Service Corporation International (SCI) has solidified its position as the preeminent provider of deathcare products and services in North America. With a vast network of funeral service locations and cemeteries, the company has built an unparalleled geographic reach and scale, enabling it to serve a diverse array of customer needs.
Company History and Evolution
Founded in 1962, SCI's original business plan was centered around the efficiencies of scale, reducing overhead costs by sharing resources across its growing cluster of funeral service locations. Over the next three decades, the company expanded its footprint through strategic acquisitions, solidifying its position as the industry's leading consolidator. In the late 1990s, the company shifted its focus, reducing acquisition activity and instead introducing the Dignity Memorial brand, the first transcontinental brand of deathcare services and products in North America.
Throughout its history, SCI has faced numerous challenges and adapted to changing market conditions. In the 1990s, the company encountered increased competition in acquisitions, leading to higher prices and reduced returns on invested capital. As a result, SCI significantly reduced its acquisition activity and divested certain international businesses and many North American funeral service locations and cemeteries. This strategic shift allowed the company to refocus on its core operations and improve its operational efficiency.
Despite the challenges, SCI has continued to grow and evolve. In the late 2000s, the company embarked on a series of transformative acquisitions, including Alderwoods Group, Keystone North America, The Neptune Society, and Stewart Enterprises. These strategic moves further strengthened the company's position, allowing it to leverage its extensive network and operational expertise to serve an even broader customer base.
Current Operations
Today, SCI operates 1,490 funeral service locations and 496 cemeteries, including 308 combination locations, across 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. This unparalleled geographic scale and reach give the company a distinct competitive advantage, enabling it to capitalize on demographic trends and deliver exceptional service to families.
Business Overview
As the largest provider of deathcare products and services in North America, SCI offers a comprehensive range of services through its funeral and cemetery segments. The company sells cemetery property and funeral/cemetery merchandise and services on both an at-need and preneed basis. SCI places a strong emphasis on providing exceptional customer service and personalized remembrances through its Dignity Memorial brand.
The company's preneed sales program, which totaled $16.01 billion in backlog at the end of 2024, helps drive future revenue growth and stability. This focus on preneed sales has contributed to SCI's consistent growth, with the company achieving a 5% compounded annual growth rate in preneed funeral sales production over the past five years.
Funeral Segment
SCI's Funeral segment provides all professional services related to funerals and cremations, including the use of funeral home facilities and motor vehicles, arranging and directing services, removal, preparation, embalming, cremations, memorialization, and catering. The segment also offers a wide range of funeral merchandise, including burial caskets and related accessories, urns and other cremation receptacles, outer burial containers, flowers, online and video tributes, stationery products, casket and cremation memorialization products, and other ancillary merchandise.
In 2024, the Funeral segment generated $2.32 billion in consolidated revenue, a 0.9% increase from 2023. Comparable funeral revenue, which excludes revenue from acquisitions, new construction, divestitures, non-funeral home preneed sales, and core general agency and other revenue, was $2.29 billion in 2024, relatively flat compared to 2023. The comparable number of funeral services performed decreased 2.5% in 2024, which was primarily offset by a 2.5% growth in the comparable average revenue per service.
The company has continued to navigate the industry's evolving landscape, marked by a gradual shift towards cremation. In 2024, SCI's comparable cremation rate increased by 70 basis points to 63.8%, up from 63.1% in the prior year. To address this trend, SCI has focused on developing complementary services and merchandise that cater to the preferences of cremation customers, leveraging its scale and customer-facing technology to improve the overall experience.
Funeral gross profit was $465.3 million in 2024, a 6.4% decrease from 2023. The decrease was primarily due to the decline in comparable funeral gross profit, which fell 6.6% to $464.1 million. The comparable gross profit percentage decreased 140 basis points to 20.3%, driven by the decline in revenue combined with higher employee-related inflationary costs, higher overhead costs including incentive compensation, and higher facility maintenance expenses from natural disasters.
Cemetery Segment
SCI's Cemetery segment provides cemetery property interment rights, including developed lots, lawn crypts, mausoleum spaces, cremation niches, and other cremation memorialization and interment options. Cemetery merchandise and services sold include cemetery markers and bases, outer burial containers, flowers and floral placement, other ancillary merchandise, graveside memorial services, merchandise installation, and interments.
Consolidated revenue from the Cemetery segment increased 3.6% to $1.86 billion in 2024 compared to 2023. This was primarily driven by a 3.0% increase in comparable cemetery revenue to $1.85 billion, including a $42.0 million increase in comparable core cemetery revenue. The increase in core revenue was mainly attributable to a $45.1 million increase in recognized preneed revenue, benefiting from growth in comparable preneed sales production and trust fund income. Comparable other revenue also increased $11.3 million, primarily from higher endowment care trust fund income.
Cemetery gross profit increased 5.2% to $625.4 million in 2024. Comparable cemetery gross profit grew $22.5 million to $618.2 million, and the gross profit percentage increased 30 basis points to 33.5%, as the growth in comparable revenue more than offset higher overhead costs and increased maintenance expenses from natural disasters.
SCI has capitalized on the aging of the Baby Boomer generation, driving strong performance in its preneed sales. In 2024, the company's comparable preneed cemetery sales production increased by 2.0%, building on the previous year's robust growth. The company's cemetery operations also benefited from higher recognized preneed property revenues, as completed construction projects triggered the recognition of prior period sales.
Financial Performance
SCI has demonstrated strong financial performance, with a robust balance sheet and favorable debt maturity profile. In 2024, the company generated total revenue of $4.19 billion, up 2.2% from 2023. Net income for the year reached $518.65 million, while annual operating cash flow stood at $944.91 million and free cash flow at $555.80 million.
For the fourth quarter of 2024, SCI reported revenue of $1.093 billion, a 4% increase year-over-year, and net income of $151.354 million, up 12% from the same period in 2023. The revenue and net income growth was driven by increases in both the funeral and cemetery segments. Funeral revenue increased 1% due to higher general agency revenue, while cemetery revenue grew 4% due to higher recognized preneed property and merchandise revenue. The increase in net income was attributable to the revenue growth and effective management of operating expenses.
As of December 31, 2024, the company reported total assets of $17.38 billion and total debt of $4.92 billion, resulting in a net debt position of $4.65 billion. The company's leverage ratio stood at 3.65x, well within its target range of 3.5x to 4.0x.
Liquidity and Capital Structure
SCI boasts ample liquidity resources to support its growth initiatives. As of the end of 2024, the company had $218.77 million in cash and cash equivalents, as well as $1.34 billion in available borrowing capacity under its revolving credit facility. This strong financial position allows SCI to invest strategically in acquisitions, new location construction, and other value-enhancing opportunities.
The company's debt-to-equity ratio stood at 2.93, with a current ratio of 0.52 and a quick ratio of 0.48. These metrics reflect SCI's solid financial footing and ability to meet its short-term obligations.
Geographic Performance
While SCI operates primarily in the United States and Canada, the vast majority of its revenue is generated domestically. In 2024, approximately 94% of revenue came from the United States, with the remaining 6% from Canadian operations.
Industry Trends and Challenges
The funeral and cemetery industry has historically seen low to moderate single-digit annual revenue growth. SCI has outperformed this trend, achieving a 5% compounded annual growth rate in preneed funeral sales production over the past five years.
Despite its strong performance, SCI has faced some challenges. In 2019, the company's California subsidiaries were sued by the California Attorney General over alleged improper practices in the sale of preneed funeral contracts. The lawsuit was settled in 2024 for $23 million in civil penalties. However, there have been no major short seller reports or CEO departures in recent years, indicating overall stability in the company's leadership and market perception.
Future Outlook
Looking ahead, SCI's management has provided guidance for 2025, targeting a normalized earnings per share range of $3.70 to $4.00, representing growth of 5% to 13% compared to 2024. This outlook reflects the company's confidence in its ability to navigate the evolving industry landscape and capitalize on favorable demographic trends.
Within the funeral segment, SCI expects flat to slightly down funeral volume compared to 2024, with average revenue per case growing at inflationary rates. The company anticipates preneed funeral production to be slightly lower in 2025 as they continue the transition of SCI Direct and focus on increasing underwritten insurance product sales.
In the cemetery segment, SCI expects to grow preneed cemetery sales production in the low to mid-single-digit percentage range, resulting in cemetery revenue growth of about 2% to 3%. The company has provided 2025 adjusted operating cash flow guidance of $830 million to $890 million, with a midpoint of $860 million.
SCI plans to continue returning capital to shareholders through dividends and share repurchases, while also allocating $75 million to $125 million for acquisitions in 2025. The company expects maintenance capital expenditures to decrease to $315 million in 2025 from the higher levels seen in 2024.
Despite the challenges posed by the COVID-19 pandemic, SCI has demonstrated its resilience and adaptability. The company's unparalleled scale, diversified revenue streams, and strong financial position have enabled it to weather the storm and emerge as an even stronger industry leader.
As the deathcare industry continues to evolve, SCI remains well-positioned to capitalize on emerging trends and meet the changing needs of its customers. With its robust operational capabilities, strategic investments, and unwavering commitment to service excellence, the company is poised to cement its position as the preeminent provider of deathcare products and services in North America.