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    SCI
    Earnings call· Mar 2026(Q1 FY26)

    SERVICE CORP INTERNATIONAL Q1 FY26 earnings call SCI

    Apr 30, 2026 Source

    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

    13
    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

    2
    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%——

    Operational metrics

    15
    Adjusted Earnings Per Share
    $0.97vs $0.96 prior year
    Q1 FY26

    Delivered despite meaningful decline in funeral case claims.

    Estimated EPS (hypothetical)
    $1.1217% growth over prior year
    Q1 FY26

    Estimate if funeral case volumes had been flat for the quarter.

    Maintenance Capital Investment
    $66 million
    Q1 FY26

    Invested back into current businesses.

    Growth Capital Investment
    $17 million
    Q1 FY26

    Towards construction of new funeral homes and purchase of real estate for future builds/expansions.

    Business Acquisitions Investment
    $24 million
    Q1 FY26

    Investment in high-quality funeral homes and cemeteries.

    Capital Returned to Shareholders
    $190 million
    Q1 FY26

    Total capital returned in the quarter.

    Shares Repurchased
    2 million
    Q1 FY26

    Repurchased during the quarter.

    Shares Outstanding
    130 million
    End of March

    Number of shares outstanding at the end of the quarter.

    Corporate G&A Expense
    $44 milliondown $1 million over prior year
    Q1 FY26

    Higher than quarterly guidance range of $40 million to $42 million.

    Combined Trust Fund Returns
    0.7% decline
    Q1 FY26

    Ended the quarter with a decline.

    Estimated Combined Trust Fund Returns
    4% to 5% increase
    April

    Observed market recovery in April.

    Liquidity
    $1.7 billion
    End of Q1 FY26

    Strong liquidity position.

    Leverage Ratio (Net Debt to EBITDA)
    3.68xsimilar to prior quarter end
    End of Q1 FY26

    At the lower end of the long-term target range.

    SCI Direct Insurance Product Rollout
    100%
    End of 2025

    Successfully rolled out the insurance product into all SCI Direct locations, completing the transition.

    Large Cemetery Sales Definition
    $100,000vs $80,000 previously
    Current

    New threshold for defining large sales in cemetery.

    Industry KPIs

    4
    MetricValueDetails
    EPS$0.97USD
    Gross margin21%%
    Cash investments balance$260 millionUSD
    Share buyback capital return$143 millionUSD

    Deals & partnerships

    1
    Multiple locationsAcquisition 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

    5
    Funeral Volume DeclineQ1 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 ExpenseQ1 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 OverrunQ1 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 DeclineQ1 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 CostsQ1 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

    5

    Funeral Volume Decline Moderation

    Q2 FY26 and H2 FY26
    Current6.6% decline in Q1 FY26
    TargetModeration 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.

    Q&A highlights

    6

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.