Carriage Services(CSV) - 2024 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements Presents the unaudited consolidated balance sheet, statements of operations, cash flows, and changes in stockholders' equity with accompanying notes Unaudited Consolidated Balance Sheet Total assets increased to $1.275 billion and stockholders' equity grew to $198.1 million as of September 30, 2024 Consolidated Balance Sheet (in thousands) | | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $43,601 | $41,721 | | Total assets | $1,275,418 | $1,268,052 | | Total current liabilities | $60,170 | $51,070 | | Total liabilities | $1,077,289 | $1,094,992 | | Total stockholders' equity | $198,129 | $173,060 | Unaudited Consolidated Statements of Operations Q3 2024 revenue grew to $100.7 million and net income more than doubled to $9.9 million year-over-year Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $100,687 | $90,494 | $306,498 | $283,686 | | Gross Profit | $35,490 | $27,412 | $109,745 | $89,669 | | Operating Income | $22,897 | $15,686 | $60,743 | $57,058 | | Net Income | $9,866 | $4,645 | $23,098 | $21,775 | | Diluted EPS | $0.63 | $0.30 | $1.48 | $1.39 | Unaudited Consolidated Statements of Cash Flows Net operating cash flow was $42.7 million for the first nine months of 2024, a decrease from the prior year Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $42,716 | $61,849 | | Net cash provided by (used in) investing activities | $708 | $(53,385) | | Net cash used in financing activities | $(43,687) | $(7,959) | | Net (decrease) increase in cash | $(263) | $505 | | Cash at end of period | $1,260 | $1,675 | Condensed Notes to Consolidated Financial Statements Details key accounting policies, segment performance, impairment tests, divestitures, and debt structure - The company operates 162 funeral homes and 31 cemeteries, with operations split into Funeral Home (65% of revenue) and Cemetery (35% of revenue) segments[17] - Annual goodwill impairment tests in 2024 and 2023 resulted in no impairment[25] - The company recorded tradename impairments of $0.6 million and $0.2 million during the nine months ended September 30, 2024 and 2023, respectively[27] - During the first nine months of 2024, the company sold six funeral homes and one cemetery for $10.9 million[40] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes financial performance, liquidity, capital resources, and operational results by segment Overview and Company Developments Highlights the recent credit facility amendment, stabilization of costs, and lower death volumes - The company amended its Credit Facility on July 31, 2024, extending maturity to 2029 and establishing Term SOFR as the benchmark rate[140] - In Q3 2024, the company benefited from stabilizing inflationary costs and lower variable interest rates on its Credit Facility[141] Liquidity and Capital Resources Details sources of liquidity, cash flow changes, and available credit facility capacity Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $42,716 | $61,849 | | Net cash provided by (used in) investing activities | $708 | $(53,385) | | Net cash used in financing activities | $(43,687) | $(7,959) | | Cash at end of the period | $1,260 | $1,675 | - The $19.1 million decrease in operating cash flow for the nine months ended Sep 30, 2024, is primarily due to non-recurring events in 2023[146][147] - As of September 30, 2024, the company had $107.4 million of availability under its Credit Facility[159] Results of Operations Q3 2024 revenue increased by $10.2 million YoY, driven by strong cemetery preneed sales Financial Highlights (in thousands, except volumes and averages) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $100,687 | $90,494 | $306,498 | $283,686 | | Gross Profit | $35,490 | $27,412 | $109,745 | $89,669 | | Net Income | $9,866 | $4,645 | $23,098 | $21,775 | | Funeral contracts | 10,713 | 11,058 | 33,483 | 34,904 | | Preneed interment rights sold | 3,511 | 2,785 | 11,127 | 8,680 | - Funeral home revenue increased by $0.8 million in Q3 2024, as a higher average contract price offset lower volume[176] - Cemetery revenue increased by $8.7 million in Q3 2024, driven by a 26.1% increase in preneed interment rights sold[180] - G&A expenses for the nine-month period increased by $15.4 million, driven by one-time executive termination and advisory fees[184] Item 3. Quantitative and Qualitative Disclosures About Market Risk Outlines primary market risks from interest rates on its credit facility and trust investments - A 100 basis point change in the borrowing rate on the $140.0 million outstanding Credit Facility balance would impact pre-tax income by $1.4 million[193] - A 0.25% change in interest rates is estimated to cause an approximate 0.86% change in the value of trust fund securities[193] - The 4.25% Senior Notes are fixed-rate, mitigating interest cost volatility from market rate changes[193] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2024 - Management concluded that disclosure controls and procedures are effective as of the end of the reporting period[194] - No material changes to internal control over financial reporting occurred during the quarter[195] PART II – OTHER INFORMATION Item 1. Legal Proceedings Discloses a new wage and hour class action lawsuit filed against the company on July 29, 2024 - A new wage and hour class action lawsuit, Denning v. Carriage Services, Inc., was filed on July 29, 2024[197] Item 1A. Risk Factors Confirms no material changes to risk factors from the most recent Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the 2023 Annual Report[198] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports no share repurchase activity during Q3 2024, with $48.9 million remaining authorized Share Repurchase Activity for Q3 2024 | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2024 | — | $ — | | August 2024 | — | $ — | | September 2024 | — | $ — | | Total for quarter | — | N/A | - Approximately $48.9 million remains authorized for future repurchases under the existing program[199] Item 5. Other Information States that no directors or officers adopted or terminated Rule 10b5-1 trading plans in Q3 2024 - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[201]