Service Corporation International (SCI) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company shows strong financial performance with an 11% increase in operating cash flow and significant capital returned to shareholders. Positive trends in preneed cemetery and funeral sales, coupled with strategic initiatives for cremation customers, indicate growth potential. Although funeral volumes are expected to be flat, optimistic guidance for 2026 EPS growth and ongoing investments in premium cemetery inventory support a positive outlook. Despite some vague management responses, the overall sentiment is positive, suggesting a stock price increase of 2% to 8%.
Key Financial Performance
Adjusted Earnings Per Share (Q4 2025) $1.14, an 8% increase compared to $1.06 in the prior year. Reasons: Moderate increases in revenues and gross profit in both funeral and cemetery segments, lower adjusted corporate, general, and administrative expenses, and a lower share count.
Adjusted Earnings Per Share (Full Year 2025) $3.85, a 9% increase compared to $3.53 in the prior year. Reasons: Solid increases in revenue, gross profit, and comparable margin percentages in both funeral and cemetery segments, lower share count, and slightly lower interest expense, partially offset by a higher effective tax rate.
Comparable Funeral Revenues (Q4 2025) Increased by $3 million or less than 1% over the prior year. Reasons: Growth in core and non-funeral home revenue, offset by lower core general agency revenue.
Core Funeral Revenue (Q4 2025) Increased by $6 million or just more than 1%. Reasons: 3.2% growth in core average revenue per service, despite a 1.9% decrease in core funeral services performed.
Non-Funeral Home Revenue (Q4 2025) Increased by $3 million, driven by an 11% increase in average revenue per service.
Core General Agency and Other Revenue (Q4 2025) Declined by $8 million or almost 13%. Reasons: Lower general agency commission rate due to changes in product mix and higher cancellations from the insurance partner transition.
Funeral Gross Profit (Q4 2025) Declined by $4 million, with gross profit percentage down by 70 basis points to about 21%. Reasons: $5 million increase in recognized selling compensation costs, shift to more fixed compensation for sales counselors, and transition to insurance-funded products.
Preneed Sales Production (Q4 2025) Increased by $29 million or 11%. Reasons: Core preneed funeral sales production increased by $25 million (12%), and non-funeral home preneed sales production increased by $4 million (8%).
Comparable Cemetery Revenue (Q4 2025) Increased by $5 million or 1%. Reasons: $8 million increase in other revenue, offset by a $3 million decline in core revenue.
Cemetery Gross Profit (Q4 2025) Increased by $5 million or 3%, with gross profit percentage up by 70 basis points to over 36%. Reasons: High-margin trust income, offset by lower-margin core revenue declines, and fixed cost growth managed to slightly above 1%.
Adjusted Operating Cash Flow (Q4 2025) $213 million, a decrease of $34 million compared to the prior year after neutralizing for a $21 million increase in cash taxes. Reasons: Higher adjusted operating income of $8 million, offset by $24 million higher cash interest and $18 million use of other working capital.
Adjusted Operating Cash Flow (Full Year 2025) $966 million, an 11% increase compared to 2024. Reasons: Excluding cash taxes and special items, cash provided by operating activities increased by $108 million.
Capital Investments (Q4 2025) $174 million. Breakdown: $107 million in maintenance capital, $31 million in growth capital, and $36 million in business acquisitions.
Capital Investments (Full Year 2025) $508 million. Breakdown: $328 million in maintenance capital, $79 million in growth capital, and $101 million in business acquisitions.
Capital Returned to Shareholders (Q4 2025) $107 million. Breakdown: $59 million in share repurchases and $48 million in dividends.
Capital Returned to Shareholders (Full Year 2025) $645 million. Breakdown: $461 million in share repurchases and $184 million in dividends.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Adjusted EPS Growth: For Q4 2025, adjusted EPS grew by 8% to $1.14 compared to $1.06 in the prior year. For the full year, adjusted EPS increased by 9% to $3.85.
Preneed Sales Growth: Preneed funeral sales production increased by $29 million (11%) in Q4 2025, with core preneed funeral sales up by $25 million (12%). Preneed cemetery sales production grew by 4% for the year.
Revenue Growth: Moderate increases in revenues and gross profit were observed in both funeral and cemetery segments. Comparable funeral revenues increased by $3 million, and cemetery revenue increased by $5 million in Q4 2025.
Acquisitions: Invested $36 million in Q4 2025 for acquisitions in North Carolina, Arizona, Florida, and Canada. Total acquisition spend for 2025 was $101 million.
Expansion Investments: Invested $31 million in Q4 2025 for new funeral homes, expansions, and real estate purchases. Total growth capital for 2025 was $79 million.
Cost Management: Fixed cost growth was managed below inflationary levels, contributing to margin improvements in both funeral and cemetery segments.
Cash Flow: Generated $213 million in adjusted operating cash flow in Q4 2025 and $966 million for the full year, an 11% increase compared to 2024.
2026 Financial Outlook: Normalized EPS for 2026 is projected at $4.05 to $4.35, reflecting 5% to 13% growth. Preneed funeral and cemetery sales are expected to grow in the low to mid-single-digit percentage range.
Capital Deployment: Plan to invest $325 million in maintenance CapEx, $75-$125 million in acquisitions, and $70-$80 million in growth capital for 2026.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Funeral Revenue Challenges: Core general agency and other revenue declined by $8 million or almost 13%, primarily due to a lower general agency commission rate impacted by changes in product mix and higher cancellations from the insurance partner transition.
Funeral Gross Profit Decline: Funeral gross profit declined by almost $4 million, with a gross profit percentage decline of 70 basis points to about 21%, driven by increased recognized selling compensation costs and a shift to lower-margin general agency commissions.
Cemetery Core Revenue Decline: Core cemetery revenue declined by $3 million, primarily due to a $3 million decline in at-need revenue.
Higher Interest Expense: Cash interest was higher by $24 million in the fourth quarter, primarily due to timing differences in bond financing and credit facility reductions.
Higher Corporate G&A Expense: Corporate G&A expense increased by $19 million in the quarter, primarily due to the prior year benefiting from a $20 million legal reserve reduction.
Flat to Declining Funeral Volume: For 2026, funeral volume is expected to be flat to slightly down compared to 2025, with modest cremation mix increases slightly negating average revenue per case growth.
Higher Selling Costs: Selling costs are expected to increase in 2026 due to a shift to a higher percentage of fixed compensation that does not get deferred.
Higher Tax Rate Impact: A higher effective tax rate in 2025 negated some of the favorable impacts on earnings per share growth, and a slightly higher tax rate is expected in 2026.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
2026 Earnings Per Share (EPS) Guidance: The company has provided a normalized EPS range of $4.05 to $4.35 for 2026, representing 5% to 13% growth, with a midpoint of $4.20 (9% growth).
Funeral Segment Outlook: Flat to slightly down funeral volume is expected compared to 2025. Average revenue per case is projected to grow at inflationary rates, slightly offset by a modest cremation mix increase. Higher general agency revenue from increased preneed sales production is anticipated, along with slightly higher recognized selling costs. Fixed costs are expected to be managed below inflationary levels, driving profit growth and increasing the gross margin percentage by 20 to 60 basis points. Preneed funeral production is expected to grow in the low to mid-single-digit percentage range.
Cemetery Segment Outlook: Preneed cemetery sales production is anticipated to grow in the low to mid-single-digit percentage range, resulting in cemetery revenue growth of about 2% to 5%. Profit dollar growth is expected, with gross margin percentages expanding by 30 to 60 basis points compared to 2025.
2026 Cash Flow Guidance: Adjusted operating cash flow is projected to range from $1.0 billion to $1.06 billion, with a midpoint of $1.03 billion. Cash taxes are expected to decline by about $20 million, and cash paid for interest is anticipated to decrease modestly.
Capital Investments for 2026: Maintenance capital expenditures (CapEx) are expected to be about $325 million, flat compared to 2025. This includes $135 million for funeral home and cemetery improvements, $165 million for cemetery development projects, and $25 million for digital strategy investments. Growth capital of $70 million to $80 million is planned for new funeral home construction and real estate opportunities. Acquisition spending is targeted at $75 million to $125 million.
Shareholder Returns: The company plans to continue returning capital to shareholders through dividends and share repurchases in a consistent and disciplined manner, absent higher return investment opportunities.
Liquidity and Financial Position: The company entered into a new $2.5 billion bank credit facility in November 2025, increasing liquidity by over $350 million. Current liquidity stands at about $1.7 billion. Leverage ended 2025 at just above 3.65x, at the lower end of the long-term net debt-to-EBITDA leverage target range of 3.5x to 4x.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Dividends in Q4 2025: $48 million returned to shareholders
Dividends in 2025: $184 million returned to shareholders
Share repurchases in Q4 2025: $59 million spent, just under 1 million shares repurchased at an average price of $79 per share
Share repurchases in 2025: $461 million spent, reducing shares outstanding to just under 140 million
Share repurchases post-2025: 500,000 shares repurchased for $40 million at an average price of $80 per share
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:What are the expectations for cemetery preneed sales production growth for 2026?
A:The company expects low to mid-single-digit growth for 2026. Large sales are predicted to increase by 2% to 3%, while core customer sales are expected to see a more robust increase. However, large sales are volatile and hard to predict.
Q:How are preneed cemetery sales and funeral sales tracking so far this year?
A:The company is seeing positive trends in both preneed cemetery sales and funeral sales. They are focusing on people retention, increasing preneed seminars, improving lead-to-sale conversion rates, and targeting large sales. January sales showed strong results, particularly in cemetery sales, but funeral volume was sluggish.
Q:What are the opportunities to grow cemetery sales for cremation customers?
A:The company is piloting initiatives in select markets to target cremation customers, including using videos to showcase opportunities and increasing visibility for cremation-related services. Early results are positive, and the rollout is ongoing.
Q:What drove the better-than-expected G&A performance in Q4 2025?
A:The better performance was driven by long-term incentive plan (LTIP) accruals, which can vary quarter-to-quarter, and some positive impacts from self-insured insurance programs. The company expects G&A expenses to stabilize at $40 million to $42 million per quarter going forward.
Q:What is the status of SCI Direct and its impact on commissions?
A:SCI Direct has fully implemented an insurance product in its markets, with over 90% of sales now insurance-based. This is expected to generate commissions and selling costs. The restructuring is complete, and the company anticipates positive trends going forward.
Q:What is driving the improvement in cemetery production velocity?
A:The improvement is attributed to higher retention of good employees, better lead generation, improved lead-to-sale conversion rates, and a focus on cremation consumers. These efforts are driving success in core cemetery sales.
Q:What are the drivers of lower-than-inflation expense growth?
A:The company attributes this to better supply chain management, labor efficiency metrics, and proactive staffing level management. A cross-functional margin improvement committee also helps disseminate best practices across the portfolio.
Q:What is the outlook for acquisitions in 2026?
A:The company expects a similar pipeline to previous years, focusing on larger independent transactions in markets where they already have a presence. The pipeline is described as healthy and busy.
Q:What are the plans for developing premium cemetery inventory and the outlook for recognition rates?
A:The company plans to invest $165 million in high-return opportunities, including tiered inventory offerings. They believe in the strong value proposition of their cemeteries, which have high barriers to entry and significant capacity for future growth.
Q:What is the guidance for funeral volumes in 2026?
A:The company expects funeral volumes to be flat to slightly down in 2026. They attribute this to normalization after COVID-related excess deaths and other societal factors. They anticipate volume growth in 2027 and beyond.
Q:What are the key factors influencing the 2026 EPS guidance?
A:The guidance of 5% to 13% growth is influenced by funeral volumes, cemetery sales activity, SCI Direct trends, and expense management. Continued soft funeral volumes could push results to the lower end, while strong sales activity and flat funeral volumes could push results to the higher end.
Q:Review of Unclear Management Responses
A:Management avoided providing specific percentages or detailed data for certain questions, such as the activity in the Brookfield location and the exact impact of flu trends on funeral volumes. Additionally, they used vague language when discussing the potential for acquisition pipeline changes and the exact impact of new insurance products on commission rates.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AVP Treasury
Core sale
Direct business
Direct front
Direct location
Direct period
Non home
Preneed sale
Relations remark
Treasury Investor
agency reduction
atneed preneed
backlog increase
business low
cancellation insurance
capital use
care trust
cash effect
cash rate
cemetery focus
cemetery increase
channel kink
commission pressure
commission selling
core home
cost
count interest
digit percentage
expense tax
funeral segment
increase agency
insurance partner
interest expense
low digit
mix
partner transition
percentage cemetery
production momentum
property sale
rate share
revenue
SCI Transcript
Service Corporation International (SCI) Q4 2025 Earnings Call Transcript
Positive2-12
The company shows strong financial performance with an 11% increase in operating cash flow and significant capital returned to shareholders. Positive trends in preneed cemetery and funeral sales, coupled with strategic initiatives for cremation customers, indicate growth potential. Although funeral volumes are expected to be flat, optimistic guidance for 2026 EPS growth and ongoing investments in premium cemetery inventory support a positive outlook. Despite some vague management responses, the overall sentiment is positive, suggesting a stock price increase of 2% to 8%.
Service Corporation International (SCI) Presents at Bank of America Leveraged Finance Conference Transcript
Neutral12-4
Service Corporation International (SCI) Presents at Stephens Annual Investment Conference 2025 Transcript
Neutral11-19
Service Corporation International (SCI) Presents at UBS Global Healthcare Conference 2025 Transcript
Neutral11-11
SCI Slides
SCI Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
