CARRIAGE SERVICES INC (CSV)

OVERVIEW

General

We operate in two business segments: Funeral Home Operations, which currently accounts for approximately 66% of our total revenue and Cemetery Operations, which currently accounts for approximately 34% of our total revenue. At June 30, 2026, we operated 155 funeral homes in 24 states and 28 cemeteries in 9 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

ATM Program

On May 6, 2026, the Company announced it had entered into an Equity Distribution Agreement with Oppenheimer & Co. Inc. and Raymond James & Associates, Inc., as sales agents (together, the “Sales Agents”), with respect to an at-the-market equity offering program (the “ATM Program”) under which the Company may offer and sell, from time to time, shares of its common stock having an aggregate offering price of up to $100.0 million (“Shares”) through or to the Sales Agents, as sales agents and/or principals. To date, we have not sold any Shares under our ATM Program.

Board of Directors

On May 12, 2026, upon the recommendation of the Corporate Governance Committee of the Company, the Board of Directors (the “Board”) unanimously elected Douglas Meehan to serve as the Chair of the Compensation Committee, effective on that date. Mr. Meehan has been a director of the Company since 2018. He succeeds Somer Webb, who continues to serve on the Board and as a member of the Audit, Compensation, and Corporate Governance Committees.

Macroeconomic and Inflationary Factors

We continue to monitor the macroeconomic, geopolitical, and certain policy factors and their potential impact, if any, on our business. During the first half of 2026, consumer discretionary spending has reflected mixed trends, with higher-income consumers appearing more resilient and moderate-income consumers exhibiting more cautious behavior, which could result in an overall reduction in consumer spending and demand for products and services. These trends continue to be influenced by moderating, but still elevated, inflation, evolving tariff and trade policies, geopolitical developments, and volatility in energy prices. Although certain indicators suggest that inflation has moderated, these factors continue to create uncertainty regarding future cost trends and broader economic conditions. Inflation and other macroeconomic conditions may negatively impact consumer discretionary spending, including the amount consumers are able to spend on our services. To date, these conditions have not materially impacted our business, and our industry has historically demonstrated resilience during similar adverse economic and market environments.

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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 additional details related to our debt and lease obligations, including our Credit Facility, Acquisition Debt and Senior Notes, refer to Notes 10 to our unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

For 2026, our plan is to remain focused on executing our growth strategy and other strategic objectives. This includes prioritizing our capital allocation for potential strategic growth acquisitions, capital expenditures, debt repayments, the payment of dividends, and other 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, potential growth acquisitions, 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, including, for example, through our ATM Program, 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”.

Cash Flows

We began 2026 with $1.7 million in cash and ended the quarter with $2.6 million in cash. As of June 30, 2026, we had borrowings of $124.0 million outstanding on our Credit Facility compared to $126.7 million as of December 31, 2025.

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

Operating Activities

For the six months ended June 30, 2026, cash provided by operating activities was $22.5 million compared to $21.9 million for the six months ended June 30, 2025. The growth was primarily driven by improvements in working capital.

Investing Activities

Our investing activities resulted in net cash outflows of $13.4 million for the six months ended June 30, 2026, compared to net cash inflows of $12.8 million for the six months ended June 30, 2025, a decrease of $26.2 million, primarily as a result of the activity described below.

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Acquisition and Divestiture Activity

During the six months ended June 30, 2026, we acquired one funeral home for $4.5 million.

During the six months ended June 30, 2026, we sold one funeral home for an aggregate of $0.3 million.

During the six months ended June 30, 2025, we sold two funeral homes and three cemeteries for an aggregate of $15.8 million. Additionally, we sold real property for $3.0 million.

Capital Expenditures

For the six months ended June 30, 2026, our capital expenditures (comprised of growth and maintenance spend) totaled $9.2 million compared to $6.0 million for the six months ended June 30, 2025, an increase of $3.2 million.

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

Financing Activities

Our financing activities resulted in a net cash outflow of $8.2 million for the six months ended June 30, 2026, compared to a net cash outflow of $34.5 million for the six months ended June 30, 2025, a decrease of $26.3 million.

During the six months ended June 30, 2026, we had net payments on our Credit Facility, acquisition debt, and finance leases of $3.0 million, net payments on our employee equity plans of $1.7 million, and paid dividends of $3.6 million.

During the six months ended June 30, 2025, we had net payments on our Credit Facility, acquisition debt, and finance leases of $24.3 million, net payments on our employee equity plans of $6.6 million, and paid dividends of $3.5 million.

FINANCIAL HIGHLIGHTS

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

Revenue for the three months ended June 30, 2026 increased $0.8 million, compared to the three months ended June 30, 2025, primarily due to an increase in acquisition and financial revenue that was partially offset by a decline in divested and comparable revenue. In our Funeral segment, we experienced a 4.7% increase in the average revenue per funeral contract, and a 21.1% increase in preneed insurance contracts sold; partially offset by a 4.0% decrease in funeral contract volume. In our Cemetery segment, we experienced a 5.0% increase in preneed sales production and a 17.3% increase in the average price per interment right (property) sold; partially offset by a 14.0% decrease in the number of preneed interment rights (property) sold.

Gross profit for the three months ended June 30, 2026 decreased $0.9 million compared to the three months ended June 30, 2025, primarily due to an increase in depreciation and amortization.

Net income for the three months ended June 30, 2026 increased $0.5 million, compared to the three months ended June 30, 2025, primarily due to a $0.9 million decrease in general and administrative expenses, a $0.4 million decrease in interest expense, and a $0.2 million decrease in income tax expense; partially offset by a $0.9 million decrease in gross profit contribution from our businesses.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

General

We operate in two business segments: Funeral Home Operations, which currently accounts for approximately 65% of our total revenue and Cemetery Operations, which currently accounts for approximately 35% of our total revenue. At December 31, 2025, we operated 155 funeral homes in 24 states and 28 cemeteries in 9 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.

Funeral Home Operations

Factors affecting our funeral operating results include: demographic trends relating to population growth and average age, which impact death rates and number of deaths; establishing and maintaining leading market share positions supported by strong local heritage and relationships; effectively responding to increasing cremation trends by selling complementary services and merchandise; controlling salary, merchandise, and other controllable costs; exercising pricing leverage related to our atneed business to increase average revenue per contract; and our response to fluctuations in capital markets and interest rates, which affect investment earnings on trust funds, which would offset lower pricing power as preneed contracts mature. Overall, volume, as funeral services performed, and pricing fluctuations impacting our average revenue per contract are the two variables that primarily affect funeral revenue. The average revenue per contract is influenced by the mix of traditional and cremation services as our average cremation service revenue is approximately one-third of the average revenue earned from a traditional burial service. Funeral homes have a relatively large fixed cost structure.

Cemetery Operations

Factors affecting our cemetery operating results include: the size and success of our sales organization; local perceptions and heritage of our cemeteries; our ability to adapt to changes in the economy and consumer confidence; controlling salary, merchandise, and other controllable costs; exercising pricing leverage related to our atneed business to increase average price per interment right sold; and our response to fluctuations in capital markets and interest rates, which affect investment earnings on trust funds, finance charges on installment contracts and our securities portfolio within the trust funds.

Macroeconomic, Inflationary, and Borrowing Costs

During 2025, consumer spending on discretionary items reflected mixed trends. Based on recent economic indicators, aggregate consumer spending continues to reflect minimal to modest growth, with higher-income consumers appearing more resilient, while many middle and lower-income consumers exhibit more cautious behavior, which could result in an overall reduction in consumer spending and demand for products and services. This consumer caution appears to be influenced by factors like elevated inflation, heightened tariff and trade-policy uncertainty, and a more cautious macroeconomic environment. Additionally, beginning in April 2025, the U.S. government announced new and increased tariffs on countries and specific goods, subject to evolving exemptions and additional proposed revisions. Certain of these tariffs have been stayed or otherwise modified and, since April 2025, the U.S. has continued to announce new or revised tariffs, along with new trade agreements with certain trading partners. Those policies, along with retaliatory actions by some trading partners and ongoing negotiations around trade policy, have led to increased uncertainty regarding the ultimate effect of the tariffs on economic conditions, volatility, and unpredictability for global trade. Given these uncertainties and 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.

We also continue to monitor the impacts of inflationary costs to our business. While inflationary pressures appear to have moderated and stabilized, we are unable to forecast or predict with any certainty whether inflationary costs will remain stable and continue to moderate in future periods, as the ultimate scope and duration of these impacts could change as a result of the impact of increased tariffs and remain unknown at this time. More broadly, the U.S. economy continues to experience the

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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 into 2026, 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 and lower average debt outstanding under our Credit Facility, which resulted in lower borrowing costs in 2025 compared to the prior year.

For further discussion of our key operating metrics, see our "Cash Flows", "Financial Highlights" and "Results of Operations" sections below. For discussion of our results of operations and liquidity and capital resources for the fiscal year ended December 31, 2024, see Management's Discussion and Analysis of Financial Conditions, Liquidity and Capital Resources, Financial Highlights, and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year December 31, 2024, filed with the Securities and Exchange Commission on February 28, 2025.

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 2026, our plan is to remain focused on executing our growth strategy and other strategic objectives. This includes prioritizing our capital allocation for potential strategic growth acquisitions, capital expenditures, debt repayments, the payment of dividends, and other 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, potential growth acquisitions, 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”.

Cash Flows

We began 2025 with $1.2 million in cash and ended the year with $1.7 million in cash. As of December 31, 2025, we had borrowings of $126.7 million outstanding on our Credit Facility compared to $137.0 million as of December 31, 2024.

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

Operating Activities

For the year ended December 31, 2025, cash provided by operating activities was $60.7 million compared to $52.0 million for the year ended December 31, 2024.

Investing Activities

Our investing activities resulted in a net cash outflows of $35.2 million for the year ended December 31, 2025, compared to net cash inflows of $3.6 million for the year ended December 31, 2024, a decrease of $31.5 million.

Acquisition and Divestiture Activity

During the year ended December 31, 2025, we acquired eight funeral homes, one cemetery, and one cremation focused business in Florida for an aggregate price of $56.5 million. We acquired substantially all of the assets and assumed certain operating liabilities of these businesses. Additionally, we acquired the real property for one funeral home that we previously leased from a third party for a purchase price of $2.5 million.

During the year ended December 31, 2025, we sold thirteen funeral homes and four cemeteries for an aggregate of $40.4 million. Additionally, we sold real property for $4.0 million.

During the year ended December 31, 2024, we sold six funeral homes and one cemetery for an aggregate of $10.9 million. Additionally, we sold real property for $1.1 million.

Insurance Proceeds

During the year ended December 31, 2024, we received proceeds of $0.4 million from our property insurance policy for the reimbursement of renovation costs for certain of our f

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