Carriage Services (CSV) Q3 2026 Earnings Call Transcript

DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Vice President, General Counsel, and Secretary - Sam Mazzu
• Chief Executive Officer and Vice Chairman of the Board of Directors - Carlos Quezada
• President and Chief Operating Officer - Steve Metzger
• Chief Financial Officer - John Enwright

TAKEAWAYS

• Total Revenue -- $100.3 million, a decline of 2.4% driven by weaker cemetery preneed performance and a $2.5 million trust tax impact.
• Adjusted Diluted EPS -- $0.59, compared to $0.75 in the prior year quarter, reflecting lower operating contribution and additional trust taxes.
• Adjusted Consolidated EBITDA -- $27.7 million, representing a 16% decline from $33 million in the prior year quarter.
• Funeral Contract Volume -- 10,374 total contracts, a 2.5% increase that management attributed to market share gains following a mortality-pressured first half.
• Average Revenue per Funeral Contract -- $5,930, representing a 1.9% increase due to improved package presentation and conversion.
• Cemetery Preneed Sales Production -- $25.7 million, a decline of 4.8% for the quarter reflecting execution challenges in fundamental sales disciplines.
• Financial EBITDA -- $5.6 million, a decrease of approximately $2.5 million primarily due to trust taxes from the sale of Master Limited Partnership investments.
• Acquisition Pipeline -- $14 million in annual revenue under contract or letter of intent, involving five separate closings across five states.
• Funeral Comparable EBITDA Margin -- 35.9%, compared to 36.9% in the prior year quarter, pressured primarily by salaries and benefits.
• Cemetery Comparable EBITDA Margin -- 41.8%, a decline from 48.3% driven by sales productivity and changes in revenue mix.
• Insurance-Funded Preneed Funeral Sales -- growing 7% year over year, reinforcing management confidence in the funeral operating strategy.
• Bank Leverage Ratio -- 4.1 times, remaining flat compared to the third quarter of 2025 following the closing of a new credit facility.
• Operating Cash Flow -- $24.7 million for the quarter, essentially unchanged from $24.7 million in the prior year period.
• Adjusted Free Cash Flow -- $19.3 million, compared to $19 million in the prior year quarter.
• Full-Year Revenue Guidance -- revised to $415 million to $420 million, down from the previous range of $435 million to $445 million.
• Full-Year Adjusted EBITDA Guidance -- revised to $125 million to $130 million, compared to the prior range of $135 million to $140 million.
• Full-Year Adjusted Diluted EPS Guidance -- revised to $2.90 to $3.05, down from $3.35 to $3.55.
• Full-Year Adjusted Free Cash Flow Guidance -- revised to $40 million to $45 million, compared to $40 million to $50 million previously.
• Capital Expenditures -- $5.8 million for the quarter, consisting of $2.7 million in maintenance and $3.1 million in growth capital.
• Cemetery Geography Performance -- down 7.1% year to date for California preneed property sales, while non-California properties rose 10.1%.
• Overhead Expenses -- $13.6 million, representing 13.5% of total revenue compared to 13.4% in the prior year period.

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RISKS

• Quezada stated, "Our cemetery preneed performance has not met our standards this year, and we are taking decisive action to improve this area," citing execution gaps in sales leadership and training.
• Quezada noted that mortality rates remain outside the company's control, stating that during the first half of the year, "lower-than-anticipated mortality pressured funeral volumes, with comparable funeral contracts declining 4.7%."

SUMMARY

Carriage Services, Inc. (NYSE:CSV) reported third quarter revenue of $100.3 million, representing a 2.4% decline from the prior year. Management attributed this performance decrease to a combination of weaker cemetery preneed sales and a discrete $2.5 million trust tax impact associated with the sale of certain Master Limited Partnership investments. While the funeral segment demonstrated recovery with same-store contract growth of 2.3%, the company lowered its full-year 2026 guidance to reflect year-to-date mortality trends and sustained sales productivity challenges in the California market. The company also increased its committed borrowing capacity by $50 million through a new $300 million credit facility to support an active acquisition pipeline that represents more than $14 million in potential annual revenue additions.

• The company launched "The Carriage Way," a new leadership and cultural framework designed to align the organization's entrepreneurial spirit with a unified culture of accountability and collaboration.
• Carlos Quezada stated, "A strong culture creates alignment, drives execution, and consistent execution delivers results."
• Management identified specific sales discipline gaps and is currently conducting a comprehensive evaluation of its sales operating system, including recruiting, training, and lead conversion.
• President Steve Metzger indicated that most acquisitions currently in the pipeline are sourced directly through existing relationships rather than through competitive bidding processes.
• John Enwright noted the company replaced leadership in its information technology department and engaged a third-party consultant to evaluate its systems programs and overall IT strategy.

INDUSTRY GLOSSARY

• ARPC: Average Revenue Per Contract, a primary metric for evaluating the average value of funeral service agreements.
• Preneed Interment Rights: Contractual agreements for cemetery burial space or property purchased by consumers before the time of need.
• Master Limited Partnership (MLP): A publicly traded business entity that combines the tax benefits of a partnership with the liquidity of a stock.
• Adjusted Free Cash Flow: A non-GAAP measure of cash generated by operations minus capital expenditures, adjusted for non-recurring or special items.
• Bank Leverage Ratio: A financial metric measuring total debt against EBITDA as defined by the company's lending agreements.
• The Carriage Way: An internal corporate framework established by the company in 2026 to standardize leadership, talent development, and operational excellence.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Carriage Services Third Quarter 2026 Earnings Conference 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, the Vice President, General Counsel, and Secretary. Please go ahead, sir.

Sam Mazzu: Good morning, everyone, and thank you for joining us to discuss our third quarter results for 2026. In addition to myself, on the call this morning for management are Carlos Quezada, Chief Executive Officer and Vice Chairman of the Board of Directors, Steve Metzger, President and Chief Operating Officer, and John Enwright, Chief Financial Officer. On the Carriage Services 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 will 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 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.

Carlos Quezada: Thank you, Sam, and welcome to everyone joining today's third quarter earnings call. I want to begin by thanking the entire Carriage team. Every day, our people serve families during some of life's most difficult moments with compassion, professionalism, and genuine care. Their commitment to deliver premier experiences remains the foundation of our company and our long-term success. Today, I will discuss our third quarter performance, address areas we are focused on improving, and highlight the progress we are making on the strategic priorities that will drive Carriage's long-term success. Then I will turn the call over to John, who will review our financial results and updated full-year outlook in greater detail. Let me begin with our operating performance.

Throughout 2026, our operating environment has reinforced the importance of building a company that can deliver consistent performance through changing market conditions. During the first half of the year, lower-than-anticipated mortality pressured funeral volumes, with comparable funeral contracts declining 4.7%. However, we saw an encouraging improvement in the third quarter, with same-store funeral contracts growing 2.3% and total funeral contracts increasing 2.5% compared to the prior year. Consolidated funeral average revenue per contract increased $109, or 1.9%, while insurance-funded preneed funeral contracts sold grew 7%. These results are encouraging and demonstrate progress from our internal focus on areas to drive volume and contract average.

While mortality rates remain outside our control, our ability to gain market share, improve average revenue per contract, and consistently deliver premier experiences is firmly within it. We believe our continued focus on these fundamentals is strengthening our competitive position and creating the foundation for more consistent organic growth. Turning to our financial results. Third quarter total revenue was $100.3 million, a decline of 2.4% compared to the prior year, primarily reflecting weaker cemetery preneed sales. Funeral comparable revenue increased 3.6% to $56.8 million, supported by improved contract volume and average revenue per contract. Cemetery comparable revenue declined 7.8% to $32.5 million.

Comparable cemetery preneed sales totaled $25.7 million, a decline of 4.8% for the quarter, although production remains relatively flat for the first nine months of the year. Our cemetery preneed performance has not met our standards this year, and we are taking decisive action to improve this area. Over the past several months, our review of leading sales indicators has identified opportunities to improve the execution of fundamental sales disciplines. We are addressing this through a comprehensive evaluation of our sales operating system, including recruiting, training, sales leadership, lead generation, conversion, compensation, and individual productivity. We are also strengthening our sales management team's accountability, establishing clear performance expectations, and improving our ability to identify and correct performance gaps earlier.

Simply put, flat performance to prior year is not good enough at Carriage. We recognize where improvements are needed, have a clear action plan already underway, and are committed to delivering measurable progress and returning to our expected growth trajectory. As evidence of our underlying growth potential, our historical performance demonstrates the growth potential of our cemetery segment. From the third quarter of 2023 through the third quarter of 2026, same-store total cemetery preneed sales achieved a compound annual growth rate of 13.9%. Our focus is on building upon that foundation, strengthening execution, and delivering consistent, sustainable growth.

Moving to financial revenue, we ended the quarter at $6.2 million, a decrease of $2.8 million, primarily due to additional trust taxes associated with the sale of certain Master Limited Partnership investments held in our trusts. John will provide additional details shortly. Adjusted consolidated EBITDA was $27.7 million, a decrease of 16%, with an adjusted EBITDA margin of 27.6% compared to 32.1% last year. Adjusted diluted EPS was $0.59 per share compared to $0.75 per share in the prior year's quarter. These results were primarily affected by lower cemetery preneed sales performance and the trust-related tax impact.

While these financial results fell short of our expectations, we remain confident in the underlying strength of our businesses and our ability to improve performance through disciplined execution, supported by the successful implementation of targeted changes to our cemetery preneed sales organization. Turning to our strategic growth initiatives, I am particularly encouraged by the momentum and quality of our acquisition pipeline. As previously communicated, we anticipated increased acquisition activity during the second half of 2026. Today, we have over $14 million in annual revenue represented by acquisitions under contract and letters of intent, with anticipated closings later this year and early 2027. This represents meaningful progress in executing our strategic growth priorities and reinforces our confidence in the opportunities ahead.

Importantly, we remain disciplined and selective. We are focused on acquiring premier businesses with strong reputations, attractive market positions, cultural alignment, and the potential to generate compelling returns on invested capital. We will not pursue growth simply to become larger. Our objective is to build a stronger, more profitable Carriage through acquisitions that enhance our portfolio, strengthen our competitive position, and create sustainable shareholder value. We believe our acquisition strategy, combined with improving organic performance, represents an important opportunity to accelerate progress towards our 2030 Vision. Beyond our financial and strategic initiatives, one of the most important developments this quarter was the launch of The Carriage Way. The Carriage Way represents more than a cultural initiative.

It is about defining who we are as an organization, how we lead, how we work together, and the standard of performance we expect from our team. Historically, Carriage has benefited from the entrepreneurial spirit, the strong local relationships, and unique identities of our individual businesses. These remain important competitive advantages, and we intend to preserve them. At the same time, as we continue to grow, we recognize the tremendous opportunity to operate more effectively as one Carriage, united by a shared purpose, common values, and a culture of accountability, collaboration, continuous improvement, and premier service.

The Carriage Way brings these principles together, creating a common foundation for leadership, talent development, operational excellence, and the experiences we deliver to the families we serve. Our passion for delivering elevated experiences is an important part of bringing this culture to life by recognizing and reinforcing the behaviors that make Carriage special. I firmly believe that culture and performance are inseparable. A strong culture creates alignment drives execution, and consistent execution delivers results. The Carriage Way is foundational to the company's success in building the exceptional operating company we envision for 2030. It will help us develop stronger leaders, attract and retain exceptional talent, share best practices, and unlock the collective strength of our organization.

We are excited about what this means for our people, our businesses, the families we serve, and the future of Carriage. As we look ahead, I want to leave you with a few thoughts. While our third quarter financial results did not meet our expectations, we are seeing encouraging progress in important areas of our business. Our funeral operations returned to positive contract growth while continuing to improve upon contract average. Our acquisition pipeline continues to grow with quality opportunities, and The Carriage Way is bringing greater alignment and shared accountability across our organization. At the same time, we recognize the work ahead, particularly as it relates to improving cemetery preneed sales performance.

We are addressing these challenges directly and with a clear focus. What gives me confidence is not simply the opportunity ahead, but the strength of our strategy, the capabilities of our people, the quality of our assets, and our determination to execute. We have a clear vision of the company we're building, a strong foundation to build upon, and a leadership team committed to turning our strategic priorities into measurable results. Our objectives remain unchanged: to build an exceptional operating company recognized for premier service, consistent performance, disciplined growth, and sustainable long-term shareholder value creation. I am confident in our direction, encouraged by the progress we're making, and excited about Carriage's future.

With that, I will turn the call over to John.

John Enwright: Thank you, Carlos, and good morning, everyone. As Carlos discussed, our third quarter results reflected encouraging improvement in funeral contract volume and average revenue per contract, offset by weaker cemetery preneed sales performance and lower financial income. While the overall financial performance was below our expectations, the quarter also demonstrated the importance of our continued focus on operating execution, cash generation, and disciplined capital allocation. Today, I will review our third quarter financial results compared with the third quarter of 2025, discuss cash flow and capital expenditures, provide an update on our balance sheet and capital allocation priorities, and conclude with our outlook for the remainder of 2026.

For the third quarter, total revenue was $100.3 million compared with $102.7 million in the prior year quarter, a decrease of approximately 2.4%. Adjusted consolidated EBITDA was $27.7 million compared with $33 million a year ago, a decline of approximately $5.3 million. Adjusted EBITDA margin was 27.6% compared with 32.1% in the prior year quarter. The year-over-year EBITDA change was primarily driven by two components. Comparable cemetery EBITDA declined approximately $3.5 million, reflecting weaker cemetery preneed sales performance, while financial EBITDA declined approximately $2.5 million. As Carlos mentioned, financial revenue was adversely affected by additional trust taxes associated with the sale of certain Master Limited Partnership investments held in our trusts.

That financial EBITDA decline includes that impact along with other year-over-year changes in financial income and related expenses. These decreases were partially offset by modest growth in our funeral comparable EBITDA, incremental acquisition EBITDA, lower overhead expense, and other changes. Our funeral comparable businesses generated $20.4 million of EBITDA, essentially flat to slightly higher than last year, despite some margin pressure. Comparable funeral revenue increased 3.6%, reflecting stronger contract volume and average revenue per contract, while comparable funeral EBITDA margin was 35.9% compared with 36.9% last year. In cemetery, comparable EBITDA was $13.6 million compared with $17.1 million a year ago, and the comparable cemetery EBITDA margin declined to 41.8% from 48.3%.

Comparable cemetery revenue was $32.5 million, down 7.8%, with preneed sales production of $25.7 million compared with $27 million in the prior year quarter. This shows the significant impact that sales productivity and revenue mix can have on a segment profitability. As Carlos described, efforts are underway, and our team is focused on more consistent execution with an emphasis on sales leadership, productivity, and conversion. Adjusted diluted earnings per share were $0.59 compared with $0.75 a year ago, primarily reflecting the lower adjusted operating contribution and trust taxes. Excluding the impact of trust taxes, our adjusted diluted earnings per share results would have been $0.70 for the third quarter of 2026.

GAAP diluted earnings per share were $0.56 compared with $0.41 in the prior year quarter. The difference in year-over-year GAAP and adjusted results reflects, in part, the impact of prior year divestitures. Moving to cash flow. Cash provided by operating activities was $24.7 million for the third quarter, essentially unchanged from the prior year quarter. Year-to-date, operating cash flow totaled $47.2 million compared with $46.6 million in the first nine months of 2025. Adjusted Free Cash Flow for the third quarter was $19.3 million compared with $19 million last year. For the first nine months of 2026, Adjusted Free Cash Flow was $33 million compared with $39.3 million in the prior year period.

The year-to-date decline principally reflects higher capital expenditures and a difference in the adjustments between operating cash and Adjusted Free Cash Flow. We continue to view cash generation as a critical component of our capital allocation strategy, supporting reinvestment in our portfolio, selective acquisitions, and financial flexibility. During the quarter, we closed on our new $300 million credit facility, increasing borrowing capacity commitment by $50 million. The new agreement provides additional flexibility to support strategic initiatives and is an important step in managing our capital structure. At quarter end, our bank leverage ratio remained flat at 4.1 times compared to the third quarter of 2025. Interest expense was approximately $200,000 lower than the prior year quarter.

Our average borrowing rate under the credit facility was approximately 80 basis points lower in the third quarter of 2025. Capital expenditures totaled $5.8 million in the quarter compared to $6.7 million a year ago. Through the first nine months of 2026, capital expenditures were $15.1 million compared to $12.7 million in the prior year period. Of the total capital expenditures in the quarter, maintenance capital was $2.7 million, growth capital was $3.1 million. We remain focused on investing in the facilities and cemetery development opportunities that support the long-term performance of our businesses while maintaining appropriate discipline around returns and cash flow.

Overhead expenses were $13.6 million in the third quarter compared to $13.7 million in the prior year period. As a percentage of revenue, overhead was 13.5% compared with 13.4% last year. Year to date, overhead has decreased to $40.5 million from $41.5 million, or 13.1% of revenue versus 13.3% a year ago. We continue to manage our cost structure carefully while investing in people, tools, and systems that we believe will improve execution and support our growth. Given the variability in revenue, maintaining expense discipline remains an important priority.

Turning to our outlook for 2026, we are revising our full-year expectations to reflect the year-to-date results, including lower-than-anticipated mortality rates during the first half of the year, weaker cemetery preneed sales performance, and the revised timing of expected acquisitions. While the improvement in our funeral business during the third quarter is encouraging, our updated outlook reflects the financial performance achieved to date and our current assessment of the fourth quarter. Our revised full-year outlook anticipates revenue between $415 million and $420 million, compared with our previous range of $435 million-$445 million. Adjusted consolidated EBITDA between $125 million and $130 million, compared with $135 million to $140 million.

Adjusted diluted earnings per share between $2.90 and $3.05, compared with $3.35 to $3.55. We now expect Adjusted Free Cash Flow between $40 million and $45 million, compared with $40 million to $50 million previously. Our capital expenditure outlook remains unchanged at $20 million-$25 million. Based on the first nine months of results, the revised ranges imply fourth-quarter revenue of approximately $106 million-$111 million and adjusted consolidated EBITDA of approximately $30 million-$35 million. In closing, our revised outlook reflects the areas where performance has fallen short of our expectations. We are encouraged by the improvement in our funeral segment, but recognize that restoring cemetery performance and improving overall consistency remain important priorities.

We will continue to focus on disciplined cost management, cash flow, and capital allocation decisions that support long-term value creation for our shareholders. This concludes our prepared remarks. I will now turn it back over to the operator to open the line for questions.

Operator: Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will pause for a moment to allow everyone an opportunity to signal for questions. While we build that queue, we will go to our first question from Laura Maher with B. Riley Securities. Please go ahead.

Laura Maher: Good morning. Thank you for taking my question. My first question is, in cemetery, is the weakness concentrated in a few large properties or broad-based across the 28 cemeteries?

Carlos Quezada: Yeah, that's a great question. Thank you for the question, Laura. As we look at the analysis, and with this, I'm going to give you some year-to-date numbers, it's pretty clear that it's highly concentrated in the California cemeteries. As we look at year to date, we look at California being down 7.1% on preneed cemetery property, where everywhere else is up 10.1%. It seems like a very highly focused area. Specifically, once you look into the different brackets of pricing within California, it's pretty clear that the contracts between below 10,000, but really below 20,000, are the ones driving the most deficit on the preneed cemetery growth, whereas contracts between 20,000 and 30,000 is up by 13.7%.

We are addressing these challenges. We're looking if it's an inventory issue, if it's just a type of lead source issue to make sure that those, I call it bread-and-butter contracts below the 20,000 average, we can target more and really get our contract count back on track in the California markets.

Laura Maher: Thank you. My second question, is there any update on the non-core divestiture program and expected proceeds?

Steve Metzger: No, Laura. We've pretty much wrapped up our divestiture focus. Haven't sold any additional businesses this year and don't have any plans to sell any in the future.

Laura Maher: Okay. Thank you. I'll pass it on.

Operator: Thank you. Our next question comes from Alex Paris with Barrington Research. Please go ahead.

Alex Paris: Morning, everybody. Thanks for taking my questions. Where to start? I think I'll start with the M&A pipeline. Very exciting. First question, very exciting because you've only done one this year in May, and it was probably about $1.5 million in revenue by my estimation. So, you got $14 million in annual revenue in the pipeline. Some will close in the fourth quarter, some will close in the first quarter. First question, how many businesses does this include, and are they funeral, cemetery, or combo businesses?

Steve Metzger: Yeah. Good morning, Alex. This is Steve. So, yeah, it includes a combination of all the above. So, it's funeral homes, it's cemeteries, it's crematories, spread out through five different states, and it's a mix of both new markets for us, which we're really excited about, bigger markets that are growing that we've been working to get into, but also increasing our presence in some markets that we've really been doing well in the past few years, and so working to build out the presence in those markets. So it's a really nice cross-mix of all those things.

When we talk about the pipeline, this is my ninth year at Carriage, and we've never been anywhere close to the number of quality conversations we're having right now with businesses that align with our growth strategy. What we talked about earlier in the year was the back half would be pretty active, and that will really be the launch for what we think is the new normal for us in terms of cadence on acquisitions. They are going to look a lot like the types of businesses you have seen us acquire in the past. So high-quality combination businesses, funeral homes and cemeteries, high-quality standalone funeral homes, with the opportunity to expand a presence in the market.

It is going to be a lot of what you have seen us do in the past.

Alex Paris: Okay. Just to follow up on that, how many closings are we expecting? Is it one, two, three, four acquisitions?

Steve Metzger: Yes, it is going to be five.

Alex Paris: Some will close in the fourth quarter, some will close in the first quarter, based on your current thinking?

Steve Metzger: Correct, and primarily driven by regulatory approvals and their timeline.

Alex Paris: Got you. I assume pricing is in line with your historical discipline?

Steve Metzger: Correct.

Alex Paris: Great. Let me move on. You talked a lot about cemetery, so I will focus my question on funeral. Funeral was pretty exciting on a same-store basis. Funeral contracts were up 2.3% in the third quarter. That is an improvement from the second quarter when it was down 3.5%, and the first quarter when it was down 5.8%. In your implied guidance for the fourth quarter, do you expect that comparable contracts to persist, comparable contract growth to persist in the fourth quarter?

John Enwright: Yeah, Alex, this is John. As we think about guide for funeral, we do anticipate it to be low single digits in the fourth quarter. So we anticipate year-over-year growth, slight growth ultimately. We do think there is an opportunity as we think about just funeral for some ARPC, some growth in pricing as well, which will help us get to that low single digit in total revenue growth.

Alex Paris: Just to be clear, the low single digits you refer to in funeral, you are talking about contracts, and then on top of that, average revenue per contract?

John Enwright: Yeah, so I would say ultimately flat to call 1% from a contract perspective, ultimately, and then some benefit associated with ARPC to get it a little bit higher than its low single-digit growth in our expectation.

Alex Paris: Okay. Is that just conservatism? You were up 2.3%, having 0.1%. Is that just conservatism, or is there-

John Enwright: Yeah. Yeah, I would say in the third quarter of last year, right, I do not want to call it an easy comp, right, but if you remember, August was down, September was down. So there was an easier comp in the third quarter compared to the fourth quarter as we look at our data. As we close, and we are not fully closed with October, right, so we see we are slightly up in October, which is meeting our expectations. It is not up to the call it the 2.5% or 2.3% that we achieved in the third quarter.

Carlos Quezada: In terms of mortality.

Steve Metzger: In terms of mortality, yep.

Carlos Quezada: One quick caveat to that is that, if you remember last year, there was some shifting of the flu season from December to January, based on how weather impact, especially some of the northern states. That's just a function that we can't really forecast for, so we're just using our best trends for the last few years to kind of guide for that. But I'm just putting that out there that if some shifting of the flu season were to happen again, then it becomes a little bit more difficult to forecast.

Alex Paris: Got you. Is the mortality rate back to normal in the third quarter? Obviously, it was below trend in the first half, but my working understanding is the death rate in the U.S. is approximately 1% per year. It was below that in the first half. Are we back into that 1% range? Where is your source of data on that other than your own internal operations?

Carlos Quezada: Well, as you know, CDC data is a little behind, typically around three, four months behind to what's currently happening. So it's difficult to say the death rate is back to normal. From our perspective, the way I look at things, if I compare it to the available information that I have, I'm going to use SCI example for the third quarter. Core funeral home for them was down by 50 basis points, whereas our volume, total funeral volume comparable was up 2.3%. To say that's a function of death rate, it would be complicated.

I do think it's a function of more market share gains and the focus we have in strategically gaining families through our phone shopper training, through our package presentation, conversion cremation, and things to that nature. It seems to me that's a reasonable explanation for the volume increase that we have.

Alex Paris: Makes sense to me. Thank you for that. Last quick question. Funeral, that tax implication, is that confined to the third quarter? Do you expect fourth quarter funeral revenue and field EBITDA to be comparable to what it was before Q3?

John Enwright: Yeah, the trust tax impact was confined to discrete item for our expectation is the third quarter. We don't expect to see any of that hit the fourth quarter going forward.

Alex Paris: Okay, great. I'll get back in the queue. I'll let somebody else focus on deep dive in cemetery. Thanks.

Operator: Thank you. We'll next go to Scott Schneeberger with Oppenheimer. Please go ahead.

Scott Schneeberger: Thank you. Good morning. Carlos and John, just curious, and I'll do that deep dive on preneed cemetery. From the first question, it sounds like you're performing well broadly geography, except for California, and it's the low end of the market. Is it just that? Is everything operating smoothly elsewhere? I know in the second quarter, it was a little bumpy as well, and there's some new systems implementations and perhaps some distractions for the sales force. Could you just speak about maybe the top two or three drivers? Geography's number one, but what's behind that, and what's system-wide versus localized? Thanks.

Carlos Quezada: Yes. Historically speaking, we see that when there's some discretionary spending pressures in the markets, California is one state that reacts perhaps more aggressively than other states, and it seems like we see a little bit of that there. But that's not the only reason why we see that decline.

It's pretty clear, and I stated that on my prepared remarks and even on the release yesterday, that it seems like we have parted ways from some basic fundamentals for sales related to our headcount targets for recruiting, the training programs we have to elevate the skill set, and being able to really improve the closing ratios that we have, and the management of the activity related to lead generation and the sales funnel that drives the performance. From my point of view, we have some significant improvement to do broadly. That includes outside of the California states. But I do see specifically to California some additional pressure we don't see as much elsewhere.

We are addressing that through pricing, inventory, training, headcount, and even, as I mentioned on the prepared remarks, sales leadership improvement. We do feel confident, as we have proven in the past, that our ability to drive preneed cemetery sales, diagnose the problems, execute with discipline, it is at a high level, and we believe we will be able to get back to that pretty soon.

Scott Schneeberger: Thanks, Carlos. Oh, John, were you saying something? Sorry.

John Enwright: No.

Scott Schneeberger: Okay. Sorry, I thought I heard something. Yeah, just following up on that topic, guys. Carlos, you mentioned improvement. What should we think about for timeframe? Because it sounds like perhaps some macro factors, and then obviously it sounds like there's some productivity enhancements that you'd like to be making. What type of timeframe do you see that? I guess I'll dovetail in, what should we think about in the fourth quarter for production?

Carlos Quezada: Absolutely. It's a good question. We were able to diagnose this a few months ago, so it's not something we suddenly got surprised by as we saw the third quarter results. It's something we've been looking at for the past few months. Around the month of August, we had a pretty broad meeting with the sales teams to really get deep into what were the areas that we needed to execute better, identify areas of improvement in the three areas of sales, recruiting, training, and activity, meaning lead generation and management of those leads. We deployed some good plans since then.

Through the month of September, October, and as we speak, we have been able to improve on the execution of that. We haven't seen the lift as fast as I would have hoped, but I do believe as we continue to execute on the program, we continue to recruit the headcount needed, because we are below what we had last year at this time around, and continue to provide the inventory needed within those brackets that I mentioned, especially around California, we should be able to get back on track by the end of the fourth quarter.

We are not putting on our guidance meaningful growth on the preneed cemetery side, just to be mindful of the trend we have seen. However, I do expect to get back on track by the first quarter of 2027, like fully back on track.

Scott Schneeberger: Excellent. Thanks for that. Just one more, I'm going to pop over to the funeral segment. Nice revenue growth there with some volume and revenue per service lift, but the margin didn't expand correspondingly. Could you just speak, I guess, John, of what were some drivers impacting margin over on the funeral side in the quarter, and what you think for that going forward? Was it investments? Was it otherwise? Just curious where you see that to project out next quarter and beyond. Thanks.

John Enwright: Yeah, it's a good question. We saw some pressure in really kind of the salary and benefit line, ultimately was the main driver of kind of the point erosion. There were some other pieces and parts that ultimately I would call non-significant and we can work through, but ultimately, as we think about kind of the leverage and the loss of leverage, call it the point, we saw that really being driven by salaries and benefits. That will persist into the fourth quarter, but we are looking at ways to kind of manage that.

Scott Schneeberger: Great. Thanks. All right, I'll turn it over, guys. Appreciate it.

Operator: Thank you. Next, we'll go to Parker Snure with Raymond James. Please go ahead.

Parker Snure: Hi, good morning. Just one quick one on the fourth quarter revenue guidance. It seems to imply a step up from roughly $100 million in the third quarter up to about $108 million in the fourth quarter at the midpoint of your new guidance. Just curious if you could give some color on the drivers there. It seems like the trust tax item is going to go away. That was about $1.7 million by my math. Correct me if I'm wrong there. I believe you also said some acquisitions will fall in the fourth quarter. So just maybe try to parse out some of those details.

How much of it is acquisitions, the trust tax item, and then just other organic growth from 3Q to 4Q? Thanks.

John Enwright: Yeah, so you can think about that. The trust tax item was over $2 million, so call it $2.5 million, just to use an average number, a round number, of impact in the quarter of Q3. We typically, funeral volume's a little bit higher, just generally speaking, in the fourth quarter compared to the third quarter, so we just see that natural growth of that as well as, we're going to see a couple points of improvement associated with that. As we think about our acquisitions, some will close in the third quarter.

So, if I think about if you're trying to get to the midpoint of, sorry, $108 million, call it two's going to be associated with the trust improvement, a couple million dollars probably going to be associated with funeral. We're going to have acquisitions of a benefit of maybe $700,000 to $1 million, roughly around that number in the quarter, and then ultimately cemetery performance could be a little bit better. Then there's some other benefits that we may see through the financial income performance as well.

As we think about the impact of the third quarter, we're looking at potential benefits that we can have in the third, excuse me, from the third quarter into the fourth quarter that may drive the financial benefit. It'll be a little bit higher.

Parker Snure: Okay, thank you. That's helpful. On broadly on acquisitions, I appreciate your comment on the timing and the expected multiples and things like that. Just more of a high-level question. Have you seen any changes in the competitive nature of the bidding process for these businesses, whether it be competition from private equity, other large competitors, things like that? You've returned to M&A over the last year or so, but you took a bit of a break for a few years, so just curious if there's been a material shift in the number of competitors in these bidding processes, whether that's maybe putting some pressure on multiples.

It doesn't seem that way, but, and just anything else that you'd note that has maybe changed in the M&A environment recently?

Steve Metzger: Yeah, Parker, this is Steve, and from our perspective, the thing we're most excited about on the M&A front is the majority of deals we're looking at right now are home sourced, for lack of a better term, and so they're not competitive deals. They're relationships that we have with these owners, and that's our preference, obviously. On the competitive deals, when there are things that other people are looking at, that process, the multiples continue to kind of be in the range we've seen over the years. Sometimes, depending on the participants, it gets a little too rich for our blood and we tap out.

We've seen that happen again this year, and primarily from some of the private equity-backed players who have entered, and we've got enough activity to where it's easy for us to be selective and say, "We'll pass on those and focus on some of these others.

Parker Snure: Okay, thank you.

Operator: Thank you, and we'll take our next question from George Kelly with ROTH Capital Partners. Please go ahead.

George Kelly: Hey, everyone. Thanks for taking my questions. To start, maybe I'll just follow up on the prior question, M&A-related question. Two more for you. How do you plan to finance these transactions that you, assuming all five of these close, how do you plan to finance them? And then second question is, how should we think about the cadence for next year and beyond? Is the pipeline beyond these five? Is there a lot still in that pipeline, or just any kind of commentary on next year would be helpful as well.

John Enwright: Hey, George, I'll answer the first part of the question and pass it on to Steve for the second. From a financing perspective, we'll use our free cash flow that we generate in the fourth quarter as well as our facility to finance.

Steve Metzger: George, on cadence, we expect this to look similar to the new normal for us. We've got a number of opportunities in the pipeline. We have some offers outstanding that we're having ongoing discussions with. So, it's always tough to predict which quarters they'll fall into, because a lot of that just depends on the comfort of the owner in terms of when they're ready. But we think that we'll have a pretty steady cadence quarter by quarter that is similar to this.

George Kelly: Okay. John, do you anticipate leverage getting much above four, inclusive of these deals, or where do you think it'll move?

John Enwright: No, so we anticipate year-end to be between four. Given kind of the change in our EBITDA expectation, we expect to be between 4 and 4.1 at year-end.

George Kelly: That's inclusive of all transactions?

John Enwright: That's inclusive of the transactions, yeah. Some will close again in Q1 of next year, right? Some of that funding will be there.

George Kelly: Okay. Second question is on the revenue guide change. It was, I think, at the midpoint, it is around $22.5 million. Can you just help us understand the key pieces of that 22.5? Like, where did it stem from, M&A and funeral and cemetery, et cetera?

John Enwright: Yeah, so the funeral is pretty consistent where we expected it to be. The third quarter results were close to where we anticipated, as well as the fourth quarter we are projecting kind of, we haven't made any real changes to our expectations given the fact that we were close on the third quarter. The largest change is in cemetery sales. When we talked and released in August, July was good, June was good, and ultimately, we expected to make up some of the shortfall that we had seen from our normal expectations for preneed sales. The vast majority of the change is associated with cemetery sales performance. Obviously, from a trust tax, we took out, call it, $2.5 million.

We didn't anticipate that. That was about, call it, 10% of that change. That wasn't anticipated in our guide at that point in time, so we have adjusted our full-year guide for financial income associated with that. When we were talking about acquisitions, we had expected to call it between zero and five, depending on the timing of that. Ultimately, we are going to be on the lower end of that this year because most of them are going to close, call it, in December, and the timing, we had initially thought maybe it would be a little bit sooner than that. Really, those are the components of how it is driven.

Funeral are not driving any real change to our forecast.

George Kelly: Okay, excellent. Last one from me on Trinity. Any update there, the pilot rollout, anything would be helpful. That is all I had. Thank you.

John Enwright: Yeah, from a Trinity perspective, we brought in a third party. I think you may have seen ultimately we've changed leadership in IT. We brought in a third party just to help us assess kind of our program in total to make sure we're going down the right path. We will share a lot more, call it, at the end of the fourth quarter, but ultimately, that's where we're at today.

George Kelly: Okay. Okay, thanks.

Operator: Thank you. With no further questions in the queue, I'd like to turn the call back over to Carlos Quezada for closing remarks.

Carlos Quezada: Thank you, everybody. I really appreciate joining the call this morning, and we really hope to have really, really good news as we continue to execute on our plans. I continue to be super excited about Carriage and the vision we have for 2030, and we keep making progress slowly but surely. I know that our preneed cemetery sales was sort of a disappointment this quarter, but we have made the changes in the process and systems to make meaningful improvements as we continue through this next few months. I'm really excited to give you better news as we report the fourth quarter in February. Thank you, everybody.

Operator: Thank you, and this does conclude today's call. We thank you for your participation. You may now disconnect.

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