Service Corporation at Oppenheimer Conference: Strategic Insights on Growth

On Thursday, 08 May 2025, Service Corporation International (NYSE:SCI) presented at the Oppenheimer 20th Annual Industrial Growth Conference, revealing a strategic focus on maintaining its market leadership in the funeral and cemetery industry. The company aims for steady earnings growth and has outlined plans for capital allocation, despite facing challenges from the normalization of funeral volumes post-COVID.

Key Takeaways

• SCI holds a 17% market share in the funeral and cemetery industry.
• The company plans 8-12% earnings growth and continues share repurchases, reducing shares from 340 million to under 145 million.
• Funeral volumes are expected to be flat to slightly down in 2025 due to COVID-19 impact normalization.
• The cremation mix is currently at 60%, with expectations of reaching 75-80% in line with global trends.
• Free cash flow for 2025 is projected at $550 million, with capital allocated to dividends, acquisitions, and share repurchases.

Financial Results

• Funeral Volume Trends:

- Increased by 13% in 2020, 4% in 2021, then decreased by 4-5% in 2022, 5-6% in 2023, and 2.5% in 2024.

- 2025 volumes are expected to be flat to slightly down.

• Funeral Revenue per Service:

- Driven by inflationary pricing, with mid-single-digit growth in 2022 and 2023.

- Cremation mix shift is a headwind, moderating to 40 basis points in Q1 2025.

• Preneed Sales:

- Funeral preneed production is expected to decline slightly in 2025.

- Cemetery preneed core business shows consistent growth, while large sales are volatile.

• Margins:

- Cemetery margins are expected to be flat in 2025, with growth potential in 2026.

- Funeral margins are stable at 21%, with potential growth from demographic shifts.

• Free Cash Flow:

- Operating cash flow in 2025 is expected to reach $860 million.

- Capital allocation includes $180 million for dividends and $150 million for share repurchases.

Operational Updates

• SCI Direct: Transitioned from trust instruments to insurance contracts, impacting sales processes.
• Insurance Provider Transition: Moved from TruStage to Global Atlantic, boosting core general agency revenue.
• Cemetery Land Management: Average inventory spans over 100 years, with strategies to optimize land use and pricing.

Future Outlook

• Volume and Market Share: Flat to slightly down volumes expected in 2025, with stability in 2026.
• Cremation Trends: Anticipate a rise in cremation mix to align with global standards.
• Growth Strategies: Focus on expanding the $16 billion preneed backlog and enhancing cemetery sales through tiering strategies.

Q&A Highlights

• Funeral Rule: Awaiting FTC updates, with most locations already providing online pricing.
• Cemetery Land: Some properties near end-of-life, prompting price adjustments and land acquisitions.

For a detailed understanding, readers are encouraged to refer to the full conference call transcript.

Full transcript - Oppenheimer 20th Annual Industrial Growth Conference:

Scott Schneeberger, Senior Business Services Analyst, Oppenheimer: Morning, everyone. I’m Scott Schneeberger, the senior business services analyst at Oppenheimer. Thank you all for joining us today. It’s our pleasure to have from Service Corp, senior vice president and treasurer, Aaron Foley, to speak on the company’s investment story. We’re drawing Service Corp’s leading position in the funeral services and cemetery offering industry.

Its opportunity to capitalize on the favorable demographics of an aging baby boomer population, and its strategy of providing preneed contracts to gain advanced market share and garner a backlog to build its trust fund portfolio. I’ll be using a fireside chat format. I’ll ask mister Foley some high level questions upfront to get an overview of the business. And then later in the session, I’ll facilitate audience questions. So please feel free, audience, to send in anything to me, and I will ask on behalf to Foley.

So getting started, could you please discuss the overall business model and strategy? Thanks.

Aaron Foley, Senior Vice President and Treasurer, Service Corp: Yeah. Thanks for having me, Scott. Good to see you. So SCI is the largest operator in The U. S.

And Canada of funeral homes and cemeteries. We’ve got about 17% by revenue market share. The other consolidators make up an estimated 9% of market share. So that leaves about 75% of the market that truly is mom and pop and smaller operations. As you think about our business, we’ve separated between a funeral segment and a cemetery segment.

And as you would expect, the funeral segment’s going to reflect our funeral services, the products and services that come along with that, whether it be the casket, the flowers, the catering, the actual pickup and removal, embalming, and so on and so forth. On the cemetery side, it’s going to be from a property perspective. We’ve got property that we’re selling, but also other products and services such as an opening and closing of that cemetery lot, the graveside service if the family so chooses, and then outer burial containers and markers from a merchandise perspective. When you think about kind of the strategy that SCI has followed with those businesses over the last really twenty plus years is we’ve kind of had the same algorithm, if you will. We’ve targeted an an eight to 12% earnings growth framework over time that split about five to 7% is from our base business.

And then you’ve got another 3% to 5% coming from capital deployment, whether that’s from acquisitions, from growth capital, or from ultimately share repurchases. During that time, we’ve reduced our outstanding shares from about $340,000,000 outstanding to just under 145,000,000 as we speak today. And so it’s been a relatively stable business to be in outside of the recent COVID experience that we’ve had that’s obviously you know, thrown thrown a wrench into things from that perspective, but it’s relatively stable.

Scott Schneeberger, Senior Business Services Analyst, Oppenheimer: Well, thanks. Great overview. Looking closer at the at need funeral and cemetery businesses, growth was elevated during the pandemic you just mentioned. That was followed by a a settle down period thereafter in normalization. If you could please share recent funeral volume trends as well as perspective on the broader timing of demographic tailwinds, just to get a sense of the forward trend there.

Thanks.

Aaron Foley, Senior Vice President and Treasurer, Service Corp: Sure. So in 2020 and 2021, we saw volumes increase 13% in 2020, another 4% in 2021. And then as we started seeing the COVID, event tail off starting in 2022 on, 2022 volumes were down by about 4% to 5%, twenty twenty three down another 5% to 6%, coming into 2024 down another 2.5%. So we’re seeing moderation in that volume decline expectation. And as we parse apart the data as well as we can, there’s obviously no perfect way to specifically identify each and every death and the drivers and how a potential pull forward impact from those excess deaths that happened above and beyond what normal was back in 2020 through 2023, really.

You know, we’ve of settled into what we believe now is a more normalized period of volume activity. As you’ve heard in our guide, we’re expecting flat to slightly down volumes in 2025. And that’s really a function of what we believe the COVID impact, any excess deaths and any negative impact from the pull forward kind of now being embedded in the base. There’s going to be a long tail particularly to that pull forward impact that as the years go on, that it pull forward impact is going to start continue moderating is what I’d say being a natural tailwind to us. But we do think that we’re getting further away from volatility that we’ve seen.

And as we spoke about, we did see in May, really May and June of last year and then November as well, there were these blips, is what I’ll call them, in funeral volume when we saw volume come in lower than expectations. And of course, our concern was, are we losing market shares? Is there a competitive force that’s driving that decline in volume? And what we ultimately found is that it truly was a death rate dynamic that was impacting not only us, but the broader industry as well. And as I sit here today, I can’t tell you that we’re not going to see a similar month like that occur potentially sometime in 2025, but I think it’s going to become less of an issue as we get through this year and further away from that COVID experience.

And as you mentioned, there’s of course an impact on cemetery with that need. It’s very similar to the dynamics that that you’re seeing on the funeral side. But I do think it’s important to keep in mind that there is on the cemetery side, our core cemetery business, which makes up 85% to 90% of our cemetery preneed sales, there is a correlation between funeral volumes as well as, cemetery velocity. And so during this period that we saw the volumes declining, we were also seeing cemetery velocity declining. That linkage comes from if if if a family loses a mother or father, the remaining spouse will want to pre need to be in geographic proximity to to the lost spouse, but then also certain family members even younger may decide they also want to drive a pre need sale.

And so I just mentioned that to say as this volume decline has occurred, we’ve also seen some headwinds on the cemetery side that that have been administered as well.

Scott Schneeberger, Senior Business Services Analyst, Oppenheimer: Excellent. Great overview again. I wanna talk about funeral revenue per service. That’s been steadily growing in the low single digits essentially since the pandemic. Please discuss the drivers and provide a long term perspective on what you see there.

And also, what’s behind it? What are some of the offerings? Thanks.

Aaron Foley, Senior Vice President and Treasurer, Service Corp: Sure. I would say that generally even post COVID, honestly during COVID and pre COVID, the funeral business really has been driven by an inflationary type pricing power, if you will, that we’ve got. It’s not there are 22,000 funeral homes across The U. S. And Canada.

So it’s a highly competitive environment. And so driving price outside of inflationary type pricing is somewhat difficult without putting broader business risk. So I would say that that is and continues to be the main driver. As we saw 2022, ’20 ’20 ’3 when inflation was higher, closer to that 4%, five %, six % type range, we did see mid single digit type growth in our funeral average sales during that period. Now, are other dynamics that can have an impact on that.

One is the cremation mix. As we see that mix shift from burial to cremation, you’re going to see some headwind on that inflationary type average growth. And so historically, that trend really over the last twenty five years or so has been somewhere in that 100 to 150 basis points type range. In 2024, we actually saw that closer to 60 to 80 basis points of a increase. And actually in the first quarter, we saw a 40 basis point increase.

So it seems that that rate of increase is moderating some. Today, as we stand, we’re at about 60% cremation mix currently. As we look at other countries where, western type death care civilizations and cultures, we see that that cremation mix seems to have stabilized somewhere around 75 to 80 basis or 80 percentage points. And so as we get closer to that point, you would expect that that slope of increase, so that 100 to 150 basis points would start moderating. And so there’s a good likelihood that we’re probably going to be closer to maybe 75 to 125 basis points of shift maybe over the next five to ten years and start seeing it moderate even more until it kind of stabilizes there.

But that’s a dynamic that creates a headwind to us on the average side. And then a final component, it’s a smaller piece of our business, but we’ve got this non funeral home channel in our funeral business. And one of the dynamics impacting the business there is a business shift that we’ve been doing over the last two to three years, which has created some volatility, but it’s, we believe, setting us up for some strong foundational growth going forward. And the dynamic that I’m referring to is we used to deliver and recognize earn kits at the time of sale. We’re stopping doing that.

And so we’ve got that headwind currently. But what we’re starting to see is those earn kits that have been deferred and put on premium contracts, we’re starting to see those now come out of the backlog and they’re impacting that non funeral home business. And in the first and really the fourth quarter, we saw a nice 10% plus growth in that sales average. So that’s going to be something that will help drive us going forward. But keep in mind, out of our $4,300,000,000 of revenue, that makes up $250,000,000 to $300,000,000 of that revenue.

So as I sit here today and try to explain what I think is going to happen with our averages over the next several years, I think we’re still going to be in that low single digit inflationary type growth period. If we do start seeing some inflationary impacts outsized as a result of some tariff implications, we will react accordingly because us as well as the other 20,000 out there are going be feeling similar type pressures, and I think we’ll be able to see that pricing impact there.

Scott Schneeberger, Senior Business Services Analyst, Oppenheimer: Thanks. So I appreciate it. Makes sense. Let’s discuss funeral preneed sales, how they have the potential to impact revenue and market share Additionally, please address any recent developments impacting this category as well as provide long term perspective on its potential growth profile at Service Corp. Thanks.

Aaron Foley, Senior Vice President and Treasurer, Service Corp: Yes. So as I just mentioned at SCI Direct, we’ve been having a shift there where from delivering earns to deferring them. And that’s, you know, obviously created some volatility from a counselor perspective, but a bigger dynamic that to impact preneed production, preneed sales. A bigger impact though is we have shifted that SCI director, the non funeral home business from selling a % trust instruments to now with a new general agency agreement with Global Atlantic, we’re now having them sell insurance contracts. And so what that does is it helps us generate general agency commissions that go to help offset some of that decline from the non delivered earns that that we’re losing in the current period.

So again, once we see that stabilize, we’re going to have a strong foundation of general agency revenue there. But then ideally, once we have this foundation under us, we’ll see strength in that funeral preneed production going up as well. But stepping back just a little bit, that shift from trust to insurance on the SCI Direct or non funeral home side really did have a impact to our counselors and impact to how they were selling to consumers. One, to sell an insurance product, you have to have an insurance or insurance license. So we had to go through a process to get each of those counselors tested and licensed as an insurance salesman.

And then on top of that, because you’re now selling a life insurance product, you have to be able to be competent in understanding the structures of those contracts, but then be able to convey to the consumer the benefits of having that life insurance component associated with that pre need contract. Therefore, if you sell a contract that’s to be paid over five years, if the individual passes in year two, the insurance will kick in and the family doesn’t need to pay for the remaining years of payments under that contract. Under a trust agreement, you don’t have that benefit. You don’t have that insurance benefit. So those dynamics have created a headwind as we’ve made this shift in SCI Direct.

And as we look at really as we saw in the first quarter, we saw a headwind in non funeral home preneed sales revenue. If you look at our press release and look at that line item, we expect a similar headwind in the second quarter, maybe somewhat of a headwind in the third quarter until we kind of stabilize in the fourth quarter. As we stand here today, about 80% of our production has been already switched in SCI Direct to this new sales model. And as we get to the end of the year, 100% will have switched. And so as we look to 2026 and beyond, we expect not only these contracts that have the deferred earned kits coming out of the backlog to give strength, but also the stability in the pre need sales production and the growth in that general agency revenue as that production grows should also provide strength going forward.

On the core business for funeral production, in July of last year, we switched from TruStage, which was our previous insurance provider, to Global Atlantic. And that, as you’ve seen over the last three quarters now, has generated some strong core general agency revenue growth on a year over year business. And we implemented that in July of last year. So we expect the second quarter will also have some strong growth coming through on the general agency commission side of things until we lap it and then see some stability on that funeral production base. But that change as well created some headaches, if you will, maybe not as much as on the SCI Direct side, but it also has created headaches on the core funeral preneed production side that our counselors have been working through.

And they’ve honestly been doing a better job as they’ve progressed through since July of last year. And we’re starting to see some stabilization of that funeral pre need. But I’d expect we’re still going to see a little bit of a headwind here in the second quarter until we get really into the third quarter when we start seeing some year over year growth in that preneed production. But that being said, for 2025, as Tom mentioned on the call last week, we are expecting low single digit declines in our funeral preneed production for 2025 as a result of all that volatility. But as we look forward to 2026, expecting stability there and growth, which to really back to your question, our hope is that growth in that backlog, which today in total for funeral and cemetery sits right at $16,000,000,000 That growth is going to help not only lock in future market share, but hopefully grow some premium or funeral market share going forward as well.

I think that, you know, we recognize that we’re cannibalizing some amount of future at need sales by putting these premeds in place. But with the structure and how we’ve set it up with general agency commissions and such that go to more than offset selling compensation for our counselors in total for the program, we still feel like it’s a good structure for us to follow the strategy.

Scott Schneeberger, Senior Business Services Analyst, Oppenheimer: Thanks. I was having trouble looking at your button there. We’re going to move over now to cemetery pre. Historically, a p and l growth driver for Service Corp. Please discuss the drivers of the growth you’ve experienced in this category as well as how it’s trending here at the start of 2025 and your outlook for over the balance of the year as well as longer term like you did just on on funeral in the sales?

Thanks.

Aaron Foley, Senior Vice President and Treasurer, Service Corp: Sure. So you really have to separate the cemetery preneed business between core and large sales. So the core business or core pre need sales make up about 85% to 90% of the pre need and then the large sales make up the balance or 10% to 15%. And when you look at that core business through 2024 and really the first quarter of twenty twenty five, we’ve seen growth in that aspect of our business. That core Green Aid sales has been growing.

It’s not been growing. It’s been growing more in that low single digit type range as a result of some of these volume dynamics that I’ve mentioned and how that conveys or correlates into the cemetery velocity. But that core business has stayed in pretty strong. Where we’ve seen some volatility, and I wouldn’t even say necessarily it’s weakness, it’s more of a timing perspective, is in the large sale dynamic. These large sales are definitionally internally any sale greater than $80,000 And in many cases or not many, but several cases, you’re going to have individual contracts where people are spending $2.03 dollars $4,000,000 on a private mausoleum to be built on an area of our cemetery that’s highly customized and built to their specifications.

And those types of transactions can take weeks, months, and in some cases, we’ve even seen years where conversations with the families to get them ultimately comfortable with what they ultimately would like as their final resting place. And what we saw in 2024 was the first and the fourth quarter were strong cemetery preneed quarters. The second and the third quarter were somewhat weak. And it’s ranged anywhere from 30,000,000 to close to $60,000,000 per quarter. But on average it’s been about $45,000,000 per quarter.

The first quarter of this year came in closer to that $30,000,000 range. We knew that it was going to be a tougher comp again because the first quarter last year was strong, but it was a little bit lighter than our expectations. You know, I I would say that right now, our perspective is is that it’s likely timing. You know, January was was the weakest month for us. It started moderating in February and March.

We actually saw a slight positive. And then as Tom mentioned on the call, April came in, you know, pretty strong as well, even higher than than March. And so the trajectory seems strong and gives us confidence in that. That being said, as we step back and kind of look at the macroeconomic environment and everyone’s looking at MSNBC, CNBC, Bloomberg, just, you know, seeing all this data coming in and and flying around, whether it be about tariffs, whether it be about inflation, jobs reports and such, there seems to be a lot of angst currently in the environment. And I think that we’re looking at that and saying, look, we’re not seeing it now, and the trajectories haven’t given rise that that is, you know, transpiring into our business because we’re seeing continued strength.

But I think that we took the approach to moderate our cemetery preneed expectations because of all this volatility. And we took that 2025 perspective from a low to mid single digit type growth in cemetery pre need to closer to a low single digit type growth in cemetery pre need. Now at the end of the day, ideally, our perspective would be, and everyone’s I would think as an investor, that we’re wrong, that it’s gonna, you know, trend more to the upper end. But I think that we just wanted to, you know, take a a little bit more cautious perspective and moderate those expectations for ourselves. But that that’s kind of the broad dynamic for 2025.

I would say that, you know, cemetery, unlike the funeral business, we’ve got a lot more pricing power. You know, of course, you’ve got some inflationary dynamics, but these 455 cemeteries that we own are these green bastions generally in the middle of these urban urban, you know, jungles. And they’re just very difficult, if not impossible to replicate. And as a result of that scarcity factor, you’ve got pricing power that’s built in there from a real estate perspective. But then on top of that, we’ve got this strategy that we’ve talked about a lot about how we go in and tier our cemetery properties.

So fifteen, twenty years ago, you would go into as one of our potentially some of our cemeteries and see it’s just homogenous lots being sold. We’re now going in and we still have those homogenous lots for the consumer who wants those as an entry level type inventory items. But we’ve built everything from private estates, bench estates. We’ve dug holes and created lakes, a lakefront type property, all the way up to the private mausoleums that I was mentioning before that can go for several million dollars. And I think that that tiering strategy followed and worked on with our counselors has really helped to provide some strong average support for those sales in those cemeteries that we operate in.

And so I think that there continues to be strength on the cemetery side. I think we’ve got some dynamics this year and over the past few years with volume coming down and this year more so now with the macroeconomic environment that we’re watching. But I think that that’s going to continue to be a nice component of our earnings growth going forward.

Scott Schneeberger, Senior Business Services Analyst, Oppenheimer: Great. Thanks. That sets up a nice segue. We’re fortunate enough to be conducting a field trip with Service Corp to Rose Hills in Los Angeles, which is not only the largest memorial park in the company’s portfolio. It’s actually the largest in all of North America, the world.

Could you please discuss some interesting attributes of that property? You were just touching on some in my view, but if you could kind of draw the parallel and then parallels to your entire portfolio as well as Rose Hills represents it. Thanks.

Aaron Foley, Senior Vice President and Treasurer, Service Corp: Yeah. Sure, Scott. And we’re really excited about that. So on June 5, I think there are still spots available. So if interested, definitely reach out to Scott or Daniel.

We’re very happy to kind of showcase this property again, not because it’s the largest, but I think as from an investor point of view, it really helps to crystallize SCI’s strategy and how we serve just multiple cultural backgrounds here in America, but also showcases the tiering of the property that we’ve talked about. And so I think it’s a good opportunity to kind of see that. As you mentioned, Rose Hills is significant for SCI. It makes up 8%, nine % of our EBITDA. Over 100,000,000 of that is EBITDA coming through.

And it at one point used to be its own public company before being bought by the Lowen Group back in the nineties and ultimately acquired by us in in 02/2006. And, you know, it’s as as Scott mentioned, it’s one of our star properties. We’re very proud of it, and, you know, we’re we’re happy to to see y’all come in and visit.

Scott Schneeberger, Senior Business Services Analyst, Oppenheimer: Let’s let’s make sure I’m off. Alright. And just as I’m going to the next question, we’re we’re coming up on time, a little bit more over five minutes. And I do have have I can see question or two in queue. So audience, I’m wrapping this part up.

If if you have any questions, now would be a good time to get them in. So, yeah, just a couple more in my segment. This one essentially on margins, particularly in the cemetery segment, can have a meaningful impact on your reported EPS. Can you please discuss some of the primary drivers, which items in particular investors should be watching as progress over 2025 and beyond that can move the the margins up or down. And again, I I mentioned cemetery segment.

It can be across the whole portfolio.

Aaron Foley, Senior Vice President and Treasurer, Service Corp: Yeah. And so what I’d say is every dollar incrementally or decrementally that comes through the top line generally has about a 70 to 80 percentage impact on the bottom line. And so in periods of revenue growth, we’re going to have a differential growth in earnings. And so specifically on cemetery, if you go back twenty years, fifteen, twenty years or so, we were closer to 20% type margins on cemetery. As we’ve been executing on our strategy to drive cemetery premium production, you’ve seen that that has transpired into margin growth and you’ve seen it go now we’re at the lower 30s from a margin perspective.

At some point during COVID, we even approached 40% from a margin perspective, just highlighting the the the leverage strength from that top line coming through. You know, as as we stand here for 2025 with the expectation of low single digit growth in cemetery preneed, that’s going to drive low single digit growth to cemetery top line with the fixed cost structure that we have in place, which is relatively large as well and something that we focus on constantly. That being said, there is inflationary pressure that that goes to compress margins to to some degree. So in total for 2025, we’re generally thinking somewhere around flat margin type dynamics for 2025 for cemetery. As we look forward to 2026 and beyond, as we get back into the more normalized mid single digit growth and or expected in cemetery pre need, that’s where we’re going to start seeing that low to mid single digit growth on the cemetery revenue side dropping down at 70% to 80% to the bottom line and then back to kind of that 8,100 basis points type growth, 5,100 basis points type growth on the cemetery margin side.

On the funeral, it’s very similar. But with flat volume and low single digit growth in average, that’s going to drive basically flat margins in that 21% range that we’re expecting for 2025 until that baby boomer dynamic starts to impact the business where we start seeing an incremental 1%, one point five % type volume coming through, then that’s where we expect to see some margin growth, 50 basis points or so coming through on the funeral side as well.

Scott Schneeberger, Senior Business Services Analyst, Oppenheimer: Hey. Thanks. I’m asking one more. I’m gonna cut my back my section back a little bit because we have two questions waiting in only about four minutes. So a quick one for you right here, and then I’ll get to the other two.

And that’s just free cash flow. The company’s historically generated strong free cash flow. Please share your expectations for what you’re gonna deliver in 2025 and beyond, and then also address how you allocate capital. Thanks.

Aaron Foley, Senior Vice President and Treasurer, Service Corp: Sure. Thanks. So this year at the midpoint, we’re expecting to generate $860,000,000 of operating cash flow. That’s lower than prior year because keep in mind, we did have a headwind of 150,000,000 of cash taxes that we’re expecting to pay in 2025 because we’ve benefited the last year and a half or so. So out of that August taking out about 315,000,000 of CapEx, we’re expecting free cash flow of around $550,000,000.

We pay a $180,000,000 dividend. We are expecting to buy back about or buy about a $100,000,000 of acquisitions at the midpoint of our ’75 to 01/2025 guidance range. We’re expecting to spend another 70 to 80,000,000 for growth capital for real estate, new funeral homes, new cemeteries. So you’re left with around $150,000,000 or so out of that free cash flow. That’s, absent other opportunities and and assuming our intrinsic value, there’s a discount to it enough, which, you know, as you would expect with the current volatility that we’re seeing, we believe that it does, we’re going to continue to be buying back shares.

And so that’s really the algorithm honestly that we’ve been following for the last twenty years, just growing over time.

Scott Schneeberger, Senior Business Services Analyst, Oppenheimer: Thanks. I’m gonna ask the last two just because we only have a couple minutes left. I’m gonna ask you these two questions at the same time and and basically paraphrase. The first one is, do you have enough cemetery land? How do you manage cemetery land?

And the second one is essentially on the on the funeral rule. And then there’s some elements to it, but you can guess what that is. Yeah. So just those are the two main themes if you could address them both, please.

Aaron Foley, Senior Vice President and Treasurer, Service Corp: So I’d I’d start with the funeral rule. There’s no incremental guidance that I can give there. Really, the last, update I had was in October 2023 when there was the symposium that took place that industry participants as well as organizations took place in to discuss questions that the FTC had. But as of right now, I have no further developments on that front, unfortunately. Think a big push of that funeral rule is ultimately, as you know, to get pricing put online.

And we’ve got pricing online at 75% of our locations already. So at the end of the day, we’re ready to comply with whatever the FTC will come out with. We’re just waiting to see obviously the volatility in DC right now kind of it remains to be seen where things head. On cemetery land, I’ve got the easy answer and then kind of the more complex. The easy is when you take our portfolio as a whole, on average, when you look at the velocity of sales that we’re currently doing, we’ve got over a hundred years of available inventory out there with our 36,000 acres of land that we have.

But the more complex question is or the complex answer is there is a handful. There are a few cemeteries that we are getting a little bit closer to that end of life on those cemeteries. And there are multiple strategies that we employ to kind of manage that end of life. One is to raise prices. Again, because of the scarcity factor, we can raise prices, slow down that velocity and try to find that balance where the sales are supported and growing, albeit maybe at a lower velocity coming through.

We can go in and reconfigure cemetery, roads, sidewalks and structures to be able to provide more inventory as well. We’ve had instances where we will go in and build multi story mausoleum. So if we don’t have space to build wide, we can build up. And so we’ve done that as well. And then more recently over the last five, seven years, we have been looking at our footprints that we understand well, where we see there might be some land constraints occurring.

And we, you know, ideally, will buy land adjacent to existing properties that we have to more easily develop out that cemetery land and increase the inventory in that situation. But outside of that, watching the population of that cemetery and where they’re moving, we historically haven’t really built any greenfield cemeteries, but we found opportunities really in the last five to seven years where we’ve bought land, we’ve developed that a portion of that land. If you buy 80 acres, you’re only gonna develop 10 acres and then kinda see how that goes and grow as as needed. But we did that recently Far West Houston, and a cemetery opened in a new cemetery was opened in 2022. We had this, you know, fifteen year pro form a model and projections.

And by year two, we were at year seven of those projections because the velocity was so great. So we’re identifying other areas like that across our footprint. And you’ve seen our real estate spend increase some as we’ve, you know, started to dip our toe into that arena to help alleviate, some of those instances of of the land constraint.

Scott Schneeberger, Senior Business Services Analyst, Oppenheimer: Excellent. Thanks. Covered both questions comprehensively and what would they entail just with the, the little keywords. Thank you. A great job.

Audience, thank you. Thanks for those questions. Thanks for being attentive and a really good overview. We appreciate it. Thanks all.

Aaron Foley, Senior Vice President and Treasurer, Service Corp: Likewise. Thank you, Scott. Thank you, Daniel. You all take care.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.