Prepared remarks
Good morning, and welcome to the Service Corporation International Fourth Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to SCI management. Please go ahead.
Good morning. This is Allie O'Connor, AVP of Investor Relations and Financial Reporting. Welcome to our fourth quarter earnings call. We will have prepared remarks about the quarter from Tom and Eric in just a moment. But before that, let me quickly go over the safe harbor language. Any comments made by our management team that state our plans, beliefs, expectations or projections for the future are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such statements. These risks and uncertainties include, but are not limited to, those factors identified in our earnings release and in our filings with the SEC that are available on our website. Today, we might also discuss certain non-GAAP financial measures. A reconciliation of these measures can be found in the tables at the end of our earnings release and also on our website. With that out of the way, I will now turn it over to Tom Ryan, Chairman and CEO.
Thanks, Allie. Hello, everyone, and thank you for joining us on the call today. This morning, I'm going to begin my remarks with some high-level color on our business performance for the quarter, then provide some greater detail around our funeral and cemetery results, and I will then close with some thoughts about our 2025 business and financial outlook. For the fourth quarter, we generated adjusted earnings per share of $1.06, which compared to $0.93 in the prior year. Revenues, gross profit and comparable margin percentages increased in both the funeral and cemetery segments, contributing $0.09 to adjusted earnings per share growth, while lower general and administrative expense contributed an additional $0.05 per share, resulting in a combined $0.14 earnings per share growth from operating income. Below the line, the favorable impact of a lower share count and a slightly lower interest expense was offset by a higher effective tax rate.
Now let's take a deeper look into the funeral results for the quarter. Total comparable funeral revenues increased over $5 million or about 1% over the prior year quarter as strong core general agency and other revenue growth exceeded declines in core revenue and SCI Direct non-funeral home preneed sales revenue. Comparable core funeral revenues decreased by $9 million or about 2%, primarily due to a 4.4% decrease in core funeral services performed, which was somewhat offset by a healthy 2.7% growth in the core average revenue per service. This core average revenue growth was achieved despite a modest increase of 100 basis points in the core cremation rate. SCI Direct non-funeral home revenue decreased by over $4 million, driven primarily by a $6 million decline in non-funeral home preneed sales revenue as a result of the anticipated negative effect of operational changes to defer merchandise deliveries.
This was partially offset by growth in general agency commissions, as we are in the process of switching from a trust to an insurance-funded preneed model. This net decline from preneed sales revenue was slightly offset by a $2 million increase in non-funeral home revenue, generated by a 10% improvement in average revenue per service from the effect of higher-value contracts maturing from the backlog. Certain of these contracts now include merchandise or travel protection that more recently was deferred at the time of sale into the backlog. This healthy average revenue per service growth should continue as more contracts with merchandise and travel protection mature over the coming years. Core general agency and other revenue grew by an impressive $19 million, primarily due to growth in general agency revenue, driven by higher average commission rates derived from our new preneed insurance marketing agreement, as well as the effect of selling a larger percentage of underwritten insurance products, which carry higher commission rates versus a flex or a non-underwritten product.
General gross profit increased by about $4 million, while the gross profit percentage increased by 40 basis points to just about 22%. This increase was the result of a modest revenue increase, combined with managing fixed costs to about a 1% increase for the quarter. Preneed funeral sales production decreased by $27 million or about 9% over the fourth quarter of 2023. Core preneed funeral sales production decreased by $14 million or 6%, primarily due to the transition to our new preneed insurance provider during the back half of 2024. We expect to continue to see increased underwritten insurance product sales production as our counselors focus on raising customer awareness of the benefits of a fully insured product. We anticipate comparable core preneed sales production to normalize later in the spring or early summer months. Non-funeral home preneed sales production decreased $13 million or 20%, as SCI Direct transitions from the sale of trust to insurance-funded preneed contracts.
This transition required many of our sales counselors to go through extensive training and obtain insurance licenses and change the payment terms for customers financing their preneed, all of which contributed to a temporary slowdown in sales. As of today, we have made the transition in markets that represent 75% of our production. So, this, too, should stabilize over the next few months and begin to grow again, probably beginning in the second half of 2025. Now shifting to cemetery. Comparable cemetery revenue increased by $20 million or about 4%. Core revenue was primarily responsible for the increase, as it grew by $21 million over the prior year quarter. Higher recognized preneed property revenues accounted for $14 million of this increase, generated by a combination of higher preneed cemetery sales production and higher preneed cemetery sales recognition rates, as completed construction projects triggered the recognition of prior period sales in the fourth quarter.
Recognized preneed merchandise and service revenue accounted for an additional $5 million of core revenue growth, as contracts with a higher sales average are being delivered out of the backlog. The backlog value has been enhanced by cumulative merchandise trust on earnings over the life of the contract. Comparable preneed cemetery sales production increased by $7 million or about 2%, primarily due to an increase in large sales, while our core production was relatively flat. Cemetery gross profits in the quarter increased by $14 million, and the gross profit percentage increased by 150 basis points, generating an operating margin percentage of 36%. The 4% revenue growth, which includes an increase in higher-margin merchandise and service trust fund income, was slightly offset by a 4% increase in our fixed costs, impacted by increased maintenance costs primarily due to damages incurred at locations impacted by natural disasters during the quarter.
Now let's shift to discussion about our outlook for 2025. As you saw in our earnings release, we provided a normalized earnings per share guidance range of $3.70 to $4 for 2025 for a midpoint of $3.85. The 2025 range would be 5% to 13% growth, with a 9% growth at the midpoint. We anticipate that the effective tax rate for 2025 will be about 25.5%, some 180 basis points higher than 2024. So by neutralizing the tax effect, we would be guiding to a 12% growth at the midpoint of our range versus the current guidance midpoint of 9%. Within our funeral segment, we expect flat to slightly down funeral volume compared to 2024, with the average revenue per case growing at inflationary rates, slightly negated by the effect of a modest cremation mix increase. We do expect to see higher general agency revenue generated from the favorable impact of our new insurance agreement, which should drive healthy profit growth for the funeral segment, increasing the gross margin percentage by 80 to 120 basis points.
We expect preneed funeral production to be slightly lower in 2025 as we continue the transition of SCI Direct and as we focus on increasing the underwritten insurance product sales in our core channel. While down for the year, for some perspective, the $1.2 billion of preneed funeral sales production this year is 27% higher than 2019, or a 5% compounded growth rate over the last five years. As we think out to 2026, we would expect preneed funeral sales production to return to low to mid-single-digit percentage growth rate. For the cemetery segment, we anticipate that we can grow preneed cemetery sales production in the low- to mid-single-digit percentage range, resulting in cemetery revenue growth of about 2% to 3%. Continued focus on managing inflationary costs should result in reasonable segment profit dollar growth while maintaining our impressive gross margin percentages as compared to 2024.
Below the line, we expect favorable impacts from slightly lower interest expense and a lower share count that will be negated by the higher effective tax rate caused by the loss of deductibility of excess tax benefits from stock option exercise. In conclusion, I want to acknowledge and thank the entire SCI team for their daily commitment to our customers, our communities, and to one another. Your dedication is the foundation of our success. Thank you for making a difference every day. With that, operator, I'll now turn it over to Eric.
Good morning, everyone. Sequentially, I'm going to do exactly what Tom just did, and I'm going to start by taking a moment to really extend my deepest gratitude to each of our 25,000-plus dedicated associates. Your unwavering commitment and exceptional service continued to make a profound impact on the lives of the families we serve. This last year in 2024, our team cared for almost 700,000 families during some of their most challenging life moments, as well as provide peace of mind through preneed arrangements. Thank you for your tireless dedication to delivering service excellence to our customers, as well as our communities. So, with that, I'm going to shift to the financial part of this and talk about our cash flow results and capital investments for the fourth quarter. I'm going to follow that by a recap of our full year performance in 2024, then provide an update of 2025 cash flow and those capital investments, and then we'll conclude with an update on our overall financial position.
So in the fourth quarter, we generated an impressive adjusted operating cash flow of $268 million. This did exceed our expectations and is at the high end of our guidance range for the quarter. So let me give you a little bit of color and break this down a little bit. Adjusted operating cash flow was positively impacted by higher operating income of about $20 million that Tom just discussed, highlighting the strength in our underlying funeral and cemetery operations during the quarter. Cash interest was also lower by about $12 million. This is really just a timing issue associated with the bond finance that we completed this past September. Offsetting these favorable impacts was a $27 million use of cash resulting from an additional payroll cycle in the current year quarter compared to the prior year. Again, this happens from time to time with the timing of our payroll funding. Additionally, preneed and other working capital resulted in a combined use of about $15 million in the quarter.
So in total, we finished 2024 very strong with adjusted operating cash flow of just over $975 million, which is above the high end of our most recent annual guidance range, which, again, was $940 million to $960 million. So continuing on in the fourth quarter. We invested $140 million into our current locations, new growth opportunities, business acquisitions, and real estate. We invested $102 million of maintenance capital back into our current businesses, with $42 million allocated to valuable cemetery development projects, $43 million into our funeral and cemetery locations, and $16 million into our digital strategy and other corporate investments. For the full year, we invested a total of $348 million of maintenance CapEx, which was up $23 million from both the prior year and the high end of our guidance range as we dedicated a portion of the strong cash flow during this quarter toward reinvestment into the maintenance of our funeral and cemetery businesses.
We also invested about $19 million of growth capital in the quarter towards the purchase of real estate, construction of new funeral homes, and the expansion of existing funeral homes and cemeteries. For the full year, this brought the total growth capital spend to just over $100 million, which was up about $9 million from 2023 as we identified meaningful opportunities to invest in greenfield cemetery and funeral projects. Let's talk a little bit about acquisitions. So we invested $19 million into business acquisitions in the fourth quarter. In total, we finished the full year with an impressive $181 million of acquisition spend. As I noted in our November earnings call, acquisition spend this year has outpaced our annual guidance range of $75 million to $125 million, and we are thrilled about these high-quality funeral homes and cemeteries joining our company, and we are happy to welcome all of these new associates to the SCI family.
Let's move on to capital investments. We returned $100 million of capital to shareholders in the quarter through $43 million of dividends and $56 million of share repurchases. We repurchased just under one million shares at an average price of $79 during the quarter. For the full year, we returned $428 million to our shareholders through $174 million of dividends and just over $250 million of share repurchases. This brings the number of shares outstanding to just under 145 million shares at the end of the year. Subsequently, we have completed $28 million of share repurchases at an average price of $78 so far during 2025. So I'd like to shift to the 2025 outlook. But before I go there, I just want to make a brief comment about our corporate G&A expense during the quarter. Year-over-year corporate G&A expense decreased $30 million in the quarter to about $15 million. This is primarily a result of reducing our California legal reserve made in the fourth quarter of 2022 by about $20 million as the primary claim period expired during the quarter.
When we exclude this impact, G&A expenses still declined about $10 million quarter-over-quarter, and this was primarily resulting due to differences in timing of long-term incentive compensation expenses compared to the prior year. When we look forward to 2025, we expect that corporate G&A will average about $39 million to $41 million a quarter. But keep in mind, there may be some variability in our long-term incentive compensation plans that could push us above or below this quarterly range during a particular quarter. Let's talk about 2025 in more detail. As we disclosed in the press release, our 2025 adjusted operating cash flow guidance range is $830 million to $890 million, with a midpoint of $860 million. The midpoint of this range assumes the following: we expect our cash earnings at the midpoint of our EPS guidance range to grow about $65 million, which reflects the growth in the underlying funeral and cemetery operations.
Cash taxes were generally flat in the fourth quarter and only about $20 million for the full year of 2024. But as we have discussed several times over the last six quarters, we expect our cash taxes to normalize in 2025 by about $150 million, as a benefit we received related to a change in tax accounting method on the timing of cemetery property revenue recognition has been fully realized at this point in time. Therefore, along with the expectation of higher earnings, we are projecting total cash taxes will increase to about $175 million during 2025. We also anticipate an effective tax rate of 25% to 26%, which is about 100 basis points higher than prior years as we expect that excess tax benefits from stock option exercises related to executive compensation will no longer be available to us. While we expect a modest decline in interest expense this year on lower rates, we also anticipate the timing impact of the semi-annual interest payments associated with our September 2024 bond transaction to result in about $5 million of higher cash interest this year.
And then finally, we anticipate having a normalized net use of working capital of probably around $20 million, driven primarily by growth in preneed sales and timing of payables, partially offset by the timing of payroll and incentive compensation payments during 2025. Let's talk about investing capital this year. We expect maintenance CapEx to actually decrease this year to $315 million from the higher levels seen in 2024. Of this target spend, we expect to invest about $130 million into improving our funeral homes and cemeteries, $160 million into cemetery development projects with the standard high rates of returns, and $25 million into our digital strategy investments and other corporate investments. We also expect to invest $75 million to $125 million towards acquisitions. This is in line with our normal annual acquisition spend target that we've talked about many times before. In addition to maintenance CapEx and acquisition targets, we also plan to invest roughly $78 million of growth capital on new funeral home construction and real estate opportunities, which together drive low to mid-teen after-tax IRR.
Finally, as we've done over the last 20 years, we plan to continue returning capital to our shareholders through dividends and our share buyback program in a consistent and disciplined manner, absent other higher return investment opportunities. So before I conclude the remarks, I'm going to give you a few comments on our financial position. We have a very attractive and manageable debt maturity profile with tremendous liquidity. At the end of 2024, liquidity totaled about $1.6 billion, consisting of approximately $220 million of cash on hand, plus a little over $1.3 billion available on our long-term bank credit facility. Our leverage began the fourth quarter at just under 3.8x, declining to about 3.65x at the end of 2024, which is in the lower end of our long-term leverage target range of 3.5x to 4x. In conclusion, our strong balance sheet, enhanced liquidity position, and predictable cash flow stream continues to support all of these capital investments in our total capital investment program, which gives us remarkable flexibility to invest opportunistically for the long-term benefit of SCI, our associates, and our shareholders.
Lastly, again, we are most proud of the way we serve our customers this year and into the future in their greatest time of need, for which I'd like to again thank the entire SCI team. So operator, this concludes our prepared remarks. And with that, I'd like to turn it back over to you for our question-and-answer period.
Questions and answers
The first question comes from John Ransom of Raymond James. Please go ahead.
Good morning. I'm looking forward to seeing everyone in Orlando in a couple of weeks. Tom, the spending outlook isn't very positive, so Eric might be disappointed. I'm going to attempt some calculations, which can be tricky, but considering the general agency performance next year, this year, and 2025 along with the acquisition timing, we expect to see a pretax benefit of around $40 million to $45 million from those two factors. Is that about right?
I think looking at the numbers, it's probably a little high, John, but not dramatically off. Probably a little higher than what we had at our midpoint.
Okay. When considering the long-term funeral pricing strategy, there's an increase coming from the backlog alongside changes in the cremation mix and other factors. Are these elements resulting in a price increase similar to what we see with the Consumer Price Index when all is considered? Also, are you suggesting, although I'm not certain, that there may be indications that the impact of the cremation mix is beginning to decrease?
Take off in a higher rate, you're saying?
Is the long-term projection still in the range of 100 to 150 basis points, or are we approaching a point where the impact won't be as significant?
Yes, I think it will definitely begin to slow. I mean, that's what we're kind of experiencing in the last couple of years. It's probably more likely it could be closer to the 100 basis points than 150. And again, that's just math. But yes, that is fair to say. And I think on your pricing question, the same, I do think CPI is a fair way of how we look at pricing from a backlog perspective. And I think the real opportunity to step on the gas a little bit is as we're selling more preneed now with a general agency commission of the way they are that that's an ability for us to drive future profitability.
Right. And so lastly, I just kind of step back and look at your funeral and preneed revenue growth. It's probably, let's call it, against CPI, to call that 3%. So to grow at 5% EBIT margins, have to do a little more work. Is that how you're seeing it?
Yes. We anticipate that as the demographic changes take effect, you will start to observe revenue growth in the funeral sector reaching 3%, 4%, or even 5%, with significant incremental revenue growth. The additional profit potential is substantial. Looking ahead to next year, we believe that funeral margin percentages will increase, and I expect this trend to continue as the demographic effects become more pronounced.
Yes. So just said another way, and you can't make it too obvious for me, obviously, is that you think '24 is kind of the last year of the COVID pull-through and it gets more normalized starting next year, '26?
I believe there will still be a residual effect from COVID, but it will gradually lessen. Other factors such as market share and demographics will likely counterbalance any remaining impact from COVID.
The next question comes from A.J. Rice of UBS. Go ahead, please.
Hi everyone. I have a couple of questions. You've experienced some fluctuations in funeral volumes and comparable cases year-over-year, which we also noticed in the second quarter. Have you analyzed this further? Is it simply typical month-to-month variation, or is there something else at play? Additionally, it seems that your expectations for case growth in 2025 have shifted from flat to slightly up to now flat to slightly down. Is this adjustment related to what we've observed this year?
Yes, I think that's accurate. We're experiencing a reduced ripple effect from COVID. The positive news for the United States and everyone is that life expectancy numbers are increasing again. Consequently, all the categories that were indirectly impacted are returning to normal, such as driving deaths, suicides, and overdoses, which are thankfully declining. I believe this residual effect has led us to consider that we can still aim for flat volume in 2025, although there is a reasonable expectation that it may be slightly lower. So we've adjusted our outlook. It's month-to-month, and we observe some volatility within the months. For instance, in the fourth quarter of this year, October showed a decline of two, December also decreased by two, and November was down six. Thus, there's some inconsistency as we progress through these quarters. This volatility is really a lasting consequence of the COVID disruption, making predictions a bit less reliable than they have been in the past.
I want to ask about the shift from trust to preneed insurance sales. You mentioned 75%. Do you anticipate that 75% of your preneed funeral sales will ultimately come from insurance as you make this transition? That's my question.
Yes, A.J. I may have confused you a bit with this. The 75% figure is not specifically related to SCI Direct. Remember that SCI Direct was selling 100% trust, and we are converting state by state over time. What I meant by the 75% is that we have now converted the states that historically produced 75% of our production. With these conversions, we are starting to compare against insurance production quarters. I think we are reaching a bottom in terms of production and are beginning to go back up. We still have 25% of production remaining, and those states need to convert this year. Therefore, I believe you'll see stabilization in the coming months, and in the latter half of the year, SCI Direct should continue to grow. On the core side, the situation is slightly different. We've primarily been selling insurance, though we have historically sold some trust products too, but we have switched to a new vendor.
With our new partner, we aim to increase the number of contracts for underwritten insurance products. You can sell a flex or trust product, but that does not always provide the necessary protection to the consumer. Sometimes, consumers may think they have coverage when they don’t, especially if it’s in the form of a flex product. We're working to eliminate that confusion at the time of need and encourage people to write underwritten insurance production. We are seeing some success and expect that production levels will begin to rise again. We may see a mix of trust, but likely a higher proportion of insurance than we have historically sold. So, we have two channels with different reasons for these developments, and I apologize for the lengthy explanation.
No, that's good because I think I did misunderstand it. When you made the conversion this new contract, I think you talked about potentially having about $900 million in business that you would move over annual business. Is that still the number with all the puts and takes? Or do you think it's a bigger number than that now at this point?
Well, if you add in SCI Direct, we're running at a $1.2 billion annual clip. I think of that as $900 million from core and $300 million from SCI Direct. Remember, SCI Direct didn't write insurance before. So in that regard, we're going to write a lot more insurance. And again, the commission rates vary depending on the type of products sold. So it's hard to predict exactly what it's going to be. But overall, we've got better general agency commission rates that should work to our favor. And again, if we sell better products to younger people, you're going to get higher commissions if you sell them to older, lower commissions is the way insurance commission rates work.
Okay. And maybe just one final one for me. The comment on the deal. So you're guiding for 75 to 125 of acquisitions this year. I think you came into last year, if I remember right, with a similar target but ended up at 181, which obviously is a positive. Is there any comment about the pipeline? Is the pipeline still quite robust? Or is that 75 to 125 really reflective of what you see in the pipeline right now?
Hey A.J., this is Eric. I would say the pipeline continues to be strong. We have mentioned this since coming out of COVID. However, these deals can fluctuate. It's essential to ensure a win-win situation with the independent family and organization that is interested in a liquidity event. Sometimes, these situations experience starts and stops and can take longer than expected. We're often working with second, third, and fourth-generation families that need to align and all want to create the liquidity event. The pipeline remains strong, but the timing of closing deals can vary. I'm just as excited this year about the strength of the pipeline as I was last year, which resulted in successful closings. We’re providing initial guidance of 75 to 125. If things move in the right direction based on the strength of the pipeline, I hope we can surpass that this year, similar to last year. However, we want a win-win situation; we're not going to compel anyone to sell. We want the family and organization to be enthusiastic about joining us and to be well-prepared.
All right. That sounds good. Thanks so much.
Our next question comes from Joanna Gajuk of Bank of America. Go ahead please.
Good morning. Thank you for addressing the questions. I have a couple of related topics. First, could you provide more insight into the outlook for funeral volume? I understand it can vary significantly from month to month, but do you have any updates regarding January? It appears that November was a weak month, and December may still be down year-over-year, so how is January looking?
Sure, Joanna. January, on the funeral volume side is down just about 3%, which wasn't very far off our expectation, quite honestly, but we expected a tough comparison. So that's where we are, and we're too early to sell.
All right. Because you also made it sound like you don't think that this is some sort of like a higher headwind from the pull-forward effect. It could be just like some other bigger factors going on. But is there anything else you might be able to glean into when you look at these numbers in terms of why this November was such a weak month or is it some sort of like you said, volatility? Or is it more like the macro stop and the pull forward?
Yes. I believe there has been some advance in demand. However, it's not quite accurate to call it a pull forward. We experienced longer periods of excess deaths than many anticipated, and the reasons weren't clear. Although some categories of deaths have decreased, possibly due to improved cancer screenings, overdose issues, and mental health concerns, overall data indicates that the country is on the mend, which is encouraging. We are seeing a return to normalcy across the board, which has influenced our perspective positively. Key factors contributing to our growth remain strong, such as our substantial preneed backlog, our competitive market position for gaining market share, and the general aging population in America. As we move forward, these elements will take precedence over the discussions regarding COVID impacts and excess deaths. We feel optimistic about our current state. Growth could be slightly down or flat, and there’s even the potential for slight improvement, though predictions are challenging at this point. We've yet to witness a significant effect from the flu season; while there is much talk about it, we haven't seen it reflected in our figures.
Right. From what I've heard, hospitals reported that Q4 had lower flu activity year-over-year, but overall, things are trending higher. We'll see what that means for your business. Another point to consider is the wildfires in California, especially near Los Angeles. Do you expect any lingering impact on your Rose Hills location due to those wildfires in the surrounding communities?
Yes. So first of all, we've had some employees that are impacted by this, and that's been our primary concern is their health and safety and getting them back to some whatever form of normalization can occur. So that's been mission number one. And I'd say as it relates to sales, it surely had an impact temporarily during the month, I think, is a distraction and people just getting displaced from their homes and all the like. So as that heals, our thoughts are, as it relates to preneed cemetery, it's a deferral and not a lost sale. So we think while there is some impact in January and probably into February, that again, as things normalize, we'll have the opportunity to bring more people and see some of our beautiful sections that we'll be opening up this year and should have a return to normalcy and some growth as it relates to California. But our thoughts are with everybody there as they continue to deal with an incredibly disruptive event.
Right. Yes. I guess there was like 200,000 people dislocated. So hopefully, that takes maybe some time. But when it comes to your preparations there, I guess, so you mentioned opening up new sections because last time you talked about there was a section that's being developed, but that kind of blocked off access to some other sections. So where are you on that front? Like, is everything kind of now open up and ready for the traffic to come through?
I believe it is on track to be. While not everything is in place yet, we expect to open up new sections that will provide opportunities for some of those excellent areas to be accessible to our consumers. So yes, that is still planned to occur, and I don't anticipate any interruptions due to the fire.
Okay. And if I may squeeze the last one. So there was a restructuring charge in the quarter. Can you give us a little bit of color like what was the driver for doing it now? And what exactly was happening?
Thanks, Joanna. This is Eric. The restructuring charge was a little over $11 million. I think the thing that you have to realize is culturally, as you've seen us over the past years and the past before that is really trying to manage this fixed cost structure in a high inflationary environment. And you're starting to see that in the numbers. As you see the margins and you see the fixed costs on the funeral side, the fixed costs on the cemetery side really start to be managed well. And the fruits of our labor are finally there over the past several years coming out of COVID, trying to manage it. This restructuring charge is primarily related to our corporate and home office and back-office functions. It really has nothing to do with the field. Any time that we go through and try to get better, this is one of those opportunities where we were looking at some things to introduce technology and to always strive to get better and more efficient.
And it kind of crescendoed into one particular quarter, which caused it to be more or less a restructuring charge. You could see these things under the radar, but they're not big enough to just sum it together and call a restructuring charge based on our continuous process improvement type mentality, but this quarter, it did. And so of the $11 million, I would call it, 80% to 90% cash. And I would say that probably half of that is some cash savings in 2025. And that's how I'd describe it.
Great. That's very helpful.
The next question comes from Scott Schneeberger of Oppenheimer. Go ahead, please.
Hey guys, good morning, it's Daniel on for Scott. Could you elaborate a little bit, please, on the outlook for cemetery preneed sales in terms of how you think about large sales activity versus the volume component?
Sure. I think for next year, what we've been looking at, again, we've guided to kind of this low single-digit percentage growth. And the way we're thinking about that is we'd anticipate the large sales that are hard to predict, as you know. So our anticipation is those would be relatively flat compared to the prior year. And so the growth is really going to come from the core production component of cemetery sales.
Got it. And the recognition rate looks a bit accelerated in the fourth quarter. Could you speak to how you think about that in 2025 as well as some perspective on cemetery margins for next year?
Sure, Daniel. The recognition rate exceeded 100% during the quarter, and it fluctuates at certain times. We aim to complete our projects and allocate capital evenly, but recognition usually peaks a bit in the fourth quarter as many projects begin in the summer months. For the entire year globally, the recognition rate is in the mid- to high 90s, which I believe is a good target for 2025. We plan to invest around $160 million in cemetery development, focusing on high-return projects that we are enthusiastic about. I expect the recognition rate to fall between 95% and 100% or maybe in the mid-90s. Regarding margins, as we start to see growth in pre-need cemetery sales in the low- to mid-single digits, we should experience some margin expansion. However, I anticipate margins to remain in the low 30% range for 2025, possibly slightly above or flat compared to 2024 levels, due to ongoing inflationary pressures, especially in cemetery maintenance. We're managing those pressures well, but generally, you can expect margins to approach the mid-30s over the next couple of years for cemetery.
Great. Thank you so much.
Our next question comes from Tobey Sommer of Truist Securities. Go ahead, please.
Thank you. Can you just give us an update on your expectations for the funeral rule and kind of what you're hearing from your government people?
There’s a lot happening right now, and I’m not sure what more to add. I don’t have any insights beyond what’s publicly known about the current volatility related to the situation in Washington. I can share that we haven't received any specific updates regarding the funeral rule since November or with the change in administration. We still support the funeral rule, but we don’t believe that some of the proposed changes will significantly impact our company. Many of those proposals align with good business practices, and we are actively implementing them in a way that is tailored to our market and reflects what we see as valuable for pricing and online experiences. Our main priority is the customer and enhancing their digital experience. This is the right approach, and we will keep at it. If the FTC makes changes, I still don’t believe it will substantially alter our business model going forward.
In the cemetery segment, could you discuss how your expenses are trending, particularly in relation to labor? Additionally, how do you perceive the year-over-year comparisons? Do you consider this to be a tailwind or a headwind?
You're going to have labor pressure always, but it's definitely less than the labor pressure that we've seen and talked about during the COVID years and coming out of the COVID years. When you think about labor, it's a $750 million to $800 million spend for our company all in with benefits across all the 25,000 associates that we have. A lot of the pressure came over the past couple of years in the lower tiers of the labor market, which particularly would impact cemetery and us operationally trying to take care of 35,000 acres of cemetery property that we have. And so that was some of the pressure that we saw. I think you're continuing to see kind of mid-single-digit percentage pressure in labor on the cemetery side, and it's more a lower single-digit percentage on the funeral side right now. But both of those feel a lot better than they did several quarters ago or a couple of years ago coming out of COVID that we described to you.
If I could sneak a last one in. From a baby boomer perspective, what do you think that trend is likely to do in terms of incremental service volumes? And what's your best forecast for when it starts to fold into the P&L?
Well, the first baby boomers turn 80 next year. And so we think within, I'd say, the window of the next few years, that you'll begin to see an incremental impact, really difficult to predict how that's going to roll out. But I do think it's kind of a stair step, a slow stair step over time as you think about the next three to five to ten years. But that's the way we're thinking about it with taking historical trends into consideration.
Our next question comes from Parker Snure of Raymond James.
I think we lost Parker.
We lost Parker, yes. Well, we just lost Parker. Did we want to wrap up the Q&A?
Sure. That would be great. I want to thank everybody for participating on the call today. We look forward to speaking to you again in April. Have a great week and weekend.
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