Service Corporation International (SCI), the largest single entity seller of funeral and cremation services in the United States, reported their 2nd Quarter 2019 and mid-year 2019 financial results yesterday. SCI has approximately 1500 funeral home, crematories, and cemeteries under its umbrella and is said to garner about 15-18% of the American death care dollar.
Because of that largeness, their results can often be looked upon as trends of how the industry may be moving. From our point of view at Funeral Director Daily this 2nd Quarter report does nothing to make a person set aside the idea of lower revenues per death case as the trending norm.
Highlights of the financial report, which can be seen here, included a growth in overall revenue to $813 million for the quarter as compared to $796 million from the same quarter a year ago. Another highlight was that pre-need sales from non-funeral home contracts sold increased about 11.2% over the same period of 2018. Non-funeral home contracts sold are explained by SCI as “a contract sold through one of our non-funeral home sales channels such as SCI Direct”.
One of the trends we are fairly certain that will happen in the future is that there will be more deaths per capita in the United States. However, the flip side of that good news for funeral purveyors is that it is believed that the revenue per case for death care will drop as consumers will spend less. . . mainly from the high percentage increase in cremation.
A look at the SCI numbers for 2Q 2019 show that is exactly what is happening with their business at this time. They did do $813 million in revenue for the quarter, but that was for, what they say, was 79,054 cases or an average of about $5,150 per case. In the preceding year, the company did only $796 million in revenue, but that was for 76,210 cases or an average of about $5,260 per case.
In essence the company did almost 4% more death care cases but for an average revenue of about 2.1% less revenue per case. A result of those numbers is that Operating profit from the funeral services segment of SCI was virtually flat at a little over $90 million for the quarter which actually dropped the Operating margin from 2018’s 19.3% to 2019’s 18.9%. It is our opinion at Funeral Director Daily, that not only for SCI, but for other funeral providers as well, that operating margin will continue to erode in sync with the decline of revenue per case.
Service Corporation also reported in its financial report that its comparable cremation rate rose to 56.7% from last year’s 54.8%. . .a rise of 1.9% on the year.
We expect to comment more after we listen and read the transcript from the Service Corporation International quarterly conference call.