Service International(SCI) - 2025 Q2 - Quarterly Results

Financial Performance Overview The company reported strong Q2 2025 financial results, driven by increased revenue and adjusted EPS, with management highlighting segment-specific growth drivers Second Quarter 2025 Highlights Service Corporation International reported strong Q2 2025 results with adjusted earnings per share of $0.88, an 11% increase year-over-year. Revenue grew by $31.4 million to $1.065 billion, and gross profit increased by 5%. Key operational achievements included a 3.1% growth in the comparable total funeral sales average and a 5.3% increase in cemetery preneed sales production Q2 2025 Key Financial Results (in millions, except per share data) | | 2025 Q2 | 2024 Q2 | 2025 YTD | 2024 YTD | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,065.4 | $1,034.0 | $2,139.6 | $2,079.4 | | Operating income | $224.5 | $220.8 | $476.1 | $453.0 | | Net income | $122.9 | $118.2 | $265.7 | $249.5 | | Diluted EPS | $0.86 | $0.81 | $1.84 | $1.69 | | Adjusted Diluted EPS | $0.88 | $0.79 | $1.84 | $1.68 | | Net cash from operations | $166.5 | $196.9 | $477.6 | $417.0 | - Key performance metrics for Q2 2025 showed positive growth - Revenue grew by $31.4 million compared to Q2 2024[7] - Gross profit increased by $13.5 million, or 5%[7] - GAAP earnings per share grew 6% to $0.86, while adjusted EPS grew 11% to $0.88[7] - Cemetery preneed sales production increased by 5.3%[7] Management Commentary The CEO attributed the impressive 11% growth in adjusted EPS to higher funeral revenue and effective fixed cost management, which led to a 14.8% increase in comparable funeral gross profit. In the cemetery segment, a focus on sales production resulted in a 5.3% increase in preneed sales, with the majority of this benefit expected in future periods as properties are developed - Funeral segment performance was driven by a higher average revenue per funeral and increased core general agency revenue, benefiting from a change in the preferred preneed insurance provider[3] - The cemetery segment's 5.3% increase in preneed sales production will primarily benefit future periods as the undeveloped property sold is constructed and the revenue is recognized[4] - The company reaffirmed its long-term growth strategy of growing revenue, leveraging scale, and making wise capital investments to enhance shareholder value[5] 2025 Financial Outlook The company reaffirmed its 2025 adjusted EPS guidance while raising its cash flow outlook due to anticipated lower cash taxes and working capital benefits Confirmed EPS and Raised Cash Flow Guidance The company confirmed its full-year 2025 adjusted EPS guidance range of $3.70 to $4.00. The guidance for net cash provided by operating activities (excluding special items) was raised to a new range of $880 million to $940 million, up from the previous $830 million to $890 million. This increase is attributed to lower anticipated cash taxes and stronger working capital benefits Revised 2025 Outlook (in millions, except per share amounts) | Metric | Original 2025 Outlook | Revised 2025 Outlook | | :--- | :--- | :--- | | Adjusted Diluted EPS | $3.70 - $4.00 | $3.70 - $4.00 | | Adjusted Operating Cash Flow | $830 - $890 | $880 - $940 | | Expected Cash Taxes | $175 | $145 | | Total Maintenance Capital Expenditures | $315 | $315 | - The cash flow outlook was increased due to lower expected cash taxes (midpoint reduced by $30 million) and stronger working capital benefits[9] Segment Performance Both funeral and cemetery segments demonstrated varied performance, with the funeral segment showing strong profit growth and the cemetery segment increasing preneed sales production Funeral Segment The funeral segment demonstrated strong performance with a 2.7% increase in comparable revenue, driven by a 3.3% rise in core average revenue per service and a 14.0% growth in core general agency revenue. This resulted in a significant 14.8% increase in comparable gross profit and a 210 basis point margin expansion to 19.9% Consolidated Funeral Results For the second quarter of 2025, consolidated funeral revenue increased to $591.4 million from $565.8 million in the prior year. Gross profit rose to $116.0 million, with the gross profit margin expanding to 19.6% from 17.7% Consolidated Funeral Results (in millions) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $591.4 | $565.8 | $1,230.9 | $1,170.5 | | Gross Profit | $116.0 | $100.4 | $270.0 | $232.3 | | Gross Profit % | 19.6% | 17.7% | 21.9% | 19.8% | Comparable Funeral Results Comparable funeral revenue grew 2.7% to $576.8 million, driven by a 3.3% increase in average revenue per service and higher general agency revenue. Despite a 1.5% decrease in core funeral services performed, gross profit surged 14.8% to $114.6 million due to revenue growth and effective cost management. Preneed sales production declined 8.8%, impacted by the transition to a new insurance provider Q2 Comparable Funeral Performance vs. Prior Year | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $576.8M | $561.6M | +2.7% | | Gross Profit | $114.6M | $99.8M | +14.8% | | Gross Profit % | 19.9% | 17.8% | +210 bps | | Total Services Performed | 84,622 | 85,353 | -0.9% | | Total Avg. Revenue / Service | $5,809 | $5,634 | +3.1% | | Total Preneed Sales | $299.3M | $328.1M | -8.8% | - Core general agency revenue grew by $7.2 million (14.0%), primarily due to higher commission rates resulting from the change in the company's preferred preneed insurance provider[31] - Comparable preneed funeral sales production decreased by $28.8 million (8.8%), which is attributed to the transition to a new preneed insurance provider that began in July 2024[31] Cemetery Segment The cemetery segment experienced modest comparable revenue growth of 0.4% to $470.0 million. While preneed sales production was strong, increasing 5.3%, the timing of revenue recognition on new property construction led to a slight decrease in recognized preneed revenue. Comparable gross profit decreased by 2.7% to $153.3 million, with margins contracting to 32.6% due to higher selling compensation on increased sales production Consolidated Cemetery Results For Q2 2025, consolidated cemetery revenue was $474.1 million, a slight increase from $468.2 million in Q2 2024. Gross profit decreased slightly to $155.5 million from $157.5 million, with the gross profit margin declining to 32.8% Consolidated Cemetery Results (in millions) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $474.1 | $468.2 | $908.8 | $908.9 | | Gross Profit | $155.5 | $157.5 | $292.9 | $299.8 | | Gross Profit % | 32.8% | 33.6% | 32.2% | 33.0% | Comparable Cemetery Results Comparable cemetery revenue saw a marginal increase of 0.4% to $470.0 million. A 5.3% increase in preneed sales production, driven by large and core sales, is expected to benefit future periods. However, gross profit declined by 2.7% to $153.3 million, and the margin contracted by 110 basis points, primarily due to higher selling compensation associated with the increased sales production Q2 Comparable Cemetery Performance vs. Prior Year | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $470.0M | $468.2M | +0.4% | | Gross Profit | $153.3M | $157.6M | -2.7% | | Gross Profit % | 32.6% | 33.7% | -110 bps | | Preneed Sales Production | $366.5M | $348.0M | +5.3% | - Preneed sales production increased by $18.5 million (5.3%), which will benefit future periods as the current undeveloped property sold is constructed and recognized[34] - The decrease in comparable cemetery gross profit was a result of modest revenue growth being offset by higher selling compensation on higher sales production[34] Other Financial Results This section details corporate expenses, cash flow dynamics, capital expenditure trends, and the strong performance of the company's trust funds Corporate Expenses and Income Taxes Corporate general and administrative expenses increased by $10.5 million to $49.5 million, largely due to a $6.4 million legal settlement. Interest expense remained stable at $64.1 million. The adjusted effective tax rate decreased to 25.4% from 25.8% in the prior year quarter, primarily due to non-taxable gains on certain life insurance policies - Corporate G&A expenses rose by $10.5 million in Q2 2025, with $6.4 million attributed to legal settlements and the remainder to higher auto/general liability claims and timing of incentive compensation accruals[34] - The adjusted effective tax rate for Q2 2025 was 25.4%, down from 25.8% in Q2 2024, mainly due to non-taxable gains on the cash surrender value of certain life insurance policies[34] Cash Flow and Capital Spending Net cash from operating activities was $166.5 million, a decrease from the prior year, primarily due to an $84.3 million increase in cash taxes paid. Excluding special items and cash taxes, operating cash flow increased by $32.7 million. Total capital expenditures decreased by $8.6 million to $83.0 million, mainly due to lower spending on digital investments and corporate projects - Net cash provided by operating activities was $166.5 million in Q2 2025, down from $196.9 million in Q2 2024. This was significantly affected by an expected $84.3 million increase in cash taxes paid[7][33] - Excluding special items and the increase in cash taxes, net cash provided by operating activities increased by $32.7 million, or over 14%[7][33] Capital Expenditures (in millions) | Category | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Maintenance & Cemetery Development | $68.9 | $82.4 | $135.7 | $152.4 | | Growth Capital Expenditures | $14.1 | $9.2 | $25.5 | $18.6 | | Total Capital Expenditures | $83.0 | $91.6 | $161.2 | $171.0 | Trust Fund Performance The company's trust funds generated strong returns in the second quarter of 2025. The combined trust funds saw a return of 8.4% for the three months and 7.8% for the six months ended June 30, 2025 Consolidated Trust Fund Returns (Gross) | Fund Type | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Preneed funeral | 8.4% | 7.6% | | Preneed cemetery | 8.6% | 8.1% | | Cemetery perpetual care | 8.0% | 7.6% | | Combined trust funds | 8.4% | 7.8% | Financial Statements and Non-GAAP Reconciliation This appendix provides detailed consolidated financial statements including operations, balance sheet, cash flows, and non-GAAP reconciliations for Q2 2025 Consolidated Statement of Operations The company reported Q2 2025 revenue of $1.065 billion and net income of $122.9 million, resulting in diluted EPS of $0.86. This compares to revenue of $1.034 billion, net income of $118.2 million, and diluted EPS of $0.81 in Q2 2024 Q2 2025 Consolidated Statement of Operations (in thousands) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Revenue | $1,065,444 | $1,034,016 | | Gross profit | $271,438 | $257,915 | | Operating income | $224,459 | $220,841 | | Net income attributable to common stockholders | $122,865 | $118,166 | | Diluted earnings per share | $0.86 | $0.81 | Consolidated Balance Sheet As of June 30, 2025, the company had total assets of $18.0 billion, up from $17.4 billion at year-end 2024. Total liabilities increased to $16.4 billion, while total equity decreased to $1.56 billion Consolidated Balance Sheet Highlights (in thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $434,141 | $377,330 | | Total assets | $17,980,205 | $17,379,438 | | Total current liabilities | $713,193 | $723,839 | | Long-term debt | $4,976,111 | $4,751,448 | | Total liabilities | $16,419,852 | $15,700,769 | | Total equity | $1,560,353 | $1,678,669 | Consolidated Statement of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $477.6 million. Net cash used in investing activities was $191.2 million, and net cash used in financing activities was $243.0 million, resulting in a net increase in cash of $49.1 million Six Months Ended June 30 Cash Flow Summary (in thousands) | | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $477,580 | $417,000 | | Net cash used in investing activities | ($191,235) | ($235,825) | | Net cash used in financing activities | ($243,025) | ($215,163) | | Net increase (decrease) in cash | $49,120 | ($36,653) | Non-GAAP Reconciliation The company reconciled its GAAP net income to non-GAAP "Earnings excluding special items." For Q2 2025, GAAP net income of $122.9 million was adjusted for items like gains on divestitures ($4.1M), legal settlements ($6.4M), and restructuring charges ($1.6M) to arrive at non-GAAP earnings of $125.5 million. This translated to an adjusted diluted EPS of $0.88 compared to the GAAP EPS of $0.86 Q2 Reconciliation of GAAP to Non-GAAP Earnings (in millions, except EPS) | | Net Income | Diluted EPS | | :--- | :--- | :--- | | As reported (GAAP) | $122.9 | $0.86 | | Gains on divestitures, net | ($4.1) | ($0.03) | | Legal settlement | $6.4 | $0.04 | | Restructuring charge | $1.6 | $0.01 | | Tax effects & other | ($1.3) | ($0.00) | | Excluding special items (Non-GAAP) | $125.5 | $0.88 |