管理層發言
Good morning, and welcome to the Second Quarter 2026 SCI Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to SCI management. Please go ahead.
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. But 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. 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.
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 and then a deeper look at our Funeral and Cemetery results for the quarter. For the second quarter, 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 where profitability declined somewhat, offsetting the favorable impacts, resulting in a $0.02 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. 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. Comparable preneed cemetery sales production grew by 8% and comparable preneed funeral sales production grew by 7% for the quarter, while adjusted cash provided 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. 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, resulting in double-digit earnings per share growth in the second half of 2026. Now let's take a deeper look into the Funeral results for the quarter. Total comparable Funeral revenues increased by $5 million or just about 1% over the prior quarter. Comparable core Funeral revenue increased by $7 million or about 1.5% primarily due to 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 first quarter. 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. 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 earnings on preneed contracts to the time of need. This transition was completed late in 2025, so we are nearing the anniversary date where all earned deliveries will occur at the time of need, 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. 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 second quarter of 2025, driven by an 8.3% increase in core preneed sales production. Now shifting to Cemetery. Comparable Cemetery revenue increased by $23 million or about 5%, and 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. 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, both Preneed Funeral and Cemetery by focusing on our four pillars: sales counselor headcount, driving 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%. 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. And because most of the growth came from core sales with a higher proportion of fixed compensation, the recognized revenues carried a larger burden of the selling compensation this quarter. The good news is 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, deliver higher relative margins. 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. 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. When combined with strong momentum in preneed Cemetery sales, average revenue per Funeral, and continued disciplined expense management, we are confident in our ability to deliver within our stated earnings range. In closing, we remain firmly focused on building long-term value for shareholders, growing revenue, leveraging the strength of our scale, and allocating capital with discipline to the highest and best use. As we move into a period of meaningful demographic tailwinds, we are exceptionally well positioned to expand our reach, serve more families and deliver sustained growth over time. In closing, I'd like to recognize and thank our entire SCI team for their ongoing commitment to our customers, our communities and each other. Your dedication continues to be the foundation of our success. With that, I'll turn the call over to Eric.
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. 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. 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. So let's talk about breaking that down a little bit. Operating income produced cash flow that was 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 preneed working capital sources were offset really by increased other working capital uses, but stronger cemetery preneed cash collections provided about a $36 million source, which is driven by both the 8% higher preneed cemetery sales production during the quarter where, again, a proportion is also deferred into the future, as well as some higher collection rates on these preneed contracts. These higher receipts that I just mentioned were offset by a corresponding $37 million use of working capital, which is primarily associated with the timing on an additional payroll funding in the current quarter, which, by the way, will benefit us in the second half 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. 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. So to break this down, we invested $80 million of maintenance capital back into our current locations which is invested 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. 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 million to $125 million of acquisition investment target for the full year of 2026. 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. 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. 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. 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 our previous midpoint of $1.035 billion to now $1.085 billion for the full year. 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 this morning. 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 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. 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 have been generated through tax equity investments. And while these credits reduced cash tax payments and, therefore, increase cash flow from operations, they are accompanied by about $40 million of cash outflows or investments, reflected in investing activities during this quarter. So assuming we pay 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. And as a side bar 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% 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, 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 and that was exactly about 3.77x for the end of the quarter. So as you could see with all of these statistics, our strong balance sheet, our robust liquidity that I just mentioned, and 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. So operator, this concludes my remarks and Tom's remarks. And with them, I'll turn it back to you, please, and we'll open the call up for questions.
分析師問答
Our first question comes from A.J. Rice of UBS.
First question: Could you explain the strategy behind shifting the sales force toward more fixed compensation and away from commission? What's the thinking there, and are you seeing results from it? Is it part of what's driving the pickup in production?
A.J., this is Tom. I'm going to answer that specifically, and then I want to let Jay Waring speak to this 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 by 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. 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. Jay, do you want to...
Yes. So as Tom mentioned, our sales strategy has four pillars for growth. And the first pillar is increasing the number of preneed sales counselors. So to answer your question, we're trying to expand and enhance the size of our sales force. The same pillar is increasing our lead-to-sale rate. So 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 preplanning. And the fourth pillar is increasing our large sales. We've had a lot of success over time with large sales. We believe they are a nice core competency of ours, and we see opportunities to further build on that. So overall, I'd say that Gerry and Brian and our entire team are executing very well. We're seeing strong results, and we're very excited about our future growth.
And A.J., just to provide a little color to what Jay said. This lead-to-sale rate, you think, what does that mean? Well, that's really about being more effective through the sales process. And the other day, Jay and Gerry were in my office showing me we're utilizing AI right now to train our people. We have the ability to have AI customer interactions that give grades, give feedback, and provide personalized advice. They're really leveraging this tool to be very effective, and it's really early days. So we're pretty excited about what we're doing and where we're headed with that.
Okay. And just another aspect on the preneed sales. I guess on the Funeral side, you made the pivot over to more insurance-related sales from the trust. 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. 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?
We are, A.J. As of July of this year, we're kind of at that steady state in the low 90s for SCI Direct. I would say about 70% is in the core, and the difference really being there are certain people that can't get insurance, right? So we always have to have some form of a trust product. And then, jurisdictionally we may prefer a trust product in certain states. So yes, I think we're — we think 70% is probably the right core number and low 90s on SCI Direct. We're really trying to push that. But again, not everybody is insurable. So we need to be flexible enough to make sure we take care of our customers.
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 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?
Yes. What we're seeing in July, A.J., it's pretty much flat — that is 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. So probably be in line or better than the trends we talked about in the first quarter.
The next question comes from Scott Schneeberger of Oppenheimer.
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. 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 will just provide more strong tailwind to what you're able to do in preneed sales?
Yes. 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 and primarily through our seminars. And one of our greatest lead sources is serving at-need customers and engaging those customers after their time of need. So to the extent the at-need account grows and the funeral volume grows, we'll be in great shape.
And then just following on A.J.'s last question about the funeral volumes. It was 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. 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 of an increase with that first quarter being anomaly or still being conservative and not certain?
I mean, Scott, as 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 could negate that slightly when I think about, let's say, 2027 — because obviously, I think we'll have a good comparison to '26 — 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 the spike of excess deaths related to a lot of things. If you look at drug overdoses, suicides, auto fatalities, there are so many trends for society that those are getting better. 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 continue to improve. 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. It's really hard to precisely predict, but that's how we feel about it as we look at models and project internally.
And then just lastly, can we speak to margins for a second, a bunch of moving pieces that have impacted the quarter. You called it out, but can we roll it together tightly about puts and takes on the margin in 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?
Sure. So kind of level set here, Scott. First is, as we think about how we manage expenses, we have labor efficiency metrics in dashboards. 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, they can manage salary costs down to 2% using those tools. They have the tools and the talent. On the Cemetery side, they have the same type of tools. And then we have a team here in corporate, staffed with a lot of leadership from the field, called the Performance Improvement Committee. 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 margins, we can do some things. So as I think about Funeral margins going forward and some of the things that were in our face, obviously, volume is a big one. But two things are happening right now 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 shortly, and we think will be better. Number two, the selling compensation changes — here, this would be two things. One is when we transition to more fixed compensation, we're getting close to the end of that. 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. Again, those kind of go away in the third quarter. 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, we used to deliver urns prior to need. We stopped doing that a while back. The last quarter that impacted us was the fourth quarter, I believe, and we will no longer have anything in both periods of delivery of urns. That hurt us by $5 million. So as I think about margins in '26, the rest of '26 and into '27, they should get better again on the funeral side. On the Cemetery side, the things I think about are backlog delivery. We told you we're selling a lot more than we're delivering, and we're deferring a lot of the expense. Those higher-margin cemetery deliveries should happen in the back half of the year. And then, again, we've got strong 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, how long has it been in the trust fund, and what are those returns. So it's not only income, it's really the value of the contract that's coming back. Those are the things that will enhance margins going forward in both Cemetery and Funeral. We're confident we have the tools and the trends are starting to shift in our favor.
The next question comes from Tyler Barishaw of Truist.
This is Tyler Barishaw on for Toby. Impressive preneed sales production of past single digits, how should we think about that for the balance of the year? What kind of range do you expect?
And you're talking about Cemetery, Tyler? I suspect or both?
Yes, primarily Cemetery.
Yes. So on the Cemetery side, for the 6 months, I think we're up about 8.8%, call it rounded 9%. And when we look at the back half of the year, I think our position would be we're going to be in the mid- to maybe low high single-digit percentages — that's a place we're modeling and believe — 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. I think we're in the mid-40s quarter of large sales — that's a comparison that's a good target. I feel good we can match it or slightly beat it. But I think we anticipate most of the growth to come from the core sales.
Can you also then touch on Funeral as well?
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.
The next question comes from Joanna Gajuk of Bank of America.
A couple of questions. The first, I guess, on the last one in terms of the numbers. Can you quantify the large sales in this quarter in Q2? Because Q1, I guess, was also like in the low $40 million.
Yes. 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. But yet, Joanna, we're starting to hit numbers closer to $50 million. And I'd say the breadth of the sales getting better. Jay, do you want to touch on that a little bit?
In terms of private mausoleum sales, I give an accolade to Gerry 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. That has helped.
So 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.
Okay. That's great. And on the comment you were making that you expect more growth from the core. So what gives you confidence that the build demand, I guess, for that type of product?
Well, I think of 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 — 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. And then specifically, we called out before, we've got a real focus on that cremation consumer. We view that opportunity as almost like a 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. We're seeing an uplift in the number of cremation consumers that are buying, and that's going to show up in velocity. That will 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 getting historically. So that's why I think we feel confident that trend should continue. Now how much? You end up with a recession, that could impact the number of people that want to prearrange, but we're confident that with our focus we should continue to drive velocity.
So on this cremation customer, on the Q1 call, when I asked about this, you said you guys piloted in like 10 markets. So are you doing it in additional markets and kind of how things are going there on the cremation customer buying cemetery product?
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. The first 10 markets had dramatically better take-up rates. The second wave is better, maybe not the same rates, but it's clear that with the focus and with the materials and the visibility — some of that is around marketing, sometimes within the facility or digital — we're seeing a real pickup in the conversation and therefore, pickup in our ability to sell where we've tested. I think by early 2027 it will be everywhere, but we're rolling out in waves and really trying to make sure we're doing it right and getting the internal buy-in.
My question on the trust fund income. It seems like you mentioned throughout the call that clearly that's helping average sales in both segments. So can you help quantify? I think you disclosed this number in the 10-Q, but can you give us a ballpark number maybe in terms of trust fund income in both segments and also — there was an other line in cemetery that benefited from that as well. So it seems like maybe the returns are tracking higher so is that correct? And also what does it mean for the second half of this year? Are you assuming higher returns coming through because of this or sort of help us understand how this helps you get to your guidance.
You bet. So 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. About 70% of that internal care fund is really a kind of 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 that's distributed to us and once in a while as portfolio managers make those decisions, whether to create realized gains, some portion of those get distributed, which makes endowment care fund income a little bit more lumpy. Although this quarter, we saw it a little bit more lumpy to the positive by $7 million or $8 million. As a very general statement, the trust fund income for the full year can range anywhere from, let's call it, $330 million to $360 million-ish. And again, I don't know what the markets are going to do in the back half. That's the best guidance I could give you. I'd tell you about $125 million of that number that I gave you is related to the endowment care fund, the rest is related to the multisite trust. And not only do you need a crystal ball to understand what the returns are going to be, as Tom mentioned earlier, you have to know how old the contracts are and what the original corpus was coming out, too. So there's a lot of moving factors in that guide, but that's generally where it is for a full year of 2026.
All right. But would you say the returns are coming in better?
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 three years alone. 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. So it really is a good, nice mix that we've designed here.
The next question comes from Parker Snure of Raymond James.
So the preneed 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%. 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 the production to flow through the P&L?
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 100%. It includes a property component which over the full 12 months should also be largely recognized, but this production growth also includes merchandise and services. When that occurs, that recognition tends to occur a little later — maybe about half of the services are recognized in the same year, and maybe about two-thirds of the merchandise is recognized in the same year. 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. We're not too far off at 88% versus where we were in the prior year at this exact time. We expect to have higher 90 percentages in the back half of this year, which would be consistent with the back half of last year. So we should end up somewhere around that 95%. It could be higher if the mix of production ends up heavier toward property than merchandise and services, maybe as high as 97%. If it ends up a little bit higher on merchandise and services, maybe around 93%. But generally, there's no movement here from a full-year basis that deviates from plan.
And Parker, just to clarify because I want to make sure it's understood: when we're talking about 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. So there are two different streams and history tells us how they behave. If we sell a lot this year but fewer are delivered, that will drive down the recognition rate. That's okay. It's a good thing because it indicates a growing backlog. Typically, merchandise and services have lives of 6 to 8 to 10 to 12 years when you think about recognition.
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 — it's 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?
I think it's more of the same of what you normally see. We have well over $500 million of capacity. We go heavier and go lighter depending on what we believe the intrinsic value is versus the share price, and we've been very disciplined with that. I think we're on a run rate in the first half of the year that was a little stronger than prior year because we were able to buy shares in that $76 to $78 range, as we've disclosed. 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. A lot of times you'll see us slow down and speed up based on that return and based on that opinion.
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. Just wanted to check in there and see how that progressed through the second quarter as well?
Like I said before, if you look at labor costs in the second quarter, we managed them to about 2%. That was a function of lower volumes and our field utilizing dashboards and metrics to manage labor costs via part-time adjustments and other levers. They do a good job. What will happen is if volumes pick up in the third quarter, I expect those costs to rise back up closer to inflationary levels, around 2.5% to 3%. So that's where we are and how we manage it.
The next question comes from Tomo Sano of JPMorgan.
On 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 expansion? And then when should we expect that backlog to translate into margins, please?
On the Funeral side, Tomo, there's seasonality. Typically, in the first two quarters we're selling a bit more than delivering because we sell into projects that get built later in the year. Many completions occur in the third and fourth quarters. The backlog delivery in the back half of the year should result in higher preneed property recognition rates — moving from the high 80s/low 90s into the higher 90s. Comparably, that happened last year as well. Sequentially, you should expect higher margins in the back half of the year.
And on follow-up, digital investments, how are digital investments impacting such as lead generation conversion, case mix, collections? Could you talk about some of the evidence that impact so far, please?
There's a lot in that digital investment. Some has to do with the leads coming from the websites and making sure that we get them into the sales funnel as quickly as possible. Some has to do with the applications we've developed in-house that the sales force uses such as the Beacon tool, the tablet-based speaking tool that's in certain areas of the company but not in all areas yet. We're obviously trying to — like anybody else — look for efficiencies through AI now and into the future in terms of that development. I'd describe it as one of the pillars that are driving sales — technology investments to give us the tools to help drive the four pillars. It's generally around $20 million to $25 million a year of technology investment that's in our CapEx guidance, and that's how I'd describe it.
This concludes our question-and-answer session. I would like to turn the conference back over to SCI management for any closing remarks.
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 third quarter earnings call. Thanks.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.