SCI — Service Corporation International

Summary of SCI Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Earnings Per Share (EPS): $0.90, up from $0.88 year-over-year.
• Total Revenue: Increased marginally in the Funeral segment by $5 million (1% growth) and Cemetery revenue grew by $23 million (5% growth).
• Adjusted Operating Cash Flow: $239 million, an increase of $71 million (42%) year-over-year.
• Preneed Cemetery Sales Production: Grew by 8%, while Preneed Funeral Sales Production increased by 6.6%.
• Capital Returns: $172 million returned to shareholders through share repurchases ($123 million) and dividends ($50 million).
• Debt Profile: Ended the quarter with a leverage ratio of 3.77x net debt to EBITDA.

2. Strategic Updates and Business Highlights

• Sales Strategy: Focus on fixed compensation for sales personnel to improve retention and effectiveness, with a four-pillar strategy aimed at increasing preneed sales.
• Digital Investments: Continued investment in technology to enhance lead generation and sales conversion, with an annual run rate of $20-$25 million.
• Acquisitions: $15 million invested in business acquisitions, adding new locations in California, Georgia, and Delaware.
• Trust Fund Income: Benefited from strong market performance, contributing positively to revenue.

3. Forward Guidance and Outlook

• 2026 Guidance: Adjusted EPS guidance narrowed to $4.10 to $4.30, with a midpoint of $4.20 confirmed.
• Cash Flow Guidance: Increased midpoint for adjusted operating cash flow by $50 million to $1.085 billion for the full year.
• Expectations for the Back Half of 2026: Anticipated double-digit EPS growth driven by strong preneed sales and improved Funeral segment performance.

4. Challenges and Points of Concern

• Funeral Volume Decline: Comparable core Funeral volume declined by 1.7%, although there was slight growth in June.
• Margin Pressures: Funeral gross profit margins were impacted by higher selling compensation and a shift to insurance-funded contracts, which may stabilize in future periods.
• Recognition Rate: Cemetery preneed recognition rate was low at 88.8%, with expectations for improvement in the second half of the year but uncertainty remains on the timing of backlog conversion to revenue.

5. Notable Q&A Insights

• Sales Strategy: Management emphasized the effectiveness of their sales strategy, particularly the transition to fixed compensation and the use of AI for training sales counselors.
• Cremation Market: Acknowledged a greenfield opportunity in selling to cremation consumers, with positive trends in sales conversion.
• Future Volume Expectations: Preliminary July data showed flat Funeral volumes, with cautious optimism for improvement in the second half of the year.
• Trust Fund Performance: Trust fund income has been strong, with low double-digit returns contributing positively to cash flows.

Overall, SCI reported stable financial performance with positive momentum in preneed sales, though challenges remain in Funeral volumes and margin pressures. The company is focused on strategic investments and operational improvements to enhance long-term growth.