Hagerty(US:HGTY)2022-08-11 00:53Financial Data and Key Metrics Changes - Total revenue grew 23% year-over-year to $206 million in Q2 2022, with a 26% increase in the first half of the year [33][15] - Written premiums increased by 14% in Q2 and 15% in the first half, reaching $238 million [15][36] - The loss ratio remained stable at 41%, allowing for reinvestment in the platform [36][19] - Net loss for the quarter was $5.5 million, compared to a net income of $12.5 million in the prior year [41] Business Line Data and Key Metrics Changes - Commission and fee revenue grew 14% to $96 million, driven by new business written premiums and policy retention of 88% [34] - Membership and other revenue increased 21% to $16 million, benefiting from an increase in total paid members [34] - Earned premium grew 34% to $94 million, driven by new business premium growth and policy retention [34] Market Data and Key Metrics Changes - Total active members grew 9% year-over-year to 2.5 million [15] - The company noted a modest demand impact at the beginning of Q2 due to inflation affecting consumer behavior, but demand stabilized quickly [20][21] Company Strategy and Development Direction - The company is focused on expanding its marketplace through the acquisition of the remaining 60% of Broad Arrow Group for $64.8 million, which is expected to be accretive to revenue and EBITDA [16][25] - Strategic partnerships, such as with State Farm, are aimed at augmenting organic growth and driving operating leverage [29][27] - The company aims to enhance its digital transformation and cross-selling of products while maintaining cost discipline [31][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to grow despite economic challenges, noting that the enthusiast vehicle market tends to be resilient during downturns [18][20] - The company anticipates a revenue growth trajectory of 24% to 28% for the full year, supported by mid-teens organic growth in written premiums and contributions from new partnerships [45][46] - Management emphasized the importance of customer-centric approaches and the need for careful management of costs while investing in growth [28][32] Other Important Information - The company reported a fair value loss of $5.4 million related to private and public warrants, impacting net loss for the quarter [41] - The company is expected to see an increase in adjusted EBITDA in the coming years as investments in digital platforms and partnerships begin to yield results [40][47] Q&A Session Summary Question: What was the catalyst for the acceleration in July? - Management noted that consumer confidence stabilized, leading to increased demand as summer driving months approached [56] Question: Was the increase in EBITDA guidance due to spending more or timing of revenue? - Management clarified that the increased spending was primarily for development related to State Farm and Broad Arrow, with no State Farm revenue included in 2022 guidance [57][58] Question: Can you size the expenses made for State Farm and other investments? - Management indicated that $80 million was spent on non-recurring pre-revenue costs, with a significant portion related to State Farm development [67] Question: Will expenses continue to rise in line with revenue? - Management expects expenses to grow at a slower pace compared to revenue growth as major development projects are completed [71]