キャリッジ・サービシズ (CSV) 2026年第3四半期決算説明会：霊園事業の低迷でガイダンス下方修正

主要なポイント

• 第3四半期の売上高は前年同期比2.4%減の1億30万ドルとなりました。調整後連結EBITDAは16%減の2,770万ドル、調整後希薄化後EPSは前年同期の0.75ドルから0.59ドルに減少しました。
• 既存店ベースの葬儀契約件数は2.3%増となり、上半期の低迷から持ち直しました。契約件数と契約あたり平均売上高の双方が改善したことで、既存店ベースの葬儀売上高は3.6%増の5,680万ドルとなりました。
• 既存店ベースの墓地売上高は7.8%減の3,250万ドルとなりました。既存店ベースの墓地生前契約売上高は4.8%減の2,570万ドルで、カリフォルニア州および2万ドル未満の契約に落ち込みが集中しました。
• 経営陣は2026年通期の業績見通しを引き下げ、売上高を4億1,500万〜4億2,000万ドル、調整後EBITDAを1億2,500万〜1億3,000万ドル、調整後希薄化後EPSを2.90〜3.05ドルとしました。
• Carriage Servicesは、年間売上高で計1,400万ドル超に相当する5件の買収について正式契約または基本合意書（LOI）を締結しています。主に規制当局の承認時期に左右されるものの、買収完了は2026年終盤および2027年初頭を見込んでいます。
• 第3四半期の営業キャッシュフローは2,470万ドルと堅調に推移し、調整後フリーキャッシュフローは1,930万ドルへと小幅に増加しました。

主要財務データ

事業および業績の動向

葬儀事業

既存店ベースの葬儀売上高は3.6%増の5,680万ドルとなりました。既存店の葬儀契約件数は2.3%増加し、葬儀契約件数全体では2.5%増加しました。連結ベースの契約あたり平均売上高は109ドル（1.9%）増加し、保険型葬儀生前契約の販売件数は7%増加しました。

既存店ベースの葬儀EBITDAは2,040万ドルとなり、前年同期比でほぼ横ばいから小幅な増加となりました。給与および福利厚生費の増加が主因となり、セグメントマージンは前年同期の36.9%から35.9%に低下しました。経営陣はこのコスト圧迫が第4四半期まで続くと見込んでいます。

経営陣は、葬儀件数の改善について、死亡率が平年水準に戻ったと結論づけるのではなく、電話問い合わせ対応の研修、パッケージ提案、火葬への転換など、市場シェア獲得に向けた取り組みに一因があるとしています。

墓地事業

既存店ベースの墓地売上高は7.8%減の3,250万ドルとなりました。既存店ベースの墓地EBITDAは前年同期の1,710万ドルから1,360万ドルに減少し、マージンは48.3%から41.8%に低下しました。

既存店ベースの墓地生前契約売上高は4.8%減の2,570万ドルとなりました。年初来の低迷はカリフォルニア州に集中しており、同州での墓地不動産の生前契約売上高が7.1%減となった一方、カリフォルニア州以外の市場は10.1%増となりました。

カリフォルニア州内では、2万ドル未満の契約が減少分の大部分を占めました。一方、2万ドルから3万ドルの契約は13.7%増加しました。

Carriage Servicesは、採用、研修、営業リーダーシップ、見込み顧客の獲得、成約率、報酬体系、個人の生産性の見直しを進めています。経営陣によると、営業担当者数は前年水準を下回っており、価格設定や販売可能物件の確保にも取り組んでいるとのことです。

金融収益および資本配分

金融収益は280万ドル減の620万ドルとなりましたが、これは主に特定のマスター・リミテッド・パートナーシップ（MLP）投資の売却に伴う追加の信託関連税によるものです。経営陣はこの税影響を一過性の第3四半期特有の要因と説明しており、第4四半期には再発しない見込みです。

同社は新たに3億ドルの融資枠を設定し、確約借入枠を5,000万ドル拡大しました。同行融資枠に基づく平均借入金利は前年同期を約80ベーシスポイント下回り、支払利息は約20万ドル減少しました。

買収パイプライン

買収パイプラインには、5つの州にまたがる葬儀場、墓地、火葬場を対象とした5件の取引が含まれています。買収対象の年間売上高は合計1,400万ドルを超え、新規市場およびCarriage Servicesがすでに事業展開している既存市場の双方が含まれます。

経営陣は、一部の案件が2026年第4四半期に、残りの案件が2027年第1四半期に完了すると見込んでいます。同社は第4四半期のフリーキャッシュフローおよび融資枠を活用してこれらの買収資金を調達する計画です。2026年に完了見込みの取引を含め、年末時点のレバレッジ比率は4.0〜4.1倍を見込んでいます。

業績見通し

経営陣は、見通しの下方修正について、上半期の死亡率、墓地生前契約の販売低迷、および買収完了時期の遅れを反映したものと説明しました。同社は、売上高見通しの引き下げ幅の大部分を墓地事業の低迷が占めており、葬儀事業の想定はほぼ変わっていないことを示しました。

第3四半期累計（9カ月間）の実績に基づくと、修正後のレンジから示唆される第4四半期の売上高は約1億600万〜1億1,100万ドル、調整後EBITDAは約3,000万〜3,500万ドルとなります。

第4四半期について、経営陣は葬儀契約件数が横ばいから約1%の増加にとどまると見込んでいます。価格設定および契約あたり平均売上高が下支えとなり、葬儀事業は1桁台前半の増収を見込んでいます。なお、この見通しには墓地生前契約の大幅な成長は織り込まれていません。

経営陣は、第4四半期末までに墓地事業のオペレーション改善が進展すると見込んでおり、2027年第1四半期までには事業が完全に回復軌道に戻る可能性があると述べています。

リスクと注視すべきポイント

• 墓地生前契約の販売動向、特にカリフォルニア州および低価格帯の契約における低迷が、引き続き事業上の主な懸念事項となっています。
• 経営陣は、営業職の採用、研修、見込み顧客の獲得、成約率、リーダーシップの責任体制における遂行上の課題を特定しました。
• 死亡率は同社の管理が及ばない要因であり、米疾病対策予防センター（CDC）のデータ公表の遅延が足元の動向の把握を困難にしています。
• 葬儀事業のマージンは、給与および福利厚生費による継続的なコスト圧迫に直面しています。
• 買収の完了時期は一部規制当局の承認に依存しており、四半期業績への寄与度に不透明感をもたらしています。
• 経営陣は、IT責任者の交代を受けて第三者機関を活用してIT刷新プロジェクト「Trinity」の評価を進めており、第4四半期以降にさらなる進捗状況を公表する予定です。

アナリスト質疑応答の要点

• 墓地事業の回復：経営陣は、改善計画が8月頃に開始されたと述べました。採用、研修、営業活動、価格設定、在庫の確保が主な注力分野となっています。
• 第4四半期の増収要因：前四半期比での増収予想には、第3四半期に生じた200万ドル超の信託関連税の影響の解消、季節要因による葬儀件数の増加、買収に伴う約70万〜100万ドルの売上貢献、ならびに墓地事業および金融収益の改善余地が含まれています。
• M&Aの競争環境：現在検討中の案件の大半は、競争入札ではなく信頼関係に基づくものです。経営陣は、プライベートエクイティが支援する買い手によって企業価値評価が過去の投資規律を超える水準まで吊り上げられた場合、買収から撤退する方針を維持すると述べました。
• 事業売却：Carriage Servicesは、非中核事業の売却プログラムは実質的に完了しており、現時点で追加の事業売却を行う予定はないと表明しました。
• 今後の買収ペース：経営陣は、公表済みの5件の取引以降も、四半期ごとに比較的安定したペースで買収を進められると見込んでいますが、取引完了の時期は売主や規制当局の手続きに左右されるとしています。

決算説明会トランスクリプト全文

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決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good day and thank you for standing by. Welcome to the Carriage Services Third Quarter 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sam Mazzu, Vice President, General Counsel and Secretary. Please go ahead, sir.

Sam Mazzu

Good morning, everyone, and thank you for joining us to discuss our third quarter results for 2026. In addition to myself, on the call this morning for management are Carlos Quezada, Chief Executive Officer and Vice Chairman of the Board of Directors; Steve Metzger, President and Chief Operating Officer; and John Enwright, Chief Financial Officer.

On the Carriage Services website, you can find our earnings press release, which was issued yesterday after the market closed. The press release is intended to supplement our remarks this morning and include supplemental financial information, including the reconciliation of differences between GAAP and non-GAAP financial measures.

Today's call will begin with formal remarks from Carlos and John and will be followed by a question-and-answer period. Before we begin, I'd like to remind everyone that during this call we'll make some forward-looking statements, including comments about our business, projections, and plans. Forward-looking statements inherently involve risks and uncertainties and only reflect our views as of today.

These risks and uncertainties include, but are not limited to, factors identified in our earnings release, as well as in our SEC filings, all of which can be found on our website. Thank you all for joining us this morning, and now I'd like to turn the call over to Carlos.

Carlos Quezada

Thank you, Sam, and welcome to everyone joining today's third quarter earnings call.

I want to begin by thanking the entire Carriage team. Every day, our people serve families during some of life's most difficult moments with compassion, professionalism, and genuine care. Their commitment to deliver premier experiences remains the foundation of our company and our long-term success.

Today, I will discuss our third quarter performance, address areas we are focused on improving, and highlight the progress we are making on the strategic priorities that will drive Carriage's long-term success. And then I will turn the call over to John, who will review our financial results and updated full-year outlook in greater detail.

Let me begin with our operating performance. Throughout 2026, our operating environment has reinforced the importance of building a company that can deliver consistent performance through changing market conditions.

During the first half of the year, lower than anticipated mortality pressured funeral volumes, with comparable funeral contracts declining 4.7%. We saw an encouraging improvement in the third quarter, with same-store funeral contracts growing 2.3% and total funeral contracts increasing 2.5% compared to the prior year. Consolidated funeral average revenue per contract increased $109 or 1.9%, while insurance-funded pre-need funeral contracts sold grew 7%.

These results are encouraging and demonstrate progress from our internal focus on areas to drive volume and contract average. While mortality rates remain outside our control, our ability to gain market share, improve average revenue per contract, and consistently deliver premier experiences is firmly within it. We believe our continued focus on these fundamentals is strengthening our competitive position and creating the foundation for more consistent organic growth.

Turning to our financial results, third quarter total revenue was $100.3 million, a decline of 2.4% compared to the prior year, primarily reflecting weaker cemetery pre-need sales. Funeral comparable revenue increased 3.6% to $56.8 million, supported by improved contract volume and average revenue per contract. Cemetery comparable revenue declined 7.8% to $32.5 million. Comparable cemetery pre-need sales totaled $25.7 million, a decline of 4.8% for the quarter, although production remains relatively flat for the first 9 months of the year.

Our cemetery pre-need performance has not met our standards this year, and we are taking decisive action to improve this area. Over the past several months, our review of leading sales indicators has identified opportunities to improve the execution of fundamental sales disciplines. We are addressing this through a comprehensive evaluation of our sales operating system, including recruiting, training, sales leadership, lead generation, conversion, compensation, and individual productivity. We are also strengthening our sales management team's accountability, establishing clear performance expectations, and improving our ability to identify and correct performance gaps earlier.

Simply put, flat performance to prior year is not good enough at Carriage. We recognize where improvements are needed, have a clear action plan already underway, and are committed to delivering measurable progress and returning to our expected growth trajectory.

As evidence of our underlying growth potential, our historical performance demonstrates the growth potential of our cemetery segment. From the third quarter of 2023 through the third quarter of 2026, same-store total cemetery pre-need sales achieved a compounded annual growth rate of 13.9%. Our focus is on building upon that foundation, strengthening execution, and delivering consistent, sustainable growth.

Moving to financial revenue, we ended the quarter at $6.2 million, a decrease of $2.8 million, primarily due to additional trust taxes associated with the sale of certain master limited partnership investments held in our trusts. John will provide additional details shortly.

Adjusted consolidated EBITDA was $27.7 million, a decrease of 16%, with an adjusted EBITDA margin of 27.6% compared to 32.1% last year. Adjusted diluted EPS was $0.59 per share compared to $0.75 per share in the prior year's quarter. These results were primarily affected by lower cemetery pre-need sales performance and the trust-related tax impact.

While these financial results fell short of our expectations, we remain confident in the underlying strength of our businesses and our ability to improve performance through disciplined execution, supported by the successful implementation of targeted changes to our cemetery pre-need sales organization.

Turning to our strategic growth initiatives, I am particularly encouraged by the momentum and quality of our acquisition pipeline. As previously communicated, we anticipated increased acquisition activity during the second half of 2026. Today, we have over $14 million in annual revenue represented by acquisitions under contract and letters of intent, with anticipated closings later this year and early 2027.

This represents meaningful progress in executing our strategic growth priorities and reinforces our confidence in the opportunities ahead. Importantly, we remain disciplined and selective. We are focused on acquiring premier businesses with strong reputations, attractive market positions, culture, true alignment, and the potential to generate compelling returns on invested capital.

We will not pursue growth simply to become larger. Our objective is to build a stronger, more profitable Carriage through acquisitions that enhance our portfolio, strengthen our competitive position, and create sustainable shareholder value. We believe our acquisition strategy, combined with improving organic performance, represents an important opportunity to accelerate progress towards our 2030 Vision.

Beyond our financial and strategic initiatives, one of the most important developments this quarter was the launch of The Carriage Way. The Carriage Way represents more than a cultural initiative. It is about defining who we are as an organization, how we lead, how we work together, and the standard of performance we expect from our team.

Historically, Carriage has benefited from the entrepreneurial spirit, strong local relationships, and unique identities of our individual businesses. These remain important competitive advantages and we intend to preserve them. At the same time, as we continue to grow, we recognize the tremendous opportunity to operate more effectively as 1 Carriage, united by a shared purpose, common values, and a culture of accountability, collaboration, continuous improvement, and premier service.

The Carriage Way brings these principles together, creating a common foundation for leadership, talent development, operational excellence, and the experiences we deliver to the families we serve. Our passion for delivering elevated experiences is an important part of bringing this culture to life by recognizing and reinforcing the behaviors that make Carriage special.

I firmly believe that culture and performance are inseparable. A strong culture creates alignment, alignment drives execution, and consistent execution delivers results. The Carriage Way is foundational to the company's success in building the exceptional operating company we envision for 2030. It will help us develop stronger leaders, attract and retain exceptional talent, share best practices, and unlock the collective strength of our organization. We are excited about what this means for our people, our businesses, the families we serve, and the future of Carriage.

As we look ahead, I want to leave you with a few thoughts. While our third quarter financial results did not meet our expectations, we are seeing encouraging progress in important areas of our business.

Our funeral operations returned to positive contract growth while continuing to improve upon contract average. Our acquisition pipeline continues to grow with quality opportunities, and The Carriage Way is bringing greater alignment and shared accountability across our organization.

At the same time, we recognize the work ahead, particularly as it relates to improving cemetery pre-need sales performance. We are addressing these challenges directly and with a clear focus. What gives me confidence is not simply the opportunity ahead, but the strength of our strategy, the capabilities of our people, the quality of our assets, and our determination to execute.

We have a clear vision of the company we are building, a strong foundation to build upon, and a leadership team committed to turning our strategic priorities into measurable results. Our objective remains unchanged: to build an exceptional operating company recognized for premier service, consistent performance, disciplined growth, and sustainable long-term shareholder value creation.

I am confident in our direction, encouraged by the progress we're making, and excited about Carriage's future. With that, I will turn the call over to John.

John Enwright

Thank you, Carlos, and good morning, everyone. As Carlos discussed, our third quarter results reflected encouraging improvement in funeral contract volume and average revenue per contract, offset by weaker cemetery pre-need sales performance and lower financial income.

While the overall financial performance was below our expectations, the quarter also demonstrated the importance of our continued focus on operating execution, cash generation, and disciplined capital allocation. Today, I will review our third quarter financial results compared with the third quarter of 2025, discuss cash flow and capital expenditures, provide an update on our balance sheet and capital allocation priorities, and conclude with our outlook for the remainder of 2026.

For the third quarter, total revenue was $100.3 million compared with $102.7 million in the prior-year quarter, a decrease of approximately 2.4%. Adjusted consolidated EBITDA was $27.7 million compared with $33 million a year ago, a decline of approximately $5.3 million. Adjusted EBITDA margin was 27.6% compared with 32.1% in the prior-year quarter.

The year-over-year EBITDA change was primarily driven by 2 components: comparable cemetery EBITDA declined approximately $3.5 million, reflecting weaker cemetery pre-need sales performance; financial EBITDA declined approximately $2.5 million. As Carlos mentioned, financial revenue was adversely affected by additional trust taxes associated with the sale of certain master limited partnership investments held in our trusts. The financial EBITDA decline includes that impact along with other year-over-year changes in financial income and related expenses. These decreases were partially offset by modest growth in our funeral comparable EBITDA, incremental acquisition EBITDA, lower overhead expense, and other changes.

Our funeral comparable businesses generated $20.4 million of EBITDA, essentially flat to slightly higher than last year, despite some margin pressure. Funeral revenue increased 3.6%, reflecting stronger contract volume and average revenue per contract, while comparable funeral EBITDA margin was 35.9% compared with 36.9% last year.

In cemetery, comparable EBITDA was $13.6 million compared with $17.1 million a year ago, and the comparable cemetery EBITDA margin declined to 41.8% from 48.3%. Comparable cemetery revenue was $32.5 million, down 7.8%, with pre-need sales production of $25.7 million compared with $27 million in the prior-year quarter. This shows the significant impact that sales productivity and revenue mix can have on segment profitability. As Carlos described, efforts are underway and our team is focused on more consistent execution with an emphasis on sales leadership, productivity, and conversion.

Adjusted diluted earnings per share were $0.59 compared with $0.75 a year ago, primarily reflecting the lower adjusted operating contribution and trust taxes. Excluding the impact of trust taxes, our adjusted diluted earnings per share results would have been $0.70 for the third quarter of 2026. GAAP diluted earnings per share were $0.56 compared with $0.41 in the prior-year quarter.

The difference in year-over-year GAAP and adjusted results reflects in part the impact of prior-year divestitures.

Moving to cash flow, cash provided by operating activities was $24.7 million for the third quarter, essentially unchanged from the prior-year quarter. Year-to-date operating cash flow totaled $47.2 million compared with $46.6 million in the first 9 months of 2025. Adjusted free cash flow for the third quarter was $19.3 million compared with $19 million last year. For the first 9 months of 2026, adjusted free cash flow was $33 million compared with $39.3 million in the prior-year period.

The year-to-date decline principally reflects higher capital expenditures and a difference in the adjustments between operating cash and adjusted free cash flow. We continue to view cash generation as a critical component of our capital allocation strategy to support reinvestment in our portfolio, selective acquisitions, and financial flexibility.

During the quarter, we closed on our new $300 million credit facility, increasing borrowing capacity commitment by $50 million. The new agreement provides additional flexibility to support strategic initiatives and is an important step in managing our capital structure. At quarter end, our bank leverage ratio remained flat at 4.1x compared to the third quarter of 2025. Interest expense was approximately $200,000 lower than the prior-year quarter. Our average borrowing rate under the credit facility was approximately 80 basis points lower than in the third quarter of 2025.

Capital expenditures totaled $5.8 million in the quarter compared to $6.7 million a year ago. Through the first 9 months of 2026, capital expenditures were $15.1 million compared to $12.7 million in the prior-year period. Of the total capital expenditures in the quarter, maintenance capital was $2.7 million and growth capital was $3.1 million. We remain focused on investing in the facilities and cemetery development opportunities that support the long-term performance of our businesses while maintaining appropriate discipline around returns and cash flow.

Overhead expenses were $13.6 million in the third quarter compared to $13.7 million in the prior-year period. As a percentage of revenue, overhead was 13.5% compared with 13.4% last year. Year to date, overhead has decreased to $40.5 million from $41.5 million, or 13.1% of revenue versus 13.3% a year ago. We continue to manage our cost structure carefully while investing in people, tools, and systems that we believe will improve execution and support our growth. Given the variability in revenue, maintaining expense discipline remains an important priority.

Turning to our outlook for 2026, we are revising our full year expectations to reflect the year-to-date results, including lower than anticipated mortality rates during the first half of the year, weaker cemetery pre-need sales performance, and the revised timing of expected acquisitions. While the improvement in our funeral business during the third quarter is encouraging, our updated outlook reflects the financial performance achieved to date and our current assessment of the fourth quarter.

Our revised full-year outlook anticipates revenue between $415 million and $420 million, compared with a previous range of $435 million to $445 million; adjusted consolidated EBITDA between $125 million and $130 million, compared with $135 million to $140 million; adjusted diluted earnings per share between $2.90 and $3.05, compared with $3.35 to $3.55. We now expect adjusted free cash flow between $40 million and $45 million, compared with $40 million to $50 million previously. The capital expenditure outlook remains unchanged at $20 million to $25 million.

Based on the first 9 months of results, the revised ranges imply fourth quarter revenue of approximately $106 million to $111 million and adjusted consolidated EBITDA of approximately $30 million to $35 million.

In closing, our revised outlook reflects the areas where performance has fallen short of our expectations. We are encouraged by the improvement in our funeral segment, but recognize that restoring cemetery performance and improving overall consistency remain important priorities. We will continue to focus on disciplined cost management, cash flow, and capital allocation decisions that support long-term value creation for our shareholders.

This concludes our prepared remarks. I will now turn the call back over to the operator to open the line for questions.

Operator

[Operator Instructions]

We will go to our first question from Laura Maher with B. Riley Securities. Please go ahead.

質疑応答

Laura Maher

Good morning. My first question is in cemetery: is the weakness concentrated in a few large properties or broad-based across the 28 cemeteries?

Carlos Quezada

Yes, that's a great question. Thank you for the question, Laura. So as we look at the analysis, and with this, I'm going to give you some year-to-date numbers, it's pretty clear that it's highly concentrated in California. As we look at year to date, we look at California being down 7.1% on pre-need cemetery property, where everywhere else is up 10.1%. And so it seems like a very highly focused area.

Specifically, once you look into the different brackets of pricing within California, it's pretty clear that the contracts below $10,000, but really below $20,000, are the ones driving the most deficit on the pre-need cemetery growth, whereas contracts between $20,000 and $30,000 are up by 13.7%. So we are addressing these challenges. We're looking if it's an inventory issue or if it's just a type of lead source issue to make sure that those, I call it, bread-and-butter contracts below the $20,000 average, we can target more and really get our contract count back on track in the California markets.

Laura Maher

Thank you. My second question: is there any update on the non-core divestiture program and expected proceeds?

Steve Metzger

No, Laura. So we pretty much wrapped up our divestiture focus. We haven't sold any additional businesses this year and don't have any plans to sell any in the future.

Laura Maher

Okay, thank you. I'll pass it on.

Operator

Thank you. And our next question comes from Alex Paris with Barrington Research. Please go ahead.

Alexander Paris

Where to start? I think I'll start with the M&A pipeline. Very exciting. Very exciting because you've only done 1 this year in May, and it was probably about $1.5 million in revenue by my estimation. So you got $14 million in annual revenue in the pipeline. Some will close in the fourth quarter, some will close in the first quarter. First question: how many businesses does this include, and are they funeral, cemetery, or combo businesses?

Steve Metzger

Good morning, Alex. This is Steve. So, yes, it includes a combination of all the above. So, it's funeral homes, it's cemeteries, it's crematories spread out through 5 different states. And it's a mix of both new markets for us, which we're really excited about, you know, bigger markets that are growing that we've been working to get into, but also increasing our presence in some markets that we've really been doing well in the past few years. And so working to build out the presence in those markets. So it's a really nice cross-mix of all those things.

And when we talk about the pipeline, this is my ninth year at Carriage, and we've never been anywhere close to the number of quality conversations we're having right now with businesses that align with our growth strategy. So what we talked about earlier in the year was the back half would be pretty active, and that will really be the launch for what we think is the new normal for us in terms of cadence on acquisitions. And they're going to look a lot like the types of businesses you've seen us acquire in the past: high-quality combination businesses, funeral homes and cemeteries, high-quality standalone funeral homes with the opportunity to expand a presence in the market. So it's going to be a lot of what you've seen us do in the past.

Alexander Paris

Okay, so just to follow up on that, how many closings are we expecting? You know, is it 1, 2, 3, 4 acquisitions?

Steve Metzger

Yes, so it's going to be 5.

Alexander Paris

And some will close in the fourth quarter, some will close in the first quarter based on your current thinking?

Steve Metzger

Correct. And primarily driven by regulatory approvals in their timeline.

Alexander Paris

Got you. And then I assume pricing is in line with your historical discipline?

Steve Metzger

Correct.

Alexander Paris

Great. And then just moving on, you talked a lot about cemetery, so I'll focus my question on funeral. Funeral was pretty exciting on a same-store basis. Funeral contracts were up 2.3% in the third quarter. That's an improvement from the second quarter when it was down 3.5% and the first quarter when it was down 5.8%. In your implied guidance for the fourth quarter, do you expect that comparable contract growth to persist in the fourth quarter?

John Enwright

Yes. This is John. So as we think about guidance for funeral, we do anticipate it to be, call it, low single digits in the fourth quarter. So we anticipate, you know, year-over-year growth, slight growth ultimately. And we do think there's an opportunity as we think about just funeral for some ARPC, some growth in pricing as well, which will help us get to, call it, that low single-digit in total revenue growth.

Alexander Paris

Just to be clear, the low single digits you refer to in funeral, you're talking about contracts, and then on top of that, average revenue per contract?

John Enwright

Yes, so I would say ultimately flat to, call it, 1% from a contract perspective, ultimately, and then some benefit associated with ARPC to get it a little bit higher into low single-digit growth.

Alexander Paris

Okay, and is that just conservatism? You're up 2.3%. Having, you know, 0% to 1%, is that just conservatism, or is there...

John Enwright

Yes. I would say in the third quarter of last year, right, I don't want to call it an easy comp, right, but if you remember, August was down, September was down. So there was an easier comp in the third quarter compared to the fourth quarter as we look at our data as we close. And we're not fully closed with October, right? So we see, you know, we're slightly up in October, which is meeting our expectations. It's not up to, call it, the 2.5% or 2.3% that we achieved in the third quarter. One quick caveat to that is years of mortality.

Carlos Quezada

If you remember last year there was some shifting of the flu season from December to January, based on how weather impacted, you know, especially some of the northern states. And so that's just a function that we can't really forecast for, so we're just using our best trends for the last few years to kind of like guide for that. But, you know, I'm just putting that out there that if some shifting of the flu season were to happen again, then it becomes a little bit more difficult to forecast.

Alexander Paris

Got you. And is the mortality rate back to normal in the third quarter? Obviously, it was below trend in the first half. But is it—my working understanding is the death rate of the United States is approximately 1% per year. It was below that in the first half. Are we back into that 1% range? And where is your source of data on that other than your own internal operations?

Carlos Quezada

Well, as you know, CDC data is a little behind, typically around 3 to 4 months behind to what's currently happening. So it's difficult to say the death rate is back to normal. From our perspective, the way I look at things, if I compare it to the available information that I have, I'm going to use the SCI example for the third quarter: core funeral home for them was down by 50 basis points, whereas our volume, total funeral volume comparable, was up 2.3%.

And so to say that's a function of death rate, it would be complicated. I do think it's a function of more market share gains and the focus we have in strategically gaining families through our phone shopper training, through our package presentation, conversion cremation, and things of that nature. And so it seems to me that that's a reasonable explanation for the volume increase that we have.

Alexander Paris

Makes sense to me, thank you for that. And then last quick question on funeral: that tax implication, is that confined to the third quarter? Do you expect fourth quarter funeral revenue and field EBITDA to be comparable to what it was before Q3?

John Enwright

Yes, the trust tax impact was confined to a discrete item. Our expectation is the third quarter; we don't expect to see any of that hit the fourth quarter going forward.

Alexander Paris

Okay, great. I'll get back in the queue. I'll let somebody else focus on a deep dive into cemetery. Thanks.

Operator

Thank you. And we'll next go to Scott Schneeberger with Oppenheimer. Please go ahead.

Scott Schneeberger

Carl and John, just curious, I'll do that deep dive on pre-need cemetery. From the first question, it sounds like you're performing well broadly geographically except for California and it's the low end of the market. Is it just that? Is everything operating smoothly elsewhere? I know in the second quarter it was a little bumpy as well and there were some new systems implementations and perhaps some distractions for the sales force. So could you just speak about maybe the top 2 or 3 drivers, if geography is #1, but what's behind that and what's system-wide versus localized? Thanks.

Carlos Quezada

Yes. Historically speaking, we see that when there's some discretionary spending pressures in the markets, California is 1 state that reacts perhaps more aggressively than other states. And it seems like we see a little bit of that there. But that's not the only reason why we see that decline. It's pretty clear, and I said that in my remarks and even in the release yesterday, that it seems like we have parted ways from some basic fundamentals for sales related to our headcount target for recruiting, the training programs we have to elevate the skill set and really improve the closing ratios that we have, and the management of the activity related to lead generation and the sales funnel that drives the performance.

From my point of view, we have some significant improvement to do broadly, that includes outside of the state of California. But I do see specifically to California some additional pressure we don't see as much elsewhere. We are addressing that through pricing, in-branch training, headcount, and even as I mentioned in the prepared remarks, sales leadership improvement. But we do feel confident, as we have proven in the past, that our ability to drive pre-need cemetery sales, diagnose the problems, and execute with discipline is at a high level. And we believe we will be able to get back to that pretty soon.

Scott Schneeberger

Thanks, Carlos. Just following up on that topic, guys. What should we think about for timeframe? Because it sounds like, you know, perhaps some macro factors, and then obviously it sounds like there's some productivity enhancements that you'd like to be making. What type of timeframe do you see that? And I guess I'll dovetail in: what should we think about in the fourth quarter for production?

Carlos Quezada

Absolutely, it's a good question. So we were able to diagnose this a few months ago, so it's not something we suddenly got surprised by as we saw the third quarter results. It's something we've been looking at for the past few months. Around the month of August, we had a pretty broad meeting with the sales teams to really get deep into what were the areas that we needed to execute better: areas of improvement in the 3 areas of sales—recruiting, training, and activity, meaning lead generation and management of those leads. And we deployed some good plans since then.

So through the month of September, October, and as we speak, we have been able to improve on the execution of that. It didn't lift as fast as I would have hoped. But I do believe as we continue to execute on the program, we continue to recruit the headcount needed—because we are below what we had last year at this time around—and continue to provide the inventory needed within those brackets that I mentioned, especially around California, we should be able to get back on track by the end of the fourth quarter.

We are not putting in our guidance meaningful growth on the pre-need cemetery side, just to be mindful of the trend we have seen. However, I do expect to get back on track, you know, by the first quarter of 2027—like fully back on track.

Scott Schneeberger

Excellent. Thanks for that. And just 1 more, I'm going to pop over to the funeral segment. A nice revenue growth there with some volume and revenue per service lift, but the margin didn't expand correspondingly. So could you just speak, I guess, John, to what were some drivers impacting margin over on the funeral side in the quarter and what you think for that going forward? Was it investments, or was it otherwise? Just curious where you see that to project out next quarter and beyond. Thanks.

John Enwright

Yes, it's a good question. We saw some pressure in really kind of the salary and benefit line, ultimately, was the main driver of kind of the point erosion. There were some other pieces and parts that ultimately I would call nonsignificant and we can work through, but ultimately as we think about kind of the leverage and the loss of leverage, call it a point, we saw that really being driven by salaries and benefits. So that will persist into the fourth quarter, but we're looking at ways to kind of manage that.

Scott Schneeberger

Great, thanks. I'll turn it over, guys. Appreciate it.

Operator

Thank you. And next we'll go to Parker Snure with Raymond James. Please go ahead.

Parker Snure

Hi, good morning. Just 1 quick one on the fourth quarter revenue guidance: it seems to imply a step-up from roughly $100 million in the third quarter up to about $108 million in the fourth quarter at the midpoint of your new guidance. Just curious if you could give some color on the drivers there. It seems like the tax item is going to go away, that was about $1.7 million by my math—correct me if I'm wrong there. I believe you also said some acquisitions will fall in the fourth quarter. So just maybe try to parse out some of those details: how much of it is acquisitions, the tax item, and then just other organic growth from 3Q to 4Q? Thanks.

John Enwright

Yes, so you can think about that. The tax item was over $2 million, so call it $2.5 million—just use an average round number of impact in Q3. Funeral volume is typically a little bit higher, just generally speaking, in the fourth quarter compared to the third quarter. So we just see that natural growth of that; as you know, we're going to see a couple points of improvement associated with that.

And as we think about our acquisitions, you know, some will close in the fourth quarter. So if I think about if you're trying to get to the midpoint of $108 million, call it $2 million is going to be associated with that trust improvement, a couple million dollars probably going to be associated with funeral, we're going to have acquisitions of a benefit of maybe $700,000 to $1 million roughly around that number in the quarter, and then ultimately cemetery performance could be a little bit better.

And then there's some other benefits that we may see through the financial income performance as well. As we think about the impact of the third quarter, we're looking at potential benefits that can have from the third quarter into the fourth quarter that may drive the financial benefit to be a little bit higher.

Parker Snure

Okay, thank you. And then broadly on acquisitions, appreciate your comment on the timing and the expected multiples and things like that. Just more of a high-level question: have you seen any changes in the competitive nature of the bidding process for these businesses, whether it be competition from private equity, other large competitors, things like that? You've returned to M&A over the last year or so, but you took a bit of a break for a few years. So just curious if there's been a material shift in the number of competitors in these bidding processes, whether that's maybe putting some pressure on multiples—it doesn't seem that way—and just anything else that you would note that has maybe changed in the M&A environment recently?

Steve Metzger

Yes, Parker, this is Steve. And from our perspective, the thing we're most excited about on the M&A front is the majority of deals we're looking at right now are home-sourced, for lack of a better term. And so they're not competitive deals; they're relationships that we have with these owners. And that's our preference, obviously.

On the competitive deals, when there are things that other people are looking at, that process and the multiples continue to kind of be in the range we've seen over the years. Sometimes, depending on the participants, it gets a little too rich for our blood and we tap out. We've seen that happen again this year, and primarily from some of the private equity-backed players who have entered, and we've got enough activity to where it's easy for us to be selective and say we'll pass on those and focus on some of these others.

Parker Snure

Okay, thank you.

Operator

Thank you. And we'll take our next question from George Kelly with ROTH Capital Partners. Please go ahead.

George Kelly

To start, maybe I'll just follow up on the prior M&A-related question. Two more for you: how do you plan to finance these transactions, assuming all 5 of these close? How do you plan to finance them? And then second question is: how should we think about the cadence for next year and beyond? Is the pipeline beyond these 5? Is there a lot still in that pipeline, or just any kind of commentary on next year would be helpful as well.

John Enwright

George, I'll answer the first part of the question and pass it on to Steve for the second. From a financing perspective, we'll use our free cash flow that we generate in the fourth quarter as well as our facility to finance.

Steve Metzger

George, on cadence, we expect this to look similar to kind of the new normal for us. We've got a number of opportunities in the pipeline. We have some offers outstanding that we're having ongoing discussions with. So it's always tough to predict which quarters they'll fall into because a lot of that just depends on the counterparty of the owner in terms of when they're ready. But we think that we'll have a pretty steady cadence quarter by quarter that is similar to this.

George Kelly

Okay. And then, John, can you anticipate whether getting much above 4x inclusive of these deals, or where do you think it'll move?

John Enwright

No, so we anticipate year end to be between 4x—given kind of the change in our EBITDA expectation, we expect to be between 4x and 4.1x at year end.

George Kelly

And that's inclusive of all transactions?

John Enwright

That's inclusive of the transactions, yes. Some will close again in Q1 of next year, right? So some of that funding will be there.

George Kelly

Okay. And then second question is on the revenue guide change. It was, I think at the midpoint, it's around $22.5 million. Can you just help us understand that? The key pieces of that $22.5 million, like where did it stem from M&A and funeral and cemetery, et cetera?

John Enwright

Yes, so funeral is pretty consistent with where we expected it to be. So the third quarter results were close to where we anticipated, as well as the fourth quarter we're projecting. We haven't made any real changes to our expectations given the fact that we were close in the third quarter. The largest change is in cemetery sales. So when we talked and released in August, July was good, June was good, and ultimately we expected to make up some of the shortfall that we had seen from our normal expectations for pre-need sales. So the vast majority of the change is associated with cemetery sales performance.

Obviously, from a trust tax, we took out, call it, $2.5 million. We didn't anticipate that; that was about, call it, 10% of that change. That wasn't anticipated in our guide at that point in time. So we've adjusted our full year guide for financial income associated with that. And then when we were talking about acquisitions, we had expected, call it, between 0 and 5 depending on the timing of that. Ultimately, we're going to be on the lower end of that this year because most of them are going to close, call it, in December, and the timing we had initially thought maybe it'd be a little bit sooner than that. So really those are the components of how it's driven; funeral did not drive any real change to our forecast.

George Kelly

Okay, excellent. And then last one from me on Trinity. Any update there, the pilot rollout? That's all I had. Thank you.

John Enwright

Yes, so from a Trinity perspective, you know, we brought in a third party. I think you may have seen ultimately we've changed leadership in IT. We brought in a third party just to help us assess kind of our program in total to make sure we're going down the right path. So we will share a lot more, call it, at the end of the fourth quarter, but ultimately that's where we're at today.

George Kelly

Okay, thanks.

Operator

Thank you. And with no further questions in the queue, I'd like to turn the call back over to Carlos Quezada for closing remarks.

Carlos Quezada

Thank you, everybody. I really appreciate you joining the call this morning and we really hope to have really, really good news as we continue to execute on our plans. I'm continuing to be super excited about Carriage and the vision we have for 2030. And we keep making progress slowly but surely.

I know that pre-need cemetery sales was sort of a disappointment this quarter, but we have made the changes in the process and systems to make meaningful improvements as we continue into these next few months. And I'm really excited to give you better news as we report the fourth quarter in February. Thank you, everybody.

Operator

This concludes today's conference. Thank you for participating. You may now disconnect.

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