Security National Financial CorporationSNFCANASDAQ
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Adam Quist: Thank you for your continued support. I look forward to updating you on our progress in the next quarter. I will now turn the time over to Steve Kiel.
Steve Kiel: Thank you, Adam. Good afternoon, everyone. My name is Steve Kiel, and I am the Chief Operating Officer of Security National Funeral Homes and Cemeteries. I would like to begin by expressing my heartfelt appreciation to our funeral home, cemetery, grounds, and operational support teams. Your unwavering dedication to service excellence and operational professionalism continues to be the cornerstone of our success. Even in the face of today's challenging economic environment, your commitment inspires confidence and upholds the highest standards of care for the families we have the privilege to serve. In 2025, we reported net earnings before tax of $1,790,000, which is down from our $2,090,000 in the second quarter of 2024, or 14.2%. Much of this decline rests within our operating earnings but more specifically derived from our cemetery operations. Our total revenue in the second quarter was $8,140,000, which was down from the $8,280,000 in revenue in 2024, or 1.7%. These results are not only a reminder of the challenges we are currently navigating, but they are also a catalyst. We continue to act with urgency to address today's pressures while making the investments and implementing operational improvements that will strengthen our foundation and position us for long-term success. Within our funeral home division in 2025, our earnings came in at $387,000, which were down slightly from the $394,000 earned in 2024. Revenue, however, rose 1.2% to $3,260,000. This was driven by a 3.3% increase in our funeral sales average. In addition, we continue to see our sales mix move another 3.6% towards cremation as our total cremation rate realized in Q2 of 2025 sits at 52.8%. As Scott Quist alluded to in his press release, we have realized a 6.1% increase in these cremation families that are choosing to have service associated with honoring their loved one's life. In our cemetery dimension, in our second quarter of 2025, our earnings were at $822,000, which were down from the prior year's quarter's $1,430,000. Revenue declined 10% from $4,810,000 to $4,330,000, with our preneed land sales lagging behind the prior year's quarter, which included large land sales that were absent in 2025. Another contributing factor to the revenue decrease is from our interment volumes being down 16.4% or 65 interments within the quarter. This is driven largely by the continued consumer shift towards cremation. We have raised both the level of professionalism and our standards of expectations within our cemetery sales team this year. This initiative has come at a short-term cost. Since January 2025, we have turned over 60% of our sales team. At the end of Q2, 50% of our cemetery sales team have joined us within the last six months. We have recruited heavily, and that has brought us talented professionals with proper mindsets. We also remain committed to investing in and developing our cemeteries to offer a full range of both burial and cremation options that meet the evolving family needs as our team educates on the importance of having a final resting place to honor the life lived. For the remainder of 2025, our focus is clear: talent development, technology, expense management, and sales culture. We remain optimistic. Our operating model is strong, and our core businesses have room to grow. We recognize that reaching our desired destination of sustained growth will require more than simply repeating what we have done in the past. Our deliberate and significant investments in people, technology, and customer service innovation, combined with disciplined cost control, will strengthen our competitive position and support performance gains in the quarters ahead. Thank you for your time, for your confidence, and most importantly, your continued partnership. I now turn the time back over to Heather Street.
Heather Street: Before we conclude today's call, we would like to open the floor for questions. As a reminder, to ask a question, please use the Zoom platform to raise your hand to unmute, or you may submit questions through the Zoom Q&A panel. Include your name and organization. We will take as many as time permits. The question comes in, what specific steps are being taken to turn around the mortgage company losses?
Andrew Quist: Specific steps that are being taken are both expense reduction on the mortgage side and an increase in margins. We are working on both the revenue and expense side of the equation. We have increased our margins in the second quarter going into the third quarter, which will certainly increase revenue in the third quarter on a comparative basis. We continue to rationalize our expenses. The two areas that we saw the biggest expense increases year over year in the second quarter were what I mentioned that we do not have operational control over, that being CECL for unexpected credit losses and deferred compensation accruals. Outside of that, we continue to work feverishly at reducing the operational expenses we can control.
Steve Kiel: Yeah.
Heather Street: Do you feel that the premium increases play a role in the life side?
Adam Quist: Yeah. Good question. This is Adam Quist. I will be answering that question. It certainly plays a role. Anytime you increase premiums, there is, in my opinion, a mindset challenge that you have with your Salesforce, and that is something we are currently navigating. We are working on the mindset of our Salesforce that we are a value proposition company. That we do not compete on price, but we compete on value. And because we compete on value, our offerings are still a very compelling offering in the marketplace. I would say that I think we are making good progress on that and that we are seeing some good headway with our Salesforce mindset and its sales velocity.
Heather Street: Next question. What is the main cause of the $4,000,000 increase in personnel costs?
Adam Quist: Yeah. I can take that. So there are a couple of things that cause it. I mean, if you are looking for one main cause, there are certain natural increases that we have to take to keep competitive with market rate compensation. We find that retaining individuals while you do have to increase market rate to market rates, it is still cheaper than having to retrain someone. And so that is one element of it. But the other element of it would be strategic investments that we have made and strategic hires that we have made that we believe will make us a stronger company going forward. Speaking specifically, I think that such as generating a proprietary aftercare program and proprietary CRM program for our Salesforce, those things do cost money. It does require a personnel investment. But we believe that that investment will be returned in the future.
Heather Street: Next question from Melanie Smith. What other issues do you feel have created a drop in life sales?
Adam Quist: Well, I would note that our premium collections were flat, so I might question the use of the word drop there. But I think the main issue, if I were to summarize it, is our leadership. And we have addressed that sales leadership. We have made changes there. And we mentioned that in the press release and also in my comments today. I simply think that we did not have good sales leadership at the positions we needed to. And combining that with a premium increase created some challenges for our field-level sales. But I think we have addressed the leadership issues, and I think we are seeing some good returns from our Salesforce at the moment. Albeit, we are still very early and young in the process.
Heather Street: Next question from mortgage. Carlos Plata says, on the mortgage side, if we increase margin, do not we run the risk of being less competitive and having lower volume?
Andrew Quist: This is Andrew Quist again. Certainly, that is a risk. Thank you for the question, Carlos. That is why we pay close attention to the market environment. And we can see through both our pricing engine, not specific competitor, but market conditions. And through publicly traded results that our competitors in the market right now have been increasing margin as well. So it is something that we have to monitor carefully and make sure that we do not increase more than what we are seeing the market increase. But, yes, that is something that we certainly monitor and we have to balance.
Heather Street: Next question. Can you speak to the overall investment exposure to real estate and your relationships with builders?
Garrett Sill: So this is Garrett Sill. I will answer kind of the first part of that question as far as investment exposure. It is something we look at when we look at our investments. I noted that we had increased our investment in real estate by about $25 million this year. And do look at it, but in spite of that increase of $25 million, we have kind of offset that with an increased investment in our bond portfolio as well. And so, you know, we try to look at it. We look at all our investments in buckets. Year over year, I do not think the percentage increase in real estate investment is significant, given our balance sheet size. But it is something we review on a regular basis, and we made a concerted effort at the beginning of the year. Actually, it started back in Q4 last year to increase our bond portfolio, which is a little more stable. Albeit it is subject to interest rates and market movements, but the income portion of that portfolio is fixed in nature and pretty steady. So, you know, we feel pretty good where we are at as far as ratios go with our investment expenses. Sorry, our investment in various assets. And so nothing too concerning the increase in Q2 of our real estate. I will let Jason Oberbaugh answer kind of a little bit more on the builder side.
Jason Oberbaugh: Thank you, Garrett. Yes. This is Jason Oberbaugh, Vice President and Director with responsibilities for our builder relationships. I will say two things about the relationships with builders we work with. One, we choose to only work with high-quality builders who have a very strong track record of performance. Typically, these builders are working in the production home models, which provide a very stable base of buyers for their homes. And then the other point I would make about these relationships is we stay very much in markets that we see as growing and expanding, where there are strong employment bases, to be able to have the open buyers to take out these homes. So high-quality builders, stable markets are very much an important part of our strategy. And I will say maybe a third thing, we have acquired some very talented people that, you know, Adam did not really give a nod to or maybe the right phrase is recognized in the increase in compensation that bring twenty-plus years of banking experience so that we are sure of our valuations and we are sure of our processes in protecting the investments that we are making in Security National Financial Corporation. So high-quality builders, high-quality markets, and then high-quality talent here at Security National ensuring the investments are handled properly.
Heather Street: Are there any further questions? Noting no more questions. We want to thank you again for your questions, and we value the engagement and thoughtful input from our shareholders and analysts. For more information about the meeting, our latest financial reports, or any other investment materials, we invite you to visit the investor relations section of our website at www.securitynational.com. We appreciate your continued support of Security National Financial Corporation. This concludes our second quarter 2025 earnings call. We look forward to speaking with you again very soon. Thank you, and have a great day.