Carriage Services Q2 2025: Unraveling Contradictions in Divestitures, M&A Strategy, and Margin Pressures

Divestiture proceeds and expectations, M&A activity and strategy, funeral segment margins and inflationary pressures, divestiture impact on revenue, and acquisition strategy and M&A pipeline are the key contradictions discussed in Carriage Services's latest 2025Q2 earnings call.



Revenue and Volume Trends:
- Carriage Services reported total Funeral operating revenue growth of 1.4% for Q2, reaching $59.6 million, with a year-to-date increase of 3.1%.
- This growth is attributed to a slight increase in costs of 0.5% and a projected 50 to 100 basis points organic volume growth for the remainder of the year.

Cemetery Revenue and Inventory Challenges:
- Cemetery operating revenue was $33.5 million, down 0.6% from the same period last year, with year-to-date revenue growth of 2.2%.
- The decline is linked to timing differences in preneed sales and the divestiture of noncore cemeteries, with delays in new construction projects impacting high-end inventory sales.

Profitability and Margin Pressure:
- GAAP net income for Q2 increased by 85.7% to $11.7 million, with GAAP diluted EPS of $0.74, up 85% year-on-year.
- Adjusted consolidated EBITDA was $32.3 million, down 1%, with Funeral field EBITDA margin decreasing to 37% and Cemetery field EBITDA margin to 44.9%.
- Margin pressure was due to inflationary costs, planned investments, and unrecognized profits from undeveloped Cemetery sales in previous months.

M&A and Financial Growth Strategy:
- Carriage Services announced plans to acquire multiple premium businesses, with a combined revenue of more than $15 million, expected to close in Q3.
- The acquisitions are aligned with the company's strategy to add shareholder value through high-quality acquisitions, aiming to enhance growth and market presence.

Capital Management and Debt Reduction:
- With more than $100 million paid towards reducing debt in the past two years, Carriage Services has lowered its leverage ratio to 4.2x from 4.6x in Q2 2024.
- This disciplined capital management has allowed the company to return to growth mode, highlighting its commitment to prudently managing capital while pursuing strategic acquisitions.