Hagerty, Inc.

Greetings and welcome to the Hagerty second quarter 2024 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, Jay Kaval, Senior Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. And thank you for joining us to discuss Hagerty's results for the second quarter of 2024. I'm joined this morning by Michiel Hagerty, Chief Executive Officer and Chairman, and Patrick McClima, 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 slides and letter to stockholders covering this period are also posted on the IR website, as well as our 8K filing. Today's discussion contains forward-looking statements and non-GAAP financial metrics, as described further on 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're subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For 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 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'll turn the call over to McKeel.

Thanks, Jay, and good morning, everyone. We appreciate you taking the time to join Hagerty's second quarter 2024 earnings call. As most car lovers know, summer is our golden time. The breezes are warm and curvy roads beckon. There are car shows and auctions in abundance, including our Greenwich Concours in June and Car Week in Monterey, California, starting next week. Hagerty is built for these moments with our entire business model carefully curated around a shared passion for cars. This singular focus, executed by our amazing team of professionals, has allowed us to deliver high rates of compounding growth in revenue and profit. The rate and durability of that growth is powered by a great value proposition with excellent customer service from our team of 1700 Hagerty employees. This team's strong execution allowed us to exceed expectations for the sixth straight time this quarter and to upgrade our full year outlook as our business model begins to hit its stride, delivering written premium growth of 18% in the first half of 2024. This increase is on top of the prior year's first half gains of 17%, which was on top of 2022's first half growth of 15%. Sustained mid-teens growth positions us to double our revenue every four to five years. Business process improvements, cost discipline, and smart technology investments should allow us to efficiently convert incremental revenue into increasing profits, driving margin expansion in the quarters and years to come. One Team Hagerty has never been better aligned and is only getting stronger, including the recent hiring of Jeff Brillia as our President of Insurance. Jeff has a proven track record of strategic change management across a variety of business areas, including insurance product development, claims, distribution, marketing, sales, and customer service. His 22 years of experience and leadership will help us to identify additional opportunities to further improve our value proposition for auto enthusiasts by leveraging Hagerty's decades of data. We also announced last week that we have hired Sean McMullen from Amazon to become the SVP of our digital marketplace and valuation. Hagerty's online marketplace has enormous potential and Sean will help us to create an industry leading user experience for customers and to scale critical elements of the business. Let me share a few key highlights from our first half results shown on slide three. This includes commission and fee revenue gains of 18% during the first six months in line with written premium growth and fueled by 8% growth in vehicle count. Earned premium for a risk taking entity, Hagerty Reinsurance, jumped 26% due to written premium growth and last year's increase in quota share. Membership Marketplace and other revenue grew 16% powered by 41% growth in Marketplace due to higher revenue from live auctions and financing streams and the methodical ramp of Hagerty's online Marketplace. First half profitability improved significantly over the prior year period with operating margins up 840 basis points. This margin improvement resulted in a $50 million improvement in net income and a $39 million jump in adjusted EBITDA. First half, G&A declined 3% and salaries and benefits grew only 5% as we maintain a strong focus on cost discipline and driving operational efficiencies. Slide four is a reminder of our 2024 priorities, including, first, improving loyalty to drive renewals and referrals, a highly profitable way for Hagerty to grow. Second, Enhancing the member experience in a cost-effective and efficient way, leveraging technology to reduce variable costs as we scale up. Third, building Hagerty Marketplace in the most trusted and preferred place to buy, sell, and finance collectible vehicles. And fourth, increasing our flexibility and control over our underwriting profits, including the CNIC insurance company acquisition. We are proud of the great results we are delivering so far this year. and would point out that this growth and margin expansion is on top of the gains we delivered in the first half of 2023. On a two-year basis since 2022, we have increased first half net income by $41 million and adjusted EBITDA by $70 million. Slide five shares some examples of how we are positioning Hagerty for sustained multi-year operating leverage and high rates of flow through beyond 2024. First, Continue to utilize our marketing team to efficiently acquire new customers. Second, evolve our member service center to serve our members more effectively, reducing handle times and freeing up resources for high rates of member growth. And third, identify potential savings within our claims organization to maintain our historically low combined ratio. Given the excellent results during the first six months and strong business momentum that has carried over into the third quarter, We have increased our full year outlook for revenue and profit growth. We now expect revenue to come in between 1.16 and 1.18 billion with net income of 76 to 84 million and adjusted EBITDA of 130 to 140 million. Improved margins and cash flow generation will enable us to continue reinvesting in our members and to create value for shareholders over the coming years. Let me now turn the call over to Patrick to go through the second quarter results and 2024 financial outlook in more detail.