STRATEGIC GROWTH
2025
PREMIER EXPERIENCES
ANNUAL REPORT
EMPOWERED PARTNERSHIP
INNOVATION
ELEVATED SERVICE
Creating premier experiences
through innovation, empowered
partnership, and elevated service.
CARRIAGE SERVICES ANNUAL REPORT 2025 | 1
INNOVATION. PARTNERSHIP. SERVICE.
Dear Shareholders, after three full years of disciplined execution of our turnaround plan, Carriage enters its next chapter positioned from a place of strength.
We have materially improved our balance sheet, implemented best-in-class systems and
processes, and built a strong, aligned leadership team grounded in experience, accountability, performance, and culture. As a result, 2025 marked the beginning of Carriage's first phase of purposeful growth.
This moment reflects years of deliberate work. We focused first on restoring financial flexibility, strengthening execution discipline,
and embedding a culture capable of sustaining performance. In 2025, those foundational investments began to translate into measurable
outcomes, improved earnings quality, and renewed confidence in Carriage's long-term value creation potential.
Total shareholder return over this three-year period was approximately 75%, reflecting the market's recognition of Carriage's successful transformation, our increasing focus on innovation as a competitive differentiator, and the early stages of our growth strategy as a disciplined consolidator of high-quality assets in a highly fragmented industry, which we believe positions the Company to compound shareholder value over the long term.
2 | CARRIAGE SERVICES ANNUAL REPORT 2025
Strategy in Action
Our progress this year was guided by a clear, consistent framework.
Carriage's purpose, to create premier experiences through innovation, empowered partnership, and elevated service,
Together with our three strategic objectives, Disciplined Capital Allocation, Purposeful Growth, and Relentless Improvement. These continue to serve as the foundation for how we operate and allocate resources.
These principles are not aspirational. They are clear and practical operating standards that shape decisions across the enterprise and ensure near-term performance advances longterm value creation.
CARRIAGE SERVICES ANNUAL REPORT 2025 | 3
INNOVATION. PARTNERSHIP. SERVICE.
Faith Chapel Funeral Home and Crematory - North | Cantonment, FL
Disciplined Capital Allocation and
Purposeful Growth,
A defining milestone in 2025 was Carriage's return to acquisition-driven growth, executed with significantly greater rigor and discipline than in prior cycles. We introduced a structured acquisition framework that incorporates objective screening criteria, defines investment
hurdle rates, and fosters cross-functional collaboration before capital is deployed.
During the year, we completed approximately
$60 million in strategic acquisitions while divesting roughly $45 million in non-core assets, reinforcing our commitment to portfolio
4 | CARRIAGE SERVICES ANNUAL REPORT 2025
Osceola Memory Gardens, Funeral Home, Cemetery, and Crematory | Poinciana, FL
optimization and balance sheet discipline. These actions reflect a deliberate focus on quality over quantity, prioritizing businesses that align culturally, enhance earnings quality, and strengthen long-term scalability and
value creation.
Equally important, we strengthened our integration processes, emphasizing early accountability, operational alignment, and transparency to accelerate value realization. Growth has returned to Carriage, but only where it reinforces discipline, durability, and expected returns.
CARRIAGE SERVICES ANNUAL REPORT 2025 | 5
INNOVATION. PARTNERSHIP. SERVICE.
6 | CARRIAGE SERVICES ANNUAL REPORT 2025
Operational Execution and Earnings Quality
Operational execution improved meaningfully across the organization in 2025. Our focus was not on isolated initiatives, but on reducing variability, improving consistency, and translating our cultural expectations into repeatable performance.
The implementation of standardized funeral service offerings (packages), combined with refined pricing discipline and an improved product mix, has created a meaningful opportunity to increase funeral average revenue per contract while supporting more consistent margin performance. In December, locations operating under our standardized packages generated an average revenue per contract of approximately $8,700, compared with locations with no offerings, which averaged just over
$6,000. This performance demonstrates not only the economic impact of clearer value
presentation and disciplined execution, but also the scalable upside potential as adoption expands across our portfolio.
We also continued to address staffing optimization and cost discipline, ensuring that there is a delicate balance between margin improvement and the delivery of a premier experience. The result is a portfolio that we believe is increasingly predictable, scalable, and positioned to compound performance over time.
To date, these operational improvements have directly translated into earnings growth. In 2025, Carriage delivered another year of strong financial performance, highlighted by GAAP
diluted EPS growth of nearly 55%, which included the benefit of gains on divestitures among other special items, and adjusted diluted EPS growth of 21%. Importantly, this EPS expansion was driven primarily by improved execution quality and operating leverage rather than short-term cost actions, reinforcing our confidence that earnings growth is durable and aligned with longterm shareholder value creation.
CARRIAGE SERVICES ANNUAL REPORT 2025 | 7
INNOVATION. PARTNERSHIP. SERVICE.
Preneed Sales Strategy, Executed with Discipline
Preneed cemetery sales remain one of the most important drivers of long-term revenue, cash flow visibility, and margin expansion across our business. We expect these sales will generate high-quality backlog, support disciplined inventory monetization, and create durable customer relationships that translate into future at-need performance. In 2025, our consolidated preneed cemetery production ended the year at
$104.7 million, an 11% increase over the prior year, while total consolidated cemetery production
reached $143.6 million, an 8.2% year-over-year increase, underscoring the effectiveness of our strategic focus and execution in this critical channel.
To support this performance, we executed two enterprise-level initiatives in 2025 that
modernized our sales infrastructure, improved portfolio alignment, and enhanced revenue quality and scalability.
The first initiative was the development and
Rolling Hills Memorial Park | Richmond, CA
8 | CARRIAGE SERVICES ANNUAL REPORT 2025
Forest Lawn East Cemetery | Matthews, NC
enterprise-wide deployment of salesEDGE 2.0, our next-generation sales enablement
platform. Fully implemented on October 20, 2025, salesEDGE 2.0 achieved over 80% adoption by year-end, reflecting strong field engagement and clear operational relevance. The enhanced platform materially expanded functionality beyond the initial release, enabling the creation and deployment of targeted, needs-based sales campaigns that were not previously available. In addition, salesEDGE 2.0 significantly improved visibility into our preneed sales funnel, enabling more accurate and timely reporting and allowing our sales leadership to more effectively monitor lead progression, conversion efficiency, and overall sales productivity. Since the launch of version 2.0, we generated $2.6 million in preneed production through salesEDGE, representing 12% of total fourth-quarter preneed property sales, with a clear objective to scale this contribution to 20% on a monthly basis.
The second initiative focused on fully integrating our preneed funeral sales strategy across the sales organization. This effort aligned portfolio structure, communication, and execution,
creating greater clarity for both field teams and sales leadership. As a result, coordination across products and channels improved, reinforcing disciplined sales execution and accountability. In 2025, we wrote 11,202 insurance-funded preneed funeral contracts, up from 8,792 in 2024, an increase of approximately 27.4%, resulting in $9.6 million in preneed funeral commission income, which reflects an increase of 51% over the prior year.
By the end of 2025, both initiatives were fully embedded in our daily operations, establishing what we believe is a scalable, repeatable foundation for sustained growth and improved sales effectiveness. Collectively, these efforts contributed to approximately $20 million in incremental sales during the year. Importantly, growth was accompanied by meaningful improvements in portfolio and product mix. We reduced average issue age compared to the prior year while achieving a healthier balance of multi-pay offerings, driving higher general agency commissions, and improving overall sales economics.
CARRIAGE SERVICES ANNUAL REPORT 2025 | 9
INNOVATION. PARTNERSHIP. SERVICE.
Systems
That Scale
Throughout 2025, we continued to invest in systems and processes designed to support disciplined growth. We advanced our continuous improvement platform, modernized our core technology infrastructure, and strengthened our data and reporting capabilities to improve the speed and quality of decision-making.
We believe these investments will enable better visibility, greater accountability, and more consistent execution across the organization. Improved reliability, enhanced financial reporting, and more accessible data will allow our leaders at every level to operate with confidence and clarity. Importantly, these systems convert effort into repeatable outcomes, a prerequisite for sustainable growth.
10 | CARRIAGE SERVICES ANNUAL REPORT 2025
People, leadership, and culture, carriage's progress in 2025 was driven by deliberate, continued investment in
our people and leadership.
We deepened leadership capability, clarified expectations, and reinforced a meritocratic culture that rewards performance aligned with our values. These efforts translated directly into improved productivity, lower turnover, and sustained employee engagement. At Carriage, culture is not an abstract or soft concept, it is a measurable economic asset that strengthens execution, reduces risk, and differentiates us in a highly local, service-driven profession.
CARRIAGE SERVICES ANNUAL REPORT 2025 | 11
INNOVATION. PARTNERSHIP. SERVICE.
Marketing, Digital, and Demand
Generation
Marketing continued its evolution into a measurable, accountable growth engine during 2025. We completed a company-wide standardization of digital platforms, strengthened local visibility, and embedded disciplined experimentation through controlled testing.
These efforts delivered clear financial results. Commissions from e-commerce sales increased 131%, reflecting our increased strategic focus.
Paid digital demand generation produced over 15,000 calls, contributing directly to new contracts, reinforcing marketing's role as a scalable contributor to growth rather than a discretionary expense. We believe we are just scratching the surface of these opportunities and expect them to contribute to our growth in a meaningful way in the years ahead.
12 | CARRIAGE SERVICES ANNUAL REPORT 2025
Financial Perspective
The financial results of 2025 reflect the quality and discipline of the work completed over the past three years. Improvements in earnings quality, reporting rigor, and transparency to date have continued to strengthen confidence in Carriage's long-term trajectory and our ability to execute consistently.
We remain committed to preserving balance sheet flexibility, deploying capital thoughtfully, improving cash conversion, and prioritizing returns that compound over time. Financial discipline remains foundational to our approach. We expect to achieve our targeted leverage ratio of 3.5x-4.0x during 2026 and to sustain that range, providing the flexibility to support organic investment, disciplined consolidation, and grow shareholder returns.
In 2025, a key focus was positioning the organization for the next phase of value creation through deliberate talent management and role redefinition, particularly within our financial functions. This was most evident in FP&A and Accounting, where the team was substantially refreshed, particularly in leadership roles,
which were strengthened by higher-caliber
professionals. While we expect the full impact of this work will become more visible over time, we have already seen improvements in analysis quality, reporting clarity, and strategic insight supporting operational and capital allocation decisions.
By the end of 2025, most of this organizational evolution was complete, with a small number of hires and backfills remaining. As these changes are fully integrated in 2026, we expect further improvements in forecast accuracy, cash flow visibility, and return-based decision-making.
This enhanced financial capability strengthens our ability to generate sustainable free cash flow and deploy capital through reinvestment, disciplined M&A, debt reduction, and direct returns to shareholders, designed to maximize long-term shareholder value.
CARRIAGE SERVICES ANNUAL REPORT 2025 | 13
INNOVATION. PARTNERSHIP. SERVICE.
Looking Ahead
As we enter 2026, Carriage
is no longer in transition. We are operating with clarity, alignment, and momentum.
Our long-term value creation strategy is firmly grounded in our purpose statement and strategic objectives, which together form the success framework guiding every major decision.
We approach the future with confidence, not complacency. We believe the platform we have built over the past three years positions Carriage to pursue growth
thoughtfully, scale responsibly, and continue delivering long-lasting value for our shareholders.
On behalf of our leadership team and our employees across the organization, thank you for your continued trust and support. We remain committed to creating long-term value while honoring our responsibility to the families and communities we serve.
CARLOS R. QUEZADA
Vice Chairman of the Board and Chief Executive Officer
Carriage Services, Inc.
14 | CARRIAGE SERVICES ANNUAL REPORT 2025
CARRIAGE SERVICES ANNUAL REPORT 2025 | 15
INNOVATION. PARTNERSHIP. SERVICE.
Images above are from the following businesses;
Fairfax Memorial Park | Fairfax, VA
Greenlawn Funeral Homes - Northeast | Bakersfield, CA
Faith Chapel Funeral Home and Crematory - North | Cantonment, FL
16 | CARRIAGE SERVICES ANNUAL REPORT 2025
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended, December 31, 2025
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-11961
CARRIAGE SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0423828
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
3040 Post Oak Boulevard, Suite 300
Houston, Texas, 77056 (Address of principal executive offices)
(713) 332-8400
(Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, Par Value $.01 Per Share
CSV
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Securities Exchange Act of 1934.
Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2025 (the last business day of the registrant's most recently completed second fiscal quarter) was approximately $699.0 million based on the closing price of $45.74 per share on the New York Stock Exchange.
The number of shares of the registrant's Common Stock, $.01 par value per share, outstanding as of February 19, 2026 was 15,751,228.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required to be disclosed in Part III of this report is incorporated by reference from the registrant's definitive proxy statement or an amendment to this report, which will be filed with the SEC not later than 120 days after the end of the fiscal year covered by this report.
Table of Contents
Page
Part I
Item 1.
Business
3
Item 1A.
Risk Factors
8
Item 1B.
Unresolved Staff Comments
19
Item 1C.
Cybersecurity
19
Item 2.
Properties
20
Item 3.
Legal Proceedings
21
Item 4.
Mine Safety Disclosures
21
Part II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
22
Item 6.
[Reserved]
23
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
24
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
34
Item 8.
Financial Statements and Supplementary Data
35
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
84
Item 9A.
Controls and Procedures
84
Item 9B.
Other Information
86
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
86
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
86
Item 11.
Executive Compensation
86
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
86
Item 13.
Certain Relationships and Related Transactions and Director Independence
87
Item 14.
Principal Accountant Fees and Services
87
Part IV
Item 15.
Exhibits and Financial Statement Schedules
87
Item 16.
Form 10-K Summary
90
Signatures
91
CAUTIONARY NOTE
Certain statements and information in this Annual Report on Form 10-K (this "Form 10-K") may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical information, should be deemed to be forward-looking statements. Words such as "may", "will", "estimate", "intend", "believe", "expect", "seek", "project", "forecast", "foresee", "should", "would", "could", "plan", "anticipate" and other similar words or expressions may be used to identify forward-looking statements; however, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements include, but are not limited to, statements regarding any projections of earnings, revenue, cash flow, investment returns, capital allocation, debt levels, equity performance, death rates, market share growth, cost inflation, overhead, including talent recruitment, field and corporate incentive compensation, preneed sales or other financial items; any statements of the plans, strategies, objectives and timing of management for future operations or financing activities, including, but not limited to, capital allocation, organizational performance, execution of our strategic objectives and growth strategy, planned acquisitions and divestitures, technology improvements, product development, the ability to obtain credit or financing, anticipated integration, performance and other benefits of recently completed and anticipated acquisitions, and cost management and debt reductions; any statements of the plans, timing and objectives of management for acquisition and divestiture activities; any statements regarding future economic and market conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future developments and their potential effect on us. While we believe these assumptions concerning future events are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenue and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions or divestitures. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to:
our ability to find and retain skilled personnel;
the effects of our talent recruitment efforts, incentive, and compensation plans and programs, including such effects on our Standards Operating Model and the Company's operational and financial performance;
our ability to execute our strategic objectives and growth strategy, if at all;
our ability to meet the timing, objectives, and expectations related to our 2030 Vision, if at all;
the potential adverse effects on the Company's business, financial, and equity performance if management fails to meet the expectations of its strategic objectives and growth plan;
the execution of our Standards Operating Model and strategic acquisition frameworks;
the effects of competition;
changes in the number of deaths in our markets, which are not predictable from market to market or over the short term;
changes in consumer preferences and our ability to adapt to or meet those changes;
our ability to generate preneed sales, including implementing our cemetery portfolio sales strategy, product development, and optimization plans;
the investment performance of our funeral and cemetery trust funds;
fluctuations in interest rates, including, but not limited to, the effects of increased borrowing costs under our Credit Facility and our ability to minimize such costs, if at all;
the effects of inflation on our operational and financial performance, including the increased overall costs for our goods and services, the impact on customer preferences as a result of changes in discretionary income, and our ability, if at all, to mitigate such effects;
our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
our ability to meet the timing, objectives and expectations related to our capital allocation framework, including our forecasted rates of return, planned uses of free cash flow and future capital allocation, including debt repayment plans, internal growth projects, potential strategic acquisitions, share repurchases, or dividend increases;
our ability to meet the projected financial and performance guidance of our full year outlook, if at all;
1
the timely and full payment of death benefits related to preneed funeral contracts funded through life insurance policies;
the financial condition of third-party insurance companies that fund our preneed funeral contracts;
increased or unanticipated costs, such as merchandise, goods, insurance or taxes, and our ability to mitigate or minimize such costs, if at all;
our level of indebtedness and the cash required to service our indebtedness;
changes in federal income tax laws and regulations and the implementation and interpretation of these laws and regulations by the Internal Revenue Service, including changes and potential impacts, if any, resulting from the recently enacted One Big Beautiful Bill Act;
effects of the application of other applicable laws and regulations, including changes in such regulations or the interpretation thereof;
the potential impact of epidemics and pandemics, including any new or emerging public health threats, on customer preferences and on our business;
government, social, business, and other actions that have been and will be taken in response to pandemics and epidemics, including potential responses to any new or emerging public health threats;
effects and expense of litigation;
consolidation in the funeral and cemetery industry;
our ability to identify and consummate strategic acquisitions on commercially reasonable terms and on a timely basis, if at all, and successfully integrate acquired businesses with our existing businesses, including expected performance and financial improvements related thereto;
our ability to successfully complete any non-core asset divestitures on commercially reasonable terms and on a timely
basis, if at all, and the impact of any such divestitures on our Company, including any financial, operational, tax or other similar impacts related thereto;
the effects of any additional imposition or changes in tariffs or trade agreements including, but not limited to, any
potential disruptions in international trade, any increased inflationary pressures on the economy or costs for our goods, and our ability, if at all, to mitigate such effects;
economic, financial, and stock market fluctuations;
significant weather events, natural disasters, or catastrophic events;
uncertainty around, and disruption from, new and emerging technologies, such as artificial intelligence ("AI") and generative AI, and the failure to adapt or successfully incorporate such technologies into the Company's business;
interruptions or security lapses of our information technology, including any cybersecurity or ransomware incidents;
adverse developments affecting the financial services industry;
acts of war or terrorists acts and the governmental or military response to such acts;
our failure to maintain effective control over financial reporting; and
other factors and uncertainties inherent in the funeral and cemetery industry.
For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see Part I, Item 1A, Risk Factors.
Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.
2
PART I
ITEM 1. BUSINESS.
GENERAL
Carriage Services, Inc. ("Carriage," the "Company," "we," "us," or "our") was incorporated in the State of Delaware in December 1993 and is a leading provider of funeral and cemetery services and merchandise in the United States ("U.S."). We operate in two business segments: 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 December 31, 2025, we operated 155 funeral homes in 24 states and 28 cemeteries in 9 states. We compete with other publicly held and independent operators of funeral and cemetery companies. We believe we are a market leader in most of our markets.
We provide funeral and cemetery services and products on both an "atneed" (time of death) and "preneed" (planned prior to death) basis.
COMPANY DEVELOPMENTS
Leadership Changes
On January 16, 2026, Carriage Services, Inc. (the "Company") announced that the Board of Directors (the "Board") appointed Steven D. Metzger to serve as the Company's President and Chief Operating Officer, effective as of February 2, 2026. Mr. Metzger's appointment was made in connection with certain executive leadership changes and appointments announced by the Company to better align with the Company's business strategy.
Acquisitions
During the year ended December 31, 2025, we acquired eight funeral homes, one cemetery, and one cremation focused business in Florida for an aggregate price of $56.5 million. We acquired substantially all of the assets and assumed certain operating liabilities of these businesses. Additionally, we acquired the real property for one funeral home that we previously leased from a third party for a purchase price of $2.5 million.
Divestitures
During the year ended December 31, 2025, we sold thirteen funeral homes, four cemetery and real property for an aggregate of $40.4 million resulting in a gain of $1.5 million. Additionally, we sold real property for $4.0 million resulting in a gain of $1.0 million.
OUR OPERATIONS
See Part II, Item 8, Financial Statements and Supplementary Data, Note 19 for segment data related to our operations.
Funeral Home and Cemetery Operations
Funeral home and cemetery businesses provide products and services to families in three principal areas: (i) ceremony and tribute, generally in the form of a funeral or memorial service; (ii) care of remains, either through burial or cremation; and (iii) memorialization, generally through monuments, markers, or inscriptions.
Our funeral homes offer a complete range of services to meet a family's funeral needs, including consultation, the removal and preparation of remains, the sale of caskets, and related funeral merchandise, the use of funeral home facilities for visitation and memorial services, and transportation services. Most of our funeral homes have a non-denominational chapel on the premises, which permits family visitation and services to take place at one location and thereby reduces transportation costs and inconvenience to the family.
Our cemeteries provide interment rights (primarily grave sites, lawn crypts, mausoleum spaces, and niches), related cemetery merchandise (such as memorial markers, outer burial containers, and monuments) and services (interments, inurnments, and installation of cemetery merchandise).
3
Preneed Programs
Funeral and cemetery arrangements sold prior to death occurring are referred to as preneed contracts. We market funeral and cemetery services and products on a preneed basis at the local level. Preneed funeral or cemetery contracts enable families to establish, in advance, the type of service to be performed, the products to be used, and the cost of such products and services. Preneed contracts permit families to eliminate the burden of making deathcare plans at the time of need and allow input from other family members before the death occurs. We guarantee the price and performance of the preneed contracts to the customer.
Approximately 16% of our funeral services performed are funded through preneed contracts, which are usually secured by placing the funds collected in trust for the benefit of the customer or by the purchase of a life insurance policy, the proceeds of which will pay for such services at the time of need. Insurance-funded contracts allow us to earn commission income to improve our near-term cash flow and offset a significant amount of the up-front costs associated with preneed sales.
In 2023, we entered into an exclusive partnership agreement with a national insurance provider to market and sell prearranged funeral services, for which we received a $6.0 million incentive payment. The incentive payment is subject to partial claw-back if certain preneed funeral sales volumes are not met within the ten-year term of the agreement. As such, we recognize the incentive payment in proportion to our achieved preneed funeral sales volume per the agreement at each reporting period. We have recognized $0.8 million of this incentive payment to-date. This partnership agreement increased our commission income 52.0% in 2025 over the previous year. We are projecting this partnership to help drive year-over-year growth in preneed funeral sales of 20% over the next five years. We sold 11,967 and 10,750 preneed funeral contracts, net of cancellations, during the years ended December 31, 2025 and 2024, respectively. At December 31, 2025, we had a backlog of 93,286 preneed funeral contracts to be delivered in the future.
Personalization and pre-planning continue to be two important trends in the funeral and cemetery industry; however, the national trend toward more cremations may be the most significant. While this trend is expected to continue, other factors are expected to lead to rising industry revenue, including an increase in spending on additional or unique funeral and cremation services. Shifting preferences will likely lead to a continued rise in cremations; as such, we are focused on educating and providing our cremation customers with additional services and products that are available. All of our funeral homes offer cremation products and services. While the average revenue for a cremation service is generally lower than that of an average traditional burial service, we have found that this revenue can be substantially enhanced by offering additional services and merchandise, including video tributes, flowers, burial garments and memorial items such as urns, keepsake jewelry and other items that hold a portion of the cremated remains.
Approximately 64% of our cemetery operating revenue is derived from preneed property sales. Our preneed cemetery strategy is to build family heritage in our cemeteries by selling property and interment rights prior to death through full time, highly motivated, and entrepreneurial local sales teams. Our goal is to build broader and deeper teams of sales leaders and counselors in our larger and more strategically located cemeteries, including the development of standardized sales systems across our portfolio of cemeteries, to focus on growth of our preneed property sales. Cemetery merchandise and services are often purchased in addition to cemetery property at the time of sale. The performance of these preneed cemetery contracts is secured by placing the funds collected in trust for the benefit of the customer, the proceeds of which will pay for such services at the time of need. General consumer confidence and discretionary income may have a significant impact on our preneed sales success rate. Cemetery revenue that originated from preneed contracts represented approximately 71% and 70% of our total operating cemetery revenue for 2025 and 2024, respectively. At December 31, 2025, we had a backlog of 65,681 preneed cemetery contracts to be delivered in the future.
Trust and Insurance Funded Contracts
We have established a variety of trusts in connection with funeral home and cemetery operations as required under applicable state laws. Such trusts include (i) preneed funeral trusts; (ii) preneed cemetery merchandise and service trusts; and
(iii) cemetery perpetual care trusts. These trusts are typically administered by independent financial institutions that we select. Investment management and advisory services are provided either by our wholly owned registered investment advisory firm ("CSV RIA") or by independent financial advisors. As of December 31, 2025, CSV RIA provided these services to approximately 80% of our trust assets, for a fee based on the market value of trust assets. Under state trust laws, we are allowed to charge the trust a fee for advising on the investment of the trust assets and these fees are recognized as income in the period in which services are provided. The investment advisors establish an investment policy that provides guidance on asset allocation, investment requirements, investment manager selection, and performance monitoring. The investment objectives are tailored to generate long-term investment returns without assuming undue risk, while ensuring the management of assets complies with applicable laws.
Preneed sales generally require deposits to a trust or purchase of a third-party insurance product. Trust fund income earned, along with the receipt and recognition of any insurance benefits, are not reflected in our revenue until the service is
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performed or the merchandise is delivered. Trust fund holdings and deferred revenue are reflected on our Consolidated Balance Sheets, while our insurance funded contracts are not reflected on our Consolidated Balance Sheets. In most states, we are not permitted to withdraw principal or investment income from such trusts until the service is performed. Additionally, in most states, regulations require a portion (generally 10%) of the sale amount of cemetery property and memorials to be placed in a perpetual care trust. The income from these perpetual care trusts provides funds necessary to maintain cemetery property and memorials in perpetuity.
For additional information with respect to our trusts, see Part II, Item 8, Financial Statements and Supplementary Data, Notes 8 and 9.
BUSINESS STRATEGY
Our operations and business strategy are founded on the shared values of honesty, integrity, and a belief in the power of people. This foundation unites us in our purpose statement: "Creating premier experiences through innovation, empowered partnership, and elevated service," which is built upon the execution of our three foundational strategic objectives; Disciplined Capital Allocation, Purposeful Growth, and Relentless Improvement. These strategic objectives guide our decision making and ensure we remain at the forefront of funeral and cemetery innovation. Our purpose statement is a testament to our unwavering commitment across all areas of our operations, emphasizing our dedication to innovation, partnership, and exceptional service delivery.
Our first strategic objective is Disciplined Capital Allocation. This strategic approach ensures our investments are focused on areas with the highest potential for returns, laying the groundwork for sustainable success and long-term value creation. This disciplined investment strategy is pivotal in navigating the Company's path toward sustainable growth and profitability.
Purposeful Growth, our second strategic objective, transcends mere expansion, emphasizing strategic and thoughtful planning. This approach to business development is not about increasing our size, but rather, enhancing our revenue and financial health through strategic, thoughtful, and data driven planning. It signifies our commitment to growing with intent and enriching our Company's value proposition organically and through strategic partnerships.
Finally, at the heart of our ethos lies our third strategic objective, Relentless Improvement and a commitment to the pursuit of excellence in all that we do. This strategic objective champions the idea that every day presents a new opportunity to refine our processes, prioritize efficiencies, enhance our service, and exceed our prior achievements.
Our three strategic objectives are more than strategic imperatives. They represent our commitment to pursue excellence relentlessly, innovate with purpose, and redefine industry standards through superior service.
As part of our strategic objectives during 2025, we focused on the following:
Strategic mergers and acquisitions: We completed $59.0 million in strategic acquisitions while divesting $44.5 million in non-core assets, reinforcing our commitment to portfolio optimization and balance sheet discipline. These actions reflect a deliberate focus on quality over quantity, prioritizing businesses that align culturally, enhance earnings quality, and strengthen long-term scalability and value creation.
Preneed funeral and cemetery sales: Preneed sales remain one of the most important drivers of long-term revenue, cash flow visibility, and margin expansion across our business. We expect these sales will generate high-quality backlog, support disciplined inventory monetization, and create durable customer relationships that translate into future at-need performance. In 2025, our consolidated preneed cemetery property production ended the year at $85 million, an increase of 8.4% over the prior year, while total cemetery production reached $143.6 million, an increase of 8.2% year over year, underscoring the effectiveness of our strategic focus and execution in this critical channel. In addition, insurance-funded preneed funeral contracts sold grew by approximately 27%, resulting in $9.6 million in preneed funeral commission income, which reflects an increase of 51% over the prior year.
Modernized sales infrastructure and continued innovation: In the fourth quarter of 2025, we implemented our next-generation sales enablement platform. This enhanced platform significantly improved visibility into our preneed sales funnel, enabling more accurate and timely reporting and allowing our sales leaders to more effectively monitor lead progression, conversion efficiency, and overall sales productivity. Since the launch, we generated $2.6 million in preneed production through our next generation platform, representing 12% of total fourth-quarter preneed property sales.
Systems that support scale: Throughout 2025, we continued to invest in systems and processes designed to support disciplined growth. We advanced our continuous improvement platform, modernized core technology infrastructure, and strengthened our data and reporting capabilities to improve decision-making speed and quality. We believe these investments in our systems will enable better visibility, greater accountability, and more consistent execution across the organization. Improved reliability, enhanced financial reporting, and more accessible data will allow our leaders at every level to operate with
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confidence and clarity. Importantly, we believe these systems convert effort into repeatable outcomes, a prerequisite for sustainable growth.
COMPETITION
The funeral and cemetery industry has been, and remains, highly competitive. The largest publicly held operators, in terms of revenue, of both funeral homes and cemeteries with operations in the U.S. are Service Corporation International ("SCI") and Carriage. We believe these two companies collectively represent approximately 23% of funeral and cemetery revenue in the
U.S. Independent businesses, along with other privately-owned consolidators, represent the remaining 77% of industry revenue.
Our funeral home and cemetery operations face competition in the markets that they serve. Our primary competition in most of our markets is from local independent operators. We have observed new start-up competition in certain areas of the country, which may impact our profitability in certain markets. Market share for funeral homes and cemeteries is largely a function of reputation and heritage, although competitive pricing, professional service, and attractive, well-maintained and conveniently located facilities are also important. Because of the importance of reputation and heritage, market share increases are usually gained over a long period of time. The sale of preneed funeral services and cemetery property has increasingly been used by many companies as a marketing tool to build market share.
There has been increasing competition from providers specializing in specific services, such as cremations, who offer minimal service and low-end pricing. We also face competition from companies that market products and related merchandise over the internet and non-traditional casket stores in certain markets. These competitors have been successful in capturing a portion of the low-end market and product sales.
SEASONALITY
Our business can be affected by seasonal fluctuations in the death rate, with number of deaths generally higher during the winter months due to the higher incidences of death from influenza and pneumonia as compared to other periods of the year. Seasonal fluctuations in the death rate may be further affected by epidemics and pandemics, including any new or emerging public health threats. These unexpected fluctuations may not only increase death rates during the affected period, but also may subsequently decrease death rates following the affected period as a result of an acceleration of death rates. As a result, we are unable to predict or forecast the duration or variation of the current death rate with any certainty.
REGULATION
General. Our operations are subject to regulations, supervision, and licensing under numerous federal, state, and local laws, ordinances, and regulations, including extensive regulations concerning trust funds, preneed sales of funeral and cemetery products and services, and various other aspects of our business. We believe that we comply in all material respects with the provisions of these laws, ordinances, and regulations. Legislative bodies and regulatory agencies frequently propose new laws and regulations, some of which could have a material impact on our business. We cannot predict the impact of any future laws and regulations or changes to existing laws and regulations.
Federal Trade Commission. Our funeral home operations are comprehensively regulated by the Federal Trade Commission ("FTC") under Section 5 of the Federal Trade Commission Act and a trade regulation rule for the funeral industry promulgated thereunder referred to as the "Funeral Rule." The Funeral Rule defines certain acts or practices as unfair or deceptive and contains certain requirements to prevent these acts or practices. The preventive measures require a funeral provider to give consumers accurate, itemized pricing information, and various other disclosures about funeral goods and services and prohibit a funeral provider from: (i) misrepresenting legal, crematory and cemetery requirements; (ii) embalming for a fee without permission; (iii) requiring the purchase of a casket for direct cremation; (iv) requiring consumers to buy certain funeral goods or services as condition for furnishing other funeral goods or services; (v) misrepresenting state and local requirements for an outer burial container; and (vi) representing that funeral goods and services have preservative and protective value. Additionally, the Funeral Rule requires the disclosure of mark-ups, commissions, additional charges and rebates related to cash advance items. On October 20, 2022, the FTC announced that it was retaining the Funeral Rule and issued an advanced notice of proposed rulemaking concerning potential amendments to the Funeral Rule. These potential amendments include, among other things, whether and how funeral providers should be required to display or attribute their price information online and through electronic means. On December 21, 2022, the FTC voted to extend the public comment period to January 17, 2023 for its advanced notice of proposed rulemaking on potential amendments to the Funeral Rule. On May 17, 2023, the FTC announced, as part of its continuing review of potential amendments to the Funeral Rule, that it would host a public workshop, held on September 7, 2023, to consider issues raised by certain consumer advocacy groups. Although the FTC's public workshop was completed, no further announcements related to the notice of proposed rulemaking on potential amendments to the Funeral Rule have been announced by the FTC. We cannot predict what changes, if any, may be made to the Funeral Rule or the impact of any such changes on our business.
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State Trust Laws. We have established a variety of trusts in connection with funeral home and cemetery operations as required under applicable state laws. Such trusts include (i) preneed funeral trusts; (ii) preneed cemetery merchandise and service trusts; and (iii) cemetery perpetual care trusts. These trusts are typically administered by independent financial institutions which we select. Under state trust laws, our wholly owned registered investment advisor is allowed to charge the trust a fee for advising on the investment of the trust assets and these fees are recognized as income in the period in which services are provided. Preneed funeral sales generally require deposits to a trust or purchase of a third-party insurance product. In most states, we are not permitted to withdraw principal or investment income from such trusts until the funeral service is performed. Some states, however, allow for the retention of a percentage (generally 10%) of the receipts to offset any administrative and selling expenses. Additionally, we are generally required under applicable state laws to deposit a specified amount (which varies from state to state, generally 50% to 100% of the selling price) into a merchandise and service trust fund for preneed cemetery merchandise and services sales.
Environmental. Our operations are also subject to certain federal, regional, state, and local laws and regulations relating to environmental protection, including legal requirements governing air emissions, waste management, and disposal and wastewater discharges. For instance, the federal Clean Air Act and analogous state laws, which restrict the emission of pollutants from many sources, including crematories, may require us to apply for and obtain air emissions permits, install costly emissions control equipment, and conduct monitoring and reporting tasks. Also, in the course of our operations, we store and use chemicals and other regulated substances as well as generate wastes that may subject us to strict liability under the federal Resource Conservation and Recovery Act and comparable state laws, which govern the treatment, storage, and disposal of nonhazardous and hazardous wastes, and the federal Comprehensive Environmental Response, Compensation and Liability Act, a remedial statute that imposes cleanup obligations on current and past owners or operators of facilities where hazardous substance releases occurred and anyone who transported or disposed or arranged for the transportation or disposal of hazardous substances released into the environment from such sites. In addition, the Federal Water Pollution Control Act, also known as the federal Clean Water Act, and analogous state laws regulate discharges of pollutants to state and federal waters. Underground and above ground storage tanks that store chemicals and fuels for vehicle maintenance or general operations are located at certain of our facilities and any spills or releases from those facilities may cause us to incur remedial liabilities under the Clean Water Act or analogous state laws as well as potential liabilities for damages to properties or persons. Failure to comply with environmental laws and regulations could result in the assessment of sanctions, including administrative, civil, and criminal penalties, the imposition of investigatory, remedial and corrective action obligations, delays in permitting or performance of projects and the issuance of injunctions restricting or prohibiting some or all of our activities in affected areas. Moreover, accidental releases or spills may occur in the course of our operations, and we cannot assure that we will not incur significant costs and liabilities as a result of such releases or spills, including any third-party claims for damages to property, natural resources or persons. Also, it is possible that implementation of stricter environmental laws and regulations or more stringent enforcement of existing environmental requirements could result in additional, currently unidentifiable costs or liabilities to us, such as requirements to purchase pollution control equipment or implement operational changes or improvements. While we believe we are in compliance with existing environmental laws and regulations, we cannot assure that we will not incur substantial costs in the future.
Worker Health and Safety. We are subject to the requirements of the federal Occupational Safety and Health Act, as amended ("OSHA"), and comparable state statutes whose purpose is to protect the health and safety of workers. In addition, the OSHA hazard communication standard, the Emergency Planning and Community Right to Know Act and implementing regulations and similar state statutes and regulations require that we organize and/or disclose information about hazardous materials used or produced in our operations and that this information be provided to employees, state and local governmental authorities and citizens. We believe that we are in compliance with all applicable laws and regulations relating to worker health and safety.
HUMAN CAPITAL
Our funeral homes and cemeteries are managed by entrepreneurially focused Managing Partners with extensive funeral and cemetery industry experience. They have responsibility for day-to-day operations and follow operating and financial metrics called "Standards" within our Standards Operating Model. Standards Achievement is the measure by which we judge the Managing Partner's performance and how we incentivize our Managing Partners and their teams. Additionally, we utilize short-term and long-term incentive performance programs to attract and retain talent in critical positions, ranging from sales counselors and sales managers to Houston support center leaders and employees.
As of December 31, 2025, we and our subsidiaries employed 2,321 employees, of whom 1,248 were full-time and 1,073 were part-time. All of our funeral directors and embalmers possess licenses required by applicable regulatory agencies. None of our employees are represented by unions.
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AVAILABLE INFORMATION
We file annual, quarterly and other reports, and any amendments to those reports, and information with the U.S Securities and Exchange Commission ("SEC"). The SEC maintains a website at https://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
Our website address is https://www.carriageservices.com. Available on our website under "Investors - SEC Filings," free of charge, are Carriage's annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, current reports on Form 8-K, insider reports on Forms 3, 4 and 5 filed on behalf of directors and officers and amendments to those reports, each as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC.
Also posted on our website, and available in print upon request, are charters for our Audit Committee, Compensation Committee and Corporate Governance Committee. Copies of the Code of Business Conduct and Ethics and the Corporate Governance Guidelines are also posted on our website under "Investors - Corporate Governance - Governance Documents." Our Code of Business Conduct and Ethics applies to all of our officers, employees and directors, including our principal executive officer, principal financial officer, and principal accounting officer. Within the time period required by the SEC and the New York Stock Exchange, we will post on our website any modifications to the charters and any waivers applicable to senior officers as defined in the applicable charters, as required by the Sarbanes-Oxley Act of 2002, as well as any amendments or modifications to our Code of Business Conduct and Ethics. Information contained on our website is not part of this Annual Report on Form 10-K.
ITEM 1A. RISK FACTORS RISKS RELATED TO OUR BUSINESS
Key Employees and CompensationThe success of our businesses is typically dependent upon one or a few key employees for success because of the localized and personal nature of our business.
Funeral home and cemetery businesses have built local heritage and tradition through successive generations, providing a foundation for ongoing business opportunities from established customer family relationships and related referrals. We believe these relationships build trust in the community and are a key driver to market share. Our businesses, which tend to serve small local markets, usually have one or a few key employees that drive our relationships. Our ability to attract and retain Managing Partners, sales force, and other personnel is an important factor in achieving future success. We can give no assurance that we can retain these employees or that these relationships will drive market share. Our inability to attract and maintain qualified and productive Managing Partners and sales force employees could have a material adverse effect on our financial condition, results of operations, and cash flows.
Our "Good to Great" incentive program could result in significant future payments to our Managing Partners.
Our Good to Great incentive program rewards our Managing Partners for achieving an average net revenue compounded annual growth rate equal to at least 1% (the "Minimum Growth Rate") over a five year performance period (the "Performance Period") with respect to our funeral homes that they operate, which aligns our incentives with long-term value creation. Each Managing Partner that achieves the Minimum Growth Rate during the applicable Performance Period and remains continuously employed as a Managing Partner of the same business throughout the Performance Period will receive a one-time bonus, payable in a combination of cash and shares of our common stock, determined at our discretion. We believe this incentive program will result in improved field-level margins, market share, and overall financial performance.
Strategic Business Execution and PerformanceImproved performance in our funeral and cemetery segments is dependent upon successful execution of our Standards Operating Model.
We have implemented our Standards Operating Model to improve and better measure performance in our funeral and cemetery operations. We developed these standards, which are updated from time to time, according to criteria, each with a different weighting, designed around market share, high-value services and operational and financial metrics. We also incentivize our Managing Partners by giving them the opportunity to earn a fixed percentage of the field-level earnings before interest, taxes, depreciation and amortization based upon the number and weighting of the standards achieved. Our expectation is that, over time, the Standards Operating Model will result in improved field-level margins, market share, customer satisfaction and overall financial performance, but there is no assurance that these goals will be met. Failure to successfully implement our Standards Operating Model in our funeral and cemetery operations could have a material adverse effect on our financial condition, results of operations, and cash flows.
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Our ability to execute our growth strategy is highly dependent upon our ability to successfully identify suitable acquisition candidates and negotiate transactions on favorable terms.
There is no assurance that we will be able to continue to identify acquisition candidates that meet our criteria or that we will be able to reach terms with identified candidates for transactions that are acceptable to us, and even if we do, we may not be able to close the transaction or successfully integrate the new business into our existing portfolio.
Divestitures could negatively impact our business and retained liabilities from businesses that we sell could adversely affect our financial results.
As part of our growth strategy, we periodically review our businesses which may no longer be aligned with our strategic business plan and long-term objectives and, as a result of these reviews of our businesses, we may pursue additional divestitures. From time to time, we engage in discussions with third parties about potential divestitures of one or more of our businesses that, if fully consummated, could result in the divestiture of a material amount of assets that have historically contributed to our results of operations. Divestitures pose risks and challenges that could negatively impact our business, including disputes with buyers or potential impairment charges. For example, when we decide to sell a business, we may be unable to do so on our terms and within our anticipated time-frame, and even after reaching a definitive agreement to sell a business, the sale may be subject to satisfaction of pre-closing conditions, which may not be satisfied, as well as regulatory and governmental approvals, which may prevent us from completing a transaction on acceptable terms. If we do not realize the expected benefits of any divestiture transaction, our financial condition, results of operations, and cash flows could be materially adversely affected.
Competitive MarketplaceThe funeral and cemetery industry is competitive.
The funeral and cemetery industry is characterized by a large number of locally owned, independent operations in the U.S. and a large number of operations owned by publicly and privately held funeral home and cemetery consolidators. To compete successfully, our funeral service locations and cemeteries must maintain good reputations and high professional standards, as well as offer attractive products and services at competitive prices. In addition, we must market ourselves in such a manner as to distinguish us from our competitors. We have historically experienced price competition from independent and publicly held funeral service and cemetery operators, monument dealers, casket retailers, low-cost providers, and other nontraditional providers of merchandise and services. If we are unable to successfully compete, our financial condition, results of operations, and cash flows could be materially adversely affected.
Marketing and sales activities by existing and new competitors could cause us to lose market share and lead to lower revenue and margins.
We face competition in all of our markets. Most of our competitors are independently owned, and some are relatively recent market entrants. Some of the recent entrants are individuals who were formerly employed by us or by our competitors and have relationships and name recognition within our markets. As a group, independent competitors tend to be aggressive in distinguishing themselves by their independent ownership, and they promote their independence through television, radio and print advertising, direct mailings and personal contact. Increasing pressures from new market entrants and continued advertising and marketing by competitors in local markets could cause us to lose market share and revenue. The types of services and the prices offered for such services by our competitors may attract customers, causing us to lose market share and revenue as well as to incur costs in response to competition to vary the types or mix of products or services offered by us.
Price competition could also reduce our market share or cause us to reduce prices to retain or recapture market share, either of which could reduce revenue and margins.
We have historically experienced price competition primarily from independent funeral home and cemetery operators, and from monument dealers, casket retailers, low-cost providers and other non-traditional providers of services or products. New market entrants tend to attempt to build market share by offering lower cost alternatives. In the past, this price competition has resulted in our losing market share in some markets. In other markets, we have had to reduce prices or offer discounts thereby reducing profit margins in order to retain or recapture market share. Increased price competition in the future could further reduce revenue, profits and our preneed backlog.
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Change in Preneed SalesOur ability to generate preneed sales depends on a number of factors, including sales incentives and local and general economic conditions.
Significant declines in preneed sales would reduce our backlog and future revenue and could reduce our future market share. On the other hand, a significant increase in preneed sales can have a negative impact on cash flow as a result of commissions and other costs incurred initially without corresponding revenue.
As we have localized our preneed sales strategies, we are continuing to refine the mix of service and product offerings in both our funeral and cemetery segments, including changes in our sales commission and incentive structure. These changes could cause us to experience declines in preneed sales in the near term. In addition, economic conditions at the local or national level could cause declines in preneed sales either as a result of less discretionary income or lower consumer confidence. Declines in preneed cemetery property sales reduces current revenue, and declines in other preneed sales would reduce our backlog and future revenue and could reduce future market share.
Increased preneed sales could have a negative impact on our cash flows.
Preneed sales of funeral and cemetery products and services generally have an initial negative impact on our cash flows, as we are required in certain states to deposit a portion of the sales proceeds into trusts or escrow accounts and often incur other expenses at the time of sale. Furthermore, many preneed purchases are paid for in installments over a period of several years, further limiting our cash flows at the time of sale. Because preneed sales generally provide positive cash flows over the long term, we market the sale of such contracts at the local level. If our efforts to increase such sales are successful, however, our current cash flows could be materially and adversely affected in the near term.
Trust and Life Insurance Funded ContractsOur funeral and cemetery trust funds own investments in equity securities, fixed income securities, and mutual funds, which are affected by market conditions that are beyond our control.
In connection with our backlog of preneed funeral and preneed cemetery merchandise and service contracts, funeral and cemetery trust funds own investments in equity securities, fixed income securities and mutual funds. Our returns on these investments are affected by financial market conditions that are beyond our control.
The following table summarizes our investment returns (realized and unrealized), excluding certain fees, on our trust funds for the years ended December 31, 2025, 2024, and 2023:
2025 | 2024 | 2023 | |||
Preneed funeral trust funds | 6.1 % | 11.1 % | 17.3 % | ||
Preneed cemetery trust funds | 6.6 % | 12.7 % | 19.1 % | ||
Perpetual care trust funds | 6.6 % | 13.2 % | 20.2 % |
Generally, earnings or gains and losses on our preneed funeral and cemetery trust investments are recognized, and we withdraw cash, when the underlying service is performed, merchandise is delivered, or upon contract cancellation. Our cemetery perpetual care trusts recognize earnings, and in certain states, capital gains and losses, and we withdraw cash when we incur qualifying cemetery maintenance costs. If the investments in our trust funds experience significant, recurring and sustained declines in subsequent years, there could be insufficient funds in the trusts to cover the costs of delivering services and merchandise or maintaining cemeteries in the future. We may be required to cover any such shortfall with cash flows from operations or other sources of cash, which could have a material adverse effect on our financial condition, results of operations or cash flows. For more information related to our trust investments, see Part II, Item 8, Financial Statements and Supplementary Data, Note 8.
If the fair market value of these trusts, plus any other amount due to us upon delivery of the associated contracts, were to decline below the estimated costs to deliver the underlying products and services at maturity, we would record a charge to earnings for the expected losses on the delivery of the associated contracts. For additional information, see Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Estimates.
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