Service Corporation International Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Business Performance Overview: Adjusted earnings per share for Q4 2025 were $1.14, an 8% increase year-over-year. Full year 2025 adjusted earnings per share were $3.85, a 9% increase. Revenues and gross profit increased in both funeral and cemetery segments.
• Funeral and Cemetery Results:
  • Funeral: Fourth quarter comparable funeral revenues up $3M; full year 2025 comparable funeral volume declined <1%. Non-funeral home revenue up $3M due to >11% growth in average revenue per service. Core general agency and other revenue down $8M due to lower commission rates.
  • Cemetery: Fourth quarter comparable cemetery revenue up $5M; other revenue up $8M from endowment care trust fund income. Preneed sales production up $15M for the quarter; full year 2025 preneed cemetery sales production grew ~4%.
• 2026 Outlook: Normalized earnings per share range for 2026 is $4.05 to $4.35 (midpoint $4.20, 5%-13% growth). Funeral volume expected flat to slightly down with average revenue per case growing at inflationary rates. Cemetery preneed sales production expected to grow in low to mid-single digits.
• Cash Flow and Capital Investments:
  • Fourth quarter adjusted operating cash flow $213M; full year 2025 adjusted operating cash flow $966M. Capital investments in Q4: $174M; full year $508M. Acquisitions in 2025 totaled $101M, within guidance range.

Segment Performance

• Funeral Segment:
  • Fourth Quarter 2025: Comparable funeral revenues increased $3 million (less than 1%) compared to prior year. Core funeral revenue rose $6 million (more than 1%), with core average revenue per service growing 3.2% despite a 30 basis point increase in the core commission rate. However, core funeral services performed declined 1.9% for the quarter. Full Year 2025: Comparable funeral volume declined less than 1%. Non-funeral home revenue increased $3 million due to over 11% growth in the average revenue per service. Preneed sales revenue increased over $2 million (more than 11%), while core general agency and other revenue declined $8 million (almost 13%) due to a lower general agency commission rate and product mix changes.
• Cemetery Segment:
  • Fourth Quarter 2025: Comparable cemetery revenue increased $5 million (about 1%). Other revenue rose $8 million primarily from endowment care trust fund income. Preneed merchandise and service sales production was up $15 million, and comparable preneed cemetery sales production grew $8 million (about 2%). Full Year 2025: Preneed cemetery sales production grew about 4%.

Guidance

• 2026 normalized earnings per share range: $4.05 to $4.35 (midpoint $4.20, 5%-13% growth).
• Funeral Segment: Expected flat to slightly down volume with average revenue per case growing at inflationary rates, higher general agency revenue from preneed sales, and fixed costs managed below inflation.
• Cemetery Segment: Preneed sales production growth in low to mid-single digits, revenue growth 2%-5%, and gross margin expansion 30-60 basis points.

Risks

• Factors causing actual results to differ from forward-looking statements, including volume fluctuations, tax rate changes, and impacts from insurance partner transitions.

Question and Answer

• Q: Joanna Gajuk on cemetery preneed sales production growth and Brookfield activity
  • A: Thomas Ryan discussed cemetery preneed sales expected low to mid-single-digit growth, focusing on people retention, lead generation, lead-to-sale rate, and large sales.
• Q: Albert Rice on G&A expense
  • A: Eric Tanzberger explained G&A expense variability due to LTIP accruals and self-insured insurance impacts, expecting ~$40-42M per quarter going forward.
• Q: Tobey Sommer on lower than inflation expense growth
  • A: Thomas Ryan talked about labor efficiency, best practices sharing, and cost management tied to volume trends.
• Q: Tomohiko Sano on cemetery inventory development
  • A: Eric Tanzberger discussed capital deployment for tiered cemetery inventory and focus on high-return opportunities.
• Q: Parker Snure on GA revenue in funeral segment
  • A: Thomas Ryan explained commission rate normalization, product mix changes, and cancellation rates impacting GA revenue.
• Q: Scott Schneeberger on funeral volumes
  • A: Thomas Ryan discussed impact of flu, volume normalization post-COVID, and expectations for 2026 funeral volumes