# Carriage Services Inc: Form 10-Q for the period ended Mar 31, 2025

- Company: [Carriage Services Inc](/companies/csv.md) (CIK 1016281)
- Form: 10-Q
- Filed: 2025-05-02
- Accepted by EDGAR: May 2, 2025, 16:18 ET
- Period: 2025-03-31
- Accession: 0001016281-25-000077
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1016281/000101628125000077/csv-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1016281/000101628125000077/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $107.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2025-01-01 to 2025-03-31 | $69.2m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2025-01-01 to 2025-03-31 | $37.8m | us-gaap:GrossProfit |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | $31.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2025-01-01 to 2025-03-31 | $7.3m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $8.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $20.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $1.34 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $1.35 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 15,389,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $13.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $3.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $1.7m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2025-03-31 | $4.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-03-31 | $49.9m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $1.28bn | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $52.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-03-31 | $1.05bn | us-gaap:Liabilities |
| Long-term debt | at 2025-03-31 | $4.9m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2025-03-31 | $581.0k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2025-03-31 | $223.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 40,791 characters.

### OVERVIEW

#### General

We operate in two business segments: Funeral Home Operations, which currently accounts for approximately 70% of our total revenue and Cemetery Operations, which currently accounts for approximately 30% of our total revenue. At March 31, 2025, we operated 160 funeral homes in 25 states and 28 cemeteries in 10 states.

Our funeral home operations are principally service businesses that generate revenue from sales of burial and cremation services and related merchandise, such as caskets and urns. Funeral services include consultation, the removal and preparation of remains, the sale of caskets and related funeral merchandise, the use of funeral home facilities for visitation and memorial services and transportation services. We provide funeral services and products on both an “atneed” (time of death) and “preneed” (planned prior to death) basis.

Our cemetery operations generate revenue primarily through sales of cemetery interment rights (primarily grave sites, lawn crypts, mausoleum spaces and niches), related cemetery merchandise (such as memorial markers, outer burial containers and monuments) and services (interments, inurnments and installation of cemetery merchandise). We provide cemetery services and products on both an atneed and preneed basis.

### COMPANY DEVELOPMENTS

#### Board and Leadership Changes

Effective January 2, 2025, John Enwright was appointed to serve as the Company’s Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer). In connection with the appointment of Mr. Enwright as the Company’s Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer), effective January 2, 2025, Kathryn Shanley ceased serving as the Company’s Interim Principal Financial Officer. Ms. Shanley continues to serve as the Company’s Chief Accounting Officer (Principal Accounting Officer).

On February 24, 2025, upon the recommendation of the Corporate Governance Committee of the Company, the Board unanimously elected Donald D. Patteson, Jr. to serve as the Company’s Non-Executive Chair of the Board, effective on that date. Prior to his appointment as Chair of the Board, Mr. Patteson served as the Chair of the Audit Committee and as a member of the Compensation and Corporate Governance Committees. Mr. Patteson has been a director of the Company since 2011. He succeeds Chad Fargason, who continues to serve on the Board and as a member of the Audit, Compensation and Corporate Governance Committees.

Additionally, on February 24, 2025, upon the recommendation of the Corporate Governance Committee of the Company, the Board elected Dr. Edmondo Robinson as the Chair of the Audit Committee, effective on that date. The election of Dr. Robinson as the Chair of the Audit Committee was as a result of Mr. Patteson being elected the Company’s Non-Executive Chair of the Board. Dr. Robinson joined the Company’s Board in 2024 and has served on each of the Audit, Compensation, and Corporate Governance Committees since 2024.

#### Divestitures

During the three months ended March 31, 2025, we sold two funeral homes and three cemeteries for an aggregate of $15.8 million resulting in a gain of $5.9 million. Additionally, we sold real property for $2.9 million resulting in a gain of $2.0 million.

#### Macroeconomic, Inflationary, Borrowing Cost and Volume Trends

During the first quarter of 2025, consumer spending on discretionary items saw a mixed performance. Based on various economic indicators, overall consumer spending remained strong, particularly among high-income earners, but it appears there was a shift towards more cautious spending, especially for middle and low-income households. We believe this caution was influenced by factors like rising inflation, additional tariffs, and a more uncertain economic outlook. Broad economic indicators have indicated that consumer confidence in the U.S. economy has been dropping over the past five months and may continue to drop, which could further influence consumer spending and the demand for our products and services. Additionally, the U.S. has adopted new and increased tariffs on countries and specific goods, subject to evolving exemptions, with additional tariff increases proposed but currently on pause. Those policies, along with retaliatory actions by some trading partners and ongoing negotiations around trade policy, have led to increased volatility and unpredictability for global trade. Given the potential of rising tariffs, we evaluated, and continue to evaluate, our current vendor agreements for our major vendors to ensure, to the extent possible, we adequately addressed any associated risks. Two vendors are currently impacted because they source a higher number of imported products from countries which have higher tariff impacts. To mitigate this risk, these vendors have shifted the source of their products to countries that have a lower tariff impact.

We also continue to monitor the impacts of inflationary costs to our business. While we are encouraged by the stabilization of inflationary costs that we have continued to experience in the first quarter of 2025 and throughout 2024, we are unable to forecast with any certainty whether inflationary costs will continue to moderate in future periods, as the ultimate scope and duration of these impacts remain unknown at this time. More broadly, the U.S. economy continues to experience the impact of several years of higher rates of inflation, which has impacted a wide variety of industries and sectors, with consumers facing rising prices. Such inflation may negatively impact consumer discretionary spending, including the amount that consumers are able to spend on our services, although we have not experienced any material impacts to date and our industry has been largely resilient to similar adverse economic and market environments in the past.

Although such conditions have not materially impacted our business to date and we expect these trends to continue in 2025, we will continue to assess these impacts and take the appropriate steps, if necessary, to mitigate any changes in consumer preferences or additional cost increases, if possible.

In addition, after giving effect to the Credit Facility Amendment, executed during the third quarter of 2024, we continue to experience lower variable interest rates under our Credit Facility, which resulted in lower borrowing costs in the first quarter of 2025 compared to the same period in the prior year. Further contributing to our lower borrowing costs was the pay down of $17 million on our revolving credit facility during the first quarter of 2025.

During the first quarter of 2025, we experienced higher funeral volumes compared to the same period in the prior year, which we believe was related to a delay in the flu season, resulting in continued fluctuations in the death rate. Although we expect fluctuations in the death rate to continue, we are unable to predict or forecast the duration or variation of the death rate with any certainty. Regardless of these fluctuations in the death rate, we continue to focus on expanding market share, cost management and executing on our strategic operational plans.

### LIQUIDITY AND CAPITAL RESOURCES

#### Overview

Our primary sources of liquidity and capital resources are internally generated cash flows from operating activities and availability under our Credit Facility.

We generate cash in our operations primarily from atneed sales and delivery of preneed sales. We also generate cash from earnings on our cemetery perpetual care trusts. Based on our recent operating results, current cash position and anticipated future cash flows, we do not anticipate any significant liquidity constraints in the foreseeable future. We have the ability to draw on our Credit Facility, as needed, subject to its customary terms and conditions.

For 2025, our plan is to remain focused on executing our strategic objectives and growth strategy. This includes prioritizing our capital allocation for debt repayments, the payment of dividends and debt obligations, internal growth capital expenditures, and general corporate purposes, as allowed under our Credit Facility. We expect to fund these payments using cash on hand and borrowings under our Credit Facility. We believe that our existing and anticipated cash resources, including, as needed, additional borrowings or other financings that we may be able to obtain, will be sufficient to meet our anticipated working capital requirements, capital expenditures, scheduled debt payments, commitments and dividends for the next 12 months, as well as our long-term financial obligations.

However, if our capital allocations and expenditures or acquisition plans change, we may need to access the capital markets or seek further borrowing capacity from our lenders to obtain additional funding and we may not be able to obtain such funding on terms and conditions that are acceptable to us. Further, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future liquidity may be adversely affected. For additional information regarding known material factors that could cause cash flow or access to and cost of finance sources to differ from our expectations, please read Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024.

#### Cash Flows

We began 2025 with $1.2 million in cash and ended the year with $4.6 million in cash. At March 31, 2025, we had borrowings of $120.0 million outstanding on our Credit Facility compared to $137.0 million at December 31, 2024.

The following table sets forth the elements of cash flow (in thousands):

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Cash and cash equivalents at beginning of period | $1,165 | $1,523 |
| Net cash provided by operating activities | 13,792 | 19,703 |
| Proceeds from divestitures and sale of other assets | 18,660 | 10,877 |
| Proceeds from insurance claims | — | 46 |
| Capital expenditures | (3,163) | (3,551) |
| Net cash provided by investing activities | 15,497 | 7,372 |
| Net payments on our credit facility, acquisition debt and finance lease obligations | (17,148) | (25,152) |
| Net payments on employee equity plans | (6,941) | (71) |
| Dividends paid on common stock | (1,722) | (1,686) |
| Net cash used in financing activities | (25,811) | (26,909) |
| Cash and cash equivalents at end of period | $4,643 | $1,689 |

#### Operating Activities

For the three months ended March 31, 2025, cash provided by operating activities was $13.8 million compared to $19.7 million for the three months ended March 31, 2024, a decrease of $5.9 million primarily due to unfavorable working capital changes related to accounts payable and accrued liabilities.

#### Investing Activities

Our investing activities resulted in a net cash outflow of $15.5 million for the three months ended March 31, 2025 compared to $7.4 million for the three months ended March 31, 2024, an increase of $8.1 million.

#### Acquisition and Divestiture Activity

During the three months ended March 31, 2025, we sold two funeral homes and three cemeteries for an aggregate of $15.8 million. Additionally, we sold real property for $2.9 million.

During the three months ended March 31, 2024, we sold six funeral homes and one cemetery for an aggregate of $10.9 million.

#### Capital Expenditures

For the three months ended March 31, 2025, our capital expenditures (comprised of growth and maintenance spend) totaled $3.2 million compared to $3.6 million for the year ended March 31, 2024, a decrease of $0.4 million.

The following tables present our growth and maintenance capital expenditures (in thousands):

| Growth | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Cemetery development | $1,602 | $2,000 |
| Renovations at certain businesses | 35 | 362 |
| Other | 116 | 27 |
| Total Growth | $1,753 | $2,389 |

| Maintenance | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| General equipment and furniture | $893 | $623 |
| Facility repairs and improvements | 268 | 302 |
| Vehicles | 32 | 14 |
| Paving roads and parking lots | 123 | 60 |
| Other | 94 | 163 |
| Total Maintenance | $1,410 | $1,162 |

38

#### Financing Activities

Our financing activities resulted in a net cash outflow of $25.8 million for the year ended March 31, 2025, compared to a net cash outflow of $26.9 million for the year ended March 31, 2024, a decrease of $1.1 million.

During the three months ended March 31, 2025, we had net payments on our Credit Facility, acquisition debt and finance leases of $17.1 million, net payments on our employee equity plans of $6.9 million, and paid dividends of $1.7 million.

During the three months ended March 31, 2024, we had net payments on our Credit Facility, acquisition debt and finance leases of $25.2 million and paid dividends of $1.7 million.

#### Dividends

Our Board declared the following dividends payable on the dates below (in thousands, except per share amounts):

| 2025 | Per Share | Dollar Value |
| --- | ---: | ---: |
| March 1st | $0.1125 | $1,722 |
| **2024** | **Per Share** | **Dollar Value** |
| March 1st | $0.1125 | $1,686 |

#### Share Repurchases

We did not repurchase any shares during the three months ended March 31, 2025 and 2024. At March 31, 2025, our share repurchase program had $48.9 million authorized for repurchases.

#### Credit Facility, Lease Obligations and Acquisition Debt

The outstanding principal of our Credit Facility, lease obligations and acquisition debt at March 31, 2025 is as follows (in thousands):

|  | March 31, 2025 |
| --- | ---: |
| Credit Facility | $120,000 |
| Operating leases | 16,275 |
| Finance leases | 9,942 |
| Acquisition debt | 5,437 |
| Total | $151,654 |

### Credit Facility

At March 31, 2025, our senior secured revolving credit facility (as amended, the “Credit Facility”) was comprised of: (i) a $250.0 million revolving credit facility, including a $15.0 million subfacility for letters of credit and a $10.0 million swingline, and (ii) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $75.0 million in the aggregate in the form of increased revolving commitments or incremental term loans.

Our obligations under the Credit Facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the Senior Notes (as defined in Note 11) and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Subsidiary Guarantors”).

On July 31, 2024, the Company entered into a fourth amendment, (the “Credit Facility Amendment”), to our Credit Facility, with the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent. The Credit Facility Amendment provided, among other things, for (i) the extension of the maturity date of the Credit Facility to July 31, 2029, provided that, if the Senior Notes (as defined in the Credit Facility) have a stated maturity date that is prior to July 31, 2029, then the maturity date shall instead be the date that is 91 days prior to the stated maturity date of the Senior Notes; (ii) the establishment of Term Secured Overnight Financing Rate (“SOFR”) as a benchmark rate and the removal of BSBY from the Credit Facility, including conforming revisions to certain defined terms under the Credit Facility; (iii) the conversion of each existing BSBY Rate Loan (as defined in the Credit Facility prior to giving effect to the Credit Facility Amendment) to a Term SOFR Loan (as defined in the Credit Facility); (iv) modifications to the definitions of “Applicable Rate” and “Applicable Fee Rate” to change the applicable rates and pricing levels set forth in each pricing grid; (v) the removal of certain mandatory prepayments arising from the issuance of either Equity Interests or Debt (as both are defined by the Credit Facility); and (vi) modifications to the permitted investments covenant, relating to the Company’s ability to make certain acquisitions, subject to the satisfaction of certain conditions therein.

The Credit Facility contains customary affirmative covenants, including, but not limited to, covenants with respect to the use of proceeds, payment of taxes and other obligations, continuation of the Company’s business and the maintenance of existing rights and privileges, the maintenance of property and insurance, among others.

In addition, the Credit Facility also contains customary negative covenants, including, but not limited to, covenants that restrict (subject to certain exceptions) the ability of the Company and the Subsidiary Guarantors to incur indebtedness, grant liens, make investments, engage in mergers and acquisitions, and pay dividends and other restricted payments, and certain financial maintenance covenants. At March 31, 2025, we were subject to the following financial covenants under our Credit Facility: (A) a Total Leverage Ratio not to exceed 5.00 to 1.00 and (B) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters. These financial maintenance covenants are calculated for the Company and its subsidiaries on a consolidated basis. We were in compliance with all of the covenants contained in our Credit Facility at March 31, 2025.

At March 31, 2025, we had outstanding borrowings under the Credit Facility of $120.0 million. We also had one letter of credit for $2.2 million under the Credit Facility. The letter of credit will expire on November 25, 2025 and is expected to automatically renew annually and secures our obligations under our various self-insured policies. At March 31, 2025, we had $127.8 million of availability under the Credit Facility.

At March 31, 2025, our outstanding borrowings under our Credit Facility bore interest at a prime rate or the SOFR rate, plus an applicable margin based on our leverage ratio. At March 31, 2025, the prime rate margin was equivalent to 1.50% and the SOFR term margin was 2.50%. The weighted average interest rate on our Credit Facility was 6.9% and 8.9% for the three months ended March 31, 2025 and 2024, respectively.

The interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands):

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Credit Facility interest expense | $2,499 | $3,916 |
| Credit Facility amortization of debt issuance costs | 88 | 138 |

The interest payments on our remaining borrowings under the Credit Facility will be determined based on the average outstanding balance of our borrowings and the prevailing interest rate during that time.

### Lease Obligations

Our lease obligations consist of operating and finance leases. We lease certain office facilities, certain funeral homes, vehicles and equipment under operating leases with original terms ranging from one to twenty years. Many leases include one or more options to renew, some of which include options to extend the leases for up to forty years. In addition, we lease certain other funeral homes, vehicles and equipment under finance leases with original terms ranging from three and a half to forty years.

The components of lease cost are as follows (in thousands):

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Operating lease cost | $993 | $978 |
| Short-term lease cost | 56 | 18 |
| Variable lease cost | (60) | 104 |
| Finance lease cost: |  |  |
| Depreciation of leased assets | $147 | $126 |
| Interest on lease liabilities | 188 | 125 |

At March 31, 2025, non-cancelable operating and finance lease obligations were $33.2 million with $5.7 million payable within 12 months.

### Acquisition Debt

Acquisition debt consists of deferred purchase price and promissory notes payable to sellers. A majority of the deferred purchase price and notes bear no interest and are discounted at imputed interest rates ranging from 6.5% to 7.3%. Original maturities typically range from nine to twenty years.

The imputed interest expense related to our acquisition debt is as follows (in thousands):

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Acquisition debt imputed interest expense | $94 | $104 |

At March 31, 2025, acquisition debt obligations were $8.2 million, with $0.9 million payable within 12 months.

### Senior Notes

At March 31, 2025, the principal amount of our 4.25% Senior Notes due in May 2029 (the “Senior Notes”) was $400.0 million. The Senior Notes were issued under an indenture, dated as of May 13, 2021 (the “Indenture”), among the Company, the Subsidiary Guarantors and Wilmington Trust, National Association, as trustee. The Senior Notes are unsecured, senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally by each of the Subsidiary Guarantors. The Senior Notes mature on May 15, 2029, unless earlier redeemed or purchased and bear interest at 4.25% per year, which is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021.

The Indenture contains restrictive covenants limiting our ability and our Restricted Subsidiaries (as defined in the Indenture) to, among other things, incur additional indebtedness or issue certain preferred shares, create liens on certain assets to secure debt, pay dividends or make other equity distributions, purchase or redeem capital stock, make certain investments, sell assets, agree to certain restrictions on the ability of Restricted Subsidiaries to make payments to us, consolidate, merge, sell or otherwise dispose of all or substantially all assets, or engage in transactions with affiliates. The Indenture also contains customary events of default.

The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 50 months of the Senior Notes. The effective interest rates on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes for both the three months ended March 31, 2025 and 2024 were 4.42% and 4.30%, respectively.

The fair value of the Senior Notes, which are Level 2 measurements, was $364.4 million at March 31, 2025.

The interest expense and amortization of debt discount and debt issuance costs related to our Senior Notes are as follows (in thousands):

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Senior Notes interest expense | $4,250 | $4,250 |
| Senior Notes amortization of debt discount | 138 | 132 |
| Senior Notes amortization of debt issuance costs | 39 | 38 |

We have future interest payments on our outstanding balance of $76.5 million, with $17.0 million payable within 12 months.

### FINANCIAL HIGHLIGHTS

Below are our financial highlights (in thousands except for volumes and averages):

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Total revenue | $107,069 | $103,493 |
| Funeral contracts | 12,172 | 12,091 |
| Average revenue per funeral contract excluding preneed interest | $5,710 | $5,580 |
| Preneed interment rights (property) sold | 3,236 | 3,437 |
| Average price per preneed interment right sold | $5,419 | $4,849 |
| Gross profit | $37,842 | $37,262 |
| Net income | $20,926 | $6,973 |

41

Revenue for the three months ended March 31, 2025 increased $3.6 million compared to the three months ended March 31, 2024. We experienced an 11.8% increase in the average price per interment right sold, offset by a 5.8% decrease in the number of preneed interment rights (property) sold. Additionally, we experienced a 2.3% increase in the average revenue per funeral contract excluding preneed interest and a 0.7% increase in funeral contract volume. The increase in cemetery revenue highlights the effectiveness of our preneed cemetery sales growth plan, as we continue to focus on executing our strategic goals. The increase in average revenue per funeral contract highlights the successful execution of our enhanced pricing strategy and the increase in funeral contract volume is primarily a result of a delayed flu season, which contributed to higher death rates in the first quarter of 2025 compared to the same period in the prior year.

Gross profit for the three months ended March 31, 2025 increased $0.6 million compared to the three months ended March 31, 2024, primarily due to the increase in revenue from our funeral home segment, which was offset by an increase in operating expenses in our cemetery segment.

Net income for the three months ended March 31, 2025 increased $14.0 million compared to the three months ended March 31, 2024. We experienced a $9.4 million increase in gain on sale of divestitures and real property, a $4.2 million decrease in general, administrative and other expenses, a $1.4 million decrease in interest expense, and a $0.6 million increase in gross profit; offset by a $1.6 million increase in income tax expense.

Further discussion of revenue and the components of gross profit for our funeral home and cemetery segments is presented under “– Results of Operations.”

Further discussion of general, administrative and other expenses, interest expense, income taxes and other components of income and expenses are presented under “– Other Financial Statement Items.”

### REPORTING AND NON-GAAP FINANCIAL MEASURES

We also present our financial performance in our “Condensed Operating and Financial Trend Report” (“Trend Report”) as reported in our earnings release for the three months ended March 31, 2025, dated April 30, 2025, and discussed in the corresponding earnings conference call. This Trend Report is used as a supplemental financial statement by management and investors to compare our current financial performance with our previous results and with the performance of other companies. We do not intend for this information to be considered in isolation or as a substitute for other measures of performance prepared in accordance with United States generally accepted accounting principles (“GAAP”). The Trend Report is a non-GAAP statement that also provides insight into underlying trends in our business.

Below is a reconciliation of gross profit (a GAAP financial measure) to adjusted operating profit (a non-GAAP financial measure) (in thousands):

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Gross profit | $37,842 | $37,262 |
| Cemetery property amortization | 1,828 | 1,756 |
| Field depreciation expense | 3,322 | 3,467 |
| Regional and unallocated funeral and cemetery costs | 5,235 | 3,842 |
| Adjusted operating profit(1) | $48,227 | $46,327 |

(1) Adjusted operating profit is defined as gross profit plus cemetery property amortization, field depreciation expense and regional and unallocated funeral and cemetery costs.

Our operations are reported in two business segments: Funeral Home and Cemetery. Below is a breakdown of adjusted operating profit (a non-GAAP financial measure) by segment (in thousands):

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Funeral Home | $33,179 | $30,602 |
| Cemetery | 15,048 | 15,725 |
| Adjusted operating profit | $48,227 | $46,327 |
| Adjusted operating profit margin(1) | 45.0% | 44.8% |

(1) Adjusted operating profit margin is defined as adjusted operating profit as a percentage of revenue.

Further discussion of adjusted operating profit for our funeral home and cemetery segments is presented under “Results of Operations.”

### RESULTS OF OPERATIONS

The following is a discussion of our results of operations for the three months ended March 31, 2025 and 2024.

The term “operating” in the funeral home and cemetery segments refers to all funeral homes and cemeteries that we owned and operated in the current reporting period, excluding certain funeral home and cemetery businesses that we have divested in such period.

The term “divested” when discussed in the funeral home segment refers to two funeral homes we sold during the three months ended March 31, 2025, and six funeral home we sold during the three months ended March 31, 2024.

The term “divested” when discussed in the cemetery segment refers to three cemeteries we sold during the three months ended March 31, 2025, and one cemetery we sold during the three months ended March 31, 2024.

The term “ancillary” in the funeral home segment represents our flower shop, monument business, pet cremation business and online cremation businesses.

Cemetery property amortization, field depreciation expense and regional and unallocated funeral and cemetery costs, are not included in adjusted operating profit, a non-GAAP financial measure. Adding back these items will result in gross profit, a GAAP financial measure.

### Funeral Home Segment

The following table sets forth certain information regarding our revenue and adjusted operating profit for our funeral home operations (in thousands):

| Revenue: | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Operating | $69,090 | $66,048 |
| Divested | 415 | 1,418 |
| Ancillary | 1,032 | 1,247 |
| Other | 4,082 | 3,118 |
| Total | $74,619 | $71,831 |
| Adjusted operating |  |  |
| Operating | $29,540 | $27,349 |
| Divested | 120 | 277 |
| Ancillary | 188 | 173 |
| Other | 3,331 | 2,803 |
| Total | $33,179 | $30,602 |
| The following consolidated operating measures reflect the significant metrics over this comparative period: |  |  |
| Contract volume | 12,172 | 12,091 |
| Average revenue per contract, excluding preneed funeral trust earnings | $5,710 | $5,580 |
| Average revenue per contract, including preneed funeral trust earnings | $5,869 | $5,756 |
| Cremation rate | 60% | 59% |

Funeral home operating revenue increased $3.0 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase in operating revenue is primarily driven by a 2.3% increase in the average revenue per contract excluding preneed interest and a 0.7% increase in contract volume. The increase in average revenue per funeral contract highlights the successful execution of our enhanced pricing strategy and the increase in funeral contract volume is primarily a result of a delayed flu season, which contributed to higher death rates in the first quarter of 2025 compared to the same period in the prior year.

Funeral home adjusted operating profit for the three months ended March 31, 2025 increased $2.2 million when compared to the same period in 2024, primarily due to the increase in operating revenue. The comparable operating profit margin increased 140 basis points to 42.8%. Operating expenses as a percentage of revenue decreased 1.3%, with the largest decrease in salaries and benefits expenses of 1.1% and transportation costs of 0.3%, while other operating expenses remained relatively flat. This reflects the continued progress we have made successfully executing on our cost management initiatives this quarter.

Ancillary revenue, which represents revenue from our flower shop, monument business, pet cremation business and online cremation businesses, decreased $0.2 million, while ancillary adjusted operating profit remained flat for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The decrease in ancillary revenue is primarily due to a decision to cease the operations of a cremation focused business at our Bakersfield, CA business, which did not contribute materially to adjusted operating profit.

*Other revenue* and other adjusted operating profit, which consists of preneed funeral insurance commissions and earnings from delivered preneed funeral trust and insurance contracts, increased $1.0 million and $0.5 million, respectively, for the three months ended March 31, 2025, compared to the same period in 2024. These increases are primarily due to an increase of $1.1 million in our general agency commission income for the first quarter of 2025 compared to the same period in 2024, which is a result of our continued focus on growth of our preneed funeral sales through our strategic partnership with a national insurance provider.

### Cemetery Segment

The following table sets forth certain information regarding our revenue and adjusted operating profit for our cemetery operations (in thousands):

| Revenue: | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Operating | $27,938 | $26,405 |
| Divested | 1,153 | 1,330 |
| Other | 3,359 | 3,927 |
| Total | $32,450 | $31,662 |
| Adjusted operating profit |  |  |
| Operating | $11,365 | $11,535 |
| Divested | 385 | 382 |
| Other | 3,298 | 3,808 |
| Total | $15,048 | $15,725 |
| The following consolidated measures reflect the significant metrics over this comparative period: |  |  |
| Preneed revenue as a percentage of operating revenue | 67% | 65% |
| Preneed revenue (in thousands) | $19,575 | $17,993 |
| Atneed revenue (in thousands) | $9,516 | $9,742 |
| Number of preneed interment rights sold | 3,236 | 3,437 |
| Average price per interment right sold | $5,419 | $4,849 |

Cemetery operating revenue increased $1.5 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, as we experienced an 11.8% increase in the average price per interment right sold, offset by a 5.8% decrease in the number of preneed interment rights (property) sold. Cemetery atneed revenue, which represents approximately 33.0% of our total operating revenue, decreased $0.2 million for the three months ended March 31, 2025, compared to the same period in 2024, primarily due to a decrease in delivered merchandise and services across our cemetery portfolio. The increase in cemetery revenue highlights the effectiveness of our preneed cemetery sales growth plan, as we continue to focus on executing our strategic objectives.

Cemetery adjusted operating profit decreased $0.2 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to an increase in operating expenses as a percentage of revenue. The comparable operating profit margin decreased 300 basis points to 40.7%. Operating expenses as a percentage of revenue increased 3.0%, with the largest increases in promotional expenses of 2.2%, allowance for credit losses of 0.9%, and salaries and benefits expenses of 0.7%, slightly offset by decreases in merchandise costs of 0.5% and general and administrative expenses of 0.3%.

*Other revenue* and other adjusted operating profit, which consist of preneed cemetery trust revenue and preneed cemetery finance charges, decreased $0.6 million and $0.5 million, respectively, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to a decrease in expected earnings for the current year in our perpetual care trust fund compared to earnings in prior year.

*Cemetery property amortization.* Cemetery property amortization totaled $1.8 million for the three months ended March 31, 2025, an increase of $0.1 million compared to the three months ended March 31, 2024, primarily driven by the increase in property sold across our cemetery portfolio.

*Field depreciation.* Depreciation expense for our field businesses totaled $3.3 million for the three months ended March 31, 2025, a decrease of $0.1 million compared to the three months ended March 31, 2024, primarily driven by our business decision to lease vehicles rather than purchase them.

*Regional and unallocated funeral and cemetery costs.* Regional and unallocated funeral and cemetery costs consist of salaries and benefits for regional management, field incentive compensation and other related costs for field infrastructure. Regional and unallocated funeral and cemetery costs totaled $5.2 million for the three months ended March 31, 2025, an increase of $1.4 million compared to the three months ended March 31, 2024, primarily driven by a $1.4 million increase in leadership and development expenses.

### Other Financial Statement Items

*General, administrative and other.* General, administrative and other expenses, which include salaries and benefits and cash and equity incentive compensation for our Houston support office, totaled $12.0 million for the three months ended March 31, 2025, a decrease of $4.2 million compared to the same period in 2024, primarily driven by the following: i) a $4.3 million decrease in salary and benefits expenses and incentive compensation costs, primarily driven by termination expense recorded in the first quarter of 2024 for our former Executive Chairman of the Board pursuant to his Transition Agreement, and ii) a $1.2 million decrease in consulting fees related to the Company's previously concluded review of strategic alternatives. These decreases were offset by an $0.8 million increase in professional fees primarily related to the development of our digital transformation project and a $0.5 million increase in all other expenses.

*Net (gain) loss on divestitures, disposals and impairment charges.* The components of *Net (gain) loss on divestitures, disposals and impairment charges* are as follows (in thousands):

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Impairment of goodwill, intangibles and PPE | $117 | $— |
| Net (gain) loss on divestitures | (5,937) | 1,501 |
| Net loss on disposals of fixed assets | 50 | 44 |
| Total | $(5,770) | $1,545 |

During the three months ended March 31, 2025, we sold two funeral homes and three cemeteries for an aggregate gain of $5.9 million. We also recognized an impairment of $0.1 million on land held for sale during the three months ended March 31, 2025.

During the three months ended March 31, 2024, we sold six funeral homes and one cemetery for a loss of $1.5 million.

*Interest expense*. Interest expense related to its respective debt arrangement is as follows (in thousands):

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Senior Notes | $4,428 | $4,420 |
| Credit Facility | 2,587 | 4,054 |
| Finance leases | 188 | 125 |
| Acquisition debt | 94 | 104 |
| Other | 1 | 9 |
| Total | $7,298 | $8,712 |

*Other, net.* During the three months ended March 31, 2025, we recorded a $2.0 million gain on the sale of other real property not used in business operations. We did not record any gain or loss activity during the three months ended March 31, 2024.

*Income taxes.* Income tax expense totaled $5.3 million for the three months ended March 31, 2025, an increase of $1.6 million compared to the three months ended March 31, 2024. Our operating tax rate before discrete items was 31.2% and 32.8% for the three months ended March 31, 2025 and 2024, respectively.

### CRITICAL ACCOUNTING ESTIMATES

The preparation of our Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Understanding our accounting policies and the extent to which our management uses judgment, assumptions and estimates in applying these policies is integral to understanding our Consolidated Financial Statements. Our critical accounting policies are more fully described in Part II, Item 8 “Financial Statements and Supplementary Data” in Note 1 in our Annual Report on Form 10-K for the year ended December 31, 2024.

We have identified Business Combinations and Goodwill as those accounting policies that require significant judgments, assumptions and estimates and that have a significant impact on our financial condition and results of operations. These policies are considered critical because they may result in fluctuations in our reported results from period to period due to the significant judgments, estimates and assumptions about complex and inherently uncertain matters and because the use of different judgments, assumptions or estimates could have a material impact on our financial condition or results of operations. Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change. Historical performance should not be viewed as indicative of future performance because there can be no assurance the margins, operating income and net earnings, as a percentage of revenue, will be consistent from period to period. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as appropriate based on changing conditions.

## Market risk

As filed, 4,402 characters.

In the ordinary course of business, we are typically exposed to a variety of market risks. Currently, these are primarily related to interest rate risk and changes in the values of securities associated with the preneed and perpetual care trusts. Management is actively involved in monitoring exposure to market risk and developing and utilizing appropriate risk management techniques when appropriate and when available at a reasonable price. We are not exposed to any other significant market risks other than those related to the impact of health and safety concerns from epidemics and pandemics and inflation which are described in more detail in Part 1, Item 1A, Risk Factors in this Form 10-K for the year ended December 31, 2024.

The following quantitative and qualitative information is provided about financial instruments to which we are a party at March 31, 2025 and from which we may incur future gains or losses from changes in market conditions. We do not enter into derivative or other financial instruments for speculative or trading purposes.

Hypothetical changes in interest rates and the values of securities associated with the preneed and perpetual care trusts chosen for the following estimated sensitivity analysis are considered to be reasonable near-term changes generally based on consideration of past fluctuations for each risk category. However, since it is not possible to accurately predict future changes in interest rates, these hypothetical changes may not necessarily be an indicator of probable future fluctuations.

The following information about our market-sensitive financial instruments constitutes a “forward-looking statement.”

In connection with our preneed funeral operations and preneed cemetery merchandise and service sales, the related funeral and cemetery trust funds own investments in equity and debt securities and mutual funds, which are sensitive to current market prices. Cost and market values of such investments at March 31, 2025 are presented in Part 1, Item 1, Financial Statements, Note 7 to our Consolidated Financial Statements in this Quarterly Report on Form 10-Q. The sensitivity of the fixed income securities is such that a 0.25% change in interest rates causes an approximate 0.82% change in the value of the fixed income securities.

We monitor current and forecasted interest rate risk in the ordinary course of business and seek to maintain optimal financial flexibility, quality and solvency. As of March 31, 2025, we had outstanding borrowings under the Credit Facility of $120.0 million. Any further borrowings or voluntary prepayments against the Credit Facility or any change in the floating rate would cause a change in interest expense. We have the option to pay interest under our Credit Facility at either the prime rate or the Term SOFR rate, plus an applicable margin based on our leverage ratio. At March 31, 2025, the prime rate margin was equivalent to 1.5% and the SOFR rate margin was 2.5%. Assuming the outstanding balance remains unchanged, a change of 100 basis points in our borrowing rate would result in a change in income before taxes of $1.2 million. We have not entered into interest rate hedging arrangements in the past. Management continually evaluates the cost and potential benefits of interest rate hedging arrangements.

Our Senior Notes bear interest at the fixed annual rate of 4.25%. We may redeem the Senior Notes, in whole or in part, at the redemption price of 102.13% on or after May 15, 2024, 101.06% on or after May 15, 2025 and 100% on or after May 15, 2026, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At March 31, 2025, the carrying value of the Senior Notes on our Consolidated Balance Sheets was $396.8 million and the fair value of the Senior Notes was $364.4 million based on the last traded or broker quoted price as reported by Financial Industry Regulatory Authority. Increases in market interest rates may cause the value of the Senior Notes to decrease, but such changes will not affect our interest costs.

The remainder of our long-term debt and leases consist of non interest-bearing notes and fixed rate instruments that do not trade in a market and do not have a quoted market value. Any increase in market interest rates causes the fair value of those liabilities to decrease, but such changes will not affect our interest costs.

## Controls and procedures

As filed, 1,741 characters.

### Management’s Evaluation of Disclosure Controls and Procedures

Our management, including our principal executive and principal financial officers, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and to ensure that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures are effective at March 31, 2025 and that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations, and cash flows for the periods presented in conformity with US GAAP.

### Changes in Internal Control over Financial Reporting

There was no change in our system of internal control over financial reporting (defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 3,063 characters.

In light of recent developments regarding U.S. foreign trade policies, we are supplementing the risk factors set out under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 with the updated risk factor set out below. Readers should carefully consider the updated risk factor below and the factors discussed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect our business, financial condition or future results. The risks described in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2024 are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

### GENERAL RISKS

### Economic Conditions and Natural Disasters

**Changes in U.S. foreign trade policies, including the imposition of additional tariffs and other trade barriers, and efforts to withdraw from or materially modify international trade agreements, may materially and adversely affect our business, operations and financial condition.**

Changes in U.S. foreign trade policies could lead to the imposition of additional trade barriers and tariffs on the foreign import of certain materials and products. For example, in April 2025, the U.S. government imposed an additional tariff on all countries for goods imported into the U.S. and individualized reciprocal higher tariffs for other countries, such as China, Mexico and Canada. Although several of these announced U.S. tariffs have been followed by announcements of temporary pauses for 90 days, along with limited exemptions, it is uncertain whether and to what extent they may become effective following this period. These actions have caused substantial uncertainty and volatility in financial markets and may result in additional retaliatory measures or costs on U.S. goods. We cannot predict what additional changes to trade policy will be announced or made by the U.S. government, including whether existing tariff policies will be maintained or modified, what products may be subject to such policies or whether the entry into new bilateral or multilateral trade agreements will occur, nor can we predict the effects that any such changes would have on our business. However, such steps, if adopted, could result in additional inflationary pressures on the U.S. economy and increase the costs of goods we offer our customers and may negatively impact the supply chain on which we depend to supply merchandise to our funeral home and cemetery locations. Although we may take measures to mitigate the effects of these impacts, if these measures are not effective, there can be no assurance that such changes in U.S. trade policy or in laws and policies governing foreign trade would not materially and adversely affect our business, financial condition, results of operations and liquidity.

Filed May 2, 2025.
Source: SEC EDGAR, the filing index for accession 0001016281-25-000077. Last ingested by Listed: Nov 5, 2026, 19:16 ET. No prices; not investment advice.