Service Corporation International · NYSE:SCI
Service Corporation International — Investor Day (2022)
104 slides from Service Corporation International's investor day presentation, 2022
Slide 1: Investor Day 2022
SERVICE CORPORATION INTERNATIONAL INVESTOR DAY 2022 SS aii
Slide 2: Forward-looking statements
Forward-looking statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements in this presentation that are not historical facts are forward-looking statements. You can generally identify our forward-lookin
Slide 3: Introduction Video
®) Introduction Video
Slide 4: Investor Day 2022
Investor Day 2022 TOM RYAN Chairman of the Board CEO and President 4
Slide 5: Our strategy has been effective and remains intact
Our strategy has been effective and remains intact GROW LEVERAGE DEPLOY REVENUE SCALE CAPITAL 5
Slide 6: Our financial position affords us financial flexibility
Our financial position affords us financial flexibility, which allows us to be opportunistic DEBT MATURIT Y PROFILE March 31, 2022 Provides financial flexibility to invest in our associates TERM LOAN AMORTIZATION PAYMENT $850 3.375% $800 and our businesses, and REVOLVER MATURITIES $750 4.000% NON-CA
Slide 7: Making our equity sweat—enhancing shareholder returns
Making our equity sweat— enhancing shareholder returns VALUE RETURNED TO SHAREHOLDERS $5.3B Value returned to shareholders through dividends and share repurchases since 2004 52% 17% CAGR SHARES OUTSTANDING DIVIDENDS PER SHARE 350,000 $1.00 Reduction in outstanding Dividends per share $0.90 325,000 s
Slide 8: Superior total shareholder returns over time
Our execution has translated into superior total shareholder returns over time TOTAL SHAREHOLDER RETURN December 31, 2021 693% 172% 47% 133% 362% 29% 85% 25% 76% 277% 246% SCI 15% S&P 500 RUSSELL 2000 S&P MIDCAP 400 1 YEAR 5 YEAR 10 YEAR Annualized Return 47% 29% 25% 15% 22% 18% 13% 12% 23% 16% 14%
Slide 9: Sustainable value creation foundational in everything we do
Sustainable value creation foundational in everything we do Our inaugural 2021 Sustainability Report is available at sci-corp.com SUPPORTING OUR INVESTING IN OUR OPERATING 24,000 ASSOCIATES COMMUNITIES WITH PRINCIPLE 2021 Sustainability Report Supporting the personal Delivering service Operating wit
Slide 10: Investor Day 2022 Key Takeaways
Investor Day 2022 Key Takeaways 1 2 3 4 5 Strong business Significant and Industry leaders Preneed model Potential for model with a consistent cash in innovation and and backlog incremental growth is sustainable growth flow continues technology strength much greater in the platform to grow different
Slide 11: Agenda
Agenda OPENING & Welcome Tom Ryan OVERVIEW Industry/Company Overview Jay Waring Funeral & Cemetery Segment Overview Steve Tidwell New Earnings Base for Growth Eric Tanzberger GROWTH Demographic Tailwinds Elisabeth Nash DRIVERS Marketing, Sales & Cemetery Jamie Pierce Inventory Impact Gerry Heard Mic
Slide 12: Industry/Company Overview
INDUSTRY/COMPANY Overview JAY WARING Senior Vice President Chief Operating Officer 12
Slide 13: North America Deathcare Industry (U.S. & Canada)
North America Deathcare Industry (U.S. & Canada) THE INDUSTRY IS HIGHLY FRAGMENTED ~22,000 ~$17B Industry Revenue Contribution ~$22B ~80% Funeral Homes Independent Deathcare Industry ~5,500 ~$5B Revenues ~5% SCI Other Large Cemeteries SCI Consolidators ~15%–16% North America is defined throughout th
Slide 14: Service Corporation International 2021 Snapshot
Service Corporation International WE ARE THE LARGEST COMPANY IN THE INDUSTRY 2021 Snapshot 1,471 $2.3B ~24K $4.1B Employees Funeral Homes ~750K 2021 SCI Customers Served (Funeral & Cemetery) Revenue 488 $1.8B $2.4B Preneed Sales Cemeteries ~$14B Backlog of Future Revenue 14 Unless otherwise noted, d
Slide 15: Our scale and footprint provides competitive advantages
Our scale and footprint provides competitive advantages CANADA 165 12 National brand FUNERAL C E M E T E RY Leading technologies Supply chain cost advantages 1,306 476 Premier preneed sales program UNITED STATES FUNERAL C E M E T E RY Network optimization/ back office efficiencies Leading cemeteries
Slide 16: Funeral and cemetery have different business characteristics
Funeral and cemetery have different business characteristics BUSINESS FOCUS BARRIERS TO ENTRY REVENUE RECOGNITION FUTURE OUTLOOK Revenue growth and High-touch personalized Moderate, except low in the Generally recognized high incremental margin service/retail price-sensitive market at time of death
Slide 17: Our base case earnings framework
ORGANIC Our base 5%–7% case earnings FUNERAL Modest revenue growth driven by increases in volume and framework sales average supporting stable margins CEMETERY remains sound Mid-single digit % preneed sales growth supporting increasing margins 8%–12% C A P I TA L D E P LOY M E N T 3%–5% Continue Rei
Slide 18: Long-Term Consistent EPS Growth
Long-Term Consistent EPS Growth Modest incremental revenue growth drives EPS above the range Our business model ADJUSTED EARNINGS PER SHARE has proven that $4.57 Comparable incremental revenue yields significant profitability; similar 14% $2.91 CAGR to post-Stewart, post- 2013–2017 $1.90 COVID, we e
Slide 19: Funeral & Cemetery Segment Overview
FUNERAL & CEMETERY Segment Overview STEVE TIDWELL Senior Vice President Sales & Marketing 19
Slide 20: Funeral
FUNERAL & CEMETERY SEGMENT OVERVIEW Funeral Dedicated to caring for customers and poised for growth 20
Slide 21: Funeral segment overview
Funeral segment overview 2021 SNAPSHOT Consolidated Operations BUSINESS High-touch personalized FOCUS service/retail $2.3B Revenues BARRIER S Moderate, except low in TO ENTRY the price-sensitive market ~500K Customers Served (atneed and preneed) REVENUE Generally recognized at RECOGNITION time of de
Slide 22: Volume expected to be flat to up 2% beyond 2023
Volume expected to be flat to up 2% beyond 2023 FUNERAL SERVICES PERFORMED Comparable PULL-FORWARD IMPACT in thousands 44 60 310 316 316 316 299 BASE CASE Target Growth Decrease in Slightly lower ( 2 024 -2 025 ) the low to than 2022 as mid-teen % volume growth range due to offset by pull-forward pu
Slide 23: We expect continued growth in the sales average
We expect continued growth in the sales average We are confident AVERAGE REVENUE PER FUNERAL SERVICE Comparable in our ability to continue to grow Core $5,930 $5,837 $5,786 $5,976 $5,561 the sales average Total $5,307 $5,337 through: $5,234 $5,183 $4,983 BASE CASE Target Growth • Inflationary Price
Slide 24: SCI Direct benefits from expanding market
SCI Direct benefits from expanding market generating double-digit profit growth SCI DIRECT REVENUES AND PRENEED PRODUCTION 2021 Comparable SNAPSHOT $37M 109 31 $ in millions Gross Profit Locations States $233 Preneed Production $197 $179 $180 $165 $208 $162 $171 $167 $159 Revenues 2017 2018 2019 202
Slide 25: Moderate funeral revenue growth with stable margins expected beyond 2023
Moderate funeral revenue growth with stable margins expected beyond 2023 REVENUE AND GROSS MARGIN Comparable 26.9% 24.2% GROSS MARGIN $2,307 2022 revenues BASE CASE 20.4% 20.0% 19.8% expected to slightly exceed 2019 levels, TARGET GROWTH BASE CASE REVENUE but decline low-teen Target Growth (2023-202
Slide 26: Strength of operating leverage proven during the pandemic
Strength of operating leverage proven during the pandemic CORE GROSS PROFIT PER FUNERAL SERVICE Comparable, Excluding SCI Direct SCI has proven we have the capacity to manage increased 2021 2020 volumes expected $1,801 2019 17% 18% with the Baby Boomer $1,305 $1,522 generation as well as the power o
Slide 27: Funeral preneed program supporting future growth
Funeral preneed program supporting future growth PRENEED FUNERAL SALES PRODUCTION Comparable 5% 7% CAGR CAGR 2016–2018 2019–2021 $1,080 $ in millions DIFFERENTIAL BASE CASE $948 BASE CASE $893 $858 TARGET GROWTH GROWTH OPPORTUNITY TARGET $809 $822 GROWTH (2022-2025) Independents do not have ( 2 02 2
Slide 28: Cemetery
FUNERAL & CEMETERY SEGMENT OVERVIEW Cemetery Our robust preneed sales program and ability to invest in new and unique property set us apart 28
Slide 29: Cemetery segment overview
Cemetery segment overview 2021 SNAPSHOT Consolidated Operations BUSINESS Real estate/sales/service FOCUS $1.8B Revenues BARRIER S High TO ENTRY (Capital/regulatory/permitting) 250K Customers Served (atneed and preneed) REVENUE Preneed property sales can be RECOGNITION recognized before death 488 Cem
Slide 30: Mid single-digit % growth in preneed sales production expected
Mid single-digit % growth in preneed sales production expected on higher post-pandemic base Production growth CEMETERY PRENEED SALES PRODUCTION benefited during the Comparable 21% pandemic; not only CAGR from higher volumes, 2019–2021 4% TARGET TARGET GROWTH $1,333 but also from CAGR 2017–2019 GROWT
Slide 31: Modest growth in atneed sales production on higher base
Modest growth in atneed sales production on higher base 2023 and beyond CEMETERY ATNEED SALES PRODUCTION Comparable Strong atneed 23% CAGR sales production 2019–2021 TARGET TARGET GROWTH during pandemic 1.3% CAGR $494 2022 down low- to mid-teen %'s GROWTHON NEW ON NEW driven by both HIGHER H I G H E
Slide 32: Future cemetery revenue and margin growth expected
Future cemetery revenue and margin growth expected from sales production strength REVENUE AND GROSS MARGIN Comparable BASE CASE 37.7% GROSS MARGIN Revenues expected TargetBASE CASE Growth 30.1% 33.1% to increase in the TARGET GROWTH ( 2 024 -2 025 ) 28.5% 29.6% low single-digit % (2023-2025) range i
Slide 33: New Earnings Base for Growth
New Earnings Base for Growth ERIC TANZBERGER Senior Vice President Chief Financial Officer 33
Slide 34: New earnings base reflects post-COVID learnings and efficiencies
New earnings base reflects post-COVID learnings and efficiencies ADJUSTED EARNINGS PER SHARE $3.37 $3.06 $2.78 $2.53 $2.30 $2.09 $1.90 Pre-COVID 10% Earnings CAGR off of Please 2019 seebase appendixoffor a$1.90 Adjusted earnings per share is a non-GAAP financial measure. reconciliation to the approp
Slide 35: New earnings base reflects post-COVID learnings and efficiencies
New earnings base reflects post-COVID learnings and efficiencies ADJUSTED EARNINGS PER SHARE $4.57 $2.27 $3.50 $0.32 Estimated COVID Impact $2.91 $3.37 $3.18 $0.65 $3.06 $0.82 $2.78 Incremental COVID learnings and $2.53 $2.30 efficiencies to 2022 Base $2.09 $1.90 Pre-COVID 10% Earnings CAGR off of P
Slide 36: New earnings base reflects post-COVID learnings and efficiencies
New earnings base reflects post-COVID learnings and efficiencies ADJUSTED EARNINGS PER SHARE ILLUSTRATIVE Growth at 10% (Midpoint of Framework) ILLUSTRATIVE 10% CAGR off of higher 2022 Post-COVID base of $3.18 $4.57 (incorporating learnings, efficiencies and higher $4.23 capital deployment) $2.27 $3
Slide 37: Incremental EPS growth in 2022 above pre-COVID expectations
Incremental EPS growth in 2022 above pre-COVID expectations P O S T- C O V I D E XPECTATION $3.50 MIDPOINT OF 2022 GUIDANCE $3.50 ~$0.32 NEW ~$0.32 Expected COVID-related impacts in 2022 $3.18 HIGHER BASE $0.65 ~75% Sales & Marketing Productivity in Cemetery ~$0.65 ~15% Accelerated Share Repurchases
Slide 38: There are 4 key pillars to reach even greater potential growth
There are 4 key pillars to reach even greater potential growth Marketing, Sales & Enhanced Preneed Demographic Growth Capital Backlog Cemetery Tailwinds Inventory Opportunities Impact Impact 36
Slide 39: Demographic Tailwinds
KEY GROWTH DRIVERS Demographic Tailwinds ELISABETH NASH Senior Vice President Operation Services 37
Slide 40: Funeral and cemetery growth coming with aging demographics
PEOPLE AGE 75 AND OLDER TAILWINDS (U.S. population, in millions) 93% INCREASE 2020 2040 Funeral and cemetery growth coming with aging demographics 23.3 44.9 U.S. SCI SCI 75+ Population U.S. Volume Footprint 2020-2040 2021 LARGEST % OF TOTAL NUMBER OF GROWTH INCREASE % FUNERAL FUNERAL NUMBER OF STATE
Slide 41: Longer-term growth expected post-Baby Boomer generation
TAILWINDS Longer-term growth expected post-Baby Boomer generation MILLIONS OF PEOPLE AGE 55 AND OLDER ( U.S. POPUL ATION ) 2020 2025 2030 2035 2040 2045 2050 2055 2060 99M 106M 112M 117M 122M 127M 133M 137M 142M Average Age SCI Customer Age 91+ Age 80+ 7M 30M ) Atneed 45 -19 Customer (1 928 75+ tion
Slide 42: COVID mortality has been significant, affecting a younger population
TAILWINDS COVID mortality has been significant, affecting a younger population as it progresses U.S. COVID DEATHS 42% 62% Of Covid Deaths Under Age 75 Of Covid Deaths Under Age 75 Total COVID Jan 20 – Mar 21 Apr 21 – Dec 21 Deaths Peak Month Volume 120,000 2020–2022 YTD 105,359 Peak Month Volume ~1M
Slide 43: Modest COVID pull-forward impact expected
TAILWINDS Modest COVID pull-forward impact expected ESTIMATED SCI COVID DEATHS PULLED FORWARD INTO 2020, 2021 AND 2022 AS A PERCENTAGE OF 2019 PRE - COVID VOLUME 6% ~110K 5% 4% SCI incremental We expect the s funeral services in 3% 2020, 2021 and 2022 2% pull-forward of 1% 1% funeral volumes to main
Slide 44: Indirect effect of COVID on mortality continues supporting volume
TAILWINDS TAILWINDS Unfortunately, Unfortunately,the theindirect indirecteffect effectof COVID of COVID continues on mortality supporting continues volume to have an impact FTC Report Finds Annual Cigarette Sales Increased for the First Time in 20 Years… FEDERAL TRADE COMMISSION We’re facing a menta
Slide 45: Preneed strategy also supporting volume growth
TAILWINDS Preneed strategy also supporting volume growth We believe we are more active and effective than our 40% 2021 35% competitors at building a high- quality funeral backlog ur sophisticated marketing O 2010 approach is proactively MATURED PRENEED FUNER ALS/TOTAL targeting consumers, generating
Slide 46: Favorable conditions exist for future volume growth
TAILWINDS Favorable conditions exist for future volume growth MAIN DRIVERS AGING MODERATION PRENEED DRIVING DEMOGRAPHICS OF COVID MARKET SHARE PULL-FORWARD These drivers could easily increase our current assumptions for funeral volume and cemetery atneed production 44
Slide 47: Marketing, Sales & Cemetery Inventory Impact
KEY GROWTH DRIVERS Marketing, Sales & Cemetery Inventory Impact 45
Slide 48: Marketing, Sales & Cemetery Inventory Impact
I N I T I AT I V E S Marketing, Sales & Cemetery Inventory Impact Driving current and sustained growth Quality & Quantity Improved Sales Cemetery of Marketing- Effectiveness & Inventory Driven Leads Efficiencies Opportunities JAMIE PIERCE GERRY HEARD MICHAEL JOHNSON Vice President — Chief Marketing
Slide 49: Marketing-Driven Leads
I N I T I AT I V E S QUALITY & QUANTITY OF Marketing- Driven Leads JAMIE PIERCE Vice President Chief Marketing Officer 47
Slide 50: Marketing channels are generating new and accretive leads
I N I T I AT I V E S Marketing channels are generating new and accretive leads CORE MARKETING LEADS LEADS Leads driven by Proactive outreach to continued relationships consumers driven primarily and referrals from by paid lead generation atneed families, as well efforts and managed by as the power o
Slide 51: Tremendous growth in visits to our websites
I N I T I AT I V E S Tremendous growth in visits to our websites 27% ANNUAL WEBSITE VISITS IN MILLIONS CAGR 2018–2021 199 27% Our active, ongoingCAGR 166 2018–2021 investments in search engine optimization in millions 125 (SEO) and user experience improvements (website 97 redesigns or navigation cha
Slide 52: Visits driving increases in digital lead volume and preneed sales
These visits are driving material increases I N I T I AT I V E S in digital lead volume and preneed sales production DIGITAL LEAD GENERATION AND PRENEED SALES FROM DIGITAL LEADS 81,837 Digital Lead Digital Lead Generated $120 Generation Preneed Sales 55,413 43,198 44% 57% $84 CAGR 2018-2021 CAGR 201
Slide 53: Advanced targeting for direct mail driving increases in production
Advanced targeting for direct mail I N I T I AT I V E S implemented in 2019 is driving increases in production DIRECT MAIL MARKETING LEAD 100,669 Direct Mail Direct Mail GENERATION AND PRENEED SALES 98% CAGR Marketing Lead 77% CAGR Marketing Lead Generated FROM DIRECT MAIL LEADS 2018-2021 Generation
Slide 54: Major changes in marketing strategy driving sizable growth
I N I T I AT I V E S Major changes in marketing strategy are driving sizable growth in production THREE PRIMARY MARKETING DIGITAL These DIRECTaffected improvements are sustainable, non-COVID MAILefficiencies and effectiveness SEMINARS LEAD CHANNELS • Few major enhancements annually • Basic-level con
Slide 55: Enhanced capabilities more than doubled production from marketing leads
Enhanced capabilities have more than I N I T I AT I V E S doubled production from marketing leads since 2018 MARKETING GENERATED PRENEED SALES PRODUCTION Strong growth in Comparable , Excluding SCI Direct marketing-generated $255 leads resulted in significant increases in 29% sales production, with
Slide 56: Marketing leads driving differential sales production growth
I N I T I AT I V E S These marketing leads are driving differential sales production growth TOTAL PRENEED SALES PRODUCTION BY LEAD CHANNEL Comparable , Excluding SCI Direct $2,179 Our marketing $ in millions $255 lead growth is not $1,660 $1,724 $1,605 Marketing-Generated $1,924 Preneed Sales cannib
Slide 57: Improved Sales Effectiveness & Efficiencies
I N I T I AT I V E S Improved Sales Effectiveness & Efficiencies GERRY HEARD Vice President Sales 55
Slide 58: Improved marketing approach igniting higher sales effectiveness
I N I T I AT I V E S Improved marketing approach igniting higher sales effectiveness… CUSTOMERS COUNSELORS Marketing data analysis improves Sales customer relationship targeted customer prospects management systems improve matching prospects with expert counselors …which is driving higher efficienci
Slide 59: Technology is foundational for continued sales production growth
I N I T I AT I V E S Technology is foundational for continued and efficient sales production growth ROBUST LEAD GENERATION MODELS Quality and quantity of leads SALESFORCE CRM More data with usage BEACON Contemporary and streamlined (Preneed Point-of-Sale Application) sales approach SALES MANAGEMENT
Slide 60: Increased usage of our CRM during COVID accelerated growth
I N I T I AT I V E S Increased usage of our CRM during COVID accelerated growth SALESFORCE AND SALES MANAGEMENT BEFORE NOW • “ Rolodex” or relationship sales approach • Higher lead quality and quantity provides competitive advantage, reduces turnover • Honor system used for following up on leads • N
Slide 61: 65% reduction in cost to train
I N I T I AT I V E S 65% reduction in cost to train SALES COUNSELOR TRAINING BEFORE NOW • Physical sales schools and in-person • Training from sales school and sales visits from sales leadership team leadership held virtually and scheduled for training so counselor can spend half day at training and
Slide 62: Higher close rates and higher sales with fewer counselors
I N I T I AT I V E S Improvements resulted in higher close rates and higher sales with fewer counselors FEWER, BUT MORE EFFECTIVE SALES COUNSELORS SUPPORTED BY TECHNOLOGY CORE CLOSE RATES ON ALL LEADS Total Funeral & Cemetery Preneed Production Comparable $2.41B Appointments to Sale 2018 2019 2020 2
Slide 63: Expecting continued growth off a higher base post-COVID
I N I T I AT I V E S Expecting continued growth off a higher base post-COVID TOTAL CEMETERY & FUNERAL PRENEED SALES PRODUCTION Comparable 14% 6% CAGR 2019–2021 2017-2021 CAGR CAGR $2,413 10% 2017–2019 $ in millions $1,784 $1,857 $1,903 $1,667 $1,080 TOTAL PRENEED PRODUCTION $893 $948 $858 $822 $1,33
Slide 64: Cemetery Inventory Opportunities
I N I T I AT I V E S Cemetery Inventory Opportunities MICHAEL JOHNSON Vice President Revenue Management 62
Slide 65: Development of tiered property inventory supporting average growth
I N I T I AT I V E S Development of tiered property inventory supporting average growth CEMETERY PROPERT Y SALES AVERAGES & DEVELOPMENT SPEND COMPARABLE PROPERTY AVERAGE DEVELOPMENT SPEND 5,461 $ in millions 4,966 5,058 4,708 4% 4,643 $95 Our cemetery property CAGR $89 2017–2021 $79 $79 $78 product
Slide 66: Cemetery Video
64 ©) Cemetery Video
Slide 67: Demand for premium property increasing
I N I T I AT I V E S Demand for premium property increasing PREMIUM PROPERT Y SALES ( >$40K ) Consolidated 2,107 18% CAGR 2015–2021 1,662 BENCH ESTATE GATED ESTATE 1,296 $50,000 – $250,000 $100,000 – $500,000 1,220 1,189 $195M 15% $ in millions 950 $149M 785 CAGR $117M $120M 2015–2021 Units $111M $9
Slide 68: Aligning developments with culturally diverse customer segments
Aligning developments with culturally diverse and I N I T I AT I V E S expanding customer segments is driving incremental growth HISPANIC OPPORTUNITIES CHINESE / VIETNAMESE OPPORTUNITIES Cultural preneed property sales 24% 2019-2021 CAGR VS. All other preneed property sales 16% 2019-2021 CAGR Our La
Slide 69: Cremation inventory is a significant growth opportunity
I N I T I AT I V E S Cremation inventory is a significant growth opportunity for us CREMATION PROPERTY PRENEED PRODUCTION Comparable GLASS-FRONT NICHE 30% $5,000 – $75,000 CAGR 2020–2021 9% CAGR 2017–2019 $126 COLUMBARIUM $ in millions $97 $10,000 - $100,000 $82 $75 $69 CREMATION GARDEN 2017 2018 20
Slide 70: Ample capacity in our cemeteries for many years to come
I N I T I AT I V E S We have ample capacity in our cemeteries for many years to come ~12,000 ~110 ~110 + = Acres Remaining Average Acres Years of ~2,000 ~10,000 Sold per Year Available Life Acres of Acres of Developed/ Undeveloped/ Unsold Land Unsold Land 68 Analysis based on current sales trends. S
Slide 71: Initiatives underway supporting further production growth
INITIATIVES Initiatives underway supporting even further production growth MAIN DRIVERS QUALITY & QUANTITY IMPROVED SALES CEMETERY OF MARKETING- EFFECTIVENESS & INVENTORY DRIVEN LEADS EFFICIENCIES OPPORTUNITIES These drivers could easily increase our current assumptions for cemetery preneed producti
Slide 72: Enhanced Growth Capital Opportunities
KEY GROWTH DRIVERS Enhanced Growth Capital Opportunities JOHN FAULK Senior Vice President Revenue & Business Development 70
Slide 73: Growth capital spend varies across our footprint
DEPLOYMENT Growth capital spend varies across our footprint ACQUISITIONS NEW BUILDS MISCELLANEOUS GROWTH Purchase of funeral New funeral home or cemetery on Facility expansions and significant homes and cemeteries existing or new property ad-hoc accretive investments 71
Slide 74: Over $770M invested in growth opportunities over the past 5 years
DEPLOYMENT Over $770M invested in growth opportunities over the past 5 years TOTAL 5- YEAR GROWTH CAPEX SPEND $482M $193M $97M Acquisitions New Build Funeral Miscellaneous $772M Homes & Cemeteries Growth $ in millions $ in millions $ in millions 2021 $121 $59 $12 $192M 2020 $64 $22 $29 $115M 2019 $5
Slide 75: Acquisitions are our best use of capital
DEPLOYMENT Acquisitions are our best use of capital ACQUISITION SPEND $176 THE OPPORTUNITY UPDATED • Low-to mid-teen IRRs $121 TARGET • Still ample opportunity to acquire closely held $75M- candidates (Target list represents $0.8B–$1B in revenue) $ in millions $65 $56 $64 $125M • Opportunities could
Slide 76: 2021 Acquisitions consisted of 32 businesses in 7 states
SCHOEDINGER FUNERAL & CREMATION MILLER JONES MORTUARY & CREMATORY AND SERVICE | NEW DUBLIN, OH MENIFEE VALLEY CEMETERY | HEMET, CA DEPLOYMENT 12 locations in the greater Columbus area in Ohio 7 funeral locations and 1 cemetery location in the Hemet Valley area in California 2021 Acquisitions consist
Slide 77: Greenfield new build opportunities are an increasing focus
DEPLOYMENT Greenfield new build opportunities are an increasing focus for us NEW BUILD FUNERAL HOMES & CEMETERIES $68 $59 TARGET THE OPPORTUNITY $32 $25M- • Expansion of footprint to reach growing $ in millions $22 $50M demographics and target customers $12 • Target 10 to 15 new funeral homes annual
Slide 78: Where we focus
DEPLOYMENT WHERE WE FOCUS DIGNITY MEMORIAL LIFE CELEBRATION CENTER | WILDWOOD, FL Target growing suburbs in urban markets where we operate Look to be the first entrant where there is a sizeable representation of our target customer Also will create combos via building funeral homes on existing, owne
Slide 79: Dallas, Texas - Market Footprint
DEPLOYMENT Dallas, Texas - Market Footprint OVERVIEW • D allas is among the fastest growth areas in U.S. • W e have scale, serving over 5,100 funeral customers and 3,800 cemetery customers PLANO GROWTH PROJECTS • T wo new locations in the northern growth corridor where we lacked presence: – Stand-al
Slide 80: New build projects in Dallas will drive future growth
DEPLOYMENT New build projects in Dallas will drive future growth for our STONEBRIAR FUNERAL HOME | FRISCO, TX (North of Dallas) shareholders OPENED 2013 | Serving ~240 families annually LAUREL LAND FUNERAL HOME | DALLAS, TX PROSPER TRAILS FUNERAL HOME & CEMETERY | DALLAS, TX NEW FACILITY OPENED 2019
Slide 81: Opportunistic considerations for expansion and redesign of current business
DEPLOYMENT Opportunistic considerations for expansion and redesign of current business $ MISCELL ANEOUS GROWTH $29 THE OPPORTUNITY •E xpand high-growth funeral homes $ in millions to increase their capacity to serve $18 $19 $19 •O pportunistic, high-return capital opportunities such as: $12 – Purcha
Slide 82: Creating unique new venues within our existing footprint
DEPLOYMENT Creating unique new venues within our existing footprint Memorial Oaks Funeral Home, Houston, TX Blount & Curry Funeral Home - MacDill Avenue, Tampa, FL Hodges Funeral Home, Naples, FL Joseph Gawler's Sons, Washington, DC Woodlawn-Roesch-Patton Funeral Home, Nashville, TN Geo. H. Lewis &
Slide 83: Growth capital adds strength to our earnings growth framework
DEPLOYMENT DEPLOYMENT Our growth capital continues to add strength to our earnings growth framework MAIN DRIVERS ACQUISITIONS NEW BUILDS OTHER GROWTH CAPITAL With more deployment years like 2021, with nearly $200M in acquisitions and new builds, we are able to support higher earnings growth potentia
Slide 84: Preneed Backlog Impact
KEY GROWTH DRIVERS Preneed Backlog Impact AARON FOLEY Vice President Treasurer 82
Slide 85: Preneed backlog supporting earnings growth and stability
STRENGTH Preneed backlog supporting earnings growth and stability DEFERRED REVENUE BACKLOG $ in billions $13.7 $12.0 $12.7 6% TRUST $11.1 $2.8 $10.7 $2.6 CAGR 2017–2021 Supported by $2.4 Trust-funded Funeral Merchandise $2.2 $2.2 marketable securities $3.9 and Services $3.2 $3.5 9% and customer $2.9
Slide 86: ~$10B Funeral Backlog
STRENGTH Funeral averages going into and coming out of backlog supporting sales average growth ~$10B CORE FUNERAL SALES AVERAGES $ in millions Comparable, Excluding SCI Direct Funeral Backlog 111% 109% 108% Matured Preneed (Coming out 106% 106% of Backlog) 70% INSURANCE | 30% TRUST ~4.5x 104% 104% 1
Slide 87: ~$4B Cemetery Backlog
STRENGTH Cemetery backlog positioned to drive future revenue growth ~$4B RECOGNIZED MERCHANDISE & SERVICE REVENUE PRENEED MERCHANDISE & SERVICE SALES Comparable $ in millions 100% TRUST Cemetery Backlog PRENEED MERCHANDISE & SERVICE SALES RECOGNIZED PRENEED MERCHANDISE & SERVICE TRUST INCOME RECOGNI
Slide 88: Preneed strategy and backlog drive earnings and cash flow growth
STRENGTH Our preneed strategy and backlog are structured to drive earnings and cash flow growth MAIN DRIVERS HIGHER-QUALITY TRUST INVESTMENT INCREASING CONTRACT SALES RETURNS SUPPORTING CEMETERY BACKLOG PRODUCTION FUTURE GROWTH RECOGNITION Strength in our backlog could easily drive increases in our
Slide 89: Long-Term Power of SCI's Growth Model
Long-Term Power of SCI’s Growth Model ERIC TANZBERGER Senior Vice President Chief Financial Officer 87
Slide 90: There are 4 key pillars to reach even greater potential growth
There are 4 key pillars to reach even greater potential growth Marketing, Sales & Enhanced Preneed Demographic Growth Capital Backlog Cemetery Tailwinds Inventory Opportunities Impact Impact 88
Slide 91: Funeral segment: tailwinds, backlog and average growth could drive accelerated growth
FUNERAL SEGMENT Demographic tailwinds, preneed backlog strength and average growth could drive accelerated growth BASE CASE GROWTH DRIVERS POTENTIAL GROWTH POTENTIAL GROWTH GUIDANCE ILLUSTR ATIVE FUNERAL REVENUE 1%–3% 200bps 3%–5% FUNERAL MARGIN 19%–20% 100–150bps 20.0%–21.5% 2023E 2024E 2025E 89
Slide 92: Cemetery segment initiatives could drive increases in revenues
CEMETERY SEGMENT Marketing, sales and cemetery inventory initiatives, along with favorable demographics, could drive increases in revenues BASE CASE GROWTH DRIVERS POTENTIAL GROWTH POTENTIAL GROWTH GUIDANCE ILLUSTR ATIVE CEMETERY REVENUE 4%–6% 200bps 6%–8% CEMETERY additional MARGIN Mid 30's 50–70bp
Slide 93: Growth drivers could increase earnings growth to high-teen or low 20's
Growth Drivers could increase our earnings growth to high-teen percentages or low 20's ADJUSTED EARNINGS PER SHARE $4.57 $4.23 ILLUSTRATIVE 10% CAGR off of $2.27 $3.85 higher 2022 Post-COVID base of $3.18 $3.50 $3.50 (incorporating learnings, efficiencies and higher $0.32 capital deployment) $2.91 $
Slide 94: Growth drivers could increase earnings growth to high-teen or low 20's
Growth Drivers could increase our earnings growth to high-teen percentages or low 20's ADJUSTED EARNINGS PER SHARE ILLUSTRATIVE Potential Growth over Post-COVID base on ILLUSTRATIVE Potential Growth demographic tailwinds and exceptional execution on initiatives ~18% $4.91 $4.57 ~19% $0.68 ILLUSTRATI
Slide 95: SCI continues to evolve to stay relevant in a changing landscape
SCI continues to evolve to stay relevant in a changing landscape CUSTOMER TRENDS ARE AT THE CORE O F OUR INNOVATION STR ATEGIES Consumer Elevated desire for more experiences celebratory for simple environments cremation Seamless experiences powered by technology 92
Slide 96: Looking Forward
©) Looking Forward
Slide 97: Investor Day 2022 Key Takeaways
Investor Day 2022 Key Takeaways 1 2 3 4 5 Strong business Significant and Industry leaders Preneed model Potential for model with a consistent cash in innovation and and backlog incremental growth is sustainable growth flow continues technology strength much greater in the platform to grow different
Slide 98: Q&A
Q&A 95
Slide 99: Appendix
APPENDIX 96
Slide 100: Definitions: Non-GAAP Financial Measures
Definitions: Non-GAAP Financial Measures This information should not be considered in isolation or as a substitute for related GAAP measures. Additionally, these measures as calculated by the Company may not be comparable to similarly titled measures used by other companies. ADJUSTED EPS OR DILUTED
Slide 101: Adjusted EPS – 2013 to 2021
Adjusted EPS – 2013 to 2021 (In millions, except Diluted EPS) 12 Months Ended December 31, 2021 2020 2019 2018 2017 2016 2015 2014 2013 Net Diluted Net Diluted Net Diluted Net Diluted Net Diluted Net Diluted Net Diluted Net Diluted Net Diluted Income EPS Income EPS Income EPS Income EPS Income EPS I
Slide 102: Adjusted EPS – 2005 to 2012
Adjusted EPS – 2005 to 2012 (In millions, except Diluted EPS) 12 Months Ended December 31, 2012 2011 2010 2009 2008 2007 2006 2005 Net Diluted Net Diluted Net Diluted Net Diluted Net Diluted Net Diluted Net Diluted Net Diluted Income EPS Income EPS Income EPS Income EPS Income EPS Income EPS Income
Slide 103: Adjusted cash flow from operations and free cash flow
Adjusted cash flow from operations and free cash flow (In(In millions) millions) 1212 Months Months Ended Ended December December 31, 31, 2021 2021 2020 2020 2019 2019 2018 2018 2017 2017 Net Netcash cash provided providedbybyoperating operating activities activities $ $ 920.6 920.6 $ $ 804.4 804.4
Slide 104: Financial outlook
Financial outlook (In millions, except Adjusted EPS) 2022 GUIDANCE Low Midpoint High Net cash provided by operating activities $750 $775 $800 Adjusted cash flow from operations Capital improvements at existing locations & $270 $280 $290 Development of Cemetery Property Diluted earnings per share exc
Service Corporation International — Investor Day (2022) on 6ix