10-K: Service Corporation International Reports Strong 2025 Growth

Service Corporation International reported increased net income and revenue for 2025, driven by strategic acquisitions, preneed sales growth, and effective cost management.

Summary

• Net income attributable to common stockholders increased to $542.6 million ($3.80 per diluted share) in 2025, up from $518.6 million ($3.53 per diluted share) in 2024.
• Total revenue grew by 2.9% to $4,309.2 million in 2025 from $4,186.4 million in 2024.
• Consolidated funeral revenue increased by 3.5% to $2,405.5 million in 2025, while comparable funeral revenue rose 1.7% due to a 2.9% growth in average revenue per service, partially offset by a 0.8% decrease in services performed.
• Consolidated cemetery revenue increased by 2.2% to $1,903.7 million in 2025, with comparable cemetery revenue up 1.6% primarily from a $12.7 million increase in recognized preneed revenue and $15.0 million from higher endowment care trust fund income.
• The preneed backlog of unfulfilled funeral and cemetery contracts reached $17.0 billion at December 31, 2025, an increase from $16.0 billion at December 31, 2024.
• Operating cash flow was $942.8 million in 2025, a slight decrease from $944.9 million in 2024.
• The company invested $101.3 million in acquiring 22 funeral service locations and 2 cemeteries in 2025.
• Repurchased 5,864,563 shares of common stock for $464.2 million in 2025 at an average cost of $79.15 per share.
• The quarterly dividend rate increased to $0.34 per common share at the end of 2025.
• A new $2.5 billion bank credit agreement was entered into in November 2025, due November 2030, consisting of a $1.75 billion revolving credit facility and a $750.0 million term loan.
• Combined trust fund investments generated a 15.1% return in 2025, exceeding internal custom benchmarks.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, with solid revenue and earnings growth, strategic acquisitions, and effective capital management, despite minor increases in certain operating costs. The growing preneed backlog and favorable trust returns are positive indicators for future stability.

Positives

• Net income attributable to common stockholders increased to $542.6 million in 2025 from $518.6 million in 2024, representing a 4.6% increase.
• Diluted earnings per share grew to $3.80 in 2025 from $3.53 in 2024, an increase of 7.6%.
• Total revenue increased by 2.9% year-over-year, demonstrating overall business growth.
• Comparable funeral average revenue per service grew by 2.9%, indicating effective pricing strategies and value offerings.
• The preneed backlog of unfulfilled contracts increased by $1.0 billion to $17.0 billion, securing future revenue streams.
• Operating cash flow remained strong at $942.8 million, providing substantial liquidity for operations and investments.
• Strategic capital allocation included $101.3 million for 22 funeral service locations and 2 cemeteries, expanding the company's footprint.
• The company returned significant capital to shareholders, repurchasing $464.2 million in common stock and increasing the quarterly dividend rate to $0.34 per share.
• A new bank credit agreement due November 2030 provides increased liquidity and a more favorable debt maturity profile.
• Combined trust fund investments achieved a 15.1% return in 2025, outperforming internal custom benchmarks and helping offset inflation.
• The company's leverage ratio of 3.67x is within its target range of 3.5x to 4.0x, indicating prudent financial management.

Negatives

• Net cash provided by operating activities slightly decreased by $2.1 million in 2025 compared to 2024.
• Cash tax payments increased by $119.2 million in 2025.
• Employee compensation payments increased by $20.2 million in 2025.
• Restructuring payments increased by $19.3 million in 2025.
• Net trust deposits increased by $12.2 million in 2025.
• Cash interest payments increased by $11.2 million in 2025.
• Comparable funeral services performed decreased by 0.8% in 2025.
• The effective tax rate increased to 25.6% in 2025 from 23.2% in 2024, primarily due to a decrease in excess tax benefits from employee share-based awards.
• Higher selling compensation costs in the funeral segment resulted from increased preneed insurance sales production and a shift from variable to fixed compensation for sales counselors.
• An impairment on tradenames of $2.0 million was recognized in 2025.

Risks

• Affiliated trust funds own investments in securities affected by market conditions beyond control, potentially leading to insufficient funds to cover future costs if investments decline significantly or in a high inflation environment.
• The company may be required to replenish affiliated funeral and cemetery trust funds to meet minimum funding requirements, which would negatively affect earnings and cash flow.
• The ability to execute the strategic plan depends on many factors, some beyond control, such as death rates, economic conditions, supply disruptions, and labor disputes.
• The company may be adversely affected by the effects of inflation, increasing overall cost structure or reducing consumer discretionary income.
• Significant weather events, natural disasters, catastrophic events, or public health crises could disrupt business operations.
• Credit agreements contain covenants that may prevent engaging in certain transactions or require actions contrary to strategic plans if breached.
• Loss of the ability to use surety bonding to support preneed activities could require material cash payments to fund certain trust funds (approximately $258.7 million as of December 31, 2025).
• The financial condition of third-party insurance companies that fund preneed contracts may impact future revenue collection.
• Unfavorable publicity could affect the company's reputation and business, which is dependent on customer trust and confidence.
• Failure to attract and retain qualified sales personnel and licensed funeral professionals could adversely affect business and financial condition.
• Exposure to unexpected costs from self-insurance programs due to unanticipated changes in actuarial assumptions or management estimates.
• Declines in overall economic conditions could reduce future potential earnings and cash flows and could result in future impairments to goodwill and/or other intangible assets, particularly in the cemetery segment ($406.8 million goodwill as of December 31, 2025).
• Any failure to protect personal information relating to customers, associates, and vendors could damage reputation, incur substantial additional costs, and lead to litigation.
• A failure of a key information technology system or process could disrupt and adversely affect the business.
• The use of artificial intelligence (AI) technologies may give rise to operational, legal, regulatory, data security, and privacy risks, including inaccurate, misleading, or biased outputs.
• Canadian business operations (approximately 5% of revenue) expose the company to operational, economic, and currency risks.
• The company's significant level of indebtedness could adversely affect cash flows, ability to raise additional capital, and flexibility to react to changes in the economy or industry.
• The funeral and cemetery industry is competitive, with a large number of locally-owned, independent operations, leading to price competition.
• A decline in the number of deaths in the company's markets could decrease cash flows and revenue.
• Inability to respond effectively to changing consumer preferences, such as the continuing upward trend in cremation, could decrease market share, revenue, and/or profitability.
• The funeral and cemetery businesses are high fixed-cost businesses, making them sensitive to sales volume declines.
• Risks associated with the supply chain, such as tariffs, disruptions, or increased costs, could materially adversely affect financial performance.
• Regulation and compliance, including new laws and regulations, could have a material adverse impact on financial results.
• Unfavorable results of litigation could have a material adverse impact on financial statements.
• Cemetery burial practice claims, based on outdated practices or alleged violations, could have a material adverse impact on financial results.
• The application of unclaimed property laws by certain states to the preneed funeral and cemetery backlog could have a material adverse impact on liquidity, cash flows, and financial results.
• Changes in taxation, or the interpretation of tax laws or regulations, could have a material adverse effect on the results of operations, financial condition, or cash flows.

Future Outlook

The company expects continued revenue growth driven by the aging Baby Boomer generation impacting at-need results and ongoing expansion of preneed sales. Management plans to remain relevant by evolving product and service offerings, leveraging its scale, and investing capital in strategic acquisitions and new locations. The company also anticipates continued shareholder returns through dividends and share repurchases, while maintaining optimal liquidity and financial flexibility.

Management Comments

• "We are North America's largest provider of deathcare products and services, with a network of funeral service locations and cemeteries unequaled in geographic scale and reach."
• "Our financial position is enhanced by our $17.0 billion backlog of future revenue from both trust and insurance-funded preneed sales at December 31, 2025."
• "We have adequate liquidity and a favorable debt maturity profile, which allow us to reinvest and grow our business as well as return capital to shareholders through share repurchases and dividends."
• "Our strong liquidity, favorable debt maturity profile, and robust cash flow generation enables us to continue our long-standing commitment to allocate capital to opportunistically grow our business and enhance shareholder value."
• "We consistently evaluate the best uses of our cash flow that will yield the highest value and return on capital."
• "Our quarterly dividend rate has steadily grown from $0.025 per common share in 2005 to $0.34 per common share at the end of 2025."
• "We target a dividend payout ratio of 30% to 40% of after-tax earnings excluding special items and intend to grow our cash dividend commensurate with the growth in our business."
• "We also expect to continue to repurchase shares of our common stock in the open market or through privately negotiated transactions, subject to market conditions, debt covenants, and normal trading restrictions."
• "Our flexible capital strategy allows us to manage our debt maturity profile by making open market debt repurchases when it is opportunistic to do so."
• "We generate a relatively consistent annual cash flow stream that is generally resistant to down economic cycles."
• "The new bank credit agreement provides us flexibility with incremental liquidity for capital investment, working capital, and other general corporate purposes."
• "Our ability to generate strong operating cash flow is one of our fundamental financial strengths and provides us with substantial flexibility in meeting operating and investing needs."
• "We believe the presentation of these additional merchandise and services through our customer-facing technology improves our customers' experience by reducing administrative burdens and allowing them to visualize the enhanced product and service offerings, which we believe will help drive increases in the average revenue for a cremation in future periods."
• "Management does not expect that we will be required to fund material future amounts related to these surety bonds due to a lack of surety capacity or surety company non-performance."

Industry Context

StockSavvy.ai notes that Service Corporation International is North America's largest deathcare provider, uniquely positioned to benefit from the aging Baby Boomer generation, which is driving trends towards personalized "celebration of life" ceremonies and increased cremation. The company's strategic focus on adapting to these evolving customer preferences through facility repurposing, digital offerings, and diverse product options aligns with broader industry shifts. Its unparalleled scale provides a competitive advantage in procurement, supply chain, and preneed sales, allowing for efficient growth in a fragmented market dominated by local, independent operators.

Comparison to Industry Standards

• The company's combined trust fund investment return of 15.1% in 2025 exceeded its internal custom benchmarks, indicating strong asset management performance relative to its own targets.
• The cremation rate in its operations increased to 64.4% in 2025, compared to 63.9% in 2024 and 63.1% in 2023, reflecting a continuing upward trend in North America, which is a key industry shift.
• The company's estimated 18% market share in North America positions it as the largest consolidated deathcare company, significantly larger than its public competitors like Carriage Services, Inc. and Matthews International Corp., which are part of its peer group for total return comparison.
• The company's leverage ratio of 3.67x at December 31, 2025, is within its target range of 3.5x to 4.0x, suggesting prudent financial management compared to its own internal benchmarks for capital structure.

Management Changes

Corporate Governance

Legal Proceedings

• Subject to various litigation and regulatory matters, investigations, and proceedings in the ordinary course of business, including operational claims and employment-related matters.
• Received notices from auditors representing the unclaimed property departments of approximately forty states regarding the escheatment of preneed trust funds held in association with unused preneed funeral and cemetery contracts.
• Unclaimed property audits have been resolved in nineteen states (Alabama, Connecticut, Iowa, Kentucky, Maryland, Massachusetts, Montana, Nebraska, Nevada, New Mexico, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, West Virginia, and Wyoming).
• Entered into an audit resolution agreement with the State of Florida Department of Financial Services and Division of Unclaimed Property, which provides for the company to retain trust fund earnings and escheat the principal to the State of Florida, resulting in increased trust fund income in 2023, 2024, and 2025.
• The company is unable to reasonably estimate the total possible loss or ranges of loss for ongoing unclaimed property matters.

Stakeholder Impact

• Shareholders benefited from increased net income, diluted EPS, growing dividends, and share repurchases. Potential for future growth from the expanding preneed backlog and strategic investments.
• Employees (17,869 full-time and 7,318 part-time) are offered comprehensive benefits including group health/life insurance, 401(k) retirement plans with matching contributions, paid time-off, financial planning support, and employee assistance programs. Training and development programs are provided for career growth.
• Customers are impacted by the company's focus on meeting changing needs and preferences, offering personalized services, digital options, and diverse cremation memorialization products under the Dignity Memorial brand, aiming for high-quality service.
• Regulatory Authorities oversee the company's operations, which are subject to extensive federal, state, and local regulations, including the FTC's Funeral Rule, environmental, health, and safety regulations, and preneed sales/trust activities. The company maintains ongoing compliance efforts.
• Creditors benefit from the company's new bank credit agreement, which provides more favorable pricing and flexibility, improving the debt maturity profile. The leverage ratio is maintained within the target range, indicating sound financial management.

Next Steps

• Continue to pursue strategic acquisitions with a focus on returns on invested capital.
• Complete divestitures of non-strategic funeral homes and cemeteries.
• Continue to invest capital to repurpose traditional casket selection rooms to event rooms and update existing locations to contemporary spaces.
• Expand tiered product and cemetery property options, including cremation offerings.
• Continue increasing digital presence through search engine optimization and other marketing channels.
• Regularly review and enhance AI governance practices, policies, and workforce training efforts.
• Return excess cash to shareholders through dividends and share repurchase programs.
• Manage debt maturity profile by making open market debt repurchases when opportunistic.
• The 2026 Annual Meeting of Stockholders will be held (Proxy Statement incorporated by reference).
• FASB guidance on disaggregation of income statement expenses is effective for annual reporting periods beginning after December 15, 2026.
• FASB guidance on internal-use software is effective for the 2028 annual period.
• The company's 2022 federal income tax return is currently under audit by the IRS.
• Various state and foreign jurisdictions are auditing tax years 2020 through 2023.

Key Dates

Recommendation

The company demonstrates strong financial health with consistent revenue and net income growth, a robust preneed backlog indicating future stability, and a disciplined capital allocation strategy that includes strategic acquisitions, shareholder returns through dividends and buybacks, and effective debt management. The proactive adaptation to changing consumer preferences and investment in technology and AI governance further strengthens its market position in a resilient industry. These factors suggest a positive outlook for long-term investor value.

Keywords

deathcare, funeral services, cemeteries, preneed sales, cremation, Dignity Memorial, SEC filing, financial results, corporate governance, risk management, capital allocation, share repurchase, dividends, debt management, trust investments, cybersecurity, AI governance, human capital management, North America, SCI