Company Overview - Service Corp. International (SCI) is North America's largest provider of funeral and cemetery services [1] - The company is uniquely positioned to benefit from demographic tailwinds and robust preneed backlogs [1] Business Performance - SCI has demonstrated constant growth and strong free cash flow due to its scale, brand leadership, and transformation towards a customer-centric experience-driven platform [2]

Core Viewpoint - Service Corp. has a long-standing presence at the conference, indicating its established reputation in the industry [1][2]. Group 1: Company History - Service Corp. has undergone significant changes throughout its history, which have shaped its current position in the market [3].

Service Corporation International (NYSE:SCI) FY Conference March 03, 2026 11:00 AM ET Company ParticipantsEric D. Tanzberger - SVP and CFOConference Call ParticipantsParker Snure - Healthcare Services AnalystParker SnureIt's the 47th edition of this conference. My name is Parker Snure, Healthcare Services Analyst here at Raymond James, and I'm pleased to be joined by the CFO of Service Corp, Eric D. Tanzberger. I think Service Corp has been coming to this conference ever since I was in elementary school, I ...

Core Insights - Service Corporation (SCI) is identified as a hidden gem in the investment landscape, with a long-term ownership perspective of over a decade [1] - The company is characterized by attractive valuations and strong durable competitive advantages, making it a favorable investment choice [1] Investment Principles - The company focuses on investing in firms with consistent earning power and durable competitive advantages [1] - A sufficient margin of safety is prioritized in investment decisions [1] - Preference is given to companies that generate substantial cash flow and consistently earn above-average returns on capital [1] - Conservative leverage is a key consideration in investment choices [1] - Maintaining an appropriate level of cash is essential to capitalize on market volatility [1]

Debt and Financial Risks - The company has a significant amount of indebtedness, which could adversely affect cash flows and limit the ability to raise additional capital [122]. - Approximately 79% of total debt was fixed rate at a weighted average rate of 4.67% as of December 31, 2025, with a hypothetical 10% increase in interest rates potentially raising interest expense by $5.9 million [268]. - The application of unclaimed property laws could adversely affect liquidity and cash flows related to preneed funeral and cemetery contracts [136]. - Economic downturns could lead to declines in revenue and cash flows, potentially resulting in impairments to goodwill and intangible assets [116]. Operational and Market Risks - The cemetery segment has a goodwill balance of $406.8 million as of December 31, 2025, and is sensitive to market conditions and preneed sales [116]. - The company faces risks related to attracting and retaining qualified sales personnel and licensed funeral professionals, which are critical for future success [113]. - The funeral and cemetery industry is highly competitive, with price competition from independent operators and nontraditional providers impacting financial performance [125]. - Supply chain risks, including tariffs, could materially adversely affect financial performance due to potential delivery delays and increased costs [130]. - The company’s Canadian operations represent approximately 5% of total revenue, exposing it to operational and currency risks [121]. Regulatory and Compliance Risks - Regulatory compliance is critical, with potential adverse impacts on financial results from changes in laws affecting the deathcare industry, including preneed sales practices [131]. - Compliance with health, safety, and environmental regulations is essential, with risks of investigations and non-compliance affecting financial results [131]. - Regulatory changes could increase costs and decrease cash flows, particularly regarding trust fund requirements and preneed sales policies [132]. - Changes in tax laws and regulations could materially impact financial condition and cash flows due to the inherent uncertainties in tax obligations [137]. Technology and Innovation Risks - The company relies on information technology systems for operations, and failures in these systems could disrupt business and incur significant costs [119]. - The company may use artificial intelligence technologies, which could introduce operational and regulatory risks [120]. - Marketable equity and debt securities are sensitive to current market prices, impacting preneed funeral operations and trust funds [266]. Trends in Services - In 2025, 64.4% of the comparable services performed were cremation cases, up from 63.9% in 2024 and 63.1% in 2023, indicating a trend towards cremation services [128]. Litigation Risks - Litigation related to cemetery burial practices may result in significant monetary damages, impacting financial condition and cash flows [135].

Core Insights - Service Corporation International (SCI) reported strong fourth-quarter 2025 results, with both revenue and earnings increasing year over year, driven by growth in funeral and cemetery segments, higher gross profit, and disciplined capital management [1][9] Financial Performance - Adjusted earnings per share (EPS) for Q4 2025 were $1.14, an 8% increase from $1.06 in the same quarter last year, matching the Zacks Consensus Estimate [2] - Total revenues reached $1,111.5 million, a 2% increase from $1,093.0 million year over year, although slightly below the Zacks Consensus Estimate of $1,119 million [2] - Gross profit rose by 1.9% to $311.7 million, maintaining a gross margin of 28% [2] Segment Analysis - **Funeral Segment**: - Total funeral revenues increased to $600.6 million from $587.7 million in Q4 2024, with gross profit rising to $126.2 million [4] - Average revenue per service grew by 3.3% to $5,880 [4] - Comparable funeral revenues rose 0.5% to $580.4 million, with comparable preneed funeral sales production up 11% to $294.1 million [5] - **Cemetery Segment**: - Total cemetery revenues increased to $510.9 million from $505.3 million in Q4 2024, with gross profit up 2.6% to $185.5 million [6] - Comparable cemetery revenues rose 0.9% to $508.3 million, driven by higher other revenues [7] Operating Income and Expenses - Operating income increased by 5.1% to $275.6 million from $262.2 million in the prior-year quarter [3] - Corporate general and administrative expenses were $33.7 million, significantly higher than $15.0 million in the prior-year period, primarily due to a reduction in legal reserves in the previous year [3] Financial Health and Outlook - At the end of 2025, SCI had $243.6 million in cash and cash equivalents, up from $218.8 million at the end of 2024, with long-term debt totaling $5.1 billion [10] - For 2026, SCI expects diluted EPS in the range of $4.05-$4.35, indicating growth within its long-term target range of 8-12% [13] - Projected net cash provided by operating activities for 2026 is between $1,005 million and $1,065 million after cash taxes [14]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share (EPS) of $1.14 for Q4 2025, an 8% increase from $1.06 in the prior year [4] - For the full year 2025, adjusted EPS was $3.85, a 9% increase compared to $3.53 in 2024 [5] - The effective tax rate increased, which negatively impacted EPS growth by $0.06 for the year [5][6] Business Line Data and Key Metrics Changes - Comparable funeral revenues increased by $3 million, or less than 1%, in Q4 2025, with core funeral revenue up by $6 million, or just over 1% [6][7] - Non-funeral home revenue increased by over $2 million, primarily due to an 11% increase in average revenue per service [8] - Comparable cemetery revenue increased by $5 million, or about 1%, driven by an $8 million increase in other revenue [11] Market Data and Key Metrics Changes - The company experienced a decline in core funeral services performed by 1.9% in Q4 2025 [6] - For the full year 2025, comparable funeral volume declined less than 1% [7] - Pre-need cemetery sales production increased by about 2% in Q4 2025, with core sales accounting for a $13 million increase [12] Company Strategy and Development Direction - The company aims to grow pre-need cemetery sales production in the low to mid-single-digit percentage range for 2026, resulting in cemetery revenue growth of about 2%-5% [15] - The focus is on managing inflationary costs and leveraging scale to drive profit growth [15] - The company plans to continue returning capital to shareholders through dividends and share repurchase programs [28] Management's Comments on Operating Environment and Future Outlook - Management expects flat to slightly down funeral volume in 2026, with average revenue per case growing at inflationary rates [14] - The company anticipates a normalized EPS range of $4.05-$4.35 for 2026, reflecting 5%-13% growth [13] - Management expressed confidence in the momentum carried into 2026, particularly in pre-need sales and core customer engagement [14][38] Other Important Information - The company generated strong adjusted operating cash flow of $213 million in Q4 2025, exceeding guidance [18] - Capital investments for Q4 2025 totaled $174 million, with a full-year total of $508 million [20] - The company returned $107 million to shareholders in Q4 2025 through share repurchases and dividends [23] Q&A Session Summary Question: Can you break down your assumptions for cemetery pre-sales production growth for 2026? - Management indicated a slight increase of 2%-3% for large sales and a more robust increase for core sales, expressing confidence in momentum [33][34] Question: How are sales tracking so far this year, particularly in the Rose Hills location? - Management reported positive trends in pre-need cemetery and funeral sales, with a focus on improving lead conversion rates [35][38] Question: What are the plans for developing and selling premium cemetery inventory? - The company plans to invest in tiered inventory offerings to cater to different customer segments, leveraging existing cemetery capacity [67][69] Question: Can you discuss the drivers of lower than inflation expense growth? - Management attributed this to effective cost management strategies, including labor efficiency and supply chain improvements [56][58] Question: What is the outlook for perpetual care trust revenue in 2026? - The company expects continued strong performance in trust funds, with a typical market return model of about 7% [85][86]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share (EPS) of $1.14 for Q4 2025, an 8% increase from $1.06 in the prior year [4] - For the full year 2025, adjusted EPS was $3.85, a 9% increase compared to $3.53 in 2024 [5] - The effective tax rate increased, which negatively impacted EPS growth by $0.06 for the year [5][6] Business Line Data and Key Metrics Changes - Comparable funeral revenues increased by $3 million, or less than 1%, in Q4 2025, with core funeral revenue up by $6 million, or just over 1% [6] - Non-funeral home revenue increased by $3 million, primarily due to an 11% increase in average revenue per service [7] - Comparable cemetery revenue increased by $5 million, or about 1%, driven by an $8 million increase in other revenue [11] Market Data and Key Metrics Changes - The company experienced a decline in core funeral services performed by 1.9% in Q4 2025 [6] - For the full year 2025, comparable funeral volume declined less than 1% [7] - Pre-need cemetery sales production increased by $8 million, or about 2%, for Q4 2025 [12] Company Strategy and Development Direction - The company aims to grow pre-need cemetery sales production in the low to mid-single-digit percentage range for 2026 [15] - The strategy includes managing inflationary costs and expanding gross margin percentages by 30-60 basis points compared to 2025 [15] - The company is focused on enhancing customer experience through capital investments in funeral homes and cemeteries [20][22] Management's Comments on Operating Environment and Future Outlook - Management expects flat to slightly down funeral volume in 2026, with average revenue per case growing at inflationary rates [14] - The company anticipates a normalized EPS range of $4.05-$4.35 for 2026, reflecting 5%-13% growth [13] - Management expressed confidence in the momentum carried into 2026, particularly in pre-need sales and core customer engagement [14][38] Other Important Information - The company generated strong adjusted operating cash flow of $213 million in Q4 2025, exceeding guidance [18] - Capital investments for the year totaled $508 million, with $174 million invested in Q4 alone [20] - The company returned $645 million to shareholders in 2025 through share repurchases and dividends [24] Q&A Session Summary Question: Can you break down your assumptions for cemetery pre-sales production growth? - Management indicated a slight increase in large sales and a more robust increase in core sales for 2026, with confidence in momentum [33][34] Question: How are sales tracking in your Rose Hills location? - Management reported positive trends in pre-need cemetery and funeral sales, with a focus on improving lead conversion rates [35][38] Question: What are the opportunities for growing cemetery sales for cremation customers? - The company is piloting initiatives to enhance visibility and awareness for cremation customers, with plans to roll out more broadly [40] Question: What drove the better performance on G&A expenses? - Management explained that fluctuations in short-term and long-term compensation plans impacted G&A expenses, with expectations of $40-$42 million per quarter moving forward [44][45] Question: Can you discuss the dynamics driving GA revenue in the funeral segment? - Management noted that the introduction of a flex product with lower commission rates and higher cancellation rates impacted GA revenue [76][80]

Financial Data and Key Metrics Changes - For Q4 2025, the company reported adjusted earnings per share (EPS) of $1.14, an 8% increase from $1.06 in the prior year [4] - For the full year 2025, adjusted EPS was $3.85, a 9% increase compared to $3.53 in 2024 [5] - The company experienced solid increases in revenue, gross profit, and comparable margin percentages in both funeral and cemetery segments [5][6] Business Line Data and Key Metrics Changes - Comparable funeral revenues increased by $3 million, or less than 1%, with core funeral revenue up by $6 million, or just over 1% [6] - Non-funeral home revenue increased by $3 million, primarily due to an 11% increase in average revenue per service [7] - Comparable cemetery revenue increased by $5 million, or about 1%, driven by an $8 million increase in other revenue [12] Market Data and Key Metrics Changes - The company noted a decline in core funeral services performed by 1.9% for Q4 2025, while comparable funeral volume for the full year declined less than 1% [7] - The average revenue per service in the funeral segment grew by 3.2%, despite a modest increase in the cremation rate [6] - Pre-need cemetery sales production increased by $8 million, or about 2%, with core sales accounting for a $13 million increase [13] Company Strategy and Development Direction - The company anticipates a normalized EPS range of $4.05-$4.35 for 2026, indicating a growth of 5%-13% [14] - The strategy includes managing fixed costs below inflationary levels while focusing on productivity to drive profit growth [15] - The company plans to continue returning capital to shareholders through dividends and share repurchase programs [29] Management's Comments on Operating Environment and Future Outlook - Management expects flat to slightly down funeral volume in 2026, with average revenue per case growing at inflationary rates [15] - The company is optimistic about pre-need sales production growth in both core and SCI Direct businesses [16] - Management highlighted a strong financial position and liquidity, allowing for opportunistic investments in 2026 [30] Other Important Information - The company generated strong adjusted operating cash flow of $213 million in Q4 2025, exceeding guidance [20] - Capital investments for the quarter totaled $174 million, with a full-year total of $508 million [22] - The company returned $107 million to shareholders in Q4 2025 through share repurchases and dividends [24] Q&A Session Summary Question: Can you break down your assumptions for cemetery pre-sales production growth? - Management indicated a slight increase of 2%-3% for large sales and a more robust increase for core sales, expressing confidence in momentum heading into 2026 [34] Question: How are sales tracking in your Rose Hills location? - Management reported positive trends in pre-need cemetery and funeral sales, with a focus on improving lead conversion rates [36] Question: What are the opportunities for growing cemetery sales for cremation customers? - The company is piloting initiatives to enhance visibility and awareness for cremation customers, with plans to roll out these efforts across more markets [41] Question: Can you discuss the drivers of lower than inflation expense growth? - Management attributed this to effective supply chain management and labor efficiency initiatives, allowing for better cost control [56] Question: What is the outlook for perpetual care trust revenue? - The company expects continued strong performance in trust funds, with a typical market return modeled at around 7% [84]

Non-GAAP Financial Measures February 12, 2026 Definitions: Non-GAAP Financial Measures This presentation includes non-GAAP financial measures. This information should not be considered in isolation or as a substitute for related GAAP measures. Additionally, these measures as calculated by the Company may not be comparable to similarly titled measures used by other companies. ADJUSTED EPS OR DILUTED EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS We use diluted earnings per share excluding special items (adjusted ...