Summary of Service Corporation International (SCI) FY Conference Call Company Overview - **Company**: Service Corporation International (SCI) - **Industry**: Funeral services and cemetery operations - **Market Position**: Largest operator in the U.S. and Canada with approximately 17% market share by revenue, while other consolidators account for about 9% [4][6] Core Business Model and Strategy - **Business Segments**: Divided into funeral services and cemetery operations, with a focus on preneed contracts to secure market share and build trust fund portfolios [4][5] - **Earnings Growth Target**: Aiming for 8% to 12% earnings growth, with 5% to 7% from base business and 3% to 5% from capital deployment (acquisitions, growth capital, share repurchases) [6] Recent Performance and Trends - **Funeral Volume Trends**: - Increased by 13% in 2020 and 4% in 2021 due to COVID-19 - Declined by 4% to 5% in 2022, 5% to 6% in 2023, and expected to decline by 2.5% in 2024 [8][9] - Anticipating flat to slightly down volumes in 2025 due to normalization post-COVID [9] - **Cemetery Operations**: - Cemetery sales are closely linked to funeral volumes, with a decline in both areas noted during the pandemic recovery [11][12] Revenue and Pricing Dynamics - **Funeral Revenue per Service**: - Steady growth in low single digits driven by inflationary pricing power, with a shift towards cremation impacting average sales growth [14][16] - Current cremation mix at 60%, with expectations to stabilize around 75% to 80% in the long term [17] - **Preneed Sales**: - Transitioning from trust instruments to insurance contracts, which is expected to stabilize and grow preneed production in the future [22][23] - Anticipated low single-digit declines in funeral preneed production for 2025, with expectations for stabilization and growth in 2026 [27] Cemetery Preneed Sales - **Core vs. Large Sales**: - Core preneed sales account for 85% to 90% of the business, showing low single-digit growth [30] - Large sales (over $80,000) are more volatile and dependent on individual family decisions [31] - **Growth Outlook**: - Expecting low single-digit growth in cemetery preneed sales for 2025, with potential for stronger performance if macroeconomic conditions improve [35] Margin and Cash Flow Expectations - **Margin Dynamics**: - Cemetery margins have improved from around 20% to the lower 30s, with expectations for flat margins in 2025 due to low single-digit growth [48] - Funeral margins expected to remain around 21% for 2025 until demographic changes drive volume increases [49] - **Free Cash Flow**: - Projecting $860 million in operating cash flow for 2025, with expected free cash flow of around $550 million after capital expenditures [51] Land Management and Future Growth - **Cemetery Land Availability**: - Over 100 years of available inventory across 36,000 acres, but some cemeteries nearing capacity [57] - Strategies include raising prices, reconfiguring land, and acquiring adjacent properties to manage land constraints [59][61] Regulatory Environment - **Funeral Rule Compliance**: - SCI is prepared to comply with the FTC's funeral rule, with pricing already online at 75% of locations [56] Conclusion - SCI is navigating a post-COVID environment with a focus on stabilizing and growing its preneed sales, managing margins, and leveraging its land assets for future growth. The company remains optimistic about its long-term strategies despite current market challenges.

Core Points - Service Corporation International (SCI) announced a quarterly cash dividend of $0.32 per share, payable on June 30, 2025, to shareholders of record as of June 13, 2025 [1] - The Board of Directors has increased the authorized level of share repurchases by approximately $528 million, bringing the total current share repurchase authority to $600 million [2] - SCI is the largest provider of deathcare products and services in North America, serving over 600,000 families annually with a diversified portfolio of brands [4] Company Overview - SCI is headquartered in Houston, Texas, and operates 1,489 funeral service locations and 496 cemeteries across 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico [4] - The company offers a full range of services from simple cremations to full life celebrations, with its Dignity Memorial® brand recognized for professionalism and compassion [4]

Core Points - Service Corporation International (SCI) announced a quarterly cash dividend of $0.32 per share, payable on June 30, 2025, to shareholders of record as of June 13, 2025 [1] - The Board of Directors has increased the authorized level of share repurchases by approximately $528 million, bringing the total current share repurchase authority to $600 million [2] - SCI is the largest provider of deathcare products and services in North America, serving over 600,000 families annually with a diversified portfolio of brands [4] Company Overview - SCI is headquartered in Houston, Texas, and operates 1,489 funeral service locations and 496 cemeteries across 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico [4] - The company offers a full range of services from simple cremations to full life celebrations and personalized remembrances under its Dignity Memorial® brand [4]

[Glossary](index=3&type=section&id=GLOSSARY) The glossary defines key terms common to the deathcare industry, such as 'Atneed,' 'Preneed,' 'Cremation,' 'Cemetery Perpetual Care Trust,' and various revenue and service-related terms, to ensure consistent understanding throughout the report - The glossary defines key terms common to the deathcare industry, such as 'Atneed,' 'Preneed,' 'Cremation,' 'Cemetery Perpetual Care Trust,' and various revenue and service-related terms, to ensure consistent understanding throughout the report[8](index=8&type=chunk)[25](index=25&type=chunk)[30](index=30&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Service Corporation International's unaudited condensed consolidated financial statements and management's discussion and analysis for the first quarter [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Service Corporation International, including the statements of operations, comprehensive income, balance sheet, cash flows, and equity, along with detailed notes explaining the company's accounting policies, preneed activities, debt, equity, segment reporting, commitments, and earnings per share for the three months ended March 31, 2025 and 2024 [Unaudited Condensed Consolidated Statement of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Operations%20-%20Three%20Months%20Ended%20March%2031%2C%202025%20%26%202024) This statement provides a summary of the company's revenues, expenses, and net income for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statement of Operations (Three Months Ended March 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | Change (%) | | :----------------------------------- | :------------------ | :------------------ | :----------- | :--------- | | Total Revenue | $1,074,167 | $1,045,382 | $28,785 | 2.75% | | Gross Profit | $291,417 | $274,213 | $17,204 | 6.27% | | Operating Income | $251,687 | $232,204 | $19,483 | 8.39% | | Net Income | $142,927 | $131,274 | $11,653 | 8.88% | | Net Income Attributable to Common Stockholders | $142,880 | $131,301 | $11,579 | 8.82% | | Basic Earnings Per Share | $0.99 | $0.90 | $0.09 | 10.00% | | Diluted Earnings Per Share | $0.98 | $0.89 | $0.09 | 10.11% | [Unaudited Condensed Consolidated Statement of Comprehensive Income](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income%20-%20Three%20Months%20Ended%20March%2031%2C%202025%20%26%202024) This statement presents the company's net income and other comprehensive income components, reflecting total comprehensive income for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statement of Comprehensive Income (Three Months Ended March 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :----------- | :--------- | | Net Income | $142,927 | $131,274 | $11,653 | 8.88% | | Foreign Currency Translation Adjustments | $527 | $(8,480) | $9,007 | -106.22% | | Total Comprehensive Income | $143,454 | $122,794 | $20,660 | 16.83% | | Total Comprehensive Income Attributable to Common Stockholders | $143,407 | $122,824 | $20,583 | 16.76% | [Unaudited Condensed Consolidated Balance Sheet](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheet%20-%20March%2031%2C%202025%20%26%20December%2031%2C%202024) This statement provides a snapshot of the company's assets, liabilities, and equity as of March 31, 2025, and December 31, 2024 Condensed Consolidated Balance Sheet (as of March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (QoQ) | Change (%) | | :-------------------------------- | :---------------------------- | :----------------------------- | :----------- | :--------- | | Total Assets | $17,316,088 | $17,379,438 | $(63,350) | -0.36% | | Total Liabilities | $15,664,468 | $15,700,769 | $(36,301) | -0.23% | | Total Equity | $1,651,620 | $1,678,669 | $(27,049) | -1.61% | [Unaudited Condensed Consolidated Statement of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows%20-%20Three%20Months%20Ended%20March%2031%2C%202025%20%26%202024) This statement details the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statement of Cash Flows (Three Months Ended March 31) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :----------- | :--------- | | Net Cash Provided by Operating Activities | $311,147 | $220,123 | $91,024 | 41.35% | | Net Cash Used in Investing Activities | $(90,744) | $(96,805) | $6,061 | -6.26% | | Net Cash Used in Financing Activities | $(205,694) | $(133,988) | $(71,706) | 53.52% | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $14,837 | $(12,496) | $27,333 | -218.74% | [Unaudited Condensed Consolidated Statement of Equity](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Equity%20-%20Three%20Months%20Ended%20March%2031%2C%202025%20%26%202024) This statement outlines changes in the company's equity components, including common stock, retained earnings, and comprehensive loss, for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statement of Equity (Three Months Ended March 31) | Metric | March 31, 2025 (in thousands) | March 31, 2024 (in thousands) | Change (YoY) | Change (%) | | :-------------------------------- | :---------------------------- | :---------------------------- | :----------- | :--------- | | Common Stock | $146,885 | $148,980 | $(2,095) | -1.41% | | Capital in Excess of Par Value | $980,463 | $952,344 | $28,119 | 2.95% | | Retained Earnings | $534,032 | $475,545 | $58,487 | 12.30% | | Accumulated Other Comprehensive Loss | $(6,694) | $16,414 | $(23,108) | -140.78% | | Total Common Stockholders' Equity | $1,651,075 | $1,590,781 | $60,294 | 3.79% | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements, covering accounting policies, preneed activities, debt, equity, and other critical financial information [1. Nature of Operations](index=10&type=section&id=1.%20Nature%20of%20Operations) Service Corporation International (SCI) is North America's largest provider of deathcare products and services, operating a network of funeral service locations and cemeteries in the U.S. and Canada - SCI is North America's largest deathcare provider, operating **1,489 funeral service locations** and **496 cemeteries** (309 combination locations) across 44 U.S. states, 8 Canadian provinces, D.C., and Puerto Rico[39](index=39&type=chunk)[88](index=88&type=chunk) - The company sells cemetery property and funeral/cemetery merchandise and services on both an at-need (after death) and preneed (prior to death) basis[39](index=39&type=chunk) [2. Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines SCI's key accounting policies, including principles of consolidation, use of estimates, and treatment of cash, cash equivalents, and restricted cash - The unaudited condensed consolidated financial statements include SCI and its subsidiaries, as well as merchandise, service, and cemetery perpetual care trusts where SCI is the primary beneficiary[42](index=42&type=chunk)[43](index=43&type=chunk) Cash, Cash Equivalents, and Restricted Cash (in thousands) | Component | March 31, 2025 | December 31, 2024 | | :-------------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $227,159 | $218,766 | | Restricted cash | $9,077 | $2,633 | | Total cash, cash equivalents, and restricted cash | $236,236 | $221,399 | Receivables, Net (in thousands) | Component | March 31, 2025 | December 31, 2024 | | :---------------------- | :------------- | :---------------- | | Receivables | $99,932 | $98,381 | | Reserve for credit losses | $(3,781) | $(4,040) | | Receivables, net | $96,151 | $94,341 | - New FASB guidance on income tax disclosures (effective after December 15, 2024) and disaggregation of income statement expenses (effective after December 15, 2026) is not expected to materially affect SCI's financial position or results of operations[50](index=50&type=chunk)[51](index=51&type=chunk) [3. Preneed Activities](index=12&type=section&id=3.%20Preneed%20Activities) This note details SCI's preneed activities, including preneed receivables, trust investments, and deferred revenue, providing comprehensive data on their financial impact Preneed Receivables, Net and Trust Investments (in thousands) | Component | March 31, 2025 | December 31, 2024 | | :-------------------------------------- | :------------- | :---------------- | | Preneed receivables, net | $1,547,225 | $1,570,773 | | Trust investments, at market | $7,007,627 | $7,084,723 | | Insurance-backed fixed income securities and other | $237,042 | $237,868 | | Preneed trust investments | $5,118,545 | $5,168,559 | | Total Preneed receivables, net and trust investments | $6,665,770 | $6,739,332 | Preneed Receivables, Net by Type (in thousands) | Type | March 31, 2025 | December 31, 2024 | | :------- | :------------- | :---------------- | | Funeral | $142,178 | $151,801 | | Cemetery | $1,405,047 | $1,418,972 | | Total | $1,547,225 | $1,570,773 | Trust Investment-Related Activities (Three Months Ended March 31, in thousands) | Activity | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Deposits | $158,266 | $156,119 | | Withdrawals | $142,934 | $130,607 | | Purchases of securities | $555,267 | $341,998 | | Sales of securities | $473,883 | $334,719 | | Realized gains from sales of securities | $101,265 | $105,445 | | Realized losses from sales of securities | $(26,137) | $(31,815) | Recognized Trust Fund Income (Three Months Ended March 31, in millions) | Trust Type | 2025 | 2024 | | :-------------------------------- | :--- | :--- | | Preneed Trust Investments | $48.2 | $42.7 | | Cemetery Perpetual Care Trust Investments | $26.1 | $23.3 | Deferred Revenue, Net (in thousands) | Component | March 31, 2025 | December 31, 2024 | | :-------------------------------------------------------------------------------- | :------------- | :---------------- | | Deferred revenue | $2,764,162 | $2,745,104 | | Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts | $(993,634) | $(989,934) | | Deferred revenue, net | $1,770,528 | $1,755,170 | [4. Income Taxes](index=18&type=section&id=4.%20Income%20Taxes) This note details SCI's income tax expense and effective tax rate for the quarter, highlighting factors influencing the rate Effective Tax Rate (Three Months Ended March 31) | Metric | 2025 | 2024 | | :------------- | :--- | :--- | | Effective Tax Rate | 26.1% | 22.9% | - The higher effective tax rate in Q1 2025 (**26.1%**) compared to Q1 2024 (**22.9%**) is mainly due to non-deductible excess tax benefits on employee share-based awards and state/foreign tax expenses, exceeding the federal statutory rate of **21.0%**[61](index=61&type=chunk) [5. Debt](index=18&type=section&id=5.%20Debt) This note outlines SCI's debt structure, including various senior notes, term loans, and credit facilities, detailing interest rates and compliance with covenants Debt Components (in thousands) | Debt Type | March 31, 2025 | December 31, 2024 | | :-------------------------------------- | :------------- | :---------------- | | Total Debt | $4,825,935 | $4,835,298 | | Less: Current maturities of long-term debt | $(87,690) | $(83,850) | | Total Long-Term Debt | $4,738,245 | $4,751,448 | Interest Rate Composition | Metric | March 31, 2025 | December 31, 2024 | | :----------- | :------------- | :---------------- | | Fixed Debt | 4.65% | 4.64% | | Floating Debt | 6.46% | 6.50% | | Total Debt | 4.92% | 4.93% | - Approximately **85% of total debt** had a fixed interest rate at March 31, 2025. The company was in compliance with all debt covenants, including a leverage ratio of **3.59** against a maximum of **5.00**[64](index=64&type=chunk)[66](index=66&type=chunk)[95](index=95&type=chunk) - During Q1 2025, SCI issued **$187.5 million** in new debt (Bank Credit Facility and Corporate Headquarters Debt Facility) and made aggregate debt payments of **$201.5 million** (Bank Credit Facility, Term Loan, and other debt)[67](index=67&type=chunk)[69](index=69&type=chunk) [6. Credit Risk and Fair Value of Financial Instruments](index=19&type=section&id=6.%20Credit%20Risk%20and%20Fair%20Value%20of%20Financial%20Instruments) This note provides fair value estimates for SCI's financial instruments, emphasizing that carrying values for short-term instruments and preneed contracts approximate fair value Fair Value of Debt Instruments (in thousands) | Debt Instrument | March 31, 2025 | December 31, 2024 | | :-------------------------------------- | :------------- | :---------------- | | 7.5% Senior Notes due April 2027 | $141,444 | $140,615 | | 4.625% Senior Notes due December 2027 | $538,852 | $536,052 | | 5.125% Senior Notes due June 2029 | $738,195 | $728,430 | | 3.375% Senior Notes due August 2030 | $761,447 | $745,612 | | 4.0% Senior Notes due May 2031 | $728,568 | $712,640 | | 5.75% Senior Notes due October 2032 | $789,528 | $778,752 | | Term Loan due January 2028 | $637,031 | $641,250 | | Bank Credit Facility due January 2028 | $110,000 | $120,000 | | Corporate Headquarters Debt Facility due February 2037 | $2,522 | $0 | | Mortgage notes and other debt | $84,989 | $85,574 | | Total Fair Value of Debt Instruments | $4,532,576 | $4,488,925 | - Fixed-rate loans are classified as Level 2 fair value measurements, while the Term Loan, Bank Credit Facility, Corporate Headquarters Debt Facility, and mortgage/other debt are Level 3, estimated using discounted cash flow analysis[70](index=70&type=chunk) [7. Equity](index=20&type=section&id=7.%20Equity) This note details SCI's share repurchase program, including the number of shares repurchased and the remaining authorization - During the three months ended March 31, 2025, SCI repurchased **1,636,341 shares** of common stock at an aggregate cost of **$130.8 million**, averaging **$79.93 per share**[71](index=71&type=chunk) - As of March 31, 2025, **$153.7 million** remained authorized under the share repurchase program. An additional **916,010 shares** were repurchased for **$71.3 million** subsequent to quarter-end[71](index=71&type=chunk)[72](index=72&type=chunk) [8. Segment Reporting](index=21&type=section&id=8.%20Segment%20Reporting) This note provides disaggregated revenue and gross profit information for SCI's funeral and cemetery operations, its reportable segments Segment Revenue and Gross Profit (Three Months Ended March 31, in thousands) | Segment | 2025 Revenue | 2024 Revenue | YoY Revenue Change | 2025 Gross Profit | 2024 Gross Profit | YoY Gross Profit Change | | :-------------------- | :----------- | :----------- | :----------------- | :---------------- | :---------------- | :---------------------- | | Funeral Operations | $639,494 | $604,733 | $34,761 (5.75%) | $153,978 | $131,874 | $22,104 (16.76%) | | Cemetery Operations | $434,673 | $440,649 | $(5,976) (-1.36%) | $137,439 | $142,339 | $(4,900) (-3.44%) | | Total from Customers | $1,074,167 | $1,045,382 | $28,785 (2.75%) | $291,417 | $274,213 | $17,204 (6.27%) | Revenue from External Customers by Geography (Three Months Ended March 31, in thousands) | Geography | 2025 | 2024 | YoY Change | | :---------- | :----------- | :----------- | :--------- | | United States | $1,020,407 | $988,456 | $31,951 | | Canada | $53,760 | $56,926 | $(3,166) | | Total | $1,074,167 | $1,045,382 | $28,785 | [9. Commitments and Contingencies](index=23&type=section&id=9.%20Commitments%20and%20Contingencies) This note addresses SCI's insurance loss reserves, ongoing litigation, and regulatory matters, particularly concerning unclaimed property audits Self-Insurance Reserves (in millions) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Self-insurance reserves | $107.4 | $105.8 | - SCI is involved in various litigation and regulatory matters, including operational claims and employment-related issues, and accrues for unfavorable outcomes when probable and estimable[80](index=80&type=chunk) - Unclaimed property audits for preneed trust funds are ongoing in some states, though resolved in 18 states. The Florida Agreement allows SCI to retain trust fund earnings while escheating principal[82](index=82&type=chunk)[83](index=83&type=chunk) [10. Earnings Per Share](index=23&type=section&id=10.%20Earnings%20Per%20Share) This note provides the reconciliation of basic and diluted earnings per share (EPS) for the three months ended March 31, 2025 and 2024 Basic and Diluted EPS Reconciliation (Three Months Ended March 31, in thousands, except per share amounts) | Metric | 2025 | 2024 | | :-------------------------------------- | :----- | :----- | | Net income — basic and diluted | $142,880 | $131,301 | | Weighted average shares — basic | 144,116 | 146,266 | | Weighted average shares — diluted | 145,292 | 147,913 | | Basic EPS | $0.99 | $0.90 | | Diluted EPS | $0.98 | $0.89 | - Diluted EPS computation excluded **4 thousand antidilutive options** in 2025 and **569 thousand** in 2024[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on SCI's financial performance, liquidity, and capital resources for the three months ended March 31, 2025 [The Company](index=25&type=section&id=The%20Company) Service Corporation International (SCI) is North America's largest deathcare provider, operating 1,489 funeral service locations and 496 cemeteries - SCI operates **1,489 funeral service locations** and **496 cemeteries** (309 combination locations) across 44 U.S. states, 8 Canadian provinces, D.C., and Puerto Rico[88](index=88&type=chunk) - The company's financial position is supported by a **$15.9 billion backlog** of future revenue from trust and insurance-funded preneed sales as of March 31, 2025[88](index=88&type=chunk) - Factors affecting operating results include demographic trends, market share, cremation trends (cremation rate increased **70 basis points to 64.1%** in Q1 2025), cost control, and pricing leverage[90](index=90&type=chunk)[142](index=142&type=chunk) [Financial Condition, Liquidity, and Capital Resources](index=25&type=section&id=Financial%20Condition%2C%20Liquidity%2C%20and%20Capital%20Resources) SCI maintains strong liquidity and a favorable debt maturity profile, supported by robust operating cash flows and a strategic capital allocation approach - SCI's leverage ratio was **3.59** as of March 31, 2025, well within the credit agreement's maximum of **5.00**, and aligned with the target of **3.5x to 4.0x**[94](index=94&type=chunk)[95](index=95&type=chunk)[100](index=100&type=chunk) - Capital allocation priorities include investing in acquisitions and new locations, returning excess cash to shareholders (targeting **30-40% payout ratio** for dividends), and managing debt[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) Net Cash Flow Activities (Three Months Ended March 31, in millions) | Activity | 2025 | 2024 | Change (YoY) | | :-------------------------------- | :----- | :----- | :----------- | | Net cash provided by operating activities | $311.1 | $220.1 | $91.0 | | Net cash used in investing activities | $(90.7) | $(96.8) | $6.1 | | Net cash used in financing activities | $(205.7) | $(134.0) | $(71.7) | Surety Bonds Outstanding (in millions) | Type | March 31, 2025 | December 31, 2024 | | :-------------------------------------- | :------------- | :---------------- | | Bonds supporting preneed funeral and cemetery obligations | $420.2 | $418.8 | | Bonds supporting preneed business permits | $8.2 | $8.1 | | Other bonds | $27.7 | $27.5 | | Total surety bonds outstanding | $456.1 | $454.4 | Preneed Sales Production and Maturities (Three Months Ended March 31, in millions) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Insurance-funded sales production | $190.5 | $177.2 | | Insurance-funded maturities | $119.7 | $108.4 | | Trust-funded funeral sales production | $97.0 | $138.9 | | Trust-funded funeral maturities | $103.8 | $96.6 | | Cemetery preneed sales production | $324.6 | $330.8 | Total Backlog of Deferred Revenue (in billions) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------------------------------------------------------- | :------------- | :---------------- | | Backlog of trust-funded deferred revenue, net of estimated allowance for cancellation | $7.64 | $7.60 | | Backlog of insurance-funded revenue | $8.37 | $8.32 | | Total backlog of deferred revenue | $15.92 | $16.01 | [Results of Operations - Three Months Ended March 31, 2025 & 2024](index=32&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20March%2031%2C%202025%20%26%202024) This section provides a detailed analysis of SCI's operating results for the first quarter of 2025 compared to 2024, highlighting changes in net income and EPS [Management Summary](index=32&type=section&id=Management%20Summary) SCI reported increased consolidated net income and diluted EPS for Q1 2025, driven by higher funeral gross profit and lower interest expense Key Financial Highlights (Three Months Ended March 31, in millions, except per share amounts) | Metric | 2025 | 2024 | Change (YoY) | | :-------------------------------------- | :----- | :----- | :----------- | | Net income attributable to common stockholders | $142.9 | $131.3 | $11.6 | | Diluted earnings per share | $0.98 | $0.89 | $0.09 | | Pre-tax gains (losses) on divestitures and impairment charges, net | $5.0 | $(0.7) | $5.7 | | Tax effect from significant items | $(1.3) | $0.1 | $(1.4) | [Funeral Results](index=32&type=section&id=Funeral%20Results) Consolidated funeral revenue increased by $34.8 million, or 5.75%, in Q1 2025, primarily due to growth from acquired properties and higher comparable revenue Consolidated Funeral Performance (Three Months Ended March 31, in millions, except per service amounts) | Metric | 2025 | 2024 | Change (YoY) | Change (%) | | :-------------------------------- | :----- | :----- | :----------- | :--------- | | Consolidated funeral revenue | $639.5 | $604.7 | $34.8 | 5.75% | | Comparable funeral revenue | $625.9 | $602.6 | $23.3 | 3.87% | | Adjusted comparable funeral revenue | $549.2 | $527.4 | $21.8 | 4.13% | | Comparable services performed | 95,624 | 93,967 | 1,657 | 1.76% | | Comparable average revenue per service | $5,743 | $5,613 | $130 | 2.32% | | Consolidated funeral gross profit | $154.0 | $131.9 | $22.1 | 16.76% | | Comparable funeral gross profit | $152.4 | $131.7 | $20.7 | 15.72% | - Non-funeral home preneed sales revenue decreased by **$6.8 million**, primarily due to an operational decision to defer urn delivery to the time of need and a **25.5% decline** in sales production, which are considered short-term impacts[141](index=141&type=chunk) - Core general agency and other revenue grew **$8.3 million**, driven by higher commission rates from a new preneed insurance agreement[142](index=142&type=chunk) [Cemetery Results](index=33&type=section&id=Cemetery%20Results) Consolidated cemetery revenue decreased by $5.9 million, or 1.3%, in Q1 2025, mainly due to a decline in comparable cemetery revenue and preneed property sales Consolidated Cemetery Performance (Three Months Ended March 31, in millions) | Metric | 2025 | 2024 | Change (YoY) | Change (%) | | :-------------------------------- | :----- | :----- | :----------- | :--------- | | Consolidated cemetery revenue | $434.7 | $440.6 | $(5.9) | -1.34% | | Comparable cemetery revenue | $432.9 | $440.7 | $(7.8) | -1.77% | | Consolidated cemetery gross profit | $137.4 | $142.3 | $(4.9) | -3.44% | | Comparable cemetery gross profit | $136.8 | $142.6 | $(5.8) | -4.07% | - The decline in comparable cemetery revenue was primarily due to an **$11.9 million decrease** in recognized preneed property revenue, partially offset by a **$2.0 million increase** in at-need revenue[146](index=146&type=chunk) [Other Financial Statement Items](index=34&type=section&id=Other%20Financial%20Statement%20Items) This section summarizes changes in other key financial statement items for Q1 2025, including corporate expenses, divestiture gains, interest expense, and tax rate - Corporate general and administrative expenses increased by **$3.4 million to $44.7 million** in Q1 2025, driven by higher workers' compensation costs and incentive compensation accruals[148](index=148&type=chunk) - SCI recognized a **$5.0 million net pre-tax gain** on asset divestitures and impairments in Q1 2025, compared to a **$0.7 million net pre-tax loss** in Q1 2024[149](index=149&type=chunk) - Interest expense decreased by **$2.9 million to $61.5 million** in Q1 2025, primarily due to lower interest rates on floating rate debt[150](index=150&type=chunk) - The effective tax rate increased to **26.1%** in Q1 2025 from **22.9%** in Q1 2024, mainly due to non-deductible excess tax benefits on employee share-based awards[151](index=151&type=chunk) - Diluted weighted average shares outstanding decreased to **145.3 million** in Q1 2025 from **147.9 million** in Q1 2024, reflecting the impact of share repurchases[152](index=152&type=chunk) [Critical Accounting Policies](index=34&type=section&id=Critical%20Accounting%20Policies) This section states that SCI's critical accounting policies have not materially changed since December 31, 2024, and involve estimates and assumptions - No significant changes to critical accounting policies since December 31, 2024, as disclosed in the Annual Report on Form 10-K[153](index=153&type=chunk) - The preparation of financial statements requires management to make estimates and assumptions, which may affect reported amounts and could differ from actual results[153](index=153&type=chunk) [Cautionary Statement on Forward-Looking Statements](index=34&type=section&id=Cautionary%20Statement%20on%20Forward-Looking%20Statements) This section serves as a cautionary statement regarding forward-looking statements, emphasizing that actual results may differ materially due to various important factors and risks - Forward-looking statements are subject to important factors that could cause actual results to differ materially, and the company assumes no obligation to update or revise them[155](index=155&type=chunk)[156](index=156&type=chunk) - Key risk factors include market conditions affecting trust funds, potential need to replenish trust funds, effects of inflation/recession, significant weather events, debt covenants, reliance on surety bonding, third-party insurance company financial condition, and various operational, competitive, and regulatory risks[155](index=155&type=chunk)[157](index=157&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section provides information on SCI's exposure to market risks, specifically interest rates and prices of marketable securities, for non-trading purposes - The primary market risks are related to changes in interest rates and prices of marketable securities held in connection with preneed operations and sales[158](index=158&type=chunk)[159](index=159&type=chunk) - All market risk-sensitive instruments are entered into for purposes other than trading[158](index=158&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of SCI's disclosure controls and procedures and reports no material changes in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025, ensuring timely and accurate reporting[160](index=160&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025[161](index=161&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers other required information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the information regarding legal proceedings from Note 9 of the financial statements - Information on legal proceedings is incorporated by reference from Note 9 of the financial statements[164](index=164&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the company's risk factors as previously disclosed in its Annual Report on Form 10-K - No material changes to risk factors have occurred since the Annual Report on Form 10-K for fiscal year ended December 31, 2024[165](index=165&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section summarizes SCI's share repurchase activities during the three months ended March 31, 2025, detailing shares purchased and remaining authorization Share Repurchases (Three Months Ended March 31, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Approximate Dollar Value of Shares That May Yet be Purchased Under the Program | | :----------------------------------- | :----------------------------- | :--------------------------- | :-------------------------------------------------------------------- | :-------------------------------------------------------------------------- | | January 1, 2025 — January 31, 2025 | 346,855 | $78.02 | 331,431 | $254,713,742 | | February 1, 2025 — February 28, 2025 | 451,866 | $78.76 | 451,866 | $219,125,768 | | March 1, 2025 — March 31, 2025 | 837,620 | $79.60 | 821,516 | $153,731,417 | | **Total** | **1,636,341** | | **1,604,813** | | - **15,424 shares** in January and **16,104 shares** in March were purchased in connection with employee tax withholding obligations and were not part of the publicly announced repurchase program[166](index=166&type=chunk) [Item 3. Defaults Upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[167](index=167&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to Service Corporation International - Mine safety disclosures are not applicable to the company[168](index=168&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) This section confirms that no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[169](index=169&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, debt agreements, and certifications - The exhibits include corporate governance documents (Restated Articles of Incorporation, Bylaws), debt agreements (Senior Indenture, Credit Agreement), employment agreements, and certifications (Sarbanes-Oxley Act Section 302 and 906)[170](index=170&type=chunk) - Interactive data files formatted in Inline XBRL are also included as exhibits[170](index=170&type=chunk) [SIGNATURE](index=39&type=section&id=SIGNATURE) This section contains the official signature confirming the accuracy and completeness of the report - The report was signed on May 1, 2025, by Tammy Moore, Vice President and Chief Accounting Officer (Principal Accounting Officer) of Service Corporation International[171](index=171&type=chunk)

Core Insights - Service Corporation International (SCI) reported strong first-quarter 2025 results, with both revenue and earnings exceeding expectations, indicating robust performance in the funeral segment [1][2]. Financial Performance - Adjusted earnings per share were 96 cents, surpassing the Zacks Consensus Estimate of 90 cents, and increased from 89 cents in the prior year, reflecting a 7.9% year-over-year growth [2]. - Total revenues reached $1,074.2 million, a 2.8% increase from $1,045.4 million in the same quarter last year, also beating the consensus estimate of $1,054 million [2]. - Gross profit rose 6.3% to $291.4 million, with gross margin expanding by 90 basis points to 27.1% [3]. Segment Performance - **Funeral Operations**: Total funeral revenues were $639.5 million, exceeding the consensus estimate of $607.3 million, and up from $604.7 million in Q1 2024. Gross profit in this segment increased 16.8% to $154 million, with gross margin improving by 230 basis points to 24.1% [5]. - **Cemetery Operations**: Total cemetery revenues were $434.7 million, slightly below the consensus estimate of $446.4 million, and down from $440.6 million in the previous year. Gross profit decreased 3.4% to $137.4 million, with gross margin declining by 70 basis points to 31.6% [10]. Operational Metrics - The number of funeral services performed increased to 97,854 from 94,366 in the prior year, with average revenues per service rising to $5,748 from $5,608 [5]. - Comparable funeral services performed grew 1.8% to 95,624, while comparable cemetery results showed core revenues decreased 2.5% to $397.7 million [7][11]. Financial Health - As of the end of the quarter, the company had cash and cash equivalents of $227.2 million, long-term debt of $4.74 billion, and total equity of $1.65 billion [13]. - Net cash provided by operating activities was $311.1 million, with total capital expenditure amounting to $78.2 million [14]. Guidance - For 2025, SCI maintains its guidance for adjusted earnings per share at $3.70-$4.00, aligning with its long-term growth framework of 8% to 12% [15]. - Total capital expenditure for 2025 is projected at $315 million, with allocations for capital improvements, cemetery property development, and digital investments [17].

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $0.96 for Q1 2025, an increase from $0.89 in the prior year, reflecting a growth of approximately 7.9% [6][7] - Total comparable funeral revenue increased by over $23 million, or about 4%, compared to the prior year quarter [8] - Funeral gross profit increased by about $21 million, with the gross profit percentage rising by 240 basis points to over 24% [10] Business Line Data and Key Metrics Changes - Comparable core funeral revenue increased by $18 million, or about 4%, driven by a 2.5% growth in core average revenue per service and a 1% increase in core funeral services performed [9] - Preneed funeral sales production decreased by $32 million, or about 10%, primarily due to the transition to a new preneed insurance provider [11] - Comparable cemetery revenue decreased by $8 million, or about 2%, with a core revenue decline of $10 million attributed to lower recognized preneed property revenue [12][13] Market Data and Key Metrics Changes - The company anticipates flat to slightly down funeral volume compared to 2024, with average revenue per case growing at inflationary rates [15] - Preneed cemetery sales production is expected to grow in the low single-digit percentage range, resulting in cemetery revenue growth of about 1% to 2% [16] Company Strategy and Development Direction - The company is transitioning from a trust to an insurance-funded preneed model, which is expected to stabilize and grow in the latter half of 2025 [12][16] - The company confirmed its normalized earnings per share guidance range of $3.7 to $4 for 2025, representing a midpoint of 9% year-over-year growth [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sales pipeline, indicating a strong outlook for the remainder of the year despite external pressures [34][37] - The company is focused on managing inflationary costs and expects to maintain impressive gross margin percentages in the 32% to 33% range [17] Other Important Information - The company generated adjusted operating cash flow of $316 million in the quarter, exceeding expectations and showing a substantial improvement over the prior year [21] - Capital investments in Q1 2025 totaled $95 million, with $67 million allocated to maintenance capital and $15 million towards business acquisitions [22][24] Q&A Session Summary Question: Can you discuss the cemetery preneed sales production being down? - Management noted that large sales were worse than core production, but they expect a strong pipeline moving forward [32][34] Question: How do you view the impact of tariffs on costs? - Management indicated that they have long-term contracts that protect against immediate impacts and do not expect material effects on guidance [41][44] Question: What drove the increase in funeral volume in Q1? - Management attributed the increase to slight growth in market share and the effects of their strong preneed program [48][50] Question: What is the outlook for preneed funeral volume to insurance? - Management expects the annual premium generated from preneed funeral contracts to be higher than initially thought as they transition to insurance [60][62] Question: How do you see the impact of M&A on funeral volumes? - Management indicated that M&A could contribute 1% to 2% growth, depending on the timing and nature of acquisitions [92][94]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $0.96 for Q1 2025, an increase from $0.89 in the prior year, reflecting a growth of approximately 7.9% [6][7] - Total comparable funeral revenue increased by over $23 million, or about 4%, compared to the prior year quarter [8] - Funeral gross profit increased by about $21 million, with the gross profit percentage rising by 240 basis points to over 24% [10] Business Line Data and Key Metrics Changes - Comparable core funeral revenue increased by $18 million, or about 4%, driven by a 2.5% growth in average revenue per service and a 1% increase in services performed [8] - Preneed funeral sales production decreased by $32 million, or about 10%, primarily due to the transition to a new insurance provider [11] - Comparable cemetery revenue decreased by $8 million, or about 2%, with a core revenue decline of $10 million attributed to lower recognized preneed property revenue [12][13] Market Data and Key Metrics Changes - The company anticipates flat to slightly down funeral volume compared to 2024, with average revenue per case growing at inflationary rates [15] - Preneed cemetery sales production is expected to grow in the low single-digit percentage range, resulting in cemetery revenue growth of about 1% to 2% [16] Company Strategy and Development Direction - The company is transitioning from a trust to an insurance-funded preneed model, which is expected to stabilize and grow in the latter half of 2025 [12][16] - The company confirmed its normalized earnings per share guidance range of $3.7 to $4 for 2025, representing a midpoint of 9% year-over-year growth [15] - The focus remains on managing inflationary costs while maintaining gross margin percentages in the 32% to 33% range [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sales pipeline, indicating a strong outlook for the remainder of the year despite external pressures [34][37] - The company is aware of macroeconomic pressures but believes that its products are viewed as essential, which may mitigate trade-down effects during economic downturns [90] - Management expects preneed funeral sales production to normalize later in 2025, with a projected $1.2 billion in production, which is 27% higher than 2019 levels [16] Other Important Information - The company generated adjusted operating cash flow of $316 million in the quarter, exceeding expectations and showing a substantial improvement over the prior year [22] - Capital investments totaled $95 million, with $67 million allocated to maintenance capital and $13 million to growth capital [23][24] - The company returned $176 million to shareholders through dividends and share repurchases, repurchasing approximately 1.7 million shares at an average price of $79 [24] Q&A Session Summary Question: Can you discuss the cemetery preneed sales production being down? - Management noted that large sales were worse than core production, but they expect a strong pipeline moving forward, with April showing good sales [32][34] Question: How do you view the impact of tariffs on costs? - Management indicated that they have long-term contracts that protect against immediate impacts and do not expect material changes to guidance due to tariffs [40][44] Question: What drove the increase in funeral volume in Q1? - Management attributed the increase to slight market share growth and the effects of their pre-need program, despite quarterly volatility [48][50] Question: What is the outlook for preneed funeral volume transitioning to insurance? - Management expects the transition to insurance to yield higher premiums in the future, with a target of returning to growth rates of 3% to 5% by 2026 [62][65] Question: How does the company view the impact of M&A on earnings and volumes? - Management indicated that M&A could contribute 1% to 3% to growth, depending on the timing and nature of acquisitions [92]

May 1, 2025 Definitions: Non-GAAP Financial Measures Non-GAAP Financial Measures This information should not be considered in isolation or as a substitute for related GAAP measures. Additionally, these measures as calculated by the Company may not be comparable to similarly titled measures used by other companies. ADJUSTED EPS OR DILUTED EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS We use diluted earnings per share excluding special items (adjusted EPS) as an underlying operational performance measure of the ...

Core Insights - Service Corp. (SCI) reported revenue of $1.07 billion for the quarter ended March 2025, reflecting a year-over-year increase of 2.8% and a surprise of +1.94% over the Zacks Consensus Estimate of $1.05 billion [1] - Earnings per share (EPS) for the quarter was $0.96, up from $0.89 in the same quarter last year, resulting in an EPS surprise of +6.67% compared to the consensus estimate of $0.90 [1] Financial Performance Metrics - Total comparable funeral average revenue per service was $5,748, slightly above the estimated $5,720.04 [4] - The number of funeral services performed was 97,854, exceeding the average estimate of 92,544 [4] - Cemetery revenues were reported at $434.70 million, below the average estimate of $446.38 million, representing a year-over-year decline of -1.3% [4] - Funeral revenues reached $639.50 million, surpassing the estimated $607.33 million, marking a year-over-year increase of +5.8% [4] - Gross profit from cemetery services was $137.40 million, lower than the average estimate of $143.59 million [4] - Gross profit from funeral services was $154 million, exceeding the average estimate of $132.71 million [4] Stock Performance - Over the past month, shares of Service Corp. have returned -1%, compared to a -0.2% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Group 1 - Service Corp. reported quarterly earnings of $0.96 per share, exceeding the Zacks Consensus Estimate of $0.90 per share, and up from $0.89 per share a year ago, representing an earnings surprise of 6.67% [1] - The company posted revenues of $1.07 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.94%, compared to year-ago revenues of $1.05 billion [2] - Service Corp. has outperformed the S&P 500, with shares adding about 0.4% since the beginning of the year, while the S&P 500 declined by 5.5% [3] Group 2 - The current consensus EPS estimate for the coming quarter is $0.87 on revenues of $1.04 billion, and for the current fiscal year, it is $3.82 on revenues of $4.26 billion [7] - The Funeral Services industry, to which Service Corp. belongs, is currently ranked in the top 36% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]