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Service Corporation International (SCI) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Consumer Discretionary· Apr 30, 2026

Source: earnings call transcript

Executive summary

Service Corporation International Q1 FY26 — Resilient Performance Amidst Funeral Volume Headwinds

Service Corporation International delivered resilient Q1 FY26 results, with adjusted EPS growing despite a significant decline in funeral volumes attributed to a tough prior-year comparison. Strong preneed cemetery and funeral sales, coupled with disciplined expense management and increased average revenue per service, largely offset the volume headwinds. The company reaffirmed its full-year EPS guidance, anticipating a moderation in funeral volume decline and continued momentum in preneed sales, positioning for sustained growth amidst demographic tailwinds.

Highlights

5

  • Adjusted EPS grew to $0.97, compared to $0.96 in the prior year, despite significant funeral volume decline.

  • Cemetery revenue and gross profit increased meaningfully, driven by double-digit growth in preneed cemetery sales production of $32 million or 10%.

  • Preneed funeral sales production increased by $18 million or 6% over Q1 2025, reflecting strong momentum and successful insurance partner transition.

  • Core average revenue per funeral service grew a healthy 3.5%, demonstrating strength of offerings and disciplined pricing.

  • Adjusted operating cash flow was $335 million, an improvement of nearly $20 million or 6% over the prior year, highlighting cash flow resiliency.

Concerns

4

  • Funeral revenue and gross profit decreased due to a 6.6% decline in core funeral services performed, resulting in a $0.02 reduction in EPS from operating income.

  • Funeral gross profit declined by approximately $23 million, with the gross profit percentage down 300 basis points to just over 21%.

  • Corporate G&A expense was $44 million, higher than the quarterly guidance range of $40 million to $42 million, primarily due to higher accruals for long-term incentive compensation.

  • Combined trust fund returns declined by 0.7% in the quarter, though April saw a market recovery.

Guidance & targets

CategoryTargetConfidence
Normalized Earnings Per Share
$4.05 to $4.35
high materiality
High
Funeral Volume Decline
1% to 3% decline
medium materiality
Medium
Acquisition Investment Target
$75 million to $125 million
medium materiality
High
Corporate G&A Expense
$40 million to $42 million
low materiality
Medium
Combined Trust Fund Return
7% increase
medium materiality
Medium
Adjusted Operating Cash Flow
$1.0 billion to $1.06 billion
high materiality
High
Full Year Cash Taxes
$120 million
medium materiality
High
Normalized Cash Tax Rate
15% to 16%
medium materiality
High
Normalized Cash Tax Rate
24% to 25%
medium materiality
Medium
Effective Tax Rate (ETR)
25% to 26%
low materiality
High
Cemetery Revenue Growth
Mid-single digit
medium materiality
Medium
Cemetery Gross Margin Growth
60 to 120 bps
medium materiality
Medium
Trust Fund Returns
$300 million to $350 million
medium materiality
Low

Segment performance

SegmentRevenueYoYQoQMargin
Funeral
Revenue and gross profit declined primarily due to a significant decrease in core funeral services performed. This was partially offset by strong growth in average revenue per service and effective cost management, with fixed cost growth held to 1%.
Core funeral revenue decline: $18 million (-3%)Core funeral services performed: -6.6%Core average revenue per service growth: 3.5%Core cremation rate increase: 40 bpsNonfuneral home revenue increase: $2 millionNonfuneral home average revenue per service increase: 10%Gross profit percentage: 21%Fixed cost growth: 1%Fixed cost inflation: 3%Preneed funeral sales production increase: $18 million (+6%)Core preneed funeral sales production increase: $13 million (+6%)Nonfuneral home preneed sales production increase: $5 million (+9%)
$17 million decrease-3%—$23 million decrease
Cemetery
Strong performance driven by higher core revenue, particularly recognized preneed revenue, and an increase in other revenue from endowment care trust funds. Preneed cemetery sales production saw impressive double-digit growth, supported by large sales and underlying sales velocity. Margins came in as expected despite above-inflation growth in fixed maintenance costs.
Core revenue increase: $25 millionRecognized preneed revenue growth: $28 million (+10%)Property revenue increase: $20 millionMerchandise and services revenue increase: $8 millionAt need revenue decline: $3 millionOther revenue increase: $6 millionPreneed cemetery sales production growth: $32 million (+10%)Large sales contribution to production growth: $20 millionCore sales contribution to production growth: $12 millionFixed cemetery maintenance costs: above-inflation growth
$31 million increase7%——

SCI operating KPIs by quarter

SCI operating KPIs stated on its earnings calls, by fiscal quarter
KPIThis call Mar 2026 Q1 FY26 Jun 2026 Q2 FY26Change vs prior quarter
Employees
25K+ And as Tom just finished, I'm going to start that way and take a moment to really sincerely thank our more than 25,000 associates across the entire SCI network. Source: earnings call transcript
25K+ Before I begin my prepared remarks, I want to take a moment to do what we always do, which is most important, and that's to thank our more than 25,000 associates across the entire SCI network and across our company for how they handle the families, work with the families in a compassionate way and continue to have that compassion and care across all the communities that they serve. Source: earnings call transcript
—
Capital expenditures Maintenance
$66M We invested $66 million of maintenance capital back into our current businesses included in this maintenance spend, we invested $41 million into new cemetery development projects, $20 million into our current funeral home and cemetery locations, which improves the overall customer experience and about $5 million into our digital strategy and some other corporate investments. Source: earnings call transcript
$80M So to break this down, we invested $80 million of maintenance capital back into our current locations which is [indiscernible] into our current funeral home and cemetery locations, which again improves the overall customer experience and $6 million into our digital strategy and other corporate investments. Source: earnings call transcript
+21.2%
Capital expenditures Digital strategy and corporate investments
~$5M We invested $66 million of maintenance capital back into our current businesses included in this maintenance spend, we invested $41 million into new cemetery development projects, $20 million into our current funeral home and cemetery locations, which improves the overall customer experience and about $5 million into our digital strategy and some other corporate investments. Source: earnings call transcript
$6M So to break this down, we invested $80 million of maintenance capital back into our current locations which is [indiscernible] into our current funeral home and cemetery locations, which again improves the overall customer experience and $6 million into our digital strategy and other corporate investments. Source: earnings call transcript
—
Capital expenditures Growth
$17M We also invested $17 million of growth capital in the quarter towards the construction of new funeral homes as well as the purchase of some real estate for future new builds and expansion opportunities. Source: earnings call transcript
$25M We also invested $25 million of growth capital during the quarter towards the construction of new funeral homes as well as the purchase of real estate for future new build and expansion opportunities. Source: earnings call transcript
+47.1%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

Multiple locations Acquisition of high-quality funeral homes and cemeteries $24 million

Acquired locations in Texas, Massachusetts, Alabama, and North Carolina, welcoming new associates to the SCI family.

Risks & headwinds

Funeral Volume Decline Q1 FY26, expected to moderate through FY26

6.6% decrease in core funeral services performed in Q1 FY26, resulting in a $0.02 reduction in EPS from operating income.

Mitigation:Disciplined pricing execution, strong control over cost structure (fixed cost growth held to 1%), expectation of historical volume recovery in H2 FY26.

Higher Interest Expense Q1 FY26

Partially offset favorable impact of lower share count and lower effective tax rate on EPS.

Mitigation:Primarily due to higher average balances on floating rate debt, partially offset by lower floating rates. Company maintains favorable and disciplined debt maturity profile.

Corporate G&A Expense Overrun Q1 FY26

$44 million in Q1 FY26, higher than $40 million to $42 million quarterly guidance.

Mitigation:Primarily due to higher accruals related to long-term incentive compensation plans driven by outperformance in total shareholder return. Expected to average $40 million to $42 million per quarter going forward, but timing of accruals can impact.

Combined Trust Fund Returns Decline Q1 FY26

0.7% decline in Q1 FY26.

Mitigation:Market recovery observed in April (estimated 4% to 5% increase), giving confidence in full-year expectation of 7% return. Trust returns are marked to market monthly, but contracts mature out of backlog, muting short-term effects.

Above-Inflation Cemetery Maintenance Costs Q1 FY26, expected to persist

Above-inflation growth in fixed cemetery maintenance costs.

Mitigation:Labor-intensive category (water, fertilizers, equipment). Management is working to improve control over these costs to align more with marketplace inflation, while continuing to invest to maintain high-quality parks for high-end inventory.

What to watch in Q2 FY26

Funeral Volume Decline Moderation

Q2 FY26 and H2 FY26
Current 6.6% decline in Q1 FY26
Target Moderation towards 1% to 3% decline for FY26

Why it matters

Recovery in funeral volumes is crucial for achieving full-year EPS guidance and improving funeral segment profitability, as historical patterns suggest Q1 is the worst and volumes improve later in the year.

While the first quarter funeral volumes presented a near-term headwind, we expect the year-over-year rate of decline to moderate as the year progresses, resulting in a 1% to 3% decline for the year.

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Q&A highlights

How did funeral volumes progress through Q1 (Jan, Feb, Mar) and what is being observed in early April for Q2?

January and February were steeper declines, March was slightly better but still down. April is also down, but not as bad as Q1. Historically, Q1 is the worst, Q2 is still challenging, and volumes tend to improve in the second half of the year, with positive comps expected then.

“What we saw was out of the gate, really all 3 months were down. I think January and February were a little steeper and March was slightly better, but still down. And what we're saying Parker and it's not unlike when we studied the 5 years before. What typically happens is the first quarter is the worst, the second quarter is still not great. and you tend to start trending the back half of the year and seeing that volume come back.”

asked by Parker Snure · answered by Thomas Ryan

2 min read 5 chapters

Detailed narrative

Funeral Volume Headwinds and Historical Context

The company experienced a significant decline in core funeral services performed, down 6.6% in Q1 FY26, primarily due to a strong flu season in the prior year and broader mortality trends. Management noted that this is consistent with historical patterns, citing five instances over the past 20 years where Q1 volumes declined 4% to 9%, with meaningful improvement as the year progressed. This historical context underpins the expectation for performance to improve in the latter half of 2026.

Preneed Sales Momentum and Strategic Initiatives

Preneed funeral sales production increased by 6% and preneed cemetery sales production grew by an impressive 10%. This growth is attributed to strategic initiatives including increased focus on key performance indicators, expanding sales force headcount, improving lead-to-sale ratios, and conducting more seminars to educate consumers. The company has also successfully transitioned its SCI Direct locations to an insurance product, with 100% rollout completed by the end of 2025, removing a prior distraction.

Cremation Cemetery Strategy Expansion

SCI is actively pursuing a cremation cemetery strategy, recognizing a lack of consumer understanding regarding offerings for cremation consumers. A pilot program in 10 markets during Q1 FY26 proved very successful, utilizing advertising, in-lobby presentations, and various media to communicate options. The company plans to roll out this initiative to another 80 markets by July, expecting it to be a significant complementary growth driver for high-margin products.

Capital Investment and Acquisition Pipeline

The company invested $108 million in capital during the quarter, including $66 million in maintenance capital (e.g., $41 million in cemetery development, $20 million in existing locations) and $17 million in growth capital for new funeral homes and real estate. Additionally, $24 million was invested in business acquisitions across several states. Management expressed optimism about the acquisition pipeline, expecting to meet its $75 million to $125 million target for FY26, focusing on high-quality funeral homes and cemeteries.

Trust Fund Performance and Outlook

Combined trust fund returns saw a 0.7% decline in Q1 FY26. However, management reported a significant market recovery in April, with an estimated 4% to 5% increase in combined trust fund returns. This recovery provides confidence in achieving the full-year expectation of approximately a 7% trust fund return. The company noted that trust fund returns are subject to market volatility, with a full-year expectation between $300 million and $350 million.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.