SCI — Service Corporation International

Summary of SCI Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Adjusted Earnings Per Share (EPS): $0.87, a 10% increase from $0.79 in Q3 2024.
• Cemetery Revenue: Increased by $31 million (almost 7%).
• Funeral Revenue: Comparable funeral revenue declined by nearly $2 million (less than 1%).
• Gross Profit: Funeral gross profit decreased by $9.5 million, while cemetery gross profit grew by $18 million.
• Adjusted Operating Cash Flow: $268 million, up $10 million year-over-year.
• Capital Returned to Shareholders: $123 million through dividends ($45 million) and share repurchases ($78 million).
• Leverage: 3.6x net debt to EBITDA, improved from 3.8x in Q3 2024.

2. Strategic Updates and Business Highlights

• Cemetery Performance: Strong growth in cemetery preneed sales, with recognized preneed revenue up significantly due to higher property and merchandise sales.
• Funeral Segment: Core funeral services performed decreased by 3.5%, but average revenue per service increased by 3%.
• Sales Strategy: Focus on improving sales management and financing options for consumers, leading to higher sales velocity.
• Investment: $140 million in capital expenditures, including maintenance and growth capital for new builds and acquisitions.

3. Forward Guidance and Outlook

• 2025 EPS Guidance: Confirming a range of $3.80 to $3.90, with Q4 expected to be between $1.09 and $1.19.
• Funeral Volume Expectations: Anticipated to be slightly down to slightly up (1% range), with a better outlook compared to 2024.
• Cemetery Sales Growth: Expected low to mid-single-digit growth in preneed sales, with a focus on increasing awareness among cremation consumers.
• Long-term Growth Target: Aiming for 8% to 12% EPS growth in 2026, with confidence based on historical performance.

4. Bad News, Challenges, or Points of Concern

• Funeral Revenue Decline: Slight decline in funeral revenues and gross profits, attributed to lower service volumes.
• Higher Tax Rate: Increased tax rate due to nondeductibility of certain excess tax benefits, which negatively impacted EPS by $0.02.
• Transition Challenges: The shift to insurance-funded preneed contracts has led to a temporary decline in non-funeral home preneed sales production.
• Cost Pressures: Potential increases in cemetery maintenance costs due to inflationary pressures on labor and materials.

5. Notable Q&A Insights

• Cemetery Preneed Sales: Management expressed confidence in sustaining growth, with a focus on educating cremation consumers about available options.
• Sales Force Transition: The transition to insurance products for SCI Direct is expected to take time, with a return to growth anticipated in 2026.
• Expense Management: Continued efforts to control corporate G&A expenses, with a decrease noted in the current quarter.
• Market Position: Management highlighted the strong position in the market, with a robust backlog and favorable demographics supporting future growth.

Overall, SCI reported solid financial performance in Q3 2025, with strategic initiatives aimed at enhancing sales and managing costs. However, challenges in the funeral segment and the transition to new sales models present potential headwinds moving forward.