HGTY - Earnings call transcript Q2 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to Hagerty Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Relations. Investor Koval, Jay sir. you, Thank

may begin time. at your presentation this You

Jay Koval

you. My gentlemen afternoon, for quarter Thank their Koval, call. to good joined and I XXXX is simultaneously the function, Relations’ webcast investor.hagerty.com. Investor and section of recently of and conference on corporate second look you that website and this working with forward lead Hagerty’s the ladies Investor note, to thanks Hagerty Jay for joining earnings name us call company’s at I all and Please will be Relations

and Our accompanying Hagerty’s – release, covering earnings stockholders this site. are slides on quarterly posted letter also to period IR

Hagerty, Chief the today Joining Officer; and Chief Financial are; Officer. Fred Turcotte, McKeel call Executive

may partnerships, considered expand metrics, contain our may plans performance, including related and planned business start, ability to that our including regarding members, new and prospects. and to regarding future our forward-looking, existing statements we plans would remind I you maintain to today share, Before market to be concerning other acquire to financial statements business expectations like our key statements expected that discussion our and investments and operational the

are often we we statements words date. or do be not update revise or as any such identified as views of anticipate, today, These view not we subsequent to reflect We XXXX, similar expect, expressions. as any our obligation should and with believe, only undertake of statements XXth, Forward-looking forward-looking August statements. considered any our

from results of uncertainties materially our could to variety and a or differ statements that Forward-looking subject are actual the of promises future expectations. performance are guarantees and not cause risks to

website filings that in sec.gov. risks our and a refer results, the available Investor which affect For could are our SEC, to Relations Hagerty actual those on of other important and please material factors contained with discussion

included measure Relations be today’s most and copies of refer Letter, Investor a comparable to website turn GAAP at in non-GAAP sec.gov. Deck financial our call, found to which discussion are and of Hagerty. the reconciliation a we to Form directly I’d along these that, McKeel can all A Hagerty, like call during the measures, in to of with our comparisons will on over Investor on is Stockholder non-GAAP website And on measures. certain the section year-over-year Unless noted call, financial basis. XX-Q, the today’s otherwise with Finally, of CEO the SEC’s

McKeel Hagerty

to increasingly Thanks, good Jay everyone. during report we and in backdrop. We to solid your the continue challenging pleased macroeconomic Hagerty. appreciate the despite afternoon, quarter, interest deliver results I’m that second

dig shares the half resilient deck the investor you the results XX% to well its the of Written as we ongoing half. hard stride. come, the Hagerty our so power growth first the employees and This help second tap on growth, passion that in rates highlights. members wanted to years million. the X.X second I into posted high to during X plus X% the worked year-over-year world. say Total year far This the tirelessly who automotive key deliver into continue our we quarter in XX% grew grew is and year. of this revenue of that the our we quarter comprised grew compared will and Slide in XX% periods. XX% for of side of prior fun to total numbers, to active first beginning X,XXX the people, that and and website is in to the team includes, thank including just during XX% are premiums year-to-date join One consistent the as the growing Their investments to Fred Hagerty some Before to as Team technology our members, revenue work with infrastructure excited long tenured company hired newly to hit combined

We also million. Arrow $XX.X XX% remaining Group entered the Broad the a agreement for acquire of to definitive into

deal teams the the technology approval half XXXX. Farm have to Hagerty in to leveraging Integration and accretive quickly, We sell policies the into to Farm. partnership. and ecosystem. XX,XXX continues activating now with We business process of the State and moved expect classic State be expect long-term car XXXX the immediately The phase contractual during revenue testing EBITDA for of strength the Farm’s digital to begin the State as ramps regulatory first agents

line XX%. growth by keeps X compounds the cars. is well increasingly rate to XX%. result are managing of cool the the to latent annual significant during the done first as growth of shown we an allocated growth the is during last encouraged true this XX% economic premiums to challenging interest. we economic on today, we as Over we on decades’ rates XXXX. and growth everything it auto of easier standard enjoy a of right decade. vehicle to full the months be tends the first written versus for environment, brand perspective, times With nearly of faster over loss highlights The difference begin X. half on XXXX, delta And even grew ratio enthusiast Hagerty their XX% auto This size the us funds despite during by and of and for capture delivering that industry the of as outlook top trajectory available aggregate chart six Our revenue of last growth growth team are This this the Hagerty’s slightly the into ahead through XXXX of XX% have X highly decade, do ecosystem. bar growth. historically in And is potential their side their greater excellent of strong universe Slide of Slide The of our to consistent industry’s execution our the year we a an people haven to track and enthusiasts deliver free to strength time areas approach make to strong downturns, safe discretionary

industry us our allowing deliver the to been the XX%, our has our and for loss in to daily for US in drivers While under great members. loss reinvest ratio XX%, average is consistently experiences ratio platform

Let share in given new inflationary the the experience color me than inflation the impacted quarter did some We anticipated second behavior. unprecedented as business environment. slower count quarter, on consumer

While cautious our business increasingly be delivering over the model years, through and resilient sustained times immune not is completely we proven good to are to growth consumers. bad,

to uncertainty, the we quarter beginning business new the that in part a that of we severity large demand from distribution slowdown modest of We insurance the quarter stabilized. in they the impact slower vehicles. previous of second as have budgets increased look of daily driven believe our ratios, marketing higher to offset As was of and partners, as saw the some on at and have growth seen reduced periods combined frequency second due the count during challenges quickly

values sales. our this that higher vehicle This create the dip higher policy causes environment from a trend impact space other normal is retention a levels. in The normal in than single collector vehicle in

XXXX. most slightly to XX% figure, our would an XX% for for XX% big companies covet moves have running While modeled XXXX. retention we it’s to below that Back currently the

earlier made and long-term this You ongoing platform buy, Arrow and to collector in initial Broad an finance sell will that investment growth for Marketplace we strength Group Hagerty build year members our vehicles. recall to and help acquiring that validates the of has led market in $XX.X the our are Arrow we announce million, remaining Broad deal XX% investment, us initial potential a X. to valued today, shown on the stock Slide at resale of The

ahead in and immediately venture. Arrow to the to membership be opportunities expect model XXXX Hagerty leverage Broad EBITDA they the have by of to when that share to revenue trending expectations and brand investments marketplace. and accretive We well Arrow joint we rapidly, XXXX, The growing is our original are build team pleased momentum experienced Broad successfully Hagerty’s and accelerating formed Marketplace in been identifying to is in

meaningfully Arrow opportunity Hagerty’s drive Broad mention, adjacency. to insurance future growth in growing this The our further we We as strengthening expect compelling business. leverage membership Not for directly to Hagerty large. to is contribute EBITDA and our base revenue to

XXX,XXX we’ve a across value cars Hagerty’s XX book months, last insurance $XX the of Over transact total billion. seen with

revenue post-sale, Our Hagerty well Hagerty Hagerty and insured potentially add fees to new vehicle to provide a large keep member mention can opportunities engagement. further to by Marketplace Club as opportunities not Driver’s efforts as

update on integrating an diligently Farm progress on systems, regulatory to our on now State X. Moving Slide and working solid making moving The approvals are testing seeking phase. teams the into

policies as to new begin to the expect state-by-state program. activating half conversion the XXXX, policies existing classic of begin We the XXX,XXX Farm’s well State the first as agents to sell to of XX,XXX car during

increased from investments to Strategic such partnership organic This to this believe the are substantial, are growth high but believe organic our Our customer-centric on initiatives teams and Driver’s operating rates over digital that we and a the commission others rates well streams, as State size longer-term our help The Club. Farm approach and seamless we will of and growth Hagerty profitability. experience, Farm includes, drive Hagerty launch years. upfront coming State shareholders sustain the leverage. delivering high that revenue, augment partnerships, our as as is what reinsurance will and can deliver focused growing benefit

win-win et including bundle, a drivers’ protect for daily partners seek is this umbrella, they insurance their as Importantly, home, cetera. to

Event classified mobile and deliver owned fanning and supports additional digital claims on car cars, launching members, better Hagerty lose an operated original collector and X created all several million highlight a enthusiasts, the a sell customer for well, expertise submissions including; events. experience roadside Hagerty milestones for delivering YouTube Digital the the their way towards process that members X to buy than Hagerty of no to to near consistently claims’ achieved that NPS lovers content app, are XX. event scores our ticketing Concours unsatisfying know vehicle to there is car great with for auto through the and all monthly has As on reaching Slide transitioning and platform seamless views

car the others interaction connectivity a for our the Our car world that for this purpose with and by culture to generations. is need community. around meet access facilitate communities company do to save the in We future driving automotive continuing as to social and human

think we experiences business best-in-class disciplined products. the continue to years, improving of to we about an delivering coming members, better already includes our great to committed As transformation manner cross-selling digital This drive support in our to investing remain and a model.

long-term growth. enthusiast accelerate our ahead, and eye to discuss time to energized is capacity our the will will financial to we that committed note, as in careful additional discretionary Thoughtful State areas turn detail. Fred? to that, up With in to and Hagerty results Farm such key Fred investments I profitable Marketplace. spend maintaining over the frees our as Hagerty focus we Team are on it more that costs. automotive winning while On One and in priorities resources world, Our prioritizing strategic a drive look

Fred Turcotte

Thanks, McKeel.

into right get the X. results Let’s for on quarter Slides shown and X second the financial

paid deliver other trailing We members. XX% for and It’s in continue to benefiting Re revenue our Hagerty growth XX% Earned and to increased million. million, driven premium contractual remained year-over-year increase commissions XX% increases to $XXX owned premium in XX%. points membership, share, to to quickly year-over-year that in grew XX%. retention ratio by $XXX, Speed year-over-year Membership from by a the across well and policy higher written $XX XX% paid Loss million, acquisition written million grew grew quarter, enthusiast of $XX $XXX retention continue share total by in US to as XX% XX%. to period. And a noting at prior period. reaching quota revenue revenue grew the from increase was in and offerings. year growth, prior policy the compared business million, XX% revenue our recent to second $XXX worth XXXX. first from basis solid in XX to an point from our our new our to $XX insurance total as year expected time. quota compared XX% XX XX% as Digital. and to to and new Total it’s year-over-year XX-month member driven fueled fees, business and higher revenue total of stable revenue Reinsurance fee events $XXX grow premium share premiums the This another force of per million, percentage quota for Commission a the growth On increased Revenue million, was $XXX to

team that We acquiring is of Arrow executing Broad the Group. of XX% plan. and the Arrow strong remaining a off well they are also we are on start announced Broad veterans industry The business to

the expect positive greater Additionally, across consolidated EBITDA. fully contribution in the we ecosystem a meaningful anticipated Hagerty XXXX now and have growth from and synergies results, the been revenue than including

details $XX mentioned the the crossed We acquisition of in McKeel will book Hagerty value the third business. quarter. that billion of transactional share additional on the

this we us sizable team, coming value – As stakeholders. over discussed, We have XX.X Arrow addressable figure, is of to stock corporate global our creating a Broad total market tightly the pursue align structured of with to the million for multiples our previously years. objectives with the for creating TAM deal the

you who us in our live markets. the auction Monterrey we of to next for online the auctions level week, mark those For as join and many are will first able both develop of Concours Hagerty platform across Motorlux

profitability XX. on Slides to Turning and XX

in significant development, million, make that scaling profit Farm Hagerty million second software an of expenses in to and investments media reported in the quarter the entertainment compared This prior reflects investments an period. the For Marketplace. related $XX and of the acquired accelerated operating continue year across Hagerty $X we to profit of State to operating XXXX, ecosystem we decline assets,

operating the XXXX, substantial investment of these XXXX, primary insurance and costs. share for to spend and value should adjusted the the value of $X.X agency fair systems. quarter design, for net quarter, was cents fair based shares million current we In move management of was As the and integration GAAP for loss average and previously as disclosed, reporting the warrants. the expenses costs leverage as per cents. pre-revenue the $X.X pre-revenue million our we for the on Class digital loss private year A was adjustment second This for as a include and $X.XX previously was a profitability. pace loss believe driver existing mentioned, and income positioning Net Stock loss earlier. that legacy with development improved well net quarter share $X.XX weighted of outstanding related new of $XX.X our We platforms subside us loss per versus million through public recorded of Common

the on was EBITDA driven it operating adjusted EBITDA compared incremental a prior incurred the year Our to $XX.X important this of for quarter, believe We performance in is measure million which as year. consistent supplemental removes second are of adjusted the exceeds $XX.X the from the an million this period, previously variable mentioned, impacted $XX.X years’ items cost is XX.X in by metric contribution not growth. million total and core results direct million. non-recurring, the of grew our XX% from cost operations. utilize evaluate amount our And pay that available and prior margin fixed We reinvest revenue to to basis, costs and

to Let’s XX. shown now turn XXXX outlook as our on Slide

car and pressures. supportive most strong are head as environment has back values. up This and the the includes, can be rate loss rate into premiums and Hagerty higher environments to favorable business actions rising Our offset has of growth power half a we increase rates pricing through where believe of competitors momentum taken wage We XXXX. strong premium taking inflationary brand

flow positions revenue for Arrow growth rate into XX% We and great growth July, in in encouraged organic higher our contribution written another and back expected premium to to rates, XXXX. the on XXXX well year increasing in through our trajectory XXXX, build Broad quota from predicated mid-teens the share XX% Group. premiums, in growth increases see we believe Our results written further will half begin of and were accelerate to us

accelerated offset to also to down and anticipated Moving the year This Full due net GAAP the million, temporarily position significant are than areas and growth the is investment we these XXXX Arrow anticipated XXXX Arrow XX% XXXX State the expect previously and $XX sustained aggregate, income depressed million we gain $XX due the now Broad Group. accounting what spend in Broad year at the for midpoint the previously $XX P&L. on our million to that the adjusted EPS supporting is are range. XX but leverage of in sale full Group. million the EBITDA operating We from over largely dollar lower roughly Farm will year which of by investments, theme a years. original consistent shared. with is believe stake the coming have is us for In

revenue combined back Strong comments. for backdrop, we prioritizing for be closing brand. long-term Hagerty to and and turn on include, cost the With all will the cash continue our investments in the growth methodically organic strength Given ambitions to structure growth, I of coming vigilant positions cost our that will with economic will of improved Hagerty discipline expansion the support aspects it investing and McKeel flow margin over years. that, long-term

McKeel Hagerty

is so compounding closing, I’m of year-after-year. team what accomplishing, the proud Thanks, Fred. growth In Hagerty

been has profitability just business, and of success market with scale, we Thank our today, organic strength of share quality to questions. believe while we team, the in in on powering the we’d in full the products drive for the our and growth like today of that record greater revenue the us partners even the potential. of And and built again future. new investing in you joining track realizing Our your and of are X% brand the up Hagerty’s open mid-teens days to for early X% current call addressable core

Operator

comes conducting At this be question-and-answer of Truist. first Instructions] line [Operator time, Our Mark we’ll from question with Hughes the session. a

question. with may your You proceed

Mark Hughes

talked getting Good acceleration Yeah, catalyst was that a spend more being thank you? marketing July? what’s – the partners’ changed environment the rate think in your better the business lower the Is distribution impacted for by afternoon. – little July? about new in you. Is you count What the What’s catalyst restrained. for the I being

Fred Turcotte

Mark. Thanks,

McKeel Hagerty

know the you first time, is question, And Thanks financial our actually a first dot-com for we’ve not very each even then I’ve It was this bubble time bust, for economic what this in of - in we an been see these what and been you it’s and know experience crisis the McKeel. the COVID. instances had my seen, in and similar. in downturn, long

at high whole brakes, rate, of consumer rate confidence way and world in it a gets it’s entire rattled, taps then kind the car insurance the We’re along a all the and market the growing world. like when kind – the through of flows

when stabilized keep depression period, won’t it’s then rate. time, driving this growing, having hit volatility had – year slightly of people the a I and and at we middle It’s in of This big we same summer, period word fun, demand saw buying and out this it’s starting cars R this kind quickly. end going second happened, thing And a quarter stabilizes. just confident quite So, it’s short just not keep of in well. that that the you less it not down, lower slightly the really than we maybe we for planned and done the it’s a just months up you really feel more with to that and growing is on there, We’ve world. the whatever know and the people use of that

why little the that there very encouraged our year, of bit half definitely is was reaffirmed we about there but which the I’m back short of for a So thinking a period. drop

Mark Hughes

Understood.

the timing you’re part I expected? spending was EBITDA the guidance that your you spending more getting revenue at or State think that on Farm. just Was you you’re said not of more

McKeel Hagerty

It’s you things. know two

take or the large partnerships. chunk You of been on also that of the either the State State our re-platforming of building it, a systems have platforming one, investments all Farm know, things kind Farm to of that to piece the are we’re business rest almost useful substantially our is of

and certainly board, than them lot just we’re partners of get they’re We have to other on a but excited State Farm other one.

today, up have Hagerty out that – year. the really, continuing rather to it we towards really spend announced get other decided Arrow are than our – throttle Marketplace accelerate Fred, the another But that, is next moving we is to though? we The to we do as for on you Broad heavily acquisition digital consolidating one to ready say,

Fred Turcotte

in look that, the to have for XXXX the side, we revenue Thanks any Mark. add the to not When revenue. at just this for you guidance for State Farm estimate Farm call Yeah, – on do State question.

the the none is I’d results the on say we’ve – well. part for thing State development Farm we’re of other expense and wouldn’t so plan year-to-date now it there Farm State So, other in the for on in And in then as completed project, on side, be testing. the the

expenditure we So move that the to that testing was a into bit accelerate of and development, so complete that first could phase. half

Mark Hughes

happening you little might I been it’s But you a pushed and have properly, soon. might if then, understand from State touched that? is see what talk how going getting – Farm your And it. it it it’s be a path I the about on earlier to like you looks Can think resolved? thinking. have that bit issues But to the out

McKeel Hagerty

it’s Well you and question. know, thank you big a

all with State the progress Farm. We’re actually very pleased around

for You to ourselves contractual know this everybody us and that a is that was long-term partnership. important remind

and large is in investment this CEO are know it’s there Board. if, not sits You when an a and our on their Hagerty

group it not Farm’s an you months complexity, XX State know hoping really, plus in comes of delay, way is there’s of like first well, looks anything a very of put manage that all, of And we – policies as proud group like Firms customers. get they But we it’s large first we’re and Score just if the agents, very the year company large it’s and on. State serve were Net when. that we have some just of business. in it that context, we just to So, to Promoter It’s have very we’ve sort

things So really sure right it’s as want just turn on. we to make really, we

about to And But which very, very know, as is it. felt to I’d testing we decided, so will you I we the think very just guess customer-centric was we be phase, complexity when important want and about lengthen know year next without with you revenue State the in in talked context, Fred we’ve strong Farm very just know trajectory this State shown you Farm as – say, year. put the just growth

it’s Farm, way and But growing partners, be to State will continue of our our even it’s going important as ahead. very year-over-year based ecosystem we high though it’s think the to goal that. forward actually like on big you Our large, the know rates not years other is a that of piece works revenue in

Mark Hughes

much. very you Thank

McKeel Hagerty

Mark. you, Thank

Operator

Our next the from of comes Paul question with Piper Newsome line Sandler.

may with question. your proceed You

Paul Newsome

wondering morning. me State little expenses all and for help call. heavily know was looking I would line so general didn’t and was administrative should general that be making? future investments Thanks investments have your some is you way impact this made these bit through these that at sort roll administrative programs, I size you’re some You size kind rise in these revenue? just if just Good expenses. desire know, for can in to Farm your expenses being part the to of more other assume hoping of it ups of the with we you of the know a invest most you’ve I long-term you in growth? far, you your of there of goes in Or

Fred Turcotte

as we have SG&A, there pre-revenue good we a with we line, where where I was well. where think where us are, had we consulting in be we for portion would part that State great wage not you. in non-recurring line, on see When as to Yeah, the we to of perspective, folks XX% in spots was smaller course, you would to of and a revenue, you’ll as we’ve it. of about you Paul consultants XX% helping think as working guided other as include of what of when SG&A. the million it from we to could Farm, an several fast as And about and about revenue State on the good know think some best half the increase And is it development that of know Farm, on costs. include spent we percentage have would year a talk development. a accelerating they’re SG&A P&L, it’s are think they to, costs are When would not $XX revenue, first the the question, at it expense grow

not that. be it helps. will with necessarily in so, that And line Hope

Paul Newsome

that we can subside point. year. That’s – no, should of slower something and the should if around – different revenue increase idea great. know basically that Anyway, that than just that? us next with expenses be similar And kind expenses, then be help will with that you continue at in of that’s you of pace growth kind commensurate or see but then see evolve said kind to kind would you of you that it a Is a pace – somewhere

Fred Turcotte

Yeah.

I lines line revenue we structure think at it they doing grow business Paul, of look as opportunistic, be we’ll obviously couple look expense good to have and we XX% do a the perspectives, you of do, while in to and that from invest to at savings, all our cost will factors. for and modulate company expense as and any we’re that macroeconomic their with XX%

two will we you in we behind of Broad XXXX. we the when State finish I the the are that of will think we’re major know when have us – we’ve in Farm feel for finish that we know projects the development thinking development right, Arrow platform way which which XXXX. incurred development opportunity we’re now those So, you there, overall to by in with material that we digital digital launch create a Farm, to, State reducing we’re know accelerated at going development we of the you – that spend time, you point leverage sort into But we some close have Group, getting this the expenses when operating finish know

Paul Newsome

Well.

for thank but ask folks the some always. help the as for you thank other questions, and call Let you

Fred Turcotte

Paul. Thanks,

Operator

concluding Hagerty over are there no team the for If back additional remarks. to questions, I will the turn call

McKeel Hagerty

you about about we know think the all you future. Hopefully thinking and you you great thank very performing much. a helped we’re what those is how Well, XXXX you Hagerty how your we about is Thank questions. hope for in understanding clarify story

companies the business we very a to excited, the around environment. passion creates it unique think certainly in into and we of way result larger other well, in We’re the we’re even more And given comparison confident remain the types we really automobile the doing space. tap how of

this of So it. automotive we’re Super I and is that follows next Week world anybody Bowl races. week who Car to Concours – say pleased Monterey together, the Seca kind which very our will Laguna two the all with our is Series World very, for Pebble Beach historic at like

big at first couple out a Motorlux Our event. efforts Arrow Auction there. media Hagerty of has Broad our

live very, If super of this we’re which very really will be in be relative able BAG to Beach of really well we’ll great be official and Concours, you’ll built and auction, of the ourselves lots Quail, in, which we exciting, and results live tuning how watch a going expecting Pebble the look exciting years that be Concours, this to group Motorsports think you’re how and engine streaming do to the Pebble interested first accelerate a partner we’re to Beach media to The in of the nice to even XX Gathering, economic forward that a in cars, going great – really is come. we environment, that

time keep all great time thank and So, a on and for your much Have attention. you you thank driving. very and

Operator

conference. today’s concludes This

you You Enjoy your day. your may your participation. lines at of disconnect time. for Thank this the rest

Hagerty (HGTY) 11 Aug 222022 Q2 Earnings call transcript