SERVICE CORPORATION INTERNATIONAL ANNOUNCES THIRD QUARTER 2024 FINANCIAL RESULTS

Conference call on Thursday, October 31, 2024, at 8:00 a.m. Central Time. 

HOUSTON, Oct. 30, 2024 /PRNewswire/ -- Service Corporation International (NYSE:SCI), the largest provider of deathcare products and services in North America, today reported results for the third quarter of 2024.

Third Quarter Highlights:

• Revenue grew $12.1 million over the third quarter of 2023
• Earnings per share was $0.81 compared to $0.80 in the third quarter of 2023
• Adjusted earnings per share was $0.79 compared to $0.78 in the third quarter of 2023
• Net cash provided by operating activities grew 16% to $263.8 million in the current year quarter compared to $227.8 million in the prior year quarter
• Net cash provided by operating activities excluding special items grew 18% to $269.0 million in the current year quarter compared to $227.8 million in the prior year quarter
• Comparable core funeral sales average grew 2.1% in the current quarter
• Acquisition spend during the quarter was $123 million compared to $33 million in the third quarter of 2023

Tom Ryan, the Company's Chairman and CEO, commented on the third quarter performance:

"Today we reported adjusted earnings per share of $0.79 and net cash provided by operating activities excluding special items of $269 million. We are excited to see the positive impact in funeral revenue from our new marketing agreement with our new preferred preneed insurance provider, which launched during the quarter. Additionally, we are pleased both funeral and cemetery gross profit were relatively stable versus the prior year third quarter with modest revenue growth reflecting our continued focus on managing fixed costs.

We also had a very active quarter on the acquisition front including premier locations in major metropolitan markets. We invested $123 million adding 10 funeral homes and 2 cemeteries, including one combination location. We are excited to welcome these new associates to the SCI family. Additionally, we invested $31 million in real estate transactions for the expansion of funeral homes and cemeteries.

In 2025, we are targeting a return to the high end of our 8-12% long-term growth framework. We remain committed to our long-term growth strategy to grow revenue, leverage our unparalleled scale, and invest our capital wisely to enhance shareholder value. We would not be able to achieve this without our 25,000 associates and their unwavering commitment to providing excellent service to our client families."

Details of our third quarter 2024 financial results and the unaudited consolidated financial statements can be found in the Appendix at the end of this press release. The table below summarizes our key financial results.

• Diluted earnings per share was $0.81 in the third quarter of 2024 compared to $0.80 in the third quarter of 2023. The current year quarter was favorably impacted by $3.5 million of net gains on divestitures and impairment charges. The prior year quarter was favorably impacted primarily by $2.5 million of net gains on divestitures and impairment charges. Diluted earnings per share excluding special items was $0.79 in the third quarter of 2024 compared to $0.78 in the third quarter of 2023. Gross profit for both funeral and cemetery were flat, while a lower share count and a lower tax rate more than offset increased corporate general and administrative expense, resulting from changes in our stock price on our long-term incentive compensation plan, and slightly higher interest expense.
• Net cash provided by operating activities grew $36.0 million to $263.8 million in the third quarter of 2024 compared to $227.8 million in the third quarter of 2023. The current year was impacted by payments related to legal matters that were expensed in 2022 of $5.2 million. Net cash provided by operating activities, excluding special items, grew $41.2 million to $269.0 million in the third quarter of 2024 compared to $227.8 million in the third quarter of 2023. Favorable changes in preneed working capital, supported by stronger preneed cash receipts, more than offset an increase in cash interest payments and lower operating income.

OUTLOOK FOR 2024

Our current outlook for the fourth quarter of 2024 for adjusted earnings per share is $1.00 to $1.10, representing expected growth of approximately 8-18% compared to $0.93 of adjusted earnings per share in the fourth quarter of 2023. This fourth quarter guidance range yields an annual adjusted earnings per share range of $3.47 to $3.57, compared to the previous expectation of the lower half of a prior $3.50 to $3.80 range.

In conjunction with our expectation of continued strength in our operating cash flow and coupled with the strong fourth quarter growth anticipated in adjusted earnings per share stated above, we are raising the midpoint of our full year 2024 adjusted operating cash flow guidance from $930 million to $950 million with a revised guidance range of $940 million to $960 million (previous range of $900 million to $960 million).

Our full year 2024 outlook for maintenance capital expenditures remains unchanged at approximately $325 million. The forecast for cash taxes includes the impact of a change in a tax accounting method related to our cemetery segment, which will defer cash taxes into future years. Our outlook for net cash provided by operating activities also excludes special items relating to the payments of certain estimated legal charges of $64.6 million recognized in the fourth quarter of 2022.

CONFERENCE CALL AND WEBCAST

We will host a conference call on Thursday, October 31, 2024, at 8:00 a.m. Central Time. A question and answer session will follow a brief presentation made by management. The conference call dial-in numbers are (888) 317-6003 (US) or (412) 317-6061 (International) with the passcode of 8508625. The conference call will also be broadcast live via the Internet and can be accessed through our website at www.sci-corp.com. A replay of the conference call will be available through November 7, 2024 and can be accessed at (877) 344-7529 (US) or (412) 317-0088 (International) with the passcode of 2356545. Additionally, a replay of the conference call will be available on our website for approximately three months.

ABOUT SERVICE CORPORATION INTERNATIONAL

Service Corporation International (NYSE:SCI), headquartered in Houston, Texas, is North America's leading provider of funeral, cemetery and cremation services, as well as final-arrangement planning in advance, serving more than 600,000 families each year. Our diversified portfolio of brands provides families and individuals a full range of choices to meet their needs, from simple cremations to full life celebrations and personalized remembrances. Our Dignity Memorial® brand is the name families turn to for professionalism, compassion, and attention to detail that is second to none. At September 30, 2024, we owned and operated 1,495 funeral service locations and 494 cemeteries (of which 307 are combination locations) in 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. For more information about Service Corporation International, please visit our website at www.sci-corp.com. For more information about Dignity Memorial®, please visit www.dignitymemorial.com.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS  

The statements in this press release that are not historical facts are forward-looking statements made in reliance on the "safe harbor" protections provided under the Private Securities Litigation Reform Act of 1995. These statements may be accompanied by words such as "believe," "estimate," "project," "expect," "anticipate," "predict," or other similar words that convey the uncertainty of future events or outcomes. The absence of these words, however, does not mean that the statements are not forward-looking. These statements are based on assumptions that we believe are reasonable; however, many important factors could cause our actual results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by us, or on our behalf. Important factors, which could cause actual results to differ materially from those in forward-looking statements include, among others, the following:

• Our affiliated trust funds own investments in securities, which are affected by market conditions that are beyond our control.
• We may be required to replenish our affiliated funeral and cemetery trust funds to meet minimum funding requirements, which would have a negative effect on our earnings and cash flow.
• Our ability to execute our strategic plan depends on many factors, some of which are beyond our control.
• We may be adversely affected by the effects of inflation.
• Our results may be adversely affected by significant weather events, natural disasters, catastrophic events, or public health crises.
• Our credit agreements contain covenants that may prevent us from engaging in certain transactions.
• If we lost the ability to use surety bonding to support our preneed activities, we may be required to make material cash payments to fund certain trust funds.
• The financial condition of third-party life insurance companies that fund our preneed contracts may impact our future revenue.
• Unfavorable publicity could affect our reputation and business.
• Our failure to attract and retain qualified sales personnel could have an adverse effect on our business and financial condition.
• We use a combination of insurance, self-insurance, and large deductibles in managing our exposure to certain inherent risks; therefore, we could be exposed to unexpected costs that could negatively affect our financial performance.
• Declines in overall economic conditions beyond our control could reduce future potential earnings and cash flows and could result in future impairments to goodwill and/or other intangible assets.
• Any failure to maintain the security of the information relating to our customers, their loved ones, our associates, and our vendors could damage our reputation, could cause us to incur substantial additional costs and to become subject to litigation, and could adversely affect our operating results, financial condition, or cash flow.
• Our Canadian business exposes us to operational, economic, and currency risks.
• Our level of indebtedness could adversely affect our cash flows, our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and may prevent us from fulfilling our obligations under our indebtedness.
• A failure of a key information technology system or process could disrupt and adversely affect our business.
• The funeral and cemetery industry is competitive.
• If the number of deaths in our markets declines, our cash flows and revenue may decrease. Changes in the number of deaths are not predictable from market to market or over the short term.
• If we are not able to respond effectively to changing consumer preferences, our market share, revenue, and/or profitability could decrease.
• The continuing upward trend in life expectancy and the number of cremations performed in North America could result in lower revenue, operating profit, and cash flows.
• Our funeral and cemetery businesses are high fixed-cost businesses.
• Risks associated with our supply chain could materially adversely affect our financial performance.
• Regulation and compliance could have a material adverse impact on our financial results.
• Unfavorable results of litigation could have a material adverse impact on our financial statements.
• Cemetery burial practice claims could have a material adverse impact on our financial results.
• The application of unclaimed property laws by certain states to our preneed funeral and cemetery backlog could have a material adverse impact on our liquidity, cash flows, and financial results.
• Changes in taxation, or the interpretation of tax laws or regulations, as well as the inherent difficulty in quantifying potential tax effects of business decisions could have a material adverse effect on the results of our operations, financial condition, or cash flows.

For further information on these and other risks and uncertainties, see our Securities and Exchange Commission filings, including our 2023 Annual Report on Form 10-K. Copies of this document as well as other SEC filings can be obtained from our website at www.sci-corp.com. We assume no obligation and make no undertaking to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by us whether as a result of new information, future events, or otherwise.

SERVICE CORPORATION INTERNATIONAL

APPENDIX: RESULTS FOR THE THIRD QUARTER OF 2024

 

 

 

Comparable Funeral Results

The table below details comparable funeral results of operations ("same store") for the three months ended September 30, 2024 and 2023. We consider comparable funeral operations to be those businesses owned for the entire period beginning January 1, 2023 and ending September 30, 2024.

• Total comparable funeral revenue increased by $7.0 million, or 1.3%, as an increase of $4.4 million in core funeral revenue and a $7.6 million increase in core general agency and other revenue was offset by a $5.5 million decrease in non-funeral home preneed sales revenue.
• Core funeral revenue increased by $4.4 million, or 1.0%, primarily due to a favorable 2.1% increase in core average revenue per service partially offset by a 1.1% decrease in core funeral services performed. The core cremation rate increased 30 basis points to 56.8%.
• Non-funeral home preneed sales revenue decreased by $5.5 million, or 17.2%, primarily due to a decline of non-funeral home preneed sales production decrease of $8.1 million, or 10.4%, impacted by our transition from trust to insurance-funded contracts.
• Core general agency and other revenue grew $7.6 million, primarily due to growth in general agency revenue from higher commission rates, primarily as a result of our new preneed insurance marketing agreement.
• Comparable funeral gross profit decreased by $1.5 million to $107.4 million and the gross profit percentage decreased 50 basis points from 19.8% to 19.3%. The stability in gross profit, in light of modest revenue growth, reflects our continued focus on managing our fixed cost structure.
• Comparable preneed funeral sales production decreased by $22.2 million, or 7.1%, in the third quarter of 2024 compared to 2023. Core preneed sales production decreased by $14.1 million, or 6.0%, primarily due to the transition to our new preneed insurance provider. Non-funeral home preneed sales production decreased $8.1 million, or 10.4%, primarily due to our transition from trust to insurance-funded contracts.

Comparable Cemetery Results

The table below details comparable cemetery results of operations ("same store") for the three months ended September 30, 2024 and 2023. We consider comparable cemetery operations to be those businesses owned for the entire period beginning January 1, 2023 and ending September 30, 2024.

• Total comparable cemetery revenue in the third quarter of 2024 was flat to prior year at $446.6 million as a decrease in core revenue of $4.8 million was offset by an increase in other revenue of $4.8 million.
• Core revenue was lower by $4.8 million primarily as a result of a $3.5 million decline in atneed revenue combined with a $1.3 million decrease in total recognized preneed revenue. Growth in recognized preneed merchandise and service revenue of $10.3 million from higher quality sales averages maturing out of the backlog was offset by a decline of $11.6 million in recognized preneed property revenue.
• Other revenue was higher by $4.8 million, or 16.5%, compared to the prior year quarter primarily from an increase in endowment care trust fund income related to the expansion of our total return investment strategy in certain states.
• Comparable cemetery gross profit increased slightly by $0.6 million to $144.9 million, and the gross profit percentage increased from 32.3% to 32.4%. This growth in gross profit on relatively flat revenue reflects our continued focus on managing our fixed cost structure.
• Comparable preneed cemetery sales production decreased $7.9 million, or 2.5%, primarily due to a decline in large sales, while our core production was relatively flat.

Other Financial Results  

• Corporate general and administrative expenses were $43.7 million in the third quarter of 2024 compared to the third quarter of 2023 of $33.2 million. The current year third quarter was pressured by long-term incentive compensation plan expenses that were impacted by the growth in our stock price. Conversely, during the prior year third quarter we saw a decline in our stock price benefiting our long-term incentive compensation plan expenses.
• Interest expense increased $4.3 million to $65.8 million in the third quarter of 2024 primarily due to higher average balances quarter over quarter on our floating rate debt.
• The GAAP effective income tax rate for the third quarter of 2024 was 21.1%, down from 24.5% in the prior year quarter. Our adjusted effective tax rate was 20.9% in the third quarter of 2024 compared to 25.1% in the prior year quarter. The lower effective tax rate in the current period was primarily due to more excess tax benefits recognized on the settlement of employee share-based awards.

Cash Flow and Capital Spending

Net cash provided by operating activities excluding special items grew $41.2 million to $269.0 million in the third quarter of 2024 compared to $227.8 million in the third quarter of 2023. Favorable working capital of approximately $54 million, including higher cash receipts from installment payments on preneed cemetery and funeral contracts and other working capital changes, more than offset an increase in cash interest payments and $11 million of lower operating income.

Total capital expenditures increased in the current quarter by $10.3 million, primarily due to higher capital improvements at existing field locations and spend on development of cemetery property, slightly offset by expected lower spend on digital investments and corporate.

Trust Fund Returns

Total trust fund returns include realized and unrealized gains and losses and dividends and are shown gross without netting of certain fees. A summary of our consolidated trust fund returns as of September 30, 2024 is set forth below:

Non-GAAP Financial Measures

Earnings excluding special items and diluted earnings per share excluding special items shown above are non-GAAP financial measures. We believe these non-GAAP financial measures provide a consistent basis for comparison between quarters and years, and better reflect the performance of our core operations, as they are not influenced by certain income or expense items not affecting operations. We also believe these measures help facilitate comparisons to our competitors' operating results.

Set forth below is a reconciliation of our reported net income attributable to common stockholders to earnings excluding special items and our GAAP diluted earnings per share to diluted earnings per share excluding special items. We do not intend for this information to be considered in isolation or as a substitute for other measures of performance prepared in accordance with GAAP.

 

 

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SOURCE Service Corporation International