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SC

SERVICE CORP INTERNATIONAL (SCI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue rose 4% year over year to $1.093B; adjusted EPS increased 14% to $1.06, driven by cemetery preneed recognition and higher funeral general agency commissions; GAAP EPS was $1.04 .
  • Cemetery segment delivered margin expansion to 35.8% on 4.7% revenue growth; funeral margin improved modestly on higher average revenue per service, offset by lower services performed and preneed sales production .
  • 2025 guidance: adjusted EPS $3.70–$4.00 (midpoint $3.85), adjusted operating cash flow excluding special items $830–$890, cash taxes ~$175M, maintenance capex ~$$315M; management flagged a higher effective tax rate (25–26%) and corporate G&A of $39–$41M per quarter .
  • Stock narrative catalysts: sustained margin expansion from preneed insurance commission structure, cemetery recognition pacing, acquisition pipeline, and dividend increase to $0.32 per share post-quarter, signaling ongoing capital returns .

What Went Well and What Went Wrong

  • What Went Well

    • Adjusted EPS up 14% YoY to $1.06; revenue up 4% YoY; gross profit up 6% YoY, supported by cemetery preneed recognition and higher funeral general agency revenue .
    • Cemetery margins expanded to 35.8% (+150 bps), with recognized preneed property +$14.1M and merchandise/service +$5.2M; recognition rate at 101.4% on project completions .
    • Management emphasized durable cash flow ($944.9M GAAP CFO FY24) and reinvestment/acquisitions (26 funeral homes, 6 cemeteries in FY24), underpinning medium-term growth .

  • What Went Wrong

    • Funeral services performed fell 3.8% YoY on comparable basis; core funeral revenue -1.8%; comparable preneed funeral sales production -9.2%, reflecting transition to insurance-funded contracts and licensing/training impacts .
    • Non-funeral home preneed sales revenue -25.0% YoY from operational changes and trust-to-insurance transition; temporary slowdown expected to stabilize through 2025 .
    • Adjusted effective tax rate rose to 24.8% in Q4 (vs 23.2% PY), and 2025 effective tax rate guided higher (25–26%), pressuring below-the-line EPS translation .

Financial Results

Quarterly Performance (Sequential)

MetricQ3 2024Q4 2024
Revenue ($USD Billions)$1.014 $1.093
Operating Income ($USD Millions)$212.4 $262.2
Net Income to Common ($USD Millions)$117.8 $151.4
Diluted EPS (GAAP) ($)$0.81 $1.04
Adjusted Diluted EPS ($)$0.79 $1.06
Net Cash from Operations ($USD Millions)$263.8 $264.1
Net Cash from Ops (ex special items) ($USD Millions)$269.0 $267.6

Q4 Year-over-Year

MetricQ4 2023Q4 2024
Revenue ($USD Billions)$1.056 $1.093
Operating Income ($USD Millions)$242.1 $262.2
Net Income to Common ($USD Millions)$138.4 $151.4
Diluted EPS (GAAP) ($)$0.93 $1.04
Adjusted Diluted EPS ($)$0.93 $1.06
Diluted Weighted Avg Shares (Millions)148.8 146.2
Net Cash from Operations ($USD Millions)$277.6 $264.1

Segment Breakdown – Q4 2024 vs Q4 2023

Segment MetricQ4 2023Q4 2024
Funeral Total Revenue ($USD Millions)$573.2 $587.7
Funeral Gross Profit ($USD Millions)$122.4 $125.1
Funeral Gross Margin (%)21.4% 21.3%
Funeral Services Performed (Units)90,459 88,934
Avg Revenue per Service ($)$5,577 $5,693
Cemetery Total Revenue ($USD Millions)$482.6 $505.3
Cemetery Gross Profit ($USD Millions)$165.2 $180.8
Cemetery Gross Margin (%)34.2% 35.8%
Recognized Preneed Property Rev ($USD Millions)$248.7 $264.4
Recognized Preneed Merch & Service Rev ($USD Millions)$95.9 $101.1

KPIs – Comparable Stores (Q4 2024 vs Q4 2023)

KPIQ4 2023Q4 2024
Funeral Total Comparable Revenue ($USD Millions)$568.4 $573.8
Funeral Comparable Gross Profit ($USD Millions)$122.3 $125.9
Core Funeral Services Performed (Units)75,264 71,940
Total Comparable Cremation Rate (%)63.3% 64.4%
Core Avg Revenue per Service ($)$6,354 $6,525
Non-Funeral Home Preneed Sales Revenue ($USD Millions)$25.6 $19.2
Core General Agency & Other Revenue ($USD Millions)$42.9 $61.4
Funeral Preneed Sales Production ($USD Millions)$289.4 $262.7
Cemetery Total Comparable Revenue ($USD Millions)$481.9 $502.1
Cemetery Comparable Gross Profit ($USD Millions)$165.5 $179.6
Recognition Rate (%)98.8% 101.4%
Cemetery Preneed Sales Production ($USD Millions)$351.4 $358.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025Targeting high end of 8–12% growth (commentary) $3.70–$4.00 (midpoint $3.85) New detailed range issued
Net Cash from Ops ex specials & cash taxes ($M)FY 2025N/A$1,005–$1,065 New
Cash Taxes ($M)FY 2025N/A~$175 at EPS midpoint New
Net Cash from Ops ex specials ($M)FY 2025N/A$830–$890 New
Maintenance Capex ($M)FY 2025~Flat vs 2024 per Q3 commentary ~$315 total; $130 improvements, $160 cemetery development, $25 digital/corporate Specified mix, slightly lower vs 2024 actual ($347.5M)
Effective Tax Rate (%)FY 2025N/A25–26% New
Corporate G&A ($M per quarter)FY 2025N/A$39–$41 (quarterly average) New
Interest ExpenseFY 2025Modestly lower outlook Slightly lower rates; ~$5M higher cash interest timing from Sept 2024 bonds Clarified timing
DividendQ1 2025 payout$0.30/share prior $0.32/share (+6.7%) payable Mar 31, 2025 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Funeral volume normalizationUnexpected decline in May/June; July improved; 2H growth expected; 2025 high end of 8–12% targeted Expect flat volumes in 2025; COVID pull-forward diminishing Outlook flat to slightly down; monthly lumpiness persists; January down ~3% YoY Stabilizing; cautious near term
Preneed insurance transition (Global Atlantic)Higher commissions expected; licensing/training underway Strong general agency revenue; funeral margins to rise 100–150 bps in 2025 Core general agency +$18.5M YoY; continued shift to underwritten products; SCI Direct conversion ~75% of production markets Positive earnings lever; execution in progress
Cemetery large sales & recognitionCore production up; large sales timing headwind; recognition comps tough in Q3; 4Q bigger Large sales strong but tough comps; recognition seasonal; Rose Hills access constraints Recognition rate >100% on project completions; margin expansion; wildfire disruption temporary at Rose Hills Improving recognition; transient local headwinds
Labor/InflationWage inflation pressured margins; moderation expected Fixed cost management improving; maintenance below inflation Labor pressure mid-single digits in cemetery; lower single digits in funeral; improving vs COVID-era Easing cost pressure
Regulatory (FTC funeral rule)Monitoring; minimal impact expected No material change anticipated; expand digital pricing as appropriate No update since November; not expected to materially affect model Neutral
Macro health/life expectancyPull-forward diminishing; demographic tailwinds ahead Demographic shift expected to lift volumes medium term Life expectancy improving; first baby boomers turn 80 next year; gradual tailwinds over 3–10 years Medium-term positive

Management Commentary

  • “We are pleased to report a strong finish for the year with adjusted earnings per share growth of 14% in the fourth quarter of 2024… Growth in cemetery preneed sales production and higher funeral general agency revenue more than offset a decline in services performed during the quarter.” — Thomas Ryan, Chairman & CEO .
  • “Within our funeral segment, we expect… higher general agency revenue generated from the favorable impact of our new insurance agreement, which should drive healthy profit growth… increasing the gross margin percentage by 80 to 120 basis points.” — Thomas Ryan .
  • “Our leverage… declined to about 3.65x at the end of 2024… liquidity totaled about $1.6 billion… our strong balance sheet… supports capital investments and total capital return program.” — Eric Tanzberger, CFO .

Q&A Highlights

  • General agency benefit magnitude: Analyst estimated a $40–$45M pretax benefit from commissions and acquisitions; management said that was “probably a little high… but not dramatically off” .
  • Funeral volume: Outlook revised to flat to slightly down; monthly variability persists; January down ~3% YoY; life expectancy improving, reducing excess deaths .
  • SCI Direct transition: 75% of production markets converted; stabilization expected in coming months; growth resuming in second half of 2025 .
  • Cemetery recognition/margins: Q4 recognition rate >100%; 2025 recognition mid-90s to ~100%; cemetery margins guided low-30% area with potential modest expansion .
  • Regulatory: No new FTC funeral rule updates; minimal expected business impact; continued digital price optimization .

Estimates Context

  • Wall Street consensus (S&P Global Capital IQ) for Q4 2024 EPS and revenue was unavailable due to provider daily request limit at time of analysis; therefore, no formal beat/miss versus SPGI consensus can be reported. Management’s Q3-issued Q4 adjusted EPS guidance ($1.00–$1.10) was met with $1.06 in Q4 2024 .

Key Takeaways for Investors

  • Q4 delivered clean execution: revenue +4% YoY, adjusted EPS +14% YoY; cemetery margins expanded and funeral margins held despite volume headwinds — signaling resilience and benefits from preneed insurance commissions .
  • The preneed insurance transition is a structural tailwind; expect continued lift from higher commission rates and underwritten mix, with funeral gross margin expansion of 80–120 bps targeted in 2025 .
  • Recognition-driven cemetery performance should remain solid; 2025 recognition rates mid-90s to ~100% support margin maintenance/expansion, with project timing seasonally favoring late-year .
  • Effective tax rate rising to 25–26% and normalized cash taxes (~$175M) temper EPS translation in 2025; investors should focus on operating margin progress and cash generation ex-tax timing .
  • Capital deployment remains attractive: maintenance capex ~$315M, robust acquisition pipeline (target $75–$125M), continued buybacks/dividends — with a post-quarter dividend lift to $0.32/share .
  • Near-term trading: watch monthly funeral volumes (flu season effects, life expectancy trends) and SCI Direct stabilization milestones; medium-term thesis centers on demographic tailwinds and margin expansion from preneed insurance and cost discipline .