SCI Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

Adjusted Earnings Per Share (EPS): $0.97, slightly up from $0.96 in Q1 2025.
Cemetery Revenue: Increased by $31 million (7%), driven by double-digit growth in preneed cemetery sales.
Funeral Revenue: Decreased by $17 million (3%), attributed to a 6.6% decline in core funeral services performed.
Gross Profit: Funeral gross profit declined by $23 million, with gross margin percentage down 300 basis points to just over 21%. Cemetery gross profit grew by $15 million (11%), with margins expanding to approximately 33%.
Adjusted Operating Cash Flow: $335 million, up 6% year-over-year.
Capital Investments: $108 million in capital expenditures, including $24 million on acquisitions.
Shareholder Returns: $190 million returned through $143 million in share repurchases and $47 million in dividends.

2. Strategic Updates and Business Highlights

Preneed Sales Growth: Strong performance in preneed funeral and cemetery sales, with preneed funeral sales production up by $18 million (6%) and cemetery sales production up by $32 million (10%).
Cost Management: Effective control over controllable expenses helped mitigate margin impacts despite lower funeral volumes.
Sales Initiatives: Focus on seminars and community outreach to enhance lead generation and conversion rates, particularly for preneed sales.
Cremation Strategy: Successful pilot programs in 10 markets to better cater to the cremation consumer, with plans for broader rollout.

3. Forward Guidance and Outlook

2026 EPS Guidance: Reaffirmed range of $4.05 to $4.35, with expectations for funeral volumes to decline by 1% to 3% for the year.
Cemetery Sales Outlook: Confidence in mid-single-digit growth for preneed cemetery sales, supported by strong first-quarter performance.
Cash Flow Guidance: Confirmed adjusted operating cash flow guidance of $1.0 billion to $1.06 billion for the year.

4. Challenges and Points of Concern

Funeral Volume Decline: Experienced a mid-single-digit decline in case volume, attributed to a strong flu season in the prior year and broader mortality trends.
Margin Pressure: Funeral gross margins expected to be slightly down for the year due to lower volumes, while cemetery margins are anticipated to improve.
Market Share Concerns: Although the company believes the volume decline is not a market share issue, it remains a concern as competition persists.

5. Notable Q&A Insights

Volume Trends: Management indicated that January and February saw steeper declines in funeral volumes, with expectations for improvement in the latter half of the year based on historical patterns.
Large Sales Performance: Large sales in cemeteries contributed significantly to revenue, but their timing remains unpredictable, leading to potential volatility in future quarters.
Trust Fund Returns: A 0.7% decline in trust fund returns was noted, but early April showed a recovery of 4% to 5%, aligning with full-year expectations of around 7%.
Cost Management: The company has established systems to manage labor costs effectively during volume downturns, which should help maintain profitability when volumes recover.

Overall, SCI's Q1 2026 results reflect a mixed performance with strong growth in preneed sales, effective cost management, and a cautious outlook on funeral volumes and margins. The company remains optimistic about its strategic initiatives and long-term growth potential despite current headwinds.

SCI — Service Corporation International