Service Corporation International (SCI) BofA Securities Leveraged Finance Conference 2025 summary

Business performance and outlook

• Funeral and cemetery segments have normalized post-pandemic, with strong averages and steady growth in contract velocity and value over recent quarters.

• Large cemetery sales are lumpy but make up 10%-15% of pre-need sales, with ongoing efforts to grow this segment.

• Maintenance capital of $160 million is allocated to cemetery property development, including both community and private family mausoleums.

• COVID-19's impact on death rates has normalized, with future volume expected to be flat to slightly down, mirroring pre-pandemic trends.

• Earnings growth framework targets 8%-12%, with 5%-7% from base business, assuming flattish funeral volume and mid-single-digit cemetery pre-need growth.

Market dynamics and strategic initiatives

• Market share stands at 17%-18% by revenue, with 12%-13% in funeral and 27%-28% in cemetery segments.

• Pre-need growth is driven by a sales force of 3,700-3,800 counselors, CRM analytics, targeted marketing, and ongoing training.

• AI is being piloted for obituary writing, lead routing, and analytics, but broader adoption is still in early stages.

• Cremation mix has slowed its rate of increase to 50-100 basis points annually, now at 57%-58%, with less pressure expected as urban areas approach saturation.

• Each 1% shift in cremation mix impacts EBITDA by about $13 million.

Margin expansion and pricing

• Cemetery margins have grown from 17%-18% to 33% over 15-20 years, driven by pre-need sales and operational effectiveness.

• Funeral margins have risen to 21% due to a new marketing agreement, with further growth expected as Baby Boomer demographics increase volume later this decade.

• New marketing agreement with Global Atlantic increased general agency commission from 26%-27% to 35%-36%, effective July 2024.

• Large cemetery purchases are driven by upper-income demographics seeking customized offerings, with scarcity and inflation factors supporting pricing.

• 70%-80% of locations have pricing online; online pricing has had negligible impact on volume or average, and may aid lead generation.