Hagerty (HGTY) 7 Nov 242024 Q3 Earnings call transcript

Greetings, and welcome to the Hagerty Third Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jay Koval, Senior Vice President of Investor Relations. Thank you.

You may begin.

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

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

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

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

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

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

over And with to the that, I'll turn call McKeel.

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

than finally driving of the ground, in were to growth numbers ever. to great customers enjoying leaves signaling fallen written another North season in special The out have last America. stubborn cars Hagerty the of end yet With larger XX%, most their premium the year-to-date

growth impressive and of in visible in add the expanding and out Media, a path on Drivers live XXXX, XXXX. Club to to compounding value-added a year offerings In as record gains XXX,XXX track in events revenue are mid-teens new fuel to including fact, continues and year margins, Hagerty with auctions, large from members portfolio our we

month, seen Hurricanes the in large the Helene and news you've were last destructive catastrophes. over Milton as all Now

employees a time prepared like and help approach customer and with have to Hagerty as members for was well to lead Net perilous of Scores. X,XXX typically can low Events Promoter carriers experience insurance we underwriting, botched to a a losses. Fortunately, service disciplined attrition these are our team their

minimal our in pride closely One the took and home Clearwater, carrier Florida, our person center hold of deposited on money take after with into to his back was even a it higher process Promoter members dealership Porsche members Net out the We road account. friction, loss at with on-site insurance our with in Florida us on his working than at get leading time to them his for to the before. entire pop-up claim in Scores

possessions. the differentiator service to you but more us also of double national with key enthusiasts prized for generate not look for long-lasting Thank helping NPS Hagerty than partnerships our and average. that Team only a expertise helps XX, to our for carriers fuels that It's to us One car who Hagerty the white industry deserve glove direct their business, create

than came over Year-to-date top translating of persisted straight period. X momentum incremental of Xx line Helene's growth impact, revenue prior of into this months third approximately total the revenue It in seventh income, the quarter marks XX% the Our greater into the year also million with $XX excluding profitability. quarter XXXX. higher first operating

of margin X $XXX expansion and cash million first year, operating during generated growth revenue the of up XX%. our the Importantly, months flow

highlights X. shown on key share me Slide a few Let other

up Marketplace premium to Marketplace and and first members due Monterey revenue. an written growth jumped risk-taking strong months. XX% fee Membership, financing by from historical live added X in Revenue gains Reinsurance, were auction, in commission driven Earned for we of in new during gains results increases line XX%, inventory growth with premium entity, and to as and XX%, quota increase our written the higher Hagerty with revenue sales due share. XX% premium grew our other XXX,XXX

prior XXX XXX significantly basis operating basis Year-to-date margin period over Helene's year on negative of despite expansion the points with point margins. profitability improved drag

Our and unusual drove than X% higher the X hold salaries G&A the ratio of during quarters, a to resulted of X%. prior year and Helene. benefits $XX losses of growth allowed cost us cat discipline operating in was in year-to-date XX%, decline and million. loss course, just to This points of $XXX including, X million due first adjusted income EBITDA in Year-to-date to

to driving referrals; reminders second, X our are the most operational our way; the quarter. member third, company, collectible cost-effective which Marketplace the launch into to during enhancing place control vehicles; and insurance efficient and of closed priorities increasing to newly and in first, flexibility X drive profits Plus finance that third fourth, trusted Enthusiast a as and our including: buy, loyalty building experience underwriting the our our early Slides efficiencies, XXXX are over through acquired we improving XXXX look Hagerty sell business and and retention in

XXXX turn Let our to updated outlook. me now

written the X the are full year of growth our we strong now Given increasing approximately total revenue revenue of expect outlook. results XX%. and during quarter, our months fourth $X.XX billion first underlying premium We into business on momentum

income of prior including and for and Milton million to million. million line outlook estimated with and our of million is $XX profit outlook, is million, $XXX underlying losses $XXX new to $XX from of net adjusted Our $XX Helene EBITDA expectations, in

result top growth us on line execution in position. lengthen and to profitability focus should and the our leadership allows that initiatives margin Our

reflect numbers as I key build-out the years. growth of Hagerty our shareholders should invest business, in for cover over believe particularly will headline don't value and which more the the and rollout, Marketplace initiatives of State such as creation detail, Patrick Enthusiast we the the the growth outlook Plus, profitability but adequately the underlying coming launch XXXX, of profit in sustained of all in Farm way pave for the

to Patrick. over call the turn now me Let

good and everyone. morning, you, Thank

on X. the and you ended XX, Let our me results shown X walk for through September Slide X months

quarter, business that retention total third line growth we to million, XX% in improved XX% This to XX% expectations to million. selective to $XXX maintaining we $XXX gains. XX%. Written and in the grew jumped delivered premiums revenue approach in Commission count growth. with revenue to performance robust are and line written as is due primarily fee In a new with premium

and XX% to $XX Membership, revenue Marketplace other increased million.

introduce Our membership members partnerships in and high growth new local began new business we chapters. delivered HDC single-digit as launch to

Arrow also taking at share We automotive backdrop. Broad team resulting specialists muted Monterey the growth in in sale, invest our industry to of XX% continue our against

million. grew $XXX premium at to XX% Earned

which catastrophe Re, claims from ratio million XX%, Helene. impacts. in came Our at XX% included $XX ceding elevated underlying Re losses. of the Year-to-date very of at loaded XX% in loss combined combined our XX%, points ratio above loss Hagerty Despite ratio X XX% commission Hurricane ratio risk-taking healthy of of is Hagerty earned and our on cat ratio, loss slightly for With cat of fully XX% our was the long-term premium, delivered entity, due to XX% return target a equity. included

and lower in incentive quarter, continue operational to X%, climb X% We double as now on Helene, salaries the Operating underlying to reported shown efficiencies. and benefits profit, margins X existing G&A, profit part compensation. tight prior and discipline a by year $XX been both profitability, have operating Turning Slides excluding third down on roughly cost the of by and would We better quarter million. leveraged declined higher X. in

million Adjusted as million $XX EBITDA were of million declined $XX by losses. offset year-over-year Helene's margins to improved $XX

quarter the helped negative of losses to On $XX public third results. related by diversified the million. prior the value the post-tax the Net of and million. bottom delivered in and in was investments, year's $XX private offset and settlement The we in line, cat million, income $X our fair change income base by in of continued loss net quarter our capital line with better warrants growth was

common $X.XX preferred on noncontrolling on third million for $X to we we diluted warrant reminder, exchange Class Class exchange after shares Class for attribution and Net million was earnings of A earnings based A the million attributable XX.X was whereby X.X in quarter outstanding. warrants. the GAAP interest in shareholders our a shares A of basic XX As to all quarter, of average completed stock common income stock accretion million per and common the issued weighted the share stock.

million. an debt, loans excluding was million we September collateralized unrestricted only back cash million. portfolio $XXX net Adjusted that gains McKeel $XXX X months Arrow by Capital's ended the at debt Long-term leverage for to in per $X.XX losses divided warrants share, third $X.XX by our the as to income before million, fully and related came versus $XXX quarter with of and first earnings for balance defined $XX of of long-term $XXX Broad of million consolidated of Thanks the the shares cars, diluted cash XXXX. operating of for collector flow mentioned,

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

we line powered by mentioned, outlook our faster combined XX%, operating increased even growth leverage to XX% of gains. of and premium for revenue are High rates the growth. and efficiencies to with written a benefits As growth, top of line operational scale, of driving total strong XX% McKeel range rates bottom

million impact range in tax. net or This $XX $XXX post outlook a adjusted revised Our Helene results EBITDA new million $XXX million and of now of of incorporates to $XX million income pretax to million. $XX $XX million from Milton, and

sustain flow are margin expansion we investing the revenue well and are executing that growth, should of years. our in to over our growth high rates profit the on In plan initiatives summary, deliver cash compounding and production, coming

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

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

first is on My expenses. question

both year-to-date. down if go a guess control think keep sort about digits As be pointed recent revenues low you few expense step at years, some catch-up right? had there I salaries this out, in some could mid-teens, expenses the but G&A Hagerty with where expense you Is will and up can back in you at where single business good grow growth and of point? Or levels? take next

faster kind we you for the business thank growth, to believe the business. Marketplace built Yes, question. deliver in is the of bit obviously, that do mid-teens that a written premium growth Pablo,

side is straightforward. I the equation, of think, So pretty that

couple On continue. That the we've for structure cost into put and the cost effort rightsizing lot the on a side, seen will what that. last maintaining years, you've of discipline of

on And quarter guidance for so We'll expansion we do expect to call. margin our over see XXXX fourth time. give

really ramp a and it technology our Obviously, investments transformation, mentioned, we Farm, are Duck what the up some And we're next Creek which then related State call in is implementation will McKeel important through where we going pretty all year. the initiatives. implementing As Apex, also, systems. the making period

And so a we investment. of phase in are

get We to up expect then again. see leg we those through then it see margin that we'll investments, some as continue expansion. to we'd And expect

to able about. that our do than we some grow So and we've the costs, side, cost and the we'll to We're trajectory be faster believe on been talking will disciplined deliver going it's that stay revenues leverage. our

And then came you traditionally you. or XX% loss you run. the Got attritional than Anything unusual have right? that right? you mentioned XX% XX%? ex I up that's a Helene, Patrick, bit So think, had to instead of ratio where just on brought that XX%, quarter this higher guys

No.

loss about of mid-XXs, mid-XXs. of up talked range the over ratio, the always it's we've kind the As years, to been sometimes

can about. a and ratio, confident And given underlying move seeing to cat nothing quarter. certainly feel There's loss big so The that in around, around the can the move still But ratio quarter we're was us. we it for it the certainly is that loss concerning event. structural

Okay. And me. then last for

going water go from under are you're matter terms? would So of I risk to hope this you recoup it those selection any the pricing? business these Or is losses have how pricing forward basis? implications a be And through the for and Helene losses Milton, losses will basically, just simplistically, bridge? on guess, a of sort something forward, So

include our always load, And we what actually so question the a Well, in pricing happens. right? is cat

X we are This those had had year, XXXX, guidance. in reflected XXXX, the we've cats, got the event in updated cat So we Ian. obviously, a and nothing.

that I So And what right? is modeling yes, changes answer looking relative to pricing cats. the what as We're at suggests there, need we those we through. in guess and flow our to is will make need our always load to

we'll our that if liability conclude increasing in lately consistently feather side. do pretty on time. that lot has us been cat side, But rates. seen A the something the over more need we on of yes, have You then to that we

next from Truist [Operator Securities. Instructions] with Mark The question comes Hughes

of shopping seen you've kind if in wonder change I behavior. any

price industry, the of the with going I you've pretty people it's that's have auto because to think good I likely more understanding, think, you a across my rates helped substantially and up got point been you that how new be business? in looking do you fair any change Do see is trend then two, around. that one, notice assessment? in And behavior? lately in that terms a Number

rates of Mark. pricing McKeel. that indeed, hardening limited states, especially pushed And just of before regulatory question. market taken where result being the some by market insurance carriers. shop, this It's coverage to It's has in we've the actions lot it's people whether just of or or great there's a Thanks, a the about definitely is more rate think a by auto being I individual talked

the that it. us. of more benefit It definitely at these we benefits market, people So from just this pushes business, and

heading the think into you the our from there, who down that the We to partners of signaling predictions I see you starting best summer, know. out that out names auto certainly of slowing some were of regular increases have the the heard markets. are

maybe people And the increase sort is leveling in off. of so I saw think shopping what that we

that ourselves rate. more We're underwriting whether works see who see again, not of think for rate hoping that increases, to after We interesting But some hurricane moderating underlying exposed. in to we're sort right what are at price well of discipline states happens it's need might where to flood season and in states to the now. some our looking this those take going be they the

and I really, wind whereas event, remember Carolinas, not to flooding flooding mean Helene a event. Milton much -- it further so into went a was and a of important up event, was that more it's the

very and benefiting different see interesting will settles we're has the it the to how So in going it. from out. be on dynamics thing Yes, to overall things it market,

rates our X% XX% will being up up a X%. industry to were something similar and back look we think ends X%. up We up and in when 'XX, the industry XX% were X% the rates Mark, up probably like at be to

drive shopping. rate And so increases those

but ever people the suggested, shop, we're gap -- think rates do it's is and product, different up risk pricing been wide about with when as as industry just because As differently. we are appropriately, our McKeel our then the going rate

we're like And so versus year. to track XXX,XXX that [indiscernible]. something on bring in last or customers year, new so And this XXX,XXX

So value with that's and is yes, right prop our we now, our do that think compelling pretty growth. helping

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

operator, us thanks busy of election you, during week. for and all this today to you joining Thank

around the brand a for Hagerty passion to the that and curated carefully together have We continues decades shared lovers. campaign the over today last X bring automobile, car

success delivering to sell highly XX believe and differentiated in that their built the business United us special for to buy, enjoy further the profitable members car that have growth year We've protect, us model a We unique we after should allows help year. States, and opportunity penetrate durable, position cars. recipe million collectible the

With only runway a believe X% have market ahead. share long today, we we

then, stakeholders. rates our well are earnings high done for highly business never the share allow have by team's as create XXXX stop fourth encouraged quarter of quality to will we the for Until our as in growth should We momentum sustain value we on and that call, as past. But all of our execution our us driving. profit outlook

teleconference. today's concludes This

your your may and this at for You thank time, you participation. lines disconnect