Service Corporation International (NYSE:SCI) Q3 2025 Earnings Call Transcript

Service Corporation International (NYSE:SCI) Q3 2025 Earnings Call Transcript October 30, 2025

Operator: Good day, and welcome to the SCI Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to SCI management team. Please go ahead.

Trey Bocage: Good morning. This is Trey Bocage, AVP of Investor Relations and Treasury. Welcome to our third quarter earnings call. We will have some prepared remarks about the quarter from Tom and Eric in just a minute. But before that, let me quickly go over the 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. 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 Tom Ryan, Chairman and CEO.

Thomas Ryan: Thanks, Trey. Hello, everyone, and thank you for joining us on the call today. This morning, I’m going to begin my remarks with some high-level color on our business performance for the quarter, then provide some greater detail around our funeral and cemetery results. I will then close with some thoughts about our earnings expectations for the rest of 2025. For the third quarter, we generated adjusted earnings per share of $0.87, which is more than 10% increase compared to the $0.79 in the prior year period. We saw impressive increases in cemetery revenue and gross profit as well as lower corporate, general and administrative expense, which was partially offset by slightly lower funeral revenues and gross profits, which when combined, resulted in $0.10 of earnings per share growth from operating income.

Below the line, the favorable impact of a lower share count was more than offset by a higher tax rate and a slightly higher net interest expense, resulting in a negative $0.02 decline in earnings per share. The higher tax rate was the result of the nondeductibility of certain excess tax benefits from the settlement of stock option awards. If the tax rate had remained constant, we would have had an additional $0.04 in earnings per share, resulting in 15% earnings per share growth over the prior year quarter. Now let’s take a deeper look into the funeral results for the quarter. Total comparable funeral revenue declined by almost $2 million or less than 1% compared to the prior year quarter. Comparable core funeral revenue declined by $3 million or just under 1%, primarily due to a 3.5% decrease in core funeral services performed, partially offset by a 3% increase in the core average revenue per service.

The core cremation rate increased modestly by 50 basis points to 57.3%. Non-funeral home revenue increased by $3 million, primarily due to a 13.4% increase in the average revenue per service. We expect this impressive growth in the average revenue per service to continue as older preneed contracts that are maturing out of our backlog have higher cumulative trust earnings and more recent preneed contracts written will mature with higher value in the backlog due to our 2024 operational decision to no longer deliver preneed merchandise at the time of sale. Non-funeral home preneed sales revenue decreased by $4.6 million, primarily due to our decision to stop delivering preneed merchandise at the time of sale, as I previously mentioned. This quarterly decline should cease later in 2026 as we anniversary the date of not delivering merchandise preneed.

And the non-funeral home average revenue per service will have a meaningful compounded growth in the coming years as each year, a higher percentage of contracts with higher value mature out of the backlog. The decline in merchandise revenue this quarter was partially offset by higher general agency revenue due to our conversion from selling a trust-funded preneed product to an insurance-funded preneed product. Core general agency and other revenue grew by $3 million or 6%, primarily driven by higher preneed insurance sales production. This positive impact from higher sales production was slightly offset by a modestly lower average general agency rate as we decided to offer a noninsured flex product in several West Coast markets, which generates a lower general agency commission rate in the current period.

Funeral gross profit decreased by $9.5 million, while the gross profit percentage declined by 170 basis points to about 18%. This gross profit decrease was attributable to the slight decline in revenues for the quarter, coupled with higher selling costs and a moderate fixed cost increase. Declines in higher-margin merchandise revenue were somewhat offset by increases in general agency revenue. This general agency revenue is substantially offset by a higher portion of our selling costs being recognized currently for GAAP purposes. We continue to manage our fixed costs below inflationary trends to about a 1.4% increase for the quarter as we continue to focus on leveraging our scale, both in the field operations through staffing metrics and in our overhead support functions.

Preneed funeral sales production increased by $6 million or about 2% over the third quarter of 2024. Core preneed funeral sales production increased by $20 million or 9% as we have now lapsed the anniversary date of the transition to Global Atlantic, and we experienced growth in both insurance and trust-funded sales production. Non-funeral home preneed sales production decreased $14 million or almost 20% as SCI Direct transitions from the sale of trust to insurance-funded preneed contracts. This transition has required many of our sales counselors in certain states to go through extensive training, obtain insurance licenses, both of which contributes to the temporary reduction in the number of contracts written. We expect in early 2026, we will experience year-over-year sales production growth again for SCI Direct as a whole.

Now shifting to cemetery. Comparable cemetery revenue increased by $31 million or almost 7%. Higher core revenue was the primary driver, complemented by higher other revenue. Our core revenue increase of $27.5 million or 7% over the prior year quarter was primarily due to a $27 million increase in total recognized preneed revenue, of which $21 million resulted from higher property revenue and $6 million from higher merchandise and services revenue, which includes recognized merchandise and service trust fund income. Other revenue, primarily internal care fund trust income increased as well by $3.5 million or 10%. Total recognized preneed revenue benefited from growth in comparable cemetery preneed sales production of $30 million or almost 10%.

Large sales grew by an impressive $8 million or 19% over the prior year quarter. Maybe more impressively, core sales accounted for $22 million of the sales production increase as solid velocity growth was complemented by higher sales averages. Cemetery gross profit in the quarter grew by $18 million, and the gross profit percentage increased by 160 basis points, generating an operating margin percentage of 34%, primarily due to the strong growth in cemetery revenues. Now let’s shift to a discussion about our outlook for the remainder of 2025. As you saw in our earnings release, we are confirming the midpoint of our normalized earnings per share guidance and narrowing the range to $3.80 to $3.90 for 2025, and we are slightly raising our cash flow outlook due to stronger working capital trends in the business as well as anticipated lower cash taxes.

Therefore, the fourth quarter range would be $1.09 to $1.19 in normalized earnings per share. In the funeral segment, we expect volumes to range in the slightly down 1% range to the slightly up 1% range, bringing the 12-month volume for 2025 to slightly below flat. This is 200 basis points better than 2024, and we believe now the pull-forward effect going forward will be negligible and can begin to see the effects of demographics, our premier locations and outstanding people and the impact of our tremendous preneed funeral backlog affect volume growth in the years to come. We would expect the sales average in the quarter to continue to see solid growth. We expect our core general agency revenues to slightly decline, even though we anticipate preneed funeral sales production growth as the average commission rate should decline due to certain markets having the ability to sell noninsured flex products this year that carry a lower commission rate.

Overall, we expect modest funeral revenue and gross profit growth as compared to the fourth quarter of 2024. In the cemetery segment, we would expect to see low to mid-single-digit cemetery preneed sales production growth, but a lower construction revenue recognition rate as we should have a slightly muted effect on the recognized cemetery revenue growth. Overall, we expect flat to low single-digit revenue growth, resulting in flat to slightly down gross profits as compared to the fourth quarter of 2024. Below the line, we expect the impact from our share repurchase program to have a favorable effect on earnings per share as compared to the prior year, which will be somewhat negated by a slightly higher tax rate in the fourth quarter. We feel very good about our momentum that we will carry into 2026.

We expect favorable trends in funeral volume, funeral average, SCI Direct, preneed cemetery sales and lower interest rates and believe that we can achieve earnings per share growth within our long-term growth framework of 8% to 12%. In conclusion, I want to acknowledge and thank the entire SCI team for their daily commitment to our customers, our communities and to one another. Your skill, dedication, compassion and attention to detail are the foundation of our success. Thank you all for making a difference every day. And with that, operator, I will now turn it over to Eric.

Eric Tanzberger: Good morning, everyone. Thanks, Tom. Thank you, everybody, for joining the call today. And as I usually do, I’m going to kick it off the way Tom just ended. So before I start my prepared remarks, I’d like to extend my sincere appreciation to all our dedicated and talented associates. Your commitment, your compassion enable us to serve client families with care and professionalism during some of life’s most challenging moments, which ultimately makes a meaningful difference in the communities that we serve. I am truly proud of the work you do every day and continue to be grateful for your continued dedication to our client families and to the communities that we serve. So with that, I’m going to begin today by providing highlights on our cash flow and our capital investments during the quarter.

And then I’ll make a few comments on corporate G&A and then touch on our remaining 2025 cash flow expectations and then conclude with an update on our overall very positive financial position here at SCI. So we generated adjusted operating cash flow of $268 million in the quarter, neutralizing for an expected $11 million of higher cash taxes, adjusted operating cash flow increased $10 million from the prior year. So let’s break that down a little bit more. Our underlying business supported adjusted operating cash flow by generating higher operating income of about $14 million during the quarter that Tom just walked you through in his comments. Cash interest was also lower by about $13 million, but that was due largely to cash interest payment timing associated with the note refinancing that we completed in September of 2024 and coinciding reduction of our drawn bank credit facility.

Additionally, lower rates on our floating rate debt were offset by higher floating rate balances. So offsetting these favorable impacts were working capital uses of about $17 million, which really related to just normal timing of payables and receivables during the 3-month period. So let’s move on to capital investment. We invested $140 million in the quarter into our existing locations, new builds, funeral home and cemetery acquisitions and real estate purchases. So let’s break that down a little bit. We invested $86 million of maintenance capital primarily into our current funeral homes and cemeteries in the quarter, which was in line with our internal expectations. $45 million of this was allocated to highly profitable cemetery development projects, $35 million into our current funeral and cemetery locations and then $6 million into digital investments and some corporate spend as well.

We also invested $17 million of growth capital in the quarter, primarily for the construction of new funeral homes and crematories. Finally, we invested $37 million into business acquisitions during the quarter, bringing our full year business acquisition investment to $65 million. Also, subsequent to quarter end, we invested an additional $3 million for a few locations in Canada, bringing us currently just shy of the low end of our full year acquisition target range. The pipeline of acquisition opportunities today as we speak, continues to be robust, and we fully expect to achieve our $75 million to $125 million acquisition investment range target for 2025. So moving on to capital distributions. We returned $123 million of capital to shareholders in the quarter through $45 million of dividends and $78 million of share repurchases.

We repurchased just under 1 million shares at an average price of about $79 during the quarter. This brings the number of shares outstanding to just over 140 million shares at the end of the quarter. Year-to-date, though, we returned $538 million in capital to shareholders, repurchasing 5.1 million shares at an average price of $78, which totals right around $400 million and an additional $135 million of dividends. And by the way, we currently still have about $410 million of remaining share repurchase authorization as we speak today. So shifting gears now for the quarter, I’m going to now make some comments about our corporate G&A expense, which decreased $5.4 million quarter-over-quarter, which was primarily due to timing of incentive compensation accruals versus the prior year quarter.

We remain very comfortable with our fourth quarter 2025 range of $39 million to $41 million for corporate G&A expense. Although as you’ve seen in the past, we fully expect some variability in this due to our long-term incentive compensation plans that could push us above or below this range slightly during any particular quarter. So shifting now to the rest of 2025 and as you saw in the release, we updated our 2025 adjusted operating cash flow guidance range to $910 million to $950 million with a midpoint of $930 million. That is a $20 million increase over our midpoint of $910 million, which we talked about last quarter. $10 million of this increase is related to lower cash taxes and $10 million is related to better working capital expectations.

So after deducting $315 million of expected maintenance capital at the midpoint of our ranges, we expect to achieve very impressive adjusted free cash flow of $615 million, which, by the way, approximates about $4.40 of free cash flow per share. And as I’ve discussed in prior quarters, cash taxes have continued to return to more normal levels in 2025 after the tax accounting method change that benefited cash flow since the third quarter of ’23. While this normalization created an expected headwind, the impact of this is now partially offset by the newly enacted federal tax legislation during this year. We now expect the full year amount of cash taxes to be approximately $135 million, which compares to the $145 million that I anticipated last quarter.

And again, this is $115 million greater than the $20 million of cash taxes paid in 2024. Lastly, as we’ve addressed in prior quarters, we expect our effective tax rate to be 25% to 26% as excess tax benefits are no longer recognized on the settlement of certain executive share-based compensation awards. So I’m now going to conclude my comments with an update on our financial position. We continue to have a favorable and manageable debt maturity profile with ample liquidity. We ended the quarter with liquidity of just under $1.5 billion, consisting of about $240 million of cash on hand and approximately $1.2 billion available on our long-term bank credit facility. Additionally, leverage at the end of the third quarter was 3.6x net debt to EBITDA, which is down from almost 3.8x at the end of the third quarter of 2024 and remains toward the lower end of our long-term leverage target range of 3.5 to 4x.

So our strong balance sheet position and its liquidity, combined with the robust cash flows continue to support our ongoing capital investment program, which provides us tremendous flexibility to invest opportunistically for the long-term benefit of SCI’s customers, our associates and our shareholders. So in closing, I want to again emphasize how proud we are of our entire SCI team. Your unwavering commitment to supporting our customers as they plan and as they manage through their most difficult times is truly inspiring. Thank you again for all that you do. So with that, operator, this concludes Tom and I’s prepared remarks, and we’d like to go ahead and open the call up now to questions.

Q&A Session

Operator: [Operator Instructions] The first question comes from Scott Schneeberger from Oppenheimer.

Daniel Hultberg: It’s Daniel on for Scott. I’d like to start with the cemetery preneed sales production. I mean velocity was clearly good in the quarter. Could you discuss how velocity trended in this quarter on a year-on-year basis versus last quarter? It sounds like it’s accelerating. So some perspective on that, please? And what do you think that means for the consumer? And as we look into next year, your comfort level with this trend to be sustained?

Thomas Ryan: Yes. I think if you look at our results and then some of the other retailers that are out there, it doesn’t jive very well because we really saw across the board a lot of great velocity in the quarter. And again, quarter is a quarter, it’s not a year. But I think, one, having the flexible financing plans for our consumers to the extent we can has made a big difference. I think just focusing on the basic metrics that we utilize in order to generate leads, good leads and bring them to close. So a lot of it is just good fundamental sales management and sales techniques that are bringing in more customers and accommodating them with financing terms that work. But I think you’re right. I mean, what’s really great about this quarter is we saw great growth on the high end with large sales up almost 18%.

And then within the core itself was the primary growth. And we saw more of an effect from velocity than from sales average, which is very inspiring when you think about that component of what we do. So right now, based on what we see, we see continued ability to focus on growing velocity, getting these inflationary cost increases, and we’re still seeing a lot of activity at the large sales level. So we feel good about those trends going into the fourth quarter and as we head into 2026.

Daniel Hultberg: Got it. Following up on that, I mean, it sounds like you’re targeting your typical 8% to 12% EPS growth range for next year. Could you please discuss your confidence level in achieving that? And is there anything on the cash flow side that’s unique or different for next year that we should be thinking about?

Thomas Ryan: Yes. So I’ll speak to the 8% to 12%, and I’ll let Eric speak to the cash flow. On the 8% to 12%, like we’ve always said, our degree of assurance in a typical year is probably 85% to 90%. I mean we have achieved that level or greater for the most part in those types of situations. I don’t know what 2026 holds, so there’s no guarantee. But if you look historically over almost any period of time, if you want to take 20 years, 10 years, 6 years, I use 6 because COVID is 5 and that’s unusual. But if you look at these, we’ve generally grown at about 14% compounded. And so we do have a tendency to be able to achieve above the target. We never know when that’s going to happen because it takes a little bit of things falling into place for that to occur.

But again, I think it’s really — for the most part, it’s about revenue growth. And if we get volume, if we get average in the same time, you’re going to see margins pop on the funeral side. Cemetery is going to be predominantly driven by preneed cemetery sales, particularly preneed property sales. More and more of it is the merchandise and services that are rolling out of the backlog, that’s become a nice growth driver complementing. But at the end of the day, to really drive cemetery margins, you got to have those sales. So I’d tell you, we still believe 85% to 90%. I don’t know what ’26 holds. And I’ll turn the cash flow question over to Eric.

Eric Tanzberger: Daniel, Yes. I mean, I think the part that you need to understand and really model as it relates to cash flows is related to cash taxes. Before I get in there, absent cash taxes, I don’t know of anything unusual in terms of working capital or whatever. But as the EBITDA grows, as the company grows, which Tom just says we expect, you’ll see cash flow from operations grow, which is — depending on the year, has been growing over a long period of time in the kind of 4% to 6% type CAGR for cash flow from operations. And that should generally continue as we move forward independent of cash taxes. So we started the year, as we all know, with about $150 million — excuse me, headwind as it relates to cash taxes. We paid $25 million last year.

We expected to originally pay $175 million. That has come down by about $40 million. A lot of that has to do with the federal tax legislation that was new this year. Some of it would be a little bit more recurring, which is more of the accelerated depreciation depending on the assets we put into play and invest in. But some of it, such as some of the internal use of software and some of those things may be more like onetime. So I guess what I’m trying to say is, I think we’ll give some of that $40 million back. I don’t know how much now. Maybe it will be more like $20 million to $30 million of that $40 million, we’ll get back. But that is something we’ll talk in more detail in February when we give you more specific guidance. But that’s the one place that I think you got to think of in terms of the cash flow.

Still, with all that being said, we don’t see huge amounts of changes in investment in our maintenance capital expenditures, which is about $315 million this year. So when you think of the free cash flow being well over, it’s almost into the mid-4s, it still should be over $4 a share, $4.25 a share, which is really significant for our company that we’re very proud of.

Operator: The next question comes from Joanna Gajuk from Bank of America.

Joanna Gajuk: So I guess maybe just to follow-up on the cemetery preneed sales production sounds like a very robust number. And I guess you gave us some details on this. So thanks to that. And how should we think about next year? I mean, it sounds like you believe you’re on track for the 8% to 12% EPS growth. So should we assume mid-single-digit growth next year for cemetery preneed sales doesn’t make sense? Or is there any reason to think about a different number?

Thomas Ryan: Yes. I think, Joanna, thanks for the question. Overall, we do expect cemetery sales will trend like they kind of have historically. We feel very good about low to mid-single-digit growth. A component of that is large sales. That’s the one that tends to have a little more volatility to it quarter-to-quarter. But overall, we would expect to be able to grow that again in the kind of low to mid-single digits with each of these categories. We just feel very good. I think the inventory is out there. The sales force is doing a tremendous job of taking people through there and educating them. The one component, we talked a little bit about this, is the cremation consumer continues to be a high-growth opportunity in our cemeteries.

We’re seeing more cremation consumers pick either cremation gardens, cremation niches. We have a lot of products that I’d tell you, consumers really don’t have familiarity with. I think a lot of cremation consumers come in and don’t really understand what we have available. So we’re really focused this year with some consumer research that we’ve done about trying to tie that consumer in a better way to educate them about what we have because we found in the focus groups that almost 0 out of 10 knew what we had and about 8 out of 10 once they saw it said, I’m interested in looking. It doesn’t mean they’re going to buy, but I think there’s a consumer there that we probably have not done as good a job with as we’ve done with the burial consumer.

So tie that into cemetery over the next couple of years, I think it’s a real growth opportunity, albeit not a huge one, but one that has an ability to grow at a higher growth rate.

Joanna Gajuk: So on the last comment on the cremation customer buying into the cemeteries, any way to say that? I mean it sounds like you said a huge one, but I guess would that — could this add a point of growth or so per year?

Thomas Ryan: Yes. Yes, I think the other parts are going to grow in traditional ways. I think we feel very good. We’ve really focused on the types of leads and our ability to close the leads, and this kind of gets back to sales productivity and sales growth. But our sales force has done, I think, a tremendous job. Our revenue team has helped construct some really nice inventory across our cemeteries. We spend about $160 million a year injecting new inventory into the system, and we do a real good job of converting that pretty quickly into sales. So we feel very good about next year right now based on everything we know at the high end, at the core level, and like I said, I just want to identify some of these productivity gains or velocity gains.

If we can get more cremation consumers in there, it’s going to drive more sales, not as high an average, obviously, but drive more velocity, more familiarity. And the nice thing about cemeteries is it’s really a family tree component to this, right? Because people are going to visit the cemeteries, people are going to want to buy adjacent properties for the family. So this is really good in educating and providing future leads and opportunities to our sales force.

Joanna Gajuk: Okay. Great. And if I may, can you talk about the sales trends, I guess, at your largest location, the Rose Hills? It sounds like that’s really running a lot of what’s happening with the company. So can you flesh out how the quarter has been going and anything to flag there?

Thomas Ryan: Yes. I would say Rose Hills is doing very well. Really congrats to Rachel and her sales team. They’ve done a tremendous job of setting the inventory up, bringing in the consumer, driving the leads. And so they had a very successful quarter, well into the double-digit growth. And we expect great things to come because, again, there’s great inventory, there’s great people, a great team. And so we expect Rose Hills to be a big part of our growth story into 2026 and beyond.

Operator: The next question comes from Tobey Sommer from Truist.

Tobey Sommer: Good job on expense control in the quarter. Do you have pretty good confidence in being able to extend the trend in low expense growth into 2026? And are there any areas where you are seeing pressure?

Thomas Ryan: Well, I think historically, Tobey, we’ve seen a little pressure on the cemetery maintenance front as you look over the last few years. And again, that’s kind of easy to understand as you think about cost of water, cost of labor, those types of trends. We definitely have been instituting some new strategies that we believe can continue to kind of manage those costs down. But probably the biggest lever we have in the margins is our staffing metrics. And so our operating teams do a tremendous job, and it’s really being able to flex when you have volume or you don’t have volume. So the way I look at it is this, I would expect that if we were to get more volume in 2026, well, it’s going to be hard to hold 1% to 2% cost growth, but that’s okay because it’s supported by the revenues.

So utilizing those staff metrics, and that’s both using part-time people. It’s about how we’re managing the staff themselves, about trying to leverage technology to take some of the burdens off our caregivers and funeral directors. So that’s really how we’re managing today. It’s a more challenging volume environment, and we’re able to kind of flex and manage those costs. So I think that’s the way I would think about the field. And then, obviously, at the home office level, we’re always trying to look for ways, particularly today with AI and technology, can we begin to think about how we do our jobs differently and begin to leverage those tools to where maybe we don’t have to hire an extra person or 2 person. So I think that’s the way, by department, we’re trying to manage the costs going forward.

Tobey Sommer: And I wanted to maybe ask a follow-up on the cemetery — excuse me, the cremation comment that you made in response to a prior question. With respect to the company’s journey in educating prospective customers about the options, how would you compare and contrast the various cemetery options in customer awareness versus cremation? And how quickly can you affect change there, do you think?

Thomas Ryan: Well, I hope very quickly, but as usual, I think on the cemetery side, if you think about a burial customer, they’re thinking about that cemetery option if they haven’t already arranged it. By the way, most of them — 80% of our customers come in with a burial place already. So that’s — I think we’re pretty good at that because we’ve got a customer that expected a customer that wants to go to the cemetery. What’s unusual about the cremation opportunity at our combo facilities, it’s easier, right? Because now you’ve got — you know there’s a cemetery behind there, you might ask the question. But one of the things we’re trying to do is just create visibility, both on the web as people are searching out there, putting it on our websites a little more prominently.

We’re going to have things in our lobby as people are waiting to meet with somebody, that’s going to flash across the screen, that’s going to tell you you’re going to see aerial views of some of these beautiful crematory gardens and niches. And so again, kind of soliciting a little bit of education there for our consumer and then also just training even our stand-alone funeral homes to realize we’ve got that offering and be able to talk about it and be able to, again, set up appointments to go out and see. So we’ve got a variety of tools to create more awareness, more discussion around it. And it’s happened naturally, by the way. And again, we have great people. And so there’s locations today that do a great job of that, and there’s some that don’t.

And so it’s really about standardizing that educational process across the network.

Operator: The next question comes from Parker Snure from Raymond James.

Parker Snure: You guys mentioned the noninsured flex product out on the West Coast. Maybe just dive deeper there, explain the rationale of why you think that product was appropriate for that market.

Thomas Ryan: Yes. So think of the noninsured flex as a product that’s more similar to trust. If you remember, so an insured product gives a consumer protection. So if you were to enter into, let’s say, a 3-year as an example, so you’re paying over 36 months. If I die at month 8, my family is covered. They’re protected by that insurance product. Well, it’s a little more expensive than a trust product because the trust product doesn’t have that protection. So Tom dies in month 8, they’re going to go to my family and say, I need to collect the balance in order to bury you. So a lot of this is about providing a product that is suitable for the consumer from an affordability perspective. And so we have that product called trust in most markets.

Some of these markets, particularly in California, is where this occurs, where we’ve offered a flex product, which acts a little more like trust. And it doesn’t generate as much of a commission for us, but it also doesn’t provide the protection for that consumer. So as we switched over to Global Atlantic, we didn’t offer the flex product in certain markets, and we saw that consumers’ needs weren’t getting met. So this was an attempt to say, we have a consumer that needs this product, let’s utilize it because it’s become an issue that is keeping them from being able to go under contract. So that’s all it is. I don’t think we expect it to expand much more than the markets we’re in because we have trust products as an alternative in other markets.

So I think we’re — the changes in, and you’ll see a little bit of a comparison as you go into early ’26 when you think about the general agency rates going forward.

Parker Snure: Okay. And then you mentioned that the funeral volume pull forward, you think is going to be more negligible going forward. So should we read that through that funeral volumes kind of trend slightly up next year or kind of more back to a more normal cadence? And then maybe just talk about the knock-on effect that, that provides to the preneed cemetery business as that acts as a lead source for that business?

Thomas Ryan: Yes. So if you think about it, we do some ratios that kind of stay around 55%, I think, is the percentage of our ability to sell preneed off of the funeral volume that walks in. So as we get a little bit more, the incremental cemetery piece should be about 55 basis points of that growth as you think about it. Now there are things we can do to tune that up, and we hope we can go higher. But to your point, it should be positive for cemetery sales leads as well. And I think the way we’re thinking about it is this, and we modeled it a long time ago and nothing is perfect, but it’s been pretty well done in the sense of the diminishing effect of the pull forward is real, and we’ve seen it year to year to year. It’s still there.

I don’t want you to say there’s none, but we just don’t expect it now to be a material factor going forward. So now you think about the things that are positive. We’ve got the best locations, the best people. We’ve got demographics beginning to work for us. We’ve got this massive backlog that nobody else and our competitors really has. And so I think we’ve captured some share and some high-value share because remember, the contracts coming out of the backlog are bigger than the ones that are walking in the door. So all those things point towards — and again, I don’t know for sure when it hits, but when it does, it’s very incremental. We know when you get a little bit of revenue growth, you can pop the margins. Look at this quarter alone, we’ve got a little over 4% revenue growth.

And if you normalize the taxes, we’re up 15%. That’s what happens when you get 4% revenue growth. When you get 2%, that can’t happen. So what we like is with demographics, with the backlog, we feel very good about the ability to generate earnings per share growth in the coming years.

Parker Snure: Okay. And if I can squeeze in one more, the insurance transition on the SCI Direct side has led to some declines in production. I understand that was 100% trust before. It’s a different sale. It’s a different product, and it’s been a phased rollout. But is there an expectation that, that will return to sort of pre-transition levels at some point? Or are we going to be kind of working off of a lower base going forward? And then also, has there been any changes or inflections in turnover with the sales force on that segment?

Thomas Ryan: And you’re talking specifically about SCI Direct, yes.

Parker Snure: SCI Direct, yes.

Thomas Ryan: It is a pretty drastic change. I mean the product is very different. It does require licensure. So I think the way to think about it is this, we expect in ’26 that we’re going to see growth again off that new base. I don’t think we get back to — pre-change levels is probably going to take a couple of years to get back to those types of levels, but we’re going to get there. And again, I think part of that is hiring the sales force where we’ve had the turnover, getting people licensed and comfortable with the product. The thing I feel better about is this really is about familiarity of sale. I mean people have been doing it a certain way for a long time, and we really disrupted their world, and we really appreciate the sales counselors and sales leadership at SCI Direct and all the hard work they’ve done.

So the fruits of their labor is coming. I think it’s going to take a couple of years, but I think you’re going to see some pretty impressive growth rates. And again, combine that with the fact — so you’re going to see higher general agency revenues. And now think about that backlog. That backlog is going to unwind, and it is very valuable and very incrementally profitable. So as you model this thing out 10 years, it’s incredibly impressive the rates of growth as you think about earnings going forward for SCI Direct.

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

Thomas Ryan: Thank you, everybody, for being on the call today. We appreciate your attendance. Happy Halloween to everybody tomorrow. Have a good, safe one. And we’ll speak to you in our fourth quarter call in next February. Thanks so much. Bye-bye.

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