Hagerty Reports 2023 Results; Expects Strong Growth and Margin Expansion to Continue in 2024

• Fourth quarter 2023 Total Revenue increased 24% to $245.0 million, and full year 2023 Total Revenue increased 27% to $1.0 billion compared to the prior year periods.
• Fourth quarter 2023 Written Premium increased 19% to $192.9 million, and full year 2023 Written Premium increased 17% to $907.2 million compared to the prior year periods.
• Fourth quarter 2023 operating margin expanded by 1550 bps and full year 2023 operating margin increased by 960 bps compared to the prior year periods.
• Fourth quarter 2023 Net Income of $9.0 million, an increase of $41.3 million, and full year 2023 Net Income of $28.2 million, an increase of $25.8 million compared to the prior year periods.
• Fourth quarter 2023 Adjusted EBITDA (a non-GAAP measure) of $9.7 million, an increase of $11.7 million, and full year 2023 Adjusted EBITDA of $88.2 million, an increase of $90.1 million compared to the prior year periods.
• Increased Policies in Force Retention to 88.7% as of December 31, 2023 from 88.0% as of December 31, 2022 and achieved insurance Net Promoter Score of 82.
• Hagerty Reinsurance Limited was assigned a Financial Strength Rating of A- (Excellent) by AM Best
• Shared 2024 Outlook for 15-17% Total Revenue growth, 116-148% Net Income growth and 41-53% Adjusted EBITDA growth

TRAVERSE CITY, Mich., March 12, 2024 /PRNewswire/ -- Hagerty, Inc. (NYSE: HGTY), an automotive enthusiast brand and leading specialty vehicle insurance provider, announced today financial results for the three months and year ended December 31, 2023.

"2023 was an excellent year at Hagerty as we successfully executed on our 2023 priorities and delivered results that consistently exceeded expectations. For the full year, we grew total revenue 27% and surpassed $1 billion in revenue for the first time. We also significantly improved our profitability, delivering a year-over-year improvement in Net Income of $26 million and Adjusted EBITDA of $90 million. Operating margins expanded 960 basis points, powered by operational efficiencies, cost discipline, and the benefits of increasing scale as we deliver high rates of compounding growth," said McKeel Hagerty, Chief Executive Officer of Hagerty.

"Our momentum has carried over into 2024 which we expect to be another year of excellent results. We anticipate growth in total revenue of 15-17%, net income of 116-148%, and Adjusted EBITDA of 41-53%," continued Mr. Hagerty. "Utilizing our improved profitability and cash flow, we are maintaining our investment posture in technology and expanded offerings that will drive growth and further improve an already great, and highly differentiated value proposition for Hagerty's customers."

Mr. Hagerty added, "As we enter our 40th year in business, Hagerty is just beginning what we believe will be a multi-year period of sustained revenue growth and strong flow-through to the bottom line. I couldn't be prouder of One Team Hagerty's work as they fuel the passion for driving and car culture by helping car enthusiasts protect, buy and sell, and enjoy their special vehicles."

YEAR ENDED 2023 FINANCIAL HIGHLIGHTS

• Fourth quarter 2023 Total Revenue increased 24% to $245.0 million and full year 2023 Total Revenue increased 27% to $1.0 billion compared to the prior year periods.
• Fourth quarter 2023 Written Premium increased 19% to $192.9 million, and full year 2023 Written Premium increased 17% to $907.2 million compared to the prior year periods.
• Fourth quarter 2023 Commission and fee revenue increased 22% to $77.5 million, and full year 2023 Commission and fee revenue increased 19% to $365.5 million compared to the prior year periods.
  • Policies in Force Retention was 88.7% as of December 31, 2023 compared to 88.0% as of December 31, 2022 and total insured vehicles increased 6% year-over-year to 2.4 million.
• Fourth quarter 2023 Loss Ratio was 41.5% compared to 41.2% in the prior year period. Full year 2023 Loss Ratio was 41.5% compared to 45.3% in the prior year period. The year-over-year improvement was due in part to better underwriting results in the current year. In addition, prior year results included $10.0 million of catastrophe losses related to Hurricane Ian.
• Fourth quarter 2023 Earned Premium increased 31% to $147.4 million, and full year 2023 Earned premium increased 32% to $531.9 million compared to the prior year periods.
  • Earned Premium growth was driven by the strong Written Premium growth as well as the increased quota share to approximately 80% compared to 70% in the prior year period.
  • AM Best assigned a financial strength rating of A- (Excellent) to Hagerty Reinsurance Limited.
• Fourth quarter 2023 Membership, Marketplace and other revenue decreased 3% to $20.1 million, and full year 2023 Membership, Marketplace and other revenue increased 33% to $102.8 million compared to the prior year periods.
  • Fourth quarter 2023 Marketplace revenue decreased 34% to $3.7 million compared to the prior year period that included a live auction, and full year 2023 Marketplace revenue increased 109% to $28.6 million compared to the prior year period.
  • Fourth quarter 2023 Membership revenue increased 4% to $12.9 million, and full year 2023 Membership revenue increased 16% to $52.5 million compared to the prior year periods.
    • Hagerty Drivers Club (HDC) paid members increased 8% to approximately 815,000 compared to the prior year period.
• Fourth quarter 2023 Operating Loss of $6.5 million compared to a Loss of $35.7 million in the prior year period, and full year 2023 Operating Income of $10.4 million compared to a Loss of $67.6 million in the prior year period.
  • Fourth quarter 2023 operating margin expanded by 1550 bps and full year 2023 operating margin increased by 960 bps compared to the prior year periods.
  • Full year 2023 depreciation and amortization was $45.8 million compared to $33.9 million in the prior year period. The increase was driven by a higher base of capital assets related to the digital platform which increased the expense by $5.8 million, as well as the $4.3 million impairment of media content assets.
  • Full year 2023 and 2022 results include restructuring charges of $8.8 million and $18.3 million, respectively, primarily associated with a reduction in force, reduced hiring plans and cost containment initiatives.
  • Full year 2023 results include losses and impairments of $4.0 million related to the termination of the Hagerty Garage + Social joint venture and the sale of DriveShare.
• Fourth quarter 2023 Net Income of $9.0 million compared to a Loss of $32.2 million in the prior year period, and full year 2023 Net Income of $28.2 million compared to $2.4 million in the prior year period.
  • Full year 2023 Net Income includes a $19.5 million increase in interest income due to higher rates and better investments, as well as the impacts from the change in fair value of warrant liabilities, the restructuring charges, revaluation gain on previously held equity method investment, and the impairment of media content assets.
• Fourth quarter 2023 Adjusted EBITDA (a non-GAAP measure) of $9.7 million compared to $(2.0) million in the prior year period, and full year 2023 Adjusted EBITDA of $88.2 million compared to $(1.9) million in the prior year period.
• Fourth quarter 2023 Basic Earnings per Share was $0.14 and Diluted Earnings per Share was $0.03, and full year 2023 Basic Earnings per Share was $0.19 and Diluted Earnings per Share was $0.09.
  • Fourth quarter 2023 Adjusted EPS (a non-GAAP measure) was $(0.01), and full year 2023 Adjusted EPS was $0.04.

The definitions and reconciliations of non-GAAP financial measures are provided under the heading Key Performance Indicators and Certain Non-GAAP Financial Measures at the end of this press release.

2024 OUTLOOK — GROWTH AND PROFITABILITY

Despite the uncertain macro environment and challenging dynamics for the insurance industry with heightened inflationary pressures, we expect 2024 to be another year of strong top-line growth and margin expansion for Hagerty as the company's performance based culture powers great results for stakeholders. We remain focused on growing our Insurance, Membership and Marketplace businesses, positioning Hagerty to deliver compounding profit growth over the coming years and fund our purpose to save driving and fuel car culture for future generations.

• Key 2024 business priorities include:
  • Further improve loyalty to drive renewals and referrals
  • Enhance member experience in a cost effective and efficient way
  • Build Hagerty Marketplace into the most trusted and preferred place to buy, sell, and finance collector cars
  • Expand insurance offerings, particularly in the post 1980s collectible space
• For full year 2024, the company expects to deliver:
  • Written Premium growth of 13-14%
  • Total Revenue growth of 15-17%
  • Net Income growth of 116-148%
  • Adjusted EBITDA growth of 41-53%

Conference Call Details
Hagerty will hold a conference call to discuss the financial results today at 10:00 am Eastern Time. A webcast of the conference call, including the Company's Investor Presentation highlighting fourth quarter and full year 2023 financial results, will be available on Hagerty's investor relations website at investor.hagerty.com. The dial-in for the conference call is (877) 423-9813 (toll-free) or (201) 689-8573 (international). Please dial the number 10 minutes prior to the scheduled start time.

A webcast replay of the call will be available at investor.hagerty.com following the call.

Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts. These forward-looking statements reflect Hagerty's current expectations and projections with respect to its expected future business and financial performance, including, among other things: (i) expected operating results, such as revenue growth and increases in profit and earned premium; (ii) changes in the market for Hagerty's products and services, (iii) anticipated business objectives; and (iv) the strength of Hagerty's business model. These statements may be preceded by, followed by or include the words "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "goal," "intend," "likely," "outlook," "plan," "potential," "project," "seek," "target," "can," "could," "may," "should," "would," "will," the negatives thereof and other words and terms of similar meaning.

A number of factors could cause actual results or outcomes to differ materially from those indicated by these forward-looking statements. These factors include, among other things, Hagerty's ability to: (i) compete effectively within its industry and attract and retain members; (ii) maintain key strategic relationships with its insurance distribution and underwriting carrier partners; (iii) prevent, monitor and detect fraudulent activity; (iv) manage risks associated with disruptions, interruptions, outages with its technology platforms or third-party services; (v) accelerate the adoption of Hagerty's membership products as well as any new insurance programs and products; (vi) manage the cyclical nature of the insurance business including through any periods of recession, economic downturn or inflation; (vii) address unexpected increases in the frequency or severity of claims; (viii) comply with the numerous laws and regulations applicable to Hagerty's business, including state, federal and foreign laws relating to insurance and rate increases, privacy, the internet and accounting matters; (ix) manage risks associated with being a controlled company; (x) successfully defend any litigation, government inquiries and investigations, and (xi) other risks and uncertainties indicated from time to time in documents filed or to be filed with the Securities and Exchange Commission (the "SEC") by Hagerty.

The forward-looking statements herein represent the judgment of Hagerty as of the date of this release and Hagerty disclaims any intent or obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise. This press release should be read in conjunction with the information included in the Company's other press releases, reports and other filings with the SEC. Understanding the information contained in these filings is important in order to fully understand Hagerty's reported financial results and our business outlook for future periods.

About Hagerty, Inc. (NYSE: HGTY)
Hagerty is an automotive enthusiast brand committed to saving driving and fueling car culture for future generations. The company is a leading provider of specialty vehicle insurance, expert car valuation data and insights, live and digital car auction services, immersive events and automotive entertainment custom made for the 67 million Americans who self-describe as car enthusiasts. Hagerty also operates in Canada and the U.K. and is home to Hagerty Drivers Club, a community of over 800,000 who can't get enough of cars. As a purpose-driven organization, Hagerty Impact aims to be a catalyst for positive change across the issues that matter most to our teams, our members, the broader automotive community, our shareholders and the planet at large. For more information, please visit www.hagerty.com or connect with us on Facebook, Instagram, Twitter and LinkedIn.

More information can be found at newsroom.hagerty.com.

Category: Financial

Source: Hagerty

Hagerty, Inc.
Key Performance Indicators and Certain Non-GAAP Financial Measures

Key Performance Indicators

The tables below present a summary of our Key Performance Indicators, which include important operational metrics, as well as certain GAAP and non-GAAP financial measures as of and for the periods presented. We use these Key Performance Indicators to evaluate our business, measure our performance, identify trends against planned initiatives, prepare financial projections, and make strategic decisions. We believe these Key Performance Indicators are useful in evaluating our performance when read together with our Consolidated Financial Statements prepared in accordance with GAAP.

Non-GAAP Financial Measures

Adjusted EBITDA

We define Adjusted EBITDA as consolidated Net income excluding interest and other income (expense), income tax expense, and depreciation and amortization, adjusted to exclude (i) changes in the fair value of our warrant liabilities; (ii) share-based compensation expense; and when applicable, (iii) restructuring, impairment and related charges, net; (iv) the net gain or loss from asset disposals; (v) losses and impairments related to divestitures; (vi) the revaluation gain on a previously held equity method investment; and (vii) certain other unusual items.

We present Adjusted EBITDA because we consider it to be an important supplemental measure of the Company's performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management uses Adjusted EBITDA as a measure of the operating performance of our business on a consistent basis, as it removes the impact of items not directly resulting from our core operations.

By providing this non-GAAP financial measure, together with a reconciliation to net income (loss), which is the most comparable GAAP measure, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. However, Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as an alternative to, or a substitute for net income (loss) or other financial statement data presented in our Consolidated Financial Statements as indicators of financial performance. Hagerty's definition of Adjusted EBITDA may be different than similarly titled measures used by other companies in our industry, which could reduce the usefulness of this non-GAAP financial measure when comparing our performance to that of other companies.

The following table reconciles Adjusted EBITDA to the most directly comparable GAAP measure, which is Net income (loss):

The following table reconciles Adjusted EBITDA for the year ended December 31, 2024 Outlook to the most directly comparable GAAP measure, which is Net income (loss):

Adjusted EPS

We define Adjusted Earnings (Loss) Per Share ("Adjusted EPS") as consolidated Net income (loss), less changes in the fair value of our warrant liabilities and, when applicable, the revaluation gain on a previously held equity method investment, divided by our outstanding and total potentially dilutive securities, which includes (i) the weighted-average issued and outstanding shares of Class A Common Stock; (ii) all issued and outstanding non-controlling interest units of The Hagerty Group; (iii) all unexercised warrants; (iv) all unissued share-based compensation awards; and (v) all issued and outstanding shares of our Series A Convertible Preferred Stock on an as-converted basis.

The most directly comparable GAAP measure to Adjusted EPS is basic earnings per share ("Basic EPS"), which is calculated as Net income (loss) available to Class A Common Stockholders divided by the weighted average number of Class A Common Stock shares outstanding during the period.

We present Adjusted EPS because we consider it to be an important supplemental measure of our operating performance and believe it is used by securities analysts, investors and other interested parties in evaluating the consolidated performance of other companies in our industry. We also believe that Adjusted EPS, which compares our consolidated Net income (loss) with our outstanding and potentially dilutive shares, provides useful information to investors regarding our performance on a fully consolidated basis.

Management uses Adjusted EPS:

• as a measurement of operating performance of our business on a fully consolidated basis;
• to evaluate the performance and effectiveness of our operational strategies; and
• as a preferred predictor of core operating performance, comparisons to prior periods and competitive positioning.

We caution investors that Adjusted EPS is not a recognized measure under GAAP and should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, including Basic EPS, and that Adjusted EPS, as we define it, may be defined or calculated differently by other companies. In addition, Adjusted EPS has limitations as an analytical tool and should not be considered as a measure of profit or loss per share.

The following table reconciles Adjusted EPS to the most directly comparable GAAP measure, which is Basic EPS:

SOURCE Hagerty