Service Corp. International (SCI) 1 Aug 24 2024 Q2 Earnings call transcript

In SCI's second-quarter earnings call, management provided insights into the company's financial performance and outlook for the rest of the year. Despite facing challenges such as a decline in funeral services and operational changes, SCI remains optimistic about its future prospects, with a focus on growth opportunities and strategic investments.

Financial Performance and Outlook

For the second quarter, SCI reported adjusted earnings per share of $0.79, down from $0.83 in the prior year. This decline was attributed to an anticipated decrease in services performed and increased interest expense, partially offset by better-than-expected results from recent acquisitions. The company's total comparable funeral revenues decreased by $5 million, with a 2.7% decline in funeral volumes. However, core preneed funeral sales production saw a 7 million increase, driven by robust increases in recognized preneed merchandise and service room.

Looking ahead, SCI expects its full-year results to be in the lower end of its adjusted earnings per share guidance range of $3.50 to $3.80 for 2024. Despite these challenges, the company anticipates growth in revenues and margins for both the funeral and cemetery segments in the second half of 2024, leading to impressive earnings per share growth compared to the prior year. This growth is expected to be driven by a more challenging funeral volume comparison in the third quarter and the positive impact of a new Global Atlantic preneed funeral insurance agreement.

Investment and Strategic Initiatives

SCI has continued its investment strategy, with over $300 million invested in the first half of 2024. This includes maintenance capital, growth capital, and mergers and acquisitions. The company has successfully closed three transactions, including in Illinois, Kentucky, and Western Canada, and expects to end the year above its targeted range of 75 to 125 million of capital invested.

Shareholder Returns and Capital Management

SCI has also returned nearly $170 million to its shareholders in the second quarter, including $43 million in dividends and $130 million in share repurchases. The company's cash flows remained resilient, with a $220 million increase in adjusted operating cash flow, primarily due to lower cash tax payments and strong cash receipts from premium and installment sales.

Key Takeaways

SCI's second-quarter earnings call highlighted the company's ability to navigate challenges and maintain a positive outlook for future growth. The company's focus on strategic investments, operational improvements, and shareholder returns positions it well for continued success in the competitive funeral services market. With a strong balance sheet, favorable debt maturity profile, and a robust preneed backlog, SCI is poised to capture incremental value for its shareholders as demographic trends continue to impact the industry.