Service Corporation International (SCI) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

August 2, 2023 9:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the SCI Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to SCI management. Please go ahead.

Debbie Young

Thank you, and good morning. This is Debbie Young, Director of Investor Relations. And on behalf of the SCI team thanks for joining us today. We're going to have some prepared remarks from Tom and Eric in just a moment. But before that, let me quickly go over the safe harbor language. Any comments made by our management team that states our plans, beliefs, expectations or projections for the future are forward-looking statements.

These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such statements. These risks and uncertainties include, but are not limited to, those factors identified in our earnings release and in our filings with the SEC that are available on our website. Today, we will also discuss certain non-GAAP financial measures. A reconciliation of these measures can be found in the tables at the end of our earnings release as well as on our website.

I'd like to now turn it over to Tom Ryan, Chairman and CEO.

Tom Ryan

Thanks, Debbie. Hello everyone, and thank you for joining us on the call today. This morning, I'm going to begin my remarks with some high-level color on our business performance for the quarter and then provide some greater detail around our solid funeral and cemetery results. For the second quarter, we generated adjusted earnings per share of $0.83, which was on par with our results from the prior year quarter. We were able to achieve this result despite absorbing a $19 million or $0.09 per share increase in interest expense resulting from a more than 400 basis point rate increase in our variable rate debt.

We continue to see significant earnings per share growth over pre-pandemic results. Compared to a second quarter 2019 of $0.47 per share, we have grown earnings per share at a compounded annual growth rate of 15% over the four-year period.

Funeral metrics were strong and performed at or above our expectations. Cemetery preneed sales production increased slightly quarter-over-quarter. However, they fell short of our internal expectations, as we experienced a decline in the number of contracts sold, primarily within the entry-level price-sensitive consumer segment. We believe this is predominantly attributable to a decline in discretionary consumer spending by this entry-level consumer due to the actual and perceived impact of inflation on our preneed cemetery property sales and a variety of other discretionary purchases.