Service Corporation International · NYSE:SCI
Service Corporation International — Service Corp International — Investor Day (February 2018)
161 slides from Service Corporation International's investor day presentation, Feb 20, 2018
Slide 1: Investor Day New York, NY February 20, 2018
INVESTOR DAY NEW YORK, NY | February 20, 2018
Slide 2: Welcome to the 2018 Investor Day
Welcome to the 2018 INVESTOR DAY DEBBIE YOUNG Director of Investor Relations 2
Slide 3: Management Introductions
3 Management Introductions WELCOME TO THE 2018 SCI INVESTOR DAY Chairman of the Board | CEO President | COO SVP | CFO SVP | Operations SVP | Sales & Merchandising SVP, Operations Services VP, Business Development VP, Treasurer Director, Investor Relations Director, Financial Services MIKE WEBB ELISA
Slide 4: Discussion Topics
Discussion Topics 4 1 Global Overview 2 Funeral 3 Cemetery 4 Preneed Funeral and Cemetery Sales Strategy 5 Business Development Strategy 6 Network Optimization and Customer - Facing Technology 7 Preneed Backlog 8 Financial Overview 9 Future Growth 2018 SCI INVESTOR DAY 1pm – 4pm WELCOME TO THE 2018
Slide 5: Forward-Looking Statements
FORWARD - LOOKING STATEMENTS The statements in this presentation that are not historical facts are forward - looking statements made in reliance on the “safe harbor” protections provided under the Private Securities Litigation Reform Act of 1995 . These statements are based on assumptions that the C
Slide 6: Global Overview
SCI OVERVIEW INDUSTRY OVERVIEW COMPANY PERFORMANCE COMPANY STRATEGY GLOBAL OVERVIEW 6
Slide 7: Global Overview
COMPANY PERFORMANCE COMPANY STRATEGY SCI OVERVIEW INDUSTRY OVERVIEW GLOBAL OVERVIEW 7
Slide 8: North American deathcare industry: ~27,000 establishments, $20B revenue
The funeral and cemetery business in North America consists of approximately 27,000 establishments that generate an estimated $20B in annual revenue on 3M deaths 8 GLOBAL OVERVIEW INDUSTRY OVERVIEW $16B ~22,000 Funeral Homes Revenue $4B Revenue ~ 5,000 Cemeteries $ 20B NORTH AMERICAN 1 DEATHCARE IND
Slide 9: Funeral industry characteristics
Funeral is the larger industry segment and is predominantly influenced by a caregiver approach 9 o Funeral employees have a caregiver mindset o Inefficient industry model (~130 services performed per year) 1 – low through - put without the benefit of scale o Certain customers driven by ethnic and re
Slide 10: Cemetery industry characteristics
Cemetery is the smaller industry segment and is predominantly influenced by a sales - centric approach 10 o Cemetery employees have a sales - centric mindset o High barriers to entry – zoning restrictions and capital requirements o Ample capacity with very few new builds occurring o Retail consumer
Slide 11: Funeral and cemetery products and services sold at need and preneed
Both funeral and cemetery products and services are sold at the time of need and also actively marketed on a preneed basis (prior to a death occurring) 11 PROFESSIONAL SERVICES MERCHANDISE CEMETERY PROPERTY FUNERAL o Arranging and directing services o Use of funeral facility/motor vehicles o Removal
Slide 12: Aging population benefits the cemetery industry
The demographic landscape of an aging population is already benefiting the cemetery industry and provides opportunity for the future 12 GLOBAL OVERVIEW INDUSTRY OVERVIEW 0 20,000 40,000 60,000 80,000 100,000 120,000 2010 2015 2020 2025 2030 2035 AGING OF AMERICA Atneed Customer Preneed F uneral C us
Slide 13: Number of deaths affected by births in Silent Generation
The number of deaths in recent years has been affected by a dearth of births reflected in the S ilent Generation and continued increases in life expectancy 13 U.S. BIRTHS BY GENERATION 1 (In thousands) U.S. DEATHS 1 (In thousands) o There was a decline in the numbers of births during the late 1920’s
Slide 14: SCI Overview
INDUSTRY OVERVIEW COMPANY STRATEGY Chairman of the Board and Chief Executive Officer TOM RYAN COMPANY PERFORMANCE SCI OVERVIEW GLOBAL OVERVIEW 14
Slide 15: Largest company in fragmented deathcare space
We are the largest company in the highly fragmented deathcare space with ~15% - 16% revenue market share in the U .S. and Canada 15 $3.1B Revenue Capitalization 2 SCI MARKET 1 Information is based on consolidated information as of December 31, 2017. GLOBAL OVERVIEW SCI OVERVIEW $1.7B Preneed Sales $
Slide 16: Funeral segment ~60% of revenue
Our funeral segment generates ~60% of consolidated revenue and provides steady margins and cash flow 16 o National brands, e.g., Dignity Memorial o Leveraging our scale from operations o Proactive preneed sales program o Contemporary products and life celebrations o Leading edge customer - facing te
Slide 17: Cemetery segment ~40% of revenue
Our cemetery segment generates ~40% of consolidated revenue and is experiencing growth in revenue and margins 17 o Much larger cemeteries compared to industry average; ability to leverage scale o Proactive preneed sales program which leverages Customer Relationship Management (CRM) system to enhance
Slide 18: Company Performance
INDUSTRY OVERVIEW SCI OVERVIEW COMPANY STRATEGY COMPANY PERFORMANCE GLOBAL OVERVIEW 18
Slide 19: Adjusted EPS growth track record
We have a strong track record for adjusted earnings per share 1 growth over time 19 CAGR $0.92 $1.11 $1.18 $1.29 $1.46 $0.09 2013 2014 2015 2016 2017 ADJUSTED EARNINGS PER SHARE 1 BEFORE EXCESS TAX BENEFITS Adjusted EPS 1 Excess Tax Benefit 1 Adjusted earnings per share is a non - GAAP financial mea
Slide 20: Steady and robust cash flow
$465 $551 $607 $621 $687 $(25) $(42) $(93) $(113) $(133) We also have steady and robust cash flow despite our journey towards becoming a full cash tax payer 20 2013 2014 2015 2016 2017 Adjusted Operating Cash Flows $440M $509M $514M $508M $554M 10% CAGR Adjusted Operating Cash Flows before Recurring
Slide 21: Superior total shareholder returns
Our success has resulted in superior total shareholder returns over time 21 Total Shareholder Return as of 12/31/2017 34% 73% 194% 221% 22% 38% 108% 126% 1 year 3 year 5 year 10 year Annualized Returns 22% 20% 34% 11% 16% 12% 24% 8 % SCI S&P 500 OUTPACING Period OVER TIME SOURCE: S&P Global Market I
Slide 22: Company Strategy
INDUSTRY OVERVIEW SCI OVERVIEW COMPANY PERFORMANCE COMPANY STRATEGY GLOBAL OVERVIEW 22
Slide 23: Three core strategies
Our three core strategies are centered on our customer and our competitive advantages 23 FIRST CORE STRATEGY SECOND CORE STRATEGY THIRD CORE STRATEGY o Remain relevant to our customers o Drive preneed sales now and into the future o Develop the sales organization o Network optimization and customer
Slide 24: Remaining relevant to our customer
First, remaining relevant to our customer is key to generating revenue growth in a changing customer environment 24 REMAINING RELEVANT TO OUR CUSTOMERS o New and contemporary products and experiences as well as tiered cemetery property offerings o Addressing varying customer needs and preferences o
Slide 25: Leveraging scale for competitive advantages
Our second core strategy, leveraging scale , gives us tremendous competitive advantages and will drive future revenue and efficiencies 25 o Enabling a sales organization of 4,300+ sales professionals with new tools and capabilities o Customer - relationship management systems are helping drive impro
Slide 26: Maximizing capital deployment opportunities
Our third core strategy is maximizing capital deployment opportunities to grow the company and generate value for our shareholders while maintaining our target leverage ratio 26 ANNUAL CAPITAL DEPLOYMENT OVERVIEW Dividends Share Repurchases Debt Profile and Liquidity Management o Payout ratio target
Slide 27: 8%-12% annual adjusted EPS growth framework
We believe we can generate an average of 8% - 12% annual growth in adjusted earnings per share 1 over the long term 27 FRAMEWORK 2 % – 3% SHARE REPURCHASES 1 Adjusted EPS is a non - GAAP financial measure. Please see appendix for additional disclosures. 2 % – 3% 4% – 6% BASE BUSINESS GROWTH TUCK - I
Slide 28: Funeral
FUNERAL SENIOR VICE PRESIDENT JAY WARING FUNERAL OVERVIEW CUSTOMER TRENDS North American Operations 28
Slide 29: Funeral Overview / Customer Trends
CUSTOMER TRENDS FUNERAL OVERVIEW FUNERAL 29
Slide 30: 1,488 funeral locations serve two channels
Our 1,488 funeral locations serve our customers through two channels addressing unique preferences 30 o Simple and direct service at low price o Ability to pre - plan arrangements o Does not want to visit a funeral home o Does not want service or memorialization o Quality and prestige o Reputation o
Slide 31: Funeral segment serves nearly 500,000 customers annually
CHANNELS ATNEED AND MATURED PRENEED SERVICES PERFORMED PRENEED CONTRACTS TOTAL Burial 140,228 58,183 198,411 Cremation *123,462 50,324 173,786 FUNERAL HOME 1,396 locations | $1.7B Total funeral home 263,690 87% 108,507 61% 372,197 77% Burial --- --- --- Cremation *39,416 69,502 108,918 NON - FUNERAL
Slide 32: Efficiencies from leveraging scale
We are able to enhance our efficiencies by leveraging our scale 32 o Centralized support o Preneed scale o National purchasing power o Portability of preneed NATIONAL SCALE LOCAL SCALE | “CLUSTER” MODEL Our scale allows us to provide standardized products to our customers and support to our location
Slide 33: Funeral Customer Trends
FUNERAL OVERVIEW Palm Mortuary Southwest | Las Vegas, NV CUSTOMER TRENDS o Customer Preferences o Cremation Overview o Contemporary Products and Services FUNERAL 33
Slide 34: Customer Preferences
FUNERAL CUSTOMER TRENDS: Customer Preferences 34
Slide 35: Four funeral customer types
We have identified four funeral customer types based on their specific preferences (give them what they want) 35 FUNERAL CUSTOMER TRENDS CUSTOMER PREFERENCES Memorialization and Prestige Religious, Ethnic, or Cultural N eeds Convenience and Simplicity Price and Pre - planning Price Price and Locatio
Slide 36: Customs conscious customer
The customs conscious customer wants products and services that meet their specific cultural, ethnic, or religious preferences o Employees who understand religious and cultural needs and can speak specific languages o Strong relationships with the ethnic or religious community o Large cultural visit
Slide 37: Full service customer
The full service funeral customer desires prestige and premier facilities o Prestigious location o High staff to guest ratio o White glove service o Large visitation space 37 FULL SERVICE CUSTOMER PREFERENCES FUNERAL CUSTOMER TRENDS CUSTOMER PREFERENCES
Slide 38: Neighborhood customer
The neighborhood customer is primarily looking for simple quality and convenience as well as value for price o Location in close proximity to family and/or residence o Simplicity of packaging to facilitate efficient selection experience o Guidance in determining what they want for memorialization o
Slide 39: Price sensitive customer
Finally, the price sensitive customer is served primarily by our non - funeral home locations o Simple services at a lower price tier o No preference for memorialization o Fewer options to aid decision - making process o Preneed option 39 PRICE SENSITIVE CUSTOMER PREFERENCES Leased Storefront Locati
Slide 40: Cremation Overview
CUSTOMER TRENDS: Cremation Overview FUNERAL 40
Slide 41: Cremation growing ~100bps per year
Cremation has been growing at a consistent pace (~100bps per year) over the last two decades; SCI as the leading provider is adapting well to this shift 41 $3.1B $ 852M REVENUE ($11 million) EBITDA ($8 million) Cremation Shift Operating Loss 2 = +1% ADJUSTED EBITDA 1 Holding all else equal, for ever
Slide 42: J.D. Power 2017 survey: cremation customer is loyal
Funeral home channel - the voice of the customer – J.D. Power 2017 survey results (cremation customer is loyal) 42 Factors that were important in the decision to choose the funeral home location: Cremation Burial Quality of service 98% 98% Reputation 95% 96% Convenience of location 88% 90% Price 85%
Slide 43: Managing fixed costs in high cremation markets
Funeral home channel – we are managing our fixed cost structure in high cremation markets leading to strong operating margins 43 1 Pre - overhead expense allocation. Despite significant cremation disposition mix, our locations are yielding healthy margins FUNERAL CUSTOMER TRENDS CREMATION OVERVIEW S
Slide 44: Leveraging local scale to adapt to cremation shift
Funeral home channel – We are leveraging our local scale and resources to position ourselves to change with this growing dynamic 44 Right - sizing our business consists of reducing the following: o Facility square f ootage o Vehicle fleet o Personnel Over time in a market, as cremation mix increases
Slide 45: Preneed backlog predicts consumer behavior; cremation mix shift
Funeral home channel – through our preneed sales and deferred revenue backlog, we are able to more accurately predict future consumer behavior and prepare accordingly for markets with these shifts 45 Similar to our atneed cremation mix, our preneed cremation mix shift is also moving at a consistent
Slide 46: SCI Direct and Neptune Society growth
Non - funeral home channel - To serve the direct cremation customer, we acquired N eptune Society in 2011, and have since grown our non - funeral home channel revenue, SCI Direct, by over 2x with an emphasis on a preneed sales strategy 46 10.7% 8.3% 17.6% 17.4% 15.8% 17.7% 20.0% 0% 5% 10% 15% 20% 25
Slide 47: Non-funeral home channel serves a different customer segment
Non - funeral home channel - We are serving a different customer segment than our funeral home channel locations, and we believe this is a significant growth engine 47 o Simple product offering and package pricing ₋ Services ₋ Urn kit ₋ Travel Relocation Protection Plan (TRPP ) ₋ Payment options for
Slide 48: SCI Direct growth without substantial capital
Non - funeral home channel - Due to our scale, we have been able to significantly grow SCI Direct without substantial capital outlays, which is partially offsetting the cremation mix shift headwind in our funeral home channel 48 UNDERLYING GROWTH FACTORS o Scale in existing and new markets with ampl
Slide 49: Contemporary Products and Services
CUSTOMER TRENDS: Contemporary Products and Services FUNERAL 49
Slide 50: From traditional mourning to unique ceremonial services
Some customers are transitioning from traditional mourning to unique ceremonial services 50 TRADITIONAL CONTEMPORARY FUNERAL CUSTOMER TRENDS CONTEMPORARY PRODUCTS AND SERVICES
Slide 51: From mourning of death to celebration of life
Whether burial or cremation, funeral customs are changing from the mourning of death to celebration of life 51 o T raditional casket rooms have been transformed into event rooms o Funeral directors have been trained to plan post - ceremonial events FUNERAL CUSTOMER TRENDS CONTEMPORARY PRODUCTS AND S
Slide 52: New experiences and product offerings
o Light of Remembrance o Webcasting o Remembrance jewelry and blanket Whether burial or cremation, today’s funeral customer wants new and relevant experiences and product offerings 52 OTHER FAMILY SUPPORT OFFERINGS CATERING BEREAVEMENT TRAVEL PROGRAM MEMORY PORTRAIT AFTERCARE PLANNER COMPASSION HELP
Slide 53: Funeral top line growth 1%-2%, stable margins
21.8% 21.1% 19.6% 20.3% 2014 2015 2016 2017 Over the near term, we expect to grow funeral top line by 1% - 2%, with margins remaining relatively stable 53 1 Information represents comparable businesses owned as of December 31, 2017. 4 - YEAR COMPARABLE FUNERAL MARGIN PERFORMANCE 1 ANNUAL GROWTH TARG
Slide 54: Positioned to drive funeral growth
We are strategically positioned to drive funeral growth in the future 54 FUNERAL FOCUSED ON CUSTOMER PREFERENCES o Remaining relevant continues to be the pillar of our funeral strategy o Ensuring our customers have the appropriate channel access to meet their purchasing needs EMBRACING CUSTOMER TREN
Slide 55: Cemetery Overview and Customer Preferences
CEMETERY SENIOR VICE PRESIDENT STEVE TIDWELL CEMETERY OVERVIEW AND CUSTOMER PREFERENCES Sales and Merchandising 55
Slide 56: Cemeteries interact with ~300,000 customers annually
Our network of 473 cemeteries interact with ~300,000 customers annually 56 Burial Cremation 2017 DISPOSITION 1 281, or 59%, of our cemeteries share property with an SCI - owned funeral home , which we refer to as combination locations PRENEED PROPERTY UNITS TOTAL 243,153 52,590 ATNEED AND MATURED PR
Slide 57: Property, merchandise and service options
We offer property, merchandise, and service options on both a preneed and atneed basis 57 Lawn Spaces Walled Estate GROUND BURIAL PROPERTY MAUSOLEUM PROPERTY CREMATION PROPERTY Columbarium MERCHANDISE AND SERVICES Bronze Granite Garden Mausoleum Private Mausoleum Services Glass Front Niches CEMETERY
Slide 58: Custom and premium offerings
For customers desiring prestige, we offer various customized property and memorialization options 58 o Usually prefer a prestigious cemetery, rich in historic heritage o Secluded and scenic grounds o Typically purchase property to accommodate multi - generational use o Property typically has premier
Slide 59: Mid-tier offerings
For consumers desiring mid - tier products, we offer a variety of solutions 59 o A good balance of quality and price o Adjacency (being close to relatives and friends) is not as critical o Cemetery is typically located within a close proximity of their residence o Offerings include appropriately lan
Slide 60: Basic customer offerings
The basic customer typically prefers simplistic offerings at an entry level price 60 o Cemetery does not necessarily need to be close to residence o Minimal to no religious preference o Basic lot gardens, simple lawn crypts, brick and/or granite niche BASIC CUSTOMER PREFERENCES Outside Niche $1,500
Slide 61: Preneed property sales production growth
The primary driver of cemetery revenue growth is preneed property sales production, which has grown at a 7% CAGR, driven by increases in average sales from our tiering strategy and inflationary pricing 61 PRENEED PROPERTY PRODUCTION BEFORE CANCELLATIONS AND TOTAL SALES AVERAGE 1 3 - year Preneed Pro
Slide 62: Tiering strategy growth with cremation customers
62 Our tiering strategy has also yielded impressive growth with our cremation customers who choose to memorialize 2017 CREMATION PROPERTY 1 PRENEED ATNEED Cremation Property Velocity 3 - year CAGR 26,960 4,132 Cremation Property Sales Average 3 - year CAGR $2,829 $2,613 1 Information is based on com
Slide 63: Comparable cemetery revenue breakdown
63 $90 $75 $85 $86 $221 $227 $230 $233 $210 $228 $246 $273 $78 $79 $84 $92 $439 $486 $516 $536 $1,038 $1,095 $1,161 $1,220 2014 2015 2016 2017 ATNEED 3 - year CAGR COMPARABLE CEMETERY REVENUE BREAKDOWN 1 1 Information is based on comparable operations owned as of December 31, 2017 . ECF AND OTHER ME
Slide 64: Cemetery revenue growth 4%-6%, margin growth
We expect to continue to grow cemetery revenue by 4% - 6% resulting in margin growth of 50 - 130bps annually 64 2015 2016 2017 $1,161 $1,095 $1,220 MARGINS REVENUE 1 Information represents comparable businesses owned as of December 31, 2017. 4 - YEAR COMPARABLE CEMETERY MARGIN PERFORMANCE 1 6.0% 5.1
Slide 65: Funeral and Cemetery Preneed Sales Strategy
Memorial Oaks | Houston, TX FUNERAL AND CEMETERY PRENEED SALES STRATEGY PRENEED SALES TRENDS PRENEED OVERVIEW DEVELOP THE SALES ORGANIZATION 65
Slide 66: Preneed Sales Strategy
DEVELOP THE SALES ORGANIZATION PRENEED SALES TRENDS PRENEED OVERVIEW FUNERAL AND CEMETERY PRENEED SALES STRATEGY 66
Slide 67: Why do customers pre-arrange?
WHY DO CUSTOMERS PRE - ARRANGE? 67 PLANNING By leaving nothing to chance and removing uncertainty for those you leave behind PROTECTION By providing emotional and financial protection to your loved ones PEACE OF MIND By eliminating the burden left on your loved ones PRENEED FUNERAL AND CEMETERY SALE
Slide 68: Demographics benefit preneed sales strategy
Recall how the demographic landscape benefits our preneed sales strategy today and in the future 68 0 20,000 40,000 60,000 80,000 100,000 120,000 2010 2015 2020 2025 2030 2035 AGING OF AMERICA Atneed Customer Preneed F uneral C ustomer Preneed Cemetery Customer Late 50’s/Early 60’s Late 60’s/Early 7
Slide 69: Size and scale drive differential preneed growth
Our size and scale has given us the opportunity to differentially grow preneed sales 69 DIFFERENTIAL ADVANTAGES o 4,300+ knowledgeable sales p rofessionals o With notably larger and more premier cemeteries, and the capital to fund cemetery development, we attract the best qualified counselors o Best
Slide 70: Develop the Sales Organization
PRENEED OVERVIEW PRENEED SALES TRENDS DEVELOP THE SALES ORGANIZATION FUNERAL AND CEMETERY PRENEED SALES STRATEGY 70
Slide 71: Sales force of approximately 4,300 professionals
We have a large location and market - based sales force of approximately 4,300 professionals 71 INSIDE SALES TOTAL % PRENEED SALES PRODUCTION LEAD SOURCES COMPENSATION Method of Payment 24% Prospecting, direct mail, seminars, and web leads 10% - 14% Commission only Sales Managers 575 Sales Directors
Slide 72: Sales leads from three key channels
Sales leads continue to be generated by three key channels 72 1 Information is from our CRM database for the year ended December 31, 2017 and excludes SCI Direct leads. Channel 1 Lead Source CUSTOMER AND FAMILY ENGAGEMENT Engagement with atneed families and existing customers 68% Brand recognition 5
Slide 73: CRM increased sales production while managing headcount
With our customer relationship management system (CRM), we have increased sales production while managing headcount 73 Preneed board volume, activities, and appointments 1,2 Preneed Board Volume 2 $1.2B $1.3B $ 1.4B 1 Includes PPAs and FSCs and excludes SCI Direct. 2 Board volume is the measure used
Slide 74: CRM improves response to new leads
Our CRM system has enabled us to quickly respond to new leads, improving the efficiency and effectiveness of our sales counselors 74 Preneed board volume and average days 1,2 Preneed board volume in millions Preneed J.D. Power data reflects that ~99% of our preneed customers feel little to no pressu
Slide 75: Preneed Sales Trends
PRENEED OVERVIEW DEVELOP THE SALES ORGANIZATION PRENEED SALES TRENDS FUNERAL AND CEMETERY PRENEED SALES STRATEGY 75
Slide 76: Comparable preneed funeral sales production
$602 $585 $599 $589 $64 $78 $87 $82 $119 $134 $153 $165 $785 $797 $839 $836 2014 2015 2016 2017 76 Comparable Preneed Funeral Sales Production 1 In millions 1 Information is based on comparable operations owned as of December 31, 2017. 2 % CAGR $494 $521 $554 $618 2010 2011 2012 2013 SCI non - funer
Slide 77: Preneed cemetery sales growth driver of EPS
Preneed cemetery sales growth has been a driver of earnings per share over the last several years 77 $450 $492 $515 $538 $224 $269 $285 $304 $674 $761 $800 $842 2014 2015 2016 2017 Property Comparable Preneed Cemetery Production 1 1 Information is based on comparable operations owned as of December
Slide 78: Three key elements driving preneed growth
We believe our preneed sales program is poised to continue growing, driven by three key elements 78 LEVERAGE TECHNOLOGY o Beacon Our tablet - based preneed sales enablement tool • Funeral module is live now in select markets • Cemetery m odule scheduled to go live in the back half of 2018 o Salesfor
Slide 79: Business Development Strategy
BUSINESS DEVELOPMENT STRATEGY VICE PRESIDENT JOHN FAULK ACQUISITION AND NEW BUILD STRATEGY FOOTPRINT AND MARKET STRATEGY Business Development 79
Slide 80: Business Development Strategy
80 ACQUISITION AND NEW BUILD STRATEGY FOOTPRINT AND MARKET STRATEGY BUSINESS DEVELOPMENT STRATEGY
Slide 81: Geographically diverse location footprint
Our location footprint is geographically diverse with unparalleled scale in this industry 81 BUSINESS DEVELOPMENT STRATEGY FOOTPRINT AND MARKET STRATEGY LOCATIONS 1,961 As of December 31, 2017 BROAD GEOGRAPHIC COVERAGE STAND - ALONE FUNERAL STAND - ALONE CEMETERY COMBOS FUNERAL AND CEMETERY UNDER ON
Slide 82: Dallas, TX market example
Below is an example of one of our larger markets and the strength of our footprint: D allas, TX 82 Dallas footprint highlights: Stand - alone Funeral Homes Stand - alone Cemeteries Combos 2,200 300 5,000 Customers s erved a nnually 157 100 Average customers s erved per location annually o Full servi
Slide 83: Cemetery is the growth engine of our footprint
Cemetery is the growth engine of our footprint 83 o Strong multi - generational heritage o SCI’s unique tiered offering approach o High barriers to entry o Ability to recognize property at the time of the sale 1 and build our backlog for merchandise and services at the time of death o Progressive sa
Slide 84: Comparable cemetery revenue growth
COMPARABLE CEMETERY REVENUE 1 GROWTH Our cemeteries have performed well growing their top line revenue 84 o Cemetery revenue has grown at a rate of 5 % - 6 % in recent years o Preneed property h eritage sales have driven growth through SCI’s tiered offering model 5.5% 6.0% 5.1% 2015 2016 2017 1 Info
Slide 85: Funeral is a steadier, volume-driven business
Funeral is a more steady business driven by volume that has been static due to accounting requirements, demographics, and death rates 85 1.9% (0.8%) 0.7% 2015 2016 2017 WHILE WE EXPECT PRENEED WILL DRIVE COMPARABLE FUNERAL VOLUME GROWTH, WHAT CAN WE DO NOW TO COMPETE MORE EFFECTIVELY? o Comparable f
Slide 86: Combination properties leverage cemetery growth
Our combination properties leverage the growth of our cemetery segment in our co - located funeral operations 19% 33% 49% 75% 60% 48% 6% 7% 3% Locations Revenue Profits 86 Stand - alones Combos Non - funeral o Offer customer the convenience of one - stop shopping o Appeal to a more traditional funer
Slide 87: Three funeral home categories
Our funeral homes can be segmented into three primary categories: (1) full service, (2) customs conscious, and (3) neighborhood o Differentiated by brand, facility, and service o Consumers want to go there and will travel o Premium offering at a premium price o Strong preneed program CUSTOMS CONSCIO
Slide 88: Improving performance in neighborhood funeral homes
Areas we are driving to improve funeral performance in neighborhood funeral homes 88 OPPORTUNITY WHY IT IS AN OPPORTUNITY o In 2005 - 2007, we stopped competing aggressively for the value direct cremation business through the funeral home channel o As a result, we have an opportunity to grow cremati
Slide 89: Testing price repositioning in neighborhood funeral homes
We are testing and learning in our neighborhood funeral homes: testing price repositioning in select areas (Opportunity 1a/1b) 89 NOT ONLY IS CREMATION VOLUME UP SIGNIFICANTLY, BUT WE ARE ALSO GROWING REVENUE WHAT WE DID o Repositioned our pricing, particularly in cremation, in areas we felt we coul
Slide 90: Renovating neighborhood funeral homes
We are also targeting more renovations for neighborhood funeral homes with high potential for significant revenue and volume increase opportunities (Opportunity 2) 90 (13%) (16%) 5% (6%) (2%) 10% 1% 11% (6%) 1% 5% (8%) 12% 6% 0% 7% 2010 2011 2012 2013 2014 2015 2016 2017 Building had not had a major
Slide 91: Acquisition and New Build Strategy
FOOTPRINT AND MARKET STRATEGY ACQUISITION AND NEW BUILD STRATEGY BUSINESS DEVELOPMENT STRATEGY 91
Slide 92: Acquisition strategy and market characteristics
Our acquisition strategies consist of targeting markets with characteristics we believe will align with our business and investment goals 92 MARKET CHARACTERISTICS o Seek attractive scale per property ₋ Funeral: $1.0M+ revenue / 200+ services performed ₋ Cemetery: $1.5M+ revenue / 350+ interments o
Slide 93: Acquisitions yield highest return on investment
Acquisitions yield the highest return on investment for us due to significant synergy opportunities 93 In millions $88 $26 $103 $72 $34 $41 $71 $75 $81 2009 2010 2011 2012 2013 2014 2015 2016 2017 TUCK - IN LARGE $283 $1,049 KEYSTONE 199 funeral homes 15 cemeteries STEWART 217 funeral homes 141 ceme
Slide 94: 2017 acquisitions examples
Our 2017 acquisitions consisted of 28 businesses in 10 different markets (examples depicted) 94 WEED - CORLEY - FISH | AUSTIN, TX 5 funeral businesses serving ~1,050 families ARLINGTON PARK CEMETERY | MILWAUKEE, WI 4 cemetery business serving ~870 families ALLNUTT FUNERAL | PRIMARILY LOCATED IN FORT
Slide 95: Acquisition pipeline and discipline
We are excited about our pipeline as we have a strong list of prospects we would like to buy, but we must stay disciplined in our acquisition approach 95 o Represents approximately $1B in revenue across ~450 funeral and ~350 cemetery properties o Maintain relationships with many of these businesses
Slide 96: New build opportunities with attractive returns
We also expand through new build opportunities with attractive returns 96 NEW BUILD DECISION DRIVERS AVERAGE NEW BUILD PROFILE o 4 - 7 new builds annually o $2M - $4M per new build o 11% - 14% IRR o 7 – 10 year payback period o Positive cash flow in 1 - 2 years o EPS accretive 2 - 3 years o 6,000 –
Slide 97: Example new builds performing well
Example new builds in growing communities of T exas, Arkansas, and N evada are performing well 97 EVERGREEN EAST FUNERAL HOME | EL PASO, TX o Built on Evergreen East Cemetery in El Paso o Property was acquired in 2016 o Opened in March 2017 PINECREST FUNERAL HOME | LITTLE ROCK, AR o Built on Pinecre
Slide 98: Maximizing growth organically and through acquisition
We will continue to maximize growth opportunities both organically and through acquisition 98 o Continue preneed sales strategy to help grow future profits o Proactively execute initiatives to address identified opportunities o Remain flexible and open - minded to consumer changes at the local level
Slide 99: Network Optimization and Customer-Facing Technology
NETWORK OPTIMIZATION AND CUSTOMER - FACING TECHNOLOGY SENIOR VICE PRESIDENT ELISABETH NASH CUSTOMER SERVICE TECHNOLOGY INNOVATION Operations Services 99
Slide 100: Network Optimization and Customer-Facing Technology
CUSTOMER SERVICE TECHNOLOGY INNOVATION NETWORK OPTIMIZATION AND CUSTOMER - FACING TECHNOLOGY 100
Slide 101: Technologies driving front and back office efficiencies
We have invested heavily in technologies that drive front and back office efficiencies 101 FUNCTIONAL TECHNOLOGIES Purchasing Aggregating ordering, receiving, and payment approval Coupa Customer Relationship Management (CRM) Manage leads, appointments and contacts Salesforce Human Resources Human ca
Slide 102: Technology gives customers a contemporary view of offerings
Our advancements in technology are giving our customers a more contemporary view of product and service offerings 102 BEACON Our newly implemented preneed sales system provides customers with the convenience of a mobile digital presentation HMIS+ Our new atneed customer system uses a digital platfor
Slide 103: Changing how we present product offerings
Technology has allowed us to change how we present product offerings 103 HMIS+ BEACON After customer - facing technology Atneed Presentation Preneed Presentation Before customer - facing technology NETWORK OPTIMIZATION AND CUSTOMER - FACING TECHNOLOGIES TECHNOLOGY INNOVATION
Slide 104: Point of sale efficiencies and synergies
Additionally, improved point of sales systems provide other significant efficiencies and synergies 104 o Ensures entire set of choices for products and services are presented o Eliminates selection rooms and related printed presentation materials o Replaces manual paper - based transactions o Accele
Slide 105: Customer-facing applications improve satisfaction and package sales
Both customer - facing applications have resulted in favorable customer satisfaction ratings and higher package sales 105 HMIS+ NETWORK OPTIMIZATION AND CUSTOMER - FACING TECHNOLOGIES TECHNOLOGY INNOVATION 1 Only ~75% of our locations are eligible for HMIS+ implementation . After customer - facing t
Slide 106: Refreshed websites and enhanced search
Our refreshed websites and enhanced search results will support a better mobile experience and provide more local content 106 Current websites... NETWORK OPTIMIZATION AND CUSTOMER - FACING TECHNOLOGIES TECHNOLOGY INNOVATION
Slide 107: Refreshed websites and mobile navigation
o Improves search engine optimization o Better interfaces with social media platforms o C ustomized for each of our almost 2,000 locations o Links to Salesforce.com platform for lead generation o More mobile friendly 107 NETWORK OPTIMIZATION AND CUSTOMER - FACING TECHNOLOGIES TECHNOLOGY INNOVATION O
Slide 108: Customer Service
TECHNOLOGY INNOVATION CUSTOMER SERVICE NETWORK OPTIMIZATION AND CUSTOMER - FACING TECHNOLOGY 108
Slide 109: Service excellence driving customer loyalty
Our commitment to service excellence is driving customer loyalty 109 30% Survey response r ate than the average response rate of 6% by other J.D. Power clients 5X higher Customers would recommend SCI 97% 3 of 4 Customers believe SCI prices meet or are below their expectations Funeral and cemetery re
Slide 110: Customer satisfaction index scores
We are proud of our customer satisfaction index (CSI) scores – some of the highest among J.D. Power clients 110 962 955 919 912 906 906 903 898 898 896 894 893 892 891 891 890 890 890 886 886 886 883 882 Investment Financial Network SCI Funeral Home SCI Cemetery National Grocery Chain Major HMO By-M
Slide 111: Service excellence recognized by J.D. Power
Our commitment to service excellence has been recognized by J.D. Power 111 1 of 12 Companies in J.D. Power’s 47 year history to receive this prestigious award NETWORK OPTIMIZATION AND CUSTOMER - FACING TECHNOLOGIES CUSTOMER SERVICE SERVICE EXCELLENCE. THIS IS WHO WE ARE.
Slide 112: Using technology to enhance customer experience
We will continue to use technology to enhance our customer experience 112 o Gain insight into employee and consumer behavior o Improve education and engagement with consumers o Guarantee presentation of all products and services o Automate manual processes and eliminate paper collateral o Seamless,
Slide 113: Preneed Backlog
INSURANCE BACKLOG MECHANICS DEFERRED REVENUE BACKLOG OVERVIEW TRUST BACKLOG MECHANICS CEMETERY PERPETUAL CARE OVERVIEW PRENEED BACKLOG OUTLOOK PRENEED BACKLOG 113
Slide 114: Preneed Backlog
114 TRUST BACKLOG MECHANICS INSURANCE BACKLOG MECHANICS CEMETERY PERPETUAL CARE OVERVIEW PRENEED BACKLOG OUTLOOK Director of Financial Services ANASTHASIA JONES DEFERRED REVENUE BACKLOG OVERVIEW PRENEED BACKLOG
Slide 115: Preneed arrangements benefit customer and SCI
Preneed arrangements provide a benefit to both our customer and to SCI 115 o Planning alleviates uncertainty o Price p rotection o Peace of mind knowing it was done their way o Availability of financing options o Availability of financing options leads to better average (Individuals spend more on th
Slide 116: $10.7B deferred revenue backlog
Our preneed sales success has created a $10.7B deferred revenue backlog, generating future growth balanced between 3 rd party life insurance policies and trust funds 116 $5.7 $1.5 $1.8 $1.7 Insurance-funded Trust-funded $5.0 We are required by law to give preneed consumers financial assurance (eithe
Slide 117: Preneed Backlog
DEFERRED REVENUE BACKLOG OVERVIEW CEMETERY PERPETUAL CARE OVERVIEW PRENEED BACKLOG OUTLOOK TRUST BACKLOG MECHANICS INSURANCE BACKLOG MECHANICS PRENEED BACKLOG 117
Slide 118: Insurance-funded backlog is predictable
About half of our deferred revenue backlog is very predictable generating stable, guaranteed returns from our preneed insurance - funded contracts 118 FUNDING MANAGEMENT REVENUE AND CASH GROWTH OVER CONTRACT LIFE RISK INSURANCE - FUNDED DEFERRED REVENUE BACKLOG OVERVIEW 53% INSURANCE - FUNDED BACKLO
Slide 119: Preneed sales production balanced between insurance and trust
Current preneed sales production is also balanced between insurance and trust 119 $ 1.7B 2017 PRENEED CEMETERY AND FUNERAL PRODUCTION o Provides consumer with layer of insurance protection o Helps organic growth strategy to be cash flow neutral 43% 27% 30% Funeral Insurance - Funded Production Cemet
Slide 120: Insurance-funded preneed funeral growth is cash flow neutral
By emphasizing insurance - funded preneed funeral production through our commission structure, our overall funeral preneed growth strategy is cash flow neutral 120 TRUST INSURANCE NET AVERAGE FUNERAL TRUST RETAINAGE NET CASH FLOWS ---- (21%) 10% (16%) AVERAGE FUNERAL GENERAL AGENCY COMMISSION 25% --
Slide 121: Trust Backlog Mechanics
121 INSURANCE BACKLOG MECHANICS DEFERRED REVENUE BACKLOG OVERVIEW CEMETERY PERPETUAL CARE OVERVIEW PRENEED BACKLOG OUTLOOK Vice President, Treasurer AARON FOLEY TRUST BACKLOG MECHANICS PRENEED BACKLOG
Slide 122: Upside from market returns on trust-funded contracts
47% We like the potential upside capture from market returns on the preneed trust - funded contracts for the remainder of our deferred revenue backlog 122 OF TOTAL DEFERRED REVENUE $5.0B TRUST - FUNDED BACKLOG Supported by marketable securities and customer receivables 25 p rofessional investment m
Slide 123: Average length of preneed contract guides trust allocation
The average length of time a preneed contract is in our backlog helps guide our trust asset allocation 123 FUNERAL CEMETERY AVERAGE LENGTH OF PRENEED CONTRACTS | 10 - 14 YEARS This contract length allows trust assets to be invested through several market cycles Gains and losses are marked to market
Slide 124: Trust asset allocation and return performance
Our optimized trust asset allocation structure has enabled us to generate a positive real return in line with our targeted range 124 PRENEED FUNERAL AND CEMETERY MERCHANDISE AND SERVICES TRUST BY ASSET ALLOCATION $1.7B TRUST FUND PERFORMANCE SUMMARY Merchandise and services trusts $3.5B $ 1.8B Funer
Slide 125: Trust management outsourced and independently overseen
Our trust management function is outsourced and overseen by independent trustees 125 SCI Members of SCI Management and Board SCI Wholly - owned Registered Investment Advisor, Trust Advisors, Inc. (TAI) PROFESSIONAL INVESTMENT MANAGERS INDEPENDENT REGISTERED INVESTMENT ADVISOR INDEPENDENT TRUSTEES PR
Slide 126: Trust return metrics and operating fees
Our disclosed trust return metrics are after investment manager fees, but before trust operating fees 126 1 This information excludes the cemetery perpetual care trusts. o Trustee fees o Trust taxes o Accounting and record - keeping for contracts in the backlog (Approximately 230 people both onshore
Slide 127: Cemetery Perpetual Care Overview
TRUST BACKLOG MECHANICS DEFERRED REVENUE BACKLOG OVERVIEW PRENEED BACKLOG OUTLOOK INSURANCE BACKLOG MECHANICS CEMETERY PERPETUAL CARE OVERVIEW PRENEED BACKLOG 127
Slide 128: $1.5B in perpetual care trust funds
In addition to our $10.7B deferred revenue backlog, we also have approximately $1.5B in perpetual care trust funds o Required to fund ~10% of a cemetery property sale proceeds into a cemetery perpetual care trust to fund cemetery maintenance expense o Included on our balance sheet, but only realized
Slide 129: Shift perpetual care allocation to total return
While our current perpetual care trust asset allocation focuses on yield, we are working to shift to a total return allocation to benefit our customers and stakeholders 129 EQUITY FIXED INCOME CASH ALTERNATIVE INVESTMENTS CURRENT YIELD ALLOCATION SHIFT TO TOTAL RETURN ALLOCATION 10% 1% 69% 20% 57% 4
Slide 130: Preneed Backlog Outlook
INSURANCE BACKLOG MECHANICS DEFERRED REVENUE BACKLOG OVERVIEW TRUST BACKLOG MECHANICS CEMETERY PERPETUAL CARE OVERVIEW Senior Vice President, Chief Financial Officer ERIC TANZBERGER PRENEED BACKLOG OUTLOOK PRENEED BACKLOG 130
Slide 131: Preneed sales averages higher than atneed averages
Our funeral preneed sales averages going into the backlog are higher than our funeral atneed averages 131 $5,284 $5,802 $5,979 $6,130 $6,284 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 2007 2012 2017 2022 2027 GOING INTO OUR DEFERRED REVENUE G TODAY ..... BENCHMARK BACKLOG 2012 - 2017 Atneed Sa
Slide 132: Higher averages coming out of the backlog
The value of our funeral preneed program is manifesting itself through higher averages coming out of the backlog than what we are selling atneed today 132 $5,284 $5,802 $5,979 $6,130 $6,284 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 2007 2012 2017 2022 2027 True Atneed Sales Average BENCHMARK
Slide 133: Funeral volume mix shifting to matured preneed
263,690 263,690 A larger portion of our funeral customers are coming from a previously written contract with a more favorable growth profile 133 TRUE ATNEED MATURED INSURANCE MATURED TRUST TOTAL MATURED PRENEED VOLUME 237,262 237,040 263,690 FUNERAL HISTORICAL AND PROJECTED VOLUME MIX CHANGE 31.8% 3
Slide 134: Preneed cemetery merchandise and services production
134 PRENEED BACKLOG PRENEED BACKLOG OUTLOOK $224 $269 $285 $304 1 1 2014 2015 2016 2017 1 Information is based on comparable operations owned as of December 31, 2017 . I n millions HISTORICAL 1 PRENEED CEMETERY MERCHANDISE AND SERVICES PRODUCTION Mid - single digit sales production growth The value
Slide 135: Cemetery merchandise and services revenue growth
135 PRENEED BACKLOG PRENEED BACKLOG OUTLOOK $221 $227 $230 $233 $210 $228 $246 $273 1 1 $431 $455 $476 $506 2014 2015 2016 2017 3 - year CAGR 1 Information is based on comparable operations owned as of December 31, 2017 . 9 % 2 % I n millions ATNEED MATURED PRENEED 6 % HISTORICAL 1 AND FUTURE CEMETE
Slide 136: Preneed program a pillar of growth strategy
Our preneed sales program is and will continue to be a pillar of our growth strategy 136 REMAINING RELEVANT TO OUR CUSTOMER o Offer financing options that allow customers to pre - plan for final farewell o Provide peace of mind and alleviate uncertainty SECURING MARKET SHARE BY LEVERAGING OUR SCALE
Slide 137: Financial Overview
FINANCIAL OVERVIEW 137
Slide 138: Cash tax payer in 2018; tax reform benefit
($20M) We should become a full cash tax payer in 2018; however, due to the 2017 Tax Cuts and Jobs Act (“Tax Reform”), we will benefit from a more favorable tax rate 138 FINANCIAL OVERVIEW GUIDANCE HISTORICAL 1 1 Assumes 200bps reduction for excess tax benefits. 2 Adjusted cash tax rate represents fe
Slide 139: Maintaining substantial liquidity
Our capital deployment strategy is dependent upon managing financial risk by maintaining substantial liquidity 139 FINANCIAL OVERVIEW $419 $233 $199 $317 $967 $792 $112 $138 $86 $134 $297 $207 2013 2014 2015 2016 2017 In millions $531 $371 $285 $451 Unencumbered Liquidity $1,264 Credit Facility Avai
Slide 140: Debt maturity profile and leverage
Additionally, we maintain flexibility by actively managing our debt maturity profile, ensuring no significant near term maturities 140 FINANCIAL OVERVIEW LEVERAGE 1 3.72x 3.50x – 4.00x $34 $34 $34 $34 $539 $250 $200 $150 $175 $850 $200 $425 $550 2018 2019 2020 2021 2022 2023 2024 2027 4.500% In mill
Slide 141: Capital deployment priorities and targets
We employ a capital deployment strategy designed to yield the highest relative value 141 FINANCIAL OVERVIEW 1 ST 2 nd 3 rd 4 th ACQUISITIONS AND GROWTH CAPITAL DIVIDENDS SHARE REPURCHASES MANAGE DEBT MATURITIES 11% - 18% 30% - 40% Payout ratio target of recurring net income IRRs expected to earn an
Slide 142: 2018 expected capital allocation
$ 570M Adjusted Cash Flow from Operations Midpoint of 2018 Guidance 2018 EXPECTED CAPITAL ALLOCATION: Maintenance $135 $100 Maintenance CAPEX $35 Capital Leases Growth $180 $80 Cemetery Property Development $75 Acquisitions $25 New Builds Return to Shareholders $255 $120 Dividends $135 Share Repurch
Slide 143: Reduced shares outstanding, increased dividend per share
Since 2010, we have reduced shares outstanding by 23% and increased the dividend per share at a 20% CAGR 143 FINANCIAL OVERVIEW $- $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 170,000 195,000 220,000 245,000 270,000 295,000 320,000 345,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Slide 144: Results-weighted capital deployment strategy
We will continue to maximize shareholder value following a results - weighted capital deployment strategy 144 o Continue to deploy capital to highest yielding investment opportunities o Maintain dividend payout targets o Maximize share repurchases formulaically when better capital deployment opportu
Slide 145: Future Growth
145 FUTURE GROWTH CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER TOM RYAN
Slide 146: 8%-12% annual adjusted EPS growth framework
We believe we can generate an average of 8% - 12% annual growth in adjusted earnings per share over the long term 146 FUTURE GROWTH FRAMEWORK 2 % – 3% SHARE REPURCHASES 1 Adjusted EPS is a non - GAAP financial measure. Please see appendix for additional disclosures. 4% – 6% BASE BUSINESS GROWTH 8% –
Slide 147: Funeral and cemetery drivers of base business growth
We believe the key funeral and cemetery drivers to deliver base business growth of 4% - 6% are achievable 147 FUTURE GROWTH 1% - 2% Growth 4% - 6% Growth Maintain margins of 19% - 21% u ntil funeral demographics arrive 5 0 to 130bps annual improvement FUNERAL CEMETERY Revenue Margins BASE BUSINESS G
Slide 148: Tuck-in acquisitions and new builds add 2%-3%
We believe tuck - in acquisitions and new builds can contribute an additional 2% - 3% 148 FUTURE GROWTH 2% – 3% TUCK - IN ACQUISITIONS $71 $75 $81 $9 $18 $18 $80 $93 $99 2015 2016 2017 In millions 1 Consolidated amounts presented above include 1031 exchange funds and the purchases of non - controlli
Slide 149: Share repurchases contribute 2%-3% growth
Finally, share repurchases are expected to contribute 2% - 3% of additional growth 149 FUTURE GROWTH 2 % – 3% SHARE REPURCHASES SHARE REPURCHASES $243 $345 $228 $200 $21.14 $25.72 $25.87 $32.14 $15.00 $20.00 $25.00 $30.00 $35.00 $- $50 $100 $150 $200 $250 $300 $350 $400 2014 2015 2016 2017 Spend (in
Slide 150: Historical results support 8%-12% growth framework
Our historical results support this 8% - 12% growth framework in adjusted EPS over the long term 150 FUTURE GROWTH GROWTH FRAMEWORK 8% – 12% 2 % – 3% SHARE REPURCHASES 2 % – 3% 4% – 6% BASE BUSINESS GROWTH TUCK - IN ACQUISITIONS AND NEW BUILDS ANNUAL ADJUSTED EPS 1 GROWTH $0.92 $0.99 $1.15 $1.24 $1.
Slide 151: Well positioned to deliver solid 2018 results
And as we look forward, we believe we are well positioned to deliver solid results in 2018 151 ADJUSTED EARNINGS PER SHARE 1 o Funeral revenue growth in the 1% - 2% range with funeral fixed costs growing over 2%, resulting in relatively flat margins in the 19% - 21% range o Core funeral revenue grow
Slide 152: Funeral growth with demographic impact
Today our funeral business is generally flat; however, when we begin to see deaths increase from the Baby B oomer effect with the backlog velocity and average growing differentially, we believe we will see accelerated growth 152 2018 GUIDANCE DEMOGRAPHIC IMPACT FUNERAL REVENUE GROWTH MARGIN IMPROVEM
Slide 153: Driving differential growth through preneed cemetery sales
In the meantime, we have the ability to drive differential growth by increasing preneed cemetery sales production 153 CEMETERY REVENUE GROWTH MARGIN IMPROVEMENT ADJUSTED EPS IMPACT 4 % - 6% If additional 200bps 50bps – 130bps Additional 70 - 80bps Additional $0.06 or more EARNINGS GROWTH FRAMEWORK I
Slide 154: Strong investment and growth company delivering superior shareholder return
We believe the success of SCI’s core strategies has made us a strong investment and growth company that delivers superior shareholder return 154 FUTURE GROWTH Grow revenue Leverage scale Increase cash flow Deploy capital effectively DELIVER SUPERIOR TOTAL SHAREHOLDER RETURN
Slide 155: Appendix
APPENDIX 155
Slide 156: Non-GAAP Financial Measures
Non - GAAP Financial Measures 156 ADJUSTED EPS OR DILUTED EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS We use diluted earnings per share excluding special items (adjusted EPS) as an underlying operational performance measure of the business and to have a basis to compare operating results to prior and
Slide 157: Adjusted Earnings per Share (2013-2017)
Adjusted Earnings per Share (2013 - 2017) 157 (In millions, except diluted EPS) Net Diluted Net Diluted Net Diluted Net Diluted Net Diluted Income EPS Income EPS Income EPS Income EPS Income EPS Net income attributable to common stockholders, as reported $546.7 $ 2.84 $ 177.0 $ 0.90 $233.8 $ 1.14 $
Slide 158: Adjusted Cash Flow from Operations (2013-2017)
Adjusted Cash F low from Operations (2013 - 2017) 158 (In millions) 2017 2016 2015 2014 2013 Net cash provided by operating activities, as reported $ 502.3 $ 463.6 $ 472.2 $ 317.4 $ 384.7 Premiums paid on early extinguishment of debt — 20.5 6.5 24.8 — Acquisition, integration and system transition c
Slide 159: Free Cash Flow (2013-2017)
Free Cash Flow (2013 - 2017) 159 (In millions) 2017 2016 2015 2014 2013 Net cash provided by operating activities, as reported $ 502.3 $ 463.6 $ 472.2 $ 317.4 $ 384.7 Premiums paid on early extinguishment of debt — 20.5 6.5 24.8 — Acquisition, integration, and system transition costs — 11.7 6.6 62.2
Slide 160: Adjusted EBITDA (2013-2017)
Adjusted EBITDA (2013 - 2017) 160 APPENDIX In millions 2017 2016 2015 2014 2013 Net income attributable to common stockholders $ 546.7 $ 177.0 $ 233.8 $ 172.5 $ 147.3 (Benefit) provision for income taxes (146.6) 149.4 135.0 226.0 93.0 Interest expense 169.1 162.1 172.9 177.6 142.4 Depreciation and a
Slide 161: Financial Outlook for 2018
FINANCIAL OUTLOOK FOR 2018 161 (A) Reconciliations from GAAP Net cash provided by operating activities are not provided for these forward - looking estimates because GAAP net cash provided by operating activities for the fiscal year ending December 31, 2018, is not accessible and reconciling informa
Service Corp International — Investor Day (February 2018) on 6ix