Service Corporation International (SCI) reported their 1st Quarter 2025 financial results last week and in doing so showed an overall revenue increase of 2.8% in year over year results.  Total Revenue for the quarter was $ 1.074.2 billion as compared to the 1st Quarter of 2024 which came in at $ 1.045.4 billion.

Those revenue numbers led to an overall improvement in Operating Income of about $ 19 million for the quarter.  The operating income margin also improved to 23.4% from the 1Q2024 mark of 22.2%.

Tom Anderson
Funeral Director Daily

In my opinion, what was really strong for the company was the performance of the funeral side of the business.  In what SCI terms “Comparable Funeral Results” — a term for a comparison of the funeral side of businesses that were operating in both comparable quarters — revenues increased a total of 3.9%.  The actual numbers were revenue of $ 625.9 million in 1Q25 as compared to revenues of $ 602.6 million in 1Q24.  (Comparable results don’t include revenue from new acquisitions or disposed of properties)

And, it was a “double-barrel” increase as both the number of services performed increased as did the revenue per service.  SCI reported that the number of services performed in 1Q25 was 95,624 as compared to the number in 1Q24 of 93,967 — a 1.8% increase.

They also reported that the revenue per service grew 2.3% from $ 5,613 per service in 1Q24 to $ 5,743 per service in 1Q25 — that’s an increase of 2.3%

Tom Ryan
SCI CEO

Here’s what SCI CEO Thomas Ryan said in a prepared statement from the 1Q2024 Earnings press release which you can access here, “This was driven by strong performance in our funeral segment with year over year increases in the number of services performed and average revenue per funeral . . . .  . Additionally, effective cost management drove solid gross profit performance and margin expansion.” 

On the flip side of that report, the “Comparable Cemetery” results were not as impressive.  Revenue, gross profit, and gross profit margin all declined from what was reported one year ago in 1Q2024.  The numbers for those categories in 1Q2025 were reported as such:

• Comparable Cemetery Revenue :  $ 432.9 million (Compared to $440.7 million in 1Q2024)
• Comparable Cemetery Gross Profit:  $ 136.8 million (Compared to $142.6 million in 1Q2024)
• Comparable Cemetery Gross Profit Margin:  31.6% (Compared to 32.4% in 1Q2024)

Here’s what CEO Ryan said in a prepared statement that was aimed at the cemetery segment, “In the cemetery segment, we are continuing to focus on production, which will benefit us in future periods, as undeveloped property sold is constructed.”

It should also be noted that Preneed production mostly slipped in 1Q2025 also.  However, it should be pointed out that the preneed sales staff is in the process of moving from a trust based system where some revenue is counted upon early delivery to an insurance based product, with their new alliance with Global Atlantic Insurance, where most of the revenue will not be counted until delivery at need.

I think it will be very difficult to comprehend how the actual preneed numbers are for SCI until they have at least one full year of comparables in the insurance-based operating model under their belts.  At this point they are, in my opinion, in a transitionary process.

On preneed however, SCI did report average preneed contracts moving up 1.1% in dollar volume.  One might wonder, however, if that actually portends a trend of less services being purchased in the future because 1.1% is certainly not keeping up with inflation.

Finally, in CEO Ryan’s opening statement he did mention acquisitions.  Here’s what he said on that subject, “. . . our robust cash flow has allowed us to continue investment toward our extensive pipeline of acquisitions while also providing us the flexibility to be opportunistic with stock repurchases.”

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

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“A servant’s attitude guided by Christ leads to a significant life”

I recently read the Carriage Services Earnings Call transcript from last week which pertained to the company’s 4th Quarter of 2024 as well as their financial year end for 2024.  It’s interesting that as I read the transcript, which you can access here from Seeking Alpha, several well-meaning cliches came to my mind. . . .

First of all the transcript brought me back to the 1960’s and the advertising campaign from Avis in battling car rental leader Hertz.  That campaign which fed on the slogan “We’re #2, we try harder” is credited with cutting the market leadership of Hertz in half.  While they don’t implicitly say anything like that in the Earnings Call, you just get the feeling that Carriage Services management, because they are smaller than industry leader Service Corporation International (SCI), is simply “trying harder” to cut the gap.  (Here’s an archived article on the Avis campaing from the Denver Post.)

Secondly, while many people try to analyze the game of golf and improve with hundreds of little tips, I’ve broke down my golf game into only two criteria — Strategy and Execution.  I build a strategy for each shot and then try to execute that shot  —  of course, the strategy has to be within one’s ability and as your ability improves your strategy can get more complex. . . . From reading the transcript I get that feeling from Carriage Services also.  They are building a strategy for each shot — supplies, payments, preneed, organic growth — and then trying to execute that strategy. . . . and, as they successfully execute on that strategy their abilities will grow and the opportunities that growth brings will then bring bigger and more complex strategies in the future.

However, the cliche that really comes to the forefront for me is “Laser focused”.  The management team of Carlos Quezada and Steve Metzger took over about two years ago and their comments indicate that they are “Laser focused” on moving Carriage Services forward.  The jury is still out on how well they will do, but there is no denying that when you read the Earnings Call transcript you will more than likely agree that they are “Laser focused” on moving their company forward.

Funeral Director Daily will supply you some of the quotes we found most interesting and informative in the transcript.

Funeral Director Daily had noticed in earlier releases Matthews International, SCI, and Carriage Services all mentioned that their volume counts for the 4th Quarter of 2024 were down. . . Carriage Services CEO Carlos Quezada made the following comments on that issue: 

“We experienced an anticipated decline in funeral volumes . . . . .  The volume decrease is primarily linked to a shift in the flu season, which usually starts late in the fall and increases through the winter months.

Our January and February volume trends are positive, indicating that a late flu season may have shifted volume from the fourth quarter of last year to the first quarter of this year. . . . 

 . . . as we look into what happened, we did some research with CDC. It seems pretty clear that there is a shift of the flu season that came late this winter season and started really more into the end of December, beginning of January and, of course, continues as we speak today. And consequence of that, it is that today, we do have greater volume for both January and February that we had in Q1 of 2024.”

In answer to a question about divestitures (the sale of funeral homes or cemetery properties) and “right-sizing” the company, when asked how many funeral homes the company would have, President Steve Metzger answered as such:

“To confirm the number, this should result in core fewer funeral homes.”

In answer to a questions about spending and where cash-flow is going, CEO Carlos Quezada made the following comments:

. . . 2023 and 2024, our focus was to drive as much as we could organic revenue. We were pretty much in the backseat of acquisitions. Our last acquisition was in March of 2023 with Greenlawn. And then we focus on paying down our debt.

So part of that effort was to allocate capital to high-growth projects, which was basically preneed cemetery. . . . . The organic growth continues to be a focus at Carriage. However, this is the year that we’re able to go back to growth mode. We have been able to get the structure that we needed over the last 2 years, get the team in place, get the systems right. . . . “

In answer to a question about the financial impacts of the company’s divestitures in 2024, President Steve Metzger answered as such:

“.So for 2024, roughly, we sold about $5.5 million worth of revenue. which represented around $1.8 million of EBITDA. Proceeds were just over $12 million for the year. . . . anticipating 2025. As we look at 2025 right now, and some of this is what we’re targeting. We have a couple of things under contract that have not closed. But we’re looking at roughly, call it, $25 million worth of proceeds.”

Tom Anderson
Funeral Director Daily

Funeral Director Daily take:  That is only a sampling of some of the items discussed in the Earnings Call.  There’s more including potential deals with suppliers to save costs, more about Carriage Services’ “Project Trinity” which is a future consumer facing platform the company has high hopes for.

And there is always “data points” one can take from these discussions and apply to your own funeral home.  For instance, President Metzger mentioned that in 2024 they sold properties and the proceeds were “over $12 million”.  He also mentioned in the same breath that the revenues of those properties were $5.5 million and the EBITDA was about $1.8 million.  So, you can come up with simplistic data points of the aggregate which would give you the figure that the properties were sold for about 2.2 times revenue and/or about 6.7 times EBIDTA.

You have to be careful when using those multiples as an absolute because we are not given all criteria on the sales, but the comment does give a data point about sale prices.

Disclaimer — The author of this article for Funeral Director Daily is a shareholder of Carriage Services.

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“A servant’s attitude guided by Christ leads to a significant life”

It’s an interesting week in the Death Care profession.  Not only do we have Halloween coming up on Thursday, but the day before that, Wednesday, October 30, both of the two largest public funeral home and cemetery operating companies in America are expected to report their 3rd Quarter 2024 earnings.

Depending on how you look at it  —  especially if you are an investor — October 30 might be a “spookier” day than Halloween the following day.  Or, on the other hand, it may bring encouraging news.

One recent writer for Seeking Alpha is cautiously optimistic about the 3Q report of Carriage Services.   This report, published on October 22, makes these observations and then concludes that “we may upgrade the stock shortly after the announcement of the company’s upcoming Q3 earnings numbers.”  Here are the observations mentioned:

• “Carriage Services’ stock has surged 25% in 6.5 months, outperforming the S&P 500, driven by Q1 and Q2 earnings beats and bullish technical indicators.”

• “Q2 revenues exceeded $100 million, with a 30%+ rise in preneed cemetery sales, leading to increased top-line guidance and bullish consensus trends.”

• “Free cash flow has grown 81% over five years, and with projected increases, investors are becoming more bullish on Carriage’s growth prospects.”

• “Successful credit agreement reduces interest expenses and supports deleveraging, enhancing return on capital and free cash flow, with potential for a post-Q3 earnings rally.”

Funeral Director Daily take:  I’ll let you read the article and decide on your own what you think about Carriage Services prospects.

In the meantime, I don’t think it is any secret that traditional funeral home operations have been challenging for the past 18 months whether you operate a 75-call firm or a 1,000 call firm.  Inflationary rising costs of doing business including financing and staffing have, at many firms, chipped away at the operating profits.

It takes an enormous amount of effort to control the cash outflows and bring increased profitability to the business amidst these headwinds.  However, once you find the correct plan and make the adjustments necessary to fine-tune the operations, you can be in a terrific spot for greater profitably while moving forward again.

I think the writer thinks that Carriage Services may be in that spot.

Disclaimer —  The author of this article for Funeral Director Daily has a stock position in Carriage Services.

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“A servant’s attitude guided by Christ leads to a significant life”

As you get older and older time seems to move faster and faster.  For those of us who were in the business back in 2013 we saw the  acquisition of Stewart Enterprises, then the 2nd largest funeral home and cemetery operator in the country, being acquired by the largest operator, Service Coporation International.

At that time, according to FTC documents, Service Corporation International (SCI) operated 1,449 funeral service operations and 374 cemeteries while Stewart Enterprises operated 217 funeral service operations and 141 cemeteries.  As you can imagine, many markets had both SCI and Stewart Enterprise properties which brought the Federal Trade Commission (FTC) into the merger discussion with anti-trust monopoly concerns at the forefront.

At the end of the day, as you can read in this FTC bulletin from back then, the acqusition was allowed to move forward but not before SCI agreed to sell 53 funeral homes and 38 cemeteries to allow a continual competitive basis for consumers in certain markets.  In addition to that requirement, the FTC put this ruling into effect pertaining to SCI and acquisitions for the next ten years, “Also, for 10 years, the FTC will be able to review any attempt by SCI to acquire any funeral or cemetery assets in the relevant geographic markets, as well as several other local areas where no remedy was required but where further acquisitions would likely to lead to competitive harm but may not require premerger notice under the Hart-Scott-Rodino Act.”

In essence, SCI was virtually prohibited from acquiring funeral home and cemetery properties in certain markets for the next ten years.  As to time flying, I was reminded in the Earnings Call from SCI’s year end results recently that prohibition will be ending come May 2024.  In response to a question on the subject, here’s what SCI CEO Thomas Ryan responded:

“I think it’s hard to size it, but it is a significant amount of markets that we’ve been really precluded from participating in for the last two years by those prior notice agreements, which expire in May. So it’s very difficult to predict when or what. But we’re excited about it. We do think it kind of allows us to be a little more active as it relates to acquisitions and get back involved in some of those markets. So we’re excited about it. We think it will create some momentum.”

And here is what SCI CFO Eric Tanzberger said in responding to another question on the subject:

“So again, we’ve always been active in these markets in the sense of developing relationships and not so much around the deal, but getting to know people, getting to know what their plans are. So it isn’t like we’re going to for the first time begin to talk to people. We’ve been out there just being a good neighbor. So again, as far as numbers of markets, I don’t have them in front of me, but think of them as being mainly in some major markets and my guess is probably somewhere that we’d be interested in 15 to 25 type of markets that are out there that we’ve not had the ability really to think too heavily as it relates to growing through acquisitions.”

Here is the press release on the FTC dictate back in 2013.

Here is the recent SCI Earnings Call transcript

Tom Anderson
Funeral Director Daily

Funeral Director Daily:  It’s certainly hard to know the corporate strategies that take shape in the context of the private board room.  But, if you look at the FTC notice back in 2013 it states that SCI owned 1,449 funeral service locations and 374 cemeteries and Stewart Enterprises owned 217 funeral service locations and 141 cemeteries.  That is a total of approximately 1,666 funeral service locations and 415 cemeteries.

We know that SCI was forced by the FTC to sell some of those properties for the acquisition to take effect and we also know that over the last decade SCI divested some of their other properties to sit at where their latest press release states, “At December 31, 2023, we owned and operated 1,483 funeral service locations and 489 cemeteries . . . “

In my opinion, management of SCI has remained at a pretty static count for the last decade and this moratorium ending provides a virtual unadulterated look and opportunity at looking at growth and acquiring growth where they want it, geographically speaking, to come from.

My guess is that SCI knows where it wants to grow and what businesses they will be looking to acquire.  I’m sure that they have been building those relationships for some time and will be moving into an acquisition mode as soon as the moratorium expires.  I also believe that as they move forward with whatever plan that they have, there will be other firms in a selling mode that don’t fit SCI’s plans and they will be available to the other acquisition companies creating what might be a great “seller’s market”. . . . although the great companies won’t overpay, especially in today’s environment of direct cremation and almost at-best “stable revenue per case” situations.

One Investor’s Viewpoint:  If you look at the FTC press release from 2013 you will notice that they (The FTC) list the combined revenues of SCI and Stewart Enterprises at approximately $2.9 billion.  SCI just announced total revenues of almost $4.1 billion for 2023.  So, the increase from 2013 is about $1.2 billion from 2013 that’s about a 41% increase or about 4.1% per year.  Pretty fair (and good for a 3x stock price increase in that time period (see article), but not enough to really be considered a “growth company”.

Public stocks are, in my opinion, valued sometimes, actually most of the time, on potential.  Without acquisitions the potential of SCI is generally internal “organic growth”. . . something that comes slowly in the death care business.  Again, my opinion is that the fastest way to raise shareholder value for SCI will be to “profitably” increase revenues in a quicker manner that will move their price earnings (P/E) ratio to one that would be more aligned with a “growth company”.  And, acquisitions will be the fastest way to do so.

Again, just my opinion, but SCI as a slow methodical organic revenue builder will be priced like a utility company stock, but if the company can show potential faster growth it will be valued at a much higher P/E level. . . . .and that’s why I think acquisitions will soon be on the table.

Disclaimer — The author of this article for Funeral Director Daily is a shareholder of SCI stock.

More news from the world of Death Care:

Funeral home directors:  Cash-strapped families are deliberately leaving deceased relatives unclaimed.  Video news story and print article.  KING TV-5 NBC Seattle (WA)

The price and process of dying abroad.  Healthnews.com

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“A servant’s attitude guided by Christ leads to a significant life”