Business, Finance, Preneed

Inside the numbers with SCI

Foundation Partners why I partnered

Last week we brought you an initial report on Service Corporation International’s report of their 1st Quarter 2020 results.  We also promised that we would go “inside the numbers” to see what other financial information we could find that may be of benefit to all of you who own or manage funeral homes.

Today, we bring you a little more from inside the numbers and don’t bring you any surprises but the numbers put forth continue to show increased cremation, a struggle to keep the “revenue per service” number moving forward, and the importance of preneed to your overall revenue numbers.  You can see the numbers for yourself here in SCI’s report.

At Funeral Director Daily we find very useful the numbers put forward by a public company in what is called “Same Store” sales.  In SCI’s case they define these numbers as their numbers for operations that were open and owned by SCI for the entire period which encompasses both dates of comparison — that would mean in this case these numbers come from their operations open from at least January 1, 2019 through March 31, 2020.

Using SCI’s funeral data they show that the company performed 85,169 total “same store” funeral services in Q1 2020 compared to 83,294 services the prior year.  That is an increase of 2.3%.  In Q1 2020 they recognized $497.9 million on those services and in Q1 2019 they recognized $490.0 million on those services. . . that is an increase of just 1.6%.

The idea of having what most funeral homes refer to as death calls increase 2.3% and your revenues increase only 1.6% would tell me that the “mix” of those calls is somewhat changing also.  And, in SCI’s case we can see that is true as they report that their total comparable cremation rate has jumped from 56.9% to 58.2% in the comparable periods.

Those numbers reinforce something we all have known for sometime. . .1) That cremation continues to grow and 2) That revenue from cremation will be less than earth burial.  So, we have to plan for our businesses to live with that fact.

SCI’s numbers also tell us something as to the value of preneed.  In their comparable funeral sales for Q1 2020 as compared to Q1 2019, they

Tom Anderson
Funeral Director Daily

illustrate that their “At need” revenue per service was $5526 for Q1 2020 which is an actual drop of $10 per service as compared to Q1 2019.  Showing the value of preneed, their numbers for “matured preneed”,  or what we believe is deaths that had a preneed policy, their average sale for Q1 2020 was $6,061 or $535 (which is almost 10% higher) than the “At need” revenue per case.  That just goes to show the value of having future clientele establish preneed policies.

It is pretty apparent that a preneed policy not only tends to build or reinforce market share to your funeral home, but in these days of changing consumer thoughts concerning cremation and/or burial, it tends to allow for a higher revenue number per service.  i.e. preneed gives us what we want. . . more services and more revenue.  You cannot underestimate the power of today’s preneed client on the future financial impact of your funeral home.

SCI does make this comment about their preneed funeral sales production for Q1 2020, “Comparable preneed funeral sales production decreased $16.6 million or 7.2%, in the first quarter of 2020 compared to 2019. . . . while trends were strong for most of the quarter, we experienced a severe decline in the last three weeks of March, primarily due to the social distancing effects of the pandemic.”

As the SCI report mentions, and we at Funeral Director Daily agree with, the social distancing issue that has happened in America during March, April, and May, is unfortunate.  SCI has mentioned that they are getting better at “getting in front” of potential preneed clients as they move forward, but it is our opinion that this 3-6 month period of low-level preneed production will eventually hurt funeral home revenues in the long run.

These are but a few of the numbers that we looked at in the SCI Q1 2020 report.  We find it fascinating to look inside the numbers and then, not only try to understand what is happening to the company – in this case Service Corporation International – but also understand how those numbers may relate to our own individual funeral businesses as well.

*The writer of this article owns stock in Service Corporation International.

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