Service Corporation International (NYSE:SCI) Q2 2020 Earnings Conference Call - Final Transcript

Jul 30, 2020 • 09:00 am ET


Service Corporation International (NYSE:SCI) Q2 2020 Earnings Conference Call - Final Transcript


Loading Event

Loading Transcript

Thomas L. Ryan

to see averages improve across the country, as states began to reopen, with the Northeast being the notable exception. Subsequently, the funeral average improved from around 12% to down about 8% when compared to the prior year. Cemetery preneed sales really began to pick up mid-May as stay-at-home orders were relaxed. We finished the month strong with growth across all business units led by our California and Hispana businesses. A big thanks to our North American sales and marketing organization, whose focus and commitment helped to grow preneed cemetery sales 19% for the month.

By June, case volume was still strong, growing over 10%, while the funeral average continued to improve, particularly in the Northeast, albeit still negative compared to the prior year quarter. Funeral volume growth was most pronounced in California, Texas and Arizona, and this time, we did not see any material degradation of the funeral average in those specific markets versus the prior year. Momentum in preneed cemetery sales continued into June, finishing the month with an impressive 40% growth over the prior year and bringing the quarter's preneed cemetery sales production growth to over 10%.

All of our successes would not be possible if not for our tremendously talented and brave team that pulled together, while focusing on the safety of our people and on our client families and selflessly putting the needs of others above their own. Thank you team so much for your efforts and for never losing sight of what we are here to do, help our families and communities with the grieving process and celebrating the life of their loved ones.

Now for an overview of the results of the quarter. Adjusted earnings per share grew $0.11 to $0.58 per share in the second quarter, a 23% improvement over the prior year and significantly better than we expected. Core funeral profits were the primary driver as a 13% increase in funeral volume, more than offset weaker funeral sales averages applied against a very lean cost structure. Preneed cemetery sales grew over 10% in the quarter. However, the majority of these sales were deferred and will be recognized as revenue in future quarters once constructed and 10% is collected. Because of this deferral, cemetery profits were relatively flat. A higher tax rate and general and administrative costs were essentially offset by a lower interest expense and a lower share count.

Now for an overview of funeral operations. Despite the higher funeral volumes, our total comparable funeral revenues declined approximately 1% during the quarter. A healthy $13 million increase in our core revenue was more than offset by an approximate $18 million decline, primarily from lower SCI Direct and General Agency revenue.

Core revenue growth of $13 million was driven by a 13.2% increase in cases, partially offset by an 8.7% decline in the average sales. The average decline was primarily driven by a reduction in average, not as much by the cremation mix. Funeral and cremation cases with a service attached went from