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CS

CARRIAGE SERVICES INC (CSV)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was mixed: total revenue fell 1.1% YoY to $97.7M as funeral volumes declined 7.3% against tough comps, but pricing and strong cemetery preneed activity partly offset; diluted EPS was $0.62 (vs $0.75 LY) and adjusted EBITDA was $29.3M (30.0% margin) vs $32.4M (32.8%) LY .
  • Sequentially, revenue and adjusted EBITDA declined vs Q3 2024 ($100.7M revenue; $30.7M adj. EBITDA; 30.5% margin) on lower funeral volume and Project Trinity costs pressuring overhead .
  • Management introduced FY2025 guidance: revenue $400–$410M, adjusted EBITDA $128–$133M, adjusted EPS $3.10–$3.30, adjusted FCF $40–$50M; includes divestitures reducing 2025 revenue by ~$7.9M and field EBITDA by ~$2.3M .
  • Key near-term catalysts: a delayed flu season lifted Jan/Feb volumes +1%–3% YoY, supply-chain savings begin ramping in 2025, and an H2’25 re-entry into M&A; leverage expected to improve to 3.7–3.8x by YE25 (from 4.3x) on debt paydown and divestiture proceeds .

What Went Well and What Went Wrong

  • What Went Well

    • Cemetery preneed momentum continued: Q4 preneed interment rights sold +8.4% YoY and average price +4.2% YoY; full-year 2024 cemetery preneed sales +26.7% drove company revenue to $404.2M (+5.7% YoY) .
    • Pricing mix management sustained funeral ASP: average revenue per funeral contract +1.4% YoY in Q4 despite higher cremation mix; management emphasized educating cremation families to upgrade services .
    • Balance sheet progress: leverage ratio improved to 4.3x from 5.1x YoY; $42.1M of credit facility paydown reduced interest expense (Q4 interest -$2.0M YoY) .
    • Management quote: “We…exceeded expectations for adjusted EBITDA and EPS…[and] believe we are well-positioned for continued success in 2025,” attributed reduced Q4 funeral revenue primarily to a delayed flu season .

  • What Went Wrong

    • Funeral volume pressure: consolidated funeral contracts -7.3% YoY in Q4; diluted EPS declined to $0.62 from $0.75 and adjusted EBITDA margin compressed 280 bps to 30.0% .
    • Overhead/Trinity spend: Q4 overhead rose YoY with ~$1.2M Project Trinity costs in the quarter; adjusted free cash flow in Q4 decreased YoY ($8.9M vs $12.8M) .
    • Working capital and full-year cash generation: FY2024 cash from operations fell to $52.0M (from $75.6M), reflecting receivables growth and mix toward preneed cemetery sales that convert to cash over time .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$98.8 $100.7 $97.7
Diluted EPS ($)$0.75 $0.63 $0.62
Adjusted Diluted EPS ($)$0.77 $0.64 $0.62
Operating Income ($M)$23.9 $22.9 $21.1
Adjusted EBITDA ($M)$32.4 $30.7 $29.3
Adjusted EBITDA Margin (%)32.8% 30.5% 30.0%

Segment revenue (operating):

SegmentQ4 2023Q3 2024Q4 2024
Funeral Operating Revenue ($M)$61.3 $59.347 $58.7
Cemetery Operating Revenue ($M)$26.7 $32.988 $29.8

Key operating KPIs:

KPIQ4 2023Q3 2024Q4 2024
Funeral Contracts (units)11,211 10,713 10,620
Avg Revenue per Funeral Contract ($)$5,471 $5,540 $5,524
Burial Rate (%)33.1% 31.6% 31.2%
Cremation Rate (%)59.3% 60.7% 61.5%
Preneed Interment Rights Sold (units)3,099 3,511 3,396
Avg Price per Preneed Interment Right ($)$5,091 $5,360 $5,264

Notes/Why:

  • The YoY EPS/EBITDA declines were driven by lower funeral volumes and overhead (Trinity, corporate), partially offset by preneed cemetery strength and lower interest expense .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($M)FY 2025N/A$400–$410 New
Adjusted Consolidated EBITDA ($M)FY 2025N/A$128–$133 New
Adjusted Diluted EPS ($)FY 2025N/A$3.10–$3.30 New
Adjusted Free Cash Flow ($M)FY 2025N/A$40–$50 New
Adjusted Tax Rate (%)FY 2025N/A28%–30% New
Interest Expense Savings ($M)FY 2025N/A$5–$6 New
Overhead (Adj.) as % RevenueFY 2025N/A13%–14% New
Capital Expenditures ($M)FY 2025N/A$19–$21 New
Leverage Ratio (YE)FY 2025 YEN/A3.7x–3.8x New
Divestitures ImpactFY 2025N/A-$7.9M revenue; -$2.3M field EBITDA included in guide New
Dividend per Share (Quarterly)Ongoing$0.1125 declared Q4 and maintained $0.1125 declared Jan 16, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Project Trinity (ERP, AI, family portal)Q2: Implementation early 2025; costs recognized; alignment to reduce overhead post-implementation . Q3: Early 2025 implementation; overhead framed within 13–14% adjusted .Pilot in Q2 2025; full rollout through 2025; adds AI to accounting and a family portal to enhance client experience .Progressing to pilot; near-term costs, longer-term efficiency .
Supply chain optimizationQ2: Phase 1 savings $0.45–$0.7M by Q4; ~$2M in 2025; phases 2–3 add ~$5M through 2026 . Q3: RFPs for urns/caskets; 2025 benefit .Launch of urn core line; partnership with Express Funeral Funding; casket core line next; margin improvement embedded in 2025 guide .Ramping savings in 2025; structural margin gains targeted .
Volume/macro (flu season)Q2: Slight volume declines expected; July slightly up YoY . Q3: October weaker than expected .Delayed flu season shifted demand into Q1; Jan/Feb volumes +1%–3% YoY .Near-term rebound in Q1; normalization thereafter .
Deleveraging/divestituresQ2: $11M proceeds YTD; targeting $20–$30M; accelerated paydown . Q3: Targeting high end of $20–$30M in 2024 with ~$3.5M EBITDA loss .2025 plan ~$25M proceeds; guide includes -$7.9M revenue/-$2.3M field EBITDA; leverage to 3.7–3.8x YE25 .Continued asset pruning; debt reduction ongoing .
M&A pipelineQ3: Preparing to resume acquisitions; focus on large combos; pipeline building .No M&A in guide; update expected by Q2 2025; re-enter growth mode in 2025 .Likely resume H2’25 if leverage targets met .

Management Commentary

  • Strategic focus and Q4 context: “While the fourth quarter saw reduced funeral home revenue—primarily due to tough year-over-year comparisons and the lower volumes we began experiencing in October—our overall performance remained strong…The decline in volume appears to be linked to a delayed flu season” .
  • 2024 delivery and 2025 stance: “We…exceeded expectations for adjusted EBITDA and EPS…we believe we are well-positioned for continued success in 2025” .
  • Supply chain roadmap: “We’re excited to announce…our new [urn] core line…[and] national partnership with Express Funeral Funding…Subsequent phases will address casket core line, fleet management and other procurement needs” .
  • Trinity benefits: “Trinity…will enable analytics, bring AI into our accounting procedures…[and] contains a family portal…from call to post services” with pilot in Q2 and rollout through 2025 .
  • Financial posture: “Adjusted EPS of $3.10 to $3.30 [in 2025] primarily driven by lower interest rates and a lower effective tax rate…interest expense savings…$5–$6 million” .

Q&A Highlights

  • Divestitures and deleveraging: 2024 divestitures ~$5.5M revenue and ~$1.8M EBITDA sold with >$12M proceeds; 2025 targeted proceeds ~$25M (mix of non-core assets and real estate) with trailing $9.5M revenue/$3.3M EBITDA, but 2025 guide includes only -$7.9M revenue/-$2.3M field EBITDA since some benefit remains pre-close .
  • Guidance building blocks: 2025 adjusted EPS growth vs modest EBITDA growth is largely from $5–$6M interest expense savings and a lower 28%–30% tax rate; supply chain savings also contribute .
  • Volume trajectory: Management indicated Jan/Feb volumes +1%–3% YoY; Q4 weakness tied to late flu season, not structural; funeral organic revenue growth assumed ~1% in 2025; cemetery high single digits .
  • Capex/Trinity: 2025 total capex $19–$21M; Trinity drives some near-term D&A and overhead but expected to produce longer-term efficiencies .
  • M&A: 2025 guide excludes acquisitions; management expects to update on pipeline around Q2 2025 and re-engage in H2 2025 subject to leverage targets .

Estimates Context

  • We attempted to retrieve S&P Global consensus (EPS, revenue, EBITDA) for Q4 2024; data were unavailable due to service limits at the time of preparation, so we cannot present vs-consensus beats/misses. We will update when access is restored [SPGI access error from tool].

Key Takeaways for Investors

  • Funeral volume headwinds are cyclical/seasonal, not structural; early Q1 volume uptick (late flu) supports a sequential recovery narrative into 1H 2025 .
  • 2025 guide embeds divestitures; underlying organic growth (ex-divestitures) expected low single digits with margin improvement from supply chain actions and normalized corporate costs—watch for early proof points in 1H .
  • Structural cost/margin levers (Trinity, supply chain contracting, centralized AP) should gradually lift EBITDA margins; monitor overhead as % revenue (target 13–14% adj.) and realized supply-chain savings vs plan .
  • Balance sheet improving: leverage guided to 3.7x–3.8x by YE25; divestiture proceeds prioritized to debt paydown—provides optionality to re-enter M&A in H2’25 if markets are constructive .
  • Dividend maintained at $0.1125/quarter; cash generation to include total capex in FCF definition—watch working-capital cadence given preneed mix .
  • Near-term trading setup: momentum catalysts include updates on Q1 volumes, supply-chain savings execution, and Trinity pilot/rollout milestones; a Q2 M&A pipeline update could re-rate the longer-term growth narrative .

Appendix: Additional Data Points (FY 2024 context)

  • FY 2024: revenue $404.2M (+5.7% YoY), adjusted EBITDA $126.2M (+11.5% YoY), GAAP diluted EPS $2.10 (–1.9% YoY), adjusted diluted EPS $2.65 (+21.0% YoY); leverage 4.3x vs 5.1x YoY .
  • Non-GAAP drivers: 2024 special items included severance and strategic alternatives expenses; reconciliations provided (e.g., adjusted EBITDA margin 31.2% vs 29.6% LY) .