Service Corporation International (SCI) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026, for Service Corporation International (SCI), North America's largest provider of deathcare products and services. The company operates 1,495 funeral service locations and 505 cemeteries across the U.S. and Canada. SCI generates revenue through at-need services and preneed contracts, which create a significant backlog of future revenue.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Total Revenue | $1,103.3 million | $1,065.4 million | $2,200.0 million | $2,139.6 million |
| Gross Profit | $273.5 million | $271.4 million | $560.0 million | $562.9 million |
| Operating Income | $231.6 million | $224.5 million | $475.4 million | $476.1 million |
| Net Income (Attributable to Common) | $124.8 million | $122.9 million | $260.6 million | $265.7 million |
| Diluted EPS | $0.90 | $0.86 | $1.87 | $1.84 |
| Operating Cash Flow (YTD) | $572.4 million (2026) vs $477.6 million (2025) | |||
| Total Debt | $5.30 billion (June 30, 2026) | |||
| Cash & Equivalents | $260.4 million (June 30, 2026) | |||
| Preneed Backlog | $17.62 billion (June 30, 2026) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 3.6% in Q2 2026 compared to Q2 2025. YTD revenue grew 2.8%.
- Segment Performance:
- Cemetery: Revenue increased 5.1% in Q2, driven by a 4.8% increase in comparable revenue and strong preneed sales production (up 8.0%). Gross profit rose 5.0%.
- Funeral: Revenue increased 2.3% in Q2, but comparable gross profit declined 5.9% due to higher selling compensation costs associated with insurance-funded preneed sales and a 1.4% decrease in comparable services performed.
- Cost Management: Corporate general and administrative expenses decreased 15.6% in Q2 ($41.8M vs $49.5M), largely due to the absence of a $6.4M legal settlement charge recorded in the prior year.
- Divestitures: The company recognized a $0.1M net loss on divestitures in Q2 2026, compared to a $4.1M gain in Q2 2025.
Guidance, Outlook, and Risks
- Capital Allocation: SCI continues to prioritize returning capital to shareholders. The Board increased the share repurchase authorization by $472 million on June 11, 2026. In the first six months of 2026, the company repurchased 3.35 million shares for $264.9 million. The quarterly dividend was raised to $0.36 per share.
- Liquidity: The company maintains a leverage ratio of 3.77x, well within its 5.0x covenant limit. It has $1.38 billion in remaining borrowing capacity under its Bank Credit Facility.
- Outlook: Management expects demand to remain resilient despite economic conditions, as deathcare services are generally non-discretionary. The company is focusing on adapting to increasing cremation trends and leveraging its $17.6 billion preneed backlog for future revenue stability.
- Risks: Key risks include market volatility affecting trust fund investments, potential unclaimed property audits regarding preneed funds, inflationary pressures on costs, and the impact of changing consumer preferences (e.g., cremation rates) on average revenue per service.
Investor Verification Checklist
- Preneed Backlog Quality: Verify the composition of the $17.62 billion backlog, specifically the ratio of trust-funded vs. insurance-funded contracts, as insurance-funded contracts do not appear on the balance sheet until maturity.
- Funeral Margin Pressure: Monitor the trend in comparable funeral gross profit margins, which declined to 18.5% in Q2 2026, driven by higher selling compensation costs.
- Trust Fund Performance: Review the performance of the $8.4 billion in trust investments, which generated $118.8 million in recognized income YTD 2026, to ensure they are offsetting inflationary costs.
- Debt Maturity Profile: Confirm the company's ability to service its $5.3 billion debt load, noting the weighted average interest rate of 4.84% and the upcoming maturities of senior notes.
- Unclaimed Property Audits: Assess the potential financial impact of ongoing state audits regarding the escheatment of unused preneed trust funds.