SCI 10-K & 10-Q changes, risk factors and insider trading

If the investments in our trust funds experience significant declines in 20252026 or subsequent years or in a high inflation environment, there could be insufficient funds in the trusts to cover the costs of delivering merchandise and services or 14 Service Corporation International maintaining our cemeteries in the future. We may be required to cover any such shortfall with cash flows from operations, which could have a material adverse effect on our financial condition, results of operations, and cash flows. For more information related to our trust investments, see Note 3 in Part II, Item 8. Financial Statements and Supplementary Data.

Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure or by reducing the amount of discretionary income consumers have available to spend on our merchandise and services. The recent existence of higherHigher inflation in the economy has resulted in, and may continue to result in,in higher interest rates and capital costs, supply shortages, increased costs of labor, components, manufacturing and shipping, as well as weakening exchange rates and other similar effects. As a result of inflation, we havemay experiencedexperience modest cost increases from certain vendors and suppliers on merchandise and goods and may continue to experience additional cost increases in the future, which could be of greater magnitude than those experienced to date.goods. Although we may take measures to mitigate the effects of inflation, if these measures are not effective, our business, financial condition, results of operations and liquidity could be materially adversely affected. Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.

•Engage in mergers, acquisitions, liquidations, and dissolutions;

Our Bank Credit Facilities require us not to maintainexceed a maximum leverage ratio. This covenant may require us to take actions to reduce our indebtedness or act in a manner contrary to our strategic plan and business objectives. In addition, events beyond our control, including changes in general economic and business conditions, may affect our ability to satisfy this covenant. A breach of this covenant could result in a default of our indebtedness. If we breach certain affirmative covenants or the negative covenant contained in our Bank Credit Facilities, then, immediately upon notice from the applicable administrative agent, an event of default will have occurred and the lenders could elect to declare all amounts outstanding thereunder, together with accrued interest, immediately due and payable. If we breach any of the other affirmative covenants contained in our Bank Credit Facilities, and such breach continues unremedied for 30 days after receipt of notice thereof, then an event of default will have occurred and the lenders party thereto could elect to declare all amounts outstanding thereunder, together with accrued interest, immediately due and payable. Any such declaration would also result in an event of default under our Senior Indenture governing our various senior notes. For additional information, see Financial Condition, Liquidity and Capital Resources in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 6 in Part II, Item 8. Financial Statements and Supplementary Data.

Our ability to attract and retain a qualified sales force, licensed funeral professionals and other personnel is an important factor in achieving future success. Buying cemetery and funeral home products and services, especially at-need products and services, is very emotional for most customers, so our sales force and licensed funeral professionals must be particularly sensitive to our customers’ needs. We cannot give assurance that we will be successful in our efforts to attract and retain a skilled sales force and licensed funeral professionals. Furthermore, the stringent licensing standards required for funeral professionals under various state regulations create a significant barrier to entry and make it especially challenging to find enough qualified talent. If we are unable to maintain a qualified and productive sales force and team of licensed funeral professionals, our revenues may decline and our cash available for distribution may decrease.

Risks associated with our supply chainchain, such as tariffs, could materially adversely affect our financial performance.

We are dependent on our supply chain to supply merchandise to our funeral home and cemetery locations. If our fulfillment network does not operate properly, if a supplier fails to deliver on its commitments, or if delivery networks have difficulty providing capacity to meet demands for their services, we could experience merchandise delivery delays or increased delivery costs, which could lead to lost sales and decreased customer confidence, and adversely affect our results of operations. Changes in the costs of procuring commodities used in our merchandise or the costs related to our supply chain,duechain, due to inflation, natural disasters, pandemics, changes to trade policy or other matters, could adversely affect our results of operations. We cannot predict how changes to trade policy may affect trade agreements or tariffs, nor can we predict the effects that any such changes would have on our supply chain.

Factors affecting our operating results include: demographic trends in terms of population growth and average age, which impact death rates and number of deaths; establishing and maintaining leading market share positions supported by strong local heritage and relationships; effectively responding to increasing cremation trends by selling complementary services and merchandise; controlling salary and merchandise costs; and exercising pricing leverage related to our atneed revenue. The average revenue per funeral contract is influenced by the mix of traditional and cremation services as our average revenue for cremations is lower than that for traditional burials. To further enhance revenue opportunities, we continue to focus on our cremation customers' preferences and remaining relevant by developing additional memorialization merchandise and services that specifically appeal to cremation customers. We believe the presentation of these additional merchandise and services through our customer-facing technology improves our customers' experience by reducing administrative burdens and allowing them to visualize the enhanced product and service offerings, which we believe will help drive increases in the average revenue for a cremation in future periods. While economic conditions, inflation, and consumer confidence may affect the timing or mix of customer purchases, demand is generally deferred rather than lost. Accordingly, demand for these products and services has historically been less sensitive to economic cycles than other discretionary consumer purchases.

For further discussion of our key operating metrics, see our "Cash Flow" and “Results of Operations” sections below. For a discussion of our results of operations and liquidity and capital resources for the fiscal year ended December 31, 2023,2024, see 24 Service Corporation International Management’s Discussion and Analysis of Financial Condition, Liquidity and Capital Resources and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year December 31, 2023,2024, filed with the Securities and Exchange Commission on February 13, 2024.2025.

Our unencumbered cash on hand, future operating cash flows, and the available capacity under our Bank Credit Facilities will givegives us adequate liquidity to meet our short-term needs as well as our long-term financial obligations. Due to cash balances residing in Canada and minimum operating cash requirements, a portion of our cash on hand is encumbered.

Investing in Acquisitions and Building New Funeral Service and Cemetery Locations. We manage our footprint by focusing on strategic acquisitions and building new funeral service locations where the expected returns are attractive and exceed our weighted average cost of capital by a meaningful margin.capital. We target businesses with favorable customer dynamics and/or where we can achieve the benefits of economies of scale. We continue to pursue strategic acquisitions and build new funeral service locations in areas that provide us with the potential for additional scale. In 2024,2025, we invested $181.2$101.3 million in acquiring 2622 funeral service locations and 62 cemeteries, which included 32 combination locations.

Return Excess Cash to Shareholders. In addition to any strategic acquisitionacquisitions or new build opportunities, we continue to return cash to shareholders through dividends and our share repurchase program. Our quarterly dividend rate has steadily grown from $0.025 per common share in 2005 to $0.30$0.34 per common share at the end of 2024.2025. We target a dividend payout ratio of 30% to 40% of after tax earnings excluding special items and intend to grow our cash dividend commensurate with the growth in our business. While we intend to pay regular quarterly cash dividends for the foreseeable future, all future dividends are subject to limitations in our debt covenants and final determination by our Board of Directors each quarter upon review of our financial performance. We also expect to continue to repurchase shares of our common stock in the open market or through privately negotiated transactions, subject to market conditions, debt covenants, and normal trading restrictions. There can be no assurance that we will buy our common stock under our repurchase program in the future. In 2025, we repurchased 5,864,563 shares of our common stock at an aggregate cost of $464.2 million, which is an average cost per share of $79.15. In 2024, we repurchased 3,439,551 shares of our common stock at an aggregate cost of $249.8 million, which is an average cost per share of $72.63. In 2023, we repurchased 8,700,767 shares of our common stock at an aggregate cost of $549.6 million, which is an average cost per share of $63.17. Subsequent to December 31, 2024,2025, we repurchased 467,208552,313 shares for $36.3$44.4 million at an average cost per share of $77.74.$80.48.

The $75.9$2.1 million increasedecrease in operating cash flow during 20242025 comprises:

•a $62.9$119.2 million decreaseincrease in cash tax payments, and

Cash flows from investing activities used $620.9$548.3 million and $469.4$620.9 million, in 2024,2025, and 2023,2024, respectively. The $151.5$72.6 million increaseddecreased outflow from 20242025 over 20232024 is primarily due to the following:

•a $108.7$79.9 million increasedecrease in cash spent on business acquisitions,

•a $5.7$43.6 million increasedecrease in cash spent on real estate acquisitions,

•a $1.1$10.3 million decreaseincrease in net proceeds for Company-owned life insurance policies, net of repayments.

Financing activities used $374.7 million in 2025 compared to $319.6 million in 20242024. comparedThe to $381.1$55.1 million in 2023. The $61.5 million decreasedincreased outflow from 20242025 over 20232024 is primarily due to the following:

•a $291.1$207.3 million decreaseincrease in the purchase of Company common stock, and

•a $32.5$27.3 million increasedecrease in proceeds from exercises of stock options, partially offset byand

•a $6.3$9.3 million increase in payments of dividends, andpartially offset by

•a $2.5$132.4 million changeincrease in bankdebt overdraftsproceeds, andnet other.of repayments,

As of December 31, 2024,2025, we had $4.8$5.1 billion in aggregate principal outstanding on our notes, term loan, revolving credit facility, finance leases, mortgage notes, and other debt (collectively "debt and finance leases"), of which $83.9$56.8 million is payable in the next twelve months. The aggregate principal excludes $44.0$38.1 million in unamortized non-cash debt issuance costs and original issuance discounts and premiums. Future interest payments associated with the debt and finance leases 26FORM Service10-K Corporation International27 total $1.2 billion, of which $239.2$249.1 million is payable in the next twelve months. For further information on our debt and finance leases see Note 6 and Note 8 of Part II, Item 8. Financial Statements and Supplementary Data.

In addition to selling our products and services to client families at the time of need, we enter into price-guaranteed preneed contracts, which provide for future funeral or cemetery merchandise and services. Because preneed funeral and cemetery merchandise or services will generally not be provided until sometime in the future, most states and provinces require that all or a portion of the funds collected from customers on preneed contracts be deposited into merchandise and service trusts until the merchandise is delivered or the service is performed. In certain situations, as described above, where permitted by state or provincial laws, we may post a surety bond as financial assurance for a certain amount of the preneed contract in lieu of placing funds into trust accounts. Alternatively, we may sell a life insurance or annuity policy from third-party insurance companies.companies or use other non-insurance funded third-party providers.

Insurance-FundedInsurance- and Other Funded Preneed Contracts

Where permitted by state or provincial law, we may sell a life insurance or annuity policy from third-party insurance companies, for which we earn a commission as a general sales agent for the insurance company. These general agency commissions (GA revenue) are based on a percentage per contract sold and are recognized as funeral revenue when the insurance purchase transaction between the preneed purchaser and third-party insurance provider is completed. All selling costs incurred pursuant to the sale of insurance-funded preneed contracts are expensed as incurred. We do not reflect the FORM28 10-KService 27Corporation International unfulfilled insurance-fundedinsurance- and other funded preneed contract amounts in our Consolidated Balance Sheet. The proceeds of the life insurance policies or annuity contracts will be reflected in funeral revenue as we perform these funerals. In early July 2024, we finalized our agreement to change our preferred preneed insurance provider in the United States, which has allowed us to further utilize our scale and streamline our processes across our network. In addition, we have shifted our non-funeral home preneed sales production from trust to insurance-funded contracts.

The table below details our results of insurance-funded and other non-insurance funded third-party preneed production and maturities.

The funds collected from customers andare deposited into trusts as required by state or provincial law are deposited into trusts.law. We retain any funds above the amounts required to be deposited into trust accounts and use them for working capital purposes, generally to offset the selling and administrative costs of our preneed programs. Although this represents cash flow to us, the associated revenues are deferred until the merchandise is delivered or services are performed (typically at maturity). The funds in trust are then invested by professional money managers with oversight by independent trustees in accordance with state and provincial laws. As discussed above in Insurance- and Other Funded Preneed Contracts, we have shifted our non-funeral home preneed sales production from trust to insurance-funded contracts.

We are North America’s largest provider of deathcare products and services, with a network of funeral service locations and cemeteries unequaled in geographic scale and reach. At MarchJune 31,30, 2026, we operated 1,4871,495 funeral service locations and 503505 cemeteries (including 314316 funeral service/cemetery combination locations), which are geographically diversified across 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. Our funeral and cemetery operations consist of funeral service locations, cemeteries, funeral service/cemetery combination locations, crematoria, and other related businesses, which enable us to serve a wide array of customer needs. We sell cemetery property and funeral and cemetery merchandise and services at the time of need and on a preneed basis. We strive to offer families exceptional service in planning life celebrations and personalized remembrances. Our Dignity Memorial® brand serves approximately 700,000 combined preneed and atneed families each year with professionalism, compassion, and attention to detail.

Our financial position is enhanced by our $17.1$17.6 billion backlog of future revenue from both trust and insurance-funded preneed sales at MarchJune 31,30, 2026. Preneed selling provides us with a strategic opportunity to gain future market share. We also believe it adds to the stability and predictability of our revenue and cash flows. While revenue on the majority of preneed merchandise and service sales is deferred until the time of need, sales of preneed cemetery property provide opportunities for revenue recognition to the extent that the property is developed and available for use.

We rely on cash flow from operations as a significant source of liquidity. Our cash flow from operating activities provided $333.8$572.4 million in the first threesix months of 2026. As of MarchJune 31,30, 2026, we had $1,448.3$1,383.7 million in remaining borrowing capacity under our Bank Credit Facility.

Our Bank Credit Facility requires us to maintain a certain leverage ratio with which we were in compliance at MarchJune 31,30, 2026. We target a leverage ratio of 3.5x to 4.0x.

Our financial covenant requirementsrequirement and actual ratio as of MarchJune 31,30, 2026 were as follows:

Returning Excess Cash to Shareholders. In addition to any strategic acquisitions or new build opportunities, we continue to return cash to shareholders through regular quarterly dividends and our share repurchase program. Our quarterly dividend rate has steadily grown from $0.025 per common share in 2005 to $0.34$0.36 per common share in the second quarter of 2026. We target a dividend payout ratio of 30% to 40% of after tax earnings excluding special items and intend to grow our cash dividend commensurate with the growth in our business. While we intend to pay regular quarterly cash dividends for the foreseeable future, all future dividends are subject to limitations in our debt covenants, and final determination by our Board of Directors each quarter upon review of our financial performance. We also expect to continue to repurchase shares of our common stock in the open market or through privately negotiated transactions, subject to market conditions, debt covenants, and normal trading restrictions. On June 11, 2026, we announced that our Board of Directors increased the authorized level of repurchases of our common stock by approximately $472 million. There can be no assurance that we will buy our common stock under our repurchase program in the future. During the threesix months ended MarchJune 31,30, 2026, we repurchased 1,789,2933,350,873 shares of our common stock at an aggregate cost of $144.4$264.9 million, which is an average cost per share of $80.69.$79.04.

Net cash provided by operating activities was $333.8$572.4 million and $311.1$477.6 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The $22.7$94.8 million increase in operating cash flows from 2025 comprises:

•a $0.5$64.8 million decrease in cash tax payments, and

•a $5.9$16.8 million increase in net trust deposits, andwithdrawals,

•a $3.7$5.3 million increasedecrease in cashrestructuring interestpayments, payments.and

Net cash flows used in investing activities was $132.3$319.8 million and $90.7$191.2 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The $41.6$128.6 million increased outflow in 2026 over 2025 is primarily due to the following:

•a $0.8$40.7 million increase in expenditurestax forcredit digitalequity investments and corporate.investments,

Net Cashcash used in financing activities was $184.9$232.5 million and $205.7$243.0 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The $20.8$10.5 million decreased outflow in 2026 over 2025 is primarily due to the following:

•a $12.7$57.6 million increasedecrease in purchase of Company common stock,

•a $0.4$34.7 million increase in bankborrowings overdraftsfrom andour other.corporate headquarters debt facility,

Except for cemetery pre-construction bonds (which are irrevocable), the surety companies generally have the right to cancel the surety bonds at any time with appropriate notice. In the event a surety company were to cancel the surety bond, we are required to obtain replacement surety assurance from another surety company or fund a trust for an amount generally less than the posted bond amount. Management does not expect that we will be required to fund material future amounts related to these surety bonds in the future due to a lack of surety capacity or surety company non-performance.

The following table reflects our backlog of trust-funded deferred preneed contract revenue, including amounts related to Deferred receipts held in trust at MarchJune 31,30, 2026 and December 31, 2025. Additionally, the table reflects our backlog of unfulfilled insurance-funded contracts and other non-insurance funded third-party contracts (which are not included in our unaudited Condensed Consolidated Balance Sheet) at MarchJune 31,30, 2026 and December 31, 2025. The backlog amounts presented include amounts due from customers for undelivered performance obligations on cancelable preneed contracts to arrive at our total backlog of deferred revenue. The table does not include the backlog associated with businesses that are held for sale.

The fair value of our trust investments was based on a combination of quoted market prices, observable inputs such as interest rates or yield curves, and appraisals. As of MarchJune 31,30, 2026, the difference between the backlog and total assets at fair value represents $0.17$0.16 billion related to contracts for which we have posted surety bonds as financial assurance in lieu of trusting, $1.42$1.46 billion collected from customers that were not required to be deposited into trusts, and $0.20 billion in allowable cash distributions from trust assets partially offset by $1.54$1.53 billion in amounts due on delivered property and merchandise. As of MarchJune 31,30, 2026, the fair value of the total backlog comprised $5.03$5.32 billion related to cemetery contracts and $12.04$12.30 billion related to funeral contracts. As of MarchJune 31,30, 2026, the fair value of the assets associated with the backlog of trust-funded deferred revenue comprised $5.07$5.32 billion related to cemetery contracts and $2.91$3.03 billion related to funeral contracts. As of MarchJune 31,30, 2026, the backlog of insurance-funded contracts of $8.84$8.98 billion was equal to the proceeds we expect to receive from the associated insurance policies when the corresponding contract is serviced by one of our operating locations.

Independent trustees manage and invest the majority of the funds deposited into the funeral and cemetery merchandise and service trusts as well as the cemetery perpetual care trusts. The majority of the trustees are selected based on their respective geographic footprint and qualifications per state and provincial regulations. These trustees, with input from SCI's wholly-owned registered investment advisor, establish an investment policy that serves as an operating document to guide the investment activities of the trusts including asset allocation and manager selection. The investments are also governed by 32 Service Corporation International state and provincial guidelines. All of the trusts are intended to control risk and volatility through a combination of asset classes, investment styles, and a diverse mix of investment managers.

As of MarchJune 31,30, 2026, approximately 96% of our trusts were under the control and custody of five large financial institutions. The U.S. trustees primarily use five managed limited liability companies (LLCs), three for the merchandise and service trust type and two for the cemetery perpetual care trust type, with independent trustees as custodians. Each financial institution acting as trustee, manages its allocation of trust assets in accordance with the investment policy through the purchase of the appropriate LLCs' units. For those accounts not eligible for participation in the LLCs or where a particular state's regulations contain other investment restrictions, the trustee utilizes institutional mutual funds that comply with our investment policy or with such state restrictions. The U.S. trusts include a modest allocation to alternative investments. These alternative investments are held in vehicles structured as LLCs and are managed by certain trustees. The trusts that are eligible to allocate a portion of their investments to alternative investments purchase units of the respective alternative investment LLCs.

Equity investments have historically provided long-term capital appreciation in excess of inflation. The trusts have direct investments in individual equity securities primarily in domestic equity portfolios that include large, mid, and small capitalization companies of different investment styles (i.e., growth and value). The majority of the equity allocation is managed by institutional investment managers that specialize in an objective-specific area of expertise. Our equity securities are exposed to market risk; however, we believe these securities are well-diversified. As of MarchJune 31,30, 2026, the largest single equity position represented approximately 1%1.1% of the total securities portfolio.