GlobeNewswire Inc | Feb 17, 2021 04:41PM EST

February 17, 2021

-- Increases Two Year Roughly Right Scenario; -- Record Monthly January Performance / First Quarter 2021 Will Reflect Elevated Spike in COVID-19 Deaths; -- Preparations Begun for Balance Sheet Refinancing After June 1, 2021; and -- Carriage Services 2021 Theme: Accelerating High Performance Flywheel Effect!

Conference call on Thursday, February 18, 2021 at 9:30 a.m. central time.

HOUSTON, Feb. 17, 2021 (GLOBE NEWSWIRE) -- Carriage Services, Inc. (NYSE: CSV) today announced record results for the fourth quarter and full year ended December 31, 2020 as shown below:

-- Record Fourth Quarter and Full Year Revenue of $90.1 million and $329.4 million, respectively; -- Record Adjusted Consolidated EBITDA of $28.3 million and $104.3 million, respectively; -- Record Full Year Adjusted Consolidated EBITDA Margin of 31.6%; -- Record Full Year Adjusted Free Cash Flow of $70.0 million; -- Record Adjusted Diluted EPS of $0.57 and $1.86, respectively; -- Record EBITDA increase/debt reduction decrease of $72.9 million drove decline in leverage ratio from 6.0 to 4.4times and; -- Recent recognition by FORBES as one of Americas Top 100 small companies.

Mel Payne, Chairman and CEO, stated, On February 19, 2020, we announced our annual theme for 2020 as TRANSFORMATIVE HIGH PERFORMANCE and the beginning of the five year timeframe of Carriages Good To Great Journey Part II. We also introduced our MILESTONE THREE YEAR SCENARIO reflecting Carriages performance transformation by year through 2022. At the top of page two in the February 19th release I summarized the three year transformation process achievements ending 2022 as follows: Reflecting back . on (performance and balance sheet achievements 2019 through 2022), our company will have executed what we believe in hindsight will be viewed as a complete Carriage Leadership, Portfolio High Performance, Balance Sheet, Earnings and Free Cash Flow Transformation as a Value Creation Platform.

Then the Coronavirus Pandemic came to America and spread across our portfolio with accompanying government lockdown restrictions about how we conduct our business, severely impacting the very social nature of our work. None of us could have imagined during the last two weeks of March and first two weeks of April that our leadership and employees, both in our funeral home and cemetery operating businesses as well as on our support teams in the field and Houston Support Center, would quickly adapt to the COVID Crisis environment and produce courageous, even heroic, service to their client families and communities, becoming role models for what Being The Best leadership in times of crisis is all about. The last two sections of this release beginning on Page15 is the last paragraph of my annual theme letter at the beginning of 2020 followed on Page16 by my year end message to all our employees, must reads for any investor or high quality independent business owner in our industry, as they express clearly and profoundly who and what really matters in our company culture.

Moreover, our courageous warrior leaders and their winning teams of employees on the front lines of the COVID-19 battlefield were able to achieve almost all of the high performance financial milestones in 2020 that had been forecast on February19th,2020 for full year 2022. Application to $1.86 of Adjusted Diluted EPS in 2020 of proforma additions of 10 from a full year of trust fund Financial Revenue and EBITDA as a result of outstanding execution of our trust fund repositioning strategy during and after the Coronavirus market crash in late February/March (incremental 24 EPS annually), as well as between 34 - 38 for full year cash interest savings from our anticipated senior notes refinancing, would produce proforma full year 2020 Adjusted Diluted EPS of $2.30 - $2.34, within the range of $2.25 - $2.40 Adjusted Diluted EPS in our original forecast for full year 2022.

The only three year milestone achievement exception was leverage ratio, as our actual Total Debt to Adjusted Consolidated EBITDA Ratio was 4.4 times at December31,2020 versus 3.8 - 4.0 times originally forecast for the year ending December31,2022. We expect to achieve the balance sheet transformation to a moderate leverage policy of about 4 times within the next few months from a combination of a strong first quarter 2021 performance with Free Cash Flow and divestiture proceeds applied to a meaningful reduction in debt, at which time we plan to refinance $400 million of 6% senior unsecured notes at a much lower interest rate in the current historically low rate environment.

Shown below and on the following pages are comparative 2020 and 2019 financial performance highlights for the fourth quarter and full year, comparative January2021 performance highlights, the Five Quarter Trend Report ending December31,2020 and our updated and increased Two Year Roughly Right Scenario ending December31,2022.

Fourth Quarter Ended December 31, 2020 versus Fourth Quarter Ended December 31, 2019

-- Record Total Revenue of $90.1 million compared to $71.1 million, an increase of 26.6%; -- Record Total Field EBITDA of $41.3 million compared to $28.6 million, an increase of 44.4%; -- Record Total Field EBITDA Margin of 45.9% compared to 40.2%, an increase of 570 basis points; -- Record Adjusted Consolidated EBITDA of $28.3 million compared to $19.2 million, an increase of 47.5%; -- Adjusted Consolidated EBITDA Margin of 31.4% compared to 27.0%, an increase of 440 basis points; -- Record Adjusted Diluted EPS of $0.57 compared to $0.28, an increase of 103.6%; -- Adjusted Free Cash Flow of $11.9 million compared to $7.2 million, an increase of 64.5%; -- Adjusted Free Cash Flow Margin of 13.2% compared to 10.1%, an increase of 310 basis points; -- Total Debt reduction during the fourth quarter of $9.9 million to $461.1 million; -- Net Income of $8.4 million, an increase of $5.8 million equal to 225.6%; and -- GAAP Diluted EPS of $0.46, an increase of $0.32 per share equal to 228.6%.

Year Ended December 31, 2020 versus Year Ended December 31, 2019

-- Record Total Revenue of $329.4 million compared to $274.1 million, an increase of 20.2%; -- Record Total Field EBITDA of $141.9 million compared to $109.8 million, an increase of 29.3%; -- Record Total Field EBITDA Margin of 43.1% compared to 40.0%, an increase of 310 basis points; -- Record Adjusted Consolidated EBITDA of $104.3 million compared to $76.6 million, an increase of 36.1%; -- Record Adjusted Consolidated EBITDA Margin of 31.6% compared to 27.9%, an increase of 370 basis points; -- Record Adjusted Diluted EPS of $1.86 compared to $1.25, an increase of 48.8%; -- Record Adjusted Free Cash Flow of $70.0 million compared to $38.8 million, an increase of 80.3%; -- Record Adjusted Free Cash Flow Margin of 21.2% compared to 14.2%, an increase of 700 basis points; -- Record Total Debt reduction of $72.9 million equal to 13.7% from $534 million on January 3, 2020 (peak debt after Oakmont acquisition) to $461.1 million on December 31, 2020. -- Total Debt of $461.1 million at December 31 to 2020 Adjusted Consolidated EBITDA of $104.3 million equal to 4.4 times compared to Total Peak Debt of $534 million at January 3rd, 2020 to Trailing Four Quarter EBITDA (proforma for three acquisitions in fourth quarter 2019 and one on January 3, 2020) of $89.0 million at December 31, 2019 equal to 6.0 times, a decline of 1.6 turns of leverage during 2020; -- Net Income of $16.1 million, an increase of $1.6 million equal to 10.7%; and -- GAAP Diluted EPS of $0.89, an increase of $0.09 per share equal to 11.3%.

We previously presented extensive explanations in our first, second and third quarter earnings releases as to why our High Performance Teams have been able to perform at such an extraordinary level in the face of the Coronavirus Pandemic, which are incorporated by reference herein and will not be repeated in this release. The primary takeaways from our 2020 Full Year TRANSFORMATIVE HIGH PERFORMANCE that will also explain the primary drivers of the continuation of high and sustainable performance in the future are as follows:

-- Leadership Teams at all levels are aligned and incentivized for outstanding execution of Carriages Three Core Models to produce a sustainable and powerful performance FLYWHEEL EFFECT; -- Coronavirus accelerated adaptation, entrepreneurialism and innovation across our portfolio by our Managing Partners and Sales Managers, who created high value uniquely customized personal services and sales in hugely adverse local environments; -- Innovation in business practices and rapid and broad acceptance of technological and digital tools to meet and communicate with client families served as an accelerator of Transformative High Performance; -- COVID performance lift in volumes, revenues and margins was material, especially so beginning in December2020 and continuing to spike thus far into 2021, yet we are confident that the combined performance from our five core operating and financial profit centers will sustain the high performance trend in 2021 and thereafter; -- Strong Same Store Funeral Performance reflects broad market share gains and substantial revenue growth in line with 2019 updated performance standards and 2020 updated incentives for Managing Partners related to achieving three-year Being The Best Compounded Revenue Growth Standards with strong financial incentives for also achieving Being The Best Field EBITDA Margin Range Standards; -- Acquisition integration of the four large acquisitions (three in fourth quarter of 2019, one on January3,2020) is accelerating with much more upside in both the funeral and cemetery segments through 2022 and thereafter; -- Same Store and Acquisition Cemetery portfolio contributed record revenue at record high Field EBITDA Margins during our record performance in the third and fourth quarters of 2020, yet has substantial preneed property sales and margin upside through 2022 and thereafter, which is covered in a separate cemetery portfolio High Performance Culture Sales Organization section in this release; -- High Performance Talent Acquisition Program has led to much broader and deeper topgrading of Managing Partners, Sales Managers and Directors of Support with A Player Leadership Talent over the last two and one half years, which comprise the three field leadership roles that are sustaining our high operating and financial performance in all areas and is covered in a separate section of this release on First Who, Then What; -- Prepared for and executed a major trust fund repositioning strategy during and after the Coronavirus market crash, substantially increasing recognized and reported Financial Revenue, EBITDA, Free Cash Flow and EPS, thereby raising Consolidated EBITDA Margins to a milestone plateau above 30% and Free Cash Flow Margins to a milestone plateau above 20% after our expected senior notes refinancing in mid-2021; -- Deleveraging the balance sheet is accelerating from higher Free Cash Flow and divestiture proceeds ahead of planned senior notes refinancing after first call date of June 1, 2021; and -- Carriage Consolidation, Operating and Value Creation Platform Financial Leveraging Dynamics are positioned for superior long term value creation and compounded shareholder returns through flexible, savvy and disciplined capital allocation in the second half of 2021 and thereafter. Our conviction on becoming a superior long term value creation platform is covered in the section on Page13 related to the Five Year Good To Great II Shareholder Value Creation Incentive Plan.

January 2021 Comparative Results

-- Record Same Store Funeral Contracts of 4,195, an increase of 33.8%; -- Record Total Revenue of $34.7 million, an increase of 30.4%; -- Record Total Field EBITDA of $17.3 million, an increase of 74.4%; -- Record Total Field EBITDA Margin of 49.8%, an increase of 1,260 basis points; -- Record Adjusted Consolidated EBITDA of $13.6 million, an increase of 99.1%; -- Record Adjusted Consolidated EBITDA Margin of 39.2%, an increase of 1,350 basis points; -- Record Adjusted Net Income of $6.5 million, an increase of 297.9%; -- Record Adjusted Diluted Earnings Per Share of $0.35, an increase of 288.9%; -- Estimated Adjusted Free Cash Flow of $12.3 million, an increase of 118.7%; and -- Estimated Adjusted Free Cash Flow Margin of 35.4%, an increase of 1,430 basis points.

Never in my wildest imagination could I have imagined that we would ever achieve a month of comparative performance from our existing portfolio of operating businesses (no new acquisitions) during which record milestone performances included Total Revenue up 30.4%, Total Field EBITDA up 74.4%, Adjusted Consolidated EBITDA up 99.1%, Estimated Adjusted Free Cash Flow up 118.7%, and Adjusted Diluted EPS up 288.9% to $0.35, equal to the $0.35 Adjusted Diluted EPS for the entire pre-COVID first quarter of 2020 and immediately ahead of our planned senior notes refinancing that should add another 3 of EPS per month.

Beginning in December 2020 we experienced a spike in deaths broadly across our portfolio of funeral homes and cemeteries in 26 states, but the epicenter of the much higher COVID-19 outbreak of infections and deaths has been and continues to be in California, as has been reported by the national media. Given our large portfolio of first class businesses in both Northern and Southern California, the tragic outbreak of COVID-19 deaths in California is producing a material increase in our overall performance. But while the California impact is extreme, our Central and Eastern Region businesses are also experiencing substantially and broadly higher volumes, revenues and margins as reflected in the incredulous 49.8% Total Field EBITDA Margin for January (ALMOST HALF of Record Revenue), up 1,260 basis points from last year.

Our peak seasonal period for deaths has historically been the December to March flu season with varying degrees of severity depending on the strain of flu and effectiveness of the flu vaccine created and modified annually as a health defense to that years flu strain. We have no reports of flu impacting the current spike in deaths, and at this point in the COVID-19 Pandemic, it is difficult to know how the various vaccines will impact the much higher death rates we are experiencing across most of our portfolio. We also dont yet know how effective the MODERNA, PFIZER, JOHNSON & JOHNSON, etc., vaccines will be against the highly contagious and potentially more deadly Coronavirus variants from the U.K., South Africa and Brazil which are now spreading rapidly in the U.S., and when or whether death rates will return to normal seasonal patterns and long term trends during 2021 and thereafter.

Our updated and increased Roughly Right Two Year Scenario section on Page 7 that includes 2021 and 2022 is therefore a little wider in Roughly Right Ranges of Performance compared to our normal ranges to accommodate for the short and long term unknowns related to the COVID-19 Pandemic that at this point are simply unknowable. But our company has enough known drivers of high performance in 2021 and thereafter that we can control to make us confident in our ability to achieve and sustain record high financial performance through the five year Good To Great II timeframe ending on December 31, 2024.

Five Quarter Trend Report

We report our performance results publicly using the same highly transparent Non-GAAP Trend Reports that we use internally and which have been explained in previous shareholder letters, including Five Year and Five Quarter Trend Reports that reflect long and short term trends in our core operating, financial and overhead sectors over time. Shown on the next page are highlights from our Five Quarter Trend Report that clearly reflect the accelerating transformative performance process that has occurred at Carriage from September 30, 2019 to December 31, 2020. Never before in our history, prior to our record third quarter 2020 performance, have all five operating and financial segments achieved Field EBITDA Margins of over 40% in the same quarter, which has now been achieved in both the third and fourth quarters of 2020.

FIVE QUARTER OPERATING AND FINANCIAL TREND REPORT HIGHLIGHTS(000?s except for 4^TH QTR 1^ST QTR 2^ND QTR 3^RD 4^THvolume, averages & 2019 2020 2020 QTR QTRmargins) 2020 2020Funeral Same Store 8,156 8,625 8,647 8,874 9,669ContractsAverage Revenue Per $5,251 $5,108 $4,855 $4,987 $5,118Contract ^(1)Funeral Same Store 3,038 3,165 3,121 3,132 3,566Burial ContractsFuneral Same Store 37.2% 36.7% 36.1% 35.3% 36.9%Burial RateAverage Revenue Per $9,179 $9,032 $8,656 $8,913 $8,981Burial ContractFuneral Same Store 4,471 4,771 4,977 5,114 5,451Cremation ContractsFuneral Same Store 54.8% 55.3% 57.6% 57.6% 56.4%Cremation RateAverage Revenue Per $3,324 $3,257 $3,036 $3,234 $3,223Cremation ContractFuneral Same Store 17.9% 16.9% 17.1% 17.4% 17.4%Preneed RatioFuneral Same Store $42,827 $44,060 $41,983 $44,252 $49,484RevenueFuneral Same Store $16,723 $17,081 $17,808 $18,148 $21,780EBITDAFuneral Same Store 39.0% 38.8% 42.4% 41.0% 44.0%EBITDA MarginFuneral Acquisition $8,414 $11,522 $11,337 $11,702 $12,336RevenueFuneral Acquisition $3,119 $4,228 $4,672 $4,699 $5,018EBITDAFuneral Acquisition 37.1% 36.7% 41.2% 40.2% 40.7%EBITDA MarginCemetery Same Store $12,061 $10,906 $11,611 $14,393 $14,784RevenueCemetery Same Store $4,158 $3,167 $3,656 $6,175 $6,471EBITDACemetery Same Store 34.5% 29.0% 31.5% 42.9% 43.8%EBITDA MarginCemetery Acquisition $295 $2,799 $4,055 $5,220 $5,509RevenueCemetery Acquisition $73 $827 $1,434 $2,335 $2,532EBITDACemetery Acquisition 24.7% 29.5% 35.4% 44.7% 46.0%EBITDA MarginTotal Financial $4,116 $4,236 $4,682 $5,591 $5,226RevenueTotal Financial $3,709 $3,819 $4,456 $5,242 $4,887EBITDATotal Financial 90.1% 90.2% 95.2% 93.8% 93.5%EBITDA MarginTotal Revenue $71,149 $77,490 $77,477 $84,393 $90,088Total Field EBITDA $28,613 $30,094 $33,221 $37,309 $41,318Total Field EBITDA 40.2% 38.8% 42.9% 44.2% 45.9%MarginAdjusted Consolidated $19,183 $22,840 $25,444 $27,666 $28,300EBITDAAdjusted Consolidated 27.0% 29.5% 32.8% 32.8% 31.4%EBITDA MarginAdjusted Diluted EPS $0.28 $0.35 $0.45 $0.51 $0.57Adjusted Free Cash $7,214 $12,607 $17,878 $27,608 $11,870FlowAdjusted Free Cash 10.1% 16.3% 23.1% 32.7% 13.2%Flow Margin(1) Excludes Preneed Funeral interest earnings reflected in TotalFinancial Revenue.

We added more detailed contract data to the Funeral Same Store Section for highly relevant additional transparency over this fifteen month period that shows the initial shock and impact from the Coronavirus Pandemic to our funeral revenue averages in March, then the peak negative impact on revenue averages in the second quarter with a trend toward normalization of revenue averages reflected in the third quarter. The fourth quarter reflects a huge spike in deaths beginning in December 2020 that contributed 1,016 (up 35.7%) or two-thirds of the increase of 1,513 (18.6%) in Same Store Funeral Contracts in the fourth quarter of 2020 over fourth quarter 2019.

Even as the COVID-19 Pandemic has recently caused a new and higher spike in deaths along with renewed mandated social restrictions, our Funeral Managing Partners and their teams of employees performed an increasing number of traditional funerals both in absolute terms and as a percentage of total funerals. The ability by our funeral Managing Partners to adapt quickly and effectively in the fourth quarter to rapidly changing local conditions was a function of learning how best to safely innovate during the early months of the pandemic, reflecting the entrepreneurial leadership skills that produced a same store average revenue per funeral contract of $5,118 in the fourth quarter of 2020, higher than any quarter during 2020 and only 2.5% lower than the $5,251 in the pre-COVID fourth quarter of 2019.

Maybe even more impressive was that our Cemetery Same Store EBITDA Margin of 43.8% in the fourth quarter almost equaled the all time record high 44.0% Funeral Same Store EBITDA Margin also achieved in the fourth quarter, but what was mind blowing to all our operating and Executive Team leaders was that our Cemetery Acquisition EBITDA Margin of 46.0% in the fourth quarter exceeded our Funeral Acquisition EBITDA Margin of 40.7% by 530 basis points. Our atneed cemetery performance was meaningfully and broadly higher because of the COVID-19 elevated death rate while our cemetery preneed property sales were no doubt dampened by the increased restrictive social mandates in some of our largest markets.

Nevertheless, our Cemetery Same Store Preneed Property Revenue in the fourth quarter of 2020 was amazingly 26.7% higher than 2019 while Same Store Preneed Margin Dollars was 45.9% higher due to an increase of 690 basis points in the Preneed Margin Percentage from 52.4% to 59.3% of Same Store Total Preneed Property Revenue. Moreover, when the higher Same Store Cemetery preneed sales and margin performance is combined with our higher atneed performance, the Same Store Cemetery Total Operating Revenue in the fourth quarter was $14.8 million or 22.6% higher than 2019, while Same Store Cemetery EBITDA was $6.5 million or 55.6% higher than 2019 because of a 930 basis point increase in Same Store Cemetery EBITDA Margin to 43.8% from 34.5% in 2019. Such outstanding performance in our Same Store Cemetery portfolio is reflective of the inherent operating leverage of significantly higher revenue flowing through the mostly fixed costs of each business which was optimized by the management skills of our Cemetery Managing Partners.

From an operational and financial perspective, when our Executive Team saw that our Total Field EBITDA Margin in the fourth quarter was 45.9% (almost HALF of Total Revenue!) on record revenue of $90.1 million, we were first almost in disbelief, which quickly turned to being humbled, honored and inspired by the breadth and depth of such amazing work by highly motivated and skilled leaders and employees throughout our highly diverse (size, geography, revenue profile) portfolio of funeral homes and cemeteries under incredibly harsh local environments. To have so many High Performance Heroes in our company during a tragic COVID-19 Pandemic courageously serving client families and communities when they are needed the most is truly a milestone achievement for a company whose Mission is Being The Best, concluded Mr. Payne.

Updated Milestone Two Year Scenario

Ben Brink, Chief Financial Officer, stated, We are excited to announce an updated Milestone Two Year Scenario that shows significantly higher performance expectations through 2022 compared to our previous third quarter earnings release on October27,2020. We believe it is important to provide the investment community with our best Roughly Right Ranges view of our future performance regardless of the uncertainty that may exist in the world around us, as we wear as a badge of high performance honor that we never withdrew our Three Year Scenario during the initial peak period of Coronavirus Pandemic uncertainty. After initially lowering the 2020 ranges after our first quarter earnings release on May19,2020, we began to raise the performance ranges but not fast enough to catch up with our increasing record 2020 performance metrics, during the balance of the year, which exceeded those for 2022 in our initial forecast and led to Carriage raising its dividend twice during the pandemic (May and October).

The updated two year scenario on the next page does not include any new acquisitions but does include the impact of our planned divestitures and the completion of a planned refinancing transaction of our high yield notes in June 2021. The major takeaways from the updated Milestone Two Year Scenario are:

Improved operating and financial performance expectations through 2022 driven by:

-- Continuation of Same Store Funeral market share gains with improvement in our average revenue per contract, particularly cremations; -- Higher growth rates in preneed cemetery property sales beginning in 2021 and accelerating in 2022 at higher Cemetery Field EBITDA Margins; -- Successful integration of the four recent strategic acquisitions leading to improved performance expectations compared to our initial expectations; -- Full impact of our trust fund repositioning strategy resulting in a significant and sustainable increase in Financial Revenue and EBITDA; and -- Substantially lower cash interest costs from our planned senior notes refinancing during the second half of 2021 and full year 2022.

After the planned refinancing of our senior notes as soon as June1,2021, we will have completely transformed all parts of our company into a sustainable and predictable shareholder value creation platform for the future by savvy, flexible and wise capital allocation to optimize the intrinsic value of each CSV share over time. One year from now at the beginning of 2022, hopefully after the tragedy of COVID-19 is behind our country and the world, we will produce another Three Year Roughly Right Scenario for the 2022-2024 timeframe. This time we will also include multiple scenarios relating to various capital allocation assumptions and the application of benchmark valuation methodologies to our increasing performance metrics which will reflect a range of CSV share price levels over the three year period that closely align with the higher 30% to 40% five year compounded CSV share price return categories in our Good To Great II Shareholder Value Creation Incentive Plan, covered in a separate section on Page 13 in this release.

Updated Two Year Scenario

3 YearPerformance Metric 2019A 2020A 2021 2022 Midpoint CAGRTotal Revenue $274.1 $329.4 $330 - $338 $335 - $345 7.5%Total Field EBITDA $109.8 $141.9 $143 - $148 $146 - $152 10.7%Total Field EBITDA Margin 40% 43.1% 43.0% - 43.5% - 3.2% 44.0% 44.5%Adjusted Consolidated EBITDA $76.6 $104.3 $104 - $110 $108 - $114 13.2%Adjusted Consolidated EBITDA 27.9% 31.6% 31.5% - 32.0% - 5.2%Margin 32.5% 33.0%Adjusted Diluted EPS $1.25 $1.86 $2.25 - $2.45 - 26.7% $2.35 $2.65Adjusted Free Cash Flow $38.8 $70.0 $63 ? $67 $67 - $71 21.8%Adjusted FCF Margin 13.6% 21.2% 19.0% - 20.0% - 14.6% 20.0% 21.0%Total Debt Outstanding^ (1) $534^ $461.1 $420 - $430^ $365 - $375 (13.5)% (2) (3)Total Debt to EBITDA 7.0^ 4.4 3.8 - 4.0 3.2 ? 3.4 N/AMultiple (1)

(1) Includes 2020 EBITDA for acquisitions.(2) Jan 3, 2020 Acquisition of Oakmont and peak debt.(3) Doesnt include approximately $20 million prepayment premium on planned $400 million Senior Notes refinancing.

Free Cash Flow and Leverage

Our record operating results in 2020 led to a record $70 million of Adjusted Free Cash Flow and a record Adjusted Free Cash Flow Margin of 21.2%. These historic performance records represent incredible increases of 80.3% in Adjusted Free Cash Flow and 700 basis points in Adjusted Free Cash Flow Margin in 2020 compared to 2019, and demonstrate the cash earning power and potential of Carriage going forward.

We introduced the new Adjusted Free Cash Flow Margin financial metric in our first quarter earnings press release dated May 19, 2020 to further illustrate the growing percentage of each dollar of revenue that is available as internally generated cash capital for allocation into high return investments to optimize the growth in intrinsic value per share of Carriage. We will continue to report this important differentiating metric in our future performance releases and expect continued expansion on an annual basis after completion of our senior note refinancing transaction.

Our record Adjusted Free Cash also benefited from a minimal amount of cash taxes being paid in 2020 due to previously implemented internal tax methodology changes and benefits from the CARES Act. In addition, we received a tax refund of approximately $7million that is not included in our reported Adjusted Free Cash Flow for 2020. Carriage will be a full cash taxpayer in 2021, which is the only reason we have forecast the range of Adjusted Free Cash Flow to be slightly lower at $63 - $67million in 2021 compared to 2020.

The record Adjusted Free Cash Flow allowed Carriage to make remarkably fast progress on our commitment to reduce debt and improve our leverage profile in 2020. For the year our leverage ratio improved 1.6 turns to 4.4times from a high of 6.0times, as our Total Debt declined $72.9million or 13.7% from a peak of $534million on January3,2020 to $461.1million at year end. Our Total Debt to Adjusted Consolidated EBITDA ratio should fall to 4times or below during the first half of 2021 ahead of our anticipated senior note refinancing.

We closed on $8.5million in divestitures in 2020 and have another $10 - $11million in divestitures that are either under contract or currently being actively marketed. We believe we will have closed or have the majority of these divestitures under contract to sell by the end of the second quarter.

Senior Note Refinancing & Capital Allocation

As we have outlined in previous earnings releases, we intend to execute a capital markets transaction to refinance our $400million 6.625% unsecured senior notes when they become callable at $104.696 on June1,2021. Based on the current trading price and yield of our outstanding bonds, the continued low interest rate environment and the strength of the high yield bond market, we expect to refinance the $400million of notes with a new 8-10 year unsecured senior notes issue with a coupon approximately 250 basis points lower than our current rate. This planned transaction would be immediately accretive to annual earnings per share by $.34-$.38 and would substantially increase annual Adjusted Free Cash Flow by reducing cash interest expense by $9-$10million.

We view the approximately $20million call premium on our senior notes from the ROIC perspective of a new investment opportunity just as we would a new acquisition or share repurchase. In this case, assuming a new $400 million senior notes issue at a coupon of 4.125% versus the existing coupon of 6.625%, the pretax cash ROIC would be 50% annually for the 8-10 year maturity of the issue. It would be almost impossible to find a better value creation use for our capital. Moreover, this transaction should lower our cost of capital a full point to about 6.5% from 7.5%, enhancing the value creation ROIC spread on all future capital allocation investments.

Post the completion of our senior notes refinancing, Carriage would have the financial flexibility to allocate our capital strategically to optimize the intrinsic value of each share. We believe Carriage has entered a capital allocation and value creation sweet spot for the next 5-10 years, meaning numerous attractive investment opportunities with higher long term organic growth potential and consequently higher rates of return on invested capital than ever before in our history. Savvy and flexible capital allocation will primarily be funded with our own recurring and growing Free Cash Flow, allowing Carriage to maintain a more moderate Debt to Adjusted EBITDA leverage profile and policy than in the past. Higher return capital allocation in combination with our lower cost of capital from the refinancing transaction should lead to significant increases in Carriages overall return on invested capital in the years ahead.

After completion of the refinancing transaction our capital allocation decisions will be focused on the following five areas:

-- Acquisitions. Partnering with the best remaining independent funeral homes and cemeteries in America based on our updated Strategic Acquisition Model. Due to the operational challenges that our industry has experienced due to the Coronavirus Pandemic, we have seen the acquisition market for high quality independent businesses in large strategic markets be close to non-existent over the past year, as independent owners focused on the challenges of the pandemic rather than succession planning. We expect this dynamic to change in the latter half of this year and into 2022 and believe Carriage will be uniquely positioned to continue to be a preferred choice for leading independent owners who are looking for the best long term succession planning solution for their businesses, employees and communities they serve. -- Internal Growth Capital Expenditures. We believe the best businesses are ones that have superior growth opportunities, enabling us to allocate more capital over time at higher and increasing rates of return on invested capital. We are excited about the opportunities we have across our portfolio to allocate capital at high rates of return as part of our expectation for higher organic Funeral Home and Cemetery Revenue and Field EBITDA growth rates in the future. -- Share Repurchases. We will allocate capital opportunistically to repurchase Carriage shares if we believe they trade at a significant discount to intrinsic value. We will also evaluate potential share repurchase activity in relation to any near term large scale acquisition opportunities, as we are much more focused on increasing the long term compounding rate for each of our ownership shares than on just getting bigger by adding revenue from acquisitions. -- Dividend Increases. We were pleased to increase our annual dividend to shareholders by 33% in 2020 with two increases of $.05 each in the second and fourth quarter. Our current annual dividend is $.40 per CSV share and represents a current dividend equity yield of about 1.1%. In the future, we intend to have our annual dividend per share at a level that approximates a 1% dividend equity yield, while the total amount of dividends paid would approximate no more than 10% of our annual Adjusted Free Cash Flow. -- Debt Repayment. We made amazingly fast progress on our debt reduction plan in 2020 that led to acceleration of the improvement in our credit profile. Once we have completed the refinancing transaction, we intend to operate at a more moderate leverage policy of about 4times Debt to Adjusted Consolidated EBITDA in order to maintain the maximum financial flexibility to support our future capital allocation. We also believe equity investors would support this policy as less risky, which could have the impact of increasing our valuation multiples.

Preneed Trust Fund Portfolio & Financial Revenue

CSV Discretionary Preneed Trust Holdings (in millions)At December Cost % Market % Unrealized Gain Annual31, 2019 Total Total /Loss IncomeFixed $ 114,519 55% $ 118,668 56% $ 4,148 $ 7,532 IncomeEquity $ 77,815 37% $ 78,957 37% $ 1,142 $ 2,568 Cash & Cash $ 15,518 8% $ 15,518 7% $ - $ 70 EquivalentsTotal $ 207,852 100% $ 213,143 100% $ 5,290 $ 10,170 At March 6, Cost % Market % Unrealized Gain Annual2020 Total Total /Loss IncomeFixed $ 88,371 40% $ 89,039 43% $ 668 $ 6,957 IncomeEquity $ 76,951 35% $ 63,239 31% $ (13,711 ) $ 2,345 Cash & Cash $ 53,876 25% $ 53,876 26% $ - $ 85 EquivalentsTotal $ 219,198 100% $ 206,154 100% $ (13,043 ) $ 9,387 At March Cost % Market % Unrealized Gain Annual23, 2020 Total Total /Loss IncomeFixed $ 100,801 46% $ 80,113 51% $ (20,688 ) $ 8,305 IncomeEquity $ 107,303 49% $ 67,927 43% $ (39,376 ) $ 3,791 Cash & Cash $ 10,286 5% $ 10,286 6% $ - $ 65 EquivalentsTotal $ 218,390 100% $ 158,326 100% $ (60,064 ) $ 12,161 At December Cost % Market % Unrealized Gain Annual31, 2020 Total Total /Loss IncomeFixed $ 138,548 61% $ 150,722 63% $ 12,174 $ 12,247 IncomeEquity $ 82,332 37% $ 85,401 35% $ 3,069 $ 3,673 Cash & Cash $ 4,667 2% $ 4,667 2% $ - $ - EquivalentsTotal $ 225,547 100% $ 240,790 100% $ 15,243 $ 15,920 At February Cost % Market % Unrealized Gain Annual8, 2021 Total Total /Loss IncomeFixed $ 138,491 63% $ 154,135 61% $ 15,644 $ 12,229 IncomeEquity $ 78,050 35% $ 95,306 38% $ 17,256 $ 3,720 Cash & Cash $ 4,052 2% $ 4,052 1% $ - $ - EquivalentsTotal $ 220,593 100% $ 253,493 100% $ 32,900 $ 15,949





Investment Performance 2020Time Frame Investment Performance Index Performance1 year ended 12/ Discretionary Total S&P High Yield Bond 70/30 Index31/2020 Trust 500 Index Benchmark 16.10% 14.90% 18.40% 7.10% 10.50%

Carriages Discretionary Preneed Trust Fund Portfolio had a total return of 16.1% in 2020 compared to 18.4% for the S&P 500 and 10.5% for our 70/30 High Yield Bond/S&P 500 benchmark. The 16.1% return in 2020 improved our long term average annual total return for our Discretionary Preneed Trust portfolio to 13.9% since Carriage began to manage its trust funds assets internally on October 14, 2008.

We have described in-depth in our previous three quarterly earnings releases the successful execution of our Trust Fund Repositioning Strategy beginning at the height of the Coronavirus Market Crisis in March 2020 when we quickly deployed $50 million of cash capital as liquidity dried up and normal price discovery mechanisms broke down throughout both equity and fixed income markets. Since March 6, 2020, we have deployed a total of about $90million in new capital through February 2021 that has led to the following benefits to the current and future performance of our trust fund portfolio and the correlated substantial increase in Carriages reported Financial Revenue and EBITDA:

-- The $90million of new capital deployed increased recurring annual income in our trust fund portfolio by approximately $8.3million or 108%, which increased the total recurring annual income to $16 million. -- The $90million of new capital deployed has generated $36.3 million of realized and unrealized capital gains, of which about $33.7million remain unrealized at this time. -- The $90 million of new capital deployed was allocated $37.8million (42%) into equities at a yield to cost of 7.2% which currently have $23million in unrealized gains, and $52.1million (58%) into fixed income securities at a yield to cost of 10.6% which currently have $10.7million in unrealized gains. -- Execution of the Repositioning Strategy coupled with existing long term core holdings has positioned our Preneed Trust Funds for additional long term capital appreciation and the ability to maintain the current high level of recurring income. -- Primarily driven by the increase in recurring investment income earned by our Cemetery Perpetual Care Trusts, our recognized and reported Financial Revenue increased 24.6% to $19.7 million while Financial EBITDA increased 29.3% to $18.4 million in 2020 compared to 2019. This increase while substantial only included the benefits to Financial Revenue and EBITDA from our Repositioning Strategy for 7 months from June through December. -- Financial Revenue is expected to increase to approximately $22 - $23 million in 2021, while Financial EBITDA is forecast to grow to $21 -$22 million at a 94% -95% Financial EBITDA Margin in 2021. We view this amount of Financial Revenue and EBITDA as sustainable over the next 3-5 years based on the current dividend profile of our equity positions and maturity and quality profile of our fixed income portfolio. -- Upside drivers to our current Roughly Right Ranges of Financial Revenue and EBITDA forecasts are higher value of maturing preneed funeral and cemetery contracts from currently unrealized capital gains that are recognized over the next 3-5 years and accrued to the underlying preneed contracts, as well as higher Cemetery Finance Charges from substantially higher increases in cemetery preneed property sales.

For additional detail regarding the execution of our Trust Fund Repositioning Strategy I would encourage investors to refer to our three previous 2020 quarterly earnings press releases, concluded Mr. Brink.

Cemetery High Performance Culture Sales Organization

Mr. Payne continued, In June 2020 Carlos Quezada joined our Executive Team to lead Cemetery Sales and Marketing and I introduced him to the public in our second quarter earnings release on July 28th as follows:

While in the past we have had spurts of high property sales performance in our ten largest cemeteries, we have never been able to sustain such performance over the long term under our decentralized decision making business model designed originally for our standalone funeral business portfolio.

Carlos will have the primary responsibility of building high performance sales teams and standardized sales systems across our portfolio of cemeteries. We believe that his leadership and past success at building high performance winning teams will finally unleash the broad and sustainable performance power within our cemetery portfolio.

It has been only six and one half months since my introduction of Carlos in the July28th second quarter earnings release, yet he has made amazing progress designing and implementing the foundational elements and initial phases of a two year plan to achieve his mission as stated above. Perhaps the most important achievement thus far is that he and the team he has assembled has instilled a sense of high performance belief and excitement not only among the leaders in our cemetery portfolio but also among leaders in the funeral portfolio, Houston Support Center and especially the Executive Team about whats possible related to the substantial incremental cemetery portfolio contribution to our future revenue, earnings and free cash flow.

While it would be difficult to define the impact Carlos and his team have had on our record Cemetery Preneed Property Revenue and Field EBITDA Dollars and Margins as reflected in the third and fourth quarters of our Five Quarter Trend Report ending December 31, 2020, we believe the impact was material yet remarkably achieved under the harshest and most restrictive preneed sales environment in the history of our company. But as Carlos and his new team constantly say, This is only the beginning, the best is yet to come and Its A Great Time To Be At Carriage!

Carlos and his team have collaborated seamlessly with all other members of our operations leadership teams as well as with Ben Brink and our other Executive Team members to build an initial financial forecast for our same store and acquisition cemetery portfolio which for the first time has been included in our updated and increased Two Year Roughly Right Scenario for 2021 and 2022. Carlos will be on our conference call tomorrow morning to share more of his exciting plans for our cemetery portfolio and how those plans will impact the future of Carriage.

High Performance Talent Acquisition Program: First Who, Then What

Jim Collins published his famous book Good To Great in 2001, yet we did not believe we were good (enough) to launch our first Five Year Good To Great Journey until the end of 2011. Since then we have focused relentlessly on the simple high performance culture concept of First Who, Then What to get the Right Whos on the Carriage Good To GreatJourney Bus, get the Wrong Whos off the Bus, and then get the Right Whos in the Right Seats on the Bus: BEFORE stepping on the gas and heading toward our Good To Great Journey Destination.

As we learned the hard way in 2017 and 2018, writing the above concept down is easy, but getting it mostly right most of the time is extraordinarily difficult to sustain over many years. But it works magic when you do get it right, the most recent example being the Tom Brady led Tampa Bay Buccaneers winning the Super Bowl over the Kansas City Chiefs and their $500million superstar magician quarterback Patrick Mahomes. I heard over and over in both the pregame activities and during the game that when Brady chose to go to the Buccaneers one year ago after winning six Super Bowls and becoming the Greatest Quarterback Of ALL Time (GOAT) with the New England Patriots, he had assessed the players and coaches and believed they lacked only one thing to become a perennial winner A CHANGE IN THEIR MINDSET and CULTURE so that LOSING was unacceptable and WINNING was the only option.

When I had to step back into leading operations in September 2018, I found that the operating leaders whom I had promoted had lost the high performance followship of our winning leaders and teams across our portfolio, and had therefore lost the winning mindset and cultural edge and alignment needed to produce broadly higher and sustainable performance in our portfolio. First Who, Then What works just as powerfully in a negative direction when you have the Wrong Whos responsible for leading a group of Right Whos. It was my First Who, Then What mistake that let our people become demoralized, so it was my duty to make it right with the help of many aligned leaders and employees. Losing was unacceptable, failure was not an option and becoming a Carriage Being the Best TEAM of WINNING TEAMS again across our portfolio was the only option.

So when we turned for help in finding a large number of Right Who A Player operating leaders at all levels of the company to replace the Wrong Whos from their seats on the Carriage Good To Great Journey Bus, Jason Buchbinder stepped up big time as head of our High Performance Talent Acquisition Program. Jason had joined Carriage only six months earlier on March 12, 2018 after twelve years of broad operating experience in our industry with another consolidation company.

What Jason has achieved in collaboration with our Operating Leaders and Executive Team Members since September 2018 has itself been transformative to the very nature of our definition of Carriage as a high performance culture company that just happens to be in the funeral and cemetery industry. He has mastered the art of getting the high performance culture concept of First Who, Then What to be The RIGHT WHOA PLAYER with almost every opportunity for High Performance Talent Acquisition that he handles, especially Directors of Support, Managing Partners, Sales Managers, Funeral Arrangers and Preneed Sales Counselors. It is an honor indeed to have him as one of the 47 key leader participants in our Good To Great II Five Year Shareholder Value Creation Incentive Plan and a guest Carriage High Performance Culture Leader participant on our call tomorrow.

Good To Great II Five Year Shareholder Value Creation Incentive Plan

We have received a lot of positive feedback from institutional investors about what I labeled on Page 7 of our first quarter release dated May 19, 2020 as a pure form of shareholder aligned Pay For Long Term High Performance, i.e. incentive awards paid in appreciated CSV shares in early 2025 to 47 key leaders of Carriage conditioned on achieving one of five CSV share price CAGR categories (20%, 25%, 30%, 35%, 40%) over the five years ending 2024 (CSV price range of $35.78 to $77.34). After initially publishing our Milestone Three Year Roughly Right Scenario on February 19, 2020, and subsequently having our shares plummet below $15 per share in the Coronavirus Pandemic market crash, it seemed like a no-brainer to create a unique five year pay for sustained high performance incentive plan for 47 of our leaders (ten of which are Best of the Best Managing Partners who serve on our Standards Council), all of whom I considered critically important to the execution of our five year operating and financial performance plan.

As I have learned from being a long time student of the awesomely simple but wonderful investment ideas of Warren Buffett and Charlie Munger, patience is a competitive advantage virtue not only in investing but also in building a good and valuable company over time based on the Good To Great high performance concepts of First Who, Then What, especially related to that company finally evolving after almost thirty years into a unique superior long term investment opportunity. Given the thousands of investment choices available in markets across the world, I realized that Mr. Market crashing almost 40% in February and March last year because of scary and real Black Swan Events related to COVID-19 had served up one of the greatest investment opportunities of my life in the company I had co-founded on June 1, 1991.

As the largest individual shareholder owning about 10% of outstanding shares with my wife and two grown children and owning nothing else but Carriage, it made total sense to create a unique one time only incentive program over five years for 47 of our most talented and aligned people based on wealth creation defined by compounded share price returns of between 20% and 40% at 5% increments, starting with the Mr. Market base gift price of $14.38. All I could think about was mentoring the other 46 participants over the five year vesting timeframe on how each of them could and therefore would execute their role individually and as a team to create sustained high performance wealth for all our shareholders which in turn would achieve financial rewards in the form of ownership of their company beyond what they could previously have imagined.

We pride ourselves for having created and evolved the most generous annual Being The Best and five year Good To Great Incentive Programs for our Managing Partners (owners) in the sixty year history of consolidation of our industry. Our annual funeral Being The Best incentive concept is simple: The higher the annual Standards Achievement between 50% (minimum for incentive bonus) and 100% by our funeral Managing Partners, the greater the percentage of the business Field EBITDA shared with the Managing Partners and his/her employees with no dollar limit. A Managing Partner of a funeral business that achieves Being The Best Standards between 50% and 70% shares in 3% times the annual Standards Achievement % times annual Field EBITDA (employees another 1% or 33% of Managing Partner incentive earned); those Managing Partners achieving 70% - 85% share in 4% and those achieving 85% - 100% share in 6% of their business Field EBITDA. Funeral Revenue and Field EBITDA referenced here includes financial revenue, which we separate on our Trend Reports but which our Managing Partners get full credit for in their incentive programs.

For example, we had a record 61 funeral businesses (excluding our four newest acquisitions) achieve between 85% - 100% of Standards during 2020, representing 48% of our 126 separately managed funeral businesses, 56% of Funeral Revenue and 59% of Funeral Field EBITDA at a combined Field EBITDA Margin of 46.2%, 510 basis points higher than 2019. This group of high performance funeral homes increased revenue in 2020 by $13.8 million or 13% over 2019 and Field EBITDA by $11.8 million or 26.7%, converting an amazing 86% of increased revenue into increased Field EBITDA. The 61 Managing Partners and their employees earned a total of $4 million in Being The Best Incentive Bonuses, an increase of $1.8 million over 2019 equal to about 15% of the increase of $11.8 million in Field EBITDA that was earned and shared with these 61 High Performance Managing Partners and their employees.

The five year Good To Great Incentive Plan for Managing Partners requires at least a minimum 1% compounded annual net revenue growth rate scaled up to a maximum of 4% compound revenue growth rate, which given the inherent operating leverage of more revenue flowing through the high fixed costs of each business, should lead to increasing Field EBITDA Margins over the full five year period, thereby producing substantially higher incremental Revenue and Field EBITDA by the end of each five year timeframe. Such sustained high performance by a funeral Managing Partner produces a substantial incentive bonus after five years, the size of which is a function of five year CAGR in Revenue and the average annual Being The Best IncentiveBonus paid in each of the five years.

All other things being equal, a 4% or higher compounded revenue rate under the five year Good To Great Incentive Plan would produce a bonus 4 times greater than a 1% compound revenue rate, paid half in cash and half in appreciated CSV shares after five years. We currently have 31 funeral businesses out of a potential group of 50 businesses which qualify for the Good To Great Award heading into their fifth year, i.e. each has achieved 1%-4% or higher compounded revenue after four years ending 2020 under the leadership of the same Managing Partner. At the end of each five year Good To Great timeframe, this long term incentive program reboots for another five years so long as the Managing Partner (First Who, Then What) remains the same.

Therefore, the Five Year Good To Great II Shareholder Value Creation Incentive Plan for 37 critical leaders who arent Managing Partners of one of our businesses aligns perfectly with the annual and five year incentive plans for our Managing Partners, which in combination serves as a superglue for high performance culture A Player talent at all levels to execute their roles individually and in teams at the highest possible level. At the end of 2020 our Executive Team and other leaders within the Houston Support Center began to brainstorm the critical components and sequential elements of the Carriage Flywheel for purposes of educating all of our people both in the field and Houston Support Center on why Carriage has become a high performance culture company that just happens to be in the funeral and cemetery business, which then led to our 2021 theme of Carriage Services 2021: Accelerating High Performance Flywheel Effect!

I have explained to all of these wonderful leaders and employees that few people in their careers are at the right company in the right industry at the right time so that their financial dreams and aspirations can come true while at the same time finding great meaning and joy in their work. We are all committed to the passionate belief that the right company is Carriage and the right time is NOW, and that we have control over our own performance destiny based on HIGH PERFORMANCE CULTURE EXECUTION, EXECUTION, EXECUTION!

Observations About 2020, the Evolution of our Standards Operating Model, and the Future

After the shock of a once in a lifetime worldwide Coronavirus Pandemic during which death and the fear of death and the unknown becomes part of daily life (or the lack of normal daily life as we had known it), it has been a time for reflection on what really matters both personally and professionally. Within Carriage, we are blessed that the nature of the noble work that our wonderful people do means that there is little distinction between personal and professional, as Carriage has become like family to most of us who are committed to a Good To Great Journey that never ends.

For those of you interested in Carriage but maybe new to our almost thirty years of history, I will repeat verbatim the entire last section in my 2016 Shareholder Letter (Pages 38 and 39), which covered the first 25 years of Carriage and was titled, The Evolution of Our Learning Journey. As you reflect upon our amazing milestone year of Transformative High Performance in 2020 during the tragedy of a Coronavirus Pandemic, I believe you will find the content in this section more profoundly valid today in the era of the COVID-19 Pandemic than when it was written four years ago in early 2017.

Final Observations About The Past and Present

To conclude this Shareholder Letter, I will share a few observations and conclusions about human nature and the nature of our markets as well as what I believe to be the current state of the nature of Carriage.

-- It is very difficult for most people (even some very smart ones) to think about something in a completely new, unorthodox, counterintuitive and unconventional way which makes the uniqueness of Carriage as it has evolved pretty cool for those who get to the other side! -- Our small market capitalization size is a large hurdle to overcome with many institutional investors who perceive our small size as riskier and/or need to invest much larger pools of capital than the liquidity of our outstanding shares can accommodate, but we have learned to live with this frustration and focus only on maximizing the compounding of the intrinsic value of each of our shares over five to ten year timeframes into a coulda, woulda, shoulda bought that share price! -- Our organizational framework is designed around the idea of partnership. Our three models and high performance culture ideas and concepts as they have evolved over the last thirteen years have turned the classic methodology of consolidation upside down and made the most important jobs in the company those of our Managing Partners at the local business level rather than up the chain of command. -- The high performance culture ideas and concepts of Carriage as they have been implemented and evolved have dramatically flattened our organization structure; eliminated numerous bureaucratic layers and the associated politics, perks and meaningless titles; simplified and eliminated in many cases the complexity of burdensome reporting, policies and procedures; and eliminated endless corporate process oriented initiatives all characteristics that creep into most companies as they grow through a succession of enterprise leaders over time. -- Our High Performance Culture Framework is more cost effective organizationally, as the corporate organizational overhead does not eat up a substantial amount of the incremental financial performance of our field businesses, especially as we leverage our consolidation platform with growth by highly selective acquisitions, enabling more of the value creation to be shared with both those who create it locally and with public shareholders. -- The best remaining family owned funeral home and cemetery business franchises in the best markets will absolutely get better over time after full integration into our Being The Best framework of operations support. -- The innovation, evolution and application of our Standards Operating Model and High Performance Culture Framework for operating and consolidating the funeral and cemetery industry is akin to intellectual property that was developed over the last thirteen years which forms a protective cultural moat around Carriages earnings power. -- Curious and disappointed why no one has challenged our contention that Carriages 29.7% Adjusted Consolidated EBITDA Margin in 2016 is not only a company but an industry milestone that has never been achieved. But even more profoundly, What Does It Mean? -- Intrigued why no one has had the curiosity to ask us about the book Beyond Budgeting co-authored and published in 2003 by Robin Frazer and Jeremy Hope or about their article Who Needs Budgets published in the February 2003 edition of Harvard Business Review. But really fascinated that the ideas and concepts they researched on a radically decentralized business model have gone nowhere fast in Corporate America over the last fourteen years. -- Fascinated to learn about and read The Evolution of Cooperation, authored by Robert Axelrod and published in 1984, from a recommendation in Mark Leonards 2014 Constellation Software Shareholder Letter, a book he said changed his thinking on many important matters. After reading this book and a subsequent one titled Harnessing Complexity with the subtitle Organizational Implications of a Scientific Frontier, co-authored by Robert Axelrod and Michael D. Cohen in 2000, I would postulate (maybe not so humbly) that Carriage has evolved into a rather advanced state of harnessing the complexity of successfully operating and consolidating the highly fragmented funeral and cemetery industry for the huge benefit over time of long term shareowners.

Who and What Really Matters

The very best part of my job is letting our wonderful leaders and employees know what those of us here in the Houston Support Center and our Board think of them and the noble work they do no matter the harshness of the environment or local conditions in which they are called to service. Shown below is the last paragraph of my 2020 annual theme letter to Managing Partners, Sales Managers and Houston Support Center Leaders at the beginning of the year dated February 18, 2020, followed by my verbatim year end message to all employees dated December 29, 2020, which together serve as the beginning and ending bookends to a year that profoundly changed our country and the world:

Last Paragraph of 2020 Theme Letter Dated February 18, 2020

I will end this theme letter the same way I have ended many others since we launched the first five year Good To Great Journey on January1,2012, with a quote from the book Good To Greatby Jim Collins

Greatness is not a matter of circumstance. Greatness, it turns out, is a matter of conscious choice!

As I have always done and can never do otherwise, I choose Greatness because the challenges and difficulties that must be overcome by special people bound together by a common cause of Being The Best at their noble profession is simply the most meaningful and wonderful journey in business and life that anyone could hope for or indeed imagine.

Mel

Year End 2020 Message to All Employees Dated December 29, 2020

We entered this year with high hopes of 2020 being a breakout year of TRANSFORMATIVE HIGH PERFORMANCE for each of our operating businesses and for Carriage as a Being The Best Company in the funeral and cemetery industry. And then the world, our country, our industry and our company were all shocked to the core by the Coronavirus Pandemic Crisis which began in March and is now reaching new peaks of infections and deaths during what has typically been our peak flu season.

Yet our wonderful Managing Partners, Sales Managers and their teams of high performance employees in each of our businesses adapted quickly to the many fears and initial unknowns related to the COVID-19 Pandemic and became role models for their communities and client families for what courageous leadership in times of crisis is all about. And the wonderful support teams comprised of our Directors of Support and Sales across the country along with the leaders and employees in the various Houston Support Center departments have been in your foxhole since day one of the pandemic supporting each of you through the battle against not only the Coronavirus but the endless mandated restrictions and frequently with a shortage of staff for serving your client families effectively when they needed it most.

In a normal environment the leaders and employees of our funeral homes and cemeteries have the heavy fiduciary responsibility of performing the noble work of caring for client families who have lost a loved one to death or are planning in advance for that inevitability. Even amidst a once in a lifetime Coronavirus Pandemic, client families have not been immune to the need for a special ritual to grieve and/or celebrate the life of a loved one or friend who has died, a uniquely human need dating back thousands of years to the beginning of time.

So I am honored and proud to express the gratefulness and pride that our Leadership Team feels toward each of you and what you have achieved through your courageous service to your client families and communities throughout this year of the Coronavirus Pandemic.

Each one of you are nothing less than an inspirational hero to each member of our Leadership Team and Board of Directors and we thank you from the bottom of our hearts.

And you did achieve a breakout year of TRANSFORMATIVE HIGH PERFORMANCE! THANK YOU FOR THE BLESSING OF YOU!

May you and those near and dear to your heart have a SAFE, HEALTHY AND HAPPY NEW YEAR!,concluded Mr. Payne.

CONFERENCE CALL AND INVESTOR RELATIONS CONTACT

Carriage Services has scheduled a conference call for tomorrow, February 18, 2021 at 9:30 a.m. Central time. To participate in the call, please dial 866-516-3867 (conference ID-8569439) and ask for the Carriage Services conference call. A replay of the conference call will be available through February 23, 2021 and may be accessed by dialing 855-859-2056 (conference ID-8569439). The conference call will also be available at www.carriageservices.com. For any investor relations questions, please contact Ben Brink at 713-332-8441 or email InvestorRelations@carriageservices.com.



CARRIAGE SERVICES, INC.OPERATING AND FINANCIAL TREND REPORT(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) Three Months Ended December 31, Years Ended December 31, 2019 2020 % Change 2019 2020 % Change Same Store ContractsAtneed 6,695 7,990 19.3 % 26,037 29,660 13.9 %ContractsPreneed 1,461 1,679 14.9 % 5,692 6,155 8.1 %ContractsTotal SameStore Funeral 8,156 9,669 18.6 % 31,729 35,815 12.9 %ContractsAcquisition ContractsAtneed 1,535 2,212 44.1 % 4,046 8,291 104.9 %ContractsPreneed 136 216 58.8 % 513 818 59.5 %ContractsTotalAcquisition 1,671 2,428 45.3 % 4,559 9,109 99.8 %FuneralContractsTotal Funeral 9,827 12,097 23.1 % 36,288 44,924 23.8 %Contracts FuneralOperating RevenueSame Store $ 42,827 $ 49,484 15.5 % $ 168,884 $ 179,779 6.5 %RevenueAcquisition 8,414 12,336 46.6 % 27,547 46,897 70.2 %RevenueTotal FuneralOperating $ 51,241 $ 61,820 20.6 % $ 196,431 $ 226,676 15.4 %Revenue CemeteryOperating RevenueSame Store $ 12,061 $ 14,784 22.6 % $ 49,218 $ 51,694 5.0 %RevenueAcquisition 295 5,509 1,767.5 % 295 17,583 5,860.3 %RevenueTotal CemeteryOperating $ 12,356 $ 20,293 64.2 % $ 49,513 $ 69,277 39.9 %Revenue TotalFinancial $ 4,116 $ 5,226 27.0 % $ 15,839 $ 19,735 24.6 %Revenue Other Revenue $ 748 $ 1,197 60.0 % $ 748 $ 4,661 523.1 % Total Divested/Planned $ 2,688 $ 1,552 (42.3 %) $ 11,576 $ 9,099 (21.4 %)DivestedRevenue Total Revenue $ 71,149 $ 90,088 26.6 % $ 274,107 $ 329,448 20.2 % Field EBITDA Same Store $ 16,723 $ 21,780 30.2 % $ 65,109 $ 74,817 14.9 %Funeral EBITDASame StoreFuneral EBITDA 39.0 % 44.0 % 500 bp 38.6 % 41.6 % 300 bp MarginAcquisition 3,119 5,018 60.9 % 10,579 18,617 76.0 %Funeral EBITDAAcquisitionFuneral EBITDA 37.1 % 40.7 % 360 bp 38.4 % 39.7 % 130 bp MarginTotal Funeral $ 19,842 $ 26,798 35.1 % $ 75,688 $ 93,434 23.4 %EBITDATotal Funeral 38.7 % 43.3 % 460 bp 38.5 % 41.2 % 270 bp EBITDA Margin Same StoreCemetery $ 4,158 $ 6,471 55.6 % $ 17,118 $ 19,469 13.7 %EBITDASame StoreCemetery 34.5 % 43.8 % 930 bp 34.8 % 37.7 % 290 bp EBITDA MarginAcquisitionCemetery 73 2,532 3,368.5 % 73 7,128 9,664.4 %EBITDAAcquisition 2,130 1,580Cemetery 24.7 % 46.0 % bp 24.7 % 40.5 % bp EBITDA MarginTotal Cemetery $ 4,231 $ 9,003 112.8 % $ 17,191 $ 26,597 54.7 %EBITDATotal Cemetery 34.2 % 44.4 % 1,020 34.7 % 38.4 % 370 bp EBITDA Margin bp TotalFinancial $ 3,709 $ 4,887 31.8 % $ 14,235 $ 18,404 29.3 %EBITDATotalFinancial 90.1 % 93.5 % 340 bp 89.9 % 93.3 % 340 bp EBITDA Margin Other EBITDA $ 298 $ 278 (6.7 %) $ 298 $ 1,186 298.0 %Other EBITDA 39.8 % 23.2 % (1,660 ) 39.8 % 25.4 % (1,440 )Margin bp bp Total Divested/Planned $ 533 $ 352 (34.0 %) $ 2,355 $ 2,321 (1.4 %)DivestedEBITDATotal Divested/Planned 19.8 % 22.7 % 290 bp 20.3 % 25.5 % 520 bp DivestedEBITDA Margin Total Field $ 28,613 $ 41,318 44.4 % $ 109,767 $ 141,942 29.3 %EBITDATotal Field 40.2 % 45.9 % 570 bp 40.0 % 43.1 % 310 bp EBITDA Margin

OPERATING AND FINANCIAL TREND REPORT(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) Three Months Ended December 31, Years Ended December 31, 2019 2020 % Change 2019 2020 % Change Overhead Total Variable $ 6,285 $ 6,740 7.2 % $ 14,117 $ 16,190 14.7 %OverheadTotal Regional 961 1,203 25.2 % 4,052 4,133 2.0 %Fixed OverheadTotalCorporate 4,857 5,220 7.5 % 19,385 20,191 4.2 %Fixed OverheadTotal Overhead $ 12,103 $ 13,163 8.8 % $ 37,554 $ 40,514 7.9 %Overhead as apercentage of 17.0 % 14.6 % (240 bp ) 13.7 % 12.3 % (140 bp )Revenue Consolidated $ 16,510 $ 28,155 70.5 % $ 72,213 $ 101,428 40.5 %EBITDAConsolidated 23.2 % 31.3 % 810 bp 26.3 % 30.8 % 450 bp EBITDA Margin Other Expenses and InterestDepreciation & $ 4,416 $ 5,109 $ 17,771 $ 19,389 AmortizationNon-Cash Stock 537 897 2,153 3,370 CompensationInterest 6,615 7,728 25,522 32,515 ExpenseAccretion ofDiscount onConvertible 63 16 241 216 SubordinatedNotesLoss onExtinguishment ? ? ? 6 of DebtNet Loss on 8 1,832 3,883 6,749 DivestituresImpairment ofGoodwill and 233 ? 963 14,693 OtherIntangiblesOther, Net (45 ) (186 ) (736 ) (152 ) Pre-Tax Income $ 4,683 $ 12,759 $ 22,416 $ 24,642 Net Tax $ 2,114 $ 4,394 $ 7,883 $ 8,552 ExpenseGAAP Net $ 2,569 $ 8,365 225.6 % $ 14,533 $ 16,090 10.7 %Income Special Items,Net of Tax, except for **Acquisitionand $ 1,646 $ (135 ) $ 1,646 $ (9 ) DivestitureExpensesSeverance andSeparation 62 ? 951 445 CostsPerformanceAwards ? 84 ? 224 Cancellationand ExchangeAccretion ofDiscount onConvertible 63 16 241 216 SubordinatedNotes **Net Loss onDivestitures 188 1,317 3,331 4,562 and OtherCostsNet Impact ofImpairment ofGoodwill and 184 124 761 9,932 OtherIntangiblesLitigation 138 ? 592 213 ReserveTax ExpenseRelated to 51 ? 911 ? DivestedBusiness**Gain onInsurance (195 ) ? (699 ) ? ReimbursementsNaturalDisaster and ? 250 ? 1,286 Pandemic CostsOther Special 265 ? 265 324 ItemsTax AdjustmentRelated toCertain ? 400 ? 400 DiscreteItems**Adjusted Net $ 4,971 $ 10,421 109.6 % $ 22,532 $ 33,683 49.5 %IncomeAdjusted Net 7.0 % 11.6 % 460 bp 8.2 % 10.2 % 200 bp Profit Margin Adjusted BasicEarnings Per $ 0.28 $ 0.58 107.1 % $ 1.26 $ 1.88 49.2 %ShareAdjustedDiluted $ 0.28 $ 0.57 103.6 % $ 1.25 $ 1.86 48.8 %Earnings PerShare GAAP BasicEarnings Per $ 0.14 $ 0.47 235.7 % $ 0.81 $ 0.90 11.1 %ShareGAAP DilutedEarnings Per $ 0.14 $ 0.46 228.6 % $ 0.80 $ 0.89 11.3 %Share WeightedAverage Basic 17,760 17,927 17,877 17,872 SharesOutstandingWeightedAverage 17,901 18,147 18,005 18,077 Diluted SharesOutstanding Reconciliationto Adjusted ConsolidatedEBITDAConsolidated $ 16,510 $ 28,155 70.5 % $ 72,213 $ 101,428 40.5 %EBITDAAcquisitionand 2,083 (170 ) 2,083 (11 ) DivestitureExpensesSeverance andSeparation 79 ? 1,205 563 CostsLitigation 175 ? 750 270 ReserveNaturalDisaster and ? 315 ? 1,627 Pandemic CostsOther Special 336 ? 336 373 ItemsAdjustedConsolidated $ 19,183 $ 28,300 47.5 % $ 76,587 $ 104,250 36.1 %EBITDAAdjustedConsolidated 27.0 % 31.4 % 440 bp 27.9 % 31.6 % 370 bp EBITDA Margin

CARRIAGE SERVICES, INC.CONDENSED CONSOLIDATED BALANCE SHEET (in thousands)

December 31, 2019 2020 ASSETS Current assets: Cash and cash equivalents $ 716 $ 889 Accounts receivable, net 21,478 25,103 Inventories 6,989 7,259 Prepaid and other current assets 10,667 2,076 Total current assets 39,850 35,327 Preneed cemetery trust investments 72,382 86,604 Preneed funeral trust investments 96,335 101,235 Preneed cemetery receivables, net 20,173 21,081 Receivables from preneed trusts, net 18,024 16,844 Property, plant and equipment, net 279,200 269,051 Cemetery property, net 87,032 101,134 Goodwill 398,292 392,978 Intangible and other non-current assets, net 32,116 29,542 Operating lease right-of-use assets 22,304 21,201 Cemetery perpetual care trust investments 64,047 70,828 Total assets $ 1,129,755 $ 1,145,825 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Current portion of debt and lease obligations $ 3,150 $ 3,432 Accounts payable 8,413 11,259 Accrued and other liabilities 24,026 31,138 Convertible subordinated notes due 2021 ? 2,538 Total current liabilities 35,589 48,367 Acquisition debt, net of current portion 5,658 4,482 Credit facility 82,182 46,064 Convertible subordinated notes due 2021 5,971 ? Senior notes due 2026 395,447 395,968 Obligations under finance leases, net of current 5,854 5,531 portionObligations under operating leases, net of current 21,533 20,302 portionDeferred preneed cemetery revenue 46,569 47,846 Deferred preneed funeral revenue 29,145 27,992 Deferred tax liability 41,368 46,477 Other long-term liabilities 1,737 4,748 Deferred preneed cemetery receipts held in trust 72,382 86,604 Deferred preneed funeral receipts held in trust 96,335 101,235 Care trusts? corpus 63,416 69,707 Total liabilities 903,186 905,323 Commitments and contingencies Stockholders? equity: Common stock 259 260 Additional paid-in capital 242,147 239,989 Retained earnings 86,213 102,303 Treasury stock (102,050 ) (102,050 )Total stockholders? equity 226,569 240,502 Total liabilities and stockholders? equity $ 1,129,755 $ 1,145,825

CARRIAGE SERVICES, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)

(unaudited) Three Months Ended Years Ended December 31, December 31, 2019 2020 2019 2020 Revenue: Service revenue $ 37,110 $ 44,154 $ 142,554 $ 164,984 Property and merchandise 29,056 39,419 114,514 139,630 revenueOther revenue 4,983 6,515 17,039 24,834 71,149 90,088 274,107 329,448 Field costs and expenses: Cost of service 18,928 20,010 72,991 79,634 Cost of merchandise 22,750 27,503 89,294 103,064 Cemetery property 995 1,511 3,985 4,956 amortizationField depreciation expense 3,120 3,236 12,370 13,006 Regional and unallocated 3,819 6,853 13,827 18,057 funeral and cemetery costsOther expenses 858 1,257 2,055 4,808 50,470 60,370 194,522 223,525 Gross profit 20,679 29,718 79,585 105,923 Corporate costs and expenses:General, administrative and 8,821 7,207 25,880 25,827 otherHome office depreciation 301 362 1,416 1,427 and amortizationNet loss on divestitures 241 1,832 4,846 21,442 and impairment chargesOperating income 11,316 20,317 47,443 57,227 Interest expense (6,615 ) (7,728 ) (25,522 ) (32,515 )Accretion of discount onconvertible subordinated (63 ) (16 ) (241 ) (216 )notesLoss on early ? ? ? (6 )extinguishment of debtOther, net 45 186 736 152 Income before income taxes 4,683 12,759 22,416 24,642 Expense for income taxes (1,845 ) (3,971 ) (7,395 ) (7,985 )Tax adjustment related to (269 ) (423 ) (488 ) (567 )discrete itemsTotal expense for income $ (2,114 ) $ (4,394 ) $ (7,883 ) $ (8,552 )taxesNet income $ 2,569 $ 8,365 $ 14,533 $ 16,090 Basic earnings per common $ 0.14 $ 0.47 $ 0.81 $ 0.90 share:Diluted earnings per common $ 0.14 $ 0.46 $ 0.80 $ 0.89 share: Dividends declared per $ 0.0750 $ 0.1000 $ 0.3000 $ 0.3375 common share:Weighted average number ofcommon and common equivalent sharesoutstanding:Basic 17,760 17,927 17,877 17,872 Diluted 17,901 18,147 18,005 18,077

CARRIAGE SERVICES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)

Years Ended December 31, 2019 2020 Cash flows from operating activities: Net income $ 14,533 $ 16,090 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 17,771 19,389 Provision for bad debt and credit losses 1,618 2,318 Stock-based compensation expense 2,153 3,370 Deferred income tax expense 10,117 4,597 Amortization of deferred financing costs 392 782 Amortization of capitalized commissions and non-compete 1,231 1,299 agreementsAccretion of discount on convertible subordinated notes 241 216 Accretion of discount, net of debt premium on senior 492 307 notesNet loss on divestitures and impairment charges 4,846 21,442 Net loss on sale of other assets 213 251 Gain on insurance reimbursements (879 ) (97 )Loss on extinguishment of debt ? 6 Other 121 19 Changes in operating assets and liabilities that provided (required) cash:Accounts and preneed receivables (5,801 ) (4,279 )Inventories, prepaid and other current assets (2,762 ) 3,516 Intangible and other non-current assets (924 ) (1,015 )Preneed funeral and cemetery trust investments (6,500 ) (5,043 )Accounts payable (580 ) 2,702 Accrued and other liabilities 1,271 10,784 Deferred preneed funeral and cemetery revenue 168 528 Deferred preneed funeral and cemetery receipts held in 5,495 5,733 trustNet cash provided by operating activities 43,216 82,915 Cash flows from investing activities: Acquisitions (140,907 ) (28,011 )Deposit on pending acquisition (5,000 ) ? Proceeds from insurance reimbursements 1,433 248 Proceeds from divestitures and sale of other assets 967 8,541 Capital expenditures (15,379 ) (15,198 )Net cash used in investing activities (158,886 ) (34,420 ) Cash flows from financing activities: Borrowings from the credit facility 174,961 109,500 Payments against the credit facility (118,261 ) (146,100 )Payment of debt issuance costs related to the long-term (891 ) ? debtRedemption of the 2.75% convertible subordinated notes (27 ) (4,563 )Payment of transaction costs related to the redemption ? (12 )of the 2.75% convertible subordinated notesProceeds from the issuance of the 6.625% senior notes 76,688 ? Payment of debt issuance costs related to the 6.625% (980 ) (66 )senior notesPayments on acquisition debt and obligations under (2,287 ) (1,745 )finance leasesPayments on contingent consideration recorded at (162 ) (169 )acquisition dateProceeds from the exercise of stock options and 1,445 1,229 employee stock purchase plan contributionsTaxes paid on restricted stock vestings and exercises (194 ) (348 )of non-qualified optionsDividends paid on common stock (5,398 ) (6,048 )Purchase of treasury stock (9,152 ) ? Net cash used in financing activities 115,742 (48,322 ) Net increase in cash and cash equivalents 72 173 Cash and cash equivalents at beginning of year 644 716 Cash and cash equivalents at end of year $ 716 $ 889

NON-GAAP FINANCIAL MEASURES

This press release uses Non-GAAP financial measures to present the financial performance of the Company. Our non-GAAP reporting provides a transparent framework of our operating and financial performance that reflects the earning power of the Company as an operating and consolidation platform.

Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Companys reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP. We believe the Non-GAAP results are useful to investors to compare our results to previous periods, to provide insight into the underlying long-term performance trends in our business and to provide the opportunity to differentiate ourselves as the best consolidation platform in the industry against the performance of other funeral and cemetery companies.

The Companys GAAP financial statements accompany this press release. Reconciliations of the Non-GAAP financial measures to GAAP measures are also provided in this press release.

The Non-GAAP financial measures include Special Items, Adjusted Net Income, Consolidated EBITDA, Adjusted Consolidated EBITDA, Adjusted Consolidated EBITDA Margin, Adjusted Free Cash Flow, Funeral, Cemetery and Financial EBITDA, Total Field EBITDA, Total Field EBITDA Margin, Other Funeral Revenue, Other Funeral EBITDA, Divested/Planned Divested Revenue, Divested/Planned Divested EBITDA, Divested/Planned Divested EBITDA Margin, Adjusted Basic Earnings Per Share, Adjusted Diluted Earnings Per Share, and Total Debt to EBITDA Multiple in this press release.These financial measurements are defined as similar GAAP items adjusted for Special Items and are reconciled to GAAP in this press release. In addition, the Companys presentation of these measures may not be comparable to similarly titled measures in other companies reports. The definitions used by the Company for our internal management purposes and in this press release are as follows:

-- Special Items are defined as charges or credits included in our GAAP financial statements that can vary from period to period and are not reflective of costs incurred in the ordinary course of our operations. Special Items are typically taxed at the federal statutory rate of 21.0%, except for the Accretion of Discount on Convertible Subordinated Notes, as this is a non-tax deductible item, the Tax Expense Related to Divested Business, the Net Loss on Divestitures and Other Costs and the Net Impact of Impairment of Goodwill and Other Intangibles. The Net Loss on Divestitures and Other Costs Special Item and the Net Impact of Impairment of Goodwill and Other Intangibles Special Item are net of the federal statutory rate of 21.0% in 2019 and are net of the operating tax rate of 32.4% in 2020. -- Adjusted Net Income is defined as net income plus adjustments for Special Items and other expenses or gains that we believe do not directly reflect our core operations and may not be indicative of our normal business operations. -- Consolidated EBITDA is defined as net income before income taxes, interest expenses, non-cash stock compensation, depreciation and amortization, and interest income and other, net. -- Adjusted Consolidated EBITDA is defined as Consolidated EBITDA plus adjustments for Special Items and other expenses or gains that we believe do not directly reflect our core operations and may not be indicative of our normal business operations. -- Adjusted Consolidated EBITDA Margin is defined as Adjusted Consolidated EBITDA as a percentage of revenue. -- Adjusted Free Cash Flow is defined as net cash provided by operations, adjusted by Special Items as deemed necessary, less cash for maintenance capital expenditures. -- Adjusted Free Cash Flow Margin is defined as Adjusted Free Cash Flow as a percentage of revenue. -- Funeral Field EBITDA is defined as Funeral Gross Profit, excluding depreciation and amortization, regional and unallocated costs, Financial EBITDA related to the Funeral Home segment, Other Funeral EBITDA and Divested/Planned Divested EBITDA -- Cemetery Field EBITDA is defined as Cemetery Gross Profit, excluding depreciation and amortization, regional and unallocated costs and Cemetery Financial EBITDA related to the Cemetery segment. -- Funeral Financial EBITDA is defined as Funeral Financial Revenue less Funeral Financial Expenses. Funeral Financial Revenue and Funeral Financial Expenses are presented within Other Revenue and Other Expenses, respectively, on the Condensed Consolidated Statement of Operations. -- Cemetery Financial EBITDA is defined as Cemetery Financial Revenue less Cemetery Financial Expenses. Cemetery Financial Revenue and Cemetery Financial Expenses are presented within Other Revenue and Other Expenses, respectively, on the Condensed Consolidated Statement of Operations. -- Total Field EBITDA is defined as Gross Profit, excluding field depreciation, cemetery property amortization and regional and unallocated funeral and cemetery costs. -- Total Field EBITDA Margin is defined as Total Field EBITDA as a percentage of revenue. -- Other Funeral Revenue is defined as revenues from our ancillary businesses, which include a flower shop, pet cremation business and online cremation business. -- Other Funeral EBITDA is defined as Other Funeral Revenue, less expenses related to our ancillary businesses noted above. -- Divested/Planned Divested Revenue is defined as revenues from eight funeral home businesses that we divested as of December 31, 2020 and five funeral home businesses that we divested as of December 31, 2019 and certain funeral home businesses we intend to divest. -- Divested/Planned Divested EBITDA is defined as Divested Revenue, less field level and financial expenses related to the divested/planned divested businesses noted above. -- Divested/Planned Divested EBITDA Margin is defined as Divested/Planned Divested EBITDA as a percentage of Divested/Planned Divested Revenue. -- Adjusted Basic Earnings Per Share is defined as GAAP Basic Earnings Per Share, adjusted for Special Items. -- Adjusted Diluted Earnings Per Share is defined as GAAP Diluted Earnings Per Share, adjusted for Special Items. -- Total Debt Outstanding is defined as indebtedness under our bank credit facility, Convertible Subordinated Notes due 2021 and Senior Notes due 2026, acquisition debt and finance leases. -- Total Debt to EBITDA Multiple is defined as Total Debt Outstanding to Adjusted Consolidated EBITDA.

Funeral Field EBITDA and Cemetery Field EBITDA

Our operations are reported in two business segments: Funeral Home Operations and Cemetery Operations. Our Field level results highlight trends in volumes, Revenue, Field EBITDA (the individual business cash earning power/locally controllable business profit) and Field EBITDA Margin (the individual business controllable profit margin).

Funeral Field EBITDA and Cemetery Field EBITDA are defined above. Gross Profit is defined as Revenue less Field costs and expenses - a line item encompassing these areas of costs: i) Funeral and cemetery field costs, ii) Field depreciation and amortization expense, and iii) Regional and unallocated funeral and cemetery costs. Funeral and cemetery field costs include cost of service, funeral and cemetery merchandise costs, operating expenses, labor and other related expenses incurred at the business level.

Regional and unallocated funeral and cemetery costs presented in our GAAP statement consist primarily of salaries and benefits of our Regional leadership, incentive compensation opportunity to our Field employees and other related costs for field infrastructure. These costs, while necessary to operate our businesses as currently operated within our unique, decentralized platform, are not controllable operating expenses at the Field level as the composition, structure and function of these costs are determined by Executive leadership in the Houston Support Center. These costs are components of our overall overhead platform presented within Consolidated EBITDA and Adjusted Consolidated EBITDA. We do not openly or indirectly push down any of these expenses to the individual business field level margins.

We believe that our Regional and unallocated funeral and cemetery costs are necessary to support our decentralized, high performance culture operating framework, and as such, are included in Consolidated EBITDA and Adjusted Consolidated EBITDA, which more accurately reflects the cash earning power of the Company as an operating and consolidation platform.

Consolidated EBITDA and Adjusted Consolidated EBITDA

Consolidated EBITDA and Adjusted Consolidated EBITDA are defined above. Our Adjusted Consolidated EBITDA include adjustments for Special Items and other expenses or gains that we believe do not directly reflect our core operations and may not be indicative of our normal business operations.

How These Measures Are Useful

When used in conjunction with GAAP financial measures, our Field EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA are supplemental measures of operating performance that we believe are useful measures to facilitate comparisons to our historical consolidated and business level performance and operating results.

We believe our presentation of Adjusted Consolidated EBITDA, key metric used internally by our management, provides investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance.

Limitations of the Usefulness of These Measures

Our Field EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA are not necessarily comparable to similarly titled measures used by other companies due to different methods of calculation. Our presentation is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Funeral Field EBITDA and Cemetery Field EBITDA are not consolidated measures of profitability.

Field EBITDA excludes certain costs presented in our GAAP statement that we do not allocate to the individual business field level margins, as noted above. A reconciliation of Field EBITDA to Gross Profit, the most directly comparable GAAP measure, is set forth below.

Consolidated EBITDA excludes certain items that we believe do not directly reflect our core operations and may not be indicative of our normal business operations. A reconciliation of Consolidated EBITDA to Net Income, the most directly comparable GAAP measure, is set forth below.

Therefore, these measures may not provide a complete understanding of our performance and should be reviewed in conjunction with our GAAP financial measures. Carriage Services strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.

Reconciliation of Non-GAAP Financial Measures:

This press release includes the use of certain financial measures that are not GAAP measures. The Non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures, all of which are reflected in the tables below.

Reconciliation of Net Income (Loss) to Adjusted Net Income for the five quarter period (in thousands):

4^TH QTR 1^ST QTR 2^ND QTR 3^RD QTR 4^TH QTR 2019 2020 2020 2020 2020Net Income (Loss) $ 2,569 $ (4,197 ) $ 6,397 $ 5,525 $ 8,365 Special Items, Net of Tax^(1)Acquisition andDivestiture 1,646 90 36 ? (135 )ExpensesSeverance and 62 228 217 ? ? Separation CostsPerformanceAwards ? ? 56 84 84 Cancellation andExchangeAccretion ofDiscount onConvertible 63 65 66 69 16 SubordinatedNotes^(1)Net Loss onDivestitures and 188 ? ? 3,245 1,317 Other Costs^(2)Net Impact ofImpairment ofGoodwill and 184 9,757 51 ? 124 Other Intangibles^(2)Litigation 138 59 154 ? ? ReserveTax ExpenseRelated to 51 ? ? ? ? Divested Business^(1)Gain on Insurance (195 ) ? ? ? ? ReimbursementsNatural Disasterand Pandemic ? 111 657 268 250 CostsOther Special 265 ? 371 (47 ) ? ItemsTax AdjustmentRelated to ? ? ? ? 400 Certain DiscreteItems^(1)Adjusted Net $ 4,971 $ 6,113 $ 8,005 $ 9,144 $ 10,421 Income

Special Items are typically taxed at the federal statutory rate of 21.0%, except for the Accretion of Discount on Convertible Subordinated Notes,(1 ) as this is a non-tax deductible item, the Tax Expense Related to Divested Business, the Tax Adjustment Related to Certain Discrete Items, the Net Loss on Divestitures and Other Costs and the Net Impact of Impairment of Goodwill and Other Intangibles (discussed below). The Net Loss on Divestitures and Other Costs Special Item and the Net(2 ) Impact of Impairment of Goodwill and Other Intangibles Special Item are net of the federal statutory rate of 21.0% in 2019 and are net of the operating tax rate of 32.4% in 2020.

Reconciliation of Net Income to Adjusted Net Income for the years ended December 31,2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):

For the Years Ended For the One Month December 31, Ended January 31, 2019 2020 2020 2021 Net Income $ 14,533 $ 16,090 $ 1,513 $ 6,064 Special Items, Net of Tax^(1) Acquisition and Divestiture 1,646 (9 ) 90 ? ExpensesSeverance and Separation Costs 951 445 ? ? Performance Awards Cancellation ? 224 ? 28 and ExchangeAccretion of Discount onConvertible Subordinated Notes^ 241 216 21 10 (1)Net Loss on Divestitures and 3,331 4,562 ? ? Other Costs^(2)Net Impact of Impairment ofGoodwill and Other Intangibles^ 761 9,932 ? ? (2)Litigation Reserve 592 213 ? ? Tax Expense Related to Divested 911 ? ? ? Business^(1)Gain on Insurance Reimbursements (699 ) ? ? ? Natural Disaster and Pandemic ? 1,286 ? 360 CostsOther Special Items 265 324 ? ? Tax Adjustment Related to Certain ? 400 ? ? Discrete Items^(1)Adjusted Net Income $ 22,532 $ 33,683 $ 1,624 $ 6,462

Special Items are typically taxed at the federal statutory rate of 21.0%, except for the Accretion of Discount on Convertible Subordinated Notes,(1 ) as this is a non-tax deductible item, the Tax Expense Related to Divested Business, the Tax Adjustment Related to Certain Discrete Items, the Net Loss on Divestitures and Other Costs and the Net Impact of Impairment of Goodwill and Other Intangibles (discussed below). The Net Loss on Divestitures and Other Costs Special Item and the Net(2 ) Impact of Impairment of Goodwill and Other Intangibles Special Item are net of the federal statutory rate of 21.0% in 2019 and are net of the operating tax rate of 32.4% in 2020.

Reconciliation of Net Income (Loss) to Consolidated EBITDA, Adjusted Consolidated EBITDA and Adjusted Consolidated EBITDA Margin for the five quarter period (in thousands):

4^TH QTR 1^ST QTR 2^ND QTR 3^RD QTR 4^TH QTR 2019 2020 2020 2020 2020Net Income $ 2,569 $ (4,197 ) $ 6,397 $ 5,525 $ 8,365 (Loss)Total Expense(Benefit) for 2,114 (2,150 ) 3,449 2,859 4,394 Income TaxesIncome (Loss)Before Income $ 4,683 $ (6,347 ) $ 9,846 $ 8,384 $ 12,759 Taxes Interest 6,615 8,428 8,352 8,007 7,728 ExpenseAccretion ofDiscount onConvertible 63 65 66 69 16 SubordinatedNotesLoss on EarlyExtinguishment ? ? ? 6 ? of DebtNon-Cash Stock 537 831 715 927 897 CompensationDepreciation & 4,416 4,549 4,698 5,033 5,109 AmortizationNet Loss on 8 ? ? 4,917 1,832 DivestituresImpairment ofGoodwill and 233 14,693 ? ? ? OtherIntangiblesOther, Net (45 ) 4 2 28 (186 )Consolidated $ 16,510 $ 22,223 $ 23,679 $ 27,371 $ 28,155 EBITDAAdjusted For: Acquisitionand 2,083 114 45 ? (170 )DivestitureExpensesSeverance andSeparation 79 288 275 ? ? CostsLitigation 175 75 195 ? ? ReserveNaturalDisaster and ? 140 832 340 315 Pandemic CostsOther Special 336 ? 418 (45 ) ? ItemsAdjustedConsolidated $ 19,183 $ 22,840 $ 25,444 $ 27,666 $ 28,300 EBITDA Revenue $ 71,149 $ 77,490 $ 77,477 $ 84,393 $ 90,088 AdjustedConsolidated 27.0 % 29.5 % 32.8 % 32.8 % 31.4 %EBITDA Margin

Reconciliation of Net Income to Consolidated EBITDA, Adjusted Consolidated EBITDA and Adjusted Consolidated EBITDA Margin for the years ended December 31,2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):

For the Years Ended For the One Month Ended December 31, January 31, 2019 2020 2020 2021 Net Income $ 14,533 $ 16,090 $ 1,513 $ 6,064 Total Expense for Income 7,883 8,552 649 2,599 TaxesIncome Before Income Taxes $ 22,416 $ 24,642 $ 2,162 $ 8,663 Interest Expense 25,522 32,515 2,846 2,552 Accretion of Discount onConvertible Subordinated 241 216 21 10 NotesLoss on Early ? 6 ? ? Extinguishment of DebtNon-Cash Stock Compensation 2,153 3,370 228 326 Depreciation & Amortization 17,771 19,389 1,468 1,591 Net Loss on Divestitures 3,883 6,749 ? ? Impairment of Goodwill and 963 14,693 ? ? Other IntangiblesOther, Net (736 ) (152 ) (8 ) ? Consolidated EBITDA $ 72,213 $ 101,428 $ 6,717 $ 13,142 Adjusted For: Acquisition and Divestiture 2,083 (11 ) 114 ? ExpensesSeverance and Separation 1,205 563 ? ? CostsLitigation Reserve 750 270 ? ? Natural Disaster and ? 1,627 ? 456 Pandemic CostsOther Special Items 336 373 ? ? Adjusted Consolidated $ 76,587 $ 104,250 $ 6,831 $ 13,598 EBITDA Revenue $ 274,107 $ 329,448 $ 26,604 $ 34,693 Adjusted Consolidated 27.9 % 31.6 % 25.7 % 39.2 %EBITDA Margin

Reconciliation of Funeral and Cemetery Gross Profit to Funeral and Cemetery Field EBITDA for the five quarter period (in thousands):

4^TH QTR 1^ST QTR 2^ND QTR 3^RD QTR 4^TH QTR 2019 2020 2020 2020 2020FuneralGross Profit $ 16,778 $ 19,004 $ 19,869 $ 18,892 $ 21,299 (GAAP)Depreciation& 2,806 2,944 2,895 2,885 2,862 AmortizationRegional &Unallocated 2,919 2,326 2,788 3,859 5,375 CostsLess: FuneralFinancial (1,841 ) (1,996 ) (1,921 ) (2,119 ) (2,150 )EBITDAOtherFuneral (298 ) (295 ) (321 ) (292 ) (278 )EBITDAFuneralDivested/Planned (522 ) (674 ) (830 ) (378 ) (310 )DivestedEBITDAFuneral $ 19,842 $ 21,309 $ 22,480 $ 22,847 $ 26,798 Field EBITDA

4^TH QTR 1^ST QTR 2^ND QTR 3^RD QTR 4^TH QTR 2019 2020 2020 2020 2020CemeteryGross Profit $ 3,901 $ 4,167 $ 5,291 $ 8,982 $ 8,419 (GAAP)Depreciation& 1,309 1,223 1,449 1,819 1,885 AmortizationRegional &Unallocated 900 430 929 872 1,478 CostsLess: CemeteryFinancial (1,868 ) (1,823 ) (2,535 ) (3,123 ) (2,737 )EBITDACemeteryDivested/Planned (11 ) (3 ) (44 ) (40 ) (42 )DivestedEBITDACemetery $ 4,231 $ 3,994 $ 5,090 $ 8,510 $ 9,003 Field EBITDA

Reconciliation of Funeral and Cemetery Gross Profit to Funeral and Cemetery Field EBITDA for the years ended December 31,2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):

For the Years Ended For the One Month Ended December 31, January 31, 2019 2020 2020 2021 Funeral Gross $ 63,602 $ 79,064 $ 6,195 $ 10,796 Profit (GAAP)Depreciation & 11,128 11,586 965 953 AmortizationRegional & 11,007 14,348 1,004 1,728 Unallocated CostsLess: Funeral Financial (7,409 ) (8,186 ) (733 ) (790 )EBITDAOther Funeral (298 ) (1,186 ) (49 ) (118 )EBITDAFuneral Divested/Planned Divested (2,342 ) (2,192 ) (222 ) (144 )EBITDAFuneral Field $ 75,688 $ 93,434 $ 7,160 $ 12,425 EBITDA

For the Years Ended For the One Month Ended December 31, January 31, 2019 2020 2020 2021 Cemetery Gross $ 15,983 $ 26,859 $ 1,130 $ 2,800 Profit (GAAP)Depreciation & 5,227 6,376 377 533 AmortizationRegional & 2,820 3,709 227 456 Unallocated CostsLess: Cemetery Financial (6,826 ) (10,218 ) (640 ) (978 )EBITDACemetery Divested/Planned Divested (13 ) (129 ) 1 (10 )EBITDACemetery Field $ 17,191 $ 26,597 $ 1,095 $ 2,801 EBITDA

Components of Total Field EBITDA for the five quarter period (in thousands):

4^TH QTR 1^ST QTR 2^ND QTR 3^RD QTR 4^TH QTR 2019 2020 2020 2020 2020FuneralField $ 19,842 $ 21,309 $ 22,480 $ 22,847 $ 26,798 EBITDACemeteryField 4,231 3,994 5,090 8,510 9,003 EBITDAFuneralFinancial 1,841 1,996 1,921 2,119 2,150 EBITDACemeteryFinancial 1,868 1,823 2,535 3,123 2,737 EBITDAOtherFuneral 298 295 321 292 278 EBITDADivested/Planned 533 677 874 418 352 DivestedEBITDATotalField $ 28,613 $ 30,094 $ 33,221 $ 37,309 $ 41,318 EBITDA

Components of Total Field EBITDA for the years ended December 31,2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):

For the Years Ended December For the One Month Ended 31, January 31, 2019 2020 2020 2021 Funeral Field $ 75,688 $ 93,434 $ 7,160 $ 12,425 EBITDACemetery Field 17,191 26,597 1,095 2,801 EBITDAFuneral Financial 7,409 8,186 733 790 EBITDACemetery 6,826 10,218 640 978 Financial EBITDAOther Funeral 298 1,186 49 118 EBITDADivested/Planned 2,355 2,321 221 154 Divested EBITDATotal Field $ 109,767 $ 141,942 $ 9,898 $ 17,266 EBITDA

Reconciliation of GAAP Basic Earnings (Loss) Per Share to Adjusted Basic Earnings Per Share for the five quarter period:

4^TH QTR 1^ST QTR 2^ND QTR 3^RD QTR 4^TH QTR 2019 2020 2020 2020 2020GAAP BasicEarnings $ 0.14 $ (0.23 ) $ 0.36 $ 0.31 $ 0.47 (Loss) PerShareSpecial Items 0.14 0.58 0.09 0.20 0.11 AdjustedBasic $ 0.28 $ 0.35 $ 0.45 $ 0.51 $ 0.58 Earnings PerShare

Reconciliation of GAAP Basic Earnings Per Share to Adjusted Basic Earnings Per Share for the years ended December 31,2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):

For the Years Ended For the One Month Ended December 31, January 31, 2019 2020 2020 2021 GAAP Basic Earnings Per $ 0.81 $ 0.90 $ 0.08 $ 0.34 ShareSpecial Items 0.45 0.98 0.01 0.02 Adjusted Basic Earnings $ 1.26 $ 1.88 $ 0.09 $ 0.36 Per Share

Reconciliation of GAAP Diluted Earnings (Loss) Per Share to Adjusted Diluted Earnings Per Share for the five quarter period:

4^TH QTR 1^ST QTR 2^ND QTR 3^RD QTR 4^TH QTR 2019 2020 2020 2020 2020GAAP Diluted(Loss) $ 0.14 $ (0.23 ) $ 0.36 $ 0.31 $ 0.46 Earnings PerShareSpecial Items 0.14 0.58 0.09 0.20 0.11 AdjustedDiluted $ 0.28 $ 0.35 $ 0.45 $ 0.51 $ 0.57 Earnings PerShare

Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the years ended December 31,2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):

For the Years Ended For the One Month Ended December 31, January 31, 2019 2020 2020 2021 GAAP Diluted Earnings $ 0.80 $ 0.89 $ 0.08 $ 0.33 Per ShareSpecial Items 0.45 0.97 0.01 0.02 Adjusted Diluted $ 1.25 $ 1.86 $ 0.09 $ 0.35 Earnings Per Share

Reconciliation ofCash Flow Provided by Operations to Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin for the five quarter period (in thousands):

4^TH QTR 1^ST QTR 2^ND QTR 3^RD QTR 4^TH QTR 2019 2020 2020 2020 2020Cash FlowProvided by $ 7,155 $ 13,546 $ 17,455 $ 36,821 $ 15,093 OperationsCash Used forMaintenance (2,614 ) (1,556 ) (1,342 ) (2,496 ) (3,368 )CapitalExpendituresFree Cash Flow $ 4,541 $ 11,990 $ 16,113 $ 34,325 $ 11,725 Plus:Incremental Special Items:Federal Tax ? ? ? (7,012 ) ? RefundAcquisitionand 2,083 114 45 ? (170 )DivestitureCostsSeverance andSeparation 79 288 275 ? ? CostsLitigation 175 75 195 ? ? ReserveNaturalDisaster and ? 140 832 340 315 Pandemic CostsOther Special 336 ? 418 (45 ) ? ItemsAdjusted Free $ 7,214 $ 12,607 $ 17,878 $ 27,608 $ 11,870 Cash Flow Revenue $ 71,149 $ 77,490 $ 77,477 $ 84,393 $ 90,088 Adjusted FreeCash Flow 10.1 % 16.3 % 23.1 % 32.7 % 13.2 %Margin

Reconciliation ofCash Flow Provided by Operations to Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin for the years ended December 31,2019 and 2020 and for the one month ended January 31, 2020 and 2021 (in thousands):

For the Years Ended For the One Month Ended December 31, January 31, 2019 2020 2020 2021 Cash Flow Provided by $ 43,216 $ 82,915 $ 6,002 $ 12,506 OperationsCash Used for Maintenance (8,795 ) (8,762 ) (497 ) (676 )Capital ExpendituresFree Cash Flow $ 34,421 $ 74,153 $ 5,505 $ 11,830 Plus: Incremental Special Items:Federal Tax Refund ? (7,012 ) ? ? Acquisition and Divestiture 2,083 (11 ) 114 ? CostsSeverance and Separation 1,205 563 ? ? CostsLitigation Reserve 750 270 ? ? Natural Disaster and ? 1,627 ? 456 Pandemic CostsOther Special Items 336 373 ? ? Adjusted Free Cash Flow $ 38,795 $ 69,963 $ 5,619 $ 12,286 Revenue $ 274,107 $ 329,488 $ 26,604 $ 34,693 Adjusted Free Cash Flow 14.2 % 21.2 % 21.1 % 35.4 %Margin

Reconciliation of Performance Outlook Scenario

Earlier in this press release, we present the Performance Outlook Scenario which reflects managements opinion on the performance of the portfolio of existing businesses, including performance of existing trusts, and excludes size and timing of acquisitions unless we have a signed Letter of Intent with a high likelihood of a closing within 90 days. This Performance Outlook Scenario is not intended to be management estimates or forecasts of our future performance, as we believe precise estimates will be precisely wrong all the time. The following reconciliations are presented at the approximate midpoint of the range in this Performance Outlook Scenario.

Reconciliation of Net Income to Consolidated EBITDA, Total Field EBITDA and Total Field EBITDA Margin for the Years Ended December 31, 2019 and 2020 and the Estimated Years Ending December 31, 2021 and 2022 (in thousands):

Years Ending December 31, Actual 2019 Actual 2020 2021E 2022ENet Income $ 14,533 $ 16,090 $ 41,000 $ 46,900 Total Tax Expense 7,883 8,552 17,000 19,000 Pretax Income $ 22,416 $ 24,642 $ 58,000 $ 65,900 Net Interest Expense,including Accretion of 25,763 32,731 24,700 19,500 Discount on ConvertibleSubordinated NotesDepreciation &Amortization, Non-cash 19,188 22,613 24,300 25,000 Stock Compensation andOther, NetNet Loss on Divestitures 4,846 21,442 ? ? and Impairment ChargesConsolidated EBITDA $ 72,213 $ 101,428 $ 107,000 $ 110,400 Overhead Expenses 37,554 40,514 39,500 40,500 Total Field EBITDA $ 109,767 $ 141,942 $ 146,500 $ 150,900 Revenue $ 274,107 $ 329,448 $ 334,000 $ 340,000 Total Field EBITDA Margin 40.0 % 43.1 % 43.9 % 44.4 %

Reconciliation of Consolidated EBITDA to Adjusted Consolidated EBITDA and Adjusted Consolidated EBITDA Margin for Years Ended December 31, 2019 and 2020 and the Estimated Years Ending December 31, 2021 and 2022 (in thousands):

Years Ending December 31, Actual 2019 Actual 2020 2021E 2022EConsolidated EBITDA $ 72,213 $ 101,428 $ 107,000 $ 110,400 Special Items 4,374 2,822 ? ? Adjusted Consolidated EBITDA $ 76,587 $ 104,250 $ 107,000 $ 110,400 Revenue $ 274,107 $ 329,448 $ 334,000 $ 340,000 Adjusted Consolidated EBITDA 27.9 % 31.6 % 32.0 % 32.5 %Margin

Reconciliation of Net Income to Adjusted Net Income for the Years Ended December 31, 2019 and 2020 and the Estimated Years Ending December 31, 2021 and 2022 (in thousands):

Years Ending December 31, Actual 2019 Actual 2020 2021E 2022ENet Income $ 14,533 $ 16,090 $ 41,000 $ 46,900 Special Items 7,999 17,593 ? ? Adjusted Net Income $ 22,532 $ 33,683 $ 41,000 $ 46,900

Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the Years Ended December 31, 2019 and 2020 and the Estimated Years Ending December 31, 2021 and 2022 (in thousands):

Years Ending December 31, Actual Actual 2021E 2022E 2019 2020GAAP Diluted Earnings Per Share $ 0.80 $ 0.89 $ 2.28 $ 2.60 Special Items 0.45 0.97 ? ? Adjusted Diluted Earnings Per $ 1.25 $ 1.86 $ 2.28 $ 2.60 Share

Reconciliation of Cash Flow Provided byOperations to Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin for the Years Ended December 31, 2019 and 2020 and the Estimated Years Ending December 31, 2021 and 2022 (in thousands):

Years Ending December 31, Actual 2019 Actual 2020 2021E 2022ECash Flow Provided by $ 43,216 $ 82,915 $ 75,000 $ 80,000 OperationsCash Used for Maintenance (8,795 ) (8,762 ) (10,000 ) (11,000 )Capital ExpendituresSpecial Items 4,374 (4,190 ) ? ? Adjusted Free Cash Flow $ 38,795 $ 69,963 $ 65,000 $ 69,000 Revenue $ 274,107 $ 329,448 $ 334,000 $ 340,000 Adjusted Free Cash Flow 14.2 % 21.2 % 19.5 % 20.3 %Margin

Supplemental Information

Funeral homes and cemeteries purchased after December31,2015 are referred to as Acquired in our Trend Report. This classification of acquisitions has been important to management and investors in monitoring the results of these businesses and to gauge the leveraging performance contribution that a selective acquisition program can have on total company performance.

The presentation below highlights the impact of our 2015 Acquired Portfolio that moved from Acquired to Same Store beginning January 1, 2020 (in thousands):

For the Three Months Ended For the Year Ended December 31, 2019 December 31, 2019 Revenue EBITDA Revenue EBITDA2015 Acquired $ 1,204 $ 541 $ 4,612 $ 1,826 Portfolio

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition to historical information, this Press Release contains certain statements and information that may constitute forward-looking statements within the safe harbor provisions 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. These statements include, but are not limited to, statements regarding any projections of earnings, revenue, asset sales, cash flow, capital allocation, debt levels or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic 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. The words may, will, estimate, intend, believe, expect, seek, project, forecast, foresee, should, would, could, plan, anticipate and other similar words or expressions are intended to identify forward-looking statements, which are generally not historical in nature. While management believes that these forward-looking statements 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. 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, those summarized below:

-- our ability to find and retain skilled personnel; -- the effects of our incentive and compensation plans and programs, including such effects on our Standards Operating Model and the Companys operational and financial performance; -- our ability to execute our growth strategy; -- the execution of our Standards Operating, 4E Leadership and Standard Acquisition Models; -- the effects of competition; -- changes in the number of deaths in our markets; -- 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; -- the investment performance of our funeral and cemetery trust funds; -- fluctuations in interest rates; -- 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 cost saving expectations related to anticipated financing activities, including our deleveraging program, forecasts and planned uses of free cash flow, expected plans and projections for refinancing our senior notes, and future capital allocation, including potential acquisitions, share repurchases, dividend increases, or debt repayment plans; -- our ability to meet the projected financial performance metrics to our updated two-year scenario, if at all; -- the timely and full payment of death benefits related to preneed funeral contracts funded through life insurance contracts; -- the financial condition of third-party insurance companies that fund our preneed funeral contracts; -- increased or unanticipated costs, such as insurance or taxes; -- 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; -- 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 the COVID-19 coronavirus (COVID-19), on customer preferences and on our business; -- effects of litigation and burial practice claims; -- consolidation of the funeral and cemetery industry; -- our ability to consummate the divestiture of low performing businesses as currently expected, if at all, including expected use of proceeds related thereto; -- our ability to integrate acquired businesses with our existing businesses, including expected performance and financial improvements related thereto; 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 Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, our Quarterly Reports on Form 10-Q, and other public filings and press releases, available at www.carriageservices.com.

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.