Service Corporation International Q2 2025 Earnings Report

Service Corporation International EPS Results

• Actual EPS: $0.88
• Consensus EPS: $0.84
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: $0.79

Service Corporation International Revenue Results

• Actual Revenue: $1.07 billion
• Expected Revenue: $1.05 billion
• Beat/Miss: Beat by +$13.95 million
• YoY Revenue Growth: +3.00%

Service Corporation International Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 9:00AM ET

Service Corp. International engages in the provision of funeral goods and services. It operates through the Funeral and Cemetery segments. The Funeral segment offers services related to cremations, including the use of home facilities and motor vehicles, arranging and directing services, removal, preparation, embalming, memorialization, and catering. The Cemetery segment provides property interment rights, including lawn crypts, mausoleum spaces, niches, and interment options. The company was founded by Robert L. Waltrip in July 1962 and is headquartered in Houston, TX.

Service Corporation International Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Adjusted EPS rose 11% to $0.88 in Q2 and full-year guidance of $3.70–$4.00 was confirmed, while free cash flow outlook was raised.
• Positive Sentiment: Funeral revenue grew 3% with a 20-basis-point gross profit margin expansion, driven by higher average revenue per service.
• Negative Sentiment: Preneed funeral sales production fell 9% due to the transition to a new insurance provider and required counselor licensing.
• Positive Sentiment: Preneed cemetery sales production increased over 5%, led by large‐sale growth that will bolster future revenue recognition.
• Negative Sentiment: Cemetery gross profit declined by $4 million and margin contracted 110 basis points amid higher selling compensation and lower property recognition rates.

Presentation

[Operator]

Good day, and welcome to the SCI Second Quarter twenty twenty five 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.

[Trey Bocage, Director of Strategic Finance and IR at Service Corporation International]

Good morning. This is Trey Bocaj, Director of Investor Relations and Strategic Finance. Welcome to our second quarter earnings call of 2025. We will have some prepared remarks about the quarter from Tom and Eric in just a minute. But before that, let me quickly go over the safe harbor language.

[Trey Bocage, Director of Strategic Finance and IR at Service Corporation International]

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 on our website.

[Trey Bocage, Director of Strategic Finance and IR at Service Corporation International]

With that out of the way, I will now turn the call over to Tom Ryan, Chairman and CEO.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

Thanks, Trey. 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. I will then close with some thoughts about our earnings expectations for the rest of 2025.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

For the second quarter, we generated adjusted earnings per share of $0.88 which was more than an 11% increase compared to the 79¢ reported in the prior year period. We saw impressive increases in funeral revenue and gross profit, partially offset by slightly lower cemetery gross profit and higher corporate general and administrative expense, which when combined resulted in $05 of earnings per share growth from operating income. Below the line, the favorable impact of a lower share count and a slightly lower net interest expense resulted in an additional $04 of earnings per share growth. Now let's take a deeper look into the funeral results for the quarter. Total comparable funeral revenue increased over $15,000,000 or about 3% over the prior year quarter, primarily due to solid growth from both core revenue and core general agency revenue.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

Comparable core funeral revenues increased by $8,000,000 or about 2%, primarily due to a healthy 3.3% growth in the core average revenue per service, which was modestly impacted by a 20 basis point increase in the core cremation rate. The favorable impact from the core average growth was partially offset by a 1.5% decrease in core funeral services performed. Core general agency and other revenue grew by an impressive $7,000,000 primarily driven by higher average commission rates derived from our new pre need insurance marketing agreement, which were partially offset by a decline in insurance funded pre need funeral sales production. Funeral gross profit increased by about $15,000,000 while the gross profit percentage increased by two ten basis points, or about 20%. This gross profit increase was the result of the solid 3% revenue increase, combined with managing our fixed costs below inflationary trends, to about a 1% increase for the quarter, as we continue to focus on leveraging our scale, both in the field operations through staffing metrics and in our overhead support functions.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

Preneed funeral sales production decreased by $29,000,000 or about 9% over the 2024. Core preneed funeral sales production decreased by $18,000,000 or 7%, primarily due to the transition to our new preneed insurance provider in July 2024. We anticipate comparable core preneed sales production growth in the 2025. Non funeral home preneed sales production decreased $10,000,000 or 14%, as SEI Direct transitions from the sale of trusts to insurance funded pre need contracts. This transition has required many of our sales counselors in certain states to go through extensive training, obtain insurance licenses, and change the payment terms for customers financing their pre need, all of which contributes to a temporary reduction in the number of contracts written.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

As of today, we have made the transition in markets that represent 95% of our production. We expect that in early twenty twenty six that we will experience year over year growth again for SCI Direct as a whole. Now shifting to cemetery. Comparable cemetery revenue increased by $2,000,000 or almost 1%. Slightly higher core revenue and higher other revenue accounted for the increase.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

Our core revenue increase of about $1,000,000 over the prior year quarter was primarily attributable to a $3,000,000 increase in at need revenue, which was partially offset by a $2,000,000 decline in recognized preneed revenue. Within recognized preneed revenue, higher preneed merchandise and service revenues, which include recognized trust fund income, were more than offset by lower preneed property revenue, which was negatively affected by a lower recognition rate on new construction compared to the prior year. While recognized preneed cemetery revenue declined due to lower recognition rates, comparable preneed cemetery sales production increased by almost $19,000,000 or over 5%, driven by a healthy increase in large sales as well as a modest increase in core sales. While these incremental sales were deferred for revenue recognition in the second quarter, they should benefit future periods as we achieve the required payment criteria and or complete construction of the project. Cemetery gross profit in the quarter decreased by $4,000,000 and the gross profit percentage declined by 110 basis points, generating an operating margin percentage of 33%.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

Our modest revenue growth was offset by higher selling compensation on higher sales production. The profit decline was partially mitigated by less than inflationary fixed cost growth of 1%, as we continue to focus on leveraging our scale, both in the field operations and in our overhead support functions. Now let's shift to a discussion about our outlook for the remainder of 2025. As you saw in the earnings release, we are confirming our normalized earnings per share guidance range of $3.7 to $4 for 2025. And we are raising our cash flow outlook due to stronger working capital trends in the business, as well as anticipated lower cash taxes from recent legislative changes that were enacted.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

For the 2025, we expect growth in revenues and margins for both the funeral and cemetery segments, resulting in impressive earnings per share growth versus the prior year's six month period, as well as compared sequentially to the first six months of twenty twenty five. We also expect both preneed cemetery sales production as well as preneed funeral sales production to grow at low to mid single digit percentages over the prior year's six month period. Below the line, we expect the favorable impact from a lower share count will be substantially negated by a higher effective tax rate, particularly in the third quarter as we compare it to a prior year rate reduced by the deductibility of excess tax benefits from certain stock option exercises, which is no longer deductible for us in 2025. In conclusion, I want to acknowledge and thank the entire SCI team for their daily commitment to our customers, our communities, and one another. Your skill, dedication, compassion, and attention to detail is the foundation of our success.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

While I know many of our professional team members help client families navigate painful loss every day, I would like to particularly recognize our Texas teams who have been caring for so many families impacted by the heartbreaking tragedy that occurred on July 4 in the Texas Hill Country. What I have witnessed and heard from countless friends and colleagues operators, is that our teams have performed above and beyond. Thank you for being a source of strength, respect, and peace. Your grace and compassion will never be forgotten. Thank you all for making a difference every day.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

And with that, operator, I'll turn it over to Eric.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

Thanks, Tom. Good morning, everybody, and thank you for joining us on the call today. To start, I really need to just continue some of the statements that Tom just mentioned and express all of our heartfelt gratitude to each of our associates. Again, your exceptional service and dedication make it possible for us to support Cline families during some of the most difficult times of their lives. Your hard work truly does make a difference, and we are appreciative and proud of all that you do to support the families as well as the communities that we serve.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

So with those statements, I'd now like to shift to beginning my remarks today, as I typically do, by providing highlights on our cash flow and capital investments during this quarter. I'll then make a few comments about corporate G and A, and I'll conclude with an update on our overall financial position. So we generated adjusted operating cash flow of $168,000,000 during the quarter. Adjusting for $84,000,000 of higher cash taxes, adjusted operating cash flow really increased 33,000,000 from the prior year after making this adjustment. Let's break that down a little bit during the quarter.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

From an underlying funeral and cemetery business perspective, adjusted operating cash flow was supported by higher funeral and cemetery gross profits of just under $14,000,000 during the quarter that Tom really just walked us through. Additionally, we had a net $43,000,000 source of working capital in the quarter driven by $20,000,000 of higher cemetery installment receipts and $23,000,000 which were sources of cash related to the timing, working capital timing of payroll, payables, and some other working capital items. Partially offsetting these increases, corporate G and A expenses increased and cash interest was also higher by about $14,000,000 which is due to the timing associated with the bond financing and coinciding reduction of our bank credit facility, which we completed 2024. Lower rates on floating rate debt were largely offset by higher floating rate balances for the remainder of the quarter. Lastly, related to cash taxes, recall that prior year cash flow was favorably impacted by a change in tax accounting method that benefited cash taxes.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

Cash taxes of $94,000,000 were significantly higher than the prior year by $84,000,000 which we fully expected and have communicated several times over the past few quarters. So now let's move on to capital investments. We invested $100,000,000 in the quarter into existing locations, cemetery development, new builds, business acquisitions and real estate purchases. Purchases. So breaking down this spend, we invested $69,000,000 of maintenance capital, primarily into our current funeral homes and cemeteries, which was in line with our expectations.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

35,000,000 of this was allocated to highly profitable cemetery development projects, 29,000,000 into current funeral and cemetery locations, and 5,000,000 into digital investments and some corporate spend. We also invested $18,000,000 of growth capital in the quarter to purchase real estate and for the construction of new funeral homes and cemeteries. Finally, we invested $13,000,000 into business acquisitions in the quarter.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

And on that topic, we again remain optimistic about our acquisition pipeline and we anticipate achieving our $75,000,000 to $125,000,000 acquisition investment target for 2025 for the full year. So moving on to capital distributions, we returned a substantial $239,000,000 of capital to our shareholders in the second quarter through $45,000,000 of dividends and a $194,000,000 of share repurchases. We repurchased about 2,500,000 shares at an average price of about $78 during the quarter, bringing the number of shares outstanding to just over 140,000,000 shares at the end of the quarter. So year to date, we've repurchased 4,100,000.0 shares at an average price of also about $78 returning a total of $320,000,000 of capital to shareholders through this repurchase program. Subsequent to the quarter, we have completed another half million shares for about $39,000,000 which equates to an average repurchase price of about $79,000,000 So moving to our corporate G and A expense during the quarter.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

After adjusting for a $6,400,000 pretax estimated charge for certain legal matters, G and A expenses increased 4,100,000.0 quarter over quarter, which primarily was related to an increase in general and auto liability insurance costs as well as higher expenses related to the timing of incentive compensation accruals. We continue to expect the recurrent corporate G and A expense will average somewhere around $40,000,000 per quarter for the remainder of the year, although we fully expect there'll be some variability in this quarterly number due to our long term incentive compensation plans that could push us above or below this during a particular quarter. So let's talk about the outlook now for the rest of the year. And as you saw in the press release, we revised and increased our 2025 adjusted operating cash flow guidance range to now $880,000,000 to $940,000,000 which is a new higher midpoint, which equates to $910,000,000 which is $50,000,000 increase over the original guidance midpoint of $860,000,000 About $30,000,000 of this cash flow increase relates to cash taxes, and another $20,000,000 relates primarily to stronger than anticipated preneed customer installment receipts. After deducting $315,000,000 of expected maintenance capital for the full year, we now expect very impressive adjusted free cash flow of almost $600,000,000 for the full year of 2025.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

As we have addressed for the past several quarters, cash taxes will revert to a more normalized level in 2025 compared to 2024, following a tax accounting method change that has benefited our cash flow since the '23. Previously, we expected cash taxes to increase a $150,000,000 year over year. However, we now expect less of an increase due to the recently enacted federal tax legislation. While we continue to study the newly enacted law, we believe that certain components such as accelerated depreciation changes will now cause our 2025 cash taxes to rise only about $120,000,000 year over year, which again results now in a full year revised estimate of cash tax of $145,000,000 As we've addressed in prior quarters, we also expect our effective tax rate to be 25% to 26% in 2025 as SS tax benefits are no longer recognized on the settlement of certain executive employee share based awards. And again, Tom also covered that.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

So I'll conclude my comments this morning with an update on our financial position. We continue to have a very attractive and manageable debt maturity profile with significant liquidity. We ended the quarter with liquidity of about $1,400,000,000 consisting of approximately $250,000,000 of cash on hand and approximately $1,200,000,000 available on our long term bank credit facility. Additionally, leverage at the end of the second quarter was 3.68 times net debt to EBITDA, which again remains in the center of our long term leverage target range of 3.5 to four times. Our strong balance sheet position and this liquidity, combined with our robust cash flows, continue to support our capital investment program, providing us tremendous flexibility to invest opportunistically for the long term benefit of SCI, our associates, and our shareholders. So finally, in closing, I want to reiterate how extremely proud we are of our entire SCI team. The way we continue to serve our customers in their greatest time of need is truly inspiring. Thank you for everything that you do.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

So with that, operator, this concludes our prepared remarks. And with that, we're going to turn it back over to you and we'll open the call for questions.

[Operator]

We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time we will pause momentarily to assemble our roster.

[Operator]

Our first question comes from AJ Rice with UBS. Please go ahead.

[A.J. Rice, Managing Director at UBS Group]

Hi, everybody. Maybe I have a couple questions I would ask if that's possible. First, on the dip in the recognition rate in the current quarter, is that just you attribute that to the normal volatility you sometimes see in the cemetery production area, or was there anything unusual that drove that? And it sounds like you think that's gonna step back up to more normal recognition rate in the back half of the year, and therefore, you'll be able to book those sales. Is that the right way to think about it?

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

It is, AJ. You know, mean, anytime that we are starting to build a new project or develop new parts of our cemetery, you know, we obviously at some point release that to our sales force and kind of pre sell that project with consumers in our particular cemeteries. And as we all know, that essentially gets moved from production into revenues, which that ratio is the rec rate you're describing at the time that the completion, the construction project is completed. By definition, that's going to kind of ebb and flow. You usually see it in the low 90s in the first half and the higher 90s in the second half.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

What you saw in the press release of the low 90s is pretty sequentially consistent with what you saw last quarter. So what you should see in the back half of the year as projects complete and previously sold inventory gets recognized for revenues upon that completion is you're going see that recognition rate raise in the second half of the year into the mid or mid to higher nineties. I think as a general statement, I think last quarter, we asked someone asked me about it and I said, I think you're going to end the year somewhere around mid nineties in terms of that rec rate. That's very consistent with what we ended last year as well. So the punch line really, A.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

J, at the end of the day is, you know, the natural ebb and flow of this process that occurs, there's nothing in the quarter that that's deviating from that ebb and flow and we feel very good about it.

[A.J. Rice, Managing Director at UBS Group]

Okay. That's great. On the cremation rate, you know, off and on for the last year, year and a half, we've seen the rate of increase seemingly moderate. I know you're up 20 basis points this quarter. You know, historically, we forecast a 100 to a 150 basis points.

[A.J. Rice, Managing Director at UBS Group]

That's created a revenue headwind that you've each year had to overcome. Do we think that we're entering a period where that pace of increase is gonna moderate? Any thoughts on what you've been seeing in the cremation rate?

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

JJ, this has been kind of an ongoing debate between Jay and I and I think he's winning. I think two things are probably impacting this. One is when you get to cremation rates in some of these larger metropolitan markets, they're already pretty high. So where you have a lot of volume, the cremation rate is probably starting to stall a bit because it's gotten to that level. And so the cremation changes are happening in probably more rural markets and places like that.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

And the other thing is just the demographic makeup. We probably serve a lot more consumers that are Hispanic customs, Asian customs, may be lower cremation rates as you think about the population as a whole. So yeah, we've kind of dialed back our expectations. I do think 20 is still a little low, but to probably say 50 to 80 is an area that we think probably as we go forward is our expectations.

[A.J. Rice, Managing Director at UBS Group]

Is there any way to translate that into at the 100 to 150 basis points, it's x percent headwind to revenue growth each year, and now at the at the new 50 to 80, it's more like y percent, or is that probably a bridge too far?

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

I think what we used to say, we used to lose a percent. So think about it as if we put in a 3% price increase it get us two with that old. And now I think instead of 100 basis point headwind maybe it's more like a 50 is the way to think about it. As an example, you saw our 3.3 increase in the quarter because the cremation rate was modest. That's an area that I think we can start to model in as closer to the 3% rather than in the old days of thinking more around the two, two point five.

[A.J. Rice, Managing Director at UBS Group]

Okay. And maybe just a final question on the comments around cash flow and the tax benefits from the federal bill, etcetera. Can you just, Eric, maybe comment a little more about what is stuff that you can realize this year? How much of a benefit versus stuff that's just gonna persist? I know some of it is gonna be permanent and some maybe just you taking advantage of things that are available on a shorter term basis.

[A.J. Rice, Managing Director at UBS Group]

Can you give us a little more flavor on how much this affects your thinking about long term cash taxes?

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

Yeah. I think it does affect it, AJ, frankly. You know, because of the components of it. So when you talk about accelerated depreciation, you think like, okay, we're gonna accelerate something and then the depreciation done with. But what it really what you're accelerating are capital improvements.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

And we're going to have a consistent ongoing capital improvement program. When you think of our maintenance CapEx of $315,000,000 we've always broken that down for you that the true piece of maintenance is somewhere around $125,000,000 $135,000,000

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

That's the type of stuff as long as it's less than twenty years as part of the tax depreciation tables, is the stuff that makes it eligible now that wasn't eligible prior to this newly enacted law. And to me, that's not a one time benefit. That's something that will continue over a period of time. There's other stuff such as software, internal use software that we create. Well, we do ongoing update our software and create our software.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

Some of our core software is homegrown, such as our HMIS system. So that's something that you're going have to continue to maintain. Beacon is homegrown. We'll continue to maintain. We'll continue to expand.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

So look, it's early, in the process for us to get it perfect. We definitely think there's, you know, a $30,000,000 benefit to us from a cash tax perspective this year. And but I don't think this is a one time thing. I think there's going to be some type of benefit similar to what I just described to you going forward as well from a cash tax perspective.

[A.J. Rice, Managing Director at UBS Group]

Okay, great. Thanks so much.

[Operator]

Our next question comes from Parker Snare with Raymond James. Please go ahead.

[Parker Snure, Associate Analyst at Raymond James]

Hey, good morning and thanks for the question. Just any comments on seasonality of funeral volumes in the back half of the year? It looks like the third quarter is a little bit of a tougher comp versus the last year. So just anything you would note in terms of for funeral volumes in third quarter versus fourth quarter?

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

You hit the nail on the head. As we think about, we use seasonality trends over multi years. You would think that the third quarter from a volume perspective is a tough comp. The good news is pre need cemetery is probably an easier comp. So, think as we think about the third quarter, we'd expect cemetery revenues to be really strong.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

Funeral will be a tougher comparison. And then as you get into the fourth quarter, I think it moderates a bit and you have a little more of a normal seasonality. A good observation.

[Parker Snure, Associate Analyst at Raymond James]

Okay. And then I know just on payment terms in Preneed Cemetery, I know there was a mention of installment receipts in the prepared remarks in terms of working capital. Has there been any changes in the customer financing or payment terms in Preneed Cemetery, whether that be percentage of money down at the at the beginning or length of payment terms?

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

No. We haven't done anything materially in that area. We're we're lengthening installment terms or changing down payments or anything along those, those lines. You know, typically you'll see us, to recognize the revenue of undeveloped property, you have to get to 10% down. You typically have seen a pattern over the years where in the first half of the year, we have some incentives where maybe we're not getting 10% down, but knowing that the customer will pay into that by the full fiscal year and that will get recognized in the back half of the year.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

That concept plays into the previous question on the call in terms of a lower recognition rate in the lower 90s and a higher recognition rate in the higher 90s in the second half of the year. But we're not materially changing. The truth to it is, the installment payments are solid, they're strong, they're probably a little bit above our expectations frankly. The consumer continues to hang in there in cemetery segment. We continue to have a large jump in production that we all know about during the COVID years.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

And we probably underestimated how much of those installments are really going to kind of hang in there versus historical levels. And I think it's just done a little bit better, consumers a little bit better than probably what we ultimately modeled, which is $20,000,000 of the $50,000,000 raise in our midpoint of cash flow that we're, you know, very excited about.

[Parker Snure, Associate Analyst at Raymond James]

Okay. Great. Thank you.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

Thank you, Parker.

[Operator]

Our next question comes from Toby Sommer with Truist. Please go ahead.

[Tobey Sommer, Managing Director at Truist Securities]

I wanted to ask a question about the financial benefit of the shift in life insurance partner, what sort of incremental benefit may you still get on an ongoing basis now that we've lapped the initial year? I'm not sure whether everybody was fully on board and fully equipped to sell at scale, so there might be some ongoing benefits. I'd love to get your thought there.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

Yeah, think the incremental benefit is going to be in the type of insurance product that we sell, Toby. You get more benefit from a multi pay versus a single pay. How much of your pre need sales streams going into pure insurance? If you're selling at levels in the mid-60s, low-70s, that's going to make a difference. I think, again, as you mentioned, as people become more equipped to present the benefits of insurance, that that's something that we can focus on.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

But I also think, having gone through this now, we feel like production is something that we can raise across the board. That could be in the insurance product, it could be in the trust product, but we feel really good about our momentum going forward and growing whether it's an insurance product or a trust. But within the insurance bucket itself it's the type of insurance product and like you said, we've got counselors that are better at giving that presentation. We'd expect an ability to grow that bucket.

[Tobey Sommer, Managing Director at Truist Securities]

Quantifying that is, you know, if we're getting if we got 7% year over year, you know, kind of in the reported quarter, is it something that's going to be appreciable? Do you think it's a single point, a couple of points? How would you think about it numerically?

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

Yeah, maybe a couple of points. I mean, again, because you're laughing yourself and you effectively have the similar rates that you had before. So now it just gets back to what is your production within that bucket. And the points that you're making are we've got a counselor that now is up and ready and is on insurance and knows how to do it and understands the benefits. So, kind of just the normal perfecting the presentations.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

So, yeah, that type of increase is not something we'd anticipate going forward.

[Tobey Sommer, Managing Director at Truist Securities]

Gotcha. My last question from a from a pricing standpoint for preneed, have you changed the percent down payment required at all?

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

No.

[Tobey Sommer, Managing Director at Truist Securities]

Okay. Perfect.

[Tobey Sommer, Managing Director at Truist Securities]

Thank you. Very clear. I'll get back in the queue.

[Operator]

Our next question comes from Joanna Gajuk with Bank of America.

[Joanna Gajuk, Equity Research Analyst at Bank of America]

So first, just a follow-up or clarification. Did I hear you said preneed sales production expect to grow low to mid single digits in both funeral and seminary? So is that all for the full year? And did I hear right, does it mean that you expect faster growth? Because I guess the cemetery preneed sales production was expected to be up low single digits for the year, or was it a comment for the second half?

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

Yeah, my comments were specifically to the second half of the year that we think low to mid single digit percentages for both printing funeral and printing cemetery. And again, on the annualized guidance, I don't have that in front of me, obviously preneed funeral has been a challenge in the first half. We expect that to turn around in the second half and carry that momentum into 2026. We've kind of gotten through all the impacts from change. At cemetery, Joanna, we feel really good about.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

We saw some great momentum as I spoke to you in the second quarter, in large sales and in core sales. And we expect that momentum to continue in the back half of the year. So feeling good about particularly where we are in the cemetery sales cycle.

[Joanna Gajuk, Equity Research Analyst at Bank of America]

So on the cemetery still for the year, I guess it's going to be low single digits, maybe a little I bit think

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

it could be low to mid. We can climb back into the mid-two. Think we feel good about obviously we need a mid or to high single digit back half to achieve that, because the first quarter was a bit of a challenge. The momentum in the second quarter, we feel pretty good. We can get back to low but also mid for the year, again, on our success as it relates to large sales and core.

[Joanna Gajuk, Equity Research Analyst at Bank of America]

Right and that was my other question in terms of the specifics because you did say you saw a healthy increase in large sales and modest growth in core. So I guess in Q1 the problem was the large sales were down to more like a 30,000,000 or so in the quarter. So what was the number in the second quarter for large sales?

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

Like 52,000,000. So we had a great second as it relates to large sales. And I think again, you know, that compares back to last year's quarter. Want to say 38, if I remember incorrect. Pretty healthy increase.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

And again, you know, you can't get too excited and too depressed either way because these sales come in a little bit lumpy. Had really good sales in the second quarter. I'd say July is off to a really nice start, but we still got August and September. So, we feel confident that momentum is good. Cemetery sales should be impressive in the third quarter and carry into the fourth quarter.

[Joanna Gajuk, Equity Research Analyst at Bank of America]

Yes, thank you for that. And I guess if I may, a little bit different topic. So thanks for the July commentary. That was good to hear that too. But on a different topic around your cash flows, right, increasing, it sounds like the $30,000,000 benefit on the lower cash taxes might be sustainable number.

[Joanna Gajuk, Equity Research Analyst at Bank of America]

So if that's the case, how should we think about capital deployment? Does that change your appetite by doing more deals or maybe some other capital deployment opportunities that you would kind of be more aggressive on given the higher cash flows? Thank you.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

Yes, I think it's more of the same of the formula, Joanna, that you've seen us done. I mean, we're going to invest capital to the highest return. Certainly, we've done a lot in shares the first half of the year. I think you'll see some momentum there that will continue, at least the shares at this level. But, you know, the M and A program is going strong.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

I know someone commented that we spent $30,000,000 year to date and the guidance is 75 to 125 in terms of investment. I think we'll get there. I feel really good about the pipeline. Some of the deals I mean, if we just get through our LOIs alone right now, we'd be into that guidance frankly, and there's a lot more that we're out there discussing. So I think we'll get into that 75.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

I think that's a good guidance number for investment for M and A. Would we do NOR? Absolutely. The other thing that you have to remember though is are the, are the greenfield investments that we're making. The new funeral homes and sometimes new cemeteries.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

This is a nice robust program which we've told you this year alone we're going to spend probably about $70,000,000 on that. Could that go up? It's possible, but you know, it takes time. That's a three year cycle. At any point in time, we have 30 to 35 projects that are in the pipeline.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

About a third of those turn, you know, every year. And that's at a, that's at a more better velocity than what we've had in the past, but we're excited about that. M and A has its benefits because you get EBITDA and cash flow right away, but so do these construction projects have these benefits where you can build exactly where you want and exactly what you want, especially having a modern celebration of life venue when we design these brand new funeral homes. So there's a lot of opportunities out there, but they're not different than what we have talked about in the past. And we'll continue to invest, you know, as we can in both of those programs as well as the share repurchase program.

[Joanna Gajuk, Equity Research Analyst at Bank of America]

Great. Appreciate it. Thank you so much.

[Operator]

Our next question comes from Scott Schneeberger with Oppenheimer. Please go ahead.

[Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.]

Thanks very much. I have, I think it's a grand total of three. Cemetery pre need, we just heard that you're doing quite well in large sales. Could you speak more on the core? That sounded like that was strong as well, certainly relative to expectations.

[Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.]

Are you selling up in the high tier? I believe the cutoff to get the large is 80,000. Are you, like, up in the fifty, sixty, 70, or is it broad based across that? And then part two of that question is, is this is what you're seeing overall velocity or volume trends speeding up or is it more from pricing, what you're getting in that pre need cemetery? Thanks.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

So on the core, it just wasn't as big of a percentage increase. Obviously it's the biggest chunk of our cemetery production, so it was a nice increase. But percentage wise, large sales was much bigger. It's really across the board, we're not seeing it at any specific point. And again, back to your velocity versus pricing, both of those were positive within the core for the quarter.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

So, all signs are looking good. It's hard to find anything we don't like right now, at least in the second quarter production. So all of it good and really across the board no specific price points Scott that I'd point out to you other than the over 80 that you already mentioned.

[Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.]

Alright, thanks, sounds good. Moving on to the next section. Funeral revenue per service, that was a bit higher than we expected. Sounds like the lower cremation rate is contributing. I'm just curious, how sustainable is this plus 3% going forward and what will be the drivers behind that?

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

3.3 might be a little higher than you'd anticipate going forward, yeah, I think we're pretty comfortable in that 2.5 to three range depending on the cremation rate change. We're really focused on discounts and I think we've done a good job of managing those things. And the other piece that wasn't as impactful for the quarter is keep in mind what's coming out of the preneed backlog. The preneed backlog has the component of what did you write the corpus at when you wrote the preneed, which we've done a really great job, and then you get the compounded interest if it's a trust product. So those types of things can have an impact on the average as well.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

But I think if we think forward, Scott, I think we feel pretty good about being able to come close to that 3% if cremation mix changes that we're seeing in most recent years hold.

[Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.]

Great, thanks Tom. Eric, I'm pulling you in for my last, don't want you on too long to break here. The G and A, how should we think about that in the back half versus the first half? And maybe a little granularity on to what kind of changes and how we should model that? Thanks.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

Yes, I mean, I think you're safe modeling it around that $40,000,000 $42,000,000 type guidance that we've given you before. Maybe it's a little bit higher than what we've said before. But ultimately, you know, when you talk about general liability and auto claims, you know, those are going to be event specific and they're going to ebb and flow. And we had a heavy amount of them during the quarter as we, as we talked about. And then the last thing that I would tell you is, and we say this in my remarks, we say it, you know, and I've said this before, is, you know, the longer term incentive comp accruals are going to move it.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

So, 40 to 41, 40 to 42 is a good baseline for it. Could it be 44 if the comp accruals need to go up? Yes. Could it be 38 if comp accruals need to go down? Yes.

[Eric Tanzberger, Executive VP & CFO at Service Corporation International]

So you've got to remember that variability that's going to be a few million dollars as well. But generally that's how I would characterize modeling it for the second half.

[Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.]

Great. Thanks guys. Nice quarter.

[Operator]

We have a follow-up question from Parker Snirra with Raymond James. Please go ahead.

[Parker Snure, Associate Analyst at Raymond James]

Hey. Thanks again. Yeah. Just one more question. Just on the long term growth algorithm of 8% to 12%, I know this year had a pretty strong benefit from the insurance transition.

[Parker Snure, Associate Analyst at Raymond James]

I mean, now that Preneed Cemetery production is kind of comping at a higher rate, it's remained elevated post COVID. Any thoughts that there's any change into the composition of your long term growth algorithm? Just now that Preneed Cemetery is kind of at an elevated rate, does that make it a little bit harder to grow on an organic basis? Just kind of any general thoughts on your long term growth algorithm as we exit the year.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

Parker, I think we still feel very comfortable with that algorithm. There's some things that you point out that are tougher comps as you go forward, but I also think there's things that are going our direction. Again, I'd point you back to SCI Direct. We have taken that business from a certain level of profitability down to essential break even, and it's all related to the way that we operate the business and the way the accounting works. As you play that out, that should be kind of a natural growth business as more and more of that comes out of the backlog, it's going to be higher averages.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

So we've just got some positive trends in the business. We talked about the sales average being stronger on the funeral side. I still think demographics are going to play into both the funeral and the cemetery side. So we're very optimistic about the age of 12 and I think there's some years coming up where we can go above that. So overall we feel very good about the guidance we're giving you and continue to feel that way.

[Parker Snure, Associate Analyst at Raymond James]

Okay. And then, sorry, I know I said one last one, but actually one more. The LA fires in Rose Hill, are you sensing that there's any kind of continuing or lingering disruption in that market or are all your KPIs that you track that property is kind of tracking along as it should?

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

I think overall, obviously there's so much the people are still dealing with so many things and so you never want to belittle that. That's going to continue to happen for years and years. But I think as it relates to our business and our ability to sell, we're not seeing anything that's impacting that business related to that event. Unfortunately people are still suffering, people are still trying to build their lives back. But it's not noticeable, I'd say, in the sales process today.

[Parker Snure, Associate Analyst at Raymond James]

Okay, great. Thank you.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to SCI management for any closing remarks.

[Thomas Ryan, Chairman, President & CEO at Service Corporation International]

Thank you, everybody. I appreciate you being here, and we'll talk to you next quarter. Have a great week.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Trey Bocage, Director of Strategic Finance and IR
• Thomas Ryan, Chairman, President & CEO
• Eric Tanzberger, Executive VP & CFO

Analysts

• A.J. Rice, Managing Director at UBS Group
• Parker Snure, Associate Analyst at Raymond James
• Tobey Sommer, Managing Director at Truist Securities
• Joanna Gajuk, Equity Research Analyst at Bank of America
• Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.