What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-01 compared with 2024-08-02 · 171 added, 164 removed, 264 unchanged (56% of the section changed)

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Funeral Home operations, which currently accounts for approximately 65% of our total revenue, and Cemetery operations, which currently accounts for approximately 35% of our total revenue.

At June 30, 2024, we operated 164 funeral homes in 26 states and 31 cemeteries in 11 states.

At September 30, 2024, we operated 162 funeral homes in 26 states and 31 cemeteries in 11 states.

We compete with other publicly held, privately held and independent operators of funeral and cemetery companies.

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COMPANY DEVELOPMENTS

Board of Directors and Leadership Changes

On April 2, 2024, the Board of Directors (the “Board”) of the Company revised the Director Compensation Policy to provide that each independent director is entitled to a quarterly retainer of $37,500 payable in cash and/or unrestricted shares of our common stock at the end of each quarter.

The chair of the Board, so long as he or she is an independent director, and the chair of our Audit Committee shall be entitled to an additional annual retainer of $20,000, the chair of our Compensation Committee is entitled to an additional annual retainer of $15,000, and the chair of our Corporate Governance Committee is entitled to an additional annual retainer of $10,000, which are payable in quarterly installments at the end of each quarter.

On May 14, 2024, the Board elected Julie Sanders to serve as chair of the Board’s Corporate Governance Committee, effective on that date, which was a result of the previous announcement of Chad Fargason, the prior chair of the Corporate Governance Committee, being elected to serve as the Company’s Non-Executive Chairman of the Board, effective March 7, 2024.

On June 6, 2024, L.

Kian Granmayeh informed the Company that he would resign from his position as Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) effective July 1, 2024 and will serve as a consultant for the Company for six months thereafter.

Granmayeh’s resignation was not the result of any disagreement with the Company on any matter relating to the Company's operations, policies, or practices, including any matters concerning the Company’s controls or any financial or accounting-related matters or disclosures.

In connection with Mr.

Granmayeh’s resignation, the Company’s Board appointed Kathryn Shanley, the Company’s Chief Accounting Officer (Principal Accounting Officer) as the Company’s interim Principal Financial Officer, effective June 6, 2024, until a permanent replacement is identified.

No new compensatory arrangements were entered into with Ms.

Shanley in connection with her appointment as the Company’s interim Principal Financial Officer.

Contingent Liability

During the three and six months ended June 30, 2024, we recorded a $5.0 million contingent liability to reflect our agreement to pay our financial advisor in connection with the review of strategic alternatives.

Credit Facility

On July 31, 2024, the Company entered into a fourth amendment, (the “Credit Facility Amendment”), to our senior secured revolving credit facility (as amended, the “Credit Facility”), with the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent.

The Credit Facility Amendment provided, among other things, for (i) the extension of the maturity date of the Credit Facility to July 31, 2029, provided that, if the Senior Notes (as defined in the Credit Facility) have a stated maturity date that is prior to July 31, 2029, then the maturity date shall instead be the date that is 91 days prior to the stated maturity date of the Senior Notes;

(ii) the establishment of Term Secured Overnight Financing Rate (“SOFR”) as a benchmark rate and the removal of BSBY from the Credit Facility, including conforming revisions to certain defined terms under the Credit Facility;

(iii) the conversion of each existing BSBY Rate Loan (as defined in the Credit Facility prior to giving effect to the Credit Facility Amendment) to a Term SOFR Loan (as defined in the Credit Facility);

(iv) modifications to the definitions of “Applicable Rate” and “Applicable Fee Rate” to change the applicable rates and pricing levels set forth in each pricing grid;

(v) the removal of certain mandatory prepayments arising from the issuance of either Equity Interests or Debt (as both are defined by the Credit Facility);

and (vi) modifications to the permitted investments covenant, relating to the Company’s ability to make certain acquisitions, subject to the satisfaction of certain conditions therein.

Inflationary and Macroeconomic Trends

During the second quarter of 2024, we continued to experience a stabilization of inflationary costs from our vendors and suppliers for merchandise and goods, particularly as it relates to utilities, funeral supplies and merchandise costs, with costs remaining flat when compared to the same period during 2023.

Although we continue to experience higher variable interest rates under our Credit Facility, we anticipate lower borrowing costs as we continue prioritizing paying down our outstanding debt throughout the year.

During the third quarter of 2024, we continued to experience a stabilization of inflationary costs from our vendors and suppliers for merchandise and goods, particularly as it relates to utilities, funeral supplies and merchandise costs, with costs remaining flat when compared to the same period during 2023.

Also, during the third quarter, after giving effect to the Credit Facility Amendment, we experienced lower variable interest rates under our Credit Facility, which resulted in lower borrowing costs during the quarter compared to the prior year.

We expect this trend to continue as we remain focused on paying down our outstanding debt throughout the year.

While we are encouraged by the stabilization of inflationary costs that we have experienced thus far in 2024, we are unable to forecast with any certainty whether inflationary costs will continue to moderate in future periods, as the ultimate scope and duration of these impacts remain unknown at this time.

More broadly, the U.S.

economy continues to experience the impact of several years of higher rates of inflation, which has impacted a wide variety of industries and sectors,

with consumers facing rising prices.

economy continues to experience the impact of several years of higher rates of inflation, which has impacted a wide variety of industries and sectors, with consumers facing rising prices.

Such inflation may negatively impact consumer discretionary spending, including the amount that consumers are able to spend on our services, although we have not experienced any material impacts to date and our industry has been largely resilient to similar adverse economic and market environments in the past.

Although we expect these trends to continue throughout the year, we will assess these impacts and take the appropriate steps, if necessary, to mitigate any changes in consumer preferences or additional cost increases, if possible.

During the second quarter of 2024, we continued to experience lower volumes as compared to prior years due to fluctuations in the death rate, although overall financial performance remains at or above prior reporting periods.

Although we expect fluctuations in the death rate to continue, we are unable to predict or forecast the duration or variation of the death rate with any certainty.

During the third quarter of 2024, we continued to experience lower volumes as compared to prior years due to fluctuations in the death rate, although overall financial performance remains at or above prior reporting periods.

Although we expect fluctuations in the death rate to continue, we are unable to predict or forecast the duration or variation of the death rate with any

Regardless of these fluctuations in the death rate, we continue to focus on expanding market share, cost management and executing on our strategic operational plans.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity and capital resources are internally generated cash flows from operating activities and availability under our Credit Facility (defined below).

Our primary sources of liquidity and capital resources are internally generated cash flows from operating activities and availability under our Credit Facility.

We generate cash in our operations primarily from atneed sales and delivery of preneed sales.

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Based on our recent operating results, current cash position and anticipated future cash flows, we do not anticipate any significant liquidity constraints in the foreseeable future.

We have the ability to draw on our Credit Facility, subject to its customary terms and conditions.

We have the ability to draw on our Credit Facility, as needed, subject to its customary terms and conditions.

Our plan is to remain focused on executing our strategic objectives and growth strategy.

This includes prioritizing our capital allocation for debt repayments, the payment of dividends and debt obligations and internal growth capital expenditures, which we expect to fund using cash on hand and borrowings under our Credit Facility, along with general corporate purposes, as allowed under our Credit Facility.

This includes prioritizing our capital allocation for debt repayments, the payment of dividends and debt obligations, internal growth capital expenditures, and general corporate purposes, as allowed under our Credit Facility.

We expect to fund these payments using cash on hand and borrowings under our Credit Facility.

We believe that our existing and anticipated cash resources, including, as needed, additional borrowings or other financings that we may be able to obtain, will be sufficient to meet our anticipated working capital requirements, capital expenditures, scheduled debt payments, commitments and dividends for the next 12 months, as well as our long-term financial obligations.

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For additional information regarding known material factors that could cause cash flow or access to and cost of finance sources to differ from our expectations, please read Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Our cash balance has remained consistent throughout the year as we began the year and ended the second quarter with $1.5 million in cash.

At June 30, 2024, we had borrowings of $155.0 million outstanding on our Credit Facility compared to $179.1 million at December 31, 2023.

We began 2023 with $1.5 million in cash and ended the third quarter with $1.3 million in cash.

At September 30, 2024, we had borrowings of $140.0 million outstanding on our Credit Facility compared to $179.1 million at December 31, 2023.

The following table sets forth the elements of cash flow (in thousands):

Six months ended June 30,

Nine months ended September 30,

Cash at beginning of the year $ 1,523 $ 1,170

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Net (payments) borrowings on our Credit Facility, acquisition debt and finance lease obligations (39,564) (3,891)

Payment of debt issuance costs for the Credit Facility (782) —

Net proceeds from employee equity plans 1,757 955

Dividends paid on common stock (5,098) (5,023)

Net cash (used in) provided by financing activities (26,272) 10,508

Net cash used in financing activities (43,687) (7,959)

Cash at end of the period $ 1,260 $ 1,675

Operating Activities

For the six months ended June 30, 2024, cash provided by operating activities was $21.9 million compared to $39.2 million for the six months ended June 30, 2023.

The decrease of $17.3 million is primarily due to the following non-recurring events, which occurred during the first six months of 2023:

i) an $8.6 million withdrawal of realized capital gains and earnings from our preneed funeral and cemetery trust investments;

and ii) receipt of a $6.0 million incentive payment from a vendor for entering into a strategic partnership agreement to market and sell prearranged funeral services in the future.

For the nine months ended September 30, 2024, cash provided by operating activities was $42.7 million compared to $61.8 million for the nine months ended September 30, 2023.

The decrease of $19.1 million is primarily due to the following non-recurring events, which occurred during the first nine months of 2023:

i) an $8.6 million withdrawal of realized capital

gains and earnings from our preneed funeral and cemetery trust investments;

and ii) the receipt of a $6.0 million incentive payment from a vendor for entering into a strategic partnership agreement to market and sell prearranged funeral services in the future.

Investing Activities

Our investing activities resulted in a net cash inflow of $4.4 million for the six months ended June 30, 2024 compared to a net cash outflow of $49.9 million for the six months ended June 30, 2023, an increase of $54.3 million.

Our investing activities resulted in a net cash inflow of $0.7 million for the nine months ended September 30, 2024, compared to a net cash outflow of $53.4 million for the nine months ended September 30, 2023.

The increase of $54.1 million is due to the activity described below.

Acquisition and Divestiture Activity

During the six months ended June 30, 2024, we sold six funeral homes and one cemetery for an aggregate of $10.9 million.

During the nine months ended September 30, 2024, we sold six funeral homes and one cemetery for an aggregate of $10.9 million.

Additionally, we sold real property for $1.1 million.

During the six months ended June 30, 2023, we acquired a business consisting of three funeral homes, two cemeteries and one cremation focused business for $44.0 million.

In addition, we sold one funeral home and two cemeteries for $0.8 million

and real property for $1.2 million.

During the nine months ended September 30, 2023, we acquired a business consisting of three funeral homes, two cemeteries and one cremation focused business for $44.0 million.

In addition, we sold two funeral homes and two cemeteries for $1.1 million and real property for $1.2 million.

Insurance Proceeds

During the six months ended June 30, 2024, we received proceeds of $0.3 million from our property insurance policy for the reimbursement of renovation costs for certain of our funeral businesses damaged by Hurricane Ian that occurred during the third quarter of 2022.

During the six months ended June 30, 2023, we received proceeds of $1.1 million from our property insurance policy for the reimbursement of renovation costs for certain of our funeral businesses damaged by Hurricane Ian that occurred during the third quarter of 2022 and a fire that occurred during the first quarter of 2023.

During the nine months ended September 30, 2024, we received proceeds of $0.4 million from our property insurance policy for the reimbursement of renovation costs for certain of our funeral businesses damaged by Hurricane Ian that occurred during the third quarter of 2022.

During the nine months ended September 30, 2023, we received proceeds of $1.4 million from our property insurance policy for the reimbursement of renovation costs for certain of our funeral businesses damaged by Hurricane Ian that occurred during the third quarter of 2022 and a fire that occurred during the first quarter of 2023.

Capital Expenditures

For the six months ended June 30, 2024, our capital expenditures (comprised of growth and maintenance spend) totaled $7.1 million compared to $9.0 million for the six months ended June 30, 2023, a decrease of $1.9 million.

For the nine months ended September 30, 2024, our capital expenditures (comprised of growth and maintenance spend) totaled $11.7 million compared to $13.1 million for the nine months ended September 30, 2023, a decrease of $1.4 million.

The following tables present our growth and maintenance capital expenditures (in thousands):

Six months ended June 30,

Nine months ended September 30,

Cemetery development $ 5,288 $ 5,128

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Total Growth $ 6,697 $ 7,143

(1) During the six months ended June 30, 2023, we spent $0.5 million for renovations on two businesses that were affected by Hurricane Ian, which occurred during the third quarter of 2022 and $0.3 million for renovations on one business that was damaged by a fire, which occurred during the first quarter of 2023, all of which was reimbursed by our property insurance.

Six months ended June 30,

(1) During the nine months ended September 30, 2023, we spent $0.5 million for renovations on two businesses that were affected by Hurricane Ian, which occurred during the third quarter of 2022 and $0.4 million for renovations on one business that was damaged by a fire, which occurred during the first quarter of 2023, all of which was reimbursed by our property insurance.

Nine months ended September 30,

General equipment and furniture $ 2,337 $ 3,584

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Financing Activities

Our financing activities resulted in a net cash outflow of $26.3 million for the six months ended June 30, 2024 compared to a net cash inflow of $10.5 million for the six months ended June 30, 2023, a decrease of $36.8 million.

During the six months ended June 30, 2024, we had net payments on our Credit Facility, acquisition debt and finance leases of $24.4 million and paid dividends of $3.4 million.

During the six months ended June 30, 2023, we had net borrowings on our Credit Facility, acquisition debt and finance leases of $13.0 million, offset by $3.3 million of dividends paid.

Our financing activities resulted in a net cash outflow of $43.7 million for the nine months ended September 30, 2024 compared to a net cash outflow of $8.0 million for the nine months ended September 30, 2023, an increase of $35.7 million.

During the nine months ended September 30, 2024, we had net payments on our Credit Facility, acquisition debt and finance leases of $39.6 million and we paid $5.1 million in dividends.

During the nine months ended September 30, 2023, we had net payments on our Credit Facility, acquisition debt and finance leases of $3.9 million and we paid $5.0 million in dividends.

Share Repurchase

We did not repurchase any shares during the six months ended June 30, 2024 and 2023.

At June 30, 2024, our share repurchase program had $48.9 million authorized for repurchases.

We did not repurchase any shares during the nine months ended September 30, 2024 and 2023.

At September 30, 2024, our share repurchase program had $48.9 million authorized for repurchases.

Cash Dividends

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$ 0.1125 $ 1,704

September 1 st

$ 0.1125 $ 1,708

2023 Per Share Dollar Value

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$ 0.1125 $ 1,679

September 1 st

$ 0.1125 $ 1,683

Credit Facility, Lease Obligations and Acquisition Debt

The outstanding principal of our Credit Facility, lease obligations and acquisition debt at June 30, 2024 is as follows (in thousands):

June 30, 2024

The outstanding principal of our Credit Facility, lease obligations and acquisition debt at September 30, 2024 is as follows (in thousands):

September 30, 2024

Credit Facility $ 140,000

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Credit Facility

At June 30, 2024, our senior secured revolving credit facility (the “Credit Facility”) was comprised of:

At September 30, 2024, our Credit Facility was comprised of:

(i) a $250.0 million revolving credit facility, including a $15.0 million subfacility for letters of credit and a $10.0 million swingline, and (ii) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $75.0 million in the aggregate in the form of increased revolving commitments or incremental term loans.

On July 31, 2024, we entered into a fourth amendment (the “Credit Facility Amendment”) to the Credit Facility.

See Note 18 – Subsequent Events for more information on the Credit Facility Amendment.

As amended by the Credit Facility Amendment, the final maturity of the Credit Facility will occur on July 31, 2029, provided, that if the Senior Notes (as defined in the Credit Facility) have a stated maturity prior to July 31, 2029, then the maturity date will instead be the date that is 91 days prior to the stated maturity date.

On July 31, 2024, the Company entered into a Credit Facility Amendment, to our Credit Facility, with the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent.

(ii) the establishment of Term SOFR as a benchmark rate and the removal of BSBY from the Credit Facility, including conforming revisions to certain defined terms under the Credit Facility;

(iv) modifications to the definitions of “Applicable Rate” and “Applicable Fee Rate” to change the applicable rates and pricing levels set forth in each pricing grid;

(v) the removal of certain mandatory prepayments arising from the issuance of either Equity Interests or Debt (as both are defined by the Credit Facility);

and (vi) modifications to the permitted investments covenant, relating to the Company’s ability to make certain acquisitions, subject to the satisfaction of certain conditions therein.

We incurred $0.8 million in transactions costs related to the Credit Facility Amendment, which were capitalized and will be amortized over the remaining term of the related debt using the straight-line method.

Our obligations under the Credit Facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the Senior Notes (as defined in Note 12) and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Subsidiary Guarantors”).

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In addition, the Credit Facility also contains customary negative covenants, including, but not limited to, covenants that restrict (subject to certain exceptions) the ability of the Company and the Subsidiary Guarantors to incur indebtedness, grant liens, make investments, engage in mergers and acquisitions, pay dividends and make other restricted payments, and certain financial maintenance covenants.

At June 30, 2024, we were subject to the following financial covenants under our Credit Facility:

At September 30, 2024, we were subject to the following financial covenants under our Credit Facility:

(A) a Total Leverage Ratio not to exceed 5.25 to 1.00 and (B) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters.

These financial maintenance covenants are calculated for the Company and its subsidiaries on a consolidated basis.

We were in compliance with all of the covenants contained in our Credit Facility at June 30, 2024.

At June 30, 2024, we had outstanding borrowings under the Credit Facility of $155.0 million.

We were in compliance with all of the covenants contained in our Credit Facility at September 30, 2024.

At September 30, 2024, we had outstanding borrowings under the Credit Facility of $140.0 million.

We also had one letter of credit for $2.6 million under the Credit Facility.

The letter of credit will expire on November 25, 2024 and is expected to automatically renew annually and secures our obligations under our various self-insured policies.

At June 30, 2024, we had $92.4 million of availability under the Credit Facility.

At September 30, 2024, we had $107.4 million of availability under the Credit Facility.

The interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands):

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

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Credit Facility amortization of debt issuance costs 105 138 381 414

Prior to our entry into the Credit Facility Amendment, outstanding borrowings under our Credit Facility bore interest at a prime rate or the Bloomberg Short-Term Bank Yield Index (“BSBY”) rate, plus an applicable margin based on our leverage ratio.

At June 30, 2024, the prime rate margin was equivalent to 2.125% and the BSBY rate margin was 3.125%.

The weighted average interest rate on our Credit Facility was 8.7% and 8.6% for the three months ended June 30, 2024 and 2023, respectively, and 8.8% and 8.3% for the six months ended June 30, 2024 and 2023, respectively.

The Credit Facility Amendment provided, among other things, for the establishment of the Term Secured Overnight Financing Rate (“SOFR”) as a benchmark rate and the removal of BSBY from the Credit Facility.

At September 30, 2024, our outstanding borrowings under our Credit Facility bore interest at a prime rate or the SOFR rate, plus an applicable margin based on our leverage ratio.

At September 30, 2024, the prime rate margin was equivalent to 1.50% and the SOFR term margin was 2.60%.

The weighted average interest rate on our Credit Facility was 8.5% and 9.0% for the three months ended September 30, 2024 and 2023, respectively, and 8.7% and 8.5% for the nine months ended September 30, 2024 and 2023, respectively.

The interest payments on our remaining borrowings under the Credit Facility will be determined based on the average outstanding balance of our borrowings and the prevailing interest rate during that time.

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In addition, we lease certain other funeral homes, vehicles and equipment under finance leases with original terms ranging from three and a half to forty years.

At June 30, 2024, operating and finance lease obligations were $34.3 million, with $5.5 million payable within 12 months.

At September 30, 2024, operating and finance lease obligations were $35.9 million, with $5.5 million payable within 12 months.

The components of lease cost are as follows (in thousands):

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

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Original maturities range from nine to twenty years.

At June 30, 2024, acquisition debt obligations were $9.0 million, with $0.9 million payable within 12 months.

At September 30, 2024, acquisition debt obligations were $8.9 million, with $0.9 million payable within 12 months.

The imputed interest expense related to our acquisition debt is as follows (in thousands):

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

Acquisition debt imputed interest expense $ 102 $ 70 $ 309 $ 212

At June 30, 2024, the principal amount of our 4.25% senior notes due in May 2029 (the “Senior Notes”) was $400.0 million.

At September 30, 2024, the principal amount of our 4.25% senior notes due in May 2029 (the “Senior Notes”) was $400.0 million.

The Senior Notes were issued under an indenture, dated as of May 13, 2021 (the “Indenture”), among the Company, the Subsidiary Guarantors and Wilmington Trust, National Association, as trustee.

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The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 56 months of the Senior Notes.

The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes for both the three and six months ended June 30, 2024 and 2023 was 4.42% and 4.30%, respectively.

At June 30, 2024, the fair value of the Senior Notes, which are Level 2 measurements, was $357.0 million.

The effective interest rates on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes for both the three and nine months ended September 30, 2024 and 2023 were 4.42% and 4.30%, respectively.

At September 30, 2024, the fair value of the Senior Notes, which are Level 2 measurements, was $371.4 million.

The interest expense and amortization of debt discount and debt issuance costs related to our Senior Notes are as follows (in thousands):

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

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Senior Notes amortization of debt issuance costs 38 37 114 110

At June 30, 2024, our future interest payments on our outstanding balance were $85.0 million, with $17.0 million payable within 12 months.

At September 30, 2024, our future interest payments on our outstanding balance were $85.0 million, with $17.0 million payable within 12 months.

FINANCIAL HIGHLIGHTS

Below are our financial highlights (in thousands except for volumes and averages):

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

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Funeral contracts 10,713 11,058 33,483 34,904

Average revenue per funeral contract $ 5,711 $ 5,492 $ 5,735 $ 5,510

Average revenue per funeral contract, excluding preneed funeral trust earnings $ 5,540 $ 5,373 $ 5,557 $ 5,357

Preneed interment rights (property) sold 3,511 2,785 11,127 8,680

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Net income $ 9,866 $ 4,645 $ 23,098 $ 21,775

Revenue for the three months ended June 30, 2024 increased $4.6 million compared to the three months ended June 30, 2023.

Revenue for the three months ended September 30, 2024 increased $10.2 million compared to the three months ended September 30, 2023.

We experienced a 26.1% increase in the number of preneed interment rights (property) sold and a 4.4% increase in the average price per interment right sold.

Additionally, we experienced a 6.6% decrease in funeral contract volume, which was partially offset by a 4.0% increase in the average revenue per funeral contract.

Additionally, we experienced a 3.1% decrease in funeral contract volume, which was offset by a 3.1% increase in the average revenue per funeral contract.

The increase in cemetery revenue highlights the effectiveness of our preneed cemetery sales growth plan, as we continue to focus on executing our strategic goals.

Furthermore, despite the funeral contract volume decline due to the COVID-19 related pull forward effect, we continue to increase our average revenue per funeral contract through the successful execution of our enhanced pricing strategy.

Gross profit for the three months ended June 30, 2024 increased $5.8 million compared to the three months ended June 30, 2023, primarily due to the increase in revenue from our cemetery segment, as well as increases in gross profit margins from both segments, as we continue to successfully execute on our cost management initiatives.

Net income for the three months ended June 30, 2024 decreased $2.0 million compared to the three months ended June 30, 2023.

We experienced a $5.8 million increase in gross profit and a $1.1 million decrease in interest expense, which was more than offset by an $8.4 million increase in general, administrative and other expenses, primarily composed of one-time costs related to executive severance payments and our agreement to pay our financial advisor in connection with the Company's previously concluded review of strategic alternatives.

Revenue for the six months ended June 30, 2024 increased $12.6 million compared to the six months ended June 30, 2023.

We experienced a 29.2% increase in the number of preneed interment rights (property) sold and a 10.3% increase in the average price per interment right sold.

Furthermore, despite the funeral contract volume decline impacted by the COVID-19 related pull forward effect, we continue to increase our average revenue per funeral contract through the successful execution of our enhanced pricing strategy.

Gross profit for the three months ended September 30, 2024 increased $8.1 million compared to the three months ended September 30, 2023, primarily due to the increase in revenue from our cemetery segment, as well as increases in gross profit margins from both segments, as we continue to successfully execute on our cost management initiatives.

Net income for the three months ended September 30, 2024 increased $5.2 million compared to the three months ended September 30, 2023.

We experienced an $8.1 million increase in gross profit and a $1.2 million decrease in interest expense, which was partially offset by a $2.9 million increase in income tax expense and a $0.9 million increase in general, administrative and other expenses.

Revenue for the nine months ended September 30, 2024 increased $22.8 million compared to the nine months ended September 30, 2023.

We experienced a 28.2% increase in the number of preneed interment rights (property) sold and an 8.4% increase in the average price per interment right sold.

Additionally, we experienced a 4.1% decrease in funeral contract volume, which was partially offset by a 3.7% increase in the average revenue per funeral contract.

The increase in cemetery revenue highlights the effectiveness of our preneed cemetery sales growth plan, as we continue to focus on executing our strategic goals.

Gross profit for the six months ended June 30, 2024 increased $12.0 million compared to the six months ended June 30, 2023, primarily due to the increase in revenue from our cemetery segment, as well as increases in gross profit margins from both segments, as we continue to successfully execute on our cost management initiatives.

Net income for the six months ended June 30, 2024 decreased $3.9 million compared to the six months ended June 30, 2023.

We experienced a $12.0 million increase in gross profit, which was more than offset by a $14.5 million increase in general, administrative and other expenses, primarily composed of one-time costs related to executive severance payments and our agreement to pay our financial advisor in connection with the Company's previously concluded review of strategic alternatives, as well as a $1.4 million increase in loss on divestitures.

Gross profit for the nine months ended September 30, 2024 increased $20.1 million compared to the nine months ended September 30, 2023, primarily due to the increase in revenue from our cemetery segment, as well as increases in gross profit margins from both segments, as we continue to successfully execute on our cost management initiatives.

Net income for the nine months ended September 30, 2024 increased $1.3 million compared to the nine months ended September 30, 2023.

We experienced a $20.1 million increase in gross profit and a $2.1 million decrease in interest expense, which was partially offset by a $15.4 million increase in general, administrative and other expenses, primarily composed of one-time costs related to executive severance payments and our agreement to pay our financial advisor in connection with the Company's previously concluded review of strategic alternatives and a $3.9 million increase in income tax expense.

Further discussion of revenue and the components of gross profit for our funeral home and cemetery segments is presented under “Results of Operations.”

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REPORTING AND NON-GAAP FINANCIAL MEASURES

We also present our financial performance in our “Condensed Operating and Financial Trend Report” (“Trend Report”) as reported in our earnings release for the three months ended June 30, 2024 issued on July 31, 2024, and discussed in the corresponding earnings conference call.

We also present our financial performance in our “Condensed Operating and Financial Trend Report” (“Trend Report”) as reported in our earnings release for the three months ended September 30, 2024 issued on October 30, 2024, and discussed in the corresponding earnings conference call.

The Trend Report is used as a supplemental financial statement by management and investors to compare our current financial performance with our previous results and with the performance of other companies.

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Below is a reconciliation of gross profit (a GAAP financial measure) to adjusted operating profit (a non-GAAP financial measure) (in thousands):

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

9 unchanged sentences

Below is a breakdown of adjusted operating profit (a non-GAAP financial measure) by segment (in thousands):

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

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RESULTS OF OPERATIONS

The following is a discussion of our results of operations for the three and six months ended June 30, 2024 and 2023.

The following is a discussion of our results of operations for the three and nine months ended September 30, 2024 and 2023.

The term “operating” in the funeral home and cemetery segments refers to all funeral homes and cemeteries that we owned and operated in the current reporting period, excluding certain funeral home and cemetery businesses that we have divested in such period.

The term “divested” when discussed in the funeral home segment refers to six funeral homes we sold and one funeral home we merged with another business we own in an existing market during the six months ended June 30, 2024, and one funeral home we sold and one funeral home we merged with another business we own in an existing market during the six months ended June 30, 2023.

The term “divested” when discussed in the cemetery segment refers to one cemetery we sold during the six months ended June 30, 2024, and two cemeteries we sold during the six months ended June 30, 2023.

The term “divested” when discussed in the funeral home segment refers to six funeral homes we sold and three funeral homes we merged with other businesses we own in existing markets during the nine months ended September 30, 2024, and two funeral homes we sold and one funeral home we merged with another business we own in an existing market during the nine months ended September 30, 2023.

The term “divested” when discussed in the cemetery segment refers to one cemetery we sold during the nine months ended September 30, 2024, and two cemeteries we sold during the nine months ended September 30, 2023.

The term “ancillary” in the funeral home segment represents our flower shop, monument business, pet cremation business and online cremation businesses.

3 unchanged sentences

The following table sets forth certain information regarding our revenue and adjusted operating profit for our funeral home operations (in thousands):

Three months ended June 30,

Three months ended September 30,

Operating $ 59,347 $ 58,533

9 unchanged sentences

Total $ 25,097 $ 23,962

The following operating measures reflect the significant metrics over this comparative period:

The following consolidated operating measures reflect the significant metrics over this comparative period:

Contract volume 10,713 11,058

2 unchanged sentences

Cremation rate 60.7% 59.5%

Funeral home operating revenue decreased $0.5 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

The decrease in operating revenue is primarily driven by a 6.6% decrease in contract volume, offset by a 4.0% increase in the average revenue per contract excluding preneed interest.

Despite the funeral contract volume decline due to the COVID-19 related pull forward effect, we continue to increase our average revenue per funeral contract through the successful execution of our enhanced pricing strategy.

Funeral home adjusted operating profit for the three months ended June 30, 2024 increased $1.8 million when compared to the same period in 2023, primarily due to a decrease in operating expenses as a percentage of revenue.

Funeral home operating revenue increased $0.8 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

The increase in operating revenue is primarily driven by a 3.1% increase in the average revenue per contract excluding preneed interest, offset by a 3.1% decrease in contract volume.

Despite the funeral contract volume decline impacted by the COVID-19 related pull forward effect, we continue to increase our average revenue per funeral contract through the successful execution of our enhanced pricing strategy.

Funeral home adjusted operating profit for the three months ended September 30, 2024 increased $0.5 million when compared to the same period in 2023, primarily due to the increase in operating revenue, as well as a decrease in operating expenses as a percentage of revenue.

The comparable operating profit margin increased 30 basis points to 37.7%.

Operating expenses as a percentage of revenue decreased 3.4%, with the largest decreases in salaries and benefits expenses of 1.8%, other expenses of 0.6% related to a legal settlement we

received in the second quarter, other funeral costs of 0.4% and promotional expenses of 0.3%, which reflects the continued progress we have made successfully executing on our cost management initiatives this quarter.

Ancillary revenue, which represents revenue from our flower shop, monument business, pet cremation business and online cremation businesses, decreased $0.2 million, while ancillary adjusted operating profit increased $0.1 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

The decrease in ancillary revenue is primarily due to a decision to cease the operations of a cremation business at our Bakersfield, CA business, which did not contribute materially to adjusted operating profit.

Other revenue and other adjusted operating profit, which consists of preneed funeral insurance commissions and earnings from delivered preneed funeral trust and insurance contracts, increased $1.0 million and $0.8 million, respectively, for the three months ended June 30, 2024, compared to the same period in 2023.

These increases are primarily due to our continued focus on growth of our preneed funeral sales through our strategic partnership with a national insurance provider that began during the second quarter of 2023.

As a result, we have experienced a 5.4% increase in preneed insurance contracts sold during the second quarter of 2024, compared to the same period in 2023.

Operating expenses as a percentage of revenue decreased 0.4%, with the largest decrease in salaries and benefits expenses, while other operating expenses remained relatively flat.

This reflects the continued progress we have made successfully executing on our cost management initiatives this quarter.

Ancillary revenue, which represents revenue from our flower shop, monument business, pet cremation business and online cremation businesses, decreased $0.1 million, while ancillary adjusted operating profit remained flat for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

The decrease in ancillary revenue is primarily due to a decision to cease the operations of a cremation focused business at our Bakersfield, CA business, which did not contribute materially to adjusted operating profit.

Other revenue and other adjusted operating profit, which consists of preneed funeral insurance commissions and earnings from delivered preneed funeral trust and insurance contracts, increased $1.3 million and $0.9 million, respectively, for the three months ended September 30, 2024, compared to the same period in 2023.

These increases are primarily due to an increase of $1.3 million in our general agency commission income earned on the sale of preneed insurance policies in the third quarter of 2024.

compared to the same period in 2023.

This is primarily due to our continued focus on growth of our preneed funeral sales through our strategic partnership with a national insurance provider that began during the second quarter of 2023.

The following table sets forth certain information regarding our revenue and adjusted operating profit for our funeral home operations (in thousands):

Six months ended June 30,

Nine months ended September 30,

Operating $ 185,150 $ 183,673

3 unchanged sentences

Total $ 199,128 $ 197,216

Adjusted operating profit:

Adjusted operating profit (loss):

Operating $ 73,277 $ 69,749

3 unchanged sentences

Total $ 81,966 $ 76,875

The following operating measures reflect the significant metrics over this comparative period:

The following consolidated operating measures reflect the significant metrics over this comparative period:

Contract volume 33,483 34,904

2 unchanged sentences

Cremation rate 59.8% 59.0%

Funeral home operating revenue increased $0.7 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Funeral home operating revenue increased $1.5 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

The increase in operating revenue is primarily driven by a 3.7% increase in the average revenue per contract excluding preneed interest, which was partially offset by a 4.1% decrease in contract volume.

Funeral home adjusted operating profit for the six months ended June 30, 2024 increased $3.0 million when compared to the same period in 2023, primarily due to the increase in operating revenue, as well as a decrease in operating expenses as a percentage of revenue.

Funeral home adjusted operating profit for the nine months ended September 30, 2024, increased $3.5 million when compared to the same period in 2023, primarily due to the increase in operating revenue, as well as a decrease in operating expenses as a percentage of revenue.

The comparable operating profit margin increased 160 basis points to 39.6%.

Operating expenses as a percentage of revenue decreased 2.2%, with the largest decreases in salaries and benefits expenses of 1.2%, other expenses of 0.2% related to a legal settlement we received in the second quarter, other funeral costs of 0.2% and promotional expenses of 0.2%, which reflects the continued progress we have made successfully executing on our cost management initiatives this year.

Ancillary revenue, which represents revenue from our flower shop, monument business, pet cremation business and online cremation businesses remained flat, while ancillary adjusted operating profit increased $0.1 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

The lack of growth in ancillary revenue is primarily due

to a decision to cease the operations of a cremation business at our Bakersfield, CA business, which did not contribute materially to adjusted operating profit.

Other revenue and other adjusted operating profit, which consists of preneed funeral insurance commissions and earnings from delivered preneed funeral trust and insurance contracts, increased $1.7 million and $1.4 million, respectively, for the six months ended June 30, 2024, compared to the same period in 2023.

As a result, we have experienced an 8.7% increase in preneed insurance contracts sold during the six months ended June 30, 2024, compared to the same period in 2023.

Operating expenses as a percentage of revenue decreased 1.6%, with the largest decreases in salaries and benefits expenses of 0.9%, other funeral costs of 0.2% and promotional expenses of 0.2%, which reflects the continued progress we have made successfully executing on our cost management initiatives this year.

Ancillary revenue, which represents revenue from our flower shop, monument business, pet cremation business and online cremation businesses decreased $0.1 million, while ancillary adjusted operating profit increased $0.2 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

The lack of growth in ancillary revenue is primarily due to a decision to cease the operations of a cremation focused business at our Bakersfield, CA business, which did not contribute materially to adjusted operating profit.

Other revenue and other adjusted operating profit, which consists of preneed funeral insurance commissions and earnings from delivered preneed funeral trust and insurance contracts, increased $2.9 million and $2.3 million, respectively, for the nine months ended September 30, 2024, compared to the same period in 2023.

These increases are primarily due to an increase of $2.9 million in our general agency commission income earned on the sale of preneed insurance policies through the third quarter of 2024, compared to the same period in 2023.

This is primarily due to our continued focus on growth of our preneed funeral sales through our strategic partnership with a national insurance provider that began during the second quarter of 2023.

Cemetery Segment

The following table sets forth certain information regarding our revenue and adjusted operating profit for our cemetery operations (in thousands):

Three months ended June 30,

Three months ended September 30,

Operating $ 32,988 $ 24,315

2 unchanged sentences

Total $ 36,985 $ 27,868

Adjusted operating profit:

Adjusted operating profit (loss):

Operating $ 15,883 $ 8,980

2 unchanged sentences

Total $ 19,846 $ 12,173

The following operating measures reflect the significant metrics over this comparative period:

The following consolidated operating measures reflect the significant metrics over this comparative period:

Preneed revenue as a percentage of operating revenue 70.0% 62.0%

3 unchanged sentences

Average price per interment right sold $ 5,360 $ 5,134

Cemetery operating revenue increased $5.9 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, as we experienced a 23.2% increase in the number of preneed interment rights (property) sold and a 12.8% increase in the average price per interment right sold.

Cemetery atneed revenue, which represents 28.0% of our total operating revenue, increased $0.1 million for the three months ended June 30, 2024, compared to the same period in 2023, primarily due to an increase in delivered merchandise and services across our cemetery portfolio.

Cemetery operating revenue increased $8.7 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, as we experienced a 26.1% increase in the number of preneed interment rights (property) sold and a 4.4% increase in the average price per interment right sold.

Cemetery atneed revenue, which represents approximately 30.0% of our total operating revenue, increased $0.4 million for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to an increase in delivered merchandise and services across our cemetery portfolio.

The increase in cemetery revenue highlights the effectiveness of our preneed cemetery sales growth plan, as we continue to focus on executing our strategic objectives.

Cemetery adjusted operating profit increased $4.2 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to the increase in operating revenue, as well as a decrease in operating expenses as a percentage of revenue.

Cemetery adjusted operating profit increased $6.9 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to the increase in operating revenue, as well as a decrease in operating expenses as a percentage of revenue.

The comparable operating profit margin increased 1,120 basis points to 48.1%.

Operating expenses as a percentage of revenue decreased 4.7%, with the largest decreases in salaries and benefits expenses of 3.9%, allowance for credit losses of 0.4% and general and administrative costs of 0.4%, which reflects the continued progress we have made successfully executing on our cost management initiatives this quarter.

Other revenue and other adjusted operating profit consist of preneed cemetery trust revenue and preneed cemetery finance charges.

Other revenue decreased $0.1 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, while other adjusted operating profit remained flat.

Operating expenses as a percentage of revenue decreased 11.5%, with the largest decreases in salaries and benefits expenses of 4.7%, promotional expense of 2.9%, merchandise costs of 1.4%, allowance for credit losses of 1.2% and general and administrative costs of 0.9%, which reflects the continued progress we have made successfully executing on our cost management initiatives this quarter.

Other revenue and other adjusted operating profit, which consist of preneed cemetery trust revenue and preneed cemetery finance charges, increased $0.7 million and $0.8 million, respectively, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to market performance in our perpetual care trust fund and an increase in realized gains on preneed merchandise and services that were delivered in the third quarter of 2024 compared to the same period of 2023.

The following table sets forth certain information regarding our revenue and adjusted operating profit for our cemetery operations (in thousands):

Six months ended June 30,

Nine months ended September 30,

Operating $ 95,339 $ 74,465

7 unchanged sentences

Total $ 56,507 $ 41,090

The following operating measures reflect the significant metrics over this comparative period:

The following consolidated operating measures reflect the significant metrics over this comparative period:

Preneed revenue as a percentage of operating revenue 69.0% 63.0%

3 unchanged sentences

Average price per interment right sold $ 5,408 $ 4,990

Cemetery operating revenue increased $12.2 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, as we experienced a 29.2% increase in the number of preneed interment rights (property) sold and a 10.3% increase in the average price per interment right sold.

Cemetery atneed revenue, which represents 31.0% of our total operating revenue, increased $0.6 million for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to an increase in delivered merchandise and services across our cemetery portfolio.

Cemetery operating revenue increased $20.9 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, as we experienced a 28.2% increase in the number of preneed interment rights (property) sold and an 8.4% increase in the average price per interment right sold.

Cemetery atneed revenue, which represents approximately 31.0% of our total operating revenue, increased $1.0 million for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to an increase in delivered merchandise and services across our cemetery portfolio.

The increase in cemetery revenue highlights the effectiveness of our preneed cemetery sales growth plan, as we continue to focus on executing our strategic objectives.

Cemetery adjusted operating profit increased $7.8 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to the increase in operating revenue, as well as a decrease in operating expenses as a percentage of revenue.

Cemetery adjusted operating profit increased $14.7 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to the increase in operating revenue, as well as a decrease in operating expenses as a percentage of revenue.

The comparable operating profit margin increased 660 basis points to 47.1%.

Operating expenses as a percentage of revenue decreased 4.3%, with the largest decreases in salaries and benefits expenses of 3.4%, merchandise costs of 0.6%, and facilities and grounds expenses of 0.4%, which reflects the continued progress we have made successfully executing on our cost management initiatives this quarter.

Other revenue and other adjusted operating profit, which consist of preneed cemetery trust revenue and preneed cemetery finance charges, both increased $0.1 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to an increase in finance charge revenue related to the increase in cemetery sales during the current year.

Operating expenses as a percentage of revenue decreased 6.7%, with the largest decreases in salaries and benefits expenses of 3.8%, merchandise costs of 0.8%, allowance for credit losses of 0.5% and promotional expense of 0.4%, which reflects the continued progress we have made successfully executing on our cost management initiatives this quarter.

Other revenue and other adjusted operating profit, which consist of preneed cemetery trust revenue and preneed cemetery finance charges, increased $0.8 million and $0.9 million, respectively, for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

These increases are primarily due to an increase in market performance in our perpetual care trust fund, an increase in realized gains on preneed merchandise and services that were delivered in the third quarter of 2024, and an increase finance charge revenue related to the increase in cemetery sales during the current year.

Cemetery property amortization .

Cemetery property amortization totaled $2.6 million and $4.3 million for the three and six months ended June 30, 2024, respectively, an increase of $0.7 million and $1.2 million compared to the same periods in 2023, primarily driven by the increase in property sold across our cemetery portfolio.

Cemetery property amortization totaled $2.0 million and $6.3 million for the three and nine months ended September 30, 2024, respectively, an increase of $0.6 million and $1.9 million compared to the same periods in 2023, primarily driven by the increase in property sold across our cemetery portfolio.

Field depreciation.

Depreciation expense for our field businesses totaled $3.4 million and $6.9 million for the three and six months ended June 30, 2024, respectively, a decrease of $0.2 million compared to the same quarter in the prior year, while the expense compared to the year-to-date period in the prior year remained flat, both were primarily driven by our business decision in 2023 to lease vehicles rather than purchase them.

Depreciation expense for our field businesses totaled $3.4 million and $10.3 million for the three and nine months ended September 30, 2024, respectively, a decrease of $0.2 million and $0.3 million compared to the same periods in 2023, primarily driven by our business decision in 2023 to lease vehicles rather than purchase them.

Regional and unallocated funeral and cemetery costs.

Regional and unallocated funeral and cemetery costs consist of salaries and benefits for regional management, field incentive compensation and other related costs for field infrastructure.

Regional and unallocated funeral and cemetery costs totaled $4.2 million for the three months ended June 30, 2024, an increase of $0.1 million compared to the same period in 2023.

Regional and unallocated funeral and cemetery costs totaled $8.1 million for the six months ended June 30, 2024, a decrease of $1.5 million compared to the same period in 2023, primarily driven by a $1.0 million decrease in incentive compensation costs and a $0.5 million decrease in incentive award trip costs.

Regional and unallocated funeral and cemetery costs totaled $4.1 million for the three months ended September 30, 2024, an increase of $0.3 million compared to the same period in 2023, primarily driven by an increase in leadership and development

expenses as we focus on the continued education of our teams to ensure the successful implementation of our various initiatives.

Regional and unallocated funeral and cemetery costs totaled $12.2 million for the nine months ended September 30, 2024, a decrease of $1.2 million compared to the same period in 2023, primarily driven by a decrease in incentive compensation costs.

Other Financial Statement Items

General, administrative and other.

General, administrative and other expenses, which include salaries and benefits and cash and equity incentive compensation for our Houston support office, totaled $18.6 million for the three months ended June 30, 2024, an increase of $8.4 million compared to the same period in 2023, primarily driven by the following:

i) a $5.0 million increase related to our agreement to pay our financial advisor in connection with the Company's previously concluded review of strategic alternatives;

ii) a $1.3 million expected increase in other professional fees primarily related to the development of our digital transformation project;

iii) an $0.8 million increase in separation and severance expenses related to our former Chief Financial Officer pursuant to his Separation and Release Agreement dated June 6, 2024;

iv) a $0.6 million increase in incentive and stock compensation;

v) a $0.3 million increase related to consulting fees paid to our former Executive Chairman of the Board pursuant to his Transition Agreement;

and vi) a $0.4 million increase in all other expenses.

General, administrative and other expenses totaled $34.8 million for the six months ended June 30, 2024, an increase of $14.5 million compared to the same period in 2023, primarily driven by the following:

i) a $6.2 million increase primarily related to our agreement to pay our financial advisor in connection with the Company's previously concluded review of strategic alternatives;

ii) a $5.7 million increase in salary and benefits expenses and cash and equity incentive compensation costs, primarily driven by the termination expense recorded during the first quarter of 2024 for our former Executive Chairman of the Board pursuant to his Transition Agreement effective February 22, 2024 and termination expense for our former Chief Financial Officer pursuant to his Separation and Release Agreement dated June 6, 2024 recorded in the second quarter of 2024;

General, administrative and other expenses, which include salaries and benefits and cash and equity incentive compensation for our Houston support office, totaled $12.2 million for the three months ended September 30, 2024, an increase of $0.9 million compared to the same period in 2023, primarily driven by the following:

i) a $1.1 million expected increase in other professional fees primarily related to the development of our digital transformation project;

ii) a $0.3 million increase primarily related to consulting fees paid to our former Executive Chairman of the Board pursuant to his Transition Agreement and to our former Chief Financial Officer pursuant to his Separation and Release Agreement, and iii) a $0.4 million net increase in all other expenses.

These increases were offset by a $0.9 million decrease in consulting fees related to the Company's previously concluded review of strategic alternatives.

General, administrative and other expenses totaled $47.0 million for the nine months ended September 30, 2024, an increase of $15.4 million compared to the same period in 2023, primarily driven by the following:

i) a $6.2 million increase in salary and benefits expenses and cash and equity incentive compensation costs, primarily driven by the termination expense of our former Executive Chairman of the Board pursuant to his Transition Agreement and termination expense for our former Chief Financial Officer pursuant to his Separation and Release Agreement;

ii) a $5.2 million increase primarily related to our agreement to pay our financial advisor in connection with the Company's previously concluded review of strategic alternatives;

iii) a $3.1 million expected increase in other professional fees primarily related to the development of our digital transformation project;

iv) a $0.2 million increase related to consulting fees paid to our former Executive Chairman of the Board pursuant to his Transition Agreement;

and v) a $0.4 million increase in all other expenses.

iv) a $0.6 million increase related to consulting fees paid to our former Executive Chairman of the Board pursuant to his Transition Agreement and our former Chief Financial Officer pursuant to his Separation and Release Agreement;

and v) a $0.3 million net increase in all other expenses.

Net loss on divestitures, disposals and impairments charges.

The components of Net loss on divestitures, disposals and impairment charges are as follows (in thousands):

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

Net loss on divestitures $ 8 $ — $ 1,509 $ 82

Impairment related to assets held for sale — 243 — 243

Net (gain) loss on divestitures $ (295) $ 24 $ 1,214 $ 106

Impairment of intangibles and PPE 637 211 637 454

Net loss on disposals of fixed assets 45 188 104 369

Total $ 387 $ 423 $ 1,955 $ 929

During the six months ended June 30, 2024, we sold six funeral homes and one cemetery for an aggregate loss of $1.5 million.

During the six months ended June 30, 2023, we sold one funeral home and two cemeteries for an aggregate loss of $0.1 million.

We also recognized an impairment of $0.2 million related to property, plant and equipment for assets held for sale.

During the nine months ended September 30, 2024, we sold six funeral homes and one cemetery for an aggregate loss of $1.2 million.

We also recognized an impairment of $0.6 million as a result of our 2024 qualitative assessment of tradenames and an impairment of $40 thousand related to property, plant and equipment for assets held for sale.

During the nine months ended September 30, 2023, we sold two funeral homes and two cemeteries for an aggregate loss of $0.1 million.

We also recognized an impairment of $0.2 million as a result of our 2023 qualitative assessment of tradenames and an impairment of $0.2 million related to property, plant and equipment for assets held for sale.

Interest expense .

Interest expense related to its respective debt arrangement is as follows (in thousands):

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

5 unchanged sentences

Total $ 8,035 $ 9,278 $ 25,071 $ 27,213

Net (gain) loss on property damage, net of insurance claims.

During the three and six months ended June 30, 2024, we recorded a $0.4 million gain, net of insurance proceeds, for damages from Hurricane Ian, which occurred during the third quarter of 2022.

During the three and six months ended June 30, 2023, we recorded a $0.2 million gain and $36,000 loss, respectively, net of insurance proceeds, for property damaged by a fire that occurred during first quarter of 2023.

During the three and six months ended June 30, 2023, we recorded a $0.1 million gain and a $0.6 million gain, respectively, on the sale of other real estate not used in business operations.

Net gain on property damage, net of insurance claims.

During the nine months ended September 30, 2024, we recorded a $0.4 million gain, net of insurance proceeds, for damages from Hurricane Ian, which occurred during the third quarter of 2022.

We did not record any gain or loss activity during the three months ended September 30, 2024.

During the three and nine months ended September 30, 2023, we recorded a $0.4 million and $0.3 million gain, respectively, net of insurance proceeds, for damages from Hurricane Ian, which occurred during the third quarter of 2022.

During the nine months ended September 30, 2023, we recorded a $0.6 million gain on the sale of other real property not used in business operations.

We did not record any gain or loss activity during the three months ended September 30, 2023.

Income taxes.

Income tax expense totaled $4.2 million for the three months ended June 30, 2024, an increase of $0.8 million compared to the same period in 2023, primarily driven by an increase in tax expense on discrete items related to equity.

Our operating tax rate before discrete items was 33.6% and 28.0% for the three months ended June 30, 2024 and 2023, respectively.

Income tax expense totaled $7.9 million for the six months ended June 30, 2024, an increase of $1.0 million compared to the same period in 2023, primarily driven by an increase in tax expense on discrete items related to equity.

Our operating tax rate before discrete items was 33.2% and 28.5% for the six months ended June 30, 2024 and 2023, respectively.

Income tax expense totaled $5.0 million for the three months ended September 30, 2024, an increase of $2.9 million compared to the same period in 2023, primarily driven by an increase in tax expense on discrete items related to equity.

Our operating tax rate before discrete items was 33.2% and 30.4% for the three months ended September 30, 2024 and 2023, respectively.

Income tax expense totaled $12.9 million for the nine months ended September 30, 2024, an increase of $3.9 million compared to the same period in 2023, primarily driven by an increase in tax expense on discrete items related to equity.

Our operating tax rate before discrete items was 33.2% and 28.9% for the nine months ended September 30, 2024 and 2023, respectively.

CRITICAL ACCOUNTING ESTIMATES

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis