SCI reports 1st Qtr 2022. . . . Preneed hitting on all cylinders

May 10, 2022/Finance/

Service Corporation International (SCI), North America’s largest grouping of funeral homes and cemeteries reported their 1st Quarter 2022 financial results last week. The company reported increased total sales of 3.2% which resulted in 1Q 22 revenue of $1.112 billion as compared to the 1st Quarter of 2021 where they reported sales of $1.077 billion. That’s an increase of over $34 million in sales for the quarter as compared to last year.

The results came on the heels of a reported decline of 1% in funeral services performed (105,430) as compared to last year’s 1Q number of 106,410. However, Average Revenue Per Service increased 4.8% to $5,398 as compared t last year’s $5,150.

SCI also saw their Cost of Revenue for the quarter increase about $40 million or 1.5% which led to a Gross Profit of $376 million as compared to 1Q 22 Gross Profit of $382 million. There is no doubt that inflationary costs contributed to Gross Profit percentages in the “Consolidated Funeral” results to drop about 1.2% and in the “Consolidated Cemetery” results to drop about 2.0%.

While increased revenue is excellent and increased inflationary expenses are probably expected, the highlight, from my point of view, for the future of the company is the increased preneed sales production that was generated during the quarter. “Comparable” Preneed Funeral Sales grew by $42 million, or 17%, for the quarter as compared to the same quarter last year and “Comparable” Preneed Cemetery Sales grew by $35 million or 11% over last year’s 1st Quarter.

Here’s what SCI CEO Tom Ryan said in the company earnings press release that you can read here, “Today we are pleased to report a solid start to 2022 with adjusted earnings per share of $1.34, a $0.02 increase over the prior year quarter. . . . .Both preneed funeral and cemetery sales production grew at double-digit percentages and we were able to generate $34 million of revenue growth against a strong first quarter 2021.”

During the Earnings Call, of which you can read the transcript here, CEO Ryan says this specifically to Preneed: “Preneed funeral sales production for the quarter exceeded our expectations growing $42 million or nearly 17% over the first quarter of 2021. Our core production was particularly strong, posting an increase of over 20% over the prior year quarter with solid gains in both velocity and sales average. We continue to see positive momentum in generating significantly more high-quality marketing leads at a lower cost through increased focus on digital leads as well as more sophisticated data targeting for our direct mail and seminar programs.”

CEO Ryan, during the Earnings call on families returning to services post-Covid: Our percentage of families selecting to have funerals and celebration of life services, has essentially returned to pre-COVID levels and the funeral sales average is being further positively impacted by an uptick in ancillary revenues such as flowers and catering. . . .This increase in average (revenue per service) was achieved despite a 120 basis point increase in the core cremation rate. Comparable core funeral volume declined about 4% compared to the prior year quarter. Slightly offsetting the positive impact of the funeral sales average.

Service Corporation International, in this press release, also announced their intent to continue to pay dividends for the immediate future and raised the board authorized amount of stock repurchases another $394 million to a total of $600 million.

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