SERVICE CORPORATION INTERNATIONAL ANNOUNCES THIRD QUARTER 2024 FINANCIAL RESULTS
Conference call on Thursday, October 31, 2024, at 8:00 a.m. Central Time.
HOUSTON, Oct. 30, 2024 /PRNewswire/ -- Service Corporation International (NYSE:SCI), the largest provider of deathcare products and services in North America, today reported results for the third quarter of 2024.
Third Quarter Highlights:
Revenue grew $12.1 million over the third quarter of 2023
Earnings per share was $0.81 compared to $0.80 in the third quarter of 2023
Adjusted earnings per share was $0.79 compared to $0.78 in the third quarter of 2023
Net cash provided by operating activities grew 16% to $263.8 million in the current year quarter compared to $227.8 million in the prior year quarter
Net cash provided by operating activities excluding special items grew 18% to $269.0 million in the current year quarter compared to $227.8 million in the prior year quarter
Comparable core funeral sales average grew 2.1% in the current quarter
Acquisition spend during the quarter was $123 million compared to $33 million in the third quarter of 2023
Tom Ryan, the Company's Chairman and CEO, commented on the third quarter performance:
"Today we reported adjusted earnings per share of $0.79 and net cash provided by operating activities excluding special items of $269 million. We are excited to see the positive impact in funeral revenue from our new marketing agreement with our new preferred preneed insurance provider, which launched during the quarter. Additionally, we are pleased both funeral and cemetery gross profit were relatively stable versus the prior year third quarter with modest revenue growth reflecting our continued focus on managing fixed costs.
We also had a very active quarter on the acquisition front including premier locations in major metropolitan markets. We invested $123 million adding 10 funeral homes and 2 cemeteries, including one combination location. We are excited to welcome these new associates to the SCI family. Additionally, we invested $31 million in real estate transactions for the expansion of funeral homes and cemeteries.
In 2025, we are targeting a return to the high end of our 8-12% long-term growth framework. We remain committed to our long-term growth strategy to grow revenue, leverage our unparalleled scale, and invest our capital wisely to enhance shareholder value. We would not be able to achieve this without our 25,000 associates and their unwavering commitment to providing excellent service to our client families."
Details of our third quarter 2024 financial results and the unaudited consolidated financial statements can be found in the Appendix at the end of this press release. The table below summarizes our key financial results.
(Dollars in millions, except for per share amounts)
Three months ended September 30,
Nine months ended September 30,
2024
2023
2024
2023
Revenue
$ 1,014.0
$ 1,001.9
$ 3,093.4
$ 3,044.0
Operating income
$ 212.4
$ 223.0
$ 665.5
$ 702.1
Net income attributable to common stockholders
$ 117.8
$ 122.0
$ 367.3
$ 398.9
Diluted earnings per share
$ 0.81
$ 0.80
$ 2.50
$ 2.60
Earnings excluding special items (1)
$ 115.3
$ 119.1
$ 363.1
$ 390.9
Diluted earnings per share excluding special items (1)
$ 0.79
$ 0.78
$ 2.47
$ 2.55
Diluted weighted average shares outstanding
146.2
152.3
147.0
153.6
Net cash provided by operating activities
$ 263.8
$ 227.8
$ 680.8
$ 591.5
Net cash provided by operating activities excluding special items (1)
$ 269.0
$ 227.8
$ 709.0
$ 604.8
(1)
Earnings excluding special items, diluted earnings per share excluding special items, and net cash provided by operating activities excluding special items are non-GAAP financial measures. These items are also referred to as "adjusted earnings per share" and "adjusted operating cash flow". A reconciliation from net income attributable to common stockholders, diluted earnings per share, and net cash provided by operating activities in accordance with generally accepted accounting principles in the United States (GAAP) can be found later in this press release under the headings "Cash Flow and Capital Spending" and "Non-GAAP Financial Measures" in the Appendix at the end of this press release.
Diluted earnings per share was $0.81 in the third quarter of 2024 compared to $0.80 in the third quarter of 2023. The current year quarter was favorably impacted by $3.5 million of net gains on divestitures and impairment charges. The prior year quarter was favorably impacted primarily by $2.5 million of net gains on divestitures and impairment charges. Diluted earnings per share excluding special items was $0.79 in the third quarter of 2024 compared to $0.78 in the third quarter of 2023. Gross profit for both funeral and cemetery were flat, while a lower share count and a lower tax rate more than offset increased corporate general and administrative expense, resulting from changes in our stock price on our long-term incentive compensation plan, and slightly higher interest expense.
Net cash provided by operating activities grew $36.0 million to $263.8 million in the third quarter of 2024 compared to $227.8 million in the third quarter of 2023. The current year was impacted by payments related to legal matters that were expensed in 2022 of $5.2 million. Net cash provided by operating activities, excluding special items, grew $41.2 million to $269.0 million in the third quarter of 2024 compared to $227.8 million in the third quarter of 2023. Favorable changes in preneed working capital, supported by stronger preneed cash receipts, more than offset an increase in cash interest payments and lower operating income.
OUTLOOK FOR 2024
Our current outlook for the fourth quarter of 2024 for adjusted earnings per share is $1.00 to $1.10, representing expected growth of approximately 8-18% compared to $0.93 of adjusted earnings per share in the fourth quarter of 2023. This fourth quarter guidance range yields an annual adjusted earnings per share range of $3.47 to $3.57, compared to the previous expectation of the lower half of a prior $3.50 to $3.80 range.
In conjunction with our expectation of continued strength in our operating cash flow and coupled with the strong fourth quarter growth anticipated in adjusted earnings per share stated above, we are raising the midpoint of our full year 2024 adjusted operating cash flow guidance from $930 million to $950 million with a revised guidance range of $940 million to $960 million (previous range of $900 million to $960 million).
Our full year 2024 outlook for maintenance capital expenditures remains unchanged at approximately $325 million. The forecast for cash taxes includes the impact of a change in a tax accounting method related to our cemetery segment, which will defer cash taxes into future years. Our outlook for net cash provided by operating activities also excludes special items relating to the payments of certain estimated legal charges of $64.6 million recognized in the fourth quarter of 2022.
(Dollars in millions, except per share amounts)
Q4 2024 Outlook
2024 Outlook
Diluted earnings per share excluding special items (1)
$1.00 - $1.10
$3.47 - $3.57
Net cash provided by operating activities excluding special items and cash taxes (1)
$240 - $255
$965 - $980
Cash taxes
$5 - $10
$20 - $25
Net cash provided by operating activities excluding special items (1)
$230 - $250
$940 - $960
Capital improvements at existing field locations
~ $35
$125
Development of cemetery property
~ $40
$165
Digital investments and corporate
~ $5
$35
Total maintenance, cemetery development, and other capital expenditures (Maintenance capital expenditures)
~ $80
$325
(1)
Diluted earnings per share excluding special items and net cash provided by operating activities excluding special items are non-GAAP financial measures. We normally reconcile these non-GAAP financial measures from diluted earnings per share and net cash provided by operating activities; however, diluted earnings per share and net cash provided by operating activities calculated in accordance with GAAP are not currently accessible on a forward-looking basis. Our outlook for 2024 excludes the following because this information is not currently available for 2024: Expenses net of insurance recoveries related to weather events and hurricanes, gains or losses associated with asset divestitures, gains or losses associated with the early extinguishment of debt, potential tax reserve adjustments and IRS payments and/or refunds, acquisition and integration costs, system implementation and transition costs, and potential costs or cash outflows associated with estimated litigation charges or legal settlements or the recognition of receivables for insurance recoveries associated with litigation, or deferred tax payments. The foregoing items could materially impact our forward-looking diluted earnings per share and/or our net cash provided by operating activities calculated in accordance with GAAP.
CONFERENCE CALL AND WEBCAST
We will host a conference call on Thursday, October 31, 2024, at 8:00 a.m. Central Time. A question and answer session will follow a brief presentation made by management. The conference call dial-in numbers are (888) 317-6003 (US) or (412) 317-6061 (International) with the passcode of 8508625. The conference call will also be broadcast live via the Internet and can be accessed through our website at www.sci-corp.com. A replay of the conference call will be available through November 7, 2024 and can be accessed at (877) 344-7529 (US) or (412) 317-0088 (International) with the passcode of 2356545. Additionally, a replay of the conference call will be available on our website for approximately three months.
ABOUT SERVICE CORPORATION INTERNATIONAL
Service Corporation International (NYSE:SCI), headquartered in Houston, Texas, is North America's leading provider of funeral, cemetery and cremation services, as well as final-arrangement planning in advance, serving more than 600,000 families each year. Our diversified portfolio of brands provides families and individuals a full range of choices to meet their needs, from simple cremations to full life celebrations and personalized remembrances. Our Dignity Memorial® brand is the name families turn to for professionalism, compassion, and attention to detail that is second to none. At September 30, 2024, we owned and operated 1,495 funeral service locations and 494 cemeteries (of which 307 are combination locations) in 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. For more information about Service Corporation International, please visit our website at www.sci-corp.com. For more information about Dignity Memorial®, please visit www.dignitymemorial.com.
For additional information contact:
Investors:
Allie O'Connor - Assistant Vice President / Investor Relations
(713) 525-9088
Trey Bocage - Director / Investor Relations
(713) 525-3454
Media:
Jay Andrew - Assistant Vice President / Corporate Communications
(713) 525-3468
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
The statements in this press release that are not historical facts are forward-looking statements made in reliance on the "safe harbor" protections provided under the Private Securities Litigation Reform Act of 1995. These statements may be accompanied by words such as "believe," "estimate," "project," "expect," "anticipate," "predict," or other similar words that convey the uncertainty of future events or outcomes. The absence of these words, however, does not mean that the statements are not forward-looking. These statements are based on assumptions that we believe are reasonable; however, many important factors could cause our actual results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by us, or on our behalf. Important factors, which could cause actual results to differ materially from those in forward-looking statements include, among others, the following:
Our affiliated trust funds own investments in securities, which are affected by market conditions that are beyond our control.
We may be required to replenish our affiliated funeral and cemetery trust funds to meet minimum funding requirements, which would have a negative effect on our earnings and cash flow.
Our ability to execute our strategic plan depends on many factors, some of which are beyond our control.
We may be adversely affected by the effects of inflation.
Our results may be adversely affected by significant weather events, natural disasters, catastrophic events, or public health crises.
Our credit agreements contain covenants that may prevent us from engaging in certain transactions.
If we lost the ability to use surety bonding to support our preneed activities, we may be required to make material cash payments to fund certain trust funds.
The financial condition of third-party life insurance companies that fund our preneed contracts may impact our future revenue.
Unfavorable publicity could affect our reputation and business.
Our failure to attract and retain qualified sales personnel could have an adverse effect on our business and financial condition.
We use a combination of insurance, self-insurance, and large deductibles in managing our exposure to certain inherent risks; therefore, we could be exposed to unexpected costs that could negatively affect our financial performance.
Declines in overall economic conditions beyond our control could reduce future potential earnings and cash flows and could result in future impairments to goodwill and/or other intangible assets.
Any failure to maintain the security of the information relating to our customers, their loved ones, our associates, and our vendors could damage our reputation, could cause us to incur substantial additional costs and to become subject to litigation, and could adversely affect our operating results, financial condition, or cash flow.
Our Canadian business exposes us to operational, economic, and currency risks.
Our level of indebtedness could adversely affect our cash flows, our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and may prevent us from fulfilling our obligations under our indebtedness.
A failure of a key information technology system or process could disrupt and adversely affect our business.
The funeral and cemetery industry is competitive.
If the number of deaths in our markets declines, our cash flows and revenue may decrease. Changes in the number of deaths are not predictable from market to market or over the short term.
If we are not able to respond effectively to changing consumer preferences, our market share, revenue, and/or profitability could decrease.
The continuing upward trend in life expectancy and the number of cremations performed in North America could result in lower revenue, operating profit, and cash flows.
Our funeral and cemetery businesses are high fixed-cost businesses.
Risks associated with our supply chain could materially adversely affect our financial performance.
Regulation and compliance could have a material adverse impact on our financial results.
Unfavorable results of litigation could have a material adverse impact on our financial statements.
Cemetery burial practice claims could have a material adverse impact on our financial results.
The application of unclaimed property laws by certain states to our preneed funeral and cemetery backlog could have a material adverse impact on our liquidity, cash flows, and financial results.
Changes in taxation, or the interpretation of tax laws or regulations, as well as the inherent difficulty in quantifying potential tax effects of business decisions could have a material adverse effect on the results of our operations, financial condition, or cash flows.
For further information on these and other risks and uncertainties, see our Securities and Exchange Commission filings, including our 2023 Annual Report on Form 10-K. Copies of this document as well as other SEC filings can be obtained from our website at www.sci-corp.com. We assume no obligation and make no undertaking to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by us whether as a result of new information, future events, or otherwise.
SERVICE CORPORATION INTERNATIONAL
APPENDIX: RESULTS FOR THE THIRD QUARTER OF 2024
Consolidated Statement of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Revenue
$ 1,013,958
$ 1,001,859
$ 3,093,356
$ 3,043,982
Cost of revenue
(761,319)
(748,176)
(2,308,589)
(2,239,737)
Gross profit
252,639
253,683
784,767
804,245
Corporate general and administrative expenses
(43,732)
(33,213)
(124,055)
(112,294)
Gains on divestitures and impairment charges, net
3,515
2,542
4,755
10,187
Operating income
212,422
223,012
665,467
702,138
Interest expense
(65,804)
(61,512)
(194,540)
(174,904)
Losses on early extinguishment of debt
(25)
—
(25)
(1,114)
Other income, net
2,815
128
7,002
2,647
Income before income taxes
149,408
161,628
477,904
528,767
Provision for income taxes
(31,547)
(39,585)
(110,549)
(129,543)
Net income
117,861
122,043
367,355
399,224
Net income attributable to noncontrolling interests
(34)
(72)
(61)
(302)
Net income attributable to common stockholders
$ 117,827
$ 121,971
$ 367,294
$ 398,922
Basic earnings per share:
Net income attributable to common stockholders
$ 0.81
$ 0.81
$ 2.53
$ 2.63
Basic weighted average number of shares
144,706
150,630
145,421
151,654
Diluted earnings per share:
Net income attributable to common stockholders
$ 0.81
$ 0.80
$ 2.50
$ 2.60
Diluted weighted average number of shares
146,223
152,289
146,978
153,554
Consolidated Balance Sheet (Unaudited)
