Service Corporation International (SCI), the largest funeral home operator in North America, has grown its “Consolidated Funeral Revenue” 20.8% from 2019 (the latest year not affected by the pandemic) through 2024.  Their annual financial report lists this number as $1.92 billion in the year 2019 and $2.32 billion in the most recent year of 2024.

 

That math would then equate to an annual average rate of revenue growth for those five years of 4.16%.  In my opinion, that’s a pretty good rate for, as stock-picker Peter Lynch would say, a “slow-growth nickel at a time” industry.

 

However, when you dive a little deeper into the SCI report on “Consolidated Funeral Revenue” you will find a listing for “Non-funeral home” revenue and when the math is done on that line item you will find that it has grown 81% or has an incredible annual growth rate of 16.2% over the past five years.  In 2019 SCI reported $52.2 million of “Non-funeral home” revenue and in 2024 the company reported $94.8 million in that same category.

 

Here’s how SCI defines “Non-funeral home” revenue in its report, “Non-funeral home revenue represents services sold on a preneed or atneed contract through one of our non-funeral home sales channels (e.g. SCI Direct). . ”

 

In a 2022 Investor Day presentation, that you can access here,  SCI intimates that this channel includes Neptune Society

and National Cremation Society operations.  That same presentation mentions that, at that time, they operated 109 locations of this type in 31 states.

 

Here’s some other information that is pointed out about SCI Direct in that presentation that are features of this segment of SCI which the company says benefits from an “Expanding market”:

 

• (It is an) Asset Light preneed model serving the direct cremation consumer
• (It is an) Incremental Channel to capture the price sensitive consumer
• (It offers) Simple product offerings and packaged pricing
• (It has) growing volume and average

 

That same 2022 Investor Day presentation claimed that SCI Direct brought home $37 million in gross profit for the year 2021.  And, if you check the 2021 annual report you will find that the “Non-funeral home” revenue was listed at $74.1 million estimating that the gross profit margin of SCI Direct could be as high as 50%.

 

That same year, the gross profit percent for the entire Consolidated Funeral Revenue of SCI was listed at 26.7%.

 

Here is the website for SCI’s National Cremation Service brand

Here is the website for SCI’s Neptune Society brand

 

Funeral Director Daily take: I started researching this because last week I took part in a Continuing Education seminar with a few other funeral directors.  A couple mentioned to me that they had seen their Direct Cremation with No Services case volume rise fairly rapidly in the last year or so.

 

I think that these statistics from SCI bear out that situation is happening.  While revenues for SCI’s funeral service overall increased at an annual rate of 4.16%, revenue for “Non-funeral” channels increased four times that percentage.  I think that is a pretty good indication that the funeral consumer is asking for “less”. . . . . Whatever “less” may be.

 

I also think that there is a lot to be optimistic about with these numbers.  In extrapolating the “ballpark” figures, SCI “Non-funeral” channels did $74.1 million of business in 2021 out of 109 locations.  That’s an average revenue of $679,816 per location.  And, if it truly had a 50% gross profit margin that would leave each location with about $340,000 to pay the bills.

 

When I look at those numbers a couple of things come to mind:

1. Margins of that nature can support this business model
2. Location overheads need to be less than historic traditional funeral home structures — both in physical structure and employee work schedule structures to make the expense side of the equation work.
3. Direct cremation is a volume business  —  high volume operations will do very well. . . . Low volume operations will struggle to survive.

 

I finally surmise that if this is the “Death Care” that the consumer wants, we will see more and more consolidation of the traditional funeral home operations in a necessary move to lower overhead cost per case by increasing case volume per location.

 

More news from the world of Death Care:

• Death and Taxes.  Larkin Funeral Home blog (UT)
• “I still pray for him”.  Staten Island wrestles with legacy of funeral director who died after arrest.  SILive.com (NY)
• ‘Til death do they serve:  Jeff and Natasha Brown continue traditions at Catlettburg funeral home.  Yahoo
• Campton Cemetery referendum’s failure means cuts, tough decisions.  Kan County Chronicle (IL)

 

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