Carriage Services, Inc. 2026 Q2 Earnings Call

Please go ahead, sir. Good morning, everyone, and thank you for joining us to discuss our second quarter results for 2026.

In addition to myself, on the call this morning from 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'll make some forward-looking statements, including comments about our business, projections, and plans.

Forward-looking statements inherently involve risks and uncertainties and only reflect our views as of today. These risks and uncertainties include, but are not limited to, factors identified in our earnings release, as well as those in our SEC filings, all of which can be found on our website. Thank you all for joining us this morning. Now, I'd like to turn the call over to Carlos.

Thank you, Sam. Welcome to everyone joining today's second quarter earnings call. Before discussing our financial performance, I want to begin by thanking the Carriage team. Every day, they serve families during some of the most difficult moments in their lives with compassion, professionalism, and genuine care. Their commitment to delivering premier experiences is what defines Carriage, and the results we are sharing today are the direct reflection of their dedication and execution. This morning, I will discuss our second quarter performance, provide some perspective on the operating environment we experienced during the quarter and first half of this year, share an update on a couple of strategic priorities, and then turn the call over to John, who will review our financial results in greater detail. Regarding the operating environment, the second quarter unfolded differently than we anticipated at the beginning of the year.

Beginning in January, mortality trends softened across much of the country and remained below our historical expectations throughout the first half of the year. During the second quarter, comparable funeral volume declined by 3.5%, and for the first six months ending June 30th, by 4.7%, both compared to last year. As everyone on this call understands, mortality is the primary demand driver for our funeral business, and it is also one of the few variables we simply cannot control. What we can control is how we operate our business. I am proud of the way our teams responded. Rather than allowing lower funeral volume to dictate our performance, our field leaders and the support center teams remained focused on execution, operating discipline, and serving families exceptionally well.

The improvements we made over the last three years in our operations, systems, processes, and leadership capability allow us to offset much of the volume pressure through stronger execution. For example, funeral home comparable average revenue per contract grew by 3.7% compared to the same period last year, while consolidated average price per preneed interment right grew by 17.3%. Another example is the 21.1% increase in consolidated insurance-funded preneed funeral contracts sold during the quarter compared to last year. In many ways, the second quarter became a real test of the organization we have been building. I believe our teams demonstrated that Carriage today is a more disciplined, more resilient, and better-operated company than ever before. Turning to our financial results. Total revenue for the second quarter was $102.9 million, an increase of $800,000 or 0.8% over the prior year quarter.

Funeral comparable revenue was $55.7 million, compared to $57 million last year, a decrease of 2.4%. As expected, lower funeral volume was driven by reduced mortality rates, creating pressure on revenue during the quarter. While call volume declined year-over-year, our teams remained focused on serving every family with excellence while continuing to improve operational efficiency across the business, partially offsetting the volume decline. Cemetery comparable revenue was $33.2 million, essentially flat compared to $33.3 million last year. Our consolidated preneed cemetery sales production grew by 5% over the previous year's quarter. The timing of preneed cemetery revenue recognition will push a portion of this production to future periods. Consolidated average price per preneed interment right sold increased by an impressive 17.3% over the same period last year, highlighting our ability to improve performance despite lower volume that also affected the at-need side of our cemetery business.

Financial revenue was $9.3 million, or 14% greater than the previous year's quarter, reflecting that continued contribution of our insurance-funded preneed strategy and the ongoing efforts of our sales organization to help more families plan ahead. Moving to profitability. Despite the revenue headwinds created by lower funeral volume, profitability continued to trend in a positive direction. Adjusted consolidated EBITDA was $33.3 million, a growth of 3.1%, representing an adjusted consolidated EBITDA margin of 32.3%, an increase of 70 basis points when compared to the same period last year. Adjusted diluted EPS for the second quarter ended at $0.78 compared to $0.74 last year, an increase of $0.04 per share or 5.4%. Perhaps more important than the absolute numbers, the quarter demonstrated the operating leverage we have been building into the business. Our teams remain disciplined in managing labor, controlling discretionary spending, improving productivity, and executing consistently across the organization.

Those efforts allow us to mitigate a meaningful portion of the volume decline while continuing to invest in the business's long-term capabilities and performance. Simply put, when external conditions became temporarily more challenging, our operating performance improved. As volume trends return to a positive position, we believe our focus on operating performance will help drive an even more significant growth story in the quarters and years ahead. That is exactly what we would expect from a stronger operating company. John will walk you through the financials in greater detail, but I want to recognize the outstanding work performed by both our field leaders and our support center teams throughout the quarter. Looking ahead, as we enter the third quarter, we were encouraged to see funeral volume return to positive growth during the month of July.

While one month certainly does not establish a long-term trend, it is an encouraging indicator after a softer first half of the year. Our strategy has never depended on perfectly favorable market conditions. It depends on consistently operating better today than we did yesterday. That philosophy remains unchanged. Operationally, we continue to make meaningful progress across several initiatives that will strengthen Carriage over the long term. Our core line for urns and caskets, as well as our package offerings, are also strategies that continue to gain traction. By simplifying merchandise selections while enhancing quality and consistency, we are improving both the family experience and the economics of our business. These initiatives represent much more than procurement programs. They are examples of how disciplined operating systems can simultaneously improve service and financial performance.

We also continue expanding our Passion for Service program, which will become an important part of how we recognize and reinforce the behaviors that differentiate Carriage. Creating premier experiences is not simply an objective, it is the way we serve families and one another across the organization. Finally, we continue to evaluate opportunities to deploy capital in ways that create long-term shareholder value. Our balance sheet remains healthy, our strategic acquisition pipeline remains busy and active, and we will continue applying the same disciplined approach to capital allocation that has guided us over the past several years. As I reflect on the quarter, one takeaway stands out. External conditions have tested our business, but they also validated the progress we have made. We cannot influence mortality trends.

We cannot dictate macroeconomic conditions, but we can control our culture, our operating discipline, our capital allocation, and the consistency with which we execute. This quarter demonstrated the value of those capabilities. When those capabilities combined with a return of positive volume trends, it truly allow us to optimize the creation of value for our shareholders. Over the past three years, we have worked intentionally to build a stronger company, not just one capable of delivering positive results when conditions are favorable, but one capable of performing through changing environments. While there is still work to do and plenty of opportunities in front of us, I believe the foundation we have built is stronger than ever and drives our focus on being an elite operating company supported by consistent performance.

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