| | | | | | | | 26 Service Corporation International
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Company
We are North America’s largest provider of deathcare products and services, with a network of funeral service locations and cemeteries unequaled in geographic scale and reach. At June 30, 2025, we owned and operated 1,485 funeral service locations and 498 cemeteries (of which 310 are combination locations), in 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. Our funeral and cemetery operations consist of funeral service locations, cemeteries, funeral service/cemetery combination locations, crematoria, and other related businesses, which enable us to serve a wide array of customer needs. We sell cemetery property and funeral and cemetery merchandise and services at the time of need and on a preneed basis. Our financial position is enhanced by our $16.4 billion backlog of future revenue from both trust and insurance-funded preneed sales at June 30, 2025. Preneed selling provides us with a strategic opportunity to gain future market share. We also believe it adds to the stability and predictability of our revenue and cash flows. While revenue on the majority of preneed merchandise and service sales is deferred until the time of need, sales of preneed cemetery property provide opportunities for full current revenue recognition to the extent that the property is developed and available for use.
We strive to offer families exceptional service in planning life celebrations and personalized remembrances. Our Dignity Memorial® brand serves with professionalism, compassion, and attention to detail approximately 700,000 families each year at their time of need or through prearrangement sales services.
Factors affecting our operating results include: demographic trends in terms of population growth and average age, which impact death rates and number of deaths; establishing and maintaining leading market share positions supported by strong local heritage and relationships; effectively responding to increasing cremation trends by selling complementary services and merchandise; controlling salary and merchandise costs; and exercising pricing leverage related to our atneed revenue. The average revenue per funeral contract is influenced by the mix of traditional and cremation services because our average revenue for cremations is lower than that for traditional burials. To further enhance revenue opportunities, we continue to focus on our cremation customers' preferences, remaining relevant by developing additional memorialization merchandise and services that specifically appeal to cremation customers. We believe the presentation of these additional merchandise and services through our customer-facing technology improves our customers' experience by reducing administrative burdens and allowing them to visualize the enhanced product and service offerings, which we believe will help drive increases in the average revenue for a cremation in future periods.
Tariffs and Trading Relationships
Since the start of 2025, the U.S. government has announced and rescinded multiple tariffs on several foreign jurisdictions, which has increased uncertainty regarding the ultimate effect of the tariffs on economic conditions. Current uncertainties about tariffs and their effects on trading relationships may affect costs for and availability of raw materials or contribute to inflation in the markets in which we operate. Although we are continuing to monitor the economic effects of such announcements, as well as opportunities to mitigate their related impacts, costs and other effects associated with the tariffs remain uncertain.
Financial Condition, Liquidity, and Capital Resources
We have adequate liquidity and a favorable debt maturity profile, which allow us to reinvest and grow our business as well as return capital to shareholders through share repurchases and dividends.
Capital Allocation Considerations
We rely on cash flow from operations as a significant source of liquidity. Our cash flow from operating activities provided $477.6 million in the first six months of 2025. As of June 30, 2025, we had $1,189.0 million in remaining borrowing capacity under our Bank Credit Facility.
Our Bank Credit Facility requires us to maintain a certain leverage ratio with which we were in compliance at June 30, 2025. We target a leverage ratio of 3.5x to 4.0x.
Our leverage ratio requirement and actual ratio as of June 30, 2025 were as follows: | | | | | | | | | | | |
| | Per Credit Agreement | | Actual |
| Leverage ratio | 5.00 (Max) | | 3.68 | |
We have the financial strength and flexibility to reward shareholders with dividends while maintaining a prudent capital structure and pursuing new opportunities for profitable growth.
Our unencumbered cash on hand, future operating cash flows, and the available capacity under our Bank Credit Facilities will give us adequate liquidity to meet our short-term needs as well as our long-term financial obligations. A portion of our cash on hand is encumbered primarily due to cash balances residing in Canada and Puerto Rico, as well as minimum captive insurance balance and operating cash requirements.
We consistently evaluate the best uses of our cash flow that will yield the highest value and return on capital. Our capital allocation strategy is prioritized as follows:
Investing in Acquisitions and Building New Funeral Service and Cemetery Locations. We manage our footprint by focusing on strategic acquisitions and building new funeral service and cemetery locations where the expected returns are attractive and exceed our weighted average cost of capital by a meaningful margin. We target businesses with favorable customer dynamics and/or where we can achieve additional economies of scale. We continue to pursue strategic acquisitions and build new funeral service and cemetery locations in areas that provide us with the potential for scale.
Returning Excess Cash to Shareholders. Absent strategic acquisitions or other higher return opportunities, we intend to return excess cash to shareholders through dividends. Our quarterly dividend rate has steadily grown from $0.025 per common share in 2005 to $0.32 per common share in 2025. We target a payout ratio of 30% to 40% of after tax earnings excluding special items and intend to grow our cash dividend commensurate with the growth in our business. While we intend to pay regular quarterly cash dividends for the foreseeable future, all future dividends are subject to limitations in our debt covenants, and final determination by our Board of Directors each quarter upon review of our financial performance.
Managing Debt. We continue to focus on maintaining optimal levels of liquidity and financial flexibility. We generate a relatively consistent annual cash flow stream that is generally resistant to down economic cycles. This cash flow stream and our significant liquidity allow us to opportunistically manage our debt maturity profile as we intend to maintain a target leverage ratio of 3.5x to 4.0x.
Cash Flow
Our ability to generate strong operating cash flow is one of our fundamental financial strengths and provides us with substantial flexibility in meeting operating and investing needs.
Operating Activities
Net cash provided by operating activities was $477.6 million and $417.0 million for the six months ended June 30, 2025 and 2024, respectively.
The $60.6 million increase in operating cash flows from 2024 comprises:
•a $50.3 million increase in cash receipts from customers,
•a $43.4 million increase in General Agency (GA) commission and other receipts,
•a $37.7 million decrease in employee compensation payments,
•a $22.3 million decrease in payments for certain legal matters,
•a $5.7 million increase in net trust withdrawals, and
•a $0.5 million decrease in cash interest payments, partially offset by
•a $87.4 million increase in cash tax payments,
•a $6.0 million increase in vendor and other payments, and
•a $5.9 million increase in restructuring payments.
Investing Activities
Cash flows from investing activities used $191.2 million and $235.8 million for the six months ended June 30, 2025 and 2024, respectively. The $44.6 million decreased outflow in 2025 over 2024 is primarily due to the following:
•a $16.7 million decrease in cash spent on real estate acquisitions,
•a $15.4 million increase in cash receipts from divestitures and asset sales,
•a $10.2 million decrease in cash spent on business acquisitions,
•a $9.8 million decrease in other investing activities primarily for investments in renewable energy tax credits,
•a $9.8 million decrease in total capital expenditures, which comprises:
28 Service Corporation International
•a $16.7 million net decrease in maintenance capital expenditures, which includes:
•a $4.5 million decrease in expenditures for capital improvements at existing field locations,
•a $9.6 million decrease in expenditures for digital investments and corporate, and
•a $2.6 million decrease in expenditures for cemetery property development,
•a $6.9 million increase in expenditures for growth capital expenditures/construction of new funeral service locations,
•a $2.7 million decrease in net payments for Company-owned life insurance policies, and
•a $1.8 million increase in net proceeds for Company-owned life insurance policies, partially offset by
•an $21.8 million increase in capital expenditures related to construction of our new corporate headquarters.
Financing Activities
Financing activities used $243.0 million for the six months ended June 30, 2025 compared to using $215.2 million for the same period in 2024. The $27.8 million increased outflow from 2025 over 2024 is primarily due to the following:
•a $147.6 million increase in purchase of Company common stock,
•a $13.8 million decrease in proceeds from exercises of stock options, and
•a $3.8 million increase in payments of dividends, partially offset by
•a $117.1 million increase in debt proceeds, net of repayments,
•a $17.1 million increase in borrowings from our corporate headquarters debt facility, and
•a $3.2 million decrease in bank overdrafts and other.
Financial Assurances
In support of our operations, we have entered into arrangements with certain surety companies whereby such companies agree to issue surety bonds on our behalf as financial assurance and/or as required by existing state and local regulations. The surety bonds are used for various business purposes; however, the majority of the surety bonds issued and outstanding have been used to support our preneed sales activities. The obligations underlying these surety bonds are recorded on our unaudited Condensed Consolidated Balance Sheet as Deferred revenue, net. The breakdown of surety bonds between funeral and cemetery preneed arrangements, as well as surety bonds for other activities, is described below.
| | | | | | | | | | | |
| June 30, 2025 | | December 31, 2024 |
| | (In millions) |
| Preneed funeral | $ | 221.5 | | | $ | 226.8 | |
| Preneed cemetery: | | | |
| Merchandise and services | 134.8 | | | 135.6 | |
| Pre-construction | 58.1 | | | 56.4 | |
| Bonds supporting preneed funeral and cemetery obligations | 414.4 | | | 418.8 | |
| Bonds supporting preneed business permits | 8.2 | | | 8.1 | |
| Other bonds | 75.3 | | | 27.5 | |
| Total surety bonds outstanding | $ | 497.9 | | | $ | 454.4 | |
When selling preneed contracts, we may post surety bonds where allowed by state law. We post the surety bonds in lieu of trusting a certain amount of funds received from the customer. The amount of the bond posted is generally determined by the total amount of the preneed contract that would otherwise be required to be trusted, in accordance with applicable state law.
Surety bond premiums are paid annually and the bonds are automatically renewable until maturity of the underlying preneed contracts, unless we are given prior notice of cancellation.
Except for cemetery pre-construction bonds (which are irrevocable), the surety companies generally have the right to cancel the surety bonds at any time with appropriate notice. In the event a surety company were to cancel the surety bond, we are required to obtain replacement surety assurance from another surety company or fund a trust for an amount generally less
than the posted bond amount. Management does not expect that we will be required to fund material future amounts related to these surety bonds due to a lack of surety capacity or surety company non-performance.
During the second quarter of 2025, we replaced our letters of credit with a $46.0 million insurance product and a related indemnity obligation with a large insurance company.
Preneed Activities and Backlog of Contracts
In addition to selling our products and services to client families at the time of need, we enter into price-guaranteed preneed contracts, which provide for future funeral or cemetery merchandise and services. Because preneed funeral and cemetery merchandise and services will generally not be provided until sometime in the future, most states and provinces require that all or a portion of the funds collected from customers on preneed contracts be deposited into merchandise and service trusts until the merchandise is delivered or the service is performed. In certain situations, as described above, where permitted by state or provincial laws, we may post a surety bond as financial assurance for a certain amount of the preneed contract in lieu of placing funds into trust accounts. Alternatively, we may sell a life insurance or annuity policy from third-party insurance companies.
Insurance-Funded Preneed Contracts
Where permitted by state or provincial law, we may sell a life insurance or annuity policy from third-party insurance companies for which we earn a commission as general sales agent for the insurance company. These general agency revenues are based on a percentage per contract sold and are recognized as funeral revenue when the insurance purchase transaction between the preneed purchaser and third-party insurance provider is complete. All selling costs incurred pursuant to the sale of insurance-funded preneed contracts are expensed as incurred. We do not reflect the unfulfilled insurance-funded preneed contract amounts in our unaudited Condensed Consolidated Balance Sheet. The proceeds of the life insurance policies or annuity contracts will be reflected in funeral revenue as we perform these funerals. In early July 2024, we finalized our agreement to change our preferred preneed insurance provider in the United States, which will allow us to further utilize our scale and streamline our processes across our network.
The table below details our results of insurance-funded preneed production and maturities.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2025 | | 2024 | | 2025 | | 2024 |
| (Dollars in millions) |
| Preneed insurance-funded: | | | | | | | |
Sales production(1) | $ | 211.8 | | | $ | 197.3 | | | $ | 402.3 | | | $ | 374.5 | |
Sales production (number of contracts)(1) | 41,188 | | | 31,475 | | | 78,572 | | | 59,923 | |
| General agency revenue | $ | 76.8 | | | $ | 54.2 | | | $ | 147.3 | | | $ | 104.0 | |
| Maturities | $ | 103.7 | | | $ | 98.7 | | | $ | 223.4 | | | $ | 207.1 | |
| Maturities (number of contracts) | 16,374 | | | 15,735 | | | 35,099 | | | 32,991 | |
(1) Amounts are not included in our unaudited Condensed Consolidated Balance Sheet.
Trust-Funded Preneed Contracts
The funds collected from customers, and required by state or provincial law, are deposited into trusts. We retain any funds above the amounts required to be deposited into trust accounts and use them for working capital purposes, generally to offset the selling and administrative costs of our preneed programs. Although this represents cash flow to us, the associated revenues are deferred until the merchandise is delivered or services are performed (typically at maturity). The funds in trust are then invested by professional money managers with oversight by independent trustees in accordance with state and provincial laws.
30 Service Corporation International
The tables below detail our results of preneed production and maturities, excluding insurance contracts:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| | 2025 | | 2024 | | 2025 | | 2024 |
| | (Dollars in millions) |
| Funeral: | | | | | | | |
| Preneed trust-funded (including bonded): | | | | | | | |
| Sales production | $ | 91.9 | | | $ | 131.3 | | | $ | 188.9 | | | $ | 270.2 | |
| Sales production (number of contracts) | 16,118 | | | 32,116 | | | 33,156 | | | 66,248 | |
| Maturities | $ | 96.5 | | | $ | 94.2 | | | $ | 200.3 | | | $ | 190.8 | |
| Maturities (number of contracts) | 20,603 | | | 20,749 | | | 43,215 | | | 42,997 | |
| Cemetery: | | | | | | | |
| Sales production: | | | | | | | |
| Preneed | $ | 369.8 | | | $ | 350.8 | | | $ | 694.4 | | | $ | 681.6 | |
| Atneed | 108.6 | | | 106.4 | | | 221.7 | | | 214.4 | |
| Total sales production | $ | 478.4 | | | $ | 457.2 | | | $ | 916.1 | | | $ | 896.0 | |
| Sales production deferred to backlog: | | | | | | | |
| Preneed | $ | 176.1 | | | $ | 158.4 | | | $ | 333.5 | | | $ | 316.9 | |
| Atneed | 75.0 | | | 76.3 | | | 154.7 | | | 154.8 | |
| Total sales production deferred to backlog | $ | 251.1 | | | $ | 234.7 | | | $ | 488.2 | | | $ | 471.7 | |
| Revenue recognized from backlog: | | | | | | | |
| Preneed | $ | 114.1 | | | $ | 117.0 | | | $ | 210.3 | | | $ | 222.0 | |
| Atneed | 76.9 | | | 76.8 | | | 154.9 | | | 155.4 | |
| Total revenue recognized from backlog | $ | 191.0 | | | $ | 193.8 | | | $ | 365.2 | | | $ | 377.4 | |
Backlog of Preneed Contracts
The following table reflects our backlog of trust-funded deferred preneed contract revenue, including amounts related to deferred receipts held in trust at June 30, 2025 and December 31, 2024. Additionally, the table reflects our backlog of unfulfilled insurance-funded contracts (which are not included in our unaudited Condensed Consolidated Balance Sheet) at June 30, 2025 and December 31, 2024. The backlog amounts presented include amounts due from customers for undelivered performance obligations on cancelable preneed contracts to arrive at our total backlog of deferred revenue. The table does not include the backlog associated with businesses that are held for sale.
The table also reflects our preneed receivables and trust investments associated with the backlog of deferred preneed contract revenue, including the amounts due from customers for undelivered performance obligations on cancelable preneed contracts. We believe that the table below is meaningful because it sets forth the aggregate amount of future revenue we expect to recognize as a result of preneed sales, as well as the amount of funds associated with this revenue. Because the future revenue exceeds the assets, future revenue will exceed the cash distributions actually received from the associated trusts and future collections from the customer.
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2025 | | December 31, 2024 |
| | Fair Value | | Cost | | Fair Value | | Cost |
| | (In billions) |
| Deferred revenue, net | $ | 1.77 | | | $ | 1.77 | | | $ | 1.76 | | | $ | 1.76 | |
| Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts | 1.00 | | | 1.00 | | | 0.99 | | | 0.99 | |
| Deferred receipts held in trust | 5.51 | | | 4.68 | | | 5.16 | | | 4.50 | |
| Allowance for cancellation on trust investments | (0.29) | | | (0.25) | | | (0.27) | | | (0.24) | |
| Backlog of trust-funded deferred revenue, net of estimated allowance for cancellation | 7.99 | | | 7.20 | | | 7.64 | | | 7.01 | |
Backlog of insurance-funded revenue(1) | 8.43 | | | 8.43 | | | 8.37 | | | 8.37 | |
| Total backlog of deferred revenue | $ | 16.42 | | | $ | 15.63 | | | $ | 16.01 | | | $ | 15.38 | |
| | | | | | | |
| Preneed receivables, net and trust investments | $ | 7.07 | | | $ | 6.24 | | | $ | 6.74 | | | $ | 6.08 | |
| Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts | 1.00 | | | 1.00 | | | 0.99 | | | 0.99 | |
| Allowance for cancellation on trust investments | (0.29) | | | (0.25) | | | (0.27) | | | (0.24) | |
| Assets associated with backlog of trust-funded deferred revenue, net of estimated allowance for cancellation | 7.78 | | | 6.99 | | | 7.46 | | | 6.83 | |
Insurance policies associated with insurance-funded deferred revenue (1) | 8.43 | | | 8.43 | | | 8.37 | | | 8.37 | |
| Total assets associated with backlog of preneed revenue | $ | 16.21 | | | $ | 15.42 | | | $ | 15.83 | | | $ | 15.20 | |
| | |
(1) Amounts are not included in our unaudited Condensed Consolidated Balance Sheet.
The fair value of our trust investments was based on a combination of quoted market prices, observable inputs such as interest rates or yield curves, and appraisals. As of June 30, 2025, the difference between the backlog and asset market amounts represents $0.17 billion related to contracts for which we have posted surety bonds as financial assurance in lieu of trusting, $1.39 billion collected from customers that were not required to be deposited into trusts, and $0.20 billion in allowable cash distributions from trust assets partially offset by $1.55 billion in amounts due on delivered property and merchandise. As of June 30, 2025, the fair value of the total backlog comprised $4.83 billion related to cemetery contracts and $11.59 billion related to funeral contracts. As of June 30, 2025, the fair value of the assets associated with the backlog of trust-funded deferred revenue comprised $4.86 billion related to cemetery contracts and $2.92 billion related to funeral contracts. As of June 30, 2025, the backlog of insurance-funded contracts of $8.43 billion was equal to the proceeds we expect to receive from the associated insurance policies when the corresponding contract is serviced.
Trust Investments
Investment earnings associated with the trust investments are expected to mitigate the inflationary costs of providing the preneed funeral and cemetery merchandise and services in the future at the prices that were guaranteed at the time of sale. Also, we are required by state and provincial law to pay a portion of the proceeds from the preneed or atneed sale of cemetery property interment rights into perpetual care trusts. For these investments, the original corpus generally remains in the trust in perpetuity and the earnings or elected distributions are withdrawn as allowed to defray the expenses to maintain the cemetery property. While many states require that net capital gains or losses be retained and added to the corpus, certain states allow the net realized capital gains and losses to be included in the earnings that are distributed. Additionally, some states allow a total return distribution that may contain elements of income, capital appreciation, and principal.
Independent trustees manage and invest the majority of the funds deposited into the funeral and cemetery merchandise and service trusts as well as the cemetery perpetual care trusts. The majority of the trustees are selected based on their respective geographic footprint and qualifications per state and provincial regulations. These trustees, with input from SCI's wholly-owned registered investment advisor, establish an investment policy that serves as an operating document to guide the investment activities of the trusts including asset allocation and manager selection. The investments are also governed by state and provincial guidelines. All of the trusts are intended to control risk and volatility through a combination of asset classes, investment styles, and a diverse mix of investment managers.
Asset allocation is based on the liability structure of each funeral, cemetery, and perpetual care trust. Based on the various criteria set forth in the investment policy, the investment advisor recommends investment managers to the trustees. The primary investment objectives for the funeral and cemetery merchandise and service trusts include 1) preserving capital within acceptable levels of volatility and risk and 2) achieving growth of principal over time sufficient to preserve and increase
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the purchasing power of the assets. Preneed funeral and cemetery contracts generally take several years to mature; therefore, the funds associated with these contracts are often invested through several market cycles.
Where allowed by state and provincial regulations, the cemetery perpetual care trusts’ primary investment objectives are growth-oriented to provide for a fixed distribution rate from the trusts’ assets. Where such distributions are limited to ordinary income, the cemetery perpetual care trusts’ investment objectives emphasize providing a steady stream of current investment income with some capital appreciation. Both types of distributions are used to provide for the current and future maintenance and beautification of the cemetery properties.
As of June 30, 2025, approximately 95% of our trusts were under the control and custody of five large financial institutions. The U.S. trustees primarily use four managed limited liability companies (LLCs), two for funeral and cemetery merchandise and service trust types and two for the cemetery perpetual care trust types, each with an independent trustee as custodian. Each financial institution acting as trustee, manages its allocation of trust assets in accordance with the investment policy through the purchase of the appropriate LLCs' units. For those accounts not eligible for participation in the LLCs or where a particular state's regulations contain other investment restrictions, the trustee utilizes institutional mutual funds that comply with our investment policy or with such state restrictions. The U.S. trusts include a modest allocation to alternative investments.
Investment Structures
The managed LLCs use the following structures for investments:
Commingled funds allow the trusts to access, at a reduced cost, some of the same investment managers and strategies used elsewhere in the portfolios.
Separately managed accounts are trusts that utilize separately managed accounts, where appropriate, to reduce the costs to the investment portfolios.
Mutual funds employ institutional share class mutual funds where operationally or economically efficient. These mutual funds are utilized to invest in various asset classes including U.S. equities, non-U.S. equities, corporate bonds, government bonds, high yield bonds, and commodities, all of which are governed by guidelines outlined in their individual prospectuses.
Asset Classes
Equity investments have historically provided long-term capital appreciation in excess of inflation. The trusts have direct investments in individual equity securities primarily in domestic equity portfolios that include large, mid, and small capitalization companies of different investment styles (i.e., growth and value). The majority of the equity allocation is managed by institutional investment managers that specialize in an objective-specific area of expertise. Our equity securities are exposed to market risk; however, we believe these securities are well-diversified. As of June 30, 2025, the largest single equity position represented approximately 1% of the total securities portfolio.
Fixed income investments are intended to preserve principal, provide a source of current income, and reduce overall portfolio volatility. The majority of the fixed income allocation for the trusts is invested in institutional share class mutual funds. Where the trusts have direct investments in individual fixed income securities, these are primarily in government and corporate instruments.
Canadian government fixed income securities are investments in Canadian federal and provincial government instruments. In many cases, regulatory restrictions mandate that the funds from the sales of preneed funeral and cemetery contracts sold in certain Canadian jurisdictions must be invested in these instruments.
Alternative investments serve to provide high rates of return with reduced volatility and lower correlation to publicly-traded securities. These investments are typically longer term in duration and are diversified by strategy, sector, manager, geography, and vintage year. The investments consist of numerous limited partnerships invested in private equity, private market real estate, energy and natural resources, infrastructure, transportation, and private debt including both distressed debt and mezzanine financing. The trustees that have oversight of their respective alternative LLCs work closely with the investment advisor in making all investment decisions.
Trust Performance
During the six months ended June 30, 2025, the Standard and Poor’s 500 Index increased 6.2% and the Bloomberg’s US Aggregate Bond Index increased 4.0%. This compares to SCI trusts that increased 7.8% during the same period. The SCI trusts have a diversified allocation of approximately 60% equities, 26% fixed income securities, 10% alternative and other investments with the remaining 4% available in money market funds.
Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $ million and $ million for the six months ended June 30, 2025 and 2024, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $ million and $ million for the six months ended June 30, 2025 and 2024, respectively. The increase in recognized trust fund income is primarily due to the market returns experienced over the trailing twelve month period.
SCI, the trustees, and the investment advisor monitor the capital markets and the trusts on an on-going basis. The trustees, with input from the investment advisor, take prudent action as needed to achieve the investment goals and objectives of the trusts.
Results of Operations — Three and Six Months Ended June 30, 2025 and 2024
Three Months Ended June 30, 2025 and 2024
Management Summary
In the second quarter of 2025, we reported consolidated net income attributable to common stockholders of $122.9 million ($0.86 per diluted share) compared to net income attributable to common stockholders in the second quarter of 2024 of $118.2 million ($0.81 per diluted share). These results were impacted by certain items including:
| | | | | | | | | | | |
| Three months ended June 30, |
| 2025 | | 2024 |
| | (In millions) |
| Pre-tax gains on divestitures and impairment charges, net | $ | 4.1 | | | $ | 1.9 | |
| | |
| | |
| | |
| | |
| Pre-tax legal settlement | $ | (6.4) | | | $ | — | |
| Pre-tax restructuring charge | $ | (1.6) | | | $ | — | |
| | |
| Tax effect from significant items | $ | 0.9 | | | $ | (0.5) | |
| Change in uncertain tax reserves and other | $ | 0.4 | | | $ | 0.9 | |
In addition to the above items, higher funeral operating results and effective cost management drove gross profit growth and margin expansion over the prior year quarter. Higher gross profit and lower share count more than offset the increase in corporate general and administrative expenses.
Funeral Results
| | | | | | | | | | | | |
| Three months ended June 30, |
| 2025 | | 2024 | |
| | (Dollars in millions, except average revenue per service) |
| Consolidated funeral revenue | $ | 591.4 | | | $ | 565.8 | | |
| Less: revenue associated with acquisitions/new construction | 14.0 | | | 2.6 | | |
| Less: revenue associated with divestitures | 0.6 | | | 1.6 | | |
Comparable(1) funeral revenue | 576.8 | | | 561.6 | | |
| Less: non-funeral home preneed sales revenue | 26.4 | | | 29.1 | | |
| Less: core general agency and other revenue | 58.8 | | | 51.6 | | |
| Adjusted comparable funeral revenue | $ | 491.6 | | | $ | 480.9 | | |
| Comparable services performed | 84,622 | | | 85,353 | | |
Comparable average revenue per service(2) | $ | 5,809 | | | $ | 5,634 | | |
| | | | |
| Consolidated funeral gross profit | $ | 116.0 | | | $ | 100.4 | | |
| Less: gross profit associated with acquisitions/new construction | 1.5 | | | 0.8 | | |
| Less: gross profit (loss) associated with divestitures | (0.1) | | | (0.2) | | |
Comparable(1) funeral gross profit | $ | 114.6 | | | $ | 99.8 | | |
(1) We define comparable (or same store) operations as those funeral locations owned by us for the entire period beginning January 1, 2024 and ending June 30, 2025.
(2) We calculate comparable average revenue per service by dividing comparable funeral revenue, excluding general agency revenue, recognized preneed revenue, and other revenue to avoid distorting our average of normal funeral services revenue, by the comparable number of funeral services performed during the period. Recognized preneed revenue is excluded from our calculation of comparable average revenue per service because the associated service has not yet been performed.
34 Service Corporation International
Funeral Revenue
Consolidated revenue from funeral operations was $591.4 million for the three months ended June 30, 2025 compared to $565.8 million for the same period in 2024. This $25.6 million increase is primarily attributable to the $11.4 million increase in revenue from acquired and newly constructed properties and the $15.2 million increase in comparable revenue.
Comparable revenue from funeral operations was $576.8 million for the three months ended June 30, 2025 compared to $561.6 million for the same period in 2024. This $15.2 million, or 2.7%, increase is primarily due to a $10.7 million increase in adjusted comparable funeral revenue and a $7.2 million increase in core general agency revenue and other revenue, partially offset by a $2.7 million decrease in non-funeral home preneed sales revenue.
Adjusted comparable funeral revenue increased $10.7 million, or 2.2%, primarily due to a favorable 3.1% increase in total average revenue per service, partially offset by a 0.9% decrease in total services performed. The total comparable cremation rate increased 40 basis points over the prior year quarter to 64.3%.
Core general agency and other revenue grew $7.2 million, primarily due to growth in general agency revenue from higher commission rates as a result of the change in our preferred preneed insurance provider.
Non-funeral home preneed sales revenue decreased $2.7 million, or 9.3%, primarily due to an operational decision to defer the delivery of urns on preneed contracts to the time of need. This is short-term in nature as we will recognize deferred urn revenue from the backlog at the time of need as non-funeral home revenue. This decrease is partially offset by an increase in general agency revenue as we shift more production from trust to insurance-funded contracts.
Funeral Gross Profit
Consolidated funeral gross profit increased $15.6 million, or 15.5%, for the three months ended June 30, 2025 compared to the same period in 2024, primarily attributable to the increase in comparable funeral gross profit. Comparable funeral gross profit increased $14.8 million to $114.6 million and the comparable gross profit percentage increased from 17.8% to 19.9%. This increase is primarily due to the growth in revenue described above and our continued focus on managing our fixed cost structure.
Cemetery Results
| | | | | | | | | | | | |
| Three months ended June 30, |
| 2025 | | 2024 | |
| | (In millions) |
| Consolidated cemetery revenue | $ | 474.1 | | | $ | 468.2 | | |
| Less: revenue associated with acquisitions/new construction | 4.1 | | | — | | |
|
Comparable(1) cemetery revenue | $ | 470.0 | | | $ | 468.2 | | |
| | | | |
| Consolidated cemetery gross profit | $ | 155.5 | | | $ | 157.5 | | |
| Less: gross profit (loss) associated with acquisitions/new construction | 2.2 | | | (0.1) | | |
|
Comparable(1) cemetery gross profit | $ | 153.3 | | | $ | 157.6 | | |
(1) We define comparable (or same store) operations as those cemetery locations owned by us for the entire period beginning January 1, 2024 and ending June 30, 2025.
Cemetery Revenue
Consolidated revenue from our cemetery operations increased $5.9 million, or 1.3%, for the three months ended June 30, 2025 compared to the same period in 2024 primarily due to a $4.1 million increase in revenue contributed by newly constructed and acquired properties and a $1.8 million increase in comparable cemetery revenue.
The comparable cemetery revenue increased $1.8 million, or 0.4%, for the three months ended June 30, 2025 primarily due to higher comparable core revenue of $0.6 million and higher comparable other revenue of $1.2 million. Comparable core revenue was higher by $0.6 million due in large measure to an increase in atneed revenue. Atneed revenue increased $2.7 million due to increased atneed property production of 4.4%. This was partially offset by a $2.1 million decrease in recognized preneed revenue. The decrease was driven by a decline in recognized preneed property revenue related to the timing of revenue recognition on newly constructed property versus the prior year quarter. Preneed sales production increased $18.5 million, or 5.3%, due to an increase in both large and core sales, which will benefit us in future periods, as this current undeveloped property sold is constructed and recognized.
Cemetery Gross Profit
Consolidated cemetery gross profit slightly decreased $2.0 million, or 1.3%, in the three months ended June 30, 2025 compared to the same period in 2024, which is primarily attributable to a $4.3 million decrease in comparable cemetery gross profit and partially offset by a $2.3 million increase in gross profit contributed by newly constructed and acquired properties. Comparable cemetery gross profit decreased $4.3 million to $153.3 million. The gross profit percentage decreased versus the prior year quarter from 33.7% to 32.6% as modest cemetery revenue growth was offset by higher selling compensation on higher sales production and partially mitigated by modest fixed cost growth as we continue to focus on managing our fixed cost structure.
Other Financial Statement Items
Corporate General and Administrative Expenses
Corporate general and administrative expenses were $49.5 million in the second quarter of 2025 compared to the second quarter of 2024 of $39.0 million. Of the increase, $6.4 million is due to the settlement of certain legal matters, with the remainder primarily due to higher auto and general liability claims as well as the timing of incentive compensation accruals versus the prior year quarter.
Gains on Divestitures and Impairment Charges, Net
We recognized a $4.1 million net pre-tax gain on asset divestitures and impairments in the second quarter of 2025 compared to a $1.9 million net pre-tax gain in the second quarter of 2024 on asset divestitures due to non-strategic asset divestitures.
Other Income, Net
Other income, net increased $2.2 million to $3.9 million for the three months ended June 30, 2025 primarily due to the change in foreign currency exchange rates compared to the prior year.
Provision for Income Taxes
Our effective tax rate was 25.2% and 25.3% for the three months ended June 30, 2025 and 2024, respectively. The lower effective tax rate in the current period was primarily due to non-taxable gains on the cash surrender value of certain life insurance policies as a result of gains in the financial markets.
Weighted Average Shares
The diluted weighted average number of shares outstanding was 143.0 million for the three months ended June 30, 2025 compared to 146.8 million for the same period in 2024. The decrease primarily reflects the impact of shares repurchased under our share repurchase program.
Six Months Ended June 30, 2025 and 2024
Management Summary
In the first six months of 2025, we reported consolidated net income attributable to common stockholders of $265.7 million ($1.84 per diluted share) compared to net income attributable to common stockholders for the same period in 2024 of $249.5 million ($1.69 per diluted share). These results were impacted by certain items including:
| | | | | | | | | | | |
| Six months ended June 30, |
| 2025 | | 2024 |
| | (In millions) |
| Pre-tax gains on divestitures and impairment charges, net | $ | 9.0 | | | $ | 1.2 | |
| | |
| | |
| | |
| | |
| Pre-tax legal settlements | $ | (6.4) | | | $ | — | |
Pre-tax restructuring charge | $ | (1.6) | | | $ | — | |
| Tax effect from significant items | $ | (0.4) | | | $ | (0.4) | |
| Change in uncertain tax reserves and other | $ | — | | | $ | 0.9 | |
In addition to the above items, the increase from the prior year is primarily due to higher funeral gross profit driven by an increase in funeral average revenue per service. Also, the increase in corporate general and administrative expense and higher tax rate was partially offset by lower interest expense and a lower share count.
Funeral Results
| | | | | | | | | | | | |
| Six months ended June 30, |
| 2025 | | 2024 | |
| | (Dollars in millions, except average revenue per service) |
| Consolidated funeral revenue | $ | 1,230.9 | | | $ | 1,170.5 | | |
| Less: revenue associated with acquisitions/new construction | 27.3 | | | 3.4 | | |
| Less: revenue associated with divestitures | 1.1 | | | 3.3 | | |
Comparable(1) funeral revenue | 1,202.5 | | | 1,163.8 | | |
| Less: non-funeral home preneed sales revenue | 48.6 | | | 58.1 | | |
| Less: core general agency and other revenue | 113.4 | | | 97.7 | | |
| Adjusted comparable funeral revenue | $ | 1,040.5 | | | $ | 1,008.0 | | |
| Comparable services performed | 180,194 | | | 179,252 | | |
Comparable average revenue per service(2) | $ | 5,774 | | | $ | 5,623 | | |
| | | | |
| Consolidated funeral gross profit | $ | 270.0 | | | $ | 232.3 | | |
| Less: gross profit associated with acquisitions/new construction | 3.4 | | | 1.0 | | |
| Less: gross losses associated with divestitures | (0.4) | | | (0.2) | | |
Comparable(1) funeral gross profit | $ | 267.0 | | | $ | 231.5 | | |
(1) We define comparable (or same store) operations as those funeral locations owned by us for the entire period beginning January 1, 2024 and ending June 30, 2025.
(2) We calculate comparable average revenue per service by dividing comparable funeral revenue, excluding general agency revenue, non-funeral home preneed sales revenue, and other revenue to avoid distorting our average of normal funeral services revenue, by the comparable number of funeral services performed during the period.
Funeral Revenue
Consolidated revenue from funeral operations was $1,230.9 million for the six months ended June 30, 2025, compared to $1,170.5 million for the same period in 2024. This $60.4 million increase is primarily attributable to a $38.7 million increase in comparable revenue and $23.9 million growth in revenue contributed by acquired and newly constructed properties.
Comparable revenue from funeral operations was $1,202.5 million for the six months ended June 30, 2025 compared to $1,163.8 million for the same period in 2024. The $38.7 million, or 3.3%, increase was due to a $32.5 million increase in adjusted comparable funeral revenue and a $15.7 million increase in core general agency and other revenue, partially offset by a $9.5 million decrease in non-funeral home preneed sales revenue.
Adjusted comparable funeral revenue increased $32.5 million, or 3.2%, primarily due to a 2.7% increase in total average revenue per service, and a 0.5% increase in total services performed. The total comparable cremation rate increased 50 basis points over prior year to 64.2%.
Core general agency and other revenue grew $15.7 million, primarily due to growth in general agency revenue from higher commission rates as a result of the change in our preferred preneed insurance provider.
Non-funeral home preneed sales revenue decreased $9.5 million, primarily due to an operational decision to defer the delivery of urns on preneed contracts to the time of need. This is short-term in nature as we will recognize deferred urn revenue from the backlog at the time of need as non-funeral home revenue. This decrease is partially offset by an increase in general agency revenue as we shift more production from trust to insurance-funded contracts.
Funeral Gross Profit
Consolidated funeral gross profit increased $37.7 million, or 16.2%, in the first six months of 2025 compared to the same period in 2024, primarily attributable to the increase in comparable funeral gross profit. Comparable funeral gross profit increased $35.5 million to $267.0 million and the comparable gross profit percentage increased from 19.9% to 22.2%. This increase is primarily due to the growth in revenue described above and our continued focus on managing our fixed cost structure.
Cemetery Results
| | | | | | | | | | | | |
| Six months ended June 30, |
| 2025 | | 2024 | |
| | (In millions) |
| Consolidated cemetery revenue | $ | 908.8 | | | $ | 908.9 | | |
| Less: revenue associated with acquisitions/new construction | 5.9 | | | — | | |
|
Comparable(1) cemetery revenue | $ | 902.9 | | | $ | 908.9 | | |
| | | | |
| Consolidated cemetery gross profit | $ | 292.9 | | | $ | 299.8 | | |
| Less: gross profit (loss) associated with acquisitions/new construction | 2.8 | | | (0.3) | | |
| Less: gross loss associated with divestitures | — | | | (0.1) | | |
Comparable(1) cemetery gross profit | $ | 290.1 | | | $ | 300.2 | | |
