Carriage Services(US:CSV)2025-11-06 15:00Financial Data and Key Metrics Changes - Total operating revenue for Q3 2025 grew to $101.3 million, an increase of 5.2% year-over-year, primarily driven by a 21.4% increase in pre-need cemetery sales [5][6] - Total field EBITDA for the quarter was $46.3 million, up $1.4 million, or 3.1% [8] - Adjusted consolidated EBITDA grew to $33 million, up $2.2 million, or 7.3% year-over-year, with an adjusted EBITDA margin of 32.1%, compared to 30.5% in the same quarter last year [10][13] - Adjusted diluted earnings per share were $0.75, an increase of 17.2% from $0.64 in the same quarter last year [10][14] Business Line Data and Key Metrics Changes - Funeral operating revenue decreased by $753,000, or 1.3%, primarily due to a 2.1% reduction in funeral volume [6] - Cemetery segment operating revenue reached $35.6 million, an increase of $4 million, or 12.6% year-over-year [6][9] - General agency commission revenue tied to insurance-funded pre-arranged funeral sales grew to $2.6 million, up 61% from the previous year [5][6] Market Data and Key Metrics Changes - The company experienced lower funeral home volumes in July and August, with a return to normal volume in September and positive trends in October [21][22] - The company anticipates a normalized growth rate of 1-2% for funeral home volume in 2026 [23] Company Strategy and Development Direction - The company is focused on disciplined capital allocation, relentless improvement, and purposeful growth to create sustainable results [4][11] - The launch of Sales Edge 2.0 and Titan, an AI-powered sales agent, aims to enhance sales capabilities and drive growth in pre-need cemetery sales [9][10] - The company is committed to a long-term growth strategy, having systematically divested non-core assets to focus on strategic markets [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum heading into Q4 2025, with expectations for record highs in revenue, adjusted consolidated EBITDA, and adjusted diluted EPS [19] - The company anticipates revenues in the range of $413-$417 million and adjusted consolidated EBITDA between $130-$132 million for the full year [19] Other Important Information - The company completed the sale of several non-core assets, which represented about $2.4 million in EBITDA and $9 million in revenue [61] - The leverage ratio improved to 4.1 times, down from 4.2 times in the previous quarter, with a focus on managing debt [17] Q&A Session Summary Question: Can you quantify the contract weakness seen in July and August? - Management noted a middle-digit percentage decline in volume for both months, with a strong recovery in September and positive trends in October [21] Question: What is the expected growth for 2026? - Management indicated a reasonable expectation of 1-2% growth on the funeral home side related to volume [23] Question: Was the strong pre-need cemetery business related to specific CapEx projects? - Management confirmed that delays in permitting affected earlier growth, but they expect continued strong performance in the fourth quarter [24][26] Question: Are there any other expenses affecting funeral home margins? - Management clarified that lower margins were primarily due to volume leverage, as the funeral home segment has high fixed costs [32][36] Question: What is the status of the insurance-funded pre-need progress? - Management stated that the rollout has been completed across the network, with expectations for continued growth into 2026 [40][42] Question: What is the competitive landscape for M&A? - Management highlighted two categories of sourcing: internal opportunities with less competition and broker-led businesses that are more competitive, with average multiples around 7-8 times [56][57]