Carriage Services’ 2026 Earnings Call: Volume Outlook, M&A Timing, and Trinity Delays Clash

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $102.9 million, an increase of $800,000 or 0.8% over the prior year quarter.
• EPS: $0.78 per diluted share, compared to $0.74 last year, an increase of $0.04 per share or 5.4%.

Guidance:

• Revenue for full-year 2026 expected between $435 and $445 million.
• Adjusted consolidated EBITDA expected between $135 and $140 million.
• Adjusted EBITDA margin expected between 31% and 31.5%.
• Adjusted diluted EPS expected between $3.35 and $3.55.
• Overhead expenses expected between 13.5% and 14% of revenue.
• Adjusted free cash flow expected between $40 and $50 million.
• Ending leverage ratio expected between 3.9 and 4 times.

Business Commentary:

Volume and Mortality Trends:

• Carriage Services reported a 3.5% decline in comparable funeral volume in Q2 2026 compared to the same period last year, with the first six months showing a 4.7% decrease.
• The decline was due to softened mortality trends across the country, which remained below historical expectations.

Revenue Performance:

• Total revenue for Q2 2026 was $102.9 million, an increase of 0.8% over the prior year quarter.
• The slight revenue increase was driven by a 3.7% growth in Funeral Home Comparable Average Revenue per Contract and a 17.3% increase in Consolidated Average Price per Printed Internment Right, despite lower funeral volume.

Profitability and Cost Management:

• Adjusted consolidated EBITDA for Q2 2026 was $33.3 million, representing a 3.1% growth and an EBITDA margin of 32.3%, up 70 basis points from the previous year.
• Profitability was supported by disciplined cost management, financial income, and improved operational efficiency, with overhead expenses decreasing to 11.8% of revenue.

Pre-Need Sales and Cemetery Business:

• Consolidated pre-need cemetery sales production grew by 5% in Q2 2026 compared to the previous year, with an average price per internment right sold increasing by 17.3%.
• The growth in sales production was not immediately reflected in revenue due to the timing of revenue recognition, which benefited future periods.

Capital Expenditures and Leverage:

• Capital expenditures for Q2 2026 totaled $5.3 million, with maintenance capital at $2.1 million and growth capital at $3.2 million.
• The increase was primarily due to cemetery development and deferred maintenance projects. The bank leverage ratio improved to 4x, down from 4.2x in the previous year, reducing borrowing costs.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed being 'pleased with our second quarter results' and highlighted 'disciplined execution' and 'operating leverage'. They noted 'positive direction' in profitability, 'stronger operating results', and that the quarter 'demonstrated the operating leverage we have been building'. Forward guidance was maintained with confidence in strategic initiatives.

Q&A:

• Question from Liam Burke (B. Reilly Securities): In the funeral home area, we're seeing a stability between cremation and traditional burials... Is that any kind of function of the mix between cremation and traditional burial?
  Response: The mix is stable, with cremation rate slightly down in Q2 and flat for the full year. The average price per contract increase is driven by a specific program to upsell cremation packages, not mix. Margins were impacted more by negative volume in a fixed-cost business.

• Question from Liam Burke (B. Reilly Securities): ...are there any underperforming properties that you said enough is enough and it's time to divest them?
  Response: The company has largely completed divesting businesses that didn't fit the long-term growth model over the past five years and does not anticipate any further divestitures.

• Question from Alex Paris (Barrington Research): Does that mean April, May, and June were down year over year in volume? And was there an improving trend before July?
  Response: Volume was negative each month from January through June, with the decline lessening through June, then flipping to positive growth in July.

• Question from Alex Paris (Barrington Research): What are the national mortality rates looking like today?
  Response: The death rate is believed to be similar to last year; the volume decline is attributed to timing, not market share loss. The company expects the second half to be much better than the first half.

• Question from Alex Paris (Barrington Research): Regarding your guidance... can you go over that with us again, one thing being the first half... and the other thing, the timing of expected acquisitions?
  Response: The $5 million reduction in revenue guidance is mostly due to the timing of acquisitions, moving from an expected $0-$5 million contribution to now an expected $0-$5 million (with more than $0). The profitability guide was raised slightly due to better-than-expected first-half performance.

• Question from Alex Paris (Barrington Research): What can you tell us about the McCammon acquisition?
  Response: McCammon is in a growing market (Knoxville); it is a new market for Carriage, currently under 300 calls/year, with opportunity for growth in pricing and market share.

• Question from Parker Snur (Raymond James): I was just curious on the funeral volume trend, were there any markets that were better or worse than your kind of average results...?
  Response: Florida saw the most significant volume decline from a state perspective, likely due to competition from established direct cremation businesses.

• Question from Parker Snur (Raymond James): ...can you provide more detail [on discipline, cost management as a driver for adjusted EBITDA performance]?
  Response: Cost management improvements stem from systems, processes, and talent enhancements over three years, not from compromising service quality, resulting in better operating leverage.

• Question from George Kelly (Roth Capital Partners): Can you be more specific about the volume growth that you saw in July?
  Response: July volume growth was strong low single digit year-over-year.

• Question from George Kelly (Roth Capital Partners): ...what's baked into your guide with respect to volume growth in the back half?
  Response: The guide assumes low single-digit volume growth in the back half, attributed to calls and continued benefits from average revenue per contract (ARPC) improvements.

• Question from George Kelly (Roth Capital Partners): ...what is the current status of Trinity, the timing of the pilots and rollout...?
  Response: Trinity was rolled out to 15 more locations on July 1st, starting a pilot phase in 17 total locations; data from this phase will influence future rollout.

• Question from George Kelly (Roth Capital Partners): ...on incentive compensation... and so I'm just wondering how material that was...
  Response: Incentive compensation accruals were adjusted down slightly in Q2 based on first-half performance; there is potential for reversal based on full-year results.

Contradiction Point 1

Full-Year Volume Trend Outlook

Inconsistent guidance on the expected volume trend for the full year.

Alex Paris (Barrington Research) - Alex Paris (Barrington Research)

2026Q2: The company believes the full-year volume trend will be similar to last year. - Carlos Quezada(CEO)

1) Regarding the funeral volume trend, was there an improving trend before July, and were April-June down year-over-year? 2) What are national mortality rates looking like today? 3) Regarding the revised 2026 guidance, can you detail the $5M revenue reduction? 4) Can you provide details on the McCammon acquisition? - Alex Paris (Barrington Research)

2026Q1: Volume is expected to normalize cyclically through the year, especially after integrating recent acquisitions and moving past a major divestiture. - Steve (Moderator/Investor Relations)

Contradiction Point 2

Trinity Software Rollout Timeline

Contradiction in the timeline for the full rollout of the Trinity software.

George Kelly (Roth Capital Partners) - George Kelly (Roth Capital Partners)

2026Q2: The Trinity software rollout is in the pilot phase, now in 17 locations (15 added on July 1st). The company is learning from this phase to determine the rollout strategy for the rest of the network. - John Enright(CFO)

1) Can you be more specific about the volume growth seen in July? 2) What volume growth is baked into the updated 2026 outlook for the back half, and is pre-need timing a factor? 3) What is the current status of the Trinity rollout? 4) Can you detail the incentive compensation adjustment? - George Kelly (ROTH Capital Partners)

2026Q1: Trinity is live in one location, with a second going live in May. Full rollout to funeral homes will be completed in 2026, with combos and cemeteries following in early 2027. - John Enwright(CFO)

Contradiction Point 3

Volume Growth Outlook and Trends

Contradiction on the volume trend's improving nature and the outlook for the full year.

Alex Paris (Barrington Research) - Alex Paris (Barrington Research)

2026Q2: The company was negative on volume every month from January through June, with a declining negative trend. Volume turned positive in July... The company believes the full-year volume trend will be similar to last year. - Carlos Quezada(CEO)

"1) Regarding the funeral volume trend, was there an improving trend before July, and were April-June down year-over-year? 2) What are national mortality rates looking like today? 3) Regarding the revised 2026 guidance, can you detail the $5M revenue reduction? 4) Can you provide details on the McCammon acquisition?" - Alexander Paris (Barrington Research Associates, Inc.)

2025Q4: High-end guidance requires: ... funeral growth at 2-3%. - John Enwright(CFO)

Contradiction Point 4

M&A Contribution Timing and Revenue Impact

Contradiction on the expected revenue contribution from new acquisitions in 2026.

Alex Paris (Barrington Research) - Alex Paris (Barrington Research)

2026Q2: The $5 million reduction in full-year revenue guidance is primarily due to the timing of acquisitions (lower than previously expected 2026 contribution). - John Enwright(CFO)

Can you detail the $5M revenue reduction in the revised 2026 guidance? - Alexander Paris (Barrington Research Associates, Inc.)

2025Q4: The $5M-$10M revenue impact from new 2026 acquisitions is factored into guidance. - John Enwright(CFO)

Contradiction Point 5

Trinity System Rollout Timing

Contradiction on the timeline for the full rollout of the Trinity software system.

George Kelly (Roth Capital Partners) asks about the company's revenue growth strategy? - George Kelly (Roth Capital Partners)

2026Q2: The Trinity software rollout is in the pilot phase, now in 17 locations (15 added on July 1st). The company is learning from this phase to determine the rollout strategy for the rest of the network. - John Enwright(CFO)

What is the current status of the Trinity rollout? - George Kelly (ROTH Capital Partners, LLC)

2025Q4: Trinity rollout: Pilot phase ongoing, with full funeral home rollout expected by Q3/Q4 2026, and cemetery/combo locations rolling out into 2027. - John Enwright(CFO)