Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to Hagerty Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jay Koval, Senior Vice President of Investor Relations. you. Thank

begin. may You

Jay Koval

outlook Good Patrick to and the discuss of Chief as and operator. morning joined for McKeel Chief by Fourth you Financial joining Full-Year Hagerty, our well as us Hagerty's Officer; XXXX, XXXX. morning you, I’m thank this and everyone Executive all Quarter for McClymont, Thank Results for Officer.

at we Hagerty’s investor.hagerty.com. accompanying presentation company's available on Investor During section an corporate this that to website morning's will refer conference the Relations call, of is

accompanying Our to covering release, letter earnings slides on stockholders this and posted also the period are IR website.

also there and is filing X-K press earnings with release Our materials. available along our other

Today's financial metrics. discussion non-GAAP and forward-looking contains statements

As of variety of statements and our are financial cause described expectations. earnings a performance the about future subject results Slide not to uncertainties and from business presentation, the of differ promises or and actual performance. include to are further They guarantees forward-looking our could that on X risks statements expected future materially

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

most reconciliations that morning's of also appendix presentation to GAAP our filing. are X-K comparable contains the metrics non-GAAP the further The supplemented this directly measures of by

I'll with our Hagerty, CEO. that, turn and And the call McKeel over Founder to

McKeel Hagerty

first as We morning, results everyone. learn taking Hagerty's the about you good appreciate and Jay, Thanks, public year company. to more a time

to for with and affinity help model enjoy consumer for We we our space. in positions their enthusiasts have and to one driving. us the And cars Hagerty into of the spent last brands services provide most the beloved building fun the them several members decades believe passion products our uniquely auto

full-year high-end premium powered ago. shared of some you towards written X automobile They our the reinsurance Re's with of gains investor revenue [ph] year of we include, strong total and shares persists from] For the [contribution a growth revenue from XXXX, economic of growth X Slide share, This our results Hagerty platform. that the mid-teens the deck XX% the arrangements, regardless quota of key of months of was backdrop. are the the compounding love contributions for proof outlook our insights. by marketplace higher

Written Premium transacted with growth and our due and revenue rate. including Hagerty’s and to growth issued in-line revenue, strength increasing during XX%, in of on between force] $XX from three Slide insurance expectations jumped live as XX% auctions year. value in [policy evident XX was proposition policies million the vehicle and Membership well-balanced in XXX,XXX is primarily new marketplace brand the marketplace value in incremental million X. seen [ph]

make progress people into the on our growth we work] We all as with move scale and And meaningful arrangement [quoting later Slide and begin drive team anticipate steady to technology Farm the writing to on complete both for X XXXX. new This initial and shown XX-year will to [ph] in Hagerty XXXX. be integration continued spring State policies side. this

the powerful nearly growth elevated XX% slightly improved promoter of by a we the model recurring average for results line revenue remained believe to in differentiated highly market Our in vehicles. the [XX] year our Net retention the score solid, solid team business Hagerty top reflects times. uncertain strategy [ph], transactional and industry and during the execution double despite

to we This the it addressable chipping initiatives X. our the create XX% by away brand distribution improve on know key Hagerty our is omnichannel shareholders pivot we Slide through that our at XXXX total shown can brings significantly profitability for that believe The and through don't those as of we value revered market meaningful strategy. yet we me to steadily serve

by sustained premium powered track our revenue gains. continue to look we double-digit of First, written growth total record strong

Hagerty teams focused our referrals and as well revenue delivering Our online as live membership from experience, unmatched an business. marketplace incremental driving loyalty also Club, are Driver's highly on and

Hagerty Second, share quota do operational agreements third, we including will and reinsurance to above cost the in the containment profitability continue Hagerty's U.S. And UK evolution significantly in an integrated XX%. insurance into Re’s through improved we an business, will efficiencies. with and increase

Let me making to profitability. largest the point that expand we final toward reflects as on because are transition change XXXX XXXX single we it from

last X have the opportunity the to As technology best heavily investing position people the over been we you our within auto space. company capitalize years know, and on in to the enthusiast

later have we the launch profits this prepare discipline State year heightened drive potential for costs This adding are [ph], the out as our both But includes in for build around marketplace] company. strong and XXXX, to the meaningful capital. and Farm [Hagerty we making investments which of incremental

not and implement actions we So, retirement reduction outlook. major to our us voluntary to mention began return increased against teams, that short to to our the leads allow order. fourth quarter overhaul initiatives, summary a of resources the to program, will force of of we an some XXXX with This during IT includes X, a in believe XXXX in profitability me along which prioritization Slide

million midpoint. XX% XXXX million year year-over-year be With our well adjusted in to growth initiatives another underway, delivering in $XX up to XX% of to expect XXXX, anticipate XX% and $XX by strong the to EBITDA momentum fueled a We in XX% productivity equivalent written million improvement at line top to we to premiums. $XX

now Patrick call to more back go over Let in to our through detail. the financials me turn

Patrick McClymont

McKeel, good morning, Thank everyone. you and

Let's Slide a total written premium quarter, On delivered into quarter across streams. for million. to the powered million, growth XXXX total of XX% by dig Commission and of XXX revenue revenue all basis to XX grew the XXX numbers to on XX% grew fourth We year-over-year from fourth revenue the solid fee XX% growth million. some and full-year X. shown

revenue. Membership Earned and total million, retention share driven by quota in growth, marketplace ratio our of XX%, point returned in the million, in increase quarter. premium XX from benefiting reinsurance paid XX% XX% our contractual XX%, and XXX to XX members increase X new XX% written revenue other loss increased additional an premium to a to policy grew marketplace and million an and to in

to profitability quarter we to the operating operating prior on fourth loss XX includes This we compared implemented $XX profitability. a in million the actions of quarter year Turning of period. an enhanced a X, charge the to loss reported million, XX fourth million Slide related restructuring drive in to loss

$X the loss XX XX fourth loss loss restructuring private loss A million our our a that share noting Net earlier. quarter shares million was year's adjustment of million, outstanding. and Class $X better of warrants. a was prior worth GAAP Net to operating public includes year million fair Stock loss net related quarter. than for based per on It's a was the before to the compared $X.XX of average charges Common value weighted

the Our slightly adjusted loss million, better X EBITDA in of in X the the fourth was year a than million quarter period. prior loss

highlights uncertain Slide written the million, our revenue economic shared XX resilient. With were growth beginning line growth environment, to summarizes reserves, XXXX due our our U.S. the our below loss of was at and Commission to call. XXX top written full-year XX% total to revenue by of elevated million. Despite in which driven decision of XX% premium ratio underwriting XX% reduced contingent increase XXX as grew slightly Ian results McKeel premium commission. the of the growth XX%, Hurricane fee to and

and loss XX different percentage operate by ratio fundamentally in in XXXX, ratios put over reinforces business increased context, increased To this industry a X we other while than XXXX, risk our This daily early we a points. to building drivers. auction the with the premium wide in Earned our share. out full-year. delta grew Membership, points revenue loss compared exceeded XX% in by percentage XX%, profile that online Attach business. for thanks membership rates XX% to and days jumped increased HDC in the of marketplace, are quota

This in Full made of a from investments includes XX supported Ian year at the also XX Keep reserves impact we quarter. increased State million and million. initiatives. in the of in million marketplace, EBITDA other mind, Hurricane adjusted pre-revenue and and the EBITDA loss Farm, came third X

the to some and XXXX color. outlook Let share move me additional now on

XX% we and continued McKeel to gains. approved As rate Written already expect of growth an growth mentioned, of be by XX% XX% share market increase will total XX%. to revenue Premium powered

the quarter. first strong February to and written start growth year teens the a January the for by and in with encouraged strong high expectations premium are in-line We with our

State the Farm be to revenue Written expect Premium contribution We outlook. in XXXX full-year and to our immaterial

marketplace with $XX asset on platform successful auctions vehicles based we focused sold, in also financing as and as million We lending. from build such event online well up our our as live streams Amelia as very ramp

that services and options, buyers escrow, Hagerty for consumers and the and is as to well-positioned differentiate services, competitors. offering sellers our brand certification trusted financing and title high both other product from of value enthusiast vehicles, serve

a better leverage [to per referrals we average brand to to are higher driving insurance in year more and to $XX membership, single at tier pricing In enthusiast [ph] growth. decades look and efficient membership through drive we'll move] of earned excellence equity the

returns a million Hagerty Hagerty from our of with business an per underwriting is very ratios Xx XX% have scale generate we share. a capital in at share XX%, increased our XX% in and to Re loss XXXX potential of then equity. Xx of future Re’s on year-end, roughly quota develop in evolve with capital staffing the in we to earned loss meaningful full premium benefit just as leverage resulting XXX to compelling into ratio margins And combined for resulting beginning

to expect be Moving EBITDA to full-year million P&L, $XX down $XX the adjusted we million.

Recently actions mentioned, loss enhanced should as at towards this the As represents million back hold. year-over-year than drive take midpoint the and pricing $XX level XX% a more implemented our improvement profitability. our efforts ratio productivity McKeel

majority seasonality the EBITDA meaning note of expected that and we during similar third second that quarters. I the our expect generated historical to XXXX levels, the in be will would

are growth strength a the such growth In from Hagerty we market. the ahead. beloved summary, a sustain the and as to the a Meanwhile, consistently expect the public towards high revenue business and in in invest company fragmented these top and a of profit our brand Hagerty years you year structure in long-term is pivoting second growth would margin company brand we tier rates delivering large in

culture historic beginning or margins that in to in to return the reward part marks transition shareholders a us this and infrastructure to of and driving XXXX the double-digit save right generations. allow future should to EBITDA size our allow process us

call let me up your questions. to the that, open With

Operator

question you. Peters is Thank first Our coming Please go James. [Operator of ahead. Greg from today Instructions] Raymond

Sidney Schultz

This for morning. good is Greg. Hey, on Sid

count to on business new It bit year-over-year. wanted Just ticked looks touch like it the first. a down

it's maybe what's a can of seeing So, pricing that or the driving in any behavior if function you you're market? just changes if discuss higher

Patrick McClymont

Sid, question. Patrick. thanks for it's Hi, for joining. the Thanks

vehicles. in little strong down penetration did we're a continued with you traditional What right. bit. very tick It You're seeing Hagerty performance the the marketplace,

then and newer vehicles. ramping pre-XXXX, are that things we're up of think So, in

And so, but activity quite our we're seeing that share in low really more on that category, is front.

last in I'd than probably that competition seen more was little say previous years. there a And year, bit price we've

of so, an was a And impact. little that bit

really the in delivered We’re We pleased. think this neighborhood XXX,XXX a in XXXX strong we is that number. same We'll year. be that that

which growth, and kind rate achieve is the to guidance of able be that And growth, talked between written for locked to growth new we'll and premium as so this XX% year. customer loaded we've about XX%

Sidney Schultz

great. Okay. ratio. maybe sense. a loss pivot then, That to Yes, makes just the And

consistently So, deliver the you've loss range. a pretty around to been XX% ratio able

underwriting maybe side from other volatile the what insurers auto can separate more how traditional underwriting the you you So, seen business remind might results have hoping run us more you and recently? just of

McKeel Hagerty

is This the the core performs McKeel. nature differently Well, you. of Thank the is customer. of The business why

concentrations, and underwriting, are disciplined profile a and good members a [ph] insured care people] traditional especially and we with their total very foremost [car risk value Our different just value than concentrations of driving higher car. because really the take and with cars collections, large they daily higher that, first of have

place the sort of in higher selecting storage areas, discipline, of So, be niche to values be, buildings, the especially to starts and members the around single that thing. the concentrated in it with then right, garages, kind car

better than years Hurricane but the then from immune industry. we catastrophes performed we've through the certainly it significantly even like So, seen not Ian,

Sidney Schultz

yes. Okay, Thanks.

Operator

next The Please Piper is Paul Sandler. is [Operator ahead. muted Please make Paul, your go of you're on not line question end. live. sure coming Instructions] Newsome from your

Paul Newsome

severity particularly anything apologize Thanks a for hoping part metal that's for topic underlying that frequency a could seeing you it? and in the has bit trends about really claim hearing business, more talk and your severity in – I you're me. was I big for been the hopefully that. little plastic you're that

McKeel Hagerty

Yes.

on certainly come a remains shop, of course, costs [shop One nice increase there have a damage lockdowns, hear when but of you. Of in the that losses industry COVID is cases shut Severity, level] compounding in have a of for higher, are the to large sort the overall you this, a kind sort car areas But the kind side. traditional, whole bit into [ph] the of Paul, many from to the a send down physical still some as courts talking severity I and due been little repair they in are areas. has frequency of to very of is is, rates of during hourly two were in bands, saw we think periods liability that higher of also our about fact higher restoration XXXX time. it

big from into a insurers coming two of year. years lot like in in we the one So, claims saw cases some

the because jump constructed, as how the of than through both us, the more us the out as physical losses it’s years we it our look kind at see premiums well again, So, for – was majority number made that the – manageable at we way our are – damage liability. as but it of

Patrick McClymont

big Yes. items about When liability. terms you talked reserves are [indiscernible] We just our what strengthen loss The XX% U.S. [ph] about two XX% Ian. reconciling and the of and did typically liability in in then being [for] being ratio, the area. McKeel think

about million reserves those And two, not X.X. to so, us right the for was we'd $XX for strengthening a back Ian was and XX%. be If

tells are we trends terms those it in of in So severity have very frequency XXXX. consistent, underlying but and headwinds very, just the

Paul Newsome

Thanks.

the into obviously lot general a in went is renewals feeds overall Can business about you that topic be pricing, course up watching over the talk January of X. that industry's and year? big should your reinsurance we any how Another the

Patrick McClymont

that Sure. It's Patrick. question. for Thanks

certainly the So, industry not for headwind and immune we're that. a from

on because for As it's us the talked profile. little just call, a our bit we risk about of different

up industry XX an loss was of the XXXX, in points where [ph]. we in only So, X] automotive were industry ratio, [up

to. And our our hard we're team as are risks XXXX. those reinsurance putting and yes, think somewhat place depending to we we're it's at that I different on going were underlying our go in definitely so, points headwinds. to And but and thought it worked the those up arguments, were successful new was reinforce way for really who costs there about The talking you're

from For a us, was standpoint. it XX% sort rate to of XX% number a

than we that bit a put the so, package is, we together retaining historically. did decided And the to way we're more risk

retention previously that's and up at going we're XX So, million million. of to $XX

with a cost. so, we risk who And get interested use that to price favorable was we've that as way then put come reinsure for And for worth in tool a to overall up to the differently. group us. it in a net were our that those different essentially together could approach Folks also a and high right collections,

millions the going up year-over-year. in our single of low So, aggregate, costs are digit by dollars

to risk there. bit We on a are more taking get

So, us. it headwind. yes, was manageable a for But

Paul Newsome

would be the repeat XX% limited the if which co-participation, – with we I [indiscernible], be in limited to of that assume? [indiscernible] hurricane – So, would

Patrick McClymont

Yes.

what that others different and particular, [ph] we would that program. that in XX our we XX because XX have less up a about, being much than net – risk] thought. Yes, just XXXX so versus new in very McKeel we lower ended have under attention risk risk is and the than have profile, would one million, Our talked of as [borne

Paul Newsome

Great. the help always. Thank as you. Appreciate

Operator

coming Pablo Instructions] [Operator final question be go today ahead. from Our will Please Singzon.

Pablo Singzon

loss the Hi, you are meant XXXX given level? at any in or we to the you those change funds keep [rates thank steady XX% filings] [ph] referenced about Should you. expect the ratio for

Patrick McClymont

given that middle the missed the part I what? of

Pablo Singzon

the that press you release. referenced think it rate XXXX, I was The in for filings

Patrick McClymont

Yes.

influencing of through all in the states started year. we XX a second that think all we flowing We've remaining That's that's how year, late the increases into rate baked about states last now. So, got loss –in this increases round rate that happened ratio.

XX% get to back think we so, we're area rate increases, had going we've that to historically. that that And with those

Pablo Singzon

then that operating X Is by targets? need in of you impairment revenues. expenses D&A points margin to of had, I XX% this about should so Thank math, the to question sort versus grew in a just XXXX quarter get you. And you] expansion excluding [ph] you about for second [gap the charge, assume growth get, the XX% excluding my your

Patrick McClymont

Yes.

the it the the of realized we're ended at guidance we've XXXX, cost the the One to reduction from slight million. that's think close I that $X So, big end what that EBITDA way talked so looking savings the in initiatives about? are get is and to up year, would reconciling our $XX loss we kind at we with of the a and to be from that of annualized up so items million

the those year. we actions And beginning of implemented right the at

we're benefit essentially And going worth them. from of full-years’ so, to get a

talked to we've about the Ian, reserve that, and about about increase addition we've $XX.X In talked that's so million.

biggest So, two couple going things our items. on the of a reconciling business, And those are there. then marketplace

revenue is, full-year. One did it And XX it million own last of for the year. now we

you own is now And So, profitable. hopefully be designed it profitable, growth. to right? that roughly if because double the plus full-year, Those live that auctions there's some business we for are

that help will so flow a cash standpoint EBITDA. actually And from

one mid-single-digits. the of then sort premium. in is that's the written increase So, other And

XX% that So, having flow to XX% what about talked through. we and the

midpoint of we add that so that we gets talked you of it when And together, [indiscernible] all sort the about. that

the hopefully reconciliation. So, that gives you

to what expense lower increasing, basis. a couple rate the than years. over take were side going of last in increasing of in G&A the are at expenses on relative XXXX Other we an shown things, where XXXX absolute we've On down we're actually they're to but

the bent we're get talking curve absolute So, to the to expenses all basis the others about. in we've on that effort we've some and profitability and reduced on

Pablo Singzon

That's Thanks. helpful.

Operator

floor turn McKeel back time, for to comments. this I'd closing At you. like over Thank the to

McKeel Hagerty

thank operator, you, Hagerty. everybody for stakeholders XXXX. your [To work you and excellent in one We to XXXX great and time for delivering results Thank questions. for part be and dedication [ph], of think to Hagerty, team] exciting is in our thank an you right. it your All your commitment appreciate

for encouraged I And the opportunity direction headed remain of to branded the as are as years about over the leveraging coming days in we XXXX. in Hagerty ever are I'm optimistic we ecosystem. our early grow as by the

the is largely unchanged. While for strategy our expanding reach

process. and never grow the become against all it our will execute on call learn and We joining a focus today We heightened in you stop driving. efficiency. year-after-year stronger for with and Thank

Operator

thank Ladies event. participation. your today's This and for concludes you gentlemen,

You logoff enjoy the may at disconnect this of your lines webcast time day. or and your the rest

Hagerty (HGTY) 14 Mar 232022 Q4 Earnings call transcript