Carriage Services, Inc. (CSV) is a leading provider of funeral and cemetery services and merchandise in the United States. The company has a rich history spanning over three decades, during which it has navigated the evolving industry landscape with a steadfast focus on innovation, operational excellence, and serving the needs of its communities.

Business Overview

Carriage Services was incorporated in the State of Delaware in December 1993, with the vision of building a premier provider of funeral and cemetery services. The company operates in two business segments - Funeral Home Operations and Cemetery Operations. Carriage Services began as a company focused on acquisitions, acquiring funeral homes and cemeteries across the country and implementing its operating model to improve performance. In the early years, the company grew rapidly through acquisitions, expanding its footprint to 26 states and operating 162 funeral homes and 31 cemeteries by the end of 2024.

Over the years, Carriage Services faced some challenges, including the industry trend towards increased cremations, which generally have lower average revenue per contract compared to traditional burials. The company responded by educating families on the additional services and merchandise available for cremation customers. Carriage Services also had to navigate changes in regulations and trust fund requirements in the various states in which it operates.

Despite these challenges, Carriage Services was able to maintain its position as a market leader in most of its local markets through its focus on local heritage, relationships, and high-quality service. The company also invested in its preneed funeral and cemetery sales programs to provide customers with planning options and secure future revenue streams. By the end of 2024, Carriage Services had a backlog of over 102,000 preneed funeral contracts and 69,000 preneed cemetery contracts to be delivered in the future.

Today, Carriage Services operates 162 funeral homes in 26 states and 31 cemeteries in 11 states. The company's funeral home operations account for approximately 65% of its total revenue, while the cemetery segment contributes the remaining 35%. Carriage Services' diversified portfolio and regional market leadership have been key drivers of its success, allowing it to weather industry challenges and capitalize on emerging trends.

Financials and Liquidity

Carriage Services' financial performance has been impressive, with the company consistently delivering strong results. In the most recent fiscal year (2024), the company reported total revenue of $404.2 million, a 5.7% increase compared to the prior year. This growth was primarily driven by a 22.9% increase in preneed interment rights sold and a 7.3% increase in the average price per preneed interment right. Net income for the year reached $33 million.

The company's profitability has also been noteworthy, with adjusted consolidated EBITDA reaching $126.2 million, representing an 11.5% increase year-over-year. Carriage Services' adjusted diluted earnings per share (EPS) for the full year 2024 was $2.65, up 21% from the previous year.

The company's balance sheet remains strong, with a net debt to adjusted EBITDA ratio of 4.3x as of the end of 2024. Carriage Services has been actively managing its debt levels, having paid down $42.1 million on its credit facility during the year. This focus on financial discipline and prudent capital allocation has positioned the company for continued growth and stability.

In terms of liquidity, Carriage Services reported a cash balance of $1.17 million as of December 31, 2024. The company has an available credit line of $110.8 million under its $250 million revolving credit facility. The debt-to-equity ratio stood at 2.02, while the current ratio and quick ratio were 0.77 and 0.63, respectively, as of the end of 2024.

For the most recent quarter (Q4 2024), Carriage Services reported revenue of $97.7 million and net income of $9.86 million. Year-over-year, revenue decreased 1.1% primarily due to a 7.3% decrease in funeral contract volume, partially offset by a 1.4% increase in average revenue per funeral contract and an 8.4% increase in preneed interment rights sold with a 4.2% increase in average price.

The company generated annual operating cash flow of $52 million and annual free cash flow of $35.9 million in 2024.

Strategic Initiatives and Growth Drivers

Carriage Services' success can be attributed to its unwavering commitment to strategic initiatives that drive sustainable growth. The company has implemented several key programs and investments that have positioned it for long-term success:

1. Preneed Sales Expansion

Carriage Services has placed a strong emphasis on growing its preneed sales, which now account for 69% of its total cemetery revenue. The company has built dedicated sales teams and implemented standardized systems across its cemetery portfolio to drive this initiative. Approximately 63% of cemetery operating revenue is derived from preneed property sales, where Carriage focuses on building family heritage in its cemeteries by selling property and interment rights prior to the time of need through highly motivated local sales teams.

2. Operational Efficiency

The company's Standards Operating Model has been a key driver of improved field-level margins, market share, and overall financial performance. By establishing and incentivizing the achievement of operational and financial metrics, Carriage Services has been able to drive continuous improvement throughout its business.

3. Digital Transformation

The company's Trinity project, a comprehensive digital platform, is expected to significantly enhance the customer experience, improve operational efficiency, and provide deeper insights to support decision-making.

4. Supply Chain Optimization

Carriage Services has invested in its supply chain strategies, including the launch of its earned core line and a partnership with Express Funeral Funding for insurance assignments. These initiatives are expected to improve service capabilities and create additional shareholder value.

5. Disciplined Capital Allocation

The company has demonstrated a strong commitment to prudent capital allocation, prioritizing debt repayment, the payment of dividends, and targeted growth investments. This approach has strengthened Carriage Services' financial position and provided the flexibility to pursue strategic opportunities.

Industry Landscape and Competitive Positioning

The funeral and cemetery industry in the United States is highly competitive, with a mix of publicly held operators, independent businesses, and privately owned consolidators. Carriage Services competes primarily on the basis of reputation, heritage, professional service, and the attractiveness and maintenance of its facilities.

The company's market share has been bolstered by its strong local brand recognition, deep community relationships, and ability to adapt to changing consumer preferences, such as the growing trend towards cremation. Carriage Services has been successful in expanding its cremation-related services and merchandise, which now account for approximately 60% of its funeral contracts.

The funeral and cemetery industry has experienced a compound annual growth rate (CAGR) of approximately 3.5% over the past 5 years, indicating steady growth in the sector.

Risks and Challenges

While Carriage Services has demonstrated resilience and adaptability, the company is not without its risks and challenges. Some of the key risks facing the company include:

1. Fluctuations in Death Rates: The number of deaths in Carriage Services' markets can be unpredictable, which can impact the company's atneed sales and revenue.

2. Competitive Pressures: The company operates in a highly competitive industry, with independent and publicly held competitors vying for market share.

3. Regulatory Changes: The funeral and cemetery industry is subject to extensive federal, state, and local regulations, which can impact Carriage Services' operations and compliance costs.

4. Trust Fund Performance: The company's preneed and perpetual care trust funds are subject to market fluctuations, which can affect the company's financial position and future cash flows.

5. Acquisitions and Integrations: While acquisitions have been a key part of Carriage Services' growth strategy, the successful integration of new businesses can present challenges and risks.

Outlook and Conclusion

Carriage Services' strong financial performance, strategic initiatives, and focus on operational excellence position the company well for continued growth and success. The company's guidance for 2025 reflects its confidence in its ability to execute on its strategic priorities, with projected revenue in the range of $400 million to $410 million and adjusted consolidated EBITDA of $128 million to $133 million.

For 2025, Carriage Services expects low single-digit organic growth, excluding the impact of divestitures. Adjusted diluted EPS is projected to be in the range of $3.10 to $3.30, driven by lower interest expense and a lower effective tax rate. The company anticipates adjusted free cash flow between $40 million and $50 million.

Carriage Services aims to further improve its financial position, with the leverage ratio expected to end 2025 between 3.7x and 3.8x, within the long-term target range of 3.5x to 4x. Total capital spending in 2025 is projected to be between $19 million and $21 million, while overhead as a percentage of revenue is expected to be in the range of 13% to 14%.

As Carriage Services navigates the evolving funeral and cemetery industry, its commitment to innovation, customer service, and financial discipline will be critical. The company's track record of delivering value to shareholders, coupled with its well-defined growth strategies, suggests that Carriage Services is poised to maintain its position as a leading provider of deathcare services in the United States.