and the results we are sharing today are the direct reflection of their dedication and execution.

This morning I will discuss our second quarter performance, provide some perspective on the operating environment we experienced during the quarter and first half of this year, share an update on a couple of strategic priorities, and then turn the call over to John who will review our financial results in greater detail. Regarding the operating environment, the second quarter unfolded differently than we anticipated at the beginning of the year. Beginning in January, mortality trends softened across much of the country and remained below our historical expectations throughout the first half of the year. 7%, both compared to last year.

As everyone on this call understands, mortality is the primary demand driver for our funeral business and it is also one of the few variables we simply cannot control. What we can control is how we operate our business. I am proud of the way our teams responded. Rather than allowing lower funeral volume to dictate our performance, our field leaders and the support center teams remained focused on execution, operating discipline, and serving families exceptionally well.

The improvements we made over the last three years in our operations systems, processes, and leadership capability allowed us to offset much of the volume pressure through stronger execution. 3%. 1% increase in consolidated insurance-funded pre-need funeral contracts sold during the quarter compared to last year. In many ways, the second quarter became a real test of the organization we have been building.

I believe our teams demonstrated that Carriage Servs today is a more disciplined, more resilient, and better-operated company than ever before. 8% over the prior-year quarter. 4%. As expected, lower funeral volume was driven by reduced mortality rates, creating pressure on revenue during the quarter.

While call volume declined year over year, our teams remained focused on serving every family with excellence while continuing to improve operational efficiency across the business, partially offsetting the volume decline. 3 million last year. Our consolidated pre-need cemetery sales production grew by 5% over the previous year's quarter. The timing of pre-need cemetery revenue recognition will push a portion of this production to future periods.

3% over the same period last year, highlighting our ability to improve performance despite lower volume. That also affected the at-need side of our cemetery business. 3 million, or 14% greater than the previous year's quarter, reflecting the continued contribution of our insurance-funded pre-need strategy and the ongoing efforts of our sales organization to help more families plan ahead. Moving to profitability, despite the revenue headwinds created by lower funeral volume, profitability continued to trend in a positive direction.

3%, an increase of 70 basis points when compared to the same period last year. 4%. Perhaps more important than the absolute numbers, the quarter demonstrated the operating leverage we have been building into the business. Our teams remained disciplined in managing labor, controlling discretionary spending, improving productivity, and executing consistently across the organization.

Those efforts allowed us to mitigate a meaningful portion of the volume decline while continuing to invest in the business's long-term capabilities and performance. Simply put, when external conditions became temporarily more challenging, our operating performance improved. As volume trends return to a positive position, we believe our focus on operating performance will help drive an even more significant growth story in the quarters and years ahead. That is exactly what we would expect from a stronger operating company.

John will walk you through the financials in greater detail, but I want to recognize the outstanding work performed by both our field leaders and our support center teams throughout the quarter. Looking ahead, as we enter the third quarter, we were encouraged to see funeral volume return to positive growth during the month of July. While one month certainly does not establish a long-term trend, it is an encouraging indicator after a softer first half of the year. Our strategy has never depended on perfectly favorable market conditions.

It depends on consistently operating better today than we did yesterday. That philosophy remains unchanged. Operationally, we continue to make meaningful progress across several initiatives that will strengthen Carriage Servs over the long term. Our core line for urns and caskets as well as our package offerings are also strategies that continue to gain traction.

By simplifying merchandise selections while enhancing quality and consistency, we are improving both the family experience and the economics of our business. These initiatives represent much more than procurement programs. They are examples of how disciplined operating systems can simultaneously improve service and financial performance. We also continue expanding our Passion for Service program, which will become an important part of how we recognize and reinforce the behaviors that differentiate Carriage Servs.

Creating premier experiences is not simply an objective; it is the way we serve families and one another across the organization. Finally, we continue evaluating opportunities to deploy capital in ways that create long-term shareholder value. Our balance sheet remains healthy, our strategic acquisition pipeline remains busy and active, and we will continue applying the same disciplined approach to capital allocation that has guided us over the past several years. As I reflect on the quarter, one takeaway stands out.

External conditions have tested our business, but they also validated the progress we have made. We cannot influence mortality trends, we cannot dictate macroeconomic conditions, but we can control our culture, our operating discipline, our capital allocation, and the consistency with which we execute. This quarter demonstrated the value of those capabilities. When those capabilities combine with the return of positive volume trends, it truly allows us to optimize the creation of value for our shareholders.

Over the past three years we have worked intentionally to build a stronger company—not just one capable of delivering positive results when conditions are favorable, but one capable of performing through changing environments. While there is still work to do and plenty of opportunities in front of us, I believe the foundation we have built is stronger than ever and drives our focus on being an elite operating company supported by consistent performance.

I remain confident in the direction of Carriage Servs, confident in our leadership team, and most importantly, confident in the remarkable people across our organization who continue to serve families with compassion and excellence every single day. To our employees, thank you for your commitment. To our shareholders, thank you for your continued trust and support. With that, I will turn the call over to John.

John Thank you, Carlos, and good morning, everyone. We are pleased with our second-quarter results and the continued progress we have made during the first half of 2026. Despite the challenging funeral volume declines, our performance reflects disciplined execution of our strategy, a focus on what we can control, and the dedication of our field and support teams. I would like to thank all of our employees for their continued commitment to serving families with excellence while staying focused on operational execution and disciplined capital allocation.

Today I will focus primarily on second-quarter 2026 performance compared to the second quarter of 2025, followed by an update of our outlook for the rest of 2026. 6% of revenue, in the second quarter of 2025. The year-over-year change was primarily driven by financial income, including funeral trust income and commissions from prearranged funeral contracts, along with disciplined cost management. 1 million of EBITDA improvement.

3% increase in the average interment rights sold. However, the growth resulted in relatively flat revenue and EBITDA compared to the prior-year quarter due to timing of revenue recognition. 4 million less in the second quarter of 2026 compared to the prior-year quarter. 4%.

Adjusted diluted EPS increased primarily due to the stronger operating results discussed earlier, partially offset by higher depreciation and amortization expense compared to the second quarter of 2025. 7%. The improvement was primarily driven by working capital benefits, as growth in preneed cemetery sales does not immediately impact operating cash flow because payments are collected over the life of the contract. These sales generate stable long-term cash flow and build a strong backlog of future revenue.

3 million in the prior year. 2 million in incremental planned capital expenditures as we continue investing in our cemeteries and funeral homes to support future growth. Our disciplined capital allocation strategy continues to strengthen the balance sheet. 2 times at the end of the second quarter of 2025.

Maintaining a lower leverage ratio helped reduce borrowing costs, resulting in interest expense that was approximately $350,000 lower than the prior-year quarter. Our average borrowing rate under the credit facility was approximately 80 basis points lower than in the second quarter of 2025. 8 million in the second quarter of 2025. 2 million.

The year-over-year increase was primarily driven by cemetery development, which supports continued cemetery preneed growth, as well as previously deferred maintenance projects. 5% of revenue, in the second quarter of 2025. The year-over-year change primarily reflects incentive compensation adjustments and a heightened focus on cost management across the organization. We remain committed to disciplined expense management while continuing to invest appropriately in the people, technology, and infrastructure necessary to support our long-term growth strategy.

Turning to our outlook for the remainder of 2026, we are updating our outlook to reflect changes in external demand assumptions, including the lower-than-anticipated trends in the first half of the year and the revised timing of expected acquisitions. 9 and 4 times. Overall, we are pleased with our first-half performance and remain focused on executing the strategic initiatives that we believe will create long-term shareholder value. We continue to invest in our people, strengthen our operations, maintain disciplined capital allocation, and position the company for sustainable growth.

That concludes our prepared remarks. I will now turn it back over to the operator to open the line for questions. OPERATOR Thank you. We will now conduct a question-and-answer session.

If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one to ask a question. And we'll pause for just a moment to allow everyone the opportunity to signal for a question.

We'll take our first question from Liam Burke with B. Riley Securities. Liam Burke, Analyst at B. Riley Securities Thank you.

Good morning, Carlos, John, Steve, how are you today? , Chief Executive Officer and Vice Chairman Good morning, Liam. We're doing great. Thank you for asking.

Liam Burke, Analyst at B. Riley Securities Super. In the funeral home area, we're seeing a stability between cremation and traditional burials. And there's always been a trade-off: the cremation was more profitable with a lower ticket, while traditional burials were the opposite—larger ticket, lower margin.