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Operator: Good day, and welcome to the SCI First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to SCI management. Thank you, and over to you.

Trey Bocage: Good morning. This is Trey Bocage, AVP of Treasury and Investor Relations. Welcome to our first quarter earnings call. We will have some prepared remarks about the quarter from Tom and Eric in just a minute. But before that, let me go over the safe harbor language. Any comments made by our management team that state our plans, beliefs, expectations or projections about 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. With that out of the way, I will now turn the call over to Tom Ryan, Chairman and CEO.

Thomas Ryan: Thanks, Trey. Good morning, everyone, and thank you for joining us. I’ll start with an overview of our quarterly performance, followed by a deeper look at our funeral and cemetery results and then conclude with our outlook for the remainder of 2026. For the first quarter, we generated adjusted earnings per share of $0.97, which compared to $0.96 in the prior year. Cemetery revenue and gross profit increased meaningfully, supported by double-digit growth in preneed cemetery sales production. This performance was more than offset by lower funeral revenue and gross profit, driven by a mid-single-digit decline in case volume, resulting in a $0.02 reduction in earnings per share from operating income. Below the line, the favorable impact of a lower share count and a slightly lower effective tax rate was partially offset by higher interest expense, which when combined, resulted in an additional $0.03 of earnings per share growth.

Despite a meaningful decline in funeral case volumes during the quarter, the company delivered strong underlying performance across several key operating metrics. Preneed funeral and cemetery sales grew exceptionally well, reflecting continued success in building long-term customer relationships and future revenue visibility. In addition, average revenue per funeral service increased meaningfully, demonstrating the strength of our offerings and disciplined pricing execution. At the same time, we maintained strong control over our cost structure, effectively managing controllable expenses, minimizing the impact on margins in a challenging volume environment. Importantly, had funeral case volumes been flat for the quarter, we estimate earnings per share would have been approximately $1.12, representing roughly 17% growth over the prior year quarter.

Taken together, these results underscore the resilience of our business model and our ability to execute strategically despite near-term headwinds. Now let’s take a deeper look into the funeral results for the quarter. Total comparable funeral revenues decreased by $17 million or just less than 3% over the prior year quarter, mainly due to a decline in core funeral revenue. Comparable core funeral revenue declined by $18 million or just more than 3%, primarily due to a 6.6% decrease in core funeral services performed. The decline in services reflects the impact of a strong flu season in the prior year quarter and is consistent with broader first quarter mortality trends as indicated by data from the CDC as well as reporting from other industry participants.

While we saw a notable decline in first quarter volumes, it’s important to put that in historical context. Outside of the COVID-impacted era, over the past 20 years, we have experienced 5 instances where first quarter volumes declined from 4% to 9%. In each of those periods, we saw a meaningful improvement as the year progressed, with full year results improving by an average of 400 basis points relative to the first quarter’s decline. While each year is different, this pattern reinforces our expectation that performance can improve as we move through the balance of the year. This unfavorable impact from funeral volume decline was partially offset by a healthy 3.5% growth in the core average revenue per service. This core average growth was achieved despite a modest increase of 40 basis points in the core cremation rate.

Nonfuneral home revenue increased by $2 million, primarily due to a 10% increase in the average revenue per service. We expect this impressive growth in the average revenue per service to continue as older preneed contracts that are maturing out of our backlog have higher cumulative trust earnings and more recent preneed contracts written will mature with higher value in the backlog due to our operational decision to no longer deliver preneed merchandise at the time of sale. Funeral gross profit declined by approximately $23 million, with the gross profit percentage down 300 basis points to just over 21%. This is primarily driven by a $17 million decline in funeral revenues. We also saw a modest increase in selling compensation, consistent with higher preneed funeral sales production and a greater mix of insurance-funded contracts, which accelerates selling expense recognition.

Importantly, more than offering and offsetting this variable cost increase, the team held fixed cost growth to just over 1% for the quarter, well below inflation, which helped moderate the negative impact on margins. As a result, margins landed in line with expectations based on an 80% incremental margin framework and roughly 3% inflation on fixed costs. Preneed funeral sales production increased by $18 million or about 6% over the first quarter of 2025. Core preneed funeral sales production increased by $13 million or 6% Nonfuneral home preneed sales production increased by over $5 million or 9% over the prior year quarter. We feel great about our momentum in both channels as we have worked through the initial challenges of the insurance partner transition in the core segment.

And as of the end of 2025, we have now rolled the insurance product into 100% of our SCI Direct locations. Now shifting to cemetery. Comparable cemetery revenue increased by $31 million or about 7%, primarily due to higher core revenue complemented by an increase in other revenue. Core revenues increased by $25 million as a $28 million or 10% increase in recognized preneed revenue was slightly offset by a $3 million decline in at-need revenue. The recognized preneed revenue growth came from a $20 million increase in property revenue and another $8 million in higher merchandise and services. Other revenue was higher by $6 million compared to the prior year quarter, primarily from an increase in endowment care trust fund income. Comparable preneed cemetery sales production grew an impressive $32 million or 10% in the quarter.

Large sales drove $20 million of that increase with core sales contributing the remaining $12 million, supported by continued strong underlying sales velocity. This performance reflects the strength of our sales organization, which continues to expand preneed production despite lower first quarter funeral volumes. Ongoing investment in sales force retention and growth, particularly in our community-based teams has broadened our reach beyond location-generated leads. Cemetery gross profit in the quarter grew by $15 million or 11% with margin expansion of 120 basis points to approximately 33%. The increase was driven by higher-margin trust income, which lifted overall profitability. This was partially offset by above-inflation growth in fixed cemetery maintenance costs.

Even so, margins came in as expected, consistent with our 75% incremental margin framework and roughly 3% fixed cost inflation. Now let’s shift to discussion about our outlook for 2026. As we look ahead, we are reaffirming our 2026 normalized earnings per share guidance range of $4.05 to $4.35. 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. When combined with strong momentum in preneed cemetery sales, average revenue per funeral and continued disciplined expense management, we are confident in our ability to deliver within our stated earnings range. In closing, we remain firmly focused on building long-term value for shareholders, growing revenue, leveraging the strength of our scale and allocating capital with discipline to the highest and best use.

As we move into a period of meaningful demographic tailwinds, we are exceptionally well positioned to expand our reach, serve more families and deliver sustained growth over time. In closing, I’d like to recognize and thank our entire SCI team for their ongoing commitment to our customers, our communities and each other. Your dedication continues to be the foundation of our success. With that, I’ll turn the call over to Eric.

Eric Tanzberger: Thanks, Tom. Good morning, everybody. Thanks for joining us today. And as Tom just finished, I’m going to start that way and take a moment to really sincerely thank our more than 25,000 associates across the entire SCI network. We are truly grateful for all of your dedication and most importantly, the compassion that you have for our client families. And we are very proud of the positive impact you continue to make in all the communities that we serve at SCI. So today, I’m going to start by reviewing our cash flow results and capital investments for the quarter. Then I’m going to take — make a few comments on corporate G&A and our trust returns, and I’ll conclude with an update on our cash flow guidance for the full year of 2026 and then talk a little bit about the overall financial position.

So during the quarter, we generated very impressive adjusted operating cash flow of $335 million. This, by the way, was in line with our expectations and was an improvement of just under $20 million or 6% over the prior year. So a little bit more color on that because some of this is timing. So adjusted operating cash flow was positively impacted by a $20 million source of working capital related to an additional payroll tax payment that was made in the first quarter of last year. So additionally, though, there were stronger preneed cash receipts and other working capital that provided an additional $7 million source. But partially offsetting these sources were lower adjusted operating income of $4 million and $4 million of higher cash interest, which is primarily due to higher average balances on our floating rate debt, partially offset by the lower floating rates.

We believe this growth in adjusted operating cash flow despite the softer volumes that we reserved in the first quarter really highlights the resiliency of our cash flow at SCI. So shifting to capital investment. We invested $108 million of capital into our existing funeral homes and cemeteries and real estate — business and real estate acquisitions and of course, construction of new operating locations. So I’m going to break that down a little bit for you. We invested $66 million of maintenance capital back into our current businesses. Included in this maintenance spend, we invested $41 million into new cemetery development projects, $20 million into our current funeral home and cemetery locations, which improves the overall customer experience and about $5 million into our digital strategy and some other corporate investments.

We also invested $17 million of growth capital in the quarter towards the construction of new funeral homes as well as the purchase of some real estate for future new build and expansion opportunities. Turning specifically to acquisitions. We invested $24 million into business acquisitions in the quarter, adding locations in several states, including Texas, Massachusetts, Alabama and North Carolina. We are excited about these high-quality funeral homes and cemeteries that are now joining our company, and we’re very happy to welcome all of those associates to the SCI family. We have seen continued momentum in April and remain optimistic about the acquisition pipeline and believe we are on pace to achieve our $75 million to $125 million acquisition investment target for 2026.

So now let’s move on to capital distributions, primarily to our shareholders. We returned $190 million of capital to shareholders in the quarter through $143 million of share repurchases and $47 million of dividends. We repurchased just under 2 million shares during the quarter at an average price of about $80 per share, bringing the number of shares outstanding at our company to just over 130 million shares at the end of March. So shifting gears now, let’s talk about corporate G&A, which spend of about $44 million in the quarter was down $1 million over the prior year but higher than our quarterly guidance range. This is primarily a result of higher accruals related to our long-term incentive compensation plans, which, by the way, was driven by outperformance in total shareholder return versus our peer group.

We expect that corporate G&A expense going forward will average around the $40 million to $42 million per quarter. But as a reminder, this rate could be impacted by timing of these accruals related to the short- and long-term compensation plans, just like you saw this quarter. And finally, before transitioning to our cash flow outlook, I wanted to update you on our trust fund returns. So as you saw in the release yesterday, we ended the quarter with a 0.7% decline in our combined trust fund returns. However, importantly, in the month of April, we observed a market recovery with an estimated 4% to 5% increase in our combined trust fund returns, which really gives us confidence to say bring us back in line with our full year expectation of about a 7% trust fund return for the full year.

Now let’s talk about our outlook as it relates to cash flow. So as we talked about in the press release, we are confirming our 2026 adjusted operating cash flow guidance range of $1.0 billion to $1.06 billion. And as I really mentioned to you in February, we anticipate full year cash taxes to be about $120 million at a normalized cash tax rate of around 15% to 16% as again, we are benefiting from an investment we made in renewable energy projects in the current year. As we look beyond 2026, we anticipate returning to a normalized cash tax rate of about 24% to 25%. That would be absent any additional tax planning strategies or any regulatory changes that we don’t know about. From an effective tax rate perspective, consistent with the guidance that we’ve talked about before, we expect full year 2026’s ETR to trend in the line with 2025 at 25% to 26%.

So in closing, I’m now going to provide some commentary about our liquidity and financial position. We continue to benefit from a favorable and disciplined debt maturity profile, complemented by robust liquidity. We ended the quarter with liquidity of about $1.7 billion, consisting of approximately $260 million of cash on hand and approximately $1.45 billion available on our long-term bank credit facility. We ended the quarter with a leverage ratio of 3.68x net debt to EBITDA. This is very similar to where we ended last quarter and again, at the lower end of our long-term leverage target range of 3.5 to 4x. So in conclusion, our solid balance sheet, enhanced liquidity position, consistent and predictable cash flow stream continue to bolster our capital deployment program, giving us significant flexibility to invest opportunistically for the long-term benefit of SCI, our associates and our shareholders.

So with that, operator, this really concludes my remarks and Tom’s remarks. I’m going to pass it back to you, and then we’ll go ahead and open the call up for questions.

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Operator: [Operator Instructions] We have the first question from the line of Parker Snure from Raymond James.

Parker Snure: On the funeral volumes, it’d be great just to hear how volume growth progressed throughout the quarter in kind of January, February, March? And then what are you seeing in early April, early days in the second quarter?

Thomas Ryan: Sure, Parker. This is Tom. Thanks for the question. 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 seeing, Parker, and it’s not unlike when we study 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 in the back half of the year and seeing that volume come back. That’s what we’ve experienced in the previous 5 times. And I’d tell you right now in April, we’re seeing the same thing. April is still down. It’s not as bad as the first quarter, but we’re still kind of facing a little bit of a headwind. And again, we, I think, anticipate that, that would get better throughout the quarter and really see — maybe get to see some positive comps in the back half of the year.

Parker Snure: Okay. And then in terms of the guidance range, I may have missed this. I know you said that you now expect comparable funeral volumes down 1% to 3%. But on the preneed cemetery side, I think that’s going to be kind of helping to offset that. It was up 9.7% in the first quarter. But just how are you guys thinking about that throughout the course of the year? The comps do get a little bit tougher, but just how are you thinking about preneed cemetery production within the full year guidance now?

Thomas Ryan: Yes. I think Parker, this time, it’s always hard to tell through 3 months. We’re very pleased with the first quarter. But we still — if we talked about guidance before, remember, I think I told you to steer you towards the low to mid-single digits. I think with the first quarter in the bank, we feel pretty good about mid-single-digit growth for the year. 10% is high step in it. But we do still feel very good about our momentum. Jay has got the team really focused on KPIs in the 4 of those. One of the channels is large sales. One of them is headcount. And so what we’re seeing today, and I touched upon it a little bit on the call, is that we’re growing the headcount. Part of that is we’re trying to retain more of our employees, and that’s being successful and then hire new ones.

And we believe we’ve got better leads. Our next KPI is our lead-to-sale ratio. And so that’s really focused on the quality of leads and our ability to follow those up. And then the third bucket before large sales is seminars. We found that seminars are a way that we can educate the consumer, get in front of them. And so Jay really pushed the initiative to say, let’s expand the number of seminars we’re doing, and we’re seeing great success with that. And those are the types of things where you’re out in the community, you’re not getting your leads to the funeral home. And that’s why I think we can say we grew velocity in a quarter even though funeral volumes were down. And by the way, funeral volumes are a great lead source, but we’re finding other ways to get out to the consumer and seeing real success there.

So we feel great about the momentum. You’re right, the comps get a little tougher as we go along the year, but still very confident that we can get to that mid-single-digit growth for the year.

Parker Snure: Okay. Yes. No, that’s great. And then if I can just squeeze in one last one, kind of more of a math question on EPS seasonality. So if I look at the first quarter, $0.97. And then if I just kind of look at the last couple of years, 2Q is down somewhere in the range of $0.08 to $0.10. So that would imply something like $0.88 in the second quarter. That gets you to $1.85 for the first half. And if I look at the last 3 years, the first half seasonality is somewhere around 50%, maybe just below that. So that would kind of imply something in the high $3 of EPS, maybe $3.70 to $3.90. So I guess the question is like what is different this year in terms of like the second half ramp than a normal year that kind of gives you confidence in getting to the guidance range?

Thomas Ryan: Yes. I think the real difference is, of course, just this down volume. And so I’d say if you can get that volume back, you’re going to shift quite a bit of profitability to the back half of the year. So in your instance, it would probably assume where you get into those low 3s that you keep the volume at down 6% for the year. We believe because history tells us, and we believe, again, that, that’s going to trend back the other way. So you’re just going to push some of that funeral profitability that was in the first half of the year to the back half of the year. And that’s how we’re looking at it. We’re modeling a couple of different scenarios like we said, it’s hard to be precise, but we think 1% to 3% is a fair estimate at this point in time. And obviously, at the end of the second quarter, we’ll have better data to make that a little more finite for you.

Operator: We have the next question from the line of Tomo Sano from JPMorgan.

Tomohiko Sano: So regarding funeral volumes, I believe the main reasons for the decline in the first quarter was tough year-over-year comps due to last year’s strong flu season. Was this trend seen across the entire industries? And do you believe it had any impact on SCI’s market share?

Thomas Ryan: Yes, Tomo, we do not think it’s market share. We don’t have a lot of public competitors, but we do talk to a lot of our friends in the private world, and we’ve got suppliers in different places. And so — and then you add that with — I’ve mentioned CDC data, we’ve got January and February, and they’re kind of right on where we see — some of our other competitors actually have worse comps. Some of our suppliers have worse comps. So we feel, number one, that it’s not a market share issue, and therefore, we believe it will bounce back. And the other checks that — my sanity checks that I use, Tomo, is typically, our SCI Direct business, I can’t remember when we had down volumes in SCI Direct. It’s always a leader, and we may be a drag in the core.

The other thing is pre-need going at-need is typically a lot better than the walk-in business, what we call the pure at-need. And in both those checks, for the first time in a long time, SCI Direct has down volumes in low single digits, but down volumes. And again, that just tells me that this is real, this is a death rate thing. Hard to predict all the reasons why. But it is a tough comparison. We did have a bigger flu season last year. And history tells us it’s going to work back. And I tried to point out on the call that if you just give us flat volume, this would have been a 17% earnings per share growth quarter. That’s how good we performed in other metrics. Unfortunately, we didn’t get the volume. So it wasn’t 17%. But we’re optimistic that we’re ready for that.

We’re working hard, doing things to have better advantages in competing on the funeral side, competing on the sales side. So anyway, hopefully, that answers your question.

Tomohiko Sano: Yes, it’s very helpful. And just a follow-up on the — in the face of declining volumes, what specific actions or initiatives were implemented at the field level to address these challenges in terms of the cost to control, the labor retentions and managing input costs, please?

Thomas Ryan: Yes. So a lot of them are just in place. We — I think I’ve spoken before that the field has the ability when volumes are down to manage labor costs. How many people we’re bringing in, part-time help versus full-time help. And so they’re really good at leveraging that model without us having to say anything. So a lot of that is built into the DNA, built into the systems that we utilize. And so they’re very good at leveraging those costs, and we really don’t have to say a thing. So I feel good about the team’s ability to pivot. And when you get that volume back, it’s going to be — the incremental margins on these things are huge. And so I look out at the rest of the year and say when that comes, we’re going to have some nice comps to go back against the prior year quarter.

So that’s predominantly it. Clearly, we’ll talk about you can manage travel costs, you can do different things, but we’re really focused on the long term in making sure that we’ve got high-quality service that we’re taking care of our customers and taking care of our employees and the volumes have come. So that’s our position.

Operator: We have the next from the line of Scott Schneeberger from Oppenheimer.

Scott Schneeberger: I have 2 preneed questions, one cemetery, one funeral. I’ll start with cemetery. You guys outlined a bunch of initiatives, Tom, you did about what you’re doing headcount and seminars, and it sounds like a lot of good progress on that front. So question — a 2-part question. What’s the sustainability of it? And then historically, you guys have provided what large sale contribution is and maybe what non-large sale contribution is in the quarter. Can you share a little bit about that in the first quarter and how you see that shaping up over the balance of the year as well?

Thomas Ryan: Sure. So Scott, the — if you start with the cemetery, I think I mentioned, we had $32 million of production growth. $20 million of which was year-over-year improvement in the large sales and again, defined as $100,000 sales or better. And then $12 million of it came from what we call the core business. And the preponderance of that was in velocity. So we didn’t have — I think our average revenue per contract was slightly up, but most of it came from velocity. So that’s kind of the breakdown. I think if you’re talking about large sales, I think we ended in like the low $40 million for the quarter, and that’s a solid quarter for us, particularly with the new — we used to use $80,000 as our limit, now it’s $100,000 — so that was a big win.

But I think the bigger win, like I’ve said before, the large sales are going to come when they come. It’s hard to — sometimes they’re going to push into a different quarter, sometimes not. But what I’m really pleased about is I think we’ve now had 4 or 5 quarters in a row where we’ve seen contract velocity increase. And I again put that back to what I mentioned before is Jay and the team focusing on the key metrics that are going to drive those contracts. And seminars is a key thing, headcount is a key thing and really pushing the lead sources outside of the funeral home to be able to grow even when you have challenging volume environment. The other thing I’ll mention, and we talked about it earlier since you asked, the cremation cemetery strategy.

I think we talked to you guys a while back that it’s our belief based upon some studies and surveys that we did with consumers that there’s a real lack of understanding of what we have to offer to the cremation consumer on the cemetery side. So we were good at the funeral side, but we weren’t getting the point across, at least consistently. So we worked really hard, and we actually piloted 10 markets in the first quarter. And I would tell you that it was very successful. And again, it’s only 10 markets, so I don’t want to get overly excited, but it’s really focusing on communicating with the consumer through advertising, through in-lobby presentations, different types of media and presentation materials. And what we’re seeing was a real difference maker in those 10 markets versus what we saw in the other markets.

So that’s just on its beginning, and we’re intending to roll out, I think, another 80 or so markets in July. So really, really happy about that, that we feel like that’s a market that we haven’t addressed as aggressively as we should have been, and we’re on it now. So a lot of good momentum on the cemetery sales side and feel good about directionally where we’re headed.

Scott Schneeberger: Great. Appreciate that color. The second question, the funeral — is funeral at preneed — excuse me, funeral preneed. And just curious, I mean, this is not a 1-quarter dynamic. This has been ongoing, but you’re delivering very strong preneed funeral growth in an environment where volumes in at-need funeral are challenged. So maybe there’s a bit of overlap in what this answer is going to be, but how have you been doing that? Can you just speak to what’s the strength behind the preneed funeral?

Thomas Ryan: Yes. I think a couple of things. First and foremost, you’re exactly right. I’m going to say the same thing, particularly the seminars. The seminars are put on in markets. They probably are not at one of our locations. They’re probably at a restaurant, somewhere, a hotel. So the draw that you’re getting for the attendees has nothing to do with your funeral home traffic. So over time, I think we’re pushing more and more of these leads outside of our locations. And therefore, we’re less sensitive to volumes as they walk through the door. So I think our focus on that particularly probably has driven a lot of it. The other thing that I wouldn’t, not point out to you is we had a lot of change in our preneed funeral, right?

We had a new partner in our insurance core business, and we had SCI Direct last year that was transitioning from a trust product to an insurance product. So just think of the forms, the explanation, the presentations. There’s a lot of detail that goes into that, and it was a bit of a distraction over, call it, a 12- to 18-month period. And I think what I’m pointing out now is, hey, that’s behind us. I mean, obviously, we’ll get better and better at utilizing the new contracts, the new tools, the new payment plans. But we’re really starting to see that stride take. And then again, I would point back to the lead sources are more outside the funeral home, and we’re able to generate better leads, have better closing rates. And so some of the same things we talk about on the cemetery side.

Operator: We have the next question from the line of Tobey Sommer from Truist.

Tyler Barishaw: This is Tyler Barishaw on for Tobey. Just wanted to double-click on the cremation in the cemetery point you just made. When you think about maybe run rate when this is at full implementation, do you have a sense for how much this could contribute or margin opportunity maybe?

Thomas Ryan: Yes. I think where it’s going to show up is in the revenue growth and pretty high-margin products. We really don’t — and I hesitate to do that, Tyler, because like I said, 10 markets does not make an initiative. So feel free to ask me as we continue how successful it is. But I would just tell you, we’re very excited because in each of these 10 markets, it exceeded the average of everybody else in some markets by quite a bit. And I think it’s just — it’s an obvious — we woke up one day and said, we’re not — we don’t have a way to get in front of the consumer in a consistent way to educate them about it. And again, when we did this consumer survey research, it really was eye-opening to us, and we learned a lot about, hey, maybe we’re focusing too much on funeral and burial, and we’ve got to have the tools and the resources to educate these consumers.

So I don’t have a number for you yet. I think it will just be a nice complementary growth to all the other things that we’ve got going, as I mentioned before, with lead sources and growing the sales force numbers. So a lot of good momentum.

Tyler Barishaw: Makes sense. And then just thinking about the funeral segment, how should we think about margins for the year on a gross margin basis despite the funeral volume contraction?

Thomas Ryan: Yes. I mean if you obviously, out of the gate, I think we talked before, if we got to flat funeral volume, we think we could grow margins, call it, 40 to 60 basis points going forward. And we talked about the sensitivity, right? So if you back into 80% gross margins on funerals lost, you can back into the number. So at this point, we’d be forecasting that margins are going to be slightly down for the year versus what we experienced in the prior year. Having said that, once again, comps are a weird thing. I like our comp first quarter of 2027, right? I mean I think we might have a pretty good one. So it is what it is. But I think for this year, you’d anticipate that our gross margin percentage will be slightly down as compared to the prior year number. And then go back to that, can we grow it at 40 to 60 bps? I think so. Give us flat to slightly up volume, and we’ll do that. And if you give us a little bit more volume, it will be a lot more.

Operator: We have the next question from the line of Joanna Gajuk from Bank of America.

Joanna Gajuk: So I guess maybe just a follow-up on the cemetery because clearly, that’s where the outperformance was. And I’m sorry if I missed it. So how are you kind of thinking about the full year now versus your prior expectations for growing low single to mid-single digits? And I guess, can you also break it up for us, if you can, expectations for the large versus core sales performance for the year?

Thomas Ryan: Sure, Joanna. So I think on the cemetery, you’re right, we guided to low to mid-single digit. I’d say based on the performance we saw in the first quarter, we’re confident in saying it’s mid-single digit. And that would be somewhere between 4% and call it, 7%, depending on how the year shakes out. That’s kind of where our head is. Then if you go to — when you think about the breakout, we obviously had quite a good comparison in the first quarter. It was an easier comp. If you go back to last year, we didn’t have a great large sale quarter. So we beat it by quite a bit. But I think both — we expect both channels to end up being nice growth trajectories. Obviously, we’ve got quite a great growth trajectory in the first quarter, and that’s going to come down over time as we got tougher comps.

But we still feel like we can grow both channels in the remaining 9 months on a year-over-year basis. And again, large sales are harder to predict because they come when they come. And sometimes they slip from June to July or they slip from September to October, and that’s okay because eventually, we’ll get them. So we feel good about both channels. And I think overall expected growth rate is in the mid-single digits.

Operator: Does that answer your question, Joanna?

Joanna Gajuk: So yes, I have a follow-up. Actually, I was talking about — I was muted — to things. So yes, I was asking, so with this growth now for the cemetery just more like mid-single digits, how should we think about your assumptions around the gross margin in that segment? It sounds like the funeral segment while with the volumes being down, the gross margin will be lower. So should we expect better, I guess, margin here given the kind of the elevated growth?

Thomas Ryan: Yes. I mean if we get the growth rates we think, you probably should see gross margins grow anywhere from 60 to, call it, 100, 120 basis points for the year. If we can get 4% revenue growth on the cemetery, we can grow at about, call it, 50, 60 basis points. So if we end up in the 5 or 6, you see a little better. So we got 9 months to go. We’ll see. But overall, we’d expect cemetery margins to go up for the year. And like I said, funeral to be slightly down.

Joanna Gajuk: And if I may, last question on the capital deployment and specifically the acquisitions. So are you seeing sort of more interest, less interest, any competitive dynamics around multiples and such? And it sounds like you mentioned before that the volume decline, the funeral volume decline of Q1 was kind of [ real behavior ]. But I think if I read it right, you said something along the lines that some of your competitors are actually doing worse. So is it changing sort of your outlook in terms of consolidation opportunities?

Eric Tanzberger: Joanna, this is Eric. I think we’ll continue to be very excited about the pipeline. We have a lot in the pipeline right now. We closed about $25 million so far in the first quarter, a couple more in April as well. And it continues to build. It takes time to make sure that we have a win-win situation with the third, fourth, fifth generation families, but we continue to be excited about it, and I think it will be a good story the rest of the year. In terms of funeral volumes, we just have — we have the CDC data like you do. We obviously have heard our vendors and other vendors and such. And it sounds like that maybe we’re a little bit better than what some of the other figures that are out there, including the CDC, probably a little bit better in January and February, which is out there in the public realm.

So that’s all we’re saying. It’s clear to us that this is not a SCI market share issue during the first quarter. We’ve definitely seen it before. But ultimately, these volumes, I don’t think short term like this is going to affect the M&A program to come full circle back to the original part of your question. It’s a long-term process with long-term relationships. We’ll continue to work those long-term relationships, and we feel pretty good about what’s ahead of us in terms of the pipeline.

Joanna Gajuk: Okay. Great. And if I may squeeze in a last one and sorry, going back to your outlook for the year. So just to make sure, right, you kind of talk about the funeral volumes worse, and I guess that comes with lower margins, but the cemetery better and then potentially, if this gets closer to like 6%, 7%, the gross profit margin would be even better. But your guidance range for your EPS is pretty wide. So is there something to be said about orienting us towards one end or the other of that range?

Thomas Ryan: No, Joanna, I think, obviously, with funeral volumes the way they are, we didn’t perform at a level we originally wanted to do. So it all kind of gets back to how much comes back in the back half of the year. And so we still feel comfortable about it. I think what you’re saying is it is a large range. Right now, with the funeral volumes the way they are, you’re probably more likely to be in the lower half of the range versus the higher, but we’re not there yet because, again, if these volumes come back, if we continue the trends we’re seeing in cemetery, we could push in the upper half of this, too. So that’s why we left it where it is. We honestly have a couple of different — a variety of models and some of which if we get some funeral volume back, we can do really well this year. If you don’t, clearly, you’re going to be on the lower end of that range.

Joanna Gajuk: All right. So you’re still standing by the — by the range, right?

Thomas Ryan: Standing by.

Operator: We have the next question from the line of A.J. Rice from UBS.

Albert Rice: Just a couple of things to tie it all up. Just you mentioned a couple — been asked a couple of times about the large sales. I know you’ve got a lot of initiatives in the cemetery side, sales and marketing initiatives. Do you think that there are any of those that are particularly directed toward the large sales so that this level of performance might be a more sustainable thing? Or is it still going to be more quarter-to-quarter volatility depending on what comes in, in any given quarter?

Thomas Ryan: Yes. I think, A.J., a couple of things to answer that. And overall, let me just say it’s a positive. I think the large sale concept, we now have in a lot more areas of the country. So we really — obviously, Rose Hills and some of the California parks in Vancouver, we’ve had large sales for a long time. Now we continue to, I think, build even more spectacular properties that are higher level. I think what we find is as we build bigger and better things, you’re surprised by the people that will buy them. So the average ticket will go up. And that’s one way to drive your sales and then the other is velocity. And one of the things we’ve done, particularly in the Asian communities and the Chinese and Vietnamese in particular, we take Qingming as an opportunity to present new inventory.

I think we did Qingming in 3 markets, if you go back 10 years. And now, Jay, we probably do it in 30 markets across the country. So I do think there’s a likelihood to have more consistency in these numbers. And so the only thing I caution, A.J., I think it’s going to continue to grow. It’s going to get better is you could have a quarter where it’s down $10 million this quarter and then you’re up $15 million next quarter. So I never get that excited about large sales. It’s a little bit like Eric is talking about visibility on acquisitions. We know the pipeline. We know the discussions that are happening. When someone is going to spend $5 million, $10 million, Jay knows about it, and he’s telling me about it. So we’re talking about it. And these aren’t sales that happen in a day.

They’ve got attorneys involved. They’ve got — I want to design a particular building. So we’re seeing the customers that are out there interested in our creative inventory, interested in personalizing it. And so that’s why we feel highly confident. We’ve got more inventory on the ground to sell, and we’re getting better and better at it, and we’re doing it in more and more places. It’s not just in California and Vancouver anymore. We’re getting those sales in Missouri and obviously, Florida, North Carolina, Tennessee, Nevada, obviously, Texas, too. So just seeing it in more locations, more pockets and excited about the future and the things that we can continue to do in stretching the imagination. And I’d love to have a $20 million private sale one day, right?

I mean it sounds incredible, but it will happen. Somebody will get it.

Albert Rice: Yes. Yes. And then I appreciate Eric’s comments on the trust fund earnings, returns and that dipped in the first quarter, but has rebounded early in the second. Is there anything — I know that, that volatility in the trust fund returns tends to take a lot longer to show up in the results. Is there anything you’re trying to signal with respect to the impact it may have had on the first quarter or positioning us for the second quarter to think about that? Or are you just making note of the fact that it’s been volatile?

Eric Tanzberger: I mean more of the latter. It’s a lot like predicting volume with what’s going on in the world, A.J., right? I mean I think trust fund income will be somewhere between $300 million and $350 million, call it, $325 million at the midpoint. That’s a pretty wide range for me to say 3 months into it, but that’s the volatility that we all know that we have out there in the markets. But we’re marking to market every month. So we’re pushing stuff through every month. But the contracts have to mature out of that backlog that’s mark-to-market is why it becomes a muted effect over a longer period of time.

Albert Rice: Right. No, that makes sense. And then just an interesting comment you had, and I’m just wondering how much of an impact that’s having? And is this just sort of an unusual thing in the quarter or not? You said that you had above inflation fixed cemetery maintenance cost. Sort of what’s going on there? Was that just sort of a 1 quarter phenomenon? Or is there some level of incremental spend you’re having to do on cemetery maintenance that’s going to persist?

Thomas Ryan: Well, I think we — this is the category that’s hardest. And again, it’s very labor-intensive. You’re talking about water, you’re talking about fertilizers, you’re talking about equipment. It’s a big, big expense. Some of it’s outsourced, some of it’s in-sourced. And it just tends to be the one that’s hardest to control. And also, I think it’s a reflection of how does your park look. And for us, because we’ve got great cemetery sales, we’ve got all this high-end inventory, we’re spending money to make it special. And so I’m not surprised by it. It’s just sometimes we’ll manage to say cemetery maintenance could be 3% to 4%. Well, if it comes in at 5%, it’s a little bit over, right? So that’s the kind of thing, A.J. I wouldn’t expect it to trend down or anything like that.

But I think we’re getting better at controllable buckets of that cost to where it will look more like inflation that’s in the marketplace versus slightly ahead. So it’s — we’re getting there.

Operator: We have the next question from the line of Parker Snure from Raymond James.

Parker Snure: Yes. Just one more follow-up. Can you just remind us on the timing of Qingming and when that selling season kind of ends up flowing through your numbers? From my understanding, it’s kind of late first quarter, early second quarter, but just how much was Qingming attributable to some of the preneed cemetery sales in the first quarter? And just kind of how do you expect that overall season to kind of play out?

Eric Tanzberger: It’s usually late March and early April, Parker. So it actually crosses over the quarter. And it depends on — each market has events for the community, community-facing events, and it kind of depends on when they plan it, to be honest with you, and where the end of the month lands. I don’t think this was any out of the ordinary of a prior year or anything like that. I don’t think it was a huge larger piece or a much smaller piece in the first quarter of ’26 than the first quarter of ’25. So I think it’s just kind of right on pace. Tom’s comment was more about that’s a great opportunity to lay out your new larger sales though and your plans for that, which we utilize a lot across some of our larger cemeteries.

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

Thomas Ryan: Thank you, everybody, for the time today. We appreciate you. We look forward to talking to you with our second quarter results in July. Have a great week.

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

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