Carriage Services(CSV) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements This section presents the unaudited Consolidated Financial Statements for the quarter ended March 31, 2025, covering Balance Sheets, Statements of Operations, Cash Flows, and Stockholders' Equity, with accompanying notes Consolidated Statement of Operations Highlights (Q1 2025 vs Q1 2024) | Financial Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $107,069 | $103,493 | +3.4% | | Gross Profit | $37,842 | $37,262 | +1.6% | | Operating Income | $31,564 | $19,477 | +62.1% | | Net Income | $20,926 | $6,973 | +200.1% | | Diluted EPS | $1.34 | $0.45 | +197.8% | Consolidated Balance Sheet Highlights | Balance Sheet Item | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $49,900 | $44,536 | | Total Assets | $1,275,229 | $1,279,580 | | Total Current Liabilities | $52,511 | $58,041 | | Total Liabilities | $1,052,167 | $1,071,030 | | Total Stockholders' Equity | $223,062 | $208,550 | Consolidated Statement of Cash Flows Highlights (Q1 2025 vs Q1 2024) | Cash Flow Activity | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $13,792 | $19,703 | | Net Cash from Investing Activities | $15,497 | $7,372 | | Net Cash from Financing Activities | ($25,811) | ($26,909) | Condensed Notes to Consolidated Financial Statements These notes detail accounting policies and financial statement line items, covering business structure, divestitures, goodwill, debt, lease obligations, and segment reporting - The company operates 160 funeral homes and 28 cemeteries, with Funeral Home Operations accounting for approximately 70% of total revenue and Cemetery Operations for about 30%[20] - In Q1 2025, the company sold two funeral homes and three cemeteries for an aggregate of $15.8 million, resulting in a net gain of $5.9 million[46] - Goodwill decreased from $414.9 million at year-end 2024 to $410.7 million at March 31, 2025, primarily due to a $4.2 million allocation of goodwill to divested businesses[44] Debt and Lease Obligations (March 31, 2025) | Obligation Type | Carrying Value (in thousands) | | :--- | :--- | | Credit Facility | $118,470 | | Senior Notes | $396,774 | | Operating Lease Liabilities | $16,275 | | Finance Lease Liabilities | $9,942 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial performance, highlighting revenue and net income growth, key company developments, liquidity, capital resources, and segment operational results, attributing success to pricing strategy and cost management Overview & Company Developments This section outlines significant corporate events in early 2025, including new executive appointments and the continuation of the company's divestiture program - Effective January 2, 2025, John Enwright was appointed as the company's new Senior Vice President, Chief Financial Officer, and Treasurer[153] - On February 24, 2025, Donald D. Patteson, Jr. was elected Non-Executive Chair of the Board, and Dr. Edmondo Robinson was elected Chair of the Audit Committee[154][155] - During Q1 2025, the company sold two funeral homes and three cemeteries for $15.8 million, resulting in a $5.9 million gain, and sold additional real property for $2.9 million, resulting in a $2.0 million gain[156] Liquidity and Capital Resources The company's liquidity is primarily from operations and its credit facility, with Q1 2025 cash from operations decreasing due to working capital changes, and capital priorities focused on debt repayment, dividends, and internal growth - Cash provided by operating activities decreased to $13.8 million in Q1 2025 from $19.7 million in Q1 2024, mainly due to unfavorable working capital changes[169] - Net cash provided by investing activities was $15.5 million, driven by $18.7 million in proceeds from divestitures and asset sales[168][170] - The company made net payments of $17.1 million on its Credit Facility, acquisition debt, and finance leases during Q1 2025[173] - As of March 31, 2025, the company had $120.0 million in outstanding borrowings and $127.8 million of availability under its Credit Facility[183] Results of Operations This section analyzes Q1 2025 segment performance, detailing revenue growth in Funeral Home and Cemetery segments, and attributing overall net income increase to divestiture gains and reduced G&A expenses Financial Highlights (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $107,069 | $103,493 | | Funeral Contracts | 12,172 | 12,091 | | Avg. Revenue per Funeral Contract | $5,710 | $5,580 | | Preneed Interment Rights Sold | 3,236 | 3,437 | | Avg. Price per Preneed Interment Right | $5,419 | $4,849 | - Funeral Home operating revenue increased by $3.0 million, driven by a 2.3% increase in average revenue per contract and a 0.7% increase in volume[204] - Cemetery operating revenue increased by $1.5 million, driven by an 11.8% increase in the average price per interment right sold, which offset a 5.8% decrease in sales volume[208] - General, administrative and other expenses decreased by $4.2 million, primarily due to a $4.3 million decrease in salary and incentive costs related to a former executive's termination agreement in Q1 2024[215] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate fluctuations on variable-rate debt and market value changes in trust securities, with a 100 basis point rate change impacting income by $1.2 million, while fixed-rate Senior Notes mitigate some exposure - The company is primarily exposed to interest rate risk on its Credit Facility and market value risk on securities in its trust funds[221] - Assuming the outstanding balance on the Credit Facility remains unchanged, a 100 basis point (1%) change in the borrowing rate would result in a $1.2 million change in income before taxes[225] - The $400 million Senior Notes bear a fixed interest rate of 4.25%, so changes in market interest rates do not affect interest costs but do affect the notes' fair value, which was $364.4 million at March 31, 2025[226][227] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of the end of the reporting period, the company's principal executive and financial officers concluded that disclosure controls and procedures were effective[229] - There were no changes in the company's internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[230] PART II – OTHER INFORMATION Legal Proceedings The company is involved in various ordinary course legal proceedings, including two class action lawsuits, which are not expected to have a material adverse effect - The company is party to a number of legal proceedings from the ordinary course of business, which are not expected to have a material adverse effect on its financial statements[233] - Two class action lawsuits have been filed against the company and its subsidiaries in California: a wage and hour case (Denning v. Carriage) and a consumer case related to cemetery maintenance (Frost v. Rolling Hills)[235][236] Risk Factors This section supplements existing risk factors by adding a specific risk concerning U.S. foreign trade policies, highlighting potential adverse effects from tariffs and trade barriers on costs and supply chain - A supplemental risk factor was added regarding changes in U.S. foreign trade policies, including tariffs and trade barriers[237][238] - The company warns that such policies could lead to inflationary pressures, increase the costs of goods offered to customers, and negatively impact the supply chain for merchandise[238] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's Q1 2025 share repurchase activity, noting no repurchases under the public program and $48.9 million remaining authorized for future repurchases Share Repurchase Activity (Q1 2025) | Period | Total Shares Purchased | Average Price Paid ($) | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | Jan 2025 | 0 | $0.00 | 0 | | Feb 2025 | 170,726 | $40.00 | 0 | | Mar 2025 | 0 | $0.00 | 0 | - As of March 31, 2025, the company had $48,898,769 remaining under its authorized share repurchase program[239] Other Disclosures and Exhibits This section confirms no defaults on senior securities, no mine safety disclosures, no Rule 10b5-1 trading arrangement changes by directors or officers, and refers to the Index of Exhibits - Item 3 (Defaults Upon Senior Securities) and Item 4 (Mine Safety Disclosures) are not applicable[240][241] - During the fiscal quarter ended March 31, 2025, no director or officer adopted or terminated any Rule 10b5-1 trading arrangements[242]