Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Hagerty Second Quarter 2023 Earnings 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, Mr. Investor of Head Koval, Relations. Jay Thank you, sir.

begin. may You

Jason Koval

McKeel thank Thank us joining quarter Chief XXXX. morning Financial and Patrick Officer; for you, Good morning, of by this joined operator. Officer. you I’m Chief to McClymont, second Executive and for the everyone, Hagerty, discuss results Hagerty’s

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

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

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

contains financial on presentation. further statements discussion Today’s the forward-looking and metrics as earnings of X non-GAAP described Slide

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

X-K and actual filings to that of Investor For factors could important discussion SEC, further the the with by at contained most comparable our affect of available those are non-GAAP are The measures appendix metrics contains which material filing. directly on a also also website and that of our Relations refer please in risks to reconciliations morning’s results, our sec.gov. the this presentation GAAP our supplemented

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

McKeel Hagerty

We do lovers services to providing these over of these sustain problems the products everyone. premium call. prized for Hagerty time last the written to been need the taking good decades, car company rates the to through second the you positioning solving delivering and work coming a has enthusiasts One their We Hagerty years. earnings by X appreciate at possessions. track quarter over growth Team our this enjoy Jay, XXXX morning, record has Thanks, growth that and double-digit and join hard of high

as high-teens State fueled half proud we momentum to written continue and that the first deliver XXXX, buy coming robust Farm despite the our And prepare ramped and the grew build we marketplace partnership I’m over commercial of significantly premium technology during out by profitability top-line we spend So months. launch sell to growth. report to up

in the deck, X first and is total results on revenue Slide dig Hagerty jumped including: premiums the shown unprecedented into to strong the commission proposition both our suffering pressures. written investor from value during months first half. superior of our consumers XX% revenue of brand XX% an grew inflationary half and first is resonating during Let’s The $XXX industry million; XXXX with X

the during we surpassing number in fact, first XXXX, numbers half In of added XXXX. we robust policies, very delivered record of a the new

share due risk our premium first In XX%. quota the entity, growth jumped increased written to premium level to our of Reinsurance half earned taking Hagerty XX% and in

and the We our to have risk with assume continued and capabilities. of strong premium associated more stable underwriting

admission other was increase million Membership, increased XX% and revenue, This event and X, revenue. sponsorship including first marketplace XX% during XX% of the months. revenue on revenue a other growth, $XX fueled Slide in marketplace described by and membership X growth

be that we fruitful very the excited is Classic Finally, under states companies. partnership State both a win-win time, X that XX-year our things Good we X, with commercial take will regarding the and confident a the program we of shown partnership agreement. begin are in initial new are will beginning to State commercial Slide policies Plus for on Farm writing Farm, that soon announce

on order. our have of growth, intense that over the we double-digit at return managing focus talked short profitability last about several Now, can length levels calls, to expense so we historic in

ahead year-over-year our to margin pleased of improvement running are is expectations. We that announce

during the EBITDA we delivered and of XXXX. also And million positive net X adjusted operating First income of $XX million. income half months $XX increased first

growth profitable X. our on our well positioned executing on XXXX shown we ambitions, Slide deliver is are key and team on initiatives to Our

high a they double-digit written a powered growth as revenue premium sustained marketplace. first, gains from by delivering rates incremental of include: and revenue As membership reminder, as well

half are first to continued increasing growth and strong revenue XX%. the fueled growth XX% written expectations momentum, year we business full XX%, by of to results XX% Given premium to

vertically of through our continuing structure; frictional business, containment evolution integrated we value the and will cost current inherent the operational reducing Second, as our into we the and this significantly consumers a improving believe costs our insurance by meaningful business in for profitability increase efficiencies. create third, control

of million, $XX half EBITDA of to we results, implies upgrading adjusted from to year for X strength of first margin the our over XXXX. Given expansion $XX which million outlook range a are our points full

In to profitable company a becoming high that of and leaner, summary, more are growth. these we self-fund stronger on can a rates path

Our generations. position flow should us future for believe million strategy productivity combined allow members, a create long-term generation including over coming when our investors. to and which for to stakeholders, capital to to car on initiatives the driving us will raise drive ambitions growth years, cash recent execute our invest and with to save We our value of $XXX partners will this and culture continue

call now the Patrick to cover the me over financials detail. to Let in turn more

Patrick McClymont

and to Hagerty’s the written grew written to in of be due let’s strength XX% and revenue revenue membership. the We strong and retention XX% and into quarter million total XX% results quarter X growth to Thank gains seen Slides fee second delivered Commission gains. you, in $XXX the contributions on quality million McKeel premium of from written McKeel, in count X. XX% the and in can business $XXX of shared new growth large first everyone. with rate. the premium morning, in premium growth brand half so shown with marketplace some dig good figures, second and

total at Porsche single-tier jumped auction our year XXth million, from members, membership $X Membership, marketplace marketplace for XX% a online in in transition revenue June, from successful contribution marketplace. the an in growing additional per revenue and to paid anniversary from other $XX benefiting an pricing $XX increase and to million and

to in XX%. roughly written XX% XX driven reinsurance increase by new and another grew point to premium quota $XXX in XXXX growth million, contractual our premium Earned share

at ratio, loss came XX%. including in a Our cats, stable

from Our book good their daily performs of care take because drivers, customers our toys. differently

using Now, million turning of second sublease. working leases related Slide increase shown to the $XX a are a primarily prior are year facilities of also of over longer $X we $XX X, we million, Operating reported impairment this an operating quarter on actually to included for million no profitability, as charge, quarter profit to and the period. profit

our income operating quarter by on includes net year in and Net a profitable swing In aggregate, as primarily second a a execute net the income successfully of delivered earlier. margin was $X driven $XX loss adjustment million year-over-year compared change net to improved we million growth of significantly we value million the ambition. warrants. related to $X our fair public income private in also The

weighted A GAAP on was of our XX million stock earnings average Class shares $X.XX based outstanding. common share per

the period. adjusted EBITDA $XX quarter the Our prior million improvement the $XX was million, during second year an in million $XX over

move me on XX. shown now on outlook upgraded to XXXX our Let Slide

than range As total XX% anticipated. McKeel powered our growth visible and written outlook XX%, mentioned, business, are to given this of growth our consistently for in by premium X higher XX% previously a to of we top-line to XX%, points revenue strong increasing momentum

Hagerty and provide base creating members of locked and million new track are a enthusiasts in to increases our on is powerful the a services. XX loaded, and auto to rate XXXX, Our products brand record add

Moving P&L. down the

of We of million full expectations EBITDA have the for to We net $XX expectations year million income to again EBITDA negative million. $X a million full expect in $XX to higher $XX million increased our adjusted $XX and now prior year. of profit $X range million, million $XX positive than

Before at million initiatives. support This raised raised the wanted underwriting, cost from a to related end $XX maintaining that I strategic State wrap evolution investors of with our allow our preferred Slide combined at I widen some XX, stack $XX of details Hagerty, which to includes of June. up, into to the full historical including ratios. additional lower aperture the Farm products while to million continued million the growth carrier from convertible highlight us our Inc., $XXX equity capital shares We

also liquidity, generating conviction progress to and our a model us cash long-term of Farm financing million Re. tops investors. This State debt capital commitment have positioning the $XX Hagerty strategic off self-sustaining a to and for cash demonstrates We of from our

are on expansion. our margin we way and our growth revenue summary, strong towards In well for achieving XXXX plan

our laying sustain are the coming the power groundwork platform. we that commission our while profits our from marketplace underwriting, building our from Importantly, also to incremental stable results over of look risk will as the add we assuming more out growth, years

open questions. to call that, the us With let now your

Operator

Truist with first Securities. Thank Instructions] conducting question question-and-answer your you. a now We’ll Hughes of comes [Operator Mark session. proceed Please with Our question. from the line be

Mark Hughes

morning. Yeah. Thanks. Good

McKeel Hagerty

Hi, Mark.

Mark Hughes

rate, are what locked increases getting me rate these average the you’re of days? rate terms Patrick, in loaded you the refresh mentioned of and on kind

Patrick McClymont

guiding way in from is now total of the of the from and of to bottom that XXXX, guess, kind is rate I sort And think of what written mid-teens. two-thirds to of is premium volume. it growth we’re coming about terms

and about rate touching in the from think double-digit So balance as high-single, then coming growth increase units. rate is

Mark Hughes

just How much in alternatives. you’re more personal perhaps not are of And migrate your appetite seeing competitors of the to of the be? units lines to is that in so, what broader that perhaps not used market some dynamic? a it dislocation or the terms your maybe you Is by being helped therefore, policyholders

Patrick McClymont

that. of evidence some is There

appetite rate, obviously. reflected in gets the So

And the and so folks board, up across shop. rates is that some are going to causing

what’s winning more we’re now viewed it competitive on us what’s we in as the the and customers some market. rates fact new going information, track when our going are when yes, that business can the of give and based is on the so, And on broadly quite right

Mark Hughes

your Yeah, online us update there? kind yeah. the of of give then marketplace, And the progress

McKeel Hagerty

here. Yeah. Mark, McKeel

We’re actually per balance that bidding with sell-through competitive is very, this of and do the very amount trying we’re team balance, to lot. of pleased. rates What

X. the when day, strong off started we’re, we spill-out of level drumbeat call bidding the it now We’ve car of of through larger is idea cars it, So, of their days. practice. I maintain reserving X comes rolling sort to touching a to sure and of and we over period started per a that kind make that groups steady And estimates, for think, above getting testing that consigners of with also the

stuff. kind ahead, very, good we it, So look growth forward of that we’re continuing so pleased to with very seeing and

guess, and say being new digital I out the sprint a capabilities we thing our of own is And every digital I product would are developed in completely methodology. one auction by traditional platform. agile features, more new weeks about And, this X rolling sort teams,

Mark Hughes

you. Thank Understood.

McKeel Hagerty

Mark. Thanks,

Patrick McClymont

Mark. Thanks,

Operator

you. Thank

Our with Raymond with your the line from proceed comes next question. Greg Please James. question of Peters

Sidney Schultz

of traditional some for you’re more for damage. the your skewed quarter, more physical different. I loss seems is ratio mentioned book This curious with there. hear to has Greg. But customer morning. seeing been more physical and Sid Hey, sticky believe, understanding up like good towards auto your it is on is you on the quarter last just And larger, ticking your carriers this target what I’m perspective damage

Patrick McClymont

quite you me? help When you can can you kind say – just of sure sticky, there, Sid, what I clarify wasn’t

Sidney Schultz

of From other to components. just seen, the it severity Yeah. from like higher a some bit a just some disclosures run damage the seems perspective continues than little physical we’ve of

Patrick McClymont

mix XX% physical look XX% our our you damage, at Look, at time. losses liability is over when

this We And that ratio, for talked some do good last strengthened experiencing we’re is We pressure about liability earlier is spot. differently. very reserves see skew in and our What think, our a that we we we right so, very year. now year. loss did

not seeing We’re now. that

right seeing We’re that severity same more and in now. low-XXs good ratio, The liability things we’re not increases so are pressure a expensive, so then loss are that we’re yes, And seeing back flowing right the and side, getting we’re inflation on through, spot. to but rate liability.

Sidney Schultz

right. Thank you. All

Patrick McClymont

it. Thanks, Sid. Appreciate

Operator

you. comes next line your Please [Operator the with Thank Pablo with from Singzon proceed JPMorgan. Our Instructions] question of question.

Pablo Singzon

morning. good Hi,

income income investment up, Is $X million. for capital at incur $X suppose I went over the year, picked you’ll I guidance, raise. through think just expectations all items? by I look has the I of those given and there, by incremental the up think Can financing financing? your So talk your EBITDA net as million, And the your costs gap balance you

Patrick McClymont

We’ve income Well, warrant there us, interest. so tricky got We’ve many is net it. are for because the to the pieces so liability. got different non-controlling

difficult quick it’s a give sort So of reconciliation. to

which the now and both within raise a is earning our good point, cash Hagerty on we’re You MGA business Re. balances, do

rates benefiting interest We’re very earning just now, income short-term, are, the where significant interest pretty on right safely but in very we’re us. increase and based is rate invested really

positive. continue And see that so, is interest be line you’ll going net income to to

preferred. type capital the it’s because actually, raised, On financing, the we of convertible

that, in with and off rates associated dividend on saving short-term but to the right So we’re a that’s then we revolver, some interest there’s not use now. the income capital So got interest right? so pay hitting benefit higher actually line, that we’ve that of income,

a the so, balance year. positive line And the of you’ll continue to that see on for

McKeel Hagerty

I’m with you adjusted you but the line parts, Pablo, moving quarter, on not for the hit happy EBITDA. follow-up after restructuring the is would $X of to million income, also call some the net see which

So the majority of delta. that the accounts for

Pablo Singzon

had sense, trough I McKeel. But guess, for for invest way from makes a cost are as the control on growing here? then of dollar and second P&L? in see through think do forward expenses, start how expenses And base sort the the terms, And right, we That the is, reasonably cost guess, you right? from you’ve you question, work savings of I here question good Patrick, I here, cost to their Yeah. I looking as just maybe here. the demonstrated impact growth, continue your trending

Patrick McClymont

– salaries And really and line up the benefits. right? focused would that I cost we’re think we really year-over-year, strong at make it’s on, then the And to be year-over-year. look curve it’s accomplishment cash the So in you Well, G&A, X.X%, XXXX up X.X% only in really trying items there. if numbers, are that

out are the to take really cost of going continue. to steps cost we that’s to off curve and business try took all and paying bend So that the that

we in how early and part budgeting the come so together next in But XXXX, on starting guidance the really or give We’re the year. on things next of we’re process month for continue focused we’ll to to will produce It want XXXX. And year. So margins the driving profit a be do modest. expand expansion. corner, margin turned what right? we this in will we is And

growing be in our grows, quickly. that growth, written top marketplace quite of with This premium line that’s right? mid-teens business Some and will the incredibly business

keep leverage there’s the expansion, but so we’re that cost keeping And to just with from margin control. that, that under going comes operating will help on focused

Pablo Singzon

of last then that And vehicles? rate the premium in growth. Okay. benefit for the Patrick, mentioned for values two-thirds about agreed had the you me. Does benefit include contributing increase rate

Patrick McClymont

into Yeah, would that baked be that.

not a lot of now valuation on. going right there’s change Although,

Pablo Singzon

you. Thank Okay.

Operator

Thank you.

I’d reached closing like have the for We end of the Hagerty back session. turn our any to Mr. to remarks. question-and-answer over call

McKeel Hagerty

for your you, continued of Thank all operator, and support. thanks to you

auto a from customer Promoter unparalleled are Hagerty Net strength. in of once which We enthusiasts. an of new providing results retention This One helps operating XX, Score industry-leading Team again position is and service for fuel business.

for channel to our line commercial Our on Hagerty’s omni-channel capitalize growth well creating as new Farm well this distribution way as direct-to-consumer brand value will allows towards are fund the us we growth our And such on cultivating through partnership. delivering shareholders. bottom ambitions State partnerships as and our strength our that

gathering see stop up. if includes you’re us next then, very at to please But own We as Monterey that that our Monterey we Motorlux. called hope many historic as you races festivities direction, until can Beach out look car for of never driving. the in Concour and the Pebble and week And

Operator

Thank concludes teleconference. today’s you. This

your disconnect lines participation, Thank you for day. may and wonderful your time. have You this a at

Hagerty (HGTY) 8 Aug 232023 Q2 Earnings call transcript