CSV Carriage Services, Inc.

Management Discussion

• The term “divested” when discussed in the Funeral Home Segment, refers to businesses sold or businesses we ceased to operate in the periods presented. The term “divested” when discussed in the Cemetery Segment, refers to three cemetery businesses that we ceased to operate on September 30, 2018, as a result of an expired management agreement. Cemetery property amortization, Field depreciation expense and Regional and unallocated funeral and cemetery costs, are not included in Operating profit, a non-GAAP financial measure. Adding back these items will result in Gross profit, a GAAP financial measure.
• Funeral home same store operating revenue for the three months ended September 30, 2019 increased $1.3 million. In the fourth quarter of 2018, we revised our funeral home standards operating model by eliminating the average revenue per contract standard to emphasize our focus on growing operating revenue and serving more families. As a result, we experienced a 6.6% increase in same store contract volumes, while we experienced a decrease of 3.2% in the average revenue per contract compared to the three months ended September 30, 2018.
• Same store operating profit for the three months ended September 30, 2019 increased $1.2 million when compared to the three months ended September 30, 2018 and the comparable operating profit margin increased 190 basis points to 36.2%. The increase is primarily due to the increase in same store revenue and better management of expenses as operating expenses remained flat for the comparable period. We experienced significant savings in salaries and benefits which decreased 1.6% as a percentage of revenue, as a result of changes implemented in the fourth quarter in 2018, which included assessing leadership and support teams at each business to ensure an optimal personnel mix, improving social media presence and reviewing pricing on merchandise and services to maximize operational efficiencies.