SERVICE CORP INTERNATIONAL

Results of Operations — Years Ended December 31, 2023 and 2022

Management Summary

In 2023, we reported consolidated net income attributable to common stockholders of $537.3 million ($3.53 per diluted share) compared to net income attributable to common stockholders in 2022 of $565.3 million ($3.53 per diluted share). These results were impacted by certain significant items including:

(1) Estimate of certain legal matters in the fourth quarter of 2022 included an estimate of $64.6 million related to a private litigation matter in Florida and settlement discussions with the California Attorney General. Both matters relate to previously disclosed litigation.

(2) See Note 5 in Part II, Item 8. Financial Statements and Supplementary Data, for additional information related to change in uncertain tax reserves and other.

In addition to the above items, the decrease over the prior year is due to an expected decline in gross profit primarily due to decreases in COVID-19 related activity. Additionally, fewer shares outstanding and a lower tax rate helped to offset the impact of higher interest expense primarily due to rising interest rates.

FORM 10-K 31

PART II

Funeral Results

(1)We define comparable (or same store) operations as those funeral locations owned by us for the entire period beginning January 1, 2022 and ending December 31, 2023.

(2)We calculate comparable average revenue per service by dividing comparable funeral revenue, excluding general agency revenue, non-funeral home preneed sales revenue, and other revenue to avoid distorting our average of normal funeral services revenue, by the comparable number of funeral services performed during the period.

Funeral Revenue

Consolidated revenue from funeral operations was $2,303.0 million for the year ended December 31, 2023, compared to $2,332.0 million in 2022. This $29.0 million, or 1.2%, decrease in revenue is primarily attributable to a $54.9 million decrease in comparable funeral revenue, partially offset by a $26.6 million increase in revenue contributed from newly constructed and acquired properties.

Comparable revenue from funeral operations was $2,266.7 million for the year ended December 31, 2023 compared to $2,321.6 million in 2022. This $54.9 million decrease was primarily driven by the decrease in core revenue of $67.1 million as the prior year was impacted by the COVID-19 pandemic. Our comparable funeral services performed decreased 5.6% which comprised of a 6.9% decrease in funeral services performed by our funeral service locations offset by a 1.9% increase in cremations performed by our non-funeral home channel. This decrease was partially offset by a $18.2 million increase in comparable core general agency and other revenue as a result of higher comparable preneed insurance sales production.

Average revenue per funeral service increased 2.8% for the year ended December 31, 2023 compared to the same period in 2022. This average revenue growth was primarily attributable to our consumer preferences for enhanced product and service offerings as well as an increase in trust fund income. Our total comparable cremation rate increased 160 basis points to 62.9% for the year ended December 31, 2023.

Funeral Gross Profit

Consolidated funeral gross profit decreased $48.6 million, or 8.9%, in 2023 compared to 2022 as the prior year was positively impacted by COVID-19. This decrease is primarily attributable to the decrease in comparable funeral gross profit of $52.2 million, or 9.5%. Comparable funeral gross profit decreased $52.2 million to $494.6 million and the comparable gross profit percentage decreased from 23.6% to 21.8%. This decrease in gross profit is due to the expected decline in revenue mentioned above combined with higher selling costs on higher preneed insurance sales production during the current year.

32 Service Corporation International

PART II

Cemetery Results

(1)We define comparable (or same store) operations as those cemetery locations owned by us for the entire period beginning January 1, 2022 and ending December 31, 2023.

Cemetery Revenue

Consolidated revenue from our cemetery operations increased $20.1 million, or 1.1%, in 2023 compared to 2022 primarily due to a $16.7 million, or 0.9%, increase in comparable cemetery revenue and a $3.7 million increase in revenue contributed by newly constructed and acquired properties.

The increase in comparable cemetery revenue was primarily attributable to a $15.0 million increase in comparable cemetery core revenue, which was driven by a $31.2 million increase in recognized preneed revenue, partially offset by a $16.2 million decline in atneed revenue. The recognized preneed revenue growth benefited from increases in property, merchandise, and service revenue, as well as higher trust fund income. The decline in comparable cemetery atneed revenue was due to an expected decrease in contract velocity compared to 2022 that was heavily impacted by the COVID-19 pandemic.

Cemetery Gross Profit

Consolidated cemetery gross profit decreased $14.2 million, or 2.3%, in 2023 compared to 2022 and is primarily attributable to the decrease in comparable cemetery gross profit of $12.8 million, or 2.1%, and a $1.4 million decrease in gross profit due to an increase in gross losses contributed by newly constructed and acquired properties. Comparable cemetery gross profit decreased $12.8 million to $596.2 million, and the gross profit percentage decreased 100 basis points to 33.3%. The decrease in gross profit is due to the decline in cemetery atneed revenue mentioned above combined with higher selling, maintenance and employee-related costs.

Other Financial Statement Items

Corporate General and Administrative Expenses

Corporate general and administrative expenses were $157.4 million in 2023 compared to $237.2 million in 2022. Excluding an estimated charge for certain legal matters of $64.6 million in the prior year, corporate general and administrative expenses decreased $15.2 million, primarily related to our incentive compensation plan.

Gains on Divestitures and Impairment Charges, Net

We recognized a $9.8 million and a $10.0 million net pre-tax gain on asset divestitures and impairments in 2023 and 2022, respectively, primarily as the result of asset divestitures associated with non-strategic funeral and cemetery locations in the United States and Canada partially offset by impairment losses.

Interest Expense

Interest expense increased $67.3 million to $239.4 million in 2023 primarily due to higher interest on our floating rate debt as well as higher balances. Our floating rate debt carried a weighted average interest rate of 7.11% for the full year 2023, which is 416 basis points higher than the weighted average rate for our floating rate debt for the full year 2022 of 2.95%.

Losses on Early Extinguishment of Debt, Net

During 2023, we made aggregate debt payments of $603.2 million for scheduled and early extinguishment payments primarily associated with our new bank credit agreement. During 2022, we made aggregate debt payments of $101.9 million for scheduled and early extinguishment payments. Certain of these transactions resulted in the recognition of pre-tax losses of $1.1 million and $1.2 million in 2023 and 2022, respectively, recorded in Losses on early extinguishment of debt, net in our Consolidated Statement of Operations.

FORM 10-K 33

PART II

Provision for Income Taxes

The 2023 consolidated effective tax rate was 24.1%, compared to 25.1% in 2022. The decrease in the effective tax rate in 2023 was primarily due to the non-taxable gains arising from the cash surrender value of certain life insurance policies. The effective tax rate for the year ended December 31, 2023 was higher than the federal statutory tax rate of 21% primarily due to state and foreign income taxes.