Funeral service company Service Corporation International (SCI), the largest owner of funeral homes in North America announced their 4th Quarter 2021 and 2021 Year-end results earlier this week.  You can see a press release of the entire announcement here.

Here’s how SCI’s CEO Thomas Ryan summed up the 4th Quarter of 2021 for the company, “Today we are proud to report fourth quarter earnings per share of $1.24 and adjusted earnings per share of $1.17, a $0.04 increase over the prior year quarter. We continued to experience elevated levels of funeral services, burials, and preneed sales against a robust customer spend, while experiencing some inflationary cost increases around staffing, maintenance, and energy related expenses. We were fortunate in being able to invest $112 million in acquiring 28 funeral homes and 2 cemeteries in six separate transactions this quarter. . . “

Funeral Director Daily noticed several highlights in the report.  For the 4th Quarter of 2021 SCI announced:

• Total revenue of $1.043 billion.  That’s a $73 million, or 8% increase, over the same period of 2020 when they reported $970.3 million in total revenue.
• “Comparable” Preneed sales were up 14% in 4Q 2021 over the same period in 2020.
• “Comparable” Cemetery sales were up 13% in 4Q 2021 over the same period in 2020.

For the full year of 2021 we give you these highlights:

• Total revenue of $4.14 billion in 2021 as compared to $3.51 billion in 2020.  That’s a 17.9% increase.
• “Operating Income” of $1.19 billion (28.7% of Revenue) in 2021 as compared to $842 million (23.9% of Revenue) in 2020.  That’s a 41.3% increase in Year over Year “Operating Income”

We also found it interesting to note that the number of “Comparable Funeral Services Performed” was down to 94,323 in 4Q 2021 as compared to 95,438 in 4Q 2020.  From our point of view, that roughly 1% decline could simply be attributed to the death rates – possible with less Covid related deaths – in the locales that SCI serves and in our opinion is not indicative of market share forces per se.

However, what was really interesting was the fact that SCI reported that they have increased their average revenue per case in 4Q 2021 8.1% over revenue per case in 4Q 2020.  They report average revenue per case in 4Q 2021 of $5,468 as compared to 4Q 2020 of $5,056.  It is our opinion at Funeral Director Daily that this increase is partly attributed to SCI being able to get a greater percentage of client families to schedule some type of funeral/memorial/celebration services that were lacking during much of the pandemic social distancing restrictions.

We also believe that the increase in revenue per case is a result in management’s decision to recognize the inflationary state of our economy and operate their businesses in relation to that decision. . .meaning raising prices fast enough to meet inflationary pressures.  I believe that management’s recognition that inflation was here, and not transitory, led to decisions that increased Operating Income for the year.

Finally, we believe that SCI’s investment in growth properties is in complete agreement with what we have been hearing about the acquisition environment.  We continue to expect to see acquisitions and consolidations moving forward. . . not only with SCI, but with the profession in general.

Funeral Director Daily take:  By now, you are tired of me telling you that by perusing these public reports from the big companies in funeral service you can improve your small funeral home operations and profits.  Here’s what I learned from this report:

• You need to raise prices to fight inflationary pressures.
• Raising prices may cost some customers, but an “efficient pricing formula” can make you more money even with less customers. Look at SCI’s revenues and operating income for 4Q 2021. . .even with less “comparable services”
• Preneed buyers certainly look ready to purchase. . . SCI’s Preneed is up 14%.  By the way, Preneed dollar amounts per contract is also up almost 8%. . . from $5,840 in 4Q 2020 to $6,302 in 4Q 2021.  If you are not working the Preneed portion of your business, you need to ramp up.  Consumers are receptive and if you don’t sign them up, your competition will.
• Direct Cremation services are still very price competitive as noticed by the Preneed contracts of non-funeral sales channels such as SCI Direct.  The report lists their Preneed contracts as averaging $2,828 in 4Q 2020 and $2,846 in 4Q 2021. . .only an $18 per case increase.

Disclaimer — The article author holds a stock position in Service Corporation International.

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