Service International(US:SCI)2022-05-04 20:05Operations Overview - The company operates 1,467 funeral service locations and 488 cemeteries across 44 states and eight Canadian provinces, serving approximately 600,000 families annually[99]. - The company plans to continue strategic acquisitions and build new funeral service locations to enhance market share and achieve economies of scale[110]. Financial Performance - Consolidated net income attributable to common stockholders for Q1 2022 was $219.5 million ($1.34 per diluted share), compared to $228.9 million ($1.33 per diluted share) in Q1 2021[150]. - Consolidated funeral revenue increased to $649.1 million in Q1 2022 from $619.4 million in Q1 2021, reflecting a $29.7 million increase[153]. - Comparable funeral revenue for Q1 2022 was $635.9 million, up from $618.2 million in Q1 2021, indicating a growth of approximately 2.8%[152]. - Consolidated revenue from cemetery operations grew by $4.8 million, or 1.0%, to $482.8 million, primarily due to a $3.9 million increase from newly constructed and acquired properties[160]. Revenue and Sales - Total sales production for preneed and atneed services reached $495.2 million in Q1 2022, up from $454.3 million in Q1 2021[126]. - Preneed insurance-funded sales production increased to $164.7 million in Q1 2022 from $133.3 million in Q1 2021, with the number of contracts sold rising to 26,904 from 23,789[124]. - Revenue recognized from backlog was $184.0 million in Q1 2022, compared to $167.3 million in Q1 2021[126]. Backlog and Deferred Revenue - As of March 31, 2022, the company has a $13.6 billion backlog of future revenue from trust and insurance-funded preneed sales, enhancing revenue stability and predictability[100]. - Total backlog of deferred revenue as of March 31, 2022, was $13.64 billion, slightly down from $13.66 billion as of December 31, 2021[150]. - The backlog of trust-funded deferred revenue, net of estimated allowance for cancellation, was $6.58 billion as of March 31, 2022, compared to $6.69 billion previously[150]. Profitability Metrics - The gross profit from consolidated funeral operations was $196.0 million in Q1 2022, compared to $194.4 million in Q1 2021[152]. - Consolidated funeral gross profit increased by $1.6 million, or 0.8%, to $193.4 million, while the comparable gross profit percentage decreased by 120 basis points to 30.4% due to higher costs[156]. - Comparable average revenue per service increased to $5,430 in Q1 2022 from $5,153 in Q1 2021, representing a growth of approximately 5.4%[152]. Cost and Expenses - Interest expense increased by $3.2 million to $39.0 million for the three months ended March 31, 2022, primarily due to the issuance of fixed-rate bonds[164]. - Corporate general and administrative expenses remained flat at $41.7 million in the first quarter of 2022 compared to the first quarter of 2021[162]. Shareholder Returns - The company targets a dividend payout ratio of 30% to 40% of after-tax earnings, with quarterly dividends growing from $0.025 per share in 2005 to $0.25 per share in 2022[112]. Tax and Shares - The effective tax rate was 26.0% for the three months ended March 31, 2022, compared to 25.3% for the same period in 2021, influenced by a decrease in the cash value of certain life insurance policies[165]. - The diluted weighted average number of shares outstanding decreased to 163.8 million for the three months ended March 31, 2022, from 172.4 million in the same period in 2021, reflecting share repurchases[166]. Investment and Trusts - Recognized trust fund income related to preneed trust investments was $45.9 million in Q1 2022, compared to $45.0 million in Q1 2021[148]. - The fair value of the backlog of insurance-funded contracts was $7.06 billion as of March 31, 2022, equal to expected proceeds from associated insurance policies[150]. - The trusts' asset allocation included approximately 59% equities, 28% fixed income securities, and 9% alternative investments as of March 31, 2022[147].