Service Corporation International (NYSE:SCI) Q4 2022 Earnings Call Transcript

Thomas Ryan: Yes. We would expect that base to grow somewhere around, call it, rounded 1%, 2%. And again, I’d say that base for a variety of reasons is going a little bit more. And again, compared to 2022, we expect 2023 to go down. But I still think we’ll be operating at elevated levels if you compound growth off that 2019 number. So we feel good about the revenue streams that we’re projecting for 2023.

Joanna Gajuk: Okay. That’s helpful. Understood. And I guess on another topic you mentioned the settlement, the almost $65 million that was excluding G&A and you excluded from the cash flow outlook. So can you give us more details on this amount, it’s quite sizable actually? So what exactly is being alleged? Are these the same cases, really, in those two states because you mentioned Florida and California, or those are two different things? And I guess with that, should we think about this an indication that similar issues happening in other states?

Eric Tanzberger: Hi, Joanna, I’ll take that. This is Eric. It’s already €“ these are two cases in California and Florida that have been previously disclosed as we said in that press release as well. The first thing I’d probably give a little bit color on is to say this relates to our SCI Direct segment. That is delivering to the direct cremation consumer products and services and are doing it very well. That’s a segment of ours. It’s just over about $200 million of revenues on our total of about $4 billion and revenue is just to give you kind of a relative size perspective. What’s really unique about this business is what we love about this business though is we’re really delivering exactly what a direct consumer wants in terms of products and services.

This is one of our segments that has some of the highest customer satisfaction surveys that we receive. Google Stars as well as we measure it. I think it’s something like almost 90% of the Google Star feedback we get are actually five stars as it relates to it. So it’s a great business. Its high customer satisfaction and we really like to continue serving that consumer in such a positive way as we have done. We’ve said in the press release, we’ve kind of broken it out for you. It’s a pretax charge. It’s very much estimated at this point in time. About two-thirds of that relates to customer cancellations, and a third of it relates to some investigative costs and other legal expenses in California. When someone cancels one of these contracts, first of all, any consumer has the ability to cancel anything that we’ve done that has been undelivered.

So the undelivered service offerings could always be canceled. These specific cancellations, though, relate to what some products and services such as merchandise, such as in our kit, that have already been delivered. And in those situations, we’re going to go ahead and open that up for a certain period of time and allow these customers if they choose to do it, to cancel it. And that’s our best estimate at this time. It could be bigger than this. It could actually be a lot smaller than this. But this is our estimate for now in terms of customer cancellations. When you think about the business then going forward, I think we may rethink some of the things that we do to deliver prior to the atneed event in this particular line of business as we move forward.