- Third quarter 2023 Total Revenue increased 27% to $275.6 million compared to the prior year period
and year-to-date 2023 Total Revenue increased 28% to $755.2 million compared to the prior year
period
- Third quarter 2023 Written Premium increased 15% year-over-year
to $255.6 million, and year-to-date
2023 Written Premium increased 16% to $714.3
million compared to the prior year period
- Third quarter 2023 Membership, marketplace and other revenue
increased 37% year-over-year to $32.6
million, and year-to-date 2023 Membership, marketplace and
other revenue increased 47% to $82.7
million compared to the prior year period
- Third quarter 2023 Net Income decreased 23% to $18.6 million compared to the prior year period,
and year-to-date 2023 Net Income decreased 45% to $19.1 million compared to the prior year
period
- Third quarter 2023 Adjusted EBITDA of $37.4 million, an increase of $47.4 million compared to the prior year period,
and year-to-date 2023 Adjusted EBITDA of $78.4 million, an increase of $78.4 million compared to the prior year
period
TRAVERSE
CITY, Mich., Nov. 8, 2023
/PRNewswire/ -- Hagerty, Inc. (NYSE: HGTY), an automotive
lifestyle brand and a leading specialty insurance provider focused
on the global automotive enthusiast market, today announced
financial results for the three and nine months ended
September 30, 2023.
"We again delivered strong revenue and cash flow growth in our
third quarter, with a revenue increase of 27% and operating cash
flow growth of 83% to $62 million,"
said McKeel Hagerty, Chief Executive
Officer of Hagerty. "2023 is turning out to be a banner year for
Hagerty, with year-to-date revenue growth of 28%, propelled by
written premium gains of 16%, earned premium growth of 32%, and
membership and marketplace gains of 47%. Our focus on creating a
more profitable business has driven dramatically improved margins
through operational efficiencies, cost discipline, and economies of
scale. Given our sustained business momentum, we now expect to hit
the upper end of our prior full year revenue guidance of 23-27% and
are once again increasing our 2023 outlook for both net income and
Adjusted EBITDA, powered by better-than-expected flow-through to
the bottom line."
Mr. Hagerty continued, "Hagerty is at the beginning of what we
believe will be a multi-year period of sustained revenue growth and
strong incremental margins. I couldn't be prouder of One Team
Hagerty's work as they fuel the passion for driving by helping car
enthusiasts protect, buy and sell, and enjoy their vehicles."
THIRD QUARTER 2023 FINANCIAL
HIGHLIGHTS
- Third quarter 2023 Total Revenue increased 27% to $275.6 million compared to the prior year period
and year-to-date 2023 Total Revenue increased 28% to $755.2 million compared to the prior year
period.
- Third quarter 2023 Written Premium increased 15% to
$255.6 million compared to the prior
year period, and year-to-date 2023 Written Premium increased 16% to
$714.3 million compared to the prior
year period.
- Third quarter 2023 Commission and fee revenue increased 21% to
$103.2 million compared to the prior
year period, and year-to-date 2023 Commission and fee revenue
increased 18% to $288.0 million
compared to the prior year period.
- Policies in Force Retention was 88.2% as of September 30, 2023 compared to 88.0% as of
September 30, 2022. Total insured
vehicles increased 6% year-over-year to 2.4 million compared to the
prior year period.
- Third quarter 2023 Loss Ratio was 41.1% compared to 56.4% in
the prior year period. Year-to-date 2023 Loss Ratio was 41.5%
compared to 46.8% 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.
- Third quarter 2023 Earned premium increased 30% to $139.8 million compared to the prior year period,
and year-to-date 2023 Earned premium increased 32% to $384.5 million compared to the prior year period.
- 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.
- Third quarter 2023 Membership, marketplace and other revenue
increased 37% year-over-year to $32.6
million compared to the prior year period, and year-to-date
2023 Membership, marketplace and other revenue increased 47% to
$82.7 million compared to the prior
year period.
- Third quarter 2023 Marketplace revenue increased 87% to
$13.0 million compared to the prior
year period, and year-to-date 2023 Marketplace revenue increased
210% to $24.9 million compared to the
prior year period.
- Third quarter 2023 Membership revenue increased 22% to
$13.8 million compared to the prior
year period, and year-to-date 2023 Membership revenue increased 20%
to $39.5 million compared to the
prior year period.
- Hagerty Driver's Club (HDC) paid
members increased 8% to approximately 807,000 compared to the prior
year period.
- Third quarter 2023 Operating Income of $16.1 million compared to a Loss of $(21.2) million in the prior year period, and
year-to-date 2023 Operating Income of $16.9
million compared to a Loss of $(31.8)
million in the prior year period.
- Year-to-date 2023 results include restructuring charges of
$8.9 million primarily associated
with a reduction in force, reduced hiring plans and cost
containment initiatives.
- Year-to-date 2023 results includes losses and impairments of
$4.1 million related to the
termination of the Garage + Social joint venture and the sale of
DriveShare.
- Year-to-date 2023 depreciation and amortization was
$34.9 million compared to
$24.3 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
$4.8 million, as well as the
$4.3 million impairment of media
content assets during the first nine months of the year.
- Third quarter 2023 Net Income of $18.6
million compared to $24.3
million in the prior year period, and year-to-date 2023 Net
Income of $19.1 million compared to
$34.6 million in the prior year
period.
- Net Income includes the impact from the change in fair value of
warrant liabilities, the restructuring charges, as well as the
impairment of media content assets.
- Third quarter 2023 Adjusted EBITDA of $37.4 million compared to $(10.0) million in the prior year period, and
year-to-date 2023 Adjusted EBITDA of $78.4
million compared to $0.1
million in the prior year period.
- Third quarter 2023 Basic Earnings per Share was $0.04 and Diluted Earnings per Share was
$0.04, and year-to-date 2023 Basic
Earnings per Share was $0.04 and
year-to-date Diluted Earnings per Share was $0.04.
- Third quarter 2023 Adjusted EPS was $0.05, and year-to-date 2023 Adjusted EPS was
$0.05.
2023 OUTLOOK — GROWTH AND
PROFITABILITY
Despite the uncertain macro environment, we are delivering
strong results in 2023 and are well positioned to deliver sustained
profitable growth over the coming years. We are confident that the
opportunities we have identified to monetize our addressable market
will expand our share, and we have thoughtfully prioritized our
growth initiatives in 2023 to significantly improve our
profitability and fund our purpose to save driving and fuel car
culture for future generations. For full year 2023, we
anticipate:
- Total Revenue growth of 26-27% powered by Written Premium
growth of 15-16%
- Sustain double-digit Written Premium growth trajectory
- Deliver an unmatched online and live Marketplace
experience
- Drive loyalty, referrals and incremental revenue and profit
from Membership
- Continued evolution into an integrated insurance
business
- Increase Hagerty Re's quota
share reinsurance agreement in the U.S. & U.K. to ~80%
- Significantly improved profitability through cost
containment measures and operational efficiencies
- Net Income of $2-12 million
- Adjusted EBITDA of $75-85
million
|
2023
Outlook
|
|
Prior Outlook at Q2
2023
|
in
thousands
|
Low
End
|
|
High
End
|
|
Low
End
|
|
High
End
|
Total
Revenue
|
$992,000
|
|
$1,000,000
|
|
$968,000
|
|
$1,000,000
|
Total Written
Premium
|
$893,000
|
|
$901,000
|
|
$878,000
|
|
$894,000
|
Net Income
|
$2,000
|
|
$12,000
|
|
$(12,000)
|
|
$8,000
|
Adjusted
EBITDA
|
$75,000
|
|
$85,000
|
|
$60,000
|
|
$80,000
|
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.
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 third quarter and year-to-date 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 earned premium; (ii) changes in the market for
Hagerty's products and services, (iii) Hagerty's plans to expand
market share, including planned investments and partnerships; (iv)
anticipated business objectives; and (v) 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; (vii) 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; and (x)
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 lifestyle 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.
Condensed
Consolidated Statements of
Operations (Unaudited)
|
|
|
Three months ended
September 30,
|
|
2023
|
|
2022
|
|
$ Change
|
|
% Change
|
|
|
|
|
|
|
|
|
REVENUE:
|
in thousands (except
percentages and per share amounts)
|
Commission and fee
revenue
|
$ 103,173
|
|
$
85,457
|
|
$
17,716
|
|
20.7 %
|
Earned
premium
|
139,785
|
|
107,487
|
|
32,298
|
|
30.0 %
|
Membership,
marketplace and other revenue
|
32,616
|
|
23,813
|
|
8,803
|
|
37.0 %
|
Total
revenue
|
275,574
|
|
216,757
|
|
58,817
|
|
27.1 %
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
Salaries and
benefits
|
51,318
|
|
50,120
|
|
1,198
|
|
2.4 %
|
Ceding
commission
|
65,413
|
|
50,415
|
|
14,998
|
|
29.7 %
|
Losses and loss
adjustment expenses
|
57,485
|
|
60,605
|
|
(3,120)
|
|
(5.1) %
|
Sales
expense
|
47,737
|
|
44,097
|
|
3,640
|
|
8.3 %
|
General and
administrative services
|
22,166
|
|
23,853
|
|
(1,687)
|
|
(7.1) %
|
Depreciation and
amortization
|
10,753
|
|
8,890
|
|
1,863
|
|
21.0 %
|
Restructuring,
impairment and related charges, net
|
473
|
|
—
|
|
473
|
|
100.0 %
|
Losses and impairments
related to divestitures
|
4,112
|
|
—
|
|
4,112
|
|
100.0 %
|
Total operating
expenses
|
259,457
|
|
237,980
|
|
21,477
|
|
9.0 %
|
OPERATING INCOME
(LOSS)
|
16,117
|
|
(21,223)
|
|
37,340
|
|
175.9 %
|
Change in fair value
of warrant liabilities
|
850
|
|
11,583
|
|
(10,733)
|
|
(92.7) %
|
Revaluation gain on
previously held equity method
investment
|
—
|
|
34,735
|
|
(34,735)
|
|
(100.0) %
|
Interest and other
income (expense)
|
6,260
|
|
662
|
|
5,598
|
|
845.6 %
|
INCOME (LOSS) BEFORE
INCOME TAX EXPENSE
|
23,227
|
|
25,757
|
|
(2,530)
|
|
(9.8) %
|
Income tax benefit
(expense)
|
(4,604)
|
|
91
|
|
(4,695)
|
|
(5159.3) %
|
Income (loss) from
equity method investment, net of tax
|
—
|
|
(1,535)
|
|
1,535
|
|
100.0 %
|
NET INCOME
(LOSS)
|
18,623
|
|
24,313
|
|
(5,690)
|
|
(23.4) %
|
Net loss (income)
attributable to non-controlling interest
|
(13,269)
|
|
(9,599)
|
|
(3,670)
|
|
38.2 %
|
Accretion of Series A
Convertible Preferred Stock
|
(1,838)
|
|
—
|
|
(1,838)
|
|
100.0 %
|
NET INCOME (LOSS)
ATTRIBUTABLE TO CLASS
A COMMON STOCKHOLDERS
|
$
3,516
|
|
$
14,714
|
|
$ (11,198)
|
|
(76.1) %
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share of Class A Common Stock:
|
|
|
|
|
|
|
|
Basic
|
$
0.04
|
|
$
0.18
|
|
|
|
|
Diluted
|
$
0.04
|
|
$
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
of Class A Common Stock
outstanding:
|
|
|
|
|
|
|
|
Basic
|
84,479
|
|
82,816
|
|
|
|
|
Diluted
|
84,479
|
|
336,768
|
|
|
|
|
Hagerty,
Inc.
Condensed
Consolidated Statements of
Operations (Unaudited)
|
|
|
Nine months ended
September 30,
|
|
2023
|
|
2022
|
|
$ Change
|
|
% Change
|
|
|
|
|
|
|
|
|
REVENUE:
|
in thousands (except
percentages and per share amounts)
|
Commission and fee
revenue
|
$ 287,972
|
|
$ 243,424
|
|
$
44,548
|
|
18.3 %
|
Earned
premium
|
384,498
|
|
290,719
|
|
93,779
|
|
32.3 %
|
Membership,
marketplace and other revenue
|
82,700
|
|
56,442
|
|
26,258
|
|
46.5 %
|
Total
revenue
|
755,170
|
|
590,585
|
|
164,585
|
|
27.9 %
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
Salaries and
benefits
|
160,122
|
|
149,867
|
|
10,255
|
|
6.8 %
|
Ceding
commission
|
181,188
|
|
138,048
|
|
43,140
|
|
31.3 %
|
Losses and loss
adjustment expenses
|
159,461
|
|
136,144
|
|
23,317
|
|
17.1 %
|
Sales
expense
|
124,791
|
|
109,989
|
|
14,802
|
|
13.5 %
|
General and
administrative services
|
64,865
|
|
64,040
|
|
825
|
|
1.3 %
|
Depreciation and
amortization
|
34,893
|
|
24,337
|
|
10,556
|
|
43.4 %
|
Restructuring,
impairment and related charges, net
|
8,857
|
|
—
|
|
8,857
|
|
100.0 %
|
Losses and impairments
related to divestitures
|
4,112
|
|
—
|
|
4,112
|
|
100.0 %
|
Total operating
expenses
|
738,289
|
|
622,425
|
|
115,864
|
|
18.6 %
|
OPERATING INCOME
(LOSS)
|
16,881
|
|
(31,840)
|
|
48,721
|
|
153.0 %
|
Change in fair value
of warrant liabilities
|
(1,419)
|
|
37,869
|
|
(39,288)
|
|
(103.7) %
|
Revaluation gain on
previously held equity method
investment
|
—
|
|
34,735
|
|
(34,735)
|
|
(100.0) %
|
Interest and other
income (expense)
|
15,677
|
|
(375)
|
|
16,052
|
|
4,280.5 %
|
INCOME (LOSS) BEFORE
INCOME TAX EXPENSE
|
31,139
|
|
40,389
|
|
(9,250)
|
|
(22.9) %
|
Income tax benefit
(expense)
|
(12,002)
|
|
(4,077)
|
|
(7,925)
|
|
(194.4) %
|
Income (loss) from
equity method investment, net of tax
|
—
|
|
(1,676)
|
|
1,676
|
|
100.0 %
|
NET INCOME
(LOSS)
|
19,137
|
|
34,636
|
|
(15,499)
|
|
(44.7) %
|
Net loss (income)
attributable to non-controlling interest
|
(13,477)
|
|
2,049
|
|
(15,526)
|
|
(757.7) %
|
Accretion of Series A
Convertible Preferred Stock
|
(1,838)
|
|
—
|
|
(1,838)
|
|
100.0 %
|
NET INCOME (LOSS)
ATTRIBUTABLE TO CLASS
A COMMON STOCKHOLDERS
|
$
3,822
|
|
$
36,685
|
|
$ (32,863)
|
|
(89.6) %
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share of Class A Common Stock:
|
|
|
|
|
|
|
|
Basic
|
$
0.04
|
|
$
0.44
|
|
|
|
|
Diluted
|
$
0.04
|
|
$
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
of Class A Common Stock
outstanding:
|
|
|
|
|
|
|
|
Basic
|
84,042
|
|
82,569
|
|
|
|
|
Diluted
|
84,042
|
|
335,392
|
|
|
|
|
Hagerty,
Inc.
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
|
|
September
30,
2023
|
|
December 31,
2022
|
|
|
|
|
|
ASSETS
|
|
in thousands (except
share amounts)
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
90,710
|
|
$
95,172
|
Restricted cash and
cash equivalents
|
|
594,865
|
|
444,019
|
Accounts
receivable
|
|
81,960
|
|
58,255
|
Premiums
receivable
|
|
179,168
|
|
100,700
|
Commissions
receivable
|
|
63,192
|
|
60,151
|
Notes
receivable
|
|
26,828
|
|
25,493
|
Deferred acquisition
costs, net
|
|
155,278
|
|
107,342
|
Other current
assets
|
|
56,783
|
|
45,651
|
Total current
assets
|
|
1,248,784
|
|
936,783
|
Notes
receivable
|
|
13,329
|
|
11,934
|
Property and equipment,
net
|
|
21,518
|
|
25,256
|
Lease right-of-use
assets
|
|
52,113
|
|
82,398
|
Intangible assets,
net
|
|
95,776
|
|
104,024
|
Goodwill
|
|
114,198
|
|
115,041
|
Other long-term
assets
|
|
37,959
|
|
37,082
|
TOTAL ASSETS
|
|
$
1,583,677
|
|
$
1,312,518
|
LIABILITIES,
TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts payable,
accrued expenses and other current liabilities
|
|
$
75,963
|
|
$
77,049
|
Losses payable and
provision for unpaid losses and loss adjustment expenses
|
|
190,784
|
|
167,257
|
Commissions
payable
|
|
111,657
|
|
77,075
|
Due to
insurers
|
|
113,485
|
|
68,171
|
Advanced
premiums
|
|
28,881
|
|
17,084
|
Unearned
premiums
|
|
335,901
|
|
235,462
|
Contract
liabilities
|
|
33,954
|
|
25,257
|
Total current
liabilities
|
|
890,625
|
|
667,355
|
Long-term lease
liabilities
|
|
52,022
|
|
80,772
|
Long-term debt,
net
|
|
75,764
|
|
108,280
|
Warrant
liabilities
|
|
46,980
|
|
45,561
|
Deferred tax
liability
|
|
17,892
|
|
12,850
|
Contract
liabilities
|
|
17,835
|
|
19,169
|
Other long-term
liabilities
|
|
3,972
|
|
11,162
|
TOTAL
LIABILITIES
|
|
1,105,090
|
|
945,149
|
Commitments and
Contingencies
|
|
—
|
|
—
|
TEMPORARY
EQUITY(1)
|
|
|
|
|
Preferred stock,
$0.0001 par value (20,000,000 shares authorized, 8,483,561 Series A
Convertible
Preferred Stock issued and outstanding as of September 30,
2023 and no shares issued and
outstanding as of December 31, 2022)
|
80,997
|
|
—
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
Class A Common Stock,
$0.0001 par value (500,000,000 shares authorized, 84,479,065
and
83,202,969 issued and outstanding as of September 30, 2023 and
December 31, 2022, respectively)
|
8
|
|
8
|
Class V Common Stock,
$0.0001 par value (300,000,000 authorized, 251,033,906 shares
issued
and outstanding as of September 30, 2023 and December 31,
2022)
|
25
|
|
25
|
Additional paid-in
capital
|
|
557,961
|
|
549,034
|
Accumulated earnings
(deficit)
|
|
(483,566)
|
|
(489,602)
|
Accumulated other
comprehensive income (loss)
|
|
(176)
|
|
(213)
|
Total stockholders'
equity
|
|
74,252
|
|
59,252
|
Non-controlling
interest
|
|
323,338
|
|
308,117
|
Total
equity
|
|
397,590
|
|
367,369
|
TOTAL LIABILITIES,
TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY
|
|
$
1,583,677
|
|
$
1,312,518
|
|
|
|
|
|
|
(1) The
Series A Convertible Preferred Stock is recorded within Temporary
Equity because it has equity conversion and cash redemption
features.
|
Hagerty,
Inc.
Condensed
Consolidated Statements of Cash
Flows (Unaudited)
|
|
|
Nine months
ended
September
30,
|
|
2023
|
|
2022
|
|
|
|
|
OPERATING
ACTIVITIES:
|
in
thousands
|
Net income
(loss)
|
$
19,137
|
|
$
34,636
|
Adjustments to
reconcile net income (loss) to net cash from operating
activities:
|
|
|
|
Change in fair value of
warrant liabilities
|
1,419
|
|
(37,869)
|
Loss on equity method
investment
|
—
|
|
1,676
|
Revaluation gain on
previously held equity method investment
|
—
|
|
(34,735)
|
Depreciation and
amortization
|
34,893
|
|
24,337
|
Provision for deferred
taxes
|
4,973
|
|
3,373
|
Impairment of operating
lease right-of-use assets
|
1,147
|
|
—
|
Loss on disposals of
equipment, software and other assets
|
2,019
|
|
1,131
|
Losses and impairments
related to divestitures
|
2,827
|
|
—
|
Share-based
compensation expense
|
13,157
|
|
8,165
|
Other
|
1,162
|
|
242
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts, premiums and
commission receivable
|
(107,001)
|
|
(71,753)
|
Deferred acquisition
costs
|
(47,936)
|
|
(32,637)
|
Losses payable and
provision for unpaid losses and loss adjustment expenses
|
23,527
|
|
53,574
|
Commissions
payable
|
34,582
|
|
21,109
|
Due to
insurers
|
45,322
|
|
40,876
|
Advanced
premiums
|
11,800
|
|
10,363
|
Unearned
premiums
|
100,439
|
|
74,624
|
Other assets and
liabilities, net
|
(9,246)
|
|
(3,549)
|
Net Cash Provided by
Operating Activities
|
132,221
|
|
93,563
|
INVESTING
ACTIVITIES:
|
|
|
|
Capital
expenditures
|
(21,556)
|
|
(33,429)
|
Acquisitions, net of
cash acquired
|
(8,690)
|
|
(12,715)
|
Purchase of previously
held equity method investment
|
—
|
|
(15,250)
|
Issuance of note
receivable to previously held equity method investment
|
—
|
|
(7,000)
|
Issuance of notes
receivable
|
(11,405)
|
|
(8,391)
|
Collection of notes
receivable
|
10,252
|
|
—
|
Purchase of fixed
income securities
|
(7,277)
|
|
(2,448)
|
Maturities of fixed
income securities
|
4,128
|
|
1,216
|
Other investing
activities
|
86
|
|
(1,662)
|
Net Cash Used in
Investing Activities
|
(34,462)
|
|
(79,679)
|
FINANCING
ACTIVITIES:
|
|
Payments on long-term
debt
|
(132,850)
|
|
(90,500)
|
Proceeds from long-term
debt, net of issuance costs
|
100,345
|
|
91,000
|
Proceeds from issuance
of preferred stock, net of issuance costs
|
79,159
|
|
—
|
Contribution from
non-controlling interest
|
779
|
|
1,000
|
Payments on notes
payable
|
—
|
|
(1,000)
|
Proceeds from issuance
of common stock under employee stock purchase plan
|
906
|
|
—
|
Net Cash Provided by
(Used in) Financing Activities
|
48,339
|
|
500
|
Effect of exchange rate
changes on cash and cash equivalents and restricted cash and cash
equivalents
|
286
|
|
(2,023)
|
|
|
|
|
Change in cash and cash
equivalents and restricted cash and cash equivalents
|
146,384
|
|
12,361
|
Beginning cash and cash
equivalents and restricted cash and cash equivalents
|
539,191
|
|
603,972
|
Ending cash and cash
equivalents and restricted cash and cash equivalents
|
$
685,575
|
|
$
616,333
|
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, including
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
the Company's performance when read together with our Condensed
Consolidated Financial Statements prepared in accordance with
GAAP.
|
|
|
Three months
ended
September
30,
|
|
Nine months
ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Operational
Metrics
|
|
|
|
|
|
|
|
Total Written Premium
(in thousands)
|
$
255,569
|
|
$
222,136
|
|
$
714,314
|
|
$
614,623
|
Loss Ratio
|
41.1 %
|
|
56.4 %
|
|
41.5 %
|
|
46.8 %
|
New Business Count
— Insurance
|
69,691
|
|
68,561
|
|
201,593
|
|
190,997
|
|
|
|
|
|
|
|
|
GAAP
Measures
|
|
|
|
|
|
|
|
Total Revenue (in
thousands)
|
$
275,574
|
|
$
216,757
|
|
$
755,170
|
|
$
590,585
|
Operating Income
(Loss) (in thousands)
|
$
16,117
|
|
$
(21,223)
|
|
$
16,881
|
|
$
(31,840)
|
Net Income (Loss)
(in thousands)
|
$
18,623
|
|
$
24,313
|
|
$
19,137
|
|
$
34,636
|
Basic Earnings (Loss)
Per Share
|
$
0.04
|
|
$
0.18
|
|
$
0.04
|
|
$
0.44
|
|
|
|
|
|
|
|
|
Non-GAAP Financial
Measures
|
|
|
|
|
|
|
|
Adjusted EBITDA (in
thousands)
|
$
37,377
|
|
$
(10,010)
|
|
$
78,449
|
|
$
96
|
Adjusted Earnings
(Loss) Per Share
|
$
0.05
|
|
$ (0.06)
|
|
$
0.05
|
|
$ (0.10)
|
|
September
30,
2023
|
|
December 31,
2022
|
Operational
Metrics
|
|
|
|
Policies in
Force
|
1,387,429
|
|
1,315,977
|
Policies in Force
Retention
|
88.2 %
|
|
88.0 %
|
Vehicles in
Force
|
2,356,603
|
|
2,234,461
|
HDC Paid Member
Count
|
806,832
|
|
752,754
|
Net Promoter Score
(NPS)
|
83
|
|
83
|
Non-GAAP Financial Measures
Adjusted EBITDA
We define Adjusted EBITDA as consolidated Net income (loss)
excluding interest and other income (expense), income tax (expense)
benefit, and depreciation and amortization, adjusted to exclude (i)
changes in fair value of 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) revaluation gain on 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 Condensed Consolidated
Financial Statements as indicators of financial performance.
Hagerty's Adjusted EBITDA may be determined or calculated
differently than similarly titled measures of 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):
|
|
Three months
ended
September
30,
|
|
Nine months
ended
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
in
thousands
|
Net income
(loss)
|
$
18,623
|
|
$
24,313
|
|
$
19,137
|
|
$
34,636
|
Interest and other
(income) expense
|
(6,260)
|
|
(662)
|
|
(15,677)
|
|
375
|
Income tax (benefit)
expense
|
4,604
|
|
(91)
|
|
12,002
|
|
4,077
|
Depreciation and
amortization
|
10,753
|
|
8,890
|
|
34,893
|
|
24,337
|
Restructuring,
impairment and related charges, net
|
473
|
|
—
|
|
8,857
|
|
—
|
Change in fair value of
warrant liabilities
|
(850)
|
|
(11,583)
|
|
1,419
|
|
(37,869)
|
Share-based
compensation expense
|
4,935
|
|
3,858
|
|
12,869
|
|
8,165
|
Losses and impairments
related to divestitures
|
4,112
|
|
—
|
|
4,112
|
|
—
|
Revaluation gain
previously held equity method
investment
|
—
|
|
(34,735)
|
|
—
|
|
(34,735)
|
Other unusual items
(1)
|
987
|
|
—
|
|
837
|
|
1,110
|
Adjusted
EBITDA
|
$
37,377
|
|
$ (10,010)
|
|
$
78,449
|
|
$
96
|
|
|
|
|
|
|
|
|
|
|
(1) Other unusual items primarily
includes a net legal settlement accrual recognized in the three and
nine months ended
September 30, 2023 and non-restructuring
severance expense recognized in the nine months ended September 30,
2022.
|
The following table reconciles Adjusted EBITDA for the year
ended December 31, 2023 Outlook to the most directly
comparable GAAP measure, which is Net income (loss):
|
|
2023 Low
|
|
2023 High
|
|
|
|
|
|
|
|
in
thousands
|
Net income
(loss)
|
$
2,000
|
|
$
12,000
|
Interest and other
(income) expense
|
(18,500)
|
|
(18,500)
|
Income tax (benefit)
expense
|
15,500
|
|
15,500
|
Depreciation and
amortization
|
44,112
|
|
44,112
|
Restructuring,
impairment and related charges, net
|
8,857
|
|
8,857
|
Change in fair value
of warrant liabilities
|
1,419
|
|
1,419
|
Share-based
compensation expense
|
17,500
|
|
17,500
|
Losses and impairments
related to divestitures
|
4,112
|
|
4,112
|
Adjusted
EBITDA
|
$
75,000
|
|
$
85,000
|
|
|
|
|
|
Adjusted EPS
We define Adjusted Earnings (Loss) Per Share ("Adjusted EPS") as
consolidated Net income (loss), less the change in fair value of
our warrants and, when applicable, the revaluation gain on
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
Hagerty Group Units; (iii) all unexercised warrants; (iv) all
unissued share-based compensation awards; and (v) all issued and
outstanding shares of the Series A Convertible Preferred Stock.
The most directly comparable GAAP measure 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:
|
|
Three months
ended
September
30,
|
|
Nine months
ended
September
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
in thousands (except
per share amounts)
|
Numerator:
|
|
|
|
|
|
|
|
Net income (loss)
available to Class A Common
Stockholders (1)
|
$
3,255
|
|
$
14,714
|
|
$
3,712
|
|
$
36,685
|
Undistributed earnings
allocated to Series A Convertible
Preferred Stock
|
261
|
|
—
|
|
110
|
|
—
|
Accretion of Series A
Convertible Preferred Stock
|
1,838
|
|
—
|
|
1,838
|
|
—
|
Net income (loss)
attributable to non-controlling interest
|
13,269
|
|
9,599
|
|
13,477
|
|
(2,049)
|
Consolidated net income
(loss)
|
18,623
|
|
24,313
|
|
19,137
|
|
34,636
|
Change in fair value
of warrant liabilities
|
(850)
|
|
(11,583)
|
|
1,419
|
|
(37,869)
|
Revaluation gain on
previously held equity method
investment
|
—
|
|
(34,735)
|
|
—
|
|
(34,735)
|
Adjusted consolidated
net income (loss) (2)
|
$
17,773
|
|
$ (22,005)
|
|
$
20,556
|
|
$ (37,968)
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average shares
of Class A Common Stock
outstanding — basic(1)
|
84,479
|
|
82,816
|
|
84,042
|
|
82,569
|
Total potentially
dilutive securities outstanding:
|
|
|
|
|
|
|
|
Conversion of
non-controlling interest Hagerty Group
Units to Class A Common Stock
|
255,499
|
|
255,758
|
|
255,499
|
|
255,758
|
Conversion of Series A
Convertible Preferred Stock to
Class A Common Stock
|
6,785
|
|
—
|
|
6,785
|
|
—
|
Total unissued
share-based compensation awards
|
8,490
|
|
6,878
|
|
8,490
|
|
6,878
|
Total warrants
outstanding
|
19,484
|
|
19,484
|
|
19,484
|
|
19,484
|
Potentially dilutive
shares outstanding
|
290,258
|
|
282,120
|
|
290,258
|
|
282,120
|
Fully dilutive shares
outstanding (2)
|
374,737
|
|
364,936
|
|
374,300
|
|
364,689
|
|
|
|
|
|
|
|
|
|
Basic
EPS(1)
|
$
0.04
|
|
$
0.18
|
|
$
0.04
|
|
$
0.44
|
|
|
|
|
|
|
|
|
|
Adjusted
EPS(2)
|
$
0.05
|
|
$
(0.06)
|
|
$
0.05
|
|
$
(0.10)
|
|
|
|
|
|
|
|
|
|
|
(1)
Numerator and Denominator of the GAAP measure Basic EPS
|
(2) Numerator and Denominator of the
non-GAAP measure Adjusted EPS
|
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SOURCE Hagerty