SCI’s Tom Ryan and others discuss SCI’s 3Q Earnings Report

Service Corporation International (SCI) sometimes takes shots from others in the industry simply because of their size.  Being the largest in any business category simply makes you an easy target.

Being the largest also means you need great leadership to get on top and eventually stay there.

SCI reported record revenues and earnings in the past quarter and, while that could be something to really crow about, at Funeral Director Daily we recognize SCI’s President Tom Ryan as one of those balanced leaders who is both empathetic and pragmatic about how SCI’s record quarter was achieved.

Yes, Service Corp had 3Q earnings per share of $0.79 when they expected only $0.42 and they had revenues of $918.2 million when they only expected about $801 million.  However, instead of gloating about that report, Ryan made much of his 3Q comments about the human effort and emotional toll that it took, both on SCI team members and the North American public, pertaining to the COVID-19 in achieving those goals.

We think that is real leadership.  It is our opinion that it doesn’t take a rocket scientist to understand that in a country where we have had over 225,000 pull forward deaths, and Ryan will bring up the idea that maybe that number is over 325,00o pull forward deaths, that the largest mortuary and cemetery operator would have better than expected results. At Funeral Director Daily, we appreciate Ryan’s attitude in understanding that also.

You can read the SCI earnings transcript here.  We are going to leave the financial information mostly out of our report and focus on some items that we took from the report that may help funeral homes in their decisions going forward.

Tom Ryan

Here is a couple of quotes from the report attributed to SCI CEO Tom Ryan:

Ryan:  “It’s a bit awkward and very humbling for us to speak to you today about our financial results for the quarter at a moment in time that has been so sad, so challenging and filled with so much uncertainty for so many people . . . ”

Ryan:  “. . . let me first say to our entire SCI family and particularly to our front-line associates, thank you so much for your courage and resolve, and for putting the safety of our client families and teammates first. In our funeral homes, personal care centers and cemeteries, you care for our client families and our communities during the most difficult of days through the most difficult of circumstances. You provide our families the opportunity to grieve, remember and celebrate starting them on the path to healing and closure, which is so important to what we do. So thank you.”

Funeral Director Daily:   The USA has already had 225,000 deaths from COVID.  Those deaths over and above the 2.8 million deaths that the CDC predicted for 2020 would indicate an 8% increase over the projected deaths expected in the country.  Here’s what CEO Ryan had to say where he believes the number of pull forward deaths may be well in excess of that number.

Ryan:  “While we believe most of the increase in cases is due to the direct impact of COVID-19, the CDC has identified approaching 100,000 excess non-COVID-19 deaths associated with cardiovascular events, diabetes, cancer, suicide and drug overdoses. We are hearing that the collateral damage effect from restricted mobility, whether government-mandated or behaviorally induced has resulted in deferred or foregone medical care for life-threatening disease screening and limited access to mental health care, potentially contributing to these excess non-COVID deaths. Our discussions with our market leaders support this position. . . “

Funeral Director Daily:  Here’s what CEO Ryan has to say about moving forward in what we hope is a post-COVID world.

Ryan:  “In a scenario where COVID has little to no impact on 2021, we would anticipate funeral volumes to decline in the 12% to 15% range from 2020 levels or a 2% to 5% decline from 2019 levels. . . . “

Funeral Director Daily:  Here’s what CEO Ryan had to say about death care with services bouncing back.

Ryan:  “. . . people are not having larger gathering and as we shared with you, our attachment rate for service used to be 63%, it drop to 40%, it’s now back to 58%.”

Funeral Director Daily:  Finally, we found a couple of comments in the earnings call made by CFO Eric Tanzberger and COO Jay Waring interesting as they pertain to the future about these items — acquisitions and gaining market share.  The comment about acquisitions brought up the idea of a presidential candidate looking at a higher capital gains tax rate and the market share thought came as it pertains to consumers now putting “safety” into their thought process about choosing a death care provider.

CFO Tanzberger on acquistions:  “. . .There’s a candidate that’s got a 39.6% right on capital gains out there. If we went that direction, I do think that’s going to motivate a lot of people.” 

COO Waring on consumer behavior:  “One thing we’re seeing about this, Tom, is a tremendous focus on safety, tremendous focus on quality, the PPE. . . . We actually added a question to our J.D. Power survey, we did that in April, to the families that use us, that ask, “Did you feel safe and clean of the location when you visit our location?” And over 99.5% of families said yes. So anecdotally, we were in Los Angeles a couple of weeks ago, and the team of Rose Hills said, we believe we are gaining share because we have a reputation in our community of safety and cleanliness. They feel comfortable coming here for gathering and for services as do clergy.”

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