Service Corporation International Q2 FY2025 earnings call

• Business Performance: Generated adjusted earnings per share of $0.88, an 11% increase y-o-y. Funeral revenue and gross profit up, partially offset by lower cemetery gross profit and higher corporate G&A expenses.
• Funeral Details: Core funeral revenue up 2% due to 3.3% growth in average revenue per service (offset by 20bps cremation rate increase) and general agency revenue up $7M from higher commission rates. Preneed sales production down due to transition to new preneed provider.
• Cemetery Details: Revenue up 1% from core and other revenue. Preneed sales production up driven by large and core sales. Gross profit down due to higher selling compensation.
• Cash Flow and Capital Investments: Adjusted operating cash flow $168M, up $33M y-o-y. Capital investments $100M, including maintenance and growth capital.
• Corporate G&A: G&A expenses up $4.1M q-o-q, expect ~$40M per quarter remainder of year.
• Financial Position: Liquidity $1.4B, leverage 3.68x net debt to EBITDA, adjusted free cash flow expected ~$600M for 2025.

Funeral: Comparable funeral revenue increased over $15 million or about 3% over the prior year quarter. Core funeral revenues increased by $8 million or about 2%, with a 3.3% growth in core average revenue per service offset by a 1.5% decrease in core funeral services performed. Core general agency and other revenue grew by $7 million. Funeral gross profit increased by about $15 million, with gross profit percentage up 210 basis points. Preneed funeral sales production decreased by $29 million or about 9% y-o-y. Cemetery: Comparable cemetery revenue increased by $2 million or almost 1%. Comparable preneed cemetery sales production increased by almost $19 million or over 5%. Cemetery gross profit decreased by $4 million, with gross profit percentage down 110 basis points.

• Revised 2025 adjusted operating cash flow guidance $880M-$940M (up from prior $860M). Adjusted free cash flow ~$600M.
• Cash taxes expected to rise ~$120M y-o-y due to federal tax legislation. Effective tax rate expected 25%-26% in 2025.

• Uncertainties from forward-looking statements in SEC filings.
• Impacts of preneed sales transition on production.
• Cremation rate trends affecting revenue.
• Seasonality impacts on funeral volumes.

Q: On the dip in the recognition rate in the current quarter, is it normal volatility or unusual?

A: It's natural ebb and flow of the process, with recognition rate expected to rise in back half of year.

Q: Thoughts on cremation rate moderation?

A: Larger metro markets have high cremation rates, demographic factors affect, expecting lower headwind than prior.

Q: Financial benefit of shift in life insurance partner?

A: Incremental benefit from type of insurance product, counselors better equipped, production expected to grow.

Q: Impact of cash flow increase on capital deployment?

A: Continue investing to highest return, M&A program strong, greenfield investments ongoing.