SCI’s Tom Ryan talks 2nd Quarter 2020

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The 2nd Quarter of 2020, that period that encompasses the months of April, May, and June, was looked at as a quarter which would produce financial results that would be unique, maybe in the entire last century, simply because it was the first 3-month period of the COVID-19 pandemic.  As the United States went into the pandemic in February and March of 2020, many people theorized on how funeral homes and cemeteries would come through with things such as social distancing and no large gatherings commonplace as well as the possibility that funeral home and cemeteries would see an increase in death volumes.

What is interesting, now that the public companies have reported their financial results, is that most people got the situation right.  Prognosticators envisioned national companies that would have an increase in deaths but a decrease in revenue per services simply because people could not congregate at funerals or visitations.  And, it appears that is what happened.

Service Corporation International CEO Thomas Ryan was asked many questions pertaining to this time period and his thoughts on how his company came through the 2nd Quarter in Service Corporation International’s earnings call which you can read here.  Here are some replies by Ryan:

On the 2nd Quarter in general:   When we last spoke in late April, while we were seeing a significant increase in funeral case volume, we were also experiencing a significant decline in preneed cemetery sales production of some 40% and a decline in the funeral sales average of about 12%. Both of these key operating drivers were being impacted by government-mandated stay-at-home orders, which fueled consumers’ fear of closely interacting with others in gathering and group settings.

We implemented a number of temporary cost-saving initiatives and quickly introduced additional technology to support our operations, sales efforts and administrative functions. Early on, the preponderance of the funeral volume increases were being felt on the East Coast, Michigan, Illinois and Louisiana. These markets, along with California, due to stay at home orders, experienced meaningful declines in funeral sales averages. On the cemetery side, we saw significant declines in a lot of places in preneed cemetery sales and more pronounced in our larger markets on the West Coast.

As we moved into May, we began to see averages improve across the country as states began to reopen with the Northeast being the notable exception. Subsequently, the funeral average improved from around 12% to down about 8% when compared to the prior year. Cemetery preneed sales really began to pick up mid-May as stay-at-home orders were relaxed. We finished the month strong with growth across all business units led by our California and Hispana businesses. A big thanks to our North American sales and marketing organization, whose focus and commitment helped to grow preneed cemetery sales 19% for the month.

By June, case volume was still strong, growing over 10%, while the funeral average continued to improve, particularly in the Northeast,

Tom Ryan

albeit still negative compared to the prior year quarter. Funeral volume growth was most pronounced in California, Texas and Arizona. And this time, we did not see any material degradation of the funeral average in those specific markets versus the prior year. Momentum in preneed cemetery sales continued into June, finishing the month with an impressive 40% growth over the prior year and bringing the quarter’s preneed cemetery sales production growth to over 10%.”

On Revenue per case: The reduction in professional service revenue combined with significant reductions in floral and catering sales drove the overall sales average decline. The good news is that the average sale was down over 12% in April and has improved to being down 5% in June. Cases with services attached continued to improve and was 57% for the month of June. Recognized preneed revenue and General Agency revenues were below prior year, primarily as we saw preneed funeral sales production decline over 27%. Social distancing, particularly around our educational events such as seminars and grassroots events, had a more pronounced effect on our preneed funeral sales versus our preneed cemetery sales.”

On Cemetery business:  Now shifting to cemetery. Comparable cemetery revenue increased almost $6 million in the second quarter, driven by a $9 million or 11% increase in atneed revenue, offset by a $3 million decline in recognized preneed revenue. This atneed increase correlates with higher funeral volume driven by the effects of COVID-19.

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