I’ve told you before that I sometimes get ideas for Funeral Director Daily articles from the strangest of sources.  Today’s thought process in thinking about year-end planning came to my mind on Wednesday afternoon when I was on the treadmill — it was 41 degrees, cold and cloudy in Minnesota — so I was inside listening to an afternoon business talk show on television while I got my daily regiment in.

The talking heads were talking about the United States’ national debt that now sits at about $38.15 trillion.  In my opinion, it is so large that it just blows my mind looking at all of the zero’s when I write it out.  Anyway, one of the commentators mentioned that the last time the United States had zero debt as a nation was when President Andrew Jackson paid it off on January 1, 1835.  Just for the record, part of how he did it was cancelling infrastructure spending and selling off lands in the western United States.  . . . . The results were not great right away for the U.S. as the federal real estate sales caused a “bubble” in real estate values and other issues led to the “Panic of 1837”.  Here’s a story from History.com on the subject.

This story is not about debt, but the idea of debt and the time around mid-November made me think of end-of-the-year business planning.  Have you looked at your business’ situation and understand how you want to spend the cash-flow that has came in during the year?

I was pretty good about planning and pretty good at holding off major expenses unless I had budgeted for them.  So, at the end of the year I generally had almost all of the cash-flow from the projected profit for the year in a bank account and it was time to decide what I would do with it.

Tom Anderson
Funeral Director Daily

It was at this time of the year that I got serious about what I would do with that money.  Depending on the financial performance for the year my first thought was always about employee bonuses which included retirement plans that included shareholders. . . . and then it was about sharing some of what we had made with non-profit entities in our community through some tax-deductible contributions.  (By the way — we always allocated 1% of annual gross revenues for what we termed “Christian Giving”.  Our team members helped us decide to which organizations we should send it to each year.)

Next, we looked at Section 179 depreciable items to see if there was anything we could take advantage of before the end of the year and expense the item completely during that calendar year.

Finally, if we had debt — and we carried very little — we might look at paying it down, especially if interest rates were on the high side.   And we would look at putting some of the cash-flow into our funeral home savings account to be used for future projects or to be simply divided up among shareholders when we decided to leave the business.

My goal here is not to tell you what to do because every business is different and there are thousands of ways to allocate a business’s cash-flow, but simply to get you to think about what might be good options now so that you have time to implement those options between now and December 31.

To that end, I came upon two short articles from the business consultants and tax specialists at CLA that might be of interest to you:

1. Year-end planning to strengthen your business operations
2. Tax Bill signed into law:  What it means for you and your tax strategy.

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

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

Service Corporation International (SCI) reported its 4th Quarter of 2024 as well as its 2024 Year End results last week.  Being as large a Death Care company as they are it is probably as close as one gets to an annual report on the status of Death Care in the North America when one digests their annual results.

Here is the press release from Service Corporation International on their 2024 4Q and 2024 Annual results which was released last week.

Here is what CEO Thomas Ryan said in prepared remarks in the press release, “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. This was driven by revenue growth in both our segments, which translated into solid gross profit performance and margin expansion. Growth in cemetery preneed sales production and higher funeral general agency revenue more than offset a decline in services performed during the quarter . . . . cash flow for the year allowed us to invest $181 million into the acquisition of 26 funeral homes and 6 cemeteries in major metropolitan markets and $62 million into real estate transactions to expand our footprint of funeral homes and cemeteries in our existing markets.”

Tom Anderson
Funeral Director Daily

Funeral Director Daily take:  There is a lot in this report and it takes some time to digest.  And, following the release of the company’s Earnings Call transcript I’ll probably provide more details and have more to say.  For the time being, here are some thoughts that I have. . .

Revenue: Total Revenue for SCI jumped from FY2023’s $4.099 billion to FY2024’s $4.186 billion — an increase of about $87 million or 2.11%.  The company probably also gained margin as the year went on because their 4Q24 revenue jumped 3.6% over the same number for 4Q23.  In my book, especially because they reported less services conducted on the year, that revenue increase is probably indicative of price increases.

SCI does report in their “Consolidated Funeral Segment” that revenue per services jumped to $5,651 in FY2024 over the FY2023 number of $5,536 — an increase of 2.1%.

Service Case Volume:  In the company’s “Consolidated Funeral Segment” results, SCI reports 355,074 services perfermed in FY2024 as compared to 358,873 services performed in FY2023 — a drop of about 1.1%.  From those numbers alone we don’t know if that drop is because of a loss of market share or simply because of less deaths occuring in their market areas.

Matthews International, in their quarterly report last week, explained away a lower unit sales of casket by what they termed as “less deaths”.  That may be correct and the case with SCI’s lower volume, but one might keep an eye on market share — especially when SCI tells us of the acquisition of 26 facilities during the year whose services numbers should also be included.  When contemplating that fact, however, we do not know when during the year, or even if, those acquisitions started contributing to the financial numbers.  In my opinion, however, the reported number of “Services Performed” will be a number worth watching in the future.

In what SCI calls their “Comparable Funeral Results” which is defined by “those businesses owned for the entire period beginning January 1, 2023 and ending December 31, 2024″,  the company shows an even steeper drop in “Services Performed” for the 4th Quarter of 2024.  SCI indicates a drop of 3,366 services performed during the 4th Quarter, compared to the year prior, which translates into a 3.8% decline for the period.

Again, that number being “Same Store” results. . . . is that indicative of a loss of market share or simply a number reflective of less deaths in their market regions?  I believe it is a number worth watching in the future.

Preneed:  In July 2024, SCI announced a new Preneed agreement with Global Atlantic as you can read from this Funeral Director Daily article on the subject.  We believe, that as is common with new partners, implementation to fine-tuned operations will take some time to get to.  In fact, the SCI report offers footnotes on that subject.

However, in reporting their “Comparable Preneed Sales Production” a Total Preneed sales dollar drop of 9.2% for the 4th Quarter of 2024 as compared to the 4th Quarter of 2023 is reported.  That, too, will need to be watched over time to see if the drop is simply in the implementation of a new policy, a change in accounting in moving from trusts to insurance-based preneed, or reflects a market share trend.

It could possibly reflect a market share trend based on the seemingly growing popularity of low-cost and/or online cremation puchases.  My thought is that the drop in preneed revenue could represent lower cremation sales prices to meet growing competition or simply losing clientele to lower priced online cremation providers.  In any case, this number bears watching in future quarterly reports.

Final Thoughts:  When I read these reports with my background in funeral home ownership I realize that the numbers simply give us a “point in time” reflection of a public company.  However, I think that bringing up questions and possibilities about the numbers is how one can “see into the future” to put their funeral home in the best possible situation to win customers in the future.

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”