Service Corporation services jump 14% in 2020

February 22, 2021/Finance/

Service Corporation International reported both their 4th Quarter 2020 and Full Year 2020 reports last week. Among the interesting items that you can find in the report, that can be accessed here, is that their total number of services increased from 319,616 in 2019 to 364,312 in 2020. . . .that’s an increase of 13.98%.

That number in itself is interesting considering the fact that Service Corporation International (SCI) is the largest provider of death care services in the United States and has a national scope in a large way. When all the numbers are finalized for 2020, COVID-19 deaths, it is believed will add about 15% to the total number of deaths predicted in the pre-COVID world in the United States. By reporting an almost 14% increase in the death numbers at their business, SCI somewhat gives credence to that expected number.,

There are some other interesting numbers in the SCI report. While the number of families that they served jumped almost 14%, total revenue jumped only 8.6% which indicates a revenue per service number on a continued downward trend. From our point of view, it probably indicates two criteria — the first being that COVID-19 rules for social distancing caused a loss in revenue per case simply because families were unable, in many circumstances by state guidelines, to hold the type of services that they preferred and, secondly, it may indicate an increase in low revenue direct cremation cases.

Here is what Service Corporation’s CEO Tom Ryan had to say in the report about the results, “As we experienced another quarter that will be remembered for its significant challenges, our associates can look back with pride for the innovative ways in which our teams stepped up to serve our communities, our customers, and each other. The steadfast dedication and courage of our teams has been nothing short of heroic over these many months and is reflective of our compassionate culture at SCI. . . . .Today we are reporting fourth quarter earnings per share of $1.15 and adjusted earnings per share of $1.13, a $0.53 increase over adjusted earnings per share for the prior year quarter. The growth was driven by elevated COVID-19 mortality which resulted in an increase in both funeral services performed and burials in our cemeteries. We also continued to benefit from a more efficient cost structure that helped drive significant improvement in both funeral and cemetery margins. Comparable preneed cemetery sales production continued to be strong and was higher by $40 million, or 16%, compared to the prior year quarter due to a higher velocity of contracts sold. “

While CEO Ryan made a point about Cemetery Preneed sales improvement, we did find this note in the report about funeral preneed:

Comparable preneed funeral sales production decreased $3.6 million, or 1.6%, in the fourth quarter of 2020 compared to 2019. We experienced a 2.5% decrease at our core funeral locations somewhat offset by a 2.4% increase at our non-funeral home locations. Although these results are improved from previous quarters, we continued to be impacted by social distancing restrictions on two of our primary lead sources, in-person seminars and in-home follow-up visits.

From our point of view at Funeral Director Daily it gives us the impression that cemetery preneed is probably increased because at the time of death a cemetery lot may be sold “At need” but at the same time a cemetery lot and services is also sold “Preneed” for what we would call that surviving or trailing spouse death in the future. i.e. it is the at need death that drove the preneed cemetery sale.

That would be in contrast to Preneed funeral plans that are generally sold to a couple at the same time as Preneed. We would concur with the SCI viewpoint that those sales have been impacted by the difficulty in having in-person seminars and in-home visit by preneed arrangement counselors. Our guess is that is a fairly standard problem in the preneed industry at this time.

We expect to report more in-depth on Service Corporation International once we have read the earnings call transcript.

Disclaimer: The author of the article holds a stock position in Service Corporation International.

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