What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-02 · 170 added, 197 removed, 147 unchanged (71% of the section changed)

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Funeral Home Operations, which currently accounts for approximately 70% of our total revenue and Cemetery Operations, which currently accounts for approximately 30% of our total revenue.

At March 31, 2025, we operated 160 funeral homes in 25 states and 28 cemeteries in 10 states.

At June 30, 2025, we operated 159 funeral homes in 25 states and 28 cemeteries in 10 states.

Our funeral home operations are principally service businesses that generate revenue from sales of burial and cremation services and related merchandise, such as caskets and urns.

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COMPANY DEVELOPMENTS

Board and Leadership Changes

Effective January 2, 2025, John Enwright was appointed to serve as the Company’s Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer).

In connection with the appointment of Mr.

Enwright as the Company’s Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer), effective January 2, 2025, Kathryn Shanley ceased serving as the Company’s Interim Principal Financial Officer.

Shanley continues to serve as the Company’s Chief Accounting Officer (Principal Accounting Officer).

On February 24, 2025, upon the recommendation of the Corporate Governance Committee of the Company, the Board unanimously elected Donald D.

Patteson, Jr.

to serve as the Company’s Non-Executive Chair of the Board, effective on that date.

Prior to his appointment as Chair of the Board, Mr.

Patteson served as the Chair of the Audit Committee and as a member of the Compensation and Corporate Governance Committees.

Patteson has been a director of the Company since 2011.

He succeeds Chad Fargason, who continues to serve on the Board and as a member of the Audit, Compensation and Corporate Governance Committees.

Additionally, on February 24, 2025, upon the recommendation of the Corporate Governance Committee of the Company, the Board elected Dr.

Edmondo Robinson as the Chair of the Audit Committee, effective on that date.

The election of Dr.

Robinson as the Chair of the Audit Committee was as a result of Mr.

Patteson being elected the Company’s Non-Executive Chair of the Board.

Robinson joined the Company’s Board in 2024 and has served on each of the Audit, Compensation, and Corporate Governance Committees since 2024.

During the three months ended March 31, 2025, we sold two funeral homes and three cemeteries for an aggregate of $15.8 million resulting in a gain of $5.9 million.

During the six months ended June 30, 2025, we sold two funeral homes and three cemeteries for an aggregate of $15.8 million resulting in a gain of $5.9 million.

Additionally, we sold real property for $3.0 million resulting in a gain of $2.0 million.

On July 16, 2025, we sold three funeral homes and one cemetery that was included in held for sale at June 30, 2025, for an aggregate of $5.5 million.

Macroeconomic, Inflationary, Borrowing Cost, and Volume Trends

During the first quarter of 2025, consumer spending on discretionary items saw a mixed performance.

During the first half of 2025, consumer spending on discretionary items continued to reflect mixed trends.

Based on various economic indicators, overall consumer spending remained strong, particularly among high-income earners, but it appears there was a shift towards more cautious spending, especially for middle and low-income households.

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Broad economic indicators have indicated that consumer confidence in the U.S.

economy has been dropping over the past five months and may continue to drop, which could further influence consumer spending and the demand for our products and services.

Additionally, the U.S.

has adopted new and increased tariffs on countries and specific goods, subject to evolving exemptions, with additional tariff increases proposed but currently on pause.

Those policies, along with retaliatory actions by some trading partners and ongoing negotiations around trade policy, have led to increased volatility and unpredictability for global trade.

Given the potential of rising tariffs, we evaluated, and continue to evaluate, our current vendor agreements for our major vendors to ensure, to the extent possible, we adequately addressed any associated risks.

Two vendors are currently impacted because they source a higher

number of imported products from countries which have higher tariff impacts.

economy has been dropping or remained flat over the past several months and may continue to drop, which could further influence consumer spending and the demand for our products and services.

Additionally, in April 2025, the U.S.

announced a series of new and increased tariffs on countries and specific goods, subject to evolving exemptions and additional proposed revisions.

Certain of these tariffs have been stayed or otherwise modified and, since April 2025, the U.S.

has continued to announce new or revised tariffs.

Those policies, along with retaliatory actions by some trading partners and ongoing negotiations around trade policy, have led to increased uncertainty regarding the ultimate effect of the tarrifs on economic conditions, volatility, and unpredictability for global trade.

Given these uncertainties and the potential of rising tariffs, we evaluated, and continue to evaluate, our current vendor agreements for our major vendors to ensure, to the extent possible, we adequately addressed any associated risks.

Two vendors are currently impacted because they source a higher number of imported products from countries which have higher tariff impacts.

To mitigate this risk, these vendors have shifted the source of their products to countries that have a lower tariff impact.

We also continue to monitor the impacts of inflationary costs to our business.

While we are encouraged by the stabilization of inflationary costs that we have continued to experience in the first quarter of 2025 and throughout 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.

While we are encouraged by the stabilization of inflationary costs that we have continued to experience in the first half of 2025 and throughout 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 could change as a result of the impact of increased tariffs and remain unknown at this time.

More broadly, the U.S.

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Although such conditions have not materially impacted our business to date and we expect these trends to continue in 2025, we will continue to assess these impacts and take the appropriate steps, if necessary, to mitigate any changes in consumer preferences or additional cost increases, if possible.

In addition, after giving effect to the Credit Facility Amendment, executed during the third quarter of 2024, we continue to experience lower variable interest rates under our Credit Facility, which resulted in lower borrowing costs in the first quarter of 2025 compared to the same period in the prior year.

Further contributing to our lower borrowing costs was the pay down of $17 million on our revolving credit facility during the first quarter of 2025.

During the first quarter of 2025, we experienced higher funeral volumes compared to the same period in the prior year, which we believe was related to a delay in the flu season, resulting in continued fluctuations in the death rate.

In addition, after giving effect to the Credit Facility Amendment, executed during the third quarter of 2024, we continue to experience lower variable interest rates under our Credit Facility, which resulted in lower borrowing costs in the first half of 2025 compared to the same period in the prior year.

Further contributing to our lower borrowing costs was the pay down of $24 million on our revolving credit facility during the first half of 2025.

During the first quarter of 2025, we experienced higher funeral volumes compared to the same period in the prior year, which we believe was partially related to a delay in the flu season, resulting in continued fluctuations in the death rate.

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.

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

For additional details related to our debt and lease obligations, including our Credit Facility, Acquisition Debt and Senior Notes, refer to Notes 9 and 10 to our unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

For 2025, 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, internal growth capital expenditures, and 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, general corporate purposes and potential strategic growth acquisitions, 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.

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, potential growth acquisitions and dividends for the next 12 months, as well as our long-term financial obligations.

However, if our capital allocations and expenditures or acquisition plans change, we may need to access the capital markets or seek further borrowing capacity from our lenders to obtain additional funding and we may not be able to obtain such funding on terms and conditions that are acceptable to us.

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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, 2024.

We began 2025 with $1.2 million in cash and ended the year with $4.6 million in cash.

At March 31, 2025, we had borrowings of $120.0 million outstanding on our Credit Facility compared to $137.0 million at December 31, 2024.

We began 2025 with $1.2 million in cash and ended the quarter with $1.4 million in cash.

At June 30, 2025, we had borrowings of $112.9 million outstanding on our Credit Facility compared to $137.0 million at December 31, 2024.

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

Three months ended March 31,

Six months ended June 30,

Cash and cash equivalents at beginning of period $ 1,165 $ 1,523

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Operating Activities

For the three months ended March 31, 2025, cash provided by operating activities was $13.8 million compared to $19.7 million for the three months ended March 31, 2024, a decrease of $5.9 million primarily due to unfavorable working capital changes related to accounts payable and accrued liabilities.

For the six months ended June 30, 2025, cash provided by operating activities was $21.9 million compared to $21.9 million for the six months ended June 30, 2024.

Investing Activities

Our investing activities resulted in a net cash outflow of $15.5 million f or the three months ended March 31, 2025 compared to $7.4 million for the three months ended March 31, 2024, an increase of $8.1 million.

Our investing activities resulted in a net cash inflows of $12.8 million f or the six months ended June 30, 2025, compared to $4.4 million for the six months ended June 30, 2024, an increase of $8.4 million.

Acquisition and Divestiture Activity

During the three months ended March 31, 2025, we sold two funeral homes and three cemeteries for an aggregate of $15.8 million.

During the six months ended June 30, 2025, we sold two funeral homes and three cemeteries for an aggregate of $15.8 million.

Additionally, we sold real property for $3.0 million.

During the three months ended March 31, 2024, we sold six funeral homes and one cemetery for an aggregate of $10.9 million.

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

Additionally, we sold real property for $0.3 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.

Capital Expenditures

For the three months ended March 31, 2025, our capital expenditures (comprised of growth and maintenance spend) totaled $3.2 million compared to $3.6 million for the year ended March 31, 2024, a decrease of $0.4 million.

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

Three months ended March 31,

Growth 2025 2024

Cemetery development $ 1,602 $ 2,000

Renovations at certain businesses 35 362

Total Growth $ 1,753 $ 2,389

Three months ended March 31,

Maintenance 2025 2024

General equipment and furniture $ 893 $ 623

Facility repairs and improvements 268 302

Vehicles 32 14

Paving roads and parking lots 123 60

Total Maintenance $ 1,410 $ 1,162

For the six months ended June 30, 2025, our capital expenditures (comprised of growth and maintenance spend) totaled $6.0 million compared to $7.1 million for the year ended June 30, 2024, a decrease of $1.1 million.

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

Six months ended June 30,

$ 3,469 $ 4,432

Total Capital Expenditures

$ 6,009 $ 7,096

Financing Activities

Our financing activities resulted in a net cash outflow of $25.8 million for the year ended March 31, 2025, compared to a net cash outflow of $26.9 million for the year ended March 31, 2024, a decrease of $1.1 million.

During the three months ended March 31, 2025, we had net payments on our Credit Facility, acquisition debt and finance leases of $17.1 million, net payments on our employee equity plans of $6.9 million, and paid dividends of $1.7 million.

During the three months ended March 31, 2024, we had net payments on our Credit Facility, acquisition debt and finance leases of $25.2 million and paid dividends of $1.7 million.

Our Board declared the following dividends payable on the dates below (in thousands, except per share amounts):

2025 Per Share Dollar Value

March 1st $ 0.1125 $ 1,722

2024 Per Share Dollar Value

March 1st $ 0.1125 $ 1,686

Share Repurchases

We did not repurchase any shares during the three months ended March 31, 2025 and 2024.

At March 31, 2025, our share repurchase program had $48.9 million authorized for repurchases.

Credit Facility, Lease Obligations and Acquisition Debt

The outstanding principal of our Credit Facility, lease obligations and acquisition debt at March 31, 2025 is as follows (in thousands):

March 31, 2025

Credit Facility $ 120,000

Operating leases 16,275

Finance leases 9,942

Acquisition debt 5,437

Total $ 151,654

Credit Facility

At March 31, 2025, our senior secured revolving credit facility (as amended, the “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.

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 11) and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Subsidiary Guarantors”).

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

The Credit Facility contains customary affirmative covenants, including, but not limited to, covenants with respect to the use of proceeds, payment of taxes and other obligations, continuation of the Company’s business and the maintenance of existing rights and privileges, the maintenance of property and insurance, among others.

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, and pay dividends and other restricted payments, and certain financial maintenance covenants.

At March 31, 2025, we were subject to the following financial covenants under our Credit Facility:

(A) a Total Leverage Ratio not to exceed 5.00 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 March 31, 2025.

At March 31, 2025, we had outstanding borrowings under the Credit Facility of $120.0 million.

We also had one letter of credit for $2.2 million under the Credit Facility.

The letter of credit will expire on November 25, 2025 and is expected to automatically renew annually and secures our obligations under our various self-insured policies.

At March 31, 2025, we had $127.8 million of availability under the Credit Facility.

At March 31, 2025, 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 March 31, 2025, the prime rate margin was equivalent to 1.50% and the SOFR term margin was 2.50%.

The weighted average interest rate on our Credit Facility was 6.9% and 8.9% for the three months ended March 31, 2025 and 2024, respectively.

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

Three months ended March 31,

Credit Facility interest expense $ 2,499 $ 3,916

Credit Facility amortization of debt issuance costs 88 138

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.

Lease Obligations

Our lease obligations consist of operating and finance leases.

We lease certain office facilities, certain funeral homes, vehicles and equipment under operating leases with original terms ranging from one to twenty years.

Many leases include one or more options to renew, some of which include options to extend the leases for up to forty years.

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.

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

Three months ended March 31,

Operating lease cost $ 993 $ 978

Short-term lease cost 56 18

Variable lease cost (60) 104

Finance lease cost:

Depreciation of leased assets $ 147 $ 126

Interest on lease liabilities 188 125

At March 31, 2025, non-cancelable operating and finance lease obligations were $33.2 million with $5.7 million payable within 12 months.

Acquisition Debt

Acquisition debt consists of deferred purchase price and promissory notes payable to sellers.

A majority of the deferred purchase price and notes bear no interest and are discounted at imputed interest rates ranging from 6.5% to 7.3%.

Original maturities typically range from nine to twenty years.

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

Three months ended March 31,

Acquisition debt imputed interest expense $ 94 $ 104

At March 31, 2025, acquisition debt obligations were $8.2 million, with $0.9 million payable within 12 months.

At March 31, 2025, 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.

The Senior Notes are unsecured, senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally by each of the Subsidiary Guarantors.

The Senior Notes mature on May 15, 2029, unless earlier redeemed or purchased and bear interest at 4.25% per year, which is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021.

The Indenture contains restrictive covenants limiting our ability and our Restricted Subsidiaries (as defined in the Indenture) to, among other things, incur additional indebtedness or issue certain preferred shares, create liens on certain assets to secure debt, pay dividends or make other equity distributions, purchase or redeem capital stock, make certain investments, sell assets, agree to certain restrictions on the ability of Restricted Subsidiaries to make payments to us, consolidate, merge, sell or otherwise dispose of all or substantially all assets, or engage in transactions with affiliates.

The Indenture also contains customary events of default.

The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 50 months of the Senior Notes.

The effective interest rates on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes for both the three months ended March 31, 2025 and 2024 were 4.42% and 4.30%, respectively.

The fair value of the Senior Notes, which are Level 2 measurements, was $364.4 million at March 31, 2025.

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 March 31,

Senior Notes interest expense $ 4,250 $ 4,250

Senior Notes amortization of debt discount 138 132

Senior Notes amortization of debt issuance costs 39 38

We have future interest payments on our outstanding balance of $76.5 million, with $17.0 million payable within 12 months.

Our financing activities resulted in a net cash outflow of $34.5 million for the six months ended June 30, 2025, compared to a net cash outflow of $26.3 million for the six months ended June 30, 2024, an increase of $8.2 million.

During the six months ended June 30, 2025, we had net payments on our Credit Facility, acquisition debt, and finance leases of $24.3 million, net payments on our employee equity plans of $6.6 million, and paid dividends of $3.5 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.

FINANCIAL HIGHLIGHTS

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

Three months ended March 31,

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

2025 2024 2025 2024

Total revenue $ 102,147 $ 102,318 $ 209,216 $ 205,811

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Net income $ 11,739 $ 6,259 $ 32,665 $ 13,232

Revenue for the three months ended March 31, 2025 increased $3.6 million compared to the three months ended March 31, 2024.

We experienced an 11.8% increase in the average price per interment right sold, offset by a 5.8% decrease in the number of preneed interment rights (property) sold.

Additionally, we experienced a 2.3% increase in the average revenue per funeral contract excluding preneed interest and a 0.7% increase in funeral contract volume.

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.

The increase in average revenue per funeral contract highlights the successful execution of our enhanced pricing strategy and the increase in funeral contract volume is primarily a result of a delayed flu season, which contributed to higher death rates in the first quarter of 2025 compared to the same period in the prior year.

Gross profit for the three months ended March 31, 2025 increased $0.6 million compared to the three months ended March 31, 2024, primarily due to the increase in revenue from our funeral home segment, which was offset by an increase in operating expenses in our cemetery segment.

Net income for the three months ended March 31, 2025 increased $14.0 million compared to the three months ended March 31, 2024.

We experienced a $9.4 million increase in gain on sale of divestitures and real property, a $4.2 million decrease in general, administrative and other expenses, a $1.4 million decrease in interest expense, and a $0.6 million increase in gross profit;

offset by a $1.6 million increase in income tax expense.

Revenue for the three months ended June 30, 2025, decreased $0.2 million compared to the three months ended June 30, 2024.

We experienced a 0.6% decrease in the average price per interment right sold and a 3.9% decrease in the number of preneed interment rights (property) sold and a 0.8% decrease in funeral contract volume;

partially offset by a 1.4% increase in the average revenue per funeral contract excluding preneed interest.

Gross profit for the three months ended June 30, 2025, decreased $1.1 million compared to the three months ended June 30, 2024, primarily due to an increase in cost of revenue primarily from growth in salaries and benefits and promotional expenses during the second quarter of 2025 compared to the same period in 2024.

Net income for the three months ended June 30, 2025, increased $5.5 million compared to the three months ended June 30, 2024.

We experienced a $6.7 million decrease in general, administrative and other expenses, a $1.3 million decrease in interest expense;

partially offset by a $1.1 million decrease in gross profit and a $0.9 million increase in income tax expense.

Revenue for the six months ended June 30, 2025, increased $3.4 million compared to the six months ended June 30, 2024.

We experienced a 4.4% increase in the average price per interment right sold;

partially offset by a 4.8% decrease in the number of preneed interment rights (property) sold.

Additionally, we experienced a 1.9% increase in the average revenue per funeral contract.

Gross profit for the six months ended June 30, 2025, decreased $0.5 million compared to the six months ended June 30, 2024, primarily due to an increase in cost of revenue primarily from growth in salaries and benefits and promotional expenses during the second quarter of 2025 compared to the same period in 2024.

Net income for the six months ended June 30, 2025, increased $19.4 million compared to the six months ended June 30, 2024.

We experienced a $10.9 million decrease in general, administrative and other expenses, as the prior year included 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, a $9.4 million increase in (gain)/loss on sale of divestitures and real property and a $2.7 million decrease in interest expense;

partially offset by a $2.5 million increase in income tax expense and a $0.5 million decrease in gross profit.

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 March 31, 2025, dated April 30, 2025, 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 June 30, 2025, dated August 6, 2025, and discussed in the corresponding earnings conference call.

This 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 March 31,

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

2025 2024 2025 2024

Gross profit $ 35,935 $ 36,993 $ 73,777 $ 74,255

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

Three months ended March 31,

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

2025 2024 2025 2024

Funeral Home 26,250 26,267 $ 59,429 $ 56,869

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Adjusted operating profit margin (1)

43.8% 46.1% 44.4% 45.4%

(1) Adjusted operating profit margin is defined as adjusted operating profit as a percentage of revenue.

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RESULTS OF OPERATIONS

The following is a discussion of our results of operations for the three months ended March 31, 2025 and 2024.

The following is a discussion of our results of operations for the three and six months ended June 30, 2025 and 2024.

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 two funeral homes we sold during the three months ended March 31, 2025, and six funeral home we sold during the three months ended March 31, 2024.

The term “divested” when discussed in the cemetery segment refers to three cemeteries we sold during the three months ended March 31, 2025, and one cemetery we sold during the three months ended March 31, 2024.

The term “divested” when discussed in the funeral home segment refers to two funeral homes we sold during the six months ended June 30, 2025, and six funeral home we sold and one funeral home we merged with another business we owned in an existing market during the six months ended June 30, 2024.

The term “divested” when discussed in the cemetery segment refers to three cemeteries we sold during the six months ended June 30, 2025, and one cemetery we sold during the six months ended June 30, 2024.

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

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

Three months ended March 31,

Three months ended June 30,

Operating $ 59,572 $ 58,753

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Total $ 65,247 $ 63,595

Adjusted operating

Adjusted operating profit

Operating $ 22,030 $ 23,220

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Total $ 26,250 $ 26,267

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

The following measures reflect significant metrics from continuing operations over the comparative period:

Contract volume 10,589 10,533

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Cremation rate 61.6% 59.9%

Funeral home operating revenue increased $3.0 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

Funeral home operating revenue increased $0.8 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.

The increase in operating revenue is primarily driven by a 0.9% increase in the average revenue per contract excluding preneed interest and a 0.5% increase in contract volume.

Funeral home adjusted operating profit for the three months ended March 31, 2025 increased $2.2 million when compared to the same period in 2024, primarily due to the increase in operating revenue.

The comparable operating profit margin increased 140 basis points to 42.8%.

Operating expenses as a percentage of revenue decreased 1.3%, with the largest decrease in salaries and benefits expenses of 1.1% and transportation costs of 0.3%, 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 $0.2 million, while ancillary adjusted operating profit remained flat for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

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 $1.0 million and $0.5 million, respectively, for the three months ended March 31, 2025, compared to the same period in 2024.

These increases are primarily due to an increase of $1.1 million in our general agency commission income for the first quarter of 2025 compared to the same period in 2024, which is a result of our continued focus on growth of our preneed funeral sales through our strategic partnership with a national insurance provider.

Funeral home adjusted operating profit for the three months ended June 30, 2025, decreased $1.2 million when compared to the same period in 2024, primarily due to the increase in operating expense.

The comparable operating profit margin decreased 250 basis points to 37.0%.

Operating expenses as a percentage of revenue increased 2.5%, with the largest increases being in investment expense, facilities and grounds expense, other funeral costs, and general and administrative expense.

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 decreased $0.2 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.

The decrease in ancillary revenue is primarily due to a decision to cease the operations of a cremation focused business during the first quarter of 2024, 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 $1.5 million and $1.4 million, respectively, for the three months ended June 30, 2025, compared to the same period in 2024.

These increases are primarily due to an increase of $1.3 million in our general agency commission income for the second quarter of 2025 compared to the same period in 2024, which is a result of our continued focus on growth of our preneed funeral sales through our strategic partnership with a national insurance provider.

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,

Operating $ 128,662 $ 124,801

Divested 415 1,918

Ancillary 1,936 2,329

Other 8,853 6,378

Total $ 139,866 $ 135,426

Adjusted operating profit

Operating $ 51,570 $ 50,569

Divested 133 359

Ancillary 220 366

Other 7,506 5,575

Total $ 59,429 $ 56,869

The following measures reflect significant metrics from continuing operations over the comparative period:

Contract volume 22,644 22,306

Average revenue per contract, excluding preneed funeral trust earnings $ 5,682 $ 5,595

Average revenue per contract, including preneed funeral trust earnings $ 5,836 $ 5,763

Cremation rate 61.0% 59.6%

Funeral home operating revenue increased $3.9 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024.

The increase in operating revenue was primarily driven by a 1.6% increase in the average revenue per contract excluding preneed interest while contract volume remained up.

The increase in revenue is driven by our success in implementing our enhanced pricing strategy through 2024, which contributed to the increase in average revenue per funeral contract.

Funeral home adjusted operating profit for the six months ended June 30, 2025, increased $1.0 million when compared to the same period in 2024, reflecting our ongoing focus on cost efficiency and operational improvements.

The comparable adjusted operating profit margin decreased 40 basis points to 40.1%, driven by a 0.4% increase in operating expenses as a percentage of revenue.

Key expense increases include facilities and grounds expense, general and administrative expense, and investment expense.

These decreases were partially offset by a decrease in salaries and benefits.

Ancillary revenue, which represents revenue from our flower shop, monument business, pet cremation business and online cremation businesses decreased $0.4 million, while ancillary adjusted operating profit decreased $0.1 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

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 $2.5 million and $1.9 million, respectively, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024.

These increases are primarily due to the increase in our general agency commission income earned on the sale of preneed insurance policies as we continue to 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 March 31,

Three months ended June 30,

Operating $ 33,450 $ 33,644

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Total $ 18,474 $ 20,936

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

The following measures reflect the significant metrics from continuing operations over this comparative period:

Preneed revenue as a percentage of operating revenue 70.2% 72.5%

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Average price per interment right sold $ 5,871 $ 6,013

Cemetery operating revenue increased $1.5 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, as we experienced an 11.8% increase in the average price per interment right sold, offset by a 5.8% decrease in the number of preneed interment rights (property) sold.

Cemetery atneed revenue, which represents approximately 33.0% of our total operating revenue, decreased $0.2 million for the three months ended March 31, 2025, compared to the same period in 2024, primarily due to a decrease 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 decreased $0.2 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to an increase in operating expenses as a percentage of revenue.

Cemetery operating revenue decreased $0.2 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, as we experienced a 2.4% decrease in the average price per interment right sold and a 0.2% decrease in the number of preneed interment rights (property) sold.

Cemetery atneed revenue, which represents approximately 29.8% of our total operating revenue, increased $0.7 million for the three months ended June 30, 2025, compared to the same period in 2024, primarily due to a 19.9% increase in property sold on atneed contracts across our cemetery portfolio.

Cemetery adjusted operating profit decreased $1.7 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to an increase in operating expenses as a percentage of revenue.

The comparable operating profit margin decreased 480 basis points to 44.9%.

Operating expenses as a percentage of revenue increased 3.0%, with the largest increases in promotional expenses of 2.2%, allowance for credit losses of 0.9%, and salaries

and benefits expenses of 0.7%, slightly offset by decreases in merchandise costs of 0.5% and general and administrative expenses of 0.3%.

Other revenue and other adjusted operating profit, which consist of preneed cemetery trust revenue and preneed cemetery finance charges, decreased $0.6 million and $0.5 million, respectively, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to a decrease in expected earnings for the current year in our perpetual care trust fund compared to earnings in prior year.

Operating expenses as a percentage of revenue increased 4.8%, with the largest increases in salaries and benefits expenses, allowance for credit losses, promotional expenses, facilities and grounds insurance expense, and general and administrative expense.

Other revenue and other adjusted operating profit, which consist of preneed cemetery trust revenue and preneed cemetery finance charges, decreased $0.5 million and $0.4 million, respectively, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to a decrease in expected earnings for the current year in our perpetual care trust fund compared to earnings in prior year.

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,

Operating $ 61,388 $ 60,049

Divested 1,154 2,456

Other 6,808 7,880

Total $ 69,350 $ 70,385

Adjusted operating profit

Operating $ 26,368 $ 28,247

Divested 419 738

Other 6,735 7,676

Total $ 33,522 $ 36,661

The following measures reflect the significant metrics from continuing operations over this comparative period:

Preneed revenue as a percentage of operating revenue 67.8% 66.8%

Preneed revenue (in thousands) $ 42,426 $ 41,779

Atneed revenue (in thousands) $ 18,962 $ 18,270

Number of preneed interment rights sold 7,116 7,269

Average price per interment right sold $ 5,705 $ 5,554

Cemetery operating revenue increased $1.3 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily as a result of a 2.7% increase in the average price per preneed interment right sold;

offset by a 2.1% decrease in the number of preneed interment rights sold.

Cemetery atneed revenue, which represents approximately 32% of our total operating revenue, increased $0.7 million for the six months ended June 30, 2025, compared to the same period of the prior year, primarily due to a 12.9% increase in property sold on atneed contracts across our cemetery portfolio.

Cemetery adjusted operating profit decreased $1.9 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to an increase in operating expenses as a percentage revenue.

The comparable operating profit margin decreased 400 basis points to 43.0%.

Operating expenses as a percentage of operating revenue increased 4.1%, driven by increases in key expenses such as promotional expenses, salaries and benefits, allowance for credit losses, and facilities and ground insurance.

Other revenue and other adjusted operating profit, which consist of preneed cemetery trust revenue and preneed cemetery finance charges, decreased $1.1 million and $0.9 million, respectively, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024.

These decreases are primarily due to a decrease in expected earnings for the current year in our perpetual care trust fund compared to earnings in prior year.

Cemetery property amortization.

Cemetery property amortization totaled $1.8 million for the three months ended March 31, 2025, an increase of $0.1 million compared to the three months ended March 31, 2024, primarily driven by the increase in property sold across our cemetery portfolio.

Cemetery property amortization totaled $2.2 million and $4.1 million for the three and six months ended June 30, 2025, respectively, a decrease of $0.3 million and $0.2 million compared to the three and six months ended June 30, 2024, respectively, primarily driven by the decrease in private mausoleums sold across our cemetery portfolio.

Field depreciation.

Depreciation expense for our field businesses totaled $3.3 million for the three months ended March 31, 2025, a decrease of $0.1 million compared to the three months ended March 31, 2024, primarily driven by our business decision to lease vehicles rather than purchase them.

Depreciation expense for our field businesses totaled $3.3 million and $6.6 million for the three and six months ended June 30, 2025, respectively, a decrease of $0.1 million and $0.3 million compared to the three and six months ended June 30, 2024, respectively, primarily driven by our business decision 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 $5.2 million for the three months ended March 31, 2025, an increase of $1.4 million compared to the three months ended March 31, 2024, primarily driven by a $1.4 million increase in leadership and development expenses.

Regional and unallocated funeral and cemetery costs totaled $3.3 million and $8.5 million for the three and six months ended June 30, 2025, respectively, a decrease of $1.0 million and an increase of $0.4 million compared to the three and six months ended June 30, 2024, respectively, primarily driven by a $1.4 million increase in leadership and development expenses.

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 $ 12.0 million for the three months ended March 31, 2025, a decrease of $4.2 million compared to the same period in 2024, primarily driven by the following:

i) a $4.3 million decrease in salary and benefits expenses and incentive compensation costs, primarily driven by termination expense recorded in the first quarter of 2024 for our former Executive Chairman of the Board pursuant to his Transition Agreement, and ii) a $1.2 million decrease in consulting fees related to the Company's previously concluded review of strategic alternatives.

These decreases were offset by an $0.8 million increase in professional fees primarily related to the development of our digital transformation project and a $0.5 million increase in all other expenses.

General, administrative and other expenses, which include salaries and benefits and cash and equity incentive compensation for our Houston support office, totaled $11.9 million for the three months ended June 30, 2025, a decrease of $6.7 million compared to the same period in 2024, primarily driven by the following:

i) a $5.4 million decrease in consulting fees related to the Company's previously concluded review of strategic alternatives, ii) a $0.9 million decrease in incentive compensation expense, and iii) a $0.8 million decrease in separation and severance expenses recorded in the prior year related to our former Chief Financial Officer pursuant to his Separation and Release Agreement dated June 6, 2024.

These decreases were offset by a net $0.4 million increase in various other general and administrative expenses.

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 $24.0 million for the six months ended June 30, 2025, an decrease of $10.9 million compared to the six months ended June 30, 2024, primarily driven by the following:

i) a $6.6 million decrease in salary and benefits expenses and cash and equity incentive compensation costs, primarily driven by the termination expense of our founder and 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 recorded in the prior year, and ii) a $5.5 million decrease in other professional fees primarily related to the development of our digital transformation project.

These decreases were offset by a $0.6 million increase in computer maintenance and licenses and a $0.6 million increase in various other general and administrative expenses.

Net (gain) loss on divestitures, disposals, and impairment charges.

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

Three months ended March 31,

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

2025 2024 2025 2024

Impairment of goodwill, intangibles and PPE $ — $ — $ 117 $ —

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Total $ (1) $ 23 $ (5,771) $ 1,568

During the three months ended March 31, 2025, we sold two funeral homes and three cemeteries for an aggregate gain of $5.9 million.

We also recognized an impairment of $0.1 million on land held for sale during the three months ended March 31, 2025.

During the three months ended March 31, 2024, we sold six funeral homes and one cemetery for a loss of $1.5 million.

During the six months ended June 30, 2025, we sold two funeral homes and three cemeteries for an aggregate gain of $5.9 million.

We also recognized an impairment of $0.1 million on land held for sale during the six months ended June 30, 2025.

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

Interest expense .

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

Three months ended March 31,

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

2025 2024 2025 2024

Senior Notes $ 4,429 $ 4,422 $ 8,857 $ 8,842

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Acquisition debt 93 103 187 207

Other 7 15 8 25

Total $ 7,034 $ 8,324 $ 14,332 $ 17,036

During the three months ended March 31, 2025, we recorded a $2.0 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 March 31, 2024.

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

During the 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 six months ended June 30, 2025, we recorded a $2.0 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 six months ended June 30, 2024.

Income taxes.

Income tax expense totaled $5.3 million for the three months ended March 31, 2025, an increase of $1.6 million compared to the three months ended March 31, 2024.

Our operating tax rate before discrete items was 31.2% and 32.8% for the three months ended March 31, 2025 and 2024, respectively.

Income tax expense totaled $5.1 million for the three months ended June 30, 2025, an increase of $0.9 million compared to the three months ended June 30, 2024.

Our operating tax rate before discrete items was 31.2% and 33.6% for the six months ended June 30, 2025 and 2024, respectively.

Income taxes.

Income tax expense totaled $10.4 million for the six months ended June 30, 2025, an increase of $2.5 million compared to the six months ended June 30, 2024.

Our operating tax rate before discrete items was 31.2% and 33.2% for the six months ended June 30, 2025 and 2024, respectively.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.

Understanding our accounting policies and the extent to which our management uses judgment, assumptions and estimates in applying these policies is integral to understanding our Consolidated Financial Statements.

The preparation of our Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.

Our critical accounting policies are more fully described in Part II, Item 8 “Financial Statements and Supplementary Data” in Note 1 in our Annual Report on Form 10-K for the year ended December 31, 2024.

We have identified Business Combinations and Goodwill as those accounting policies that require significant judgments, assumptions and estimates and that have a significant impact on our financial condition and results of operations.

These policies are considered critical because they may result in fluctuations in our reported results from period to period due to the significant judgments, estimates and assumptions about complex and inherently uncertain matters and because the use of different judgments, assumptions or estimates could have a material impact on our financial condition or results of operations.

We have identified Goodwill as an accounting policy that requires significant judgments, assumptions and estimates and has a significant impact on our financial condition and results of operations.

This policy is considered critical because it may result in fluctuations in our reported results from period to period due to the significant judgments, estimates and assumptions about complex and inherently uncertain matters and because the use of different judgments, assumptions or estimates could have a material impact on our financial condition or results of operations.

Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change.

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We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as appropriate based on changing conditions.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

For quantitative and qualitative disclosures about market risk, see Part II, Item 7(a), “Quantitative and Qualitative Disclosures About Market Risk,” in our 2024 Annual Report on Form 10-K.

Our exposure to market risk has not changed materially since December 31, 2024.

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