Service Corporation International (SCI) conducted their 2nd Quarter 2025 Earnings Call where they answered questions from investment experts about two weeks ago.  You can access a copy of the transcript here.

During the Question and Answer session of that call SCI’s Executive Vice-President and CFO Eric Tansberger responded to a question about cash-flows and capital deployment with this answer:

“I mean we’re going to invest capital to the highest return. Certainly, we’ve done a lot in shares the first half of the year. I think you’ll see some momentum there that will continue at least the shares at this level. But the M&A program is going strong. I know someone commented that we spent $30 million year-to-date and the guidance is $75 million to $125 million in terms of investment. I think we’ll get there. I feel really good about the pipeline.

Some of the deals, I mean, if we just get through our LOIs alone right now, we’d be into that guidance, frankly, and there’s a lot more that we’re out there discussing. So I think we’ll get into that 75 — I think that’s a good guidance number for investment for M&A. Would we do more? Absolutely. The other thing that you have to remember, though, is — are the greenfield investments that we’re making, the new funeral homes and sometimes new cemeteries. This is a nice robust program, which we’ve told you — this year alone, we’re going to spend probably about $70 million on that. Could that go up? It’s possible, but it takes time. That’s a 3-year cycle. At any point in time, we have 30 to 35 projects that are in the pipeline. About 1/3 of those turn every year. And that’s at a more better velocity than what we’ve had in the past, but we’re excited about that.

M&A has its benefits because you get EBITDA and cash flow right away, but so do these construction projects have these benefits where you can build exactly where you want and exactly what you want, especially having a modern celebration of life venue when we design these brand-new funeral homes. So there’s a lot of opportunities out there, but they’re not different than what we have talked about in the past, and we’ll continue to invest as we can in both of those programs as well as the share repurchase program.”

 

Tom Anderson
Funeral Director Daily

Funeral Director Daily take:  I think that this is a very appropriate and interesting answer.  A lot of people in the Death Care business think all that SCI does is go out and buy funeral homes.  But, there responsibility is not necessarily to simply go out and buy funeral homes.  Shareholders want financial returns and Tanzberger lets one know with his comments that the company has multiple options to bring excellent financial returns to its shareholders.

Yes, there are funeral homes to be acquired that can immediately add to the operating EBITDA.  But there are also share buybacks which he indicates that SCI has “done a lot“.

The most interesting thing he says in his answer, in my opinon, is his talk of “greenfield investments”.  Tanzberger goes on to say about these greenfield investments, “. . .these construction projects have these benefits where you can build exactly where you want and exactly what you want, especially having a modern celebration of life venue when we design these brand-new funeral homes”.

I think that the answer also represents a realization  that Death Care has made some changes and things, in an overall scheme are becoming different than the way they have been in the past.   Building “exactly where you want and exactly what you want” is somewhat of a change in original modus operandi for SCI over their tried-and-true acquisition method.

I think SCI’s open-ness about building these new facilities that are designed for today’s consumer might tell some existing funeral homes that they are either outdated in client amenities or the demographic numbers of their current neighborhoods may not be as profitable as they once were.

Again, Tanzberger’s answer makes this statement about the new facility and cemetery program, “This is a nice robust program, which we’ve told you — this year alone, we’re going to spend probably about $70 million on that.”  

In the same answer he says this about SCI’s acquisition program, “So I think we’ll get into that 75 (million) — I think that’s a good guidance number for investment for M&A.”

I’m just going off the top of my head here. . . .but when is the last time SCI spent as much on building new as they did on acquisitions?

Obviously, there is a “proposition value” to what SCI eventually decides to do. . . . Has the “propsition value” changed over the years between aquisitions and building new “where and what you want”?  SCI might know more than many of us about facilities, traditions, and trends. . . . and, as Tanzberg states, “I mean we’re going to invest capital to the highest return”.

Disclaimer — The author of this article for Funeral Director Daily is a Service Corporation International shareholder.

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