Hagerty(HGTY) - 2025 Q2 - Quarterly Results

Executive Summary and Business Outlook This section provides an overview of the company's strong financial performance in the first half of 2025, including CEO commentary, detailed Q2 and YTD financial highlights, and an increased full-year 2025 outlook CEO Commentary McKeel Hagerty, CEO, highlighted solid first-half 2025 results with significant revenue, net income, and Adjusted EBITDA growth, alongside margin expansion and strategic investments. He also noted an increased 2025 outlook and the planned evolution of the Markel partnership for 2026 - Hagerty delivered solid results in the first half of 2025 with revenue growth of 18%, net income gains of 46%, and Adjusted EBITDA gains of 28%[3] - Strategic investments include rolling out State Farm Classic+, launching the Enthusiast+ product, building the European Marketplace team, and investing in technology for future margin expansion[3] - The company increased its 2025 revenue growth outlook to 13-14% and net income growth to 43-53%[4] - A non-binding LOI was announced for a new fronting arrangement with Markel, aiming for Hagerty to control 100% of the premium as of January 1, 2026[4][5] Second Quarter and YTD 2025 Financial Highlights Hagerty reported strong financial and operational performance for Q2 and YTD 2025, with significant year-over-year growth across total revenue, written premium, and particularly in marketplace revenue. Profitability metrics like operating income, net income, and Adjusted EBITDA also saw substantial increases, while key operational metrics like policies in force retention remained stable and total insured vehicles grew Q2 2025 Financial Highlights (in millions) | Metric | Value (Q2 2025) | YoY Change | | :-------------------------------- | :-------------- | :--------- | | Total Revenue | $368.7 million | +18% | | Written Premium | $356.0 million | +11% | | Marketplace Revenue | $26.8 million | +327% | | Operating Income | $47.7 million | +25% | | Net Income | $47.2 million | +11% | | Adjusted EBITDA | $63.7 million | +20% | | Basic & Diluted EPS | $0.09 | 0% | YTD 2025 Financial Highlights (in millions) | Metric | Value (YTD 2025) | YoY Change | | :-------------------------------- | :-------------- | :--------- | | Total Revenue | $688.3 million | +18% | | Written Premium | $600.3 million | +11% | | Marketplace Revenue | $55.8 million | +232% | | Operating Income | $73.4 million | +46% | | Net Income | $74.5 million | +46% | | Adjusted EBITDA | $103.4 million | +28% | | Basic & Diluted EPS | $0.16 | 166.7% | - Policies in Force Retention was 88.7% as of June 30, 2025, consistent with the prior year period, while total insured vehicles increased 6% year-over-year to 2.7 million[6] - Hagerty Drivers Club (HDC) paid members increased 6% year-over-year to approximately 908,000[6] - The Loss Ratio for Q2 2025 was 42.3% (including 1.6% from catastrophe losses), up from 41.1% in the prior year period. YTD 2025 Loss Ratio was 42.2% (including 4.1% from catastrophe losses), also up from 41.1%[6] - The company ended the quarter with $140.3 million of unrestricted cash and $176.1 million of total debt[9] 2025 Outlook - Sustained Revenue Growth and Margin Expansion Hagerty has increased its full-year 2025 outlook for revenue and profit growth, anticipating continued strong performance. The revised outlook incorporates $20 million in elevated technology investments and a $10 million pre-tax impact from Southern California wildfires Revised Full Year 2025 Outlook (in thousands) | Metric | Prior 2025 Outlook (Low-High) | Revised 2025 Outlook (Low-High) | | :---------------- | :------------------------------ | :------------------------------ | | Total Written Premium | $1,180,000 - $1,191,000 | $1,180,000 - $1,191,000 | | Total Revenue | $1,344,000 - $1,356,000 | $1,356,000 - $1,368,000 | | Net Income | $102,000 - $110,000 | $112,000 - $120,000 | | Adjusted EBITDA | $150,000 - $160,000 | $162,000 - $172,000 | - For full year 2025, Hagerty anticipates Written Premium growth of 13-14%, Total Revenue growth of 13-14%, Net Income growth of 43-53%, and Adjusted EBITDA growth of 30-38%[13] - Profit ranges for 2025 incorporate $20 million of elevated technology investments, primarily in the new Duck Creek platform, and approximately $10 million pre-tax impact from the Southern California wildfires[10][12] Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated statements of operations, balance sheets, and cash flows, detailing the company's financial position and performance for Q2 and YTD 2025 Condensed Consolidated Statements of Operations (Unaudited) The condensed consolidated statements of operations show strong revenue growth for both the three and six months ended June 30, 2025, driven by increases across all revenue streams, particularly membership, marketplace, and other revenue. Operating income and net income also saw significant year-over-year improvements Three Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :-------------------------------- | :------- | :------- | :------- | :------- | | Commission and fee revenue | $143,287 | $128,816 | $14,471 | 11.2 % | | Earned premium | $177,785 | $157,612 | $20,173 | 12.8 % | | Membership, marketplace and other revenue | $47,627 | $26,797 | $20,830 | 77.7 % | | Total revenue | $368,699 | $313,225 | $55,474 | 17.7 % | | Total operating expenses | $321,000 | $275,158 | $45,842 | 16.7 % | | OPERATING INCOME | $47,699 | $38,067 | $9,632 | 25.3 % | | NET INCOME | $47,202 | $42,657 | $4,545 | 10.7 % | | Basic Earnings Per Share | $0.09 | $0.09 | $0 | 0 % | Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :-------------------------------- | :------- | :------- | :------- | :------- | | Commission and fee revenue | $243,574 | $217,656 | $25,918 | 11.9 % | | Earned premium | $347,140 | $309,231 | $37,909 | 12.3 % | | Membership, marketplace and other revenue | $97,578 | $58,046 | $39,532 | 68.1 % | | Total revenue | $688,292 | $584,933 | $103,359 | 17.7 % | | Total operating expenses | $614,865 | $534,642 | $80,223 | 15.0 % | | OPERATING INCOME | $73,427 | $50,291 | $23,136 | 46.0 % | | NET INCOME | $74,495 | $50,856 | $23,639 | 46.5 % | | Basic Earnings Per Share | $0.16 | $0.06 | $0.10 | 166.7 % | Condensed Consolidated Balance Sheets (Unaudited) The balance sheet as of June 30, 2025, shows an increase in total assets, primarily driven by higher cash and cash equivalents, restricted cash, investments, and various receivables. Total liabilities also increased, notably in accounts payable, advance premiums, and unearned premiums, while total equity grew Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $140,300 | $104,784 | | Restricted cash and cash equivalents | $190,286 | $128,061 | | Investments | $119,326 | $73,957 | | Premiums receivable | $249,830 | $153,748 | | Total current assets | $1,212,984 | $858,405 | | TOTAL ASSETS | $2,040,575 | $1,709,338 | | Accounts payable, accrued expenses and other current liabilities | $138,349 | $73,383 | | Advance premiums and due to insurers | $188,403 | $108,352 | | Unearned premiums | $410,496 | $357,539 | | Total current liabilities | $1,145,980 | $915,446 | | Long-term debt, net | $153,383 | $104,968 | | TOTAL LIABILITIES | $1,379,724 | $1,101,169 | | Total equity | $578,038 | $523,506 | Condensed Consolidated Statements of Cash Flows (Unaudited) For the six months ended June 30, 2025, net cash provided by operating activities decreased compared to the prior year, while net cash used in investing activities significantly reduced. Net cash provided by financing activities turned positive, primarily due to higher proceeds from long-term debt Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | | :-------------------------------- | :------- | :------- | | Net Cash Provided by Operating Activities | $97,714 | $122,255 | | Net Cash Used in Investing Activities | $(31,839) | $(479,937) | | Net Cash Provided by (Used in) Financing Activities | $29,480 | $(50,783) | | Change in cash and cash equivalents and restricted cash and cash equivalents | $97,741 | $(408,754) | | Ending cash and cash equivalents and restricted cash and cash equivalents | $330,586 | $315,522 | - Net cash provided by operating activities decreased primarily due to changes in accounts, premiums, and commissions receivable, partially offset by increases in advance premiums and unearned premiums[28] - Net cash used in investing activities significantly reduced from $(479,937) thousand in 2024 to $(31,839) thousand in 2025, mainly due to lower purchases of fixed maturity securities and higher proceeds from sales and maturities[28] - Net cash provided by financing activities turned positive, driven by a substantial increase in proceeds from long-term debt ($192,339 thousand in 2025 vs. $25,482 thousand in 2024)[28] Key Performance Indicators and Non-GAAP Financial Measures This section outlines key operational and financial performance indicators, including detailed reconciliations for non-GAAP measures like Adjusted EBITDA and Adjusted EPS, providing insights into core business performance Key Performance Indicators Hagerty's Key Performance Indicators for Q2 and YTD 2025 demonstrate strong growth in Total Written Premium and Total Revenue, alongside improved profitability metrics like Operating Income, Net Income, and Adjusted EBITDA. Operational metrics show stable retention and growth in insured vehicles and paid members, despite a slight decrease in new business count Q2 2025 Key Performance Indicators (in thousands, except percentages) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :------- | :------- | :------- | :------- | | Total Written Premium | $355,985 | $321,173 | $34,812 | 10.8 % | | Hagerty Re Loss Ratio | 42.3 % | 41.1 % | 1.2 % | N/M | | Hagerty Re Combined Ratio | 89.6 % | 88.1 % | 1.5 % | N/M | | New Business Count — Insurance | 87,872 | 89,049 | (1,177) | (1.3)% | | Total Revenue | $368,699 | $313,225 | $55,474 | 17.7 % | | Operating Income | $47,699 | $38,067 | $9,632 | 25.3 % | | Net Income | $47,202 | $42,657 | $4,545 | 10.7 % | | Adjusted EBITDA | $63,744 | $53,113 | $10,631 | 20.0 % | YTD 2025 Key Performance Indicators (in thousands, except percentages) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :------- | :------- | :------- | :------- | | Total Written Premium | $600,312 | $539,459 | $60,853 | 11.3 % | | Hagerty Re Loss Ratio | 42.2 % | 41.1 % | 1.1 % | N/M | | Hagerty Re Combined Ratio | 89.1 % | 88.3 % | 0.8 % | N/M | | New Business Count — Insurance | 143,181 | 148,335 | (5,154) | (3.5)% | | Total Revenue | $688,292 | $584,933 | $103,359 | 17.7 % | | Operating Income | $73,427 | $50,291 | $23,136 | 46.0 % | | Net Income | $74,495 | $50,856 | $23,639 | 46.5 % | | Adjusted EBITDA | $103,352 | $80,440 | $22,912 | 28.5 % | Operational Metrics (as of June 30, 2025, except percentages) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :---------- | :---------- | :------- | :------- | | Policies in Force | 1,559,798 | 1,506,451 | 53,347 | 3.5 % | | Policies in Force Retention | 88.7 % | 89.0 % | (0.3)% | N/M | | Vehicles in Force | 2,664,611 | 2,576,700 | 87,911 | 3.4 % | | HDC Paid Member Count | 907,963 | 875,822 | 32,141 | 3.7 % | | Net Promoter Score (NPS) | 82 | 82 | — | 0 % | Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure used by Hagerty to assess core operating performance by excluding non-operating and non-cash items. For Q2 and YTD 2025, Adjusted EBITDA increased by 20% and 28.5% respectively, and the company projects a 30-38% growth for the full year 2025 - Adjusted EBITDA is defined as consolidated Net income, excluding net interest and other income (expense), income tax expense, and depreciation and amortization, further adjusted for warrant liabilities, share-based compensation, restructuring, divestiture-related items, and certain other unusual items[32] Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------- | :------- | :------- | :------- | | Net income | $47,202 | $42,657 | $74,495 | $50,856 | | EBITDA | $56,532 | $46,140 | $91,748 | $62,784 | | Adjusted EBITDA | $63,744 | $53,113 | $103,352 | $80,440 | 2025 Outlook Adjusted EBITDA Reconciliation (in thousands) | Metric | 2025 Low | 2025 High | | :-------------------------- | :------- | :-------- | | Net income | $112,000 | $120,000 | | Adjusted EBITDA | $162,000 | $172,000 | Adjusted EPS Adjusted EPS is a non-GAAP measure that provides insight into Hagerty's operating performance on a fully consolidated and diluted basis. For Q2 2025, Adjusted EPS was $0.13, and for YTD 2025, it was $0.21, showing an increase from the prior year periods - Adjusted EPS is defined as consolidated Net income, excluding net gains and losses related to warrant liabilities prior to the Warrant Exchange, divided by outstanding and total potentially dilutive securities[37] Adjusted EPS Reconciliation (in thousands, except per share amounts) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------- | :------- | :------- | :------- | | Consolidated net income | $47,202 | $42,657 | $74,495 | $50,856 | | Adjusted consolidated net income | $47,202 | $44,598 | $74,495 | $58,937 | | Basic EPS | $0.09 | $0.09 | $0.16 | $0.06 | | Adjusted EPS | $0.13 | $0.12 | $0.21 | $0.16 | Corporate Information and Disclosures This section provides essential corporate information, including conference call details, forward-looking statements, and an overview of Hagerty, Inc.'s mission and business activities Conference Call Details Hagerty scheduled a conference call for August 4, 2025, at 10:00 am ET to discuss the second quarter 2025 financial results, with webcast and dial-in options available - A conference call to discuss financial results was scheduled for August 4, 2025, at 10:00 am Eastern Time[14] - A webcast of the conference call and Investor Presentation is available on Hagerty's investor relations website at investor.hagerty.com[14][15] - Dial-in numbers for the conference call are (877) 423-9813 (toll-free) or (201) 689-8573 (international)[14] Forward-Looking Statements This section contains a standard disclaimer that the press release includes forward-looking statements about Hagerty's future performance, strategy, and market conditions. It warns that actual results could differ materially due to various risks, including competition, strategic partnerships, technology issues, market adoption, the Markel arrangement, and regulatory compliance - The press release contains forward-looking statements regarding Hagerty's future operating results, financial position, business strategy, plans, products, services, technology implementations, market conditions, growth, trends, expansion plans, opportunities, and objectives[16] - Actual results could differ materially due to factors such as competition, ability to attract and retain policyholders, maintaining strategic relationships, preventing fraud, managing technology risks, accelerating product adoption, successfully implementing the Markel fronting arrangement, managing insurance business cyclicality, addressing claims, and complying with regulations[17] About Hagerty, Inc. Hagerty, Inc. is an automotive enthusiast brand dedicated to preserving car culture, serving as a leading provider of specialty vehicle insurance, valuation data, auction services, events, and entertainment. It operates globally and fosters a community through its Hagerty Drivers Club - Hagerty is an automotive enthusiast brand committed to saving driving and fueling car culture for future generations[19] - 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[19] - Hagerty operates in Canada and the U.K. and is home to Hagerty Drivers Club, a community of over 900,000 members[19]