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SERVICE CORP INTERNATIONAL (SCI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered broad-based beats: revenue $1.074B (+2.8% YoY), GAAP EPS $0.98 (+10% YoY), and adjusted EPS $0.96 (+8% YoY); all exceeded S&P Global consensus (Rev $1.061B, EPS $0.91) as funeral strength and higher general agency commissions offset cemetery softness . Estimates from S&P Global*.
  • Adjusted operating cash flow surged to $316.0M vs $220.1M YoY, driven by higher operating income, lower cash interest, and favorable working capital timing; GAAP cash from operations was $311.1M .
  • Management confirmed 2025 guidance (adjusted EPS $3.70–$4.00; adjusted operating cash flow $830–$890M; maintenance capex $315M), with an expected adjusted ETR of ~25–26% and corporate G&A averaging $39–41M per quarter for the rest of the year .
  • Capital return accelerates: quarterly dividend declared at $0.32 and share repurchase authorization increased to $600M, enhancing buyback capacity and potential stock support .
  • Key catalysts: funeral segment margin expansion (+240 bps same-store), strong cash generation supporting buybacks/M&A, and insurance-funded preneed transition setting up sustained average revenue per service uplift in future periods .

What Went Well and What Went Wrong

  • What Went Well

    • Funeral segment outperformance: total funeral revenue $639.5M (+$34.8M YoY) and gross profit $154.0M (+$22.1M YoY), with comparable funeral gross margin +240 bps to 24.3% on higher average revenue per service and services performed .
    • General agency revenue tailwind: core general agency and other revenue grew $8.3M YoY on higher commission rates and a greater mix of underwritten insurance products under the new preneed agreement .
    • Cash flow strength: adjusted operating cash flow rose to $316.0M (+$95.9M YoY) on working capital benefits (cemetery installment receipts and payroll timing), higher operating income, and lower cash interest .
    • Management quote: “Adjusted EPS growth of 8% and strong adjusted operating cash flows… driven by strong performance in our funeral segment… and margin expansion” — Tom Ryan .

  • What Went Wrong

    • Cemetery softness: cemetery revenue declined to $434.7M (−$5.9M YoY) and gross profit to $137.4M (−$4.9M YoY), with comparable cemetery gross margin down 80 bps to 31.6% on lower recognized preneed property revenue .
    • SCI Direct preneed headwinds: non‑funeral home preneed sales revenue decreased by $6.8M YoY amid operational changes deferring merchandise deliveries and expected administrative challenges from trust-to-insurance transition; non‑funeral preneed production fell $19.9M (−25.5%) .
    • Higher tax rate: GAAP effective tax rate rose to 26.1% (adjusted 25.9%) vs 22.9% prior year, tempering below-the-line benefits from lower interest and share count .
    • Analyst concern: large cemetery sales were at the lower end of the quarterly range (~$30M) due to timing and development constraints (e.g., Rose Hills), though management expects recovery in subsequent quarters .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$1.014 $1.093 $1.074
GAAP EPS ($)$0.81 $1.04 $0.98
Adjusted EPS ($)$0.79 $1.06 $0.96
Operating Income ($USD Millions)$212.4 $262.2 $251.7
Gross Profit ($USD Millions)$252.6 $305.9 $291.4
Gross Margin (%)24.9% (252.6/1,013.96) 28.0% (305.9/1,093.0) 27.1% (291.4/1,074.2)
Net Income ($USD Millions)$117.8 $151.4 $142.9
Cash from Operations ($USD Millions)$263.8 $264.1 $311.1

Segment breakdown (Q1 2025 vs Q1 2024):

SegmentQ1 2024 Revenue ($MM)Q1 2025 Revenue ($MM)YoY ΔQ1 2024 Gross Profit ($MM)Q1 2025 Gross Profit ($MM)Gross Margin Q1 2024Gross Margin Q1 2025
Funeral$604.7 $639.5 +$34.8$131.9 $154.0 21.8% 24.1%
Cemetery$440.6 $434.7 −$5.9$142.3 $137.4 32.3% 31.6%

KPIs (Q1 2025 vs Q1 2024):

KPIQ1 2024Q1 2025
Funeral services performed (total)94,366 97,854
Avg revenue per service (total)$5,608 $5,748
Comparable funeral services performed93,967 95,624
Comparable total average revenue per service$5,613 $5,743
Comparable core cremation rate56.6% 57.0%
Total comparable cremation rate63.4% 64.1%
Comparable preneed funeral sales production ($MM)$316.2 $284.1
Comparable preneed cemetery sales production ($MM)$330.8 $322.5
Cemetery recognition rate92.9% 91.5%

Actual vs S&P Global consensus (Q1 2025):

MetricConsensusActualSurprise
Revenue ($USD Billions)$1.061*$1.074 +1.3% — bold beat
Adjusted EPS ($)$0.91*$0.96 +5.5% — bold beat
EBITDA ($USD Millions)$321.9*$327.3 (from release appendix’s EBITDA calc) +1.7% — bold beat

Values with asterisk (*) retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025$3.70–$4.00 $3.70–$4.00 Maintained
Adj. CFO ex special items and cash taxes ($MM)FY 2025$1,005–$1,065 $1,005–$1,065 Maintained
Cash taxes ($MM)FY 2025$175 $175 Maintained
Adj. CFO ex special items ($MM)FY 2025$830–$890 $830–$890 Maintained
Maintenance capex ($MM)FY 2025$315 $315 Maintained
Corporate G&A ($MM/quarter)Q2–Q4 2025N/A~$39–$41 per quarter New color
Effective tax rateFY 2025N/A~25%–26% New color
Quarterly dividend ($/share)Q2 2025N/A$0.32 (payable 6/30/25) Announced
Share repurchase authorization ($MM)Current~$72 remainingIncreased by $528 to $600 total Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Preneed insurance transitionTransition to new provider; SCI Direct shifting trust→insurance; temporary sales slowdown 80% of markets transitioned; expect stabilization and growth by 4Q25; higher general agency commissions Improving execution; tailwind to commissions
Cemetery large sales timingQ3: large sales strong but volatile; Rose Hills access constrained Q1: large sales toward low end (~$30M) on timing; April pipeline strong Near-term timing headwind; recovery expected
Cremation mixQ3: mix increase ~30–100 bps; slowing vs historic Core cremation rate +40 bps YoY; management expects <100 bps annual shifts going forward Stabilizing at high base
Cash taxes normalization2025 headwind ~$150M vs 2024 ETR ~25–26%; cash taxes normalized starting Q2 Headwind affirmed
Supply chain/tariffsNot highlightedMerchandise/bronze/granite exposure manageable; long-term contracts and U.S. sourcing; immaterial impact in guidance Risk monitored; immaterial near term
Regulatory (FTC funeral rule)N/ANo material expected impact; ahead of curve on disclosures Neutral
Salesforce/technology initiativesCRM/process improvements post-COVID Focus on lead pipeline efficiency and retention; tech to improve close rates Execution focus continues
Trust fund returnsQ3: strong gains Q1: modest negative returns (combined −0.5%) Market-driven volatility

Management Commentary

  • “Comparable funeral… gross profit percentage increased 240 basis points… due to increase in revenue and continued successful focus on managing our fixed cost structure.” — Release appendix .
  • “Core general agency and other revenue grew… due to higher average commission rates… and selling a larger percentage of underwritten insurance products.” — Tom Ryan .
  • “Adjusted operating cash flow of $316M… supported by ~$20M higher operating income, ~$15M lower cash interest, and ~$65M working capital (cemetery installments, payroll timing).” — Eric Tanzberger .
  • “We are confirming our normalized EPS guidance range of $3.70 to $4.00 for 2025… midpoint +9% YoY; tax rate headwind masks underlying ~12% EPS growth.” — Tom Ryan .
  • “Liquidity ~$1.6B; net debt/EBITDA 3.59x, near lower end of target 3.5–4x.” — Eric Tanzberger .

Q&A Highlights

  • Cemetery preneed production: Large sales at low end due to timing; pipeline strong with April looking “very good”; Rose Hills disruptions manageable and projects opening later 2025/early 2026 .
  • Tariffs exposure: Caskets, urns, granite/bronze costs largely U.S.-sourced (~60–67%); long-term supplier contracts provide near-term protection; guidance unchanged .
  • Funeral volumes: Q1 swing to +1.8% YoY vs Q4 −3.8% attributed to share gains and diminishing COVID pull-forward; full-year view still cautious but improving .
  • Insurance-funded preneed: Transition increases general agency revenue; SCI Direct average revenue per service expected to trend higher as backlog matures (from ~$1.4–1.5k toward >$3k over time) .
  • Capital deployment: ~$176M returned in Q1 (dividends $46M, buybacks $130M); opportunistic repurchases at avg ~$79; M&A pipeline healthy with target $75–$125M in 2025 .
  • Operating cadence: Cemetery recognition seasonality favors 2H; annual recognition rate expected ~95–97% .

Estimates Context

  • Q1 2025 beats: Revenue $1.074B vs $1.061B consensus (+1.3%); adjusted EPS $0.96 vs $0.91 (+5.5%); EBITDA $327M vs $322M (+1.7%). Beats reflect funeral volume and pricing, general agency commission tailwinds, and fixed-cost discipline; cemetery softness was offset . Estimates from S&P Global*.
  • Potential estimate revisions: Funeral margin trajectory and general agency commissions support near-term upward bias; tax rate headwind (25–26%) may temper EPS leverage; guidance unchanged implies consensus likely consolidates around midpoint .

Key Takeaways for Investors

  • Q1 delivered clean beats on revenue, EPS, and EBITDA with clear drivers (funeral strength, general agency tailwind), reinforcing confidence in the 2025 outlook (estimates from S&P Global*).
  • Cash generation remains a differentiator (adjusted CFO $316M), enabling accelerated buybacks and continued M&A within a robust pipeline .
  • Insurance-funded preneed transition is a temporary headwind to preneed production but structurally accretive to future average revenue per service and commissions as backlog matures .
  • Cemetery softness is predominantly timing and mix-related (recognized preneed property and large sales); management points to improving pipeline and seasonal recognition in 2H .
  • Expect higher effective tax rate and normalized cash taxes beginning Q2 to be EPS/cash flow headwinds vs 2024, partially offset by lower interest and share count .
  • Capital returns enhanced: $0.32 quarterly dividend and $600M total repurchase authorization should provide ongoing support to TSR and flexibility around valuation-driven buybacks .
  • Near-term trading lens: reaffirmed guidance plus buyback capacity and funeral margin expansion are supportive; watch updates on SCI Direct transition pace, cemetery large sales cadence (Rose Hills), and trust fund performance for volatility signals .

Footnote: Values marked with * are retrieved from S&P Global.