Hagerty(US:HGTY)2025-11-04 15:48Financial Performance - For the three months ended September 30, 2025, the company reported net income of $46.2 million, a 142.9% increase compared to the prior year, and adjusted EBITDA of $49.7 million, a 105.7% increase [224]. - For the nine months ended September 30, 2025, net income reached $120.7 million, a 72.7% increase compared to the prior year, with total revenue of $1.07 billion, a 17.6% increase [225]. - Total revenue for Q3 2025 reached $380.0 million, reflecting a $56.6 million increase or 17.5% from Q3 2024 [250]. - Operating income surged to $34.3 million in Q3 2025, a significant increase of $24.2 million or 240.1% compared to Q3 2024 [250]. - Net income for Q3 2025 was $46.2 million, an increase of $27.2 million or 142.9% from Q3 2024 [250]. - Adjusted EBITDA for the nine months ended September 30, 2025, was $153.1 million, compared to $104.6 million for the same period in 2024, reflecting a significant increase [334]. - Adjusted EPS for the nine months ended September 30, 2025, was $0.34, up from $0.22 in the same period of 2024 [340]. - Basic EPS for the nine months ended September 30, 2025, was $0.35, compared to $0.09 for the same period in 2024 [340]. Revenue Growth - Total written premium for the same period was $334.0 million, reflecting a 16.1% growth year-over-year, which drove an 18.0% increase in commission and fee revenue [224]. - Commission and fee revenue for Q3 2025 was $137.1 million, an increase of $20.9 million or 18.0% compared to Q3 2024, driven by both policy renewals and new policies [251]. - Membership, marketplace, and other revenue increased to $55.9 million in Q3 2025, a rise of $14.3 million or 34.5% compared to Q3 2024 [250]. - Membership, marketplace, and other revenue reached $153.4 million, up $53.9 million or 54.1%, with marketplace revenue increasing significantly due to higher inventory sales [280]. - Earned premium, net for Q3 2025 was $187.0 million, up $21.4 million or 12.9% from Q3 2024, primarily due to growth in subject premiums written through MGA subsidiaries [254]. - Earned premium, net rose to $534.2 million, an increase of $59.3 million or 12.5%, primarily due to a $88.3 million increase in subject premiums written through MGA subsidiaries [279]. Underwriting Performance - The Hagerty Re loss ratio improved to 42.0% for Q3 2025, down from 60.0% in the prior year, indicating better underwriting performance [229]. - The Hagerty Re combined ratio improved to 89.6% for Q3 2025, down from 107.7% in the prior year, indicating enhanced underwriting profitability [229]. - The loss ratio improved to 42.1% for the nine months ended September 30, 2025, down from 47.7% in the prior year, despite $10.3 million in pre-tax catastrophe losses [288]. - The company experienced a 47.9% increase in new policies written compared to the prior year, largely due to a master alliance agreement with State Farm [252]. Expenses and Costs - Salaries and benefits expenses rose to $68.1 million in Q3 2025, an increase of $20.9 million or 44.3% from Q3 2024 [250]. - General and administrative expenses were $24.4 million, up 17.3% from $20.8 million in 2024, driven by higher professional fees and software-related costs [267]. - Total operating expenses were $960.5 million, an increase of $112.6 million or 13.3%, with sales expenses rising by $52.9 million or 36.0% [275]. - General and administrative expenses increased to $69.2 million, up $7.1 million or 11.5%, primarily due to software-related costs and professional fees associated with recent transactions [290]. Cash Flow and Liquidity - Net cash provided by operating activities for the nine months ended September 30, 2025, was $189.9 million, a slight increase of $0.2 million or 0.1% compared to 2024 [319]. - Cash used in investing activities decreased by $439.7 million for the nine months ended September 30, 2025, compared to 2024, mainly due to diversification of the investment portfolio [321]. - Cash from financing activities increased by $57.5 million for the nine months ended September 30, 2025, primarily due to net proceeds from credit facility borrowings [322]. - As of September 30, 2025, the company believes its sources of liquidity will be sufficient to support its anticipated commitments and capital requirements [302]. Tax and Regulatory Matters - An income tax benefit of $32.8 million was recorded for the three months ended September 30, 2025, a significant increase of $31.8 million compared to 2024, primarily due to the release of a valuation allowance [274]. - The income tax benefit for the nine months ended September 30, 2025, was $21.2 million, an increase of $31.1 million compared to 2024, primarily due to the release of the valuation allowance [298]. - The company expects to have adequate capital resources to meet obligations under the TRA with Legacy Unit Holders [323]. - The estimated value of the Tax Receivable Agreement (TRA) liability was $39.9 million, with $2.0 million classified as a current liability [325]. Business Developments - The company launched a new insurance product, Enthusiast+, aimed at modern enthusiast vehicles, with an initial rollout in Colorado in Q3 2025 and plans for a nationwide rollout over the next four years [220][222]. - The company recognized approximately $4.0 million in losses and impairments related to the reorganization of certain businesses, including Hagerty Garage + Social and DriveShare, in 2023 [223].