SCI 2024 4Q and Year-End Earnings Call: “$181 million in acquisitions during the year”

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Yesterday Funeral Director Daily reported on the 4th Quarter and Year-End press release of Service Corporation International.  And, last week SCI also had it’s quarterly discussion with financial company personnel in which we peruse the transcript for more detailed information.

As has been our practice of late with this type of information we will link the transcript of the Earnings Call courtesy of Seeking Alpha as well as a new concise report by Seeking Alpha called “Earnings Call Insights”.  In addition, Funeral Director Daily will post some quotations from the Earnings Call below.

CFO Eric Tanzberger on “Growth Spending”:  “We also invested about $19 million of growth capital in the quarter towards the purchase of real estate, construction of new funeral homes and the expansion of existing funeral homes and cemeteries. For the full year, this brought the total growth capital spend to just over $100 million, which was up about $9 million from 2023 as we identified meaningful opportunities to invest in greenfield cemetery and funeral projects.

Let’s talk a little bit about acquisitions. So we invested $19 million into business acquisitions in the fourth quarter. In total, we finished the full year with an impressive $181 million of acquisition spend.”

CEO Thomas Ryan on “4th Quarter Comparable Revenue and Services”:  “Comparable core funeral revenues decreased by $9 million or about 2%, primarily due to a 4.4% decrease in core funeral services performed, which was somewhat offset by a healthy 2.7% growth in the core average revenue per service.”

“Comparable cemetery revenue increased by $20 million or about 4%. Core revenue was primarily responsible for the increase, as it grew by $21 million over the prior year quarter.”

Tom Ryan
SCI CEO

CEO Thomas Ryan on the prospects for 2025:  “Within our funeral segment, we expect flat to slightly down funeral volume compared to 2024, with the average revenue per case growing at inflationary rates, slightly negated by the effect of a modest cremation mix increase.”

“We do expect to see higher general agency revenue generated from the favorable impact of our new insurance agreement, which should drive healthy profit growth for the funeral segment, increasing the gross margin percentage by 80 to 120 basis points.

We expect preneed funeral production to be slightly lower in 2025 as we continue the transition of SCI Direct and as we focus on increasing the underwritten insurance product sales in our core channel.”

“For the cemetery segment, we anticipate that we can grow preneed cemetery sales production in the low to mid-single-digit percentage range, resulting in cemetery revenue growth of about 2% to 3%.”

“Continued focus on managing inflationary costs should result in reasonable segment profit dollar growth while maintaining our impressive gross margin percentages as compared to 2024. Below the line, we expect favorable impacts from slightly lower interest expense . . . . “

CEO Thomas Ryan in answer to a question on the lingering “Pull-Forward” death rate effects of the pandemic:  “I think there’s still some hangover pull-through because there’ll be — it’s just a diminishing amount. And I think the other factors take over market share, preneed demographics that those things will offset what little impact COVID will continue to have.”

CEO Eric Tanzberger on a question about “Acquisitions”:  “I would say the pipeline continues to be robust. And if you remember, we’ve been saying that really kind of coming out of COVID. But these deals ebb and flow.

You have to make sure that it’s a win-win situation with the independent family and organization that is ready and wants to raise their hand for a liquidity event. Sometimes you have a start and stop in those situations. Sometimes it takes a lot longer. These are sometimes second, third, fourth-generation families that need to align accordingly, and all want to create the liquidity event.

So the pipeline has been strong. And — but in terms of closing the deals, it’s going to ebb and flow based on that. But just as strong as I said last year that end up coming to fruition in terms of the timing of closing, I still am just as excited this year with the strength of the pipeline.

So we’re going to give you an initial guidance of (spending) 75 to 125 (million dollars). If it ebbs and flows in the right direction based on the strength of the pipeline, I hope we could exceed that again this year like we did last year.

But again, a little bit of this is we want a win-win situation. We’re not in a situation where we are going to force people to sell. We want to — that family and that organization to be very excited about joining us and have all their ducks in a row and ready.”

CEO Thomas Ryan in answer to a question on “Lower Service Case volumes”:  “January, on the funeral volume side is down just about 3%, which wasn’t very far off our expectation. . . . . .

. . . . I think it’s a little of a pull forward. And like I said, it’s not — I guess, it’s not technically the pull forward when I say we saw extended periods of excess deaths that had occurred maybe longer than other people anticipated. And you couldn’t explain why, right? You just had — you knew these categories of deaths are down, there could be cancer screenings, it could be overdose, all these different things, mental health issues.

And now I think categorically, all the data that we’re looking at is saying that the country is kind of healing, which is a good thing. And so maybe normalizing back. And that’s the piece that’s probably moved us a little bit is to say, hey, in a good way, those things are normalizing again.

And now the factors that we would anticipate to contribute to our growth, which would be our strong preneed backlog, our competitive position in the markets to grow market share. And then just the general aging of America, that those three things will begin to be the more dominant talking point as we go forward, and we’ll see less and less COVID impact, less and less excess deaths conversation.

So that’s kind of where we are. And again, we feel pretty good about where we are. We think it could be slightly down, it could be flat. I mean, it may surprise us to be up slightly, but it’s pretty hard to predict right now. And we haven’t seen a real impact from the flu season yet. We hear a lot about the flu, but really hadn’t seen it, I’d say, in our numbers.”

• To read the entire Earnings Call Transcript from Seeking Alpha click here.
• To read a summary of the Earnings Call Transcript from Seeking Alpha click here

Disclaimer — The author of this article for Funeral Director Daily is a shareholder of Service Corporation International.

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