Q2 2026 Service Corp International Earnings Call

July 30, 2026

Speaker #1: Good morning, and welcome to the second quarter 2026 SCI earnings conference call. All participants will be a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator 2: Good morning. Welcome to the Q2 2026 SCI Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to SCI Management. Please go ahead.

Operator: Good morning. Welcome to the Q2 2026 SCI Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to SCI Management. Please go ahead.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad.

Speaker #1: To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to SCI management.

Speaker #1: Please go ahead.

Speaker #2: Good morning. This is Trey Bocage, AVP of Investor Relations and Treasury. Welcome to our second quarter earnings call of 2026. We are going to have some prepared remarks about the quarter from Tom and Eric in just a minute.

Trey Bocage: Good morning. This is Trey Bocage, Director, Investor Relations and Treasury. Welcome to our Q2 earnings call of 2026. We are going to have some prepared remarks about the quarter from Tom and Eric in just a minute. Before that, I will quickly go over our safe harbor language. 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.

Speaker #2: But before that, I will quickly go over our safe comments made by our management team that state our plans, beliefs, expectations, or projections for the future are forward-looking statements.

Speaker #2: 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.

Speaker #2: 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: 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 it over to Thomas L. Ryan, Chairman and CEO.

Speaker #2: With that out of the way, I will now turn it over to Tom Ryan, Chairman and CEO.

Speaker #3: Thanks, Trey, and good morning, everyone. And thank you for joining us. I'll start with an overview of our quarterly performance. Followed by some expectation setting for the back half of 2026.

Thomas L. Ryan: Thanks, Trey. Good morning, everyone, and thank you for joining us. I will start with an overview of our quarterly performance, followed by some expectation setting for the H2 2026, then a deeper look at our funeral and cemetery results for the quarter. For Q2, we generated earnings per share of $0.90, which compared to $0.88 in the prior year. Cemetery revenue and gross profit increased, supported by high single-digit growth in preneed cemetery sales production and solid growth from cemetery trust fund income. This favorable impact was slightly enhanced by lower general and administrative expense. Funeral revenues grew marginally, profitability declined somewhat, offsetting the favorable impacts, resulting in a $0.02 increase in earnings per share from operating income.

Speaker #3: And then a deeper look at our funeral and cemetery results for the quarter. For the second quarter, we generated earnings per share of 90 cents, which compared to 88 cents in the prior year.

Speaker #3: Cemetery revenue and gross profit increased, supported by high single-digit growth in pre-need cemetery sales production and solid growth from cemetery trust fund income. This favorable impact was slightly enhanced by lower general and administrative expense.

Speaker #3: Funeral revenues grew marginally but profitability declined somewhat, offsetting the favorable impacts resulting in a 2-cent increase 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 offset by the net negative impact from interest expense and other income expense.

Thomas L. Ryan: Below the line, the favorable impact of a lower share count and a slightly lower effective tax rate was offset by the net negative impact from interest expense and other income expense. While Q1 and Q2 earnings per share growth was muted by lower funeral case volumes and deferrals of cemetery revenue, we have some very positive momentum to carry into the H2 2026. Comparable preneed cemetery sales production grew by 8%, comparable preneed funeral sales production grew by 7% for the quarter. Adjusted cash by operating activities increased by $71 million to $239 million, helping to fund our business capital needs and new growth capital investments while affording us the flexibility to be opportunistic, returning capital through share buybacks, and consistently through dividend increases.

Speaker #3: While the first and second quarter earnings per share growth was muted by lower funeral case volumes and deferrals of cemetery revenue, we have some very positive momentum to carry into the back half of 2026. cemetery sales production grew by 8%, and comparable pre-need funeral sales production grew by 7% for the quarter. cash by operating activities increased by 71 million dollars to 239 million dollars. fund our business capital needs, and new growth capital investments, while affording us the flexibility to be opportunistic returning capital through share buybacks and consistently through dividend increases. As we enter the back half of 2026, we believe we are poised to deliver solid revenue growth as well as margin expansion in both the funeral and cemetery segments as compared to the back half of 2025.

Thomas L. Ryan: As we enter the H2 2026, we believe we are poised to deliver solid revenue growth as well as margin expansion in both the funeral and cemetery segments as compared to the H2 2025, resulting in double-digit earnings per share growth in the H2 2026. Let's take a deeper look into the funeral results for Q2. Total comparable funeral revenues increased by $5 million, or just about 1% over the prior Q. Comparable core funeral revenue increased by $7 million, or about 1.5%, primarily due to a healthy 3.3% growth in the core average revenue per service. This core average growth was achieved despite a modest increase of 60 basis points in the core cremation rate. Comparable core funeral volume declined by 1.7%, exceeding our expectations coming out of a challenging Q1.

Speaker #3: Resulting in double-digit Total comparable funeral Comparable pre-need Now let's take a Comparable core funeral revenue increased by 7 million dollars or about 1.5%, primarily due to a healthy 3.3% growth in the core average revenue per service.

Speaker #3: This core average growth was achieved despite a modest increase of 60 basis points in the core cremation rate. Comparable core funeral volume declined by 1.7%, exceeding our expectations coming out of a challenging first quarter.

Speaker #3: We saw less meaningful declines in April and May as compared to the first quarter, and slight volume growth for the month of June. Non-funeral home revenue increased by over $2 million, primarily due to a 9% increase in the average revenue per service.

Thomas L. Ryan: We saw less meaningful declines in April and May as compared to Q1, slight volume growth for the month of June. Non-funeral home revenue increased by over $2 million, primarily due to a 9% 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 a higher average revenue per service. Non-funeral home preneed sales revenue decreased by $5 million, primarily due to an operational shift to defer the delivery of urns on preneed contracts to the time of need. This transition was completed late in 2025, we are nearing the anniversary date where all urn deliveries will occur at the same time of need as non-funeral home revenue.

Speaker #3: We expect this impressive growth in the average revenue per service to continue, as older pre-need contracts that are maturing out of our backlog have higher cumulative trust earnings, and more recent pre-need contracts written will mature with a higher average revenue per service.

Speaker #3: Non-funeral home pre-need sales revenue decreased by 5 million dollars primarily due to an operational shift to defer the delivery of earns on pre-need contracts to the time of need.

Speaker #3: This transition was completed late in 2025, so we are nearing the anniversary date where all earned deliveries will occur at the same time of need, as non-funeral home revenue.

Speaker #3: Then this segment line item will primarily report non-funeral home general agency revenue. Funeral gross profit for the quarter declined by approximately 7 million dollars with the gross profit percentage down 130 basis points to 18.5%.

Thomas L. Ryan: This segment line item will primarily report non-funeral home general agency revenue. Funeral gross profit for the quarter declined by approximately $7 million with the gross profit percentage down 130 basis points to 18.5%. In a high fixed cost business model, revenue growth of less than 2% is always going to present a challenge to gross margins. In addition, gross profit was impacted by higher selling compensation associated with strong insurance-funded preneed sales production. Selling compensation costs incurred or paid out were relatively consistent as a percentage of sales production dollars versus the prior year. We have shifted to a model that sells more insurance-funded contracts, both for core and SCI Direct, and under GAAP, less selling compensation gets deferred versus a trust-funded product, resulting in a higher percentage of selling compensation being recognized against general agency revenues in the current period.

Speaker #3: In a high fixed cost business model, revenue growth of less than 2% is always going to margins. In addition, gross profit was impacted by higher selling compensation associated with strong insurance funded pre-need sales production.

Speaker #3: Selling compensation costs incurred or paid out were relatively consistent as a percentage of sales production dollars versus the prior year. We have shifted to a model that sells more insurance funded contracts both for core and SDI direct, and under GAAP less selling compensation gets deferred versus a trust funded product.

Speaker #3: Resulting in a higher percentage of selling compensation being recognized against general agency revenues in the current period. Early July was the anniversary of the preponderance of our sales production shift to insurance products.

Thomas L. Ryan: Early July was the anniversary of the preponderance of our sales production shift to insurance products. Going forward, recognized selling compensation should stabilize and improve funeral gross margin comparisons in future periods. Preneed funeral sales production increased by $20 million, or about 6.6% over the Q2 of 2025, driven by an 8.3% increase in core preneed sales production. Shifting to cemetery. Comparable cemetery revenue increased by $23 million or about 5%, primarily due to higher core revenue, complemented by an increase in other revenue. Core revenues increased by $14 million, primarily due to a $15 million increase in total recognized preneed revenue, of which $5 million resulted from higher property revenue and $10 million from higher merchandise and service revenue. Merchandise and service revenue also reflects the positive impact from increased trust fund income.

Speaker #3: Going forward, recognized selling compensation should stabilize and improve funeral gross margin comparisons in future periods. Pre-need funeral sales production increased by 20 million dollars or about 6.6% over the second quarter of 2025, driven by an 8.3% increase in core pre-need sales production.

Speaker #3: Now shifting to cemetery. Comparable cemetery revenue increased by 23 million dollars or about 5%, primarily due to higher core revenue complemented by an increase in other revenue.

Speaker #3: Core revenues increased by $14 million, primarily due to a $15 million increase in total recognized pre-need revenue, of which $5 million resulted from higher property revenue and $10 million from higher merchandise and service revenue.

Speaker #3: Merchandise and service revenue also reflects the positive impact from increased trust fund income. Other revenue was higher by 8 million dollars compared to the prior year quarter, primarily from an increase in endowment care trust fund income based on market performance and higher total return distributions.

Thomas L. Ryan: Other revenue was higher by $8 million compared to the prior year quarter, primarily from an increase in endowment care trust fund income based on market performance and higher total return distributions. Comparable preneed sales production grew an impressive $29.7 million or 8% in the quarter. Core sales contributed $24.4 million, supported by continued strong underlying sales velocity growth in the mid-single digits. Large sales accounted for the remaining $5.3 million increase. This performance reflects the strength and effectiveness of our sales strategy and execution, generating high single-digit percentage sales growth in both preneed funeral and cemetery by focusing on our four pillars: sales counselor headcount, driving lead effectiveness, seminars, and large sales in the face of fewer leads generated from activities through our locations. Cemetery gross profit in the quarter grew by $7 million or 4%, with margins relatively flat at approximately 33%.

Speaker #3: Comparable pre-need sales production grew an impressive 29.7 million dollars or 8% in the quarter, core sales contributed 24.4 million supported by continued strong underlying sales velocity growth in the mid-single digits.

Speaker #3: Large sales accounted for the remaining 5.3 million dollar increase. This performance reflects the strength and effectiveness of our sales strategy and execution, generating high single-digit percentage sales growth in both pre-need funeral and cemetery by focusing on our four pillars: sales counselor headcount, driving lead effectiveness, seminars, and large sales.

Speaker #3: In the face of fewer leads generated from activities, through our locations. Cemetery gross profit in the quarter grew by 7 million dollars or 4%, with margins relatively flat at approximately 33%.

Speaker #3: Gross profit was impacted by higher selling compensation reflecting the strong pre-need sales production growth of 8%. A large percentage of our pre-need sales production growth, particularly for cemetery property, was deferred relative to the growth in pre-need recognized revenue.

Thomas L. Ryan: Gross profit was impacted by higher selling compensation, reflecting the strong preneed sales production growth of 8%. A large percentage of our preneed sales production growth, particularly for cemetery property, was deferred relative to the growth in preneed recognized revenue. On the selling compensation side, we recognized all of the fixed compensation in the period incurred. Because most of the growth came from core sales with a higher proportion of fixed compensation, the recognized revenues bore a larger burden of the selling compensation this quarter. You want the good news? The deferred revenues that went into the backlog to be recognized over the coming quarters will not only deliver revenue growth, but lower associated selling compensation expense, and therefore, at higher relative margins. Let's shift to a discussion about our outlook for 2026.

Speaker #3: On the selling compensation side, we recognized all of the fixed compensation in the period incurred, and because most of the growth came from core sales, with a higher proportion of fixed compensation, the recognized revenues bore a larger burden of the selling compensation this quarter.

Speaker #3: You want the good news? The deferred revenues that went into the backlog to be recognized over the coming quarters will not only deliver revenue growth, but also lower associated selling compensation expense and therefore result in higher relative margins.

Speaker #3: Now let's shift to a discussion about our outlook for 2026. The $4.20 midpoint of our annual guidance range for 2026 is confirmed as we narrow the range expected for adjusted earnings per share of $4.10 to $4.30.

Thomas L. Ryan: The $4.20 midpoint of our annual guidance range for 2026 is confirmed as we narrow the range expected for adjusted earnings per share of $4.10 to $4.30. While the Q1 funeral volumes presented a near-term headwind, we saw the year-over-year rate of decline moderate, and expect that to continue in the H2 of the year. When combined with strong momentum in pre-need 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.

Speaker #3: While the first quarter funeral volumes presented a near-term headwind, we saw the year-over-year rate of decline moderate, and expect that to continue in the back half of the year.

Speaker #3: When combined with strong momentum in pre-need cemetery sales, average revenue per funeral, and continued disciplined expense management, we are confident in our ability to deliver within our stated earnings range.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: In closing, I'd like to recognize and thank our entire SDI team for their ongoing commitment to our customers, our communities, and each other. Your dedication continues to be the foundation of our success.

Thomas L. Ryan: 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.

Speaker #3: With that, I'll turn the call over to Eric.

Speaker #2: Thank you, Tom. Good morning, everybody. Thanks for being on the call today. Before I begin my prepared remarks, I want to take a moment to do what we always do, which is most important, and that's to thank our more than 25,000 associates across the entire SDI network and across our company for how they handle the families, work with the families, and a compassionate way and continue to have that compassionate care across all the communities that they serve.

Eric D. Tanzberger: Thank you, Tom. Good morning, everybody. Thanks for being on the call today. Before I begin my prepared remarks, I want to take a moment to do what we always do, which is most important, and that's to thank our more than 25,000 associates across the entire SCI network and across our company for how they handle the families, work with the families in a compassionate way, and continue to have that compassion and care across all the communities that they serve. We're truly proud of the very positive impact that those associates are having in the communities that we serve. With that being said, I'll start by reviewing our cash flow results this morning and capital investments for the quarter before concluding with an update on our cash guidance for the full year and our overall financial position. Let's start with the Q2.

Speaker #2: We're truly proud of the very positive impact that those associates are having in the communities that we serve. So with that being said, I'll start by reviewing our cash flow results this morning and capital investments for the quarter before concluding with an update on our cash guidance for the full year and our overall financial position.

Speaker #2: So let's start with the second quarter. We generated impressive adjusted operating cash flow of about $239 million. This exceeded our expectations and was an improvement of about $71 million or 42% over the prior year.

Eric D. Tanzberger: We generated impressive adjusted operating cash flow, about $239 million. This exceeded our expectations and was an improvement of about $71 million or 42% over the prior year. Let's talk about breaking that down a little bit. Operating income produced cash flow that was about higher by about $7 million. Cash taxes were also lower by $64 million, predominantly due to a renewable energy investment credit realized in the quarter, and I'm going to give you a little bit more detail later in these remarks. Outside of cash taxes, working capital was relatively flat in the quarter as our pre-need working capital sources were offset really by increased other working capital uses. Stronger cemetery pre-need cash collections provided about a $36 million source, which is driven by both the 8% higher pre-need cemetery sales production during the quarter.

Speaker #2: So let's talk about breaking that down a little bit. Operating income produced cash flow that was about higher by about $7 million. Cash taxes were also lower by $64 million predominantly due to a renewable energy investment credit realized in the quarter that I'm going to give you a little bit more detail later in these remarks.

Speaker #2: Outside of cash taxes, working capital was relatively flat in the quarter, as our pre-need working capital sources were offset really by increased other working capital uses.

Speaker #2: But stronger cemetery pre-need cash collections provided about a 36 million dollar source which has driven by both the 8% higher pre-need cemetery sales production during the quarter were again a proportion of this was deferred into the future, as well as some higher collection rates on these pre-need contracts.

Eric D. Tanzberger: Again, a proportion of this is deferred into the future, as well as some higher collection rates on these pre-need contracts. These higher receipts that I just mentioned were offset by a corresponding pretty much $37 million use of working capital, which is primarily associated with the timing of an additional payroll funding in the current quarter, which by the way, will benefit us in the H2 of this year. Finally, cash interest was modestly lower by just about $1 million, as lower cash interest associated with our 2032 notes was partially offset by higher interest on our floating rate debt. Let's talk about capital investment during the quarter. We invested $120 million of capital into our existing funeral home and cemetery locations. Also, business acquisitions, real estate, and new construction of funeral homes and cemeteries.

Speaker #2: These higher receipts that I just mentioned were offset by a corresponding pretty much 37 million dollar use of working capital which is primarily associated with the timing of an additional payroll funding in the current quarter which, by the way, will benefit us in the second half of this year.

Speaker #2: Finally, cash interest was monestly lower by just about $1 million as lower cash interest associated with our 2032 notes was partially offset by higher interest on our floating rate debt.

Speaker #2: So let's talk about capital investment during the quarter. We invested $120 million of capital into our existing funeral home and cemetery locations. Also business acquisitions real estate and new construction of funeral homes and cemeteries.

Speaker #2: So to break this down, we invested $80 million of maintenance capital back into our current locations which was slightly higher than the prior year due to the timing of certain projects.

Eric D. Tanzberger: To break this down, we invested $80 million of maintenance capital back into our current locations, which is slightly higher than the prior year due to the timing of certain projects. Included in this maintenance spend, we invested $45 million into new high-returning cemetery development projects, $30 million into our current funeral home and cemetery locations, which again improves the overall customer experience, and $6 million into our digital strategy and other corporate investments. We also invested $25 million of growth capital during the quarter towards the construction of new funeral homes, as well as the purchase of real estate for future new build and expansion opportunities. From an acquisition standpoint, we deployed $15 million towards business acquisitions in the quarter, which added funeral and cemetery locations in California, Georgia, and Delaware.

Speaker #2: Included in this maintenance spend, we invested $45 million into new high returning cemetery development projects, $30 million into our current funeral home and cemetery locations, which again improves the overall customer experience, and $6 million into our digital strategy and other corporate investments.

Speaker #2: We also invested $25 million of growth capital during the quarter toward the construction of new funeral homes, as well as the purchase of real estate for future new builds and expansion opportunities.

Speaker #2: From an acquisition standpoint, we deployed $15 million towards business acquisitions in the quarter which added funeral and cemetery locations in California, Georgia, and Delaware.

Speaker #2: As always, we're thrilled about these high quality funeral homes and cemeteries joining our company. And we're more than happy to welcome all the new associates to the SDI family.

Eric D. Tanzberger: As always, we're thrilled about these high-quality funeral homes and cemeteries joining our company, and we're more than happy to welcome all the new associates to the SCI family. These acquisitions bring our full year acquisition investment to almost $40 million, and we remain confident in the current acquisition pipeline and our ability to achieve $75 to $125 million of acquisition investment target for the full year of 2026. Moving on to capital distributions to our shareholders. We returned $172 million of capital to shareholders during the quarter, through $123 million of share repurchases and just under $50 million of dividends. We repurchased over 1.5 million shares during the quarter at an average price of about $76 per share. This brings the number of shares outstanding to just over 136 million at the end of the quarter.

Speaker #2: These acquisitions bring our full year acquisition investment to almost $40 million and we remain confident in the current acquisition pipeline and our ability to achieve 75 to 125 million dollars of acquisition investment target for the full year of 2026.

Speaker #2: So moving on to capital distributions to our shareholders, we returned $172 million of capital to shareholders during the quarter through $123 million of share repurchases and just under $50 million of dividends.

Speaker #2: We repurchased over one and a half million shares during the quarter at an average price of about $76 per share. This brings the number of shares outstanding to just over $136 million at the end of the quarter.

Speaker #2: Year to date, we have returned over $360 million in capital to shareholders repurchasing $3.3 million shares at an average price of $78 which totals to $266 million and additional $96 million of dividends.

Eric D. Tanzberger: Year to date, we have returned over $360 million in capital to shareholders, repurchasing 3.3 million shares at an average price of $78, which totals to $266 million, an additional $96 million of dividends. Subsequent to the end of this quarter, we've continued that momentum by repurchasing another 330,000 shares for about $26 million, which equates to about $78 per share. Let's now shift to the rest of 2026 in terms of cash flows. As we reported in the press release, we are increasing the midpoint of our adjusted operating cash flow guidance for the full year by about $50 million from a previous midpoint of $1.035 billion to now $1.085 billion for the full year.

Speaker #2: Subsequent to the end of this quarter, we've continued that momentum by repurchasing another $330,000 shares for about $26 million which equates to about $78 per share.

Speaker #2: So let's now shift to the rest of 2026 in terms of cash flows. As we reported in the press release, we are increasing the midpoint of our adjusted operating cash flow guidance for the full year by about $50 million from a previous midpoint of $1.035 billion to now $1.085 billion for the full year.

Speaker #2: This $50 million increase is driven by better than expected working capital sources which is primarily the increase in cemetery down payments and installment cash receipts on higher production that we've mentioned today this morning.

Eric D. Tanzberger: This $50 million increase is driven by better than expected working capital sources, which is primarily the increase in cemetery down payments and installment cash receipts on higher production that we've mentioned today this morning. We're also raising maintenance CapEx slightly by about $10 million from $325 million in total to $335 million, with cemetery development and maintenance targets really both only increasing by about $5 million each. When deducting this $335 million of maintenance CapEx for the full year from the adjusted operating cash flow guidance midpoint that I just mentioned, we calculate our adjusted free cash flow at $750 million for the full year of 2026. This is an impressive 18% increase over last year's $637 million of adjusted full year free cash flow for 2025. A little bit more detail here as well.

Speaker #2: Finally, we're also raising maintenance capex slightly by about $10 million from $325 million in total to $335 million with cemetery development and maintenance targets really both only increasing by about $5 million each.

Speaker #2: When deducting this $335 million of maintenance capex for the full year from the adjusted operating cash flow guidance midpoint that I just mentioned, we calculate our adjusted free cash flow at $750 million for the full year of 2026.

Speaker #2: This is an impressive 18% increase over last year's $637 million of adjusted full year free cash flow for 2025. A little bit more detail here as well.

Speaker #2: There's no change in our cash tax guidance, which is approximately $120 million of cash taxes for the full year. However, I do want to remind everyone—we've talked about this before.

Eric D. Tanzberger: There's no change in our cash tax guidance, which is approximately $120 million of cash taxes for the full year. However, I do want to remind everyone, we've talked about this before, that we are not a full cash taxpayer during 2026, with a cash tax rate of about 15% to 16%, which really compares to a more normalized cash tax rate of about 24% to 25% expected sometime in the future. Cash taxes this year are primarily benefited from the utilization of solar tax credits that would've been generated through tax equity investments. While these credits reduce cash tax payments and therefore increase cash flow from operations, they are accompanied by about $40 million of cash outflows or investments reflecting in investing activities during this quarter.

Speaker #2: That we are not a full cash tax payer during 2026 with a cash tax rate of about 15 to 16 percent which really compares to a more normalized cash tax rate of about 24 to 25 percent expected sometime in the future.

Speaker #2: Cash taxes this year are primarily benefited from the utilization of solar tax credits that have been generated through tax equity investments. And while these credits reduce cash tax payments and therefore increase cash flow from operations, they are accompanied by about $40 million of cash outflows or investments reflecting in investing activities during this quarter.

Speaker #2: So assuming we paid cash taxes at the full normalized rate of 24 to 25 percent, we'd actually pay closer to $190 million of cash taxes for a full normalized run rate which would have also brought our calculated free cash flow to about $680 million which again is still a very strong 7% increase over the prior year of $637 million that I just mentioned to you.

Eric D. Tanzberger: Assuming we paid cash taxes at the full normalized rate of 24% to 25%, we'd actually pay closer to $190 million of cash taxes for a full normalized run rate, which would have also brought our calculated free cash flow to about $680 million, which again, is still a very strong 7% increase over the prior year $637 million that I just mentioned to you. As a sidebar from an effective tax rate perspective for the income statement, we continue to expect our full year 2026 to trend in line with what you see in the prior year with about a 25% to 26% effective tax rate. I also want to provide some brief updates on our liquidity and financial position this morning. We continue to benefit from a favorable and disciplined debt maturity profile.

Speaker #2: And as a sidebar from an effective tax rate perspective for the income statement, we continue to expect our full year 2026 to trend in line with what you've seen in the prior year with about a 25 to 26 percent effective tax rate.

Speaker #2: So I also want to provide some brief updates on our liquidity and financial position this morning. We continue to benefit from a favorable and disciplined debt maturity profile.

Speaker #2: While $137 million of our seven and a half percent 2027 notes became current this quarter, our balance sheet provides ample flexibility as we evaluate our refinancing alternatives.

Eric D. Tanzberger: While $137 million of our 7.5% 2027 notes became current this quarter, our balance sheet provides ample flexibility as we evaluate our refinancing alternatives. We ended the quarter with liquidity of about $1.6 billion, which consists of $260 million of cash on hand and just under $1.4 billion available on our long-term bank credit facility. We also ended the quarter at the midpoint of our long-term leverage target range of 3.5x to 4x net debt to EBITDA, that was exactly about 3.77 for the end of the quarter.

Speaker #2: We ended the quarter with liquidity of about $1.6 billion. Which consists of $260 million of cash on hand and just under $1.4 billion available on our long-term bank credit facility.

Speaker #2: We also ended the quarter at the midpoint of our long-term leverage target range of three and a half to four times net debt to EBITDA and that was exactly about 3.77 for the end of the quarter.

Speaker #2: So as you can see with all of these statistics, our strong balance sheet are robust liquidity that I just mentioned are very consistent and predictable cash flow stream really continue to supplement our capital investment programs which ultimately results in significant flexibility that we have to invest opportunistically for the long-term benefit of SCI our associates and our shareholders.

Eric D. Tanzberger: As you can see with all these statistics, our strong balance sheet, our robust liquidity that I just mentioned, our very consistent and predictable cash flow stream really continue to supplement our capital investment programs, which ultimately results in significant flexibility that we have to invest opportunistically for the long-term benefit of SCI, our associates, and our shareholders. Operator, this concludes my remarks and Tom's remarks, and with that, I'm going to turn it back to you, please, and we'll open the call up for questions.

Speaker #2: So operator, this concludes my remarks and Tom's remarks and with them I turn it back to you please and we'll open the call up for questions.

Speaker #1: 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.

Operator 2: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from A.J. Rice of UBS. Go ahead, please.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from A.J. Rice of UBS. Go ahead, please.

Speaker #1: To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from AJ Rice of UBS.

Speaker #1: Go ahead please.

Speaker #3: Thanks. Hi everybody. First question maybe just to ask a little bit about the strategy behind what you're doing with the Salesforce moving more to fix compensation a little away from commission.

A.J. Rice: Thanks. Hi, everybody. First question, maybe just to ask a little bit about the strategy behind what you're doing with the sales force, moving more to fixed compensation, a little away from commission. What's the thinking there, and are you seeing that have results and is that part of what's going on with the production picking up?

Speaker #3: What's the thinking there and are you seeing that have results in is that part of what's going on with the production picking up?

Speaker #2: Yeah. AJ, this is Tom. I'm going to answer that specifically and then I want to let Jay Waring speak to the strategy a little more in depth.

Thomas L. Ryan: Yeah. A.J., this is Tom. I'm going to answer that specifically, and then I want to let Jay Waring speak to this strategy a little more in depth. The short answer is yes. By giving more fixed compensation, the idea is to attract the best people we can and therefore most appropriately retain the best people that we can. Giving them a better opportunity to stay in there and really learn the selling techniques. It's mostly a retention tool, and we do find it effective. With that, I referenced the 4 pillars as part of our strategy, and I think it's a good question to kind of launch Jay to give you a little more detail into some of the things we're focused on and what we think is driving some of the extraordinary performance. Jay, you want to?

Speaker #2: The short answer is yes. By giving more fixed compensation, the idea is to attract the best people we can and therefore most appropriately retain the best people that we can.

Speaker #2: So giving them a better opportunity to stay in there and really learn the selling techniques and so it's mostly a retention tool and we do find it effective.

Speaker #2: But with that, I referenced the four pillars as part of our strategy and I think it's a good question to kind of launch Jay to give you a little more detail into some of the things we're focused on and what we think is driving some of the extraordinary performance.

Speaker #2: Jay, you want to.

Speaker #4: Yeah. So as Tom mentioned, our sales strategy has four pillars for growth. And the first pillar is increasing the number of printed sales counselors.

Jay Waring: Yeah. As Tom mentioned, our sales strategy has four pillars for growth, the first pillar is increasing the number of preneed sales counselors. A.J., that gets right at your question. We're trying to expand and enhance the size of our sales force. The second pillar is increasing our lead to sale rate, the percentage of our leads that end up resulting in a sale. The third pillar is increasing our number of preneed seminars. Our customers tell us that attending a preneed seminar is a very low-key, low-pressure way for them to learn about the benefits of pre-planning. The fourth pillar is increasing our large sales. We've had a lot of success over time with large sales. We believe they're a nice core competency of ours, and we see opportunities to further build on them.

Speaker #4: So AJ, that gets right to your question. We're trying to expand and enhance the size of our Salesforce. The second pillar is increasing our lead to sale rate.

Speaker #4: So the percentage of our leads to end up resulting in a sale. The third pillar is increasing our number of prenatal seminars. So our customers tell us that attending a prenatal seminar is a very low key low pressure way for them to learn about the benefits of pre-planning.

Speaker #4: And the fourth pillar is increasing our large sales. We've had a lot of success over time with large sales. We believe they're a nice core competency of ours.

Speaker #4: And we see opportunities to further build on them. So overall, I'd say that Jerry and Brian and our entire team are executing very well.

Jay Waring: Overall, I'd say that Jerry and Brian and our entire team are executing very well. We're seeing strong results, we're very excited about our future growth.

Speaker #4: We're seeing strong results, and we're very excited about our future growth.

Speaker #3: And AJ, just to kind of just to provide a little color to what Jay something Jay said. This lead to sale rate, you think what does that mean?

Thomas L. Ryan: A.J., just to kind of

A.J. Rice: Okay. Thanks, Tom.

Thomas L. Ryan: just to provide a little color to something Jay said, this lead to sale rate, you think, well, what does that mean? Well, that's really about being more effective through the sales process. The other day, Jay and Jerry were in my office showing me we're utilizing AI right now to train our people, and we have the ability to have AI customer interactions that give grades, give feedback, personalized advice. They're really leveraging this tool to be very effective, and it's really early days. We're pretty excited about what we're doing and where we're headed with that.

Speaker #3: Well, that's really about being more effective through the sales process. And the other day Jay and Jerry were in my office showing me we're utilizing AI right now to train our people.

Speaker #3: And we have the ability to have AI customer interactions that give grades, provide feedback, and offer personalized advice. And so they're really leveraging this tool to be very effective.

Speaker #3: And it's really early days, but we're pretty excited about what we're doing and where we're headed with that.

Speaker #2: Okay. And just another aspect on the prenatal sales. I guess on the funeral side, you made the pivot over to more insurance related sales from the trust.

A.J. Rice: Okay. Just another aspect on the preneed sales. I guess on the funeral side, you've made the pivot over to more insurance-related sales from the trust. I believe at least some states still require you to do the trust, and there may be reasons to do the trust in some instances. Where do you settle out in terms of how much of the sales going forward are going to be insurance-related versus trust, and are we at that point where you're sort of at a steady state going forward?

Speaker #2: But I know some I believe at least some states still require you to do the trust and there may be reasons to do the trust in some instances.

Speaker #2: Where do you settle out in terms of how much of the sales going forward are going to be insurance related versus trust and are we at that point where you're sort of at a steady state going forward?

Speaker #3: We are AJ. As of July I think this year we're kind of at that steady state in the low 90s. And I'm talking about SCI direct.

Thomas L. Ryan: We are, A.J. As of July, I think this year, we're kind of at that steady state in the low 90s. I'm talking about SCI Direct, sorry. I would say 70s in the core, and the difference really being there's certain people that can't get insurance, right? We always have to have some form of a trust product. Then again, jurisdictionally, we may prefer a trust product in certain states. Yeah, we think 70 is probably the right core number and low 90s on the SCI Direct. We're really trying to push that. Again, not everybody's insurable, so we need to be flexible enough to make sure we take care of all our customers.

Speaker #3: Sorry. It's a little I would say 70s in the core. And the difference really being there's certain people that can't get insurance, right? So we always have to have some form of a trust product and then again jurisdictionally we may prefer a trust product in certain states.

Speaker #3: So yeah, I think we're we think 70 is probably the right core number and low 90s on the SCI direct. We're really trying to push that.

Speaker #3: But again, not everybody's insurable so we need to be flexible enough to make sure we take care of all our customers.

Speaker #2: Okay. And just a final question on you made the comment that over the course of the second quarter it sounds like the funeral volumes basically stabilized and even improved a little bit.

A.J. Rice: Okay. Just a final question on, you made the comment that over the course of Q2, it sounds like the funeral volumes basically stabilized and even improved a little bit in the last month of the quarter. Any early read on what you're seeing in Q3? Is it continuing to be steady to improving?

Speaker #2: In the last month of the quarter, any early read on what you're seeing in the third quarter? Is it continuing to be steady to improving?

Speaker #3: Yeah. What we're seeing in July AJ, it's pretty much flat. It's kind of preliminary. Obviously, we're not done with July. But right around kind of flat volume versus last year.

Thomas L. Ryan: Yeah. What we're seeing in July, A.J., is pretty much flat, is kind of preliminary. Obviously, we're not done with July, but right around kind of flat volume versus last year. Obviously, we don't know what the rest of the year holds, but I think we feel pretty good that the percentage that we're at now will continue to shrink as we get to the back half of the year. Probably be in line or better than the trends we talked about in Q1.

Speaker #3: Obviously, we don't know what the rest of the year holds. But I think we feel pretty good that the percentage that we're at now will continue to shrink as we get to the back half of the year.

Speaker #3: And so, we’ll probably be in line with or better than the trends we talked about in the first quarter.

Speaker #2: Okay. All right. Thanks so much.

A.J. Rice: Okay. All right. Thanks so much.

Speaker #3: Thank you AJ.

Thomas L. Ryan: Thank you, A.J.

Speaker #1: The next question comes from Scott Schneeburger of Oppenheimer. Go ahead please.

Operator 2: The next question comes from Scott Schneeberger of Oppenheimer. Go ahead, please.

Operator: The next question comes from Scott Schneeberger of Oppenheimer. Go ahead, please.

Speaker #5: Thanks. Good morning. I'm just going to follow up on some things Jay said. In prepared remarks, you all mentioned, hey, we're doing the four pillars.

Scott Schneeberger: Thanks. Good morning. I'm just going to follow up on some things Jay said. In prepared remarks, you all mentioned, hey, we're doing the four pillars, that these are structural and ongoing in the sales technique, because with the softer funeral activity, there's less companion sales and lead opportunity. In time, do you anticipate, as that comes back, that'll just provide more strong tailwind to what you're able to do in pre-need sales? Thanks.

Speaker #5: These are structural and ongoing. In the sales technique, because with the softer funeral activity, there's less companion sales and lead opportunity. In time, do you anticipate, as that comes back, that that'll just provide a more strong tailwind to what you're able to do in preneed sales?

Speaker #5: Thanks.

Speaker #4: Yeah. This is Jay. I'd say yes. What you're seeing today is really garnering more customers away from the cemetery, away from the funeral home, primarily through our seminars.

Jay Waring: Yeah, this is Jay. I'd say yes. What you're seeing today is really garnering more customers away from the cemetery, away from the funeral home, primarily through our seminars. One of our greatest lead sources is serving at-need customers and following for those customers after their time of need. To the extent the interment count grows and the funeral volume grows, we'll be in great shape.

Speaker #4: And one of our greatest lead sources is serving at need customers and filing for those customers after their time of need. So to the extent the interim account grows and the funeral volume grows, we'll be in great shape.

Speaker #5: Thanks. And then just following on AJ's last question about the funeral volumes. Surprisingly soft in the first quarter, but it looks like it's much more stable on a year-over-year basis here in the second and July as mentioned.

Scott Schneeberger: Thanks. Just following on A.J.'s last question about the funeral volumes. Surprisingly soft in Q1, but it looks like it's much more stable on a year-over-year basis here in Q2, and July, as mentioned. How are you thinking about that going forward? I'm talking looking a year out. Do you think we're getting back to a normalized level and perhaps working towards a demographic shift of an increase with that Q1 being anomaly or still being conservative and not certain? Thanks.

Speaker #5: How are you thinking about that going forward? And I'm talking looking a year out. Do you think we're getting back to a normalized level and perhaps working towards a demographic shift, with an increase?

Speaker #5: With that first quarter being anomaly or still being conservative and not certain? Thanks.

Speaker #4: I mean, Scott, as

Thomas L. Ryan: Scott, as you know, we don't know, but I personally feel like we're on the cusp of beginning to see this impact. The only thing that negates that slightly when I think about, let's say, 2027, because obviously I think we'll have a good comparison to 2026. I feel good about that. I think we'll begin to see the demographic impacts. The things that I read about are, we came out of COVID, we kind of had this spike of excess deaths related to a lot of things, right? If you look at drug overdoses, if you look at suicides, if you look at auto fatalities, there's so many good trends for society that those are getting better, right? Now, at some point, those stabilize. When I think of 2026 to 2027, I hope the suicide rate goes down again.

Speaker #3: you know, we don't know. But I personally feel like we're on the cusp of beginning to see this impact. And the only thing that negates that slightly when I think about, let's say, 2027, because obviously I think we'll have a good comparison to '26.

Speaker #3: I feel good about that. And I think we'll begin to see the demographic impacts the things that I read about are we came out of COVID.

Speaker #3: We kind of had this spike of excess deaths related to a lot of things, right? I mean, if you look at drug overdoses, if you look at suicides, if you look at auto fatalities, there's so many good trends for society that those are getting better, right?

Speaker #3: Now, at some point, those stabilize. But when I think of '26 to '27, I hope the suicide rate goes down again. I hope all these things are going to happen.

Thomas L. Ryan: I hope all of these things are going to happen. That could be something that has a minor impact on 2027 as I think about it. Overall, I think the demographics, we should begin to see that kick into the numbers, and I think that's our expectation. It's really hard to precisely predict, but that's how we feel about as we look at models and project internally.

Speaker #3: So that could be something that has a minor impact on 2027, as I think about it. But overall, I think the demographics—we should begin to see that kick into the numbers, and I think that's our expectation.

Speaker #3: And it's really hard to precisely predict, but that's how we feel about as we look at models and project internally.

Speaker #5: Thanks for that. And then just lastly, can we speak to margins for a second? A bunch of moving pieces. That have impacted the quarter.

Scott Schneeberger: Thanks for that. Just lastly, can we speak to margins for a second? A bunch of moving pieces that have impacted the quarter. You all called it out, but can we roll it together tightly about puts and takes on the margin Q2, how we might see Q3, not only the payroll, but how some of the activity in production versus sales and in sales compensation is going to impact that? Thank you.

Speaker #5: You all called it out, but can we roll it together tightly about puts and takes on the margin second quarter, how we might see third quarter, not only the payroll, but how some of the activity in production versus sales and sales compensation is going to impact that.

Speaker #5: Thank you.

Speaker #3: Sure. So kind of level set here. Scott, first is as we think about how we manage expenses, we have labor efficiency metrics and dashboards.

Thomas L. Ryan: Sure. Kind of level set here, Scott. First is, as we think about how we manage expenses, we have labor efficiency metrics and dashboards. Our frontline leaders and team members are out there every day utilizing those to manage as best we can. As an example, if salary expense inflation is three, in a tough quarter, and again, this is a global statement, they can manage salary costs down to two, right? They have the tools, they have the talent. I can't remember what that quote is from. Some movie. Cemetery side, they have the same type of tools. We have a team here in corporate that's staffed with a lot of leadership from the field, that's called the Performance Improvement Committee.

Speaker #3: And so our frontline leaders and team members are out there every day utilizing those to manage as best we can. So as an example, if salary expense inflation is 3% in a tough quarter—and again, this is a global statement—they can manage salary costs down to 2%, right?

Speaker #3: So they have the tools. They have the talent. I can't remember what that quote is from. Some movie. And then cemetery side, they have the same type of tools.

Speaker #3: And then we have a team here in corporate that's staffed with a lot of leadership from the field, called the Performance Improvement Committee.

Speaker #3: And so we take ideas and from the field and can disseminate those quickly and manage costs as best we can. Again, it's a high fixed cost business.

Thomas L. Ryan: We take ideas from the field and can disseminate those quickly and manage costs as best we can. Again, it's a high fixed cost business, but on the margin, we can do some things. As I think about funeral margins going forward and some of the things, the winds that were in our face, obviously volume's a big one. Two things are happening right now that are, or a couple of things are happening that are going to go away. We talk about our general agency revenues, both on SCI Direct and Core. As you think about the transition from one vendor to the next, we've had to create a cancellation reserve. They're bearing the burden right now of probably about 200 basis points of creating a reserve that, I'd say, will go away sometime shortly, and we think will be better.

Speaker #3: But on the margin, we can do some things. So as I think about funeral margins going forward and some of the things the wins that were in our face, obviously volume is a big one.

Speaker #3: But two things are happening right now that are a couple of things are happening that are going to go away. We talk about our general agency revenues, both on SEI direct and core.

Speaker #3: And as you think about the transition from one vendor to the next, we've had to create a cancellation reserve. And so they're bearing the burden right now of probably about 200 basis points of creating a reserve that I'd say will go away sometime shortly.

Speaker #3: And we think we'll be better. Number two, the selling compensation changes—and here this would be two things. One is, when we transition to more fixed cost, we're getting close to the end of that.

Thomas L. Ryan: Number two, the selling compensation changes. Here, this would be two things. One is when we transition to more fixed cost, we're getting close to the end of that. The other piece is the transition to an insurance product. Those two things, for lack of a better term, didn't really impact our cash outlay, but impacted the way we recognize expenses. Again, those go away in Q3. We've been bearing the brunt of this, and funeral margins should get a little better. The last one, they're all happening at the same time, we used to deliver urns prior to need. We stopped doing that a while back. The last quarter, I believe, is Q4, Trey, is that right?

Speaker #3: And the other piece is the transition to an insurance product. So, those two things, for lack of a better term, didn't really impact our cash outlay but impacted the way we recognize expenses. And again, those kind of go away in the third quarter.

Speaker #3: So we've been bearing the brunt of this and it's so funeral margins should get a little better. The last one and again, they're all happening at the same time.

Speaker #3: We used to deliver earns prior to need we stopped doing that a while back. The last quarter, I believe, is the fourth quarter, Trey, is that right?

Speaker #3: We’ll no longer have anything in both periods of delivery of earns. And that hurt us by $5 million. So as I think about margins in ’26, the rest of ’26, they should get better.

Thomas L. Ryan: We'll no longer have anything in both periods of delivery of urns, that hurt us by $5 million. As I think about margins in 2026, the rest of 2026, they should get better. 2027, they should get better again on the funeral side. On the cemetery side, the things I think about are backlog delivery, right? We told you we're selling a lot more than we're delivering, and we're deferring a lot less expense. Those higher margin cemeteries delivery should happen in H2. Again, we've got great performance in our trust funds. I hope those continue. I think they will. The key metrics of that trust fund, just to keep in mind, are what's the original corpus going in? We always talk about income, but I want to point out something.

Speaker #3: '27, they should get better again. On the funeral side. On the cemetery side, the things I think about are backlog delivery, right? We told you we're selling a lot more than we're delivering.

Speaker #3: And we're deferring a lot less expense, so those higher-margin cemeteries' delivery should happen in the back half of the year. And then again, we've got great performance on our trust funds.

Speaker #3: I hope those continue. I think they will. And the key metrics of that trust fund, just to keep in mind, are what's the original corpus going in?

Speaker #3: And we always talk about income, but I kind of want to point out something. The business that's in the backlog has a higher base value than it's always going to improve.

Thomas L. Ryan: The business that's in the backlog has a higher base value, it's always going to improve. We see it every quarter. It's better written business. How long has it been in the trust fund, so we can get what's the period of time that it's been at work, and then what are those returns? It's not only income, it's really just the value of the contract that's coming back. Those are the things when I think about cemetery, that ought to enhance the margins going forward and enhance the margins on funeral. We're confident, we have the tools, and the trends are starting to shift in our favor.

Speaker #3: We see it every quarter, it's better written business. How long has it been in the trust funds, so we can get the period of time that it's been at work?

Speaker #3: And then what are those returns? So it's not only income, it's really just the value of the contract that's coming back. And those are the things I think when I think about cemetery, that ought to enhance the margins going forward and enhance the margins on funeral.

Speaker #3: And so we're confident. We have the tools. And the trends are starting to shift in our favor.

Speaker #5: Thanks, guys.

Scott Schneeberger: Thanks, guys.

Speaker #2: The next question comes from Tyler Barasha of Truist. Go ahead, please.

Operator 2: The next question comes from Tyler Barashaw of Truist. Go ahead, please.

Operator: The next question comes from Tyler Barashaw of Truist. Go ahead, please.

Speaker #6: Good morning. This is Tyler Barasha for Toby. Impressive pre-need sales production, up high single digits. How should we think about that for the balance of the year?

Tyler Barashaw: Good morning. This is Tyler Barashaw. For Toby, impressive preneed sales production, up high single digits. How should we think about that for the balance of the year? What kind of range do you expect?

Speaker #6: What kind of range do you expect?

Speaker #3: And you're talking about cemetery, Tyler? I suspect, or both?

Thomas L. Ryan: You're talking about cemetery, Tyler, I suspect? Both?

Speaker #6: Yeah. Primarily pharmacists.

Tyler Barashaw: Yep.

Thomas L. Ryan: Yeah.

Tyler Barashaw: Primarily cemetery

Speaker #3: Yeah, so on the cemetery side, for the six months, I think we're up about 8.8%—call it rounded, nine. And when we think about the back half of the year, I think right now our position would be we're going to be in the mid to probably the mid to maybe low high-single-digit percentages. That's a place that we're kind of modeling and believe.

Thomas L. Ryan: Yeah. On the cemetery side, for the 6 months, I think we're up about 8.8%, call it rounded 9. When we think about the back half of the year, I think right now our position would be, we're going to be in the mid to maybe low high single-digit percentages, is a place that we're modeling and believe. We think most of that is going to come from core. That's the piece, because as you think about the back half of the year from a large sale perspective, last year was pretty good. I think we were in the mid-40s type of by quarter of large sales. That's a comparison that's a good target, and I feel good we can match it or slightly beat it. I think we anticipate most of the growth to come from the core sales.

Speaker #3: And we think most of that is going to come from core. That's the piece because as you think about the back half of the year from a large sale perspective, last year was pretty good.

Speaker #3: I think we're in the mid-40s, type of, by quarter, of large sales. And that's a comparison—that's a good target. And I feel good we can match it or slightly beat it.

Speaker #3: But I think we anticipate most of the growth to come from the core sales.

Speaker #6: Do you also then touch on funeral as well?

Tyler Barashaw: You also touched on funeral as well?

Speaker #3: Yeah. Funeral probably the same. Mid single digit type of percentages as we think about those things. And again, trending better, I hope, as we think about general agency commission rates and things like that, particularly as we get out into 2027.

Thomas L. Ryan: Yeah, funeral, probably the same, mid-single-digit type of percentages as we think about those things. Again, trending better, I hope, as we think about general agency commission rates and things like that, particularly as we get out into 2027.

Speaker #6: Thank you.

Tyler Barashaw: Thank you.

Speaker #3: Thank you.

Thomas L. Ryan: Thank you.

Speaker #2: The next question comes from Joanna Gage of Bank of America. Go ahead, please.

Operator 2: The next question comes from Joanna Gajuk of Bank of America. Go ahead, please.

Operator: The next question comes from Joanna Gajuk of Bank of America. Go ahead, please.

Speaker #7: Oh, hey. Good morning. A couple of questions. So first, I guess on this last one, in terms of the numbers, can you quantify the large sales in this quarter and two?

Joanna Gajuk: Oh, hey, good morning. A couple questions. First, I guess on this last one, in terms of the numbers, can you quantify the large sales in this quarter in Q2? Because Q1, I guess, was also in the low $40 million.

Speaker #7: Because Q1, I guess, was also in the low 40 million?

Speaker #3: Yeah. We actually in the second quarter approached almost about 50 million. So it was a really good quarter. Obviously, it wasn't dramatically more than last year because last year was a great quarter too.

Thomas L. Ryan: Yeah, we actually, in Q2, approached almost about 50 million. It was a really good quarter.

Joanna Gajuk: Okay.

Thomas L. Ryan: Obviously, it wasn't dramatically more than last year, because last year was a great quarter too. Yeah, Joanna, we're starting to hit numbers closer to 50, and I'd say the breadth of the sales are getting better. Jay, you want to touch on that a little bit?

Speaker #3: But yeah, Joanna, we're seeing we're starting to hit numbers closer to 50, and I'd say the breadth of the sales is getting better. Jay, you want to touch on that a little bit?

Speaker #6: In terms of private modeling and sales?

Jay Waring: In terms of private mausoleum sales?

Speaker #3: Yeah. I mean, I think we talked about the other day the over a million segment is kind of a different one. What we're really seeing success in now is the call it the 100,000 dollar sale to the 900,000 dollar sale.

Thomas L. Ryan: Yeah. I think we talked about the other day, the over 1 million segment is kind of a different one. What we're really seeing success in now is, they'll call it the $100,000 sale to the $900,000 sale. You want to touch a little bit about our focus on that?

Speaker #3: You want to touch a little bit about our focus on that?

Speaker #6: Yeah. Give an accolade to Jerry and Brian and the team who are doing intensive training with our sales force on understanding what all the options are, and showing the options to the customers, and really letting them pick.

Jay Waring: Yeah. I'd give an accolade to Jerry and Brian and the team who are doing intensive training with our sales force on understanding what all the options are and showing the options to the customers to really let them pick.

Speaker #3: So, it's really more contracts, and I think that's a very positive thing—hitting that inventory level that's more affordable for more people. I think that focus is really paying off.

Thomas L. Ryan: It's really more contracts, and I think that's a very positive thing of hitting that inventory level that's more affordable for more people, and I think that focus is really paying off.

Speaker #7: Okay. That's great. And on the comment you were making that you expect more growth, excuse me, I'm losing my voice from the core. So what gives you confidence that there's growth demand, I guess, for that type of product?

Joanna Gajuk: Okay, that's great. On this comment you were making that you expect more growth, excuse me, I'm losing my voice, from the core. What gives you confidence that there's growth demand, I guess, for this type of product?

Speaker #3: Well, I think it's the trend. We've seen five quarters in a row of trending strong velocity. I think a component of that is the training we're talking about and the focus.

Thomas L. Ryan: Well, I think it's the trend. We've seen 5 quarters in a row of trending strong velocity. I think a component of that is the training we're talking about and the focus. Jay keeps talking about the four pillars. We've really got the team all singing from the same song sheet. We're focused on the things that are going to drive that, whether it be predominantly from seminars and getting those types of leads, focusing on the closing rate using those AI tools. Then specifically, we called out before, we've got a real focus on that cremation consumer. Again, remember, we view that opportunity as almost like greenfield opportunity. We had cremation consumers that we weren't talking to about these products. Now we have the props, if you will, within our facilities where it's natural in conversation.

Speaker #3: Jay keeps talking about the four pillars. We've really got the team all singing from the same song sheet. We're focused on the things that are going to drive that, whether it be predominantly from seminars and getting those types of leads, or focusing on the closing rate, using those AI tools.

Speaker #3: And then specifically, we called out before, we've got a real focus on that cremation consumer. So again, remember, we view that opportunity as almost like a greenfield opportunity.

Speaker #3: We had cremation consumers that we weren't talking to about these products. And now we have the props, if you will, to within our facilities, where it's natural and conversation.

Speaker #3: And so we're seeing an uplift in the number of cremation consumers that are buying, and that's going to show up in velocity. Now, that's going to push down the average price a little bit, but that's okay.

Thomas L. Ryan: We're seeing an uplift in the number of cremation consumers that are buying, and that's going to show up in velocity. Now, that's going to push down the average price a little bit, but that's okay. We'll take it every time, because it's a new consumer we weren't going to get or we haven't got historically. That's why I think we feel confident that that trend should continue. Now, how much? You're right. You end up with a recession, that could impact the number of people that want to prearrange, but we're confident that absent that, we should continue to keep the focus on driving velocity.

Speaker #3: We'll take it every time, because it's a new consumer we weren't going to get, or we haven't gotten historically. So that's why I think we feel confident that that trend should continue.

Speaker #3: Now, how much? You're right. I mean, you end up with a recession, that could impact the number of people that want to pre-arrange. But we're confident that absent that, we should continue to keep the focus on driving velocity.

Speaker #7: So on this cremation customer, any update there? I think on the Q1 call, when I asked about this, you said you guys piloted it in like 10 markets.

Joanna Gajuk: On this cremation customer, any update there? I think on the Q1 call, when I asked about this, you said you guys piloted it in like 10 markets. Are you doing it in additional markets and kind of how things are going there on the cremation customer buying cemetery product?

Speaker #7: So are you doing it in additional markets and kind of how things are going there on the cremation customer buying cemetery products?

Speaker #3: We have. We rolled it, I think, in early July to a number of other markets, and we're continuing to monitor the waves, and it continues to be incremental.

Thomas L. Ryan: We have. We rolled it, I think, in early July to a number of other markets. We're continuing to monitor the waves. It continues to be incremental. I think the first 10 markets, the take-up rate was dramatically better. I think in the second wave, it's better. Maybe not the same rate, but it's clear that with the focus, with the materials and the visibility, some of that again, is around marketing, sometimes within the facility or digitally, we're seeing a real pickup in the conversation, therefore a pickup in our ability to sell where we've tested. We ultimately, I think by early 2027, it'll be everywhere. We're rolling out waves and really trying to make sure we're doing it right and getting the internal buy-in.

Speaker #3: So, I think the first 10 markets, the take-up rate was dramatically better. I think in the second wave it's better—maybe not the same rates, but it's clear that with the focus and with the materials and the visibility, and some of that, again, is around marketing, sometimes within the facility or digitally.

Speaker #3: We're seeing a real pick up in the conversation and therefore a pick up in our ability to sell where we've tested. So ultimately, I think by early '27, it'll be everywhere but we're rolling out waves and really trying to make sure we're doing it right and getting the internal buy-in.

Speaker #7: Okay. That's great. My question on different topic, this is a follow-up, but it was around trust fund income. It seems like it gets highlighted throughout the call that clearly that's flowing through the numbers helping our sales in both segments.

Joanna Gajuk: All right. That's great. My question on the same topic, this is a follow-up. It was around trust fund income. It seems like it gets highlighted throughout the call that clearly that's flowing through the numbers, helping our sales in both segments. Can you help us quantify? I think you disclosed this number in 10-Q, but can you give us a ballpark number of maybe in terms of recognized trust fund income in both segments? Also, there was this other line in cemetery that benefited from that as well. It seems like maybe the returns are tracking higher. Is that correct? Also, what does it mean for H2 of this year? Are you assuming higher returns coming through because of this, or sort of help us understand how this helps to get to your guidance. Thank you.

Speaker #7: So, can you help us quantify? I think you disclosed this number in the 10-Q, but can you give us a ballpark number, maybe in terms of recognized trust fund income in both segments? Also, there was this other line in cemetery that benefited from that as well.

Speaker #7: So it seems like maybe the returns are tracking higher and so is that correct? And also what does it mean for the second half of this year?

Speaker #7: Are you assuming a higher returns coming through because of this or sort of kind of help us understand how this helps your to get to your guidance?

Speaker #7: Thank you.

Speaker #3: You bet. So remember, we have about $8 billion or so, plus of trust funds, about $2.5 billion in the internal care fund, which is a little bit of a different animal, Joanna, as we've talked about in the past. About 70% of that internal care fund is really a kind of fixed return that we could take out according to the state laws.

Eric D. Tanzberger: You bet. Remember, we have about $8 billion or so plus of trust funds, about $2.5 billion is in the internal care fund, which is a little bit of a different animal, Joanna, as we've talked about in the past. 70% of that internal care fund is really a fixed return that we could take out according to the state laws. The 30% is the old way, where it's mostly fixed income investments, and that's ordinary income get that distributed to us. Once in a while, as portfolio managers make those decisions whether to create realized gains, those can sometimes, or some portion of those, get distributed to it, which makes ECF a little bit more lumpy. Although this quarter, we saw it a little bit more lumpy to the +$7 or $8 million.

Speaker #3: The 30% is the old way, where it's mostly fixed income investments, and that's ordinary income that gets distributed to us. Once in a while, as portfolio managers make those decisions—whether to create realized gains—those can sometimes, or some portion of those, get distributed too, which makes ECF a little bit more lumpy.

Speaker #3: Although this quarter, we saw it a little bit more lumpy to the positive by seven or eight million dollars. As a very general statement, the trust fund income for all three can range anywhere from let's call it 330 to 360 million-ish.

Eric D. Tanzberger: As a very general statement, the trust fund income for all three can range anywhere from, let's call it $330 to $360 million-ish. Again, I don't know what the markets are going to do the H2, so that's the best guidance I could give to you. I'd tell you about $125 million of that number that I gave you is related to the ECF. The rest is related to the MST. Not only do you have to have a crystal ball to understand what the returns are going to be, as Tom mentioned earlier, you've got to have a crystal ball in terms of how old the contracts are and what the original amount corpus was coming out too. There's a lot of moving factors, kind of in that guide, but that's generally where it is for a full year of 2026.

Speaker #3: And again, I don't know what the markets are going to do the back half. So that's the best guidance I could give to you.

Speaker #3: I'd tell you about 125 million of that number that I gave you is related to the ECF. The rest is related to the MST.

Speaker #3: And not only do you have to have a crystal ball to understand what the returns are going to be, as Tom mentioned earlier, you’ve got to have a crystal ball in terms of how old the contracts are and what the original amount or corpus was coming out to.

Speaker #3: So there are a lot of moving factors in that guide, but that's generally where it is for the full year of 2026.

Speaker #7: All right. But would you say the returns are coming in better and...

Joanna Gajuk: All right. Would you say the returns are coming better and-

Speaker #3: Yeah, they are. I mean, we’ve had—yeah, we’ve disclosed the returns every quarter, as you know. And what’s really benefited this is, we’ve had low double-digit to mid-teen returns on these trust funds for the past three years alone.

Eric D. Tanzberger: They are. We've disclosed the returns every quarter, as you know. What's really benefited this is we've had low double-digit to mid-teen returns on these trust funds for the past 3 years alone. You're really starting to see the value of the diversity of not just having the general agency revenue with the insurance contracts and all of that cash flow, but you're also seeing the benefit of diversifying over to the trust fund investments as well, and having those good markets create nice trust fund income for the company's cash flows as well. It really is a good, nice mix that we've kind of designed here.

Speaker #3: So you're really starting to see the value of the diversity of not just having the general agency revenue with the insurance contracts, and all of that cash flow, but you're also seeing the benefit of diversifying over to the trust fund investments as well and having those good markets create nice trust fund income for the company's cash flows as well.

Speaker #3: So it really is a good nice mix that we've kind of designed here.

Joanna Gajuk: Great. Perfect. Thank you so much for question.

Speaker #7: Great. Perfect. Thank you so much for the question.

Speaker #3: Sure.

Eric D. Tanzberger: Sure.

Speaker #7: The next question comes from Parker Schnur of Raymond James. Go ahead, please.

Operator 2: The next question comes from Parker Snure of Raymond James. Go ahead, please.

Operator: The next question comes from Parker Snure of Raymond James. Go ahead, please.

Speaker #3: Hey, good morning. So the pre-need cemetery, you had another great quarter there, fifth straight quarter of positive, same store production growth. But the recognition rate was low at 88.8%.

Parker Snure: Hey, good morning. The pre-need cemetery, you had another great quarter there, fifth straight quarter of positive same-store production growth. The recognition rate was low at 88.8%. I guess, what's your expectation for the recognition rate in the back half of the year, and when should we largely expect a lot of this production to flow through the P&L?

Speaker #3: I guess what's your expectation for the recognition rate in the back half of the year? And when should we largely expect a lot of this production to flow through the P&L?

Speaker #3: So you really have to split it up, Parker, as you and I have talked about before. The recognition rate includes an at-need component, and that's generally at 100%.

Eric D. Tanzberger: You really have to split it up, Parker, as you and I have talked about before. The recognition rate includes an at-need component, and that's generally 100%. It includes a property component, which over the full 12 months should also be about 12%. This production growth also includes merchandise and services, just to state the obvious. When that occurs, that recognition rate occurs a little later. Maybe about half of the services occur, the revenue recognition, the same year. Maybe about two-thirds of the merchandise occurs in the same way. When you put all that together for a full year, that's where you get to about the 95% recognition rate that we report to you, and those are the components of it, so everybody understands it. We're not too far off at 88 than we were in the prior year, at this exact time.

Speaker #3: It includes a property component which over the full 12 months should also be about 12%. But this production growth also includes merchandise and services to kind of state the obvious.

Speaker #3: And when that occurs, that recognition rate occurs a little later, maybe about half of the services occur the revenue recognition the same year, maybe about two-thirds of the merchandise occurs in the same wear.

Speaker #3: When you put all that together, for a full year, that's where you get to about the 95% recognition rate that we report to you.

Speaker #3: And those are the components of it. So everybody understands it. We're not too far off at 88 than we were in the prior year.

Speaker #3: At this exact time, so I don't think we're coming off of our guidance at all. We expect to have higher 90-percentages, if you will, in the back half of this year.

Eric D. Tanzberger: I don't think we're coming off of our guidance at all. We expect to have higher 90%, if you will, in H2 of this year. That would be very consistent with H2 of last year. We should end up somewhere around that 95%. It could be higher if the mix of production, which we can't perfectly predict, ends up heavier towards property than merchandise and services. Maybe you see as high as 97%. If it ends up a little bit higher on merchandise and services, maybe you see somewhere around 93%. Generally, there's no real movement here from a full-year basis to comment that we're not on plan in what you normally see during the year.

Speaker #3: That would be very consistent with the back half of last year. But it also, so we should end up somewhere around that 95%. It could be higher.

Speaker #3: If the mix of production, which we can't perfectly predict, ends up heavier towards property, the merchandise and services, maybe you see as high as 97.

Speaker #3: If it ends up a little bit higher on merchandise and services, maybe you see somewhere around 93. But generally, there's no real movement here from a full-year basis to comment that we're not kind of on plan and what you normally see during the year.

Parker Snure: Yeah.

Speaker #2: And Parker, just to clarify because I want to make sure it's understood. When we're talking about the merchandise and services, very few of them turn within a year.

Thomas L. Ryan: Parker, just to clarify, because I want to make sure it's understood. When we're talking about the merchandise and services, very few of them turn within a year. The real answer is, we're selling, for lack of a better term, we're going to sell 100 this year, and 65 are going to come out of the backlog, and they generally have nothing to do with one another. It's two different streams, and that's what history tells us. How many are coming out of the backlog? We don't know. If we sell a lot, to Eric's point, if instead of selling 100, we sell 110, but only 60 come in, that's going to drive down that recognition rate, right? That's why it's hard to project or predict, because there's two components that really have nothing to do with one another.

Speaker #2: The real answer is we're selling for lack of a better term, we're going to sell 100 this year, and 65 are going to come out of the backlog.

Speaker #2: And they generally have nothing to do with one another. And so it's two different streams. And that's what history tells us. But how many come out of the backlog, we don't know.

Speaker #2: If we sell a lot, to Eric's point, if instead of selling 100, we sell 110, but only 60 come in, that's going to drive down that recognition rate, right?

Speaker #2: So that's why it's hard to project or predict, because there are two components that really have nothing to do with one another. And if we have a good selling year, the recognition rate on merchandise and services is going to look low.

Thomas L. Ryan: If we have a good selling year, the recognition rate on merchandise and services is going to look low. That's okay. That's a good thing, right? These are typically going to have a life of six to eight to 10 to 12 years when you think about merchandise and services.

Speaker #2: That's okay. That's a good thing, right? So just to clarify, it's these are typically going to have a life of 6 to 8 to 10 to 12 years when you think about merchandise and services.

Speaker #3: Right. Yeah, no, that's helpful. That's really helpful. And then just on share repurchase, you increased your authorization in June. I know that's a fluid thing with the stock price, and it certainly has run over the last couple of months, but what's your general expectation baked into your guidance for share repurchase for the remainder of the year?

Parker Snure: Right. Yeah, no, that's helpful. That's really helpful. Then just on share repurchase, you increased your authorization in June. I know that's a fluid thing with the stock price, and certainly it's run over the last couple of months. What's your general expectation baked into your guidance for share repurchase for the remainder of the year?

Speaker #4: I think it's more of the same of what you normally see. I mean, we have well over 500 million dollars of capacity. I want to remind everybody that we go heavier and go lighter depending on what we believe the intrinsic value is versus the share price.

Eric D. Tanzberger: I think it's more of the same of what you normally see. We have well over $500 million of capacity. I want to remind everybody that we go heavier and go lighter depending on what we believe the intrinsic value is versus the share price, we've been very disciplined with that. I think we're on a run rate H1 of the year to be a little bit stronger than we were prior year because we're able to buy shares in that $76 to $78 range as we've disclosed to you. We're not trading at that right now, we'll take that into account. We still feel very good about the return we're getting from those shares. A lot of times what you'll see us do is slow down and speed up based on that return and based on that opinion that we just gave to you.

Speaker #4: And we've been very disciplined with that. I think we're on a run rate first half of the year to be a little bit stronger than we were prior year because we're able to buy shares in that 76 to 78 dollar range as we've disclosed to you.

Speaker #4: We're not trading at that right now. So we'll take that into account, but we still feel very good about the return we're getting from those shares, but a lot of times what you'll see us do is slow down and speed up based on that return and based on that opinion that we just gave to you.

Speaker #3: Right. Okay. And if I can just squeeze in one last one, just on fixed cost control, I know in the first quarter you guys talked about managing fixed costs below inflation.

Parker Snure: Right. Okay. If I can just squeeze in one last one, just on fixed cost control. I know in the Q1, you guys talked about managing fixed costs below inflation. Just wanted to check in there and see how that progressed through the Q2 as well.

Speaker #3: Just wanted to check in there and see how that progressed through the second quarter as well.

Speaker #2: Yeah, I think like I said before, if you look at labor costs in the second quarter, we managed them to about 2%. And that was again a function of we didn't our volumes are down a little bit and our field utilizes those dashboards and metrics to manage labor costs, whether it be part-time and the like.

Thomas L. Ryan: I think, like I said before, if you look at labor costs in the Q2, we managed them to about 2%. That was again, a function of our volumes are down a little bit, and our field utilizes those dashboards and metrics to manage labor costs, whether it be part-time and the like. They do a fabulous job. Parker Snure, what I hope happens is, we do more funerals in the Q3, I expect that cost again rise back up to kind of inflationary levels closer to 3%, 2.5%. That's where we are and how we manage it.

Speaker #2: And so they do a fabulous job. And so Parker what'll happen is if what I hope happens is we do more funerals in the third quarter and then I'd expect that cost to again rise back up to kind of inflationary levels closer to 3, 2 and a half.

Speaker #2: So that's where we are. And how we manage it.

Speaker #3: Okay. Super helpful. Thank you so much.

Parker Snure: Okay. Super helpful. Thank you so much.

Speaker #2: Thanks, Park.

Thomas L. Ryan: Thanks, Parker.

Speaker #1: The next question comes from Tomosano of JP Morgan. Go ahead, please.

Operator 2: The next question comes from Tomo Sano of J.P. Morgan. Go ahead, please.

Operator: The next question comes from Tomo Sano of J.P. Morgan. Go ahead, please.

Speaker #5: Hi, good morning, everyone.

Tomo Sano: Hi. Good morning, everyone.

Speaker #3: Good morning, Tomo.

Eric D. Tanzberger: Good morning, Tomo.

Speaker #5: Thank you for taking my questions. On a production side, when production out of phase is recognized revenue, what KPIs or guardrails do you use to manage the trade-off between near-term margin pressures and future margin expansions?

Tomo Sano: Thank you for taking my questions. On the production side, when production outpaces recognized revenue, what KPIs or guardrails do you use to manage the trade-off between near-term margin pressures and future margin expansions? When should we expect that backlog to translate into margins, please?

Speaker #5: And then when should we expect that backlog to translate into margins, please?

Thomas L. Ryan: On the funeral side, Tomo, I think there's a seasonality to this business. What you typically see is in the first two quarters, and it's true again now, is we're selling a bit more than we are delivering because we're selling into projects that get built later in the year. A lot of completions of projects can happen in the third and fourth quarter. The other thing that's happening is we're selling in those projects, it's building that backlog. We'd expect the back half of the year that our preneed property recognition rates would go 100% or higher. Because what we're experiencing right now, as Eric pointed out, is lower rates on those properties. We're in the 90s, sometimes the high 80s, and that corrects itself in the third and fourth quarters. Now, comparably, that happened last year, right?

Speaker #2: On the funeral side, Tomo, I think there's a seasonality to this business. So what you typically see is in the first two quarters—and it's true again now—is we're selling a bit more than we are delivering because we're selling into projects that get built later in the year.

Speaker #2: So a lot of completions of projects can happen in the third and fourth quarter. And the other thing that's happening is we're selling in those projects; it's building that backlog.

Speaker #2: So, we'd expect in the back half of the year that our pre-need property recognition rates would go to 100% or higher, because what we're experiencing right now, as Eric pointed out, is lower rates on those properties.

Speaker #2: We're in the 90s, sometimes the high 80s. And that gets correct itself in the third and fourth quarters. Now, comparably, that happened last year, right?

Speaker #2: So, it doesn't really help you when you think about the comparisons, but sequentially, you expect higher margins to occur in the back half of the year, and we expect that again.

Thomas L. Ryan: It doesn't really help you when you think about the comparisons, sequentially, you expect higher margins to occur in the back half of the year, and we expect that again.

Speaker #5: Thank you. And on follow-up, digital investments, how are digital investments impacting such as lead generation conversion, case mix, collections, and could you talk about some of the evidence that impacts so far, please?

Tomo Sano: Thank you. On follow-up, digital investments. How are digital investments impacting, such as lead generation, conversion, case mix, collections, and could you talk about some of the evidence that impacts so far, please?

Speaker #4: Well, there's a lot in that digital investment. Some has to do with the leads that you just described—coming from the websites—and making sure that we get them into the sales funnel as quickly as possible.

Eric D. Tanzberger: Well, there's a lot in that digital investment. Some has to do with the leads that you just described coming from the websites and making sure that we get it into the sales funnel as quickly as possible. Some has to do with the applications that we've developed in-house that the sales force uses, such as the Beacon tool, the tablet-based Beacon tool, that's in certain areas of our company, but not in all areas of our company, that we continue to work on. We've separated that application development, and we're trying to, like anybody else, look for efficiencies through AI now and into the future in terms of that development.

Speaker #4: Some of this has to do with the applications that we've developed in-house that Salesforce uses, such as the Beacon tool—the tablet-based Beacon tool that's in certain areas of our company, but not in all areas of our company—that we continue to work on.

Speaker #4: We're obviously trying to—we've separated that application development, and we're trying to, like anybody else, look for efficiencies through AI now and into the future in terms of that development.

Speaker #4: But the way I describe it, Tomo, is as we talked about our four pillars that are driving sales, this is one of those pillars in terms of the technology investments to give us the tools to help drive those four pillars.

Eric D. Tanzberger: The way I describe it, Tomo, is, as we talked about our four pillars that are driving sales, this is one of those pillars in terms of the technology investments to give us the tools to help drive those four pillars, and that's how I'd describe it. It's generally around $20 million, $25 million a year is what that technology investment has been run rate. That's in our CapEx guidance, but that's how I'd describe it.

Speaker #4: And that's how I'd kind of describe it. It's generally around 20, 25 million dollars a year is what that technology investment has been run rate.

Speaker #4: That's in our CapEx guidance, but that's how I'd describe it.

Speaker #2: And Tomo, I know you probably heard we talk about how we're utilizing AI today. To do customized training and feedback for our sales counselors.

Thomas L. Ryan: Tomo, I know you probably heard we talk about how we're utilizing AI today to do customized training and feedback for our sales counselors, and it's still early days, but it's just such an incredibly powerful tool to get immediate feedback and be able to role-play. It just gives people the confidence, and therefore, we believe, going to improve efficiencies. Again, the beauty of AI is you're taking your best sales techniques and everybody's getting the same training. They haven't tried it out on me yet, and that would be the real answer. If I can sell something, then look out.

Speaker #2: And it's still early days, but it's just such an incredibly powerful tool to get immediate feedback and be able to role-play. It just gives people confidence and, therefore, we believe it's going to improve efficiencies.

Speaker #2: And again, the beauty of AI is you're taking your best sales techniques and everybody's getting the same training. They haven't tried it out on me yet and that would be the real answer if I can sell something and look out.

Speaker #5: Thank you, Tom. Eric, appreciate it.

Tomo Sano: Thank you, Tom, Eric. Appreciate it.

Speaker #3: Thanks, Tomo.

Thomas L. Ryan: Thanks, Tom.

Speaker #1: This concludes our question and answer session. I would like to turn the conference back over to SCI management for any closing remarks.

Operator 2: This concludes our question and answer session. I would like to turn the conference back over to SCI management for any closing remarks.

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

Speaker #2: I want to thank everybody for joining us today. We really appreciate your participation. Have a great rest of the summer. We look forward to seeing you in late October.

Thomas L. Ryan: I want to thank everybody for joining us today. We really appreciate your participation. Have a great rest of the summer. We look forward to seeing you in late October for our Q3 earnings call. Thanks.

Speaker #2: For our third quarter earnings call. Thanks.

Operator 2: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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

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