Hagerty, Inc.

Greetings and welcome to the Hagerty second quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Jay Koval, head of investor relations. Thank you, sir. You may begin.

Thank you, Operator. Good morning, everyone, and thank you for joining us to discuss Hagerty's results for the second quarter of 2023. I'm joined this morning by McKeel Hagerty, Chief Executive Officer, and Patrick McClimat, Chief Financial Officer. During this morning's conference call, we will refer to an accompanying presentation that is available on Hagerty's Investor Relations section of the company's corporate website at investor.hagerty.com. Our earnings release, accompanying slides, and letter to stockholders covering this period are also posted on the IR website. Our 8-K filing is also available there, along with our earnings press release and other materials. Today's discussion contains forward-looking statements and non-GAAP financial metrics, as described further in slide two of the earnings presentation. Forward-looking statements include statements about our expected future business and financial performance, and are not promises or guarantees of future performance. They are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and important factors that could affect our actual results, please refer to those contained in our filings with the SEC, which are also available on our investor relations website and at SEC.gov. The appendix of the presentation also contains reconciliations of our non-GAAP metrics to the most directly comparable GAAP measures that are further supplemented by this morning's 8K filing. And with that, I will turn the call over to McKeel, our founder and CEO.

Thanks, Jay, and good morning, everyone. We appreciate you taking the time to join our second quarter 2023 earnings call. Hagerty has a track record of delivering double-digit written premium growth over the last two decades. And one team, Hagerty, has been hard at work positioning the company to sustain these high rates of growth over the coming years. We do this by solving problems for car lovers through providing the products and services that these enthusiasts need to enjoy their prized possessions. So I'm proud to report that we continue to deliver robust top-line momentum during the first half of 2023, fueled by high teens' written premium growth. And we significantly grew profitability despite ramped up technology spend as we build out our buy and sell marketplace and prepare to launch the State Farm Commercial Partnership over the coming months. Let's dig into the first half results shown on slide three of our investor deck, including total revenue jumped 28% during the first six months of 2023 to $480 million. Written premiums and commission revenue both grew 17% during the first half. The Hagerty brand is strong and our superior value proposition is resonating with consumers in an industry suffering from unprecedented inflationary pressures. In fact, in the first half of 2023, we added a record number of new policies surpassing the very robust numbers we delivered during 2021. In our risk-taking entity, Hagerty Reinsurance, first half earned premium jumped 34% due to the growth in written premium and our increased level of quota share to 80%. We have continued to assume more of the risk and premium associated with our strong and stable underwriting capabilities. Membership, marketplace, and other revenue increased 53% during the first six months. This growth was fueled by 20% membership growth, $12 million of marketplace revenue, described on slide 4, and a 12% increase in other revenue, including sponsorship and event admission revenue. Finally, regarding our commercial partnership with State Farm, shown on slide 5, we are excited to announce that we will soon begin writing new policies in four initial states under the 10-year agreement. Good things take time and we are confident that the State Farm Classic Plus program is the beginning of a very fruitful commercial partnership that will be a win-win for both companies. Now, over the last several calls, we have talked at length about our intense focus on managing expense growth so that we can return to historic levels of double-digit profitability in short order. We are pleased to announce that our year-over-year margin improvement is running ahead of expectations. First half adjusted EBITDA of $41 million increased $31 million, and we also delivered positive operating income and net income during the first six months of 2023. Our team is executing well on our profitable growth ambitions, and we are positioned to deliver on our 2023 key initiatives shown on slide six. As a reminder, they include, first, delivering high rates of revenue growth powered by sustained double-digit written premium gains, as well as incremental revenue from membership and marketplace. Given the strong first half results and continued business momentum, we are increasing full-year revenue growth expectations to 23% to 27%, fueled by written premium growth of 13% to 15%. Continuing our evolution into a vertically integrated insurance business, we believe this will create meaningful value for consumers as we increase our control by reducing the frictional costs inherent in the current structure. And third, significantly improving the profitability of our business through cost containment and operational efficiencies. Given the strength of our first half results, we are upgrading our full year outlook for adjusted EBITDA to a range of $60 to $80 million, which implies over seven points of margin expansion from 2022. In summary, we are on a path to becoming a leaner, stronger, and more profitable company that can self-fund these high rates of growth. Our productivity initiatives will drive cash flow generation over the coming years, which when combined with our recent capital raise of $105 million, should position us to continue to invest and to execute on our long-term growth ambitions, and to allow us to save driving and car culture for future generations. We believe this strategy will create value for our stakeholders, including members, partners, and investors. Let me now turn the call over to Patrick to cover the financials in more detail.