Sign in

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

SC

SERVICE CORP INTERNATIONAL (SCI)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered adjusted EPS of $0.87 (+10% YoY) and revenue of $1.06B (+4.4% YoY), driven by strong cemetery preneed production (+9.6%) and lower corporate G&A; funeral revenue was modestly lower as volumes declined, partially offset by higher averages .
  • The company narrowed 2025 EPS guidance to $3.80–$3.90 (midpoint confirmed at $3.85) and raised operating cash flow guidance to $910–$950M; cash taxes expected reduced to ~$135M (from $145M) .
  • Q3 beat S&P Global consensus on both revenue ($1,058.1M vs $1,042.1M*) and normalized EPS ($0.87 vs $0.83*); the beat was primarily due to cemetery strength and lower G&A, partially offset by a higher tax rate .
  • Subsequent to quarter-end, SCI increased its quarterly dividend to $0.34/share (+6.3%), a potential stock reaction catalyst alongside tightened EPS guidance and raised cash flow outlook .

What Went Well and What Went Wrong

  • What Went Well

    • “Strong performance in our cemetery segment was led by an increase in preneed cemetery sales production of 10%, which drove growth in comparable cemetery revenue of 7% and cemetery gross profit of 12%.” – Tom Ryan .
    • Corporate G&A decreased $5.4M YoY due to timing of incentive accruals, supporting EPS outperformance .
    • Comparable funeral sales average rose 3.1% YoY; non-funeral home sales average up 13.4% YoY, offsetting lower services performed and underpinning durable pricing power .

  • What Went Wrong

    • Comparable funeral gross profit declined $9.5M and margin fell 170 bps to 17.5%, pressured by higher selling compensation costs tied to increased preneed insurance sales production and slightly lower total comparable revenue .
    • Non-funeral home preneed sales revenue fell $4.6M due to operational decisions to defer urn delivery to time-of-need and the ongoing transition from trust- to insurance-funded contracts (temporary headwind expected to complete in 2026) .
    • GAAP effective tax rate increased to 26.9% (adjusted 24.1%), reducing EPS by ~$0.04 versus a constant rate; change in estimate tied to finalization of the 2024 tax return and less excess tax benefit on share-based awards .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$1,074.2 $1,065.4 $1,058.1
Operating Income ($USD Millions)$251.7 $224.5 $226.4
Net Income Attributable to Common ($USD Millions)$142.9 $122.9 $117.5
Diluted EPS ($)$0.98 $0.86 $0.83
Adjusted Diluted EPS ($)$0.96 $0.88 $0.87
Diluted Weighted Avg Shares (Millions)145.3 143.0 141.4
Net Cash from Operating Activities ($USD Millions)$311.1 $166.5 $252.3
Net Cash from Operating Activities (Excl. Special Items) ($USD Millions)$316.0 $168.3 $267.9

Segment Breakdown

Segment MetricQ1 2025Q2 2025Q3 2025
Funeral Total Revenue ($USD Millions)$639.5 $591.4 $574.1
Funeral Gross Profit ($USD Millions)$154.0 $116.0 $99.6
Funeral Gross Profit %24.1% 19.6% 17.3%
Cemetery Total Revenue ($USD Millions)$434.7 $474.1 $484.0
Cemetery Gross Profit ($USD Millions)$137.4 $155.5 $165.9
Cemetery Gross Profit %31.6% 32.8% 34.3%

KPIs

KPI (Comparable unless noted)Q1 2025Q2 2025Q3 2025
Funeral Services Performed (#)95,624 84,622 82,057
Average Revenue per Service ($)$5,743 $5,809 $5,852
Core Cremation Rate (%)57.0% 57.1% 57.3%
Cemetery Preneed Sales Production ($USD Millions)$322.5 $366.5 $345.6
Recognition Rate (%)91.5% 91.3% 98.0%

Notes:

  • Q3 YoY revenue +$44.1M (+4.4%); gross profit +$12.9M (+5%) .
  • Q3 comparable cemetery revenue +6.9%, gross profit +12.4% .
  • Q3 comparable funeral revenue -0.3%; average revenue per service +3.1% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Diluted EPS excl. special items ($)2025$3.70–$4.00 $3.80–$3.90; midpoint confirmed $3.85 Narrowed; midpoint confirmed
Net CFFO excl. special items & cash taxes ($M)2025$1,025–$1,085 $1,045–$1,085 Raised lower bound (+$20M)
Cash taxes expected ($M)2025$145 $135 Lowered ($10M)
Net CFFO excl. special items ($M)2025$880–$940 $910–$950 Raised (low +$30M; high +$10M)
Maintenance Capex ($M)2025$315 $315 Maintained
Quarterly Dividend per Share ($)Q4 2025$0.32 (prior) $0.34 Raised (+6.3%)

Earnings Call Themes & Trends

TopicQ1 2025 (Previous Mentions)Q2 2025 (Previous Mentions)Q3 2025 (Current Period)Trend
Preneed insurance transition & general agency revenueHigher general agency revenue from new preneed insurance agreement; pricing/mix tailwinds General agency revenue growth from higher commission rates; margin support Core general agency up; slight commission rate pressure from non-insured Flex product in select markets; expect slight decline in Q4 Net positive, localized commission pressure
SCI Direct trust-to-insurance transitionNon-funeral home preneed revenue/production down due to transition; short-term impact Continued declines as transition progresses Non-funeral preneed revenue −$4.6M; production −19.5%; recovery and growth expected from 2026 Temporary headwind; recovery trajectory
Funeral volume pull-forward normalizationServices performed +1.8% YoY Core services slightly down, averages up Pull-forward effect now negligible; volumes expected ~flat to ±1%; positive implications for cemetery leads Normalizing; improving setup for 2026
Cemetery sales velocity & large salesLarge sales softness; preneed down modestly Preneed +5.3% on larger/core sales; recognition timing effects Velocity strong; large sales +~19%; margins up to ~34% Accelerating
Cash taxes & cash flowHigher effective tax rate commentary Guidance reduced cash taxes ($175M→$145M) Cash taxes now ~$135M; raised cash flow guidance; adjusted FCF ≈$615M midpoint Improving cash tax outlook
Expense control & staffing metrics/technologyFixed cost focus; margin expansion Fixed cost management continues Fixed costs below inflation (~1.4%); leveraging staffing metrics and technology/AI Continuous discipline

Management Commentary

  • “We are proud to report adjusted earnings per share of $0.87 and net cash provided by operating activities of $252.3 million… Strong performance in our cemetery segment… Based on these strong results, we are well positioned to have a strong finish to the year.” – Tom Ryan .
  • “We are confirming the midpoint of our normalized EPS guidance and narrowing the range to $3.80 to $3.90 for 2025, and we are slightly raising our cash flow outlook due to stronger working capital trends… Therefore, the fourth quarter range would be $1.09 to $1.19 in normalized EPS.” – Tom Ryan .
  • “We ended the quarter with liquidity of just under $1.5 billion… leverage… 3.6x net debt to EBITDA, down from almost 3.8x… toward the lower end of our long-term leverage target range of 3.5x–4x.” – Eric Tanzberger .

Q&A Highlights

  • Cemetery velocity strong with large sales up ~18–19%; focus on flexible financing and sales execution; momentum expected to carry into Q4 and 2026 .
  • Confidence in achieving 8–12% EPS growth framework next year; drivers include funeral volume/average, cemetery preneed property sales, and backlog maturation .
  • Non-insured Flex product on the West Coast introduced to meet affordability needs; lower commission rates versus insured, limited to specific markets .
  • Funeral pull-forward effect now negligible; modest volume normalization expected to feed cemetery preneed leads (~55% conversion ratio) .
  • SCI Direct transition requires licensing/training; expects growth off the new base in 2026; backlog unwinding seen as valuable long-term earnings driver .

Estimates Context

MetricQ1 2025 Estimate*Q1 2025 ActualQ2 2025 Estimate*Q2 2025 ActualQ3 2025 Estimate*Q3 2025 Actual
Primary EPS (Normalized) ($)$0.91*$0.96 $0.85*$0.88 $0.83*$0.87
Revenue ($USD Millions)$1,060.9*$1,074.2 $1,051.6*$1,065.4 $1,042.1*$1,058.1
  • Q3 beats: Revenue beat of ~$16.0M; EPS beat of ~$$0.04 vs consensus .
  • FY 2025 Primary EPS consensus: ~$3.85* (aligned with narrowed guidance midpoint) [functions.GetEstimates].

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Cemetery outperformance (velocity and large sales) lifted revenue and margins; funeral segment remains resilient via pricing despite modest volume declines .
  • Guidance de-risked: EPS range narrowed (midpoint held) and cash flow raised; lower cash taxes provide incremental tailwind to free cash flow .
  • Persistent EPS/revenue beats vs consensus across Q1–Q3 2025 suggest estimate revisions should bias upward for Q4 and FY 2025 normalization .
  • Dividend growth (+6.3%) and remaining buyback authorization (~$410M) reinforce capital return visibility amid stable leverage and ample liquidity .
  • Near-term watch items: funeral margin pressure from selling costs, commission rate mix (Flex product), and SCI Direct transition; medium-term benefits from backlog maturation and demographic tailwinds .
  • Operating discipline (fixed costs below inflation, staffing metrics, technology/AI) supports margin resilience into 2026 .
  • For trading: Q4 normalized EPS guide ($1.09–$1.19) and cemetery momentum are likely positive narrative drivers; any evidence of SCI Direct stabilization or further cash tax relief could catalyze upside .