Service Corporation International Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Scott Schneeberger - Oppenheimer - Analyst : Thanks. Good morning, everyone. I'd like to start out the discussion, cemetery preneed sales. Just want to get a sense for maybe recognized revenue here into the end of the year and into 2025 and more so in 2025. Thinking about where, based on what you're seeing ending '24, what type of levels you think would be reasonable? With any commentary about large sales appreciated as well. Thanks.

Question: Scott Schneeberger - Oppenheimer - Analyst : Thanks. And Tom, just on large sales, I heard you mention Rose Hills has some ongoing construction that may prohibit timing on that. Does that

Question: Scott Schneeberger - Oppenheimer - Analyst : Thanks, I appreciate that. And then just on the funeral side, and I'll turn it over. What gives confidence for flattish volume growth in '25 as perhaps another year of reversion post the pandemic pull forward? Just want to get a sense of what you're seeing there and tying in that funeral preneed was a little weaker than we expected in the quarter? Just some thoughts on what the kind of run rate should be on that going forward of the status quo? Thanks so much.

Question: Scott Schneeberger - Oppenheimer - Analyst : Thanks.

Question: Tobey Sommer - Truist - Analyst : Thanks. I was hoping you could dig into this new insurance relationship? And maybe given, like you said, some of the changes in selling and products and organization, maybe talk about the lower efficiency that you might have had here near term? And what kind of delta you could have in the sales force as you go into next year when things are a little bit more settled, so to speak?

Question: Tobey Sommer - Truist - Analyst : Thanks. The acquisitions were pretty sizable in the quarter. Does the pipeline remain strong? And are you, in this post-COVID period. Are you seeing mom and pops sort of more willing to sell? Do you have an expectation that the strength could continue? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 1:00PM, SCI.N - Q3 2024 Service Corporation International Earnings Call

Question: Tobey Sommer - Truist - Analyst : Thank you very much.

Question: Joanna Gajuk - Bank of America - Analyst : Hi, good morning. Thanks so much for taking the question. Maybe first, just a clarification on the comment on the funeral loans next year to be flattish. That's organic, isn't it?

Question: Joanna Gajuk - Bank of America - Analyst : Okay. Right. Exactly. Because we're just talking about all these acquisitions. So I just want to clarify that. I guess, two other questions. So when you talk about switching to cemetery, you talk about this large preneed sales had tough comp, and then, I guess, the Rose Hills, some limitations there. Can you talk about these large preneed sales compared to 2019? So I understand last year was very active. And also, when thinking about these large sales, are those delayed? Is there any indications that these clients might come back in Q4?

Question: Joanna Gajuk - Bank of America - Analyst : Okay. That's good color. Thank you. And I guess, on P&O margins, right, the improvement you see from Q2, especially, and this 19% in this quarter is much better than, call it, 16% in 2019, in the third quarter, right, because that tends to be lowest. So is this, I guess, a new runway? And I guess, is this already benefiting from this new insurance contract? Or how should we think about kind of full year funeral margins, considering the benefits of the senior insurance contract?

Question: Joanna Gajuk - Bank of America - Analyst : Great. Thank you. And if I may squeeze a last one funeral, the cremation shift, why it was only 40 bps? That's the fourth consecutive quarter of that should be below what you had been describing previously, being like a trend of [100, 150]. So is that enough to call it a new trend? Or then are we kind of in the new paradigm, where, maybe that shift headwind is smaller now? Thank you.

Question: Joanna Gajuk - Bank of America - Analyst : Thank you.

Question: Albert Rice - UBS - Analyst : Hi, everybody. A couple of questions, if I could. So the anticipation that volumes might start to trend a little more positive. Obviously, we've been through a period of time where the forecast has been flat to down on atneed volumes. Any, what would you say is underpinning your thoughts that we'll start to see that turn more positive?

Question: Albert Rice - UBS - Analyst : And just to think about, I haven't asked you about this in a while, but with some of the volatility in volumes this year. And also, frankly, on the cemetery production side, when you think about that pull-forward dynamic, the lingering effects of COVID, either, and how it might affect the demand for preneed cemetery property sales or in the atneed funeral side, have you changed your thinking? What's the updated thinking versus what you guys laid out at your Investor Day a couple of years ago about the pull-forward effect and where we're at in all of that?

Question: Albert Rice - UBS - Analyst : Okay. Great. And then on the acquisitions, the step-up in pace there. It sounds like maybe some of these transactions are in markets where you already have a presence, which will presumably make them potentially even more accretive than just an outright purchase. Is that true? Can you talk about pricing, ability to contribute? Is that part of your comfort with expressing a return to sort of the high end of the growth targets, what you've seen on acquisitions more recently?

Question: Albert Rice - UBS - Analyst : Great. And then maybe last thing. We don't often ask you about this, but intra-quarter, there was an announcement about some management changes, updates, et cetera. Any perspective you can provide us on what you guys are doing there?

Question: Parker Snure - Raymond James - Analyst : Hey, good morning. This is Parker on for John Ransom. And sorry if I asked anything that was said on, I missed the beginning of the call. But the preneed cemetery selling, I know you noted the lower-end consumer is kind of hold in there, flat year-over-year. I know you guys have done some changes over the past couple of years or maybe just losing some of the payment terms on some of those contracts. What would you, I guess, attribute the lower end stability to? Is it just kind of core resilience in the lower-end consumer? Is it some of the loosening of the payment terms? Is there anything else that you would note just on that segment?

Question: Parker Snure - Raymond James - Analyst : Okay. And then late in the third quarter, early fourth quarter, there was obviously some big hurricanes down in Florida. I know you guys have a decent amount of exposure in Florida and the Southeast. Did you see an impact kind of late in the third quarter, early fourth quarter, whether it be on funeral volumes or some of the preneed selling activity?

Question: Parker Snure - Raymond James - Analyst : Okay. And if I can just get one last one. Yes, just more of a high level question on the acquisitions. When you're acquiring these smaller kind of regional or mom and pop operators, what types of things are you doing when you're going through the integration process? I'm assuming it's things like overlaying some of your preneed selling, integrating the type platform? And how should we think about some of the synergies that you're able to realize on these deals? And maybe the effective multiple or how you're able to work down the purchase multiple down to the effective multiple over the course of a few years when you're doing these acquisitions?

Question: Parker Snure - Raymond James - Analyst : Great. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 1:00PM, SCI.N - Q3 2024 Service Corporation International Earnings Call