HGTY - Earnings call transcript Q2 2024

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Operator

Greetings, and welcome to the Hagerty Second Quarter 2024 Earnings Call. [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. Please go ahead.

Jason Koval

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

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

our period slides website are letter covering filing. as also as on release, to and earnings this Our IR posted the well X-K stockholders

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

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

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

McKeel Hagerty

Second join Jay, Earnings Thanks, taking you Call. and good morning, Quarter XXXX Hagerty's appreciate time to everyone. the We

allowed exceed and California breezes team around our value and entire and full passion sixth Concours starting of Kirby of time proposition model service stride, profits. Monterey, for This to rate business us first are these great is from As year which a by powered most execution options our XXXX's and The is singular with cars. durability business of first Greenwich professionals, the high XX%, compounding Car to including this XXXX. our to as shared and car The car for lovers a abundance, deliver customer our first outlook amazing thus focus prior our Hagerty growth that of team for executed the the premium rates and with week. of model employees. of expectations in of half Week on warm growth carefully revenue upgrade aged This our its curated time. strong X,XXX hit half is by increase in is of growth gains moments know, beckon. built and golden and There This growth excellent summer quarter next straight Roads June top our delivering in are top XX% written was begins of to half XX%. year's on of team's shows

track proven a customer enthusiasts our of opportunities XX improve years His us areas, leadership double us technology will across the discipline improvements, Hagerty's of product sustained service. and stronger, efficiently variety business value should and distribution, us getting our including better smart has additional The Jeff been hiring Hagerty to and business driving expansion never mid-teens leveraging a allow identify to decades positions and auto X revenue in margin record help claims, of years. Insurance. into further and cost proposition is process of insurance recent the come. to of team sales change President data. aligned X One has our development, of incremental convert as marketing, years only to by strategic Brilla experience Jeff revenue management to growth profits, every to quarters investments increasing including for

critical online for marketplace SVP the marketplace will to industry-leading elements an valuation. We experience also to and business. help Hagerty's week we of potential, Amazon and announced enormous to us our Sean scale the last user digital has hired Sean create from of that McMullen have customers become and

Let by me entity, X% agri risk-taking premium on during fueled first fee and streams Marketplace in XX% ramp last reinsurance vehicle highlights live premium count. growth Earned X. of revenue gains marketplace. written growth other This Membership in jumped grew first growth due commission powered with online and and and X due and from to our premium written the share. of by higher Hagerty's our shown XX% methodical growth the and revenue quota few from to financing for a results share increase Slide year's includes XX% months, key half in revenue marketplace XX%, auctions in line

XXX in year net $XX jump up basis First prior a period income points. with improved improvement half operating the in in margin $XX EBITDA. and adjusted significantly This margins resulted a profitability over improvement million million

profitable declined as and reminder a to way G&A operational only and renewals a drive priorities, First and efficiencies. Slide cost strong a highly X% and improving to grow. benefits including: Hagerty X% on first, focus grew maintain is we XXXX of referrals, for salaries discipline driving half loyalty our X

experience technology cost-effective in efficient member to way, the enhancing reduce scale leveraging a we as costs variable Second, and up.

preferred building flexibility and our buy, fourth, control Marketplace Third, and in vehicles; trusted finance to over most underwriting including profits, collectible company the CNIC and place Hagerty insurance and the sell acquisition. our increasing

the net year of and have proud we by On We half a out $XX is expansion by delivered this the X-year margin EBITDA point delivering top million. gains growth on million great in are income XXXX. half $XX and we of far basis results the first would we of since first increased and so are adjusted that XXXX, this

XXXX. flow high some we how through rates X sustained leverage beyond Slide examples shares positioning Hagerty a are for of multiyear of operating and

acquire to third, resources First, growth center reducing and times historically efficiently low maintain organization members ratio. our customers; handle our continue service serve member for team freeing within our more combined our to to second, to of rates savings up effectively identify evolve member our potential claims new high utilize marketing and;

profit million year third expect now into come increased revenue we the over full Given results $X.XX billion, $X.XX will months that with million and during reinvesting net growth. and billion $XXX of of and to create and to shareholders enable Improved and to have our in us EBITDA generation value years. to $XXX coming X million. We adjusted over the million excellent flow quarter, margins income in to for the our momentum is continue $XX $XX revenue cash for between first the business members carried strong outlook and

now turn more me to Let through second Patrick go in financial outlook results over and the call XXXX to quarter detail. the

Patrick McClymont

Thank everyone. good you, and morning,

and we our Written total X results me revenue Let to to X due XX% growth XX, shown you June X. quarter, grew through on XX% and the months ended second XXXX, for In delivered in the results. million. premium $XXX The Slide XX%. $XXX fee walk XX% growth and increased jumped Marketplace count other business revenue retention that $XX than strong new underwriting million, revenue higher to improved and premium to and on Membership robust slightly written Commission to XX% million.

our team specialists party higher revenue and strong dedicated collateralized and from across live of automotive as Our delivering sales well as facility. growing is Arrow Broad private financing revenue our

special results, came grew grew We point thanks produced million last $XXX in quarter. mid-teens, customers lower vehicles. of garage loss below underwriting and fewer XX% social experience to revenue second the year's fall. ensuring ratio the premium joint predictable by the due to and revenue venture highly to stable Earned locations X Membership last decades of XX%, at and offset in post dissolution

million, a prior merit quarter second to The improvement X, we incentive million operating on and X% quarter. accruals points XXX $XX of reported Slides as strong and versus expanded in for flat period, year-to-date than increases took up Operating quarter Turning profitability, XX%. shown an second given of XXX%. now higher the comp, the We margins to benefits year results. profit X Salaries along basis more $XX grew the held by hold in G&A with

improvement $XX in is of on year-over-year improvement million EBITDA of This million. to XXXX, Adjusted quarter $XX X-year top in the a delivered of $XX resulting million EBITDA $XX million. the second in stacked increased

be change value line, quarter issue million successful million offer. of the our with forward we fair in income net charge. income to million in the the income improved private second net improvement of year's $XX interest longer and absence On following quarter Significantly earlier. minimal the bottom our margins $X a of warrants and $XX delivered higher public million exchange drove year operating no an along last $XX compared The in will was and going restructuring

million, first XXXX. million of million, of change million attributable the stock. warrants GAAP income per preferred half of on income an million, shareholders for in common $X.XX million fair from back and the of A basic shares weighted came Class for cash $X.XX defined of collateralized of to $X at portfolio Net fully jumped unrestricted quarter was flow versus diluted stock divided in Class the the earnings $XXX X which first The to balance before Capital's loans of $XX outstanding. share shares the million cars. Adjusted and Operating accretion million A the Broad in is by June was average of per value year interest on diluted leverage Arrow consolidated after common as earnings $XX end cash half collector share XX for $XXX resulting based $XXX and debt of long-term by in net of $X.XX

further best We took on few some focus use. the additional simplify precious during business our months to and their actions last highest and resources

in for valuing X.X stock. Class the help This outstanding of cost of we warrants. First, the and the warrants noise for and the exchanged should common forward. going our accounting net EPS income and July, in remove successfully $XX.X million million A shares eliminate

now diluted shares Given the equity warrant awards is million. exchange, our count, preferred and including share fully unvested $XXX

our we $XX million expanded by Wells of with new capacity bank, addition the a Second, Fargo. credit the also facility borrowing of

and buyer, Americas and who formula Association, motor Motorsport the events Formula with Motorsports, the Finally, in sport Transam operates marketing sports U.S. our platform we vintage Rege, racing created motorsports series, a and such Regional online car management as a partnership X the strategic long-term calendar owns event Farella and sold

XXXX up XX. wrap on Slide our Let outlook shown me with

XX% for expected written leverage. expect first the with to to is efficiencies XX-plus XX% to track XXX%. million growth, in outlook revenue call to XXXX, of of scale margin plan of $XXX to of from XX% As and premium. but million High now XX% well rates McKeel flow and XX%. growth executing in compounding to and drive revenue result summary, come to outlook yet XXXX growth $XX to we our questions. range drive to higher incremental on now of we we open XX% high growth on our the XX% are expansion position percent our be net we to people let line million quarter to in as and EBITDA margins rates increased to should by is over shared us to growth roughly Adjusted With continue best in that, your powered for million, representing believe margins and years. call production, income mentioned, $XXX $XX ensuing the to EBITDA of XXXX and up now deliver benefits should of the are to We million, margins growth year-over-year investments In XXX% on cash adjusted equating and total significantly XX% from we a combined operational technology our us to operating the the top $XX

Operator

Instructions]. [Operator

Your with Mark Truist first question comes from Hughes Securities.

Mark Hughes

say Sean his about takes marketplace. digital the envision over? he run early there Anything you priorities, as about Hiring what kind can you of McMullen

McKeel Hagerty

important different question. to recently, of at areas Amazon, to of Music has Sean big of know the most a a division great been we marketplace join of us. a one It's things was Amazon platform itself excited for the in responsible for thanks. His like Amazon. of the together experience digital the really thing a Amazon and in And is an excited he about knit complexity is team. lot lot we're have Well, We're

to We lot it together expand. secret in all has is of to for sauce knits forward and our us think promise, -- we're going we to But the it toolbox. the with have continuing looking how a be tools it other

those digital types speed things. acquisition, our valuation, of So

do underlying growth? be do together? continue at march looking then of those of knit how the going he's pieces the we And to core to How things. both So we

Mark Hughes

just just with XX, -- that carriers, evolving over very pricing growth ago, the market, your now you changing? this What is you've of -- you strategic premium written observed of last are the versus kind kind what it said consistent months? the about months relationships and in the in XX, as think the other have impact Thinking about Understood. strong, XX XX

Patrick McClymont

up X then I'll as about like market so companies up it's for something -- to is something Mark, can XX% we continue think something talk with McKeel we our drivers, will take things us up to think that Patrick. end handle where it the and being going partners. up X%. stand like And to this price year end pricing daily compares or rate. at, Overall,

that us, understand lower so is at is part And doing benefit why risk of grow to we in So just value price great that's are to we're continues for the customers a but and it really taking we're for how rate. compelling. and a we XXXX, we it prop that much and because The quickly. think our able

McKeel Hagerty

working level indications basis. XX months last is, to rate delivering They guess I on add in and it's definitely what And is there industry, right. way get our we're required or it general We're from the and profitably benefited to although I just had off, to everybody whatever a is that, get benefit of push partners to to its regulated would make or is -- that really pricing the The maybe lot over have we've hearing -- starting from are all the that business. know shop, industry-wide it's to out we that. we're action an that people the year through a has increases sure their early we've

in because have is a is X insured And well, from and when we're those car maybe to, better -- X, lot rate us, that benefit on that cars of might and X somebody a it There's market. going comes we so taking gee, by a one. get of special the out X,

them and of as Do business usual. back off, that levels cars proposition celebrating about well, do people the So to to sort who agents as communicate what bring value we us, the to it's and keep for own cool the us. it need

Mark Hughes

XX% the about talked margin. you Patrick, incremental

the You've you're a tremendous think good on go-forward a of you had kind basis? significantly is drive leverage, as good a to higher You expense ratio? XX% said target that positioned of profitability

Patrick McClymont

for think and I of margin kind level, so communicated continued XXXX, think, expansion be what at guidance. a that is the there expect with we consistent basis. do that's far on we've we'll We go-forward be year full to

should where communicate talked corner more of year as meaningful guidance. we'll give the these when a for out this shakes profitability that we've to on next terms In year we've But and in year, about we that we've year. and early little calls, years, the will think next aggregate being be, gotten last teens, we're turned bit us to up margin. the high couple but getting something that we in X there. -- need where And not the close maybe to take operating right? XX% We business to years of overall end get X, profit overall And that another

do be will there continued expect expansion. we So

Operator

[Operator from Instructions] Next with Singzon comes JPMorgan. Pablo question

Pablo Singzon

the should Was came rate? expecting. below about a in quarter? came rate the we think there bit we unusual anything The tax were And how what go-forward this tax

Patrick McClymont

could No, where a that consistent nothing nothing point it unusual I there's this I don't to. -- on quirky with quarter. I should be think we've And go-forward basis, been.

Pablo Singzon

other that and about interest improved right? there's $XX a drove sequential. to then line sequential right, there about actual the And think $X Did and expense that? strongly invested interest on basis is income, on forward? contribution we think income. million going then What that P&L how to from And pretty should So I million

Patrick McClymont

a we in part, being all monthly the year in renegotiation most the we it A that expansion it's our producing now more the margins. a paid with and for from McKeel, lot CUC of the A to now is arrangement the of is following cash. So paid basis. get of shifted just we arrears, lot sort of paid where it of have lot started on our

positive a cash that's So been flow swing. big

MGA invest Re within Hagerty build. the to amount cash within and we of the continues have to So

big And so and the just driver talking environment. we're the about more we just rate is invested -- cash the is then other

new and previous And X. to relative were on X% so implement X%, get north been did balances. in April investment to off where cash a of sometimes able strategy, We we've kicked we earnings those that years, around

that in It now bonds. where invested will entirely numbers going much previously, So a put really in of And simply, forward. were cash. aren't we're it in reflected moved the overwhelmingly to invested And we've the yet. strategy we investment-grade results to be

classes. rates We to interest have entirely now kind We've were think essentially years to way before exposed to the pushed invested But some about exposure cash. we duration to it It's because other being simple like. in out our bit. cash asset is short-term of X versus we're a X

actually efficient right? simply should risk, we've going the that to but We're forward. think less we be better frontier, to So moved able produce taking returns on

Pablo Singzon

quick just makes follow-up that on point, a And That sense. Patrick.

fair of go balances to Are baseline just this sort level, -- income. XQ, don't $XX it that thinking XX reason off Would right back million you the are XQ assume and that cash million why be rates right? from right? was back about you isn't any So you the where in

Patrick McClymont

No. the That's volatile right is obviously, now, now. right -- as we environment interest pretty sit rate

things so reasonable move the year. balance assumption for may of think a around, it's the I but And

Operator

I the McKeel would Hagerty like remarks. for you. to over turn Thank to floor closing

McKeel Hagerty

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

We curated we help Hagerty car members long carefully and vehicles. their over to as prized ahead X for of have have protect lovers, the decades brand we enjoy and last buy-sell a runway us the

over in the together, them for we further buy profitable have car after recipe United million the for durable growth, multiple business well opportunity have to profit is States, and Promoter growing Scores and high-growth sell Net delivering people evolution and excellent fast preferred our and to year. retention offering a our growth the us positions trusted platform penetrate with that engagement legs and We year Bring a cars. the underwriting membership success becoming including and that control that collector distribution to marketplace profits in drives collector all $XX

California, automotive in the where all world will Monterey, cars stars be and come the week, of Next the X events we together. the largest in

those to own auctions, on incredible the at Monterey including and broad the our that been, For the Arrow until enjoy August Signature of course, an Delagans then, Jet haven't stop hope it's yet sale Laguna driving. Center. Concur Car at and never XX. Beach Seca opportunity Pebble X-day We there racing

Operator

concludes This teleconference. today's

your may lines in. disconnect You

Hagerty (HGTY) 6 Aug 242024 Q2 Earnings call transcript