Sign in

You're signed outSign in or to get full access.

SC

SERVICE CORP INTERNATIONAL (SCI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered an 11% year-over-year increase in adjusted EPS to $0.88, with revenue up 3% to $1.065B, driven by higher funeral revenue per service and elevated general agency commissions; cemetery gross profit declined modestly on selling compensation tied to stronger sales production .
  • Against Wall Street consensus, SCI posted an EPS beat (+3.6%) and revenue beat (+1.3%), while EBITDA was slightly below expectations; management confirmed FY25 EPS guidance ($3.70–$4.00) and raised adjusted operating cash flow guidance to $880–$940M on lower cash taxes and working capital strength .
  • Funeral comparable gross profit rose 14.8% YoY with 210bps margin expansion, aided by effective fixed cost control; cemetery preneed sales production increased 5.3%, building future revenue recognition as projects complete and payment criteria are met .
  • Operating cash flow of $166.5M was depressed by an expected $84.3M increase in cash taxes; excluding this and special items, adjusted operating cash flow grew over 14% QoQ to $262.6M .
  • Capital returns accelerated: $239M returned via dividends and repurchases in Q2, and the Board declared a $0.32 per-share dividend payable Sep 30, 2025; management reiterated confidence in the 8–12% long-term EPS growth algorithm .

What Went Well and What Went Wrong

What Went Well

  • Funeral comparable gross profit increased $14.8M with margin up 210bps to 19.9%, supported by a 3.3% increase in core average revenue per service and disciplined fixed cost management .
  • General agency revenues benefitted from SCI’s transition to a new preferred preneed insurance provider, lifting commission rates and driving core general agency revenue growth (+$7.2M YoY) .
  • “We are pleased to report adjusted earnings per share of $0.88, an impressive increase of 11% over the prior year quarter… Higher funeral revenue and effective fixed cost management drove significant growth in comparable funeral gross profit and solid margin expansion.” — Tom Ryan, CEO .

What Went Wrong

  • Cemetery comparable gross profit fell $4.3M and margin declined 110bps to 32.6%, as higher selling compensation offset modest revenue growth; recognized preneed property revenue dipped on timing of revenue recognition for newly constructed property .
  • Corporate G&A rose $10.5M, including $6.4M for legal settlements and higher liability claims, diluting operating leverage in the quarter .
  • Cash taxes surged $84.3M as expected, pulling reported operating cash flow down to $166.5M despite underlying strength; adjusted cash interest rose $14.1M with timing tied to the September 2024 bond financing and bank facility reduction .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$1,093.0 $1,074.2 $1,065.4
Operating Income ($USD Millions)$262.2 $251.7 $224.5
Net Income ($USD Millions)$151.4 $142.9 $122.9
Diluted EPS ($USD)$1.04 $0.98 $0.86
Adjusted Diluted EPS ($USD)$1.06 $0.96 $0.88
Gross Profit ($USD Millions)$305.9 $291.4 $271.4
Net Cash from Operations ($USD Millions)$264.1 $311.1 $166.5

Segment detail

Segment MetricQ4 2024Q1 2025Q2 2025
Funeral Total Revenue ($USD Millions)$587.7 $639.5 $591.4
Funeral Gross Profit ($USD Millions)$125.1 $154.0 $116.0
Funeral Gross Profit %21.3% 24.1% 19.6%
Funeral Services Performed (Units)88,934 97,854 87,014
Avg Revenue per Service ($USD)$5,693 $5,748 $5,807
Cemetery Total Revenue ($USD Millions)$505.3 $434.7 $474.1
Cemetery Gross Profit ($USD Millions)$180.8 $137.4 $155.5
Cemetery Gross Profit %35.8% 31.6% 32.8%

KPIs

KPIQ4 2024Q1 2025Q2 2025
Core Cremation Rate (%)57.5% 57.0% 57.1%
Total Cremation Rate (%)64.4% 64.1% 64.3%
Comparable Funeral Preneed Sales ($USD Millions)$262.7 $284.1 $299.3
Comparable Cemetery Preneed Sales ($USD Millions)$358.6 $322.5 $366.5
Cemetery Recognition Rate (%)101.4% 91.5% 91.3%

Actual vs Wall Street estimates

MetricQ1 2025 Est*Q1 2025 ActualQ2 2025 Est*Q2 2025 Actual
Primary EPS ($USD)0.90803$0.96 0.84906$0.88
Revenue ($USD Millions)1,060.9$1,074.2 1,051.6$1,065.4
EBITDA ($USD Millions)321.9327.338*309.3306.243*
  • Values retrieved from S&P Global (SPGI).
  • Bold highlights: Q2 EPS beat and revenue beat; slight EBITDA miss.

Guidance Changes

MetricPeriodPrevious Guidance (Apr 30)Current Guidance (Jul 30)Change
Diluted EPS ex special items ($)FY 2025$3.70–$4.00 $3.70–$4.00 Maintained
Net cash from ops ex special items ($M)FY 2025$830–$890 $880–$940 Raised
Net cash from ops ex special items & cash taxes ($M)FY 2025$1,005–$1,065 $1,025–$1,085 Raised
Cash taxes (midpoint EPS) ($M)FY 2025$175 $145 Lowered
Maintenance Capex ($M)FY 2025$315 $315 Maintained
Capital improvements ($M)FY 2025$130 $130 Maintained
Cemetery property development ($M)FY 2025$160 $160 Maintained
Digital investments & corporate ($M)FY 2025$25 $25 Maintained
Quarterly Dividend ($/share)Q3 2025—$0.32 declared Aug 6, payable Sep 30 New action

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 / Q1 2025)Current Period (Q2 2025)Trend
Preneed insurance transition & general agency commissionsShift drove core general agency revenue growth; preneed funeral production down during transition Higher commission rates boost general agency revenue; expect preneed funeral production growth in H2 2025 as transition completes Positive tailwind building
Cemetery recognition rate timingStrong recognition rate in Q4 (101.4%) amid project completions Recognition rate in low 90s expected to rise to mid/high 90s in H2 as projects complete Seasonal normalization expected
Cremation rate moderationCore cremation rate rose 100bps YoY in Q4 Modest increase (20bps); management expects slower pace vs history (50–80bps vs 100–150bps) Easing revenue headwind
Cash taxes & legislation impactCash taxes low in 2024; FY25 outlook initially $175M Legislative changes cut FY25 cash taxes by ~$30M to $145M; benefit seen as sustainable via accelerated depreciation Structural improvement to cash flow
Working capital & installment receiptsQ4 used cash on payroll timing; preneed working capital mixed Strong installment receipts (+$20M source), payroll/payables timing (+$22.8M) drove working capital benefits Improving
G&A and liability claimsQ4 G&A lower on reserve release Q2 G&A up $10.5M (legal settlement, auto/general liability claims) Near-term headwind
Capital allocation (M&A & greenfield)Robust acquisition and real estate activity in 2024 Q2 returns $239M to shareholders; pipeline supports $75–$125M FY25 M&A; ~$70M greenfield spend expected Continued deployment

Management Commentary

  • “We remain committed to our long-term growth strategy to grow revenue, leverage our unparalleled scale, and invest our capital wisely… With these results, we believe we are well positioned to achieve our 2025 targeted results.” — Tom Ryan (press release) .
  • “We are confirming our normalized EPS guidance range of $3.70 to $4.00 for 2025. We are raising our cash flow outlook due to stronger working capital trends and anticipated lower cash taxes from recent legislative changes.” — Tom Ryan (call) .
  • “We generated adjusted operating cash flow of $168M during the quarter, adjusting for $84M of higher cash taxes… plus a net $43M source of working capital.” — Eric Tanzberger (call) .
  • “We returned $239M of capital to shareholders in Q2 through $45M of dividends and $194M of share repurchases.” — Eric Tanzberger (call) .

Q&A Highlights

  • Recognition rate: Management emphasized normal seasonality—low 90s in H1, rising to mid/high 90s in H2 as project completions trigger revenue recognition .
  • Cremation rate: Pace of increase has moderated; model a smaller annual headwind versus historical levels, supporting higher sustainable growth in funeral average revenue per service .
  • Cash taxes: New federal legislation (accelerated depreciation, software) reduces FY25 cash taxes and should provide ongoing benefits beyond 2025; estimate FY25 cash taxes ~$145M .
  • Capital deployment: Continued repurchases at ~$78–$79 average; robust M&A pipeline supports $75–$125M FY25 investment; ~30–35 greenfield projects in pipeline, ~one-third turn annually .
  • Preneed momentum: Expect low- to mid-single-digit growth in preneed funeral and cemetery sales in H2, with large cemetery sales strong (Q2 large sales ~$52M) and SCI Direct transition nearing completion (95% of markets) .

Estimates Context

  • Q2 2025 beat on EPS and revenue, slight EBITDA miss: EPS $0.88 vs 0.849*, revenue $1,065.4M vs $1,051.6M*, EBITDA $306.2M* vs $309.3M* .
  • Q1 2025 also beat EPS/revenue with EBITDA ahead of consensus: EPS $0.96 vs 0.908*, revenue $1,074.2M vs $1,060.9M*, EBITDA $327.3M* vs $321.9M*.
  • Implications: Street models likely need to reflect stronger funeral margins and sustained general agency tailwinds, while cemetery recognition timing shifts revenue into H2; cash tax reduction supports higher FY25 adjusted operating cash flow.
  • Values retrieved from S&P Global (SPGI).

Key Takeaways for Investors

  • Q2 showed quality beats on EPS and revenue driven by funeral average revenue and general agency commissions, despite cemetery margin headwinds—supports confidence in FY EPS guidance range .
  • Raised FY25 adjusted operating cash flow guidance ($880–$940M) and lower cash tax outlook ($145M) increase free cash flow visibility; H2 cash conversion should strengthen as recognition rates rise .
  • Funeral margin expansion from disciplined fixed cost management appears durable; cremation rate moderation reduces a structural headwind to per-service economics .
  • Cemetery preneed production growth (+5.3%) builds future revenue; timing effects in recognition are transitory with normalization expected in H2 .
  • Capital returns remain aggressive (Q2 $239M), complemented by a $0.32 dividend and a healthy M&A/greenfield pipeline—balanced deployment across buybacks, acquisitions, and new builds .
  • Watch corporate G&A and liability claims as potential near-term noise, but management’s baseline expectation is ~$40–$42M per quarter with variability from LT incentive accruals .
  • Near-term trading: Expect focus on funeral margin trajectory, H2 recognition rate ramp, and cash tax tailwinds; medium-term thesis centers on scale advantages, preneed insurance partner economics, and steady 8–12% EPS growth algorithm .
Notes on non-GAAP: Adjusted EPS and adjusted operating cash flow are non-GAAP measures; reconciliations provided in the press release appendix **[89089_0000089089-25-000066_exhibit991q225earningsrele.htm:14]** **[89089_20250730DA41050:13]**.