Hagerty, Inc.

Greetings and welcome to the Hagerty third quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jay Kaval, Senior Vice President of Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, everyone. And thank you for joining us to discuss Hagerty's results for the third quarter of 2024. I'm joined this morning by McKeel Hagerty, Chief Executive Officer and Chairman, 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 slides and letter to stockholders covering this period are also posted on the IR website, as well as our 8 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 are 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 for 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'll turn the call over to McKeel.

Thanks, Jay, and good morning, everyone. We appreciate you taking the time to join Hagerty's third quarter 2024 earnings call. The last of the most stubborn leaves have finally fallen to the ground, signaling the end to yet another great driving season in North America. With year-to-date written premium growth of 16%, HireD customers were out enjoying their special cars in larger numbers than ever. In fact, we are on track to add a record 275,000 new members in 2024, as our impressive portfolio of value-added offerings from events and live auctions to HireD Drivers Club and media continues to fuel mid-teens compounding revenue growth in year in and year out, with a visible path to expanding margins, including large gains in 2024. Now, as you have all seen on the news over the last month, hurricanes Helene and Milton were large, destructive catastrophes. Fortunately, we have a disciplined approach to underwriting, and our team of 1,700 Hagerty employees was well prepared to help members with their losses. Events like these are typically a perilous time for insurance carriers, as a botched customer service experience can lead to attrition and low net promoter scores. One of our Florida members was on hold with his home insurance carrier the entire time it took for us to process his loss in person at our onsite pop-up center at the Porsche dealership in Clearwater, Florida, and deposited money into his account. We take pride in working closely with our members to get them back out on the road with minimal friction, leading to even higher net promoter scores after a claim than before. Thank you to One Team Hagerty for helping us generate our NPS of 82, more than double the industry average. It's a key differentiator that not only fuels our direct business, but also helps us to create long lasting partnerships with national carriers who look to Hagerty for the expertise and white glove service that car enthusiasts deserve for their prized possessions. Our top line momentum persisted into the third quarter with total revenue growth of 20% over the first nine months of 2024. It also marks the seventh straight quarter of translating this incremental revenue into greater profitability. Year-to-date operating income, excluding Helene's $25 million impact, came in approximately five times higher than the prior year period. Importantly, our revenue growth and margin expansion generated $190 million of operating cash flow during the first nine months of the year, up 43%. Let me share a few other key highlights shown on slide three. Revenue gains were driven by commission and fee growth of 16% in line with written premium gains as we added 220,000 new members during the first nine months. Earned premium for our risk-taking entity, Hagerty Reinsurance, jumped 24% due to written premium growth and historical increases in quota share. Membership, marketplace, and other revenue grew 20% with marketplace up 54% due to strong results from our Monterey Live auction, higher inventory sales, and an increase in financing revenue. Year-to-date profitability improved significantly over the prior year period, with operating margin expansion of 440 basis points, despite Helene's negative 280 basis point drag on margins. Our cost discipline drove a year-to-date decline in G&A of 4%, and allowed us to hold growth in salaries and benefits to just 1%. Year-to-date loss ratio was 47%, six points higher than the prior year due to unusual CAT losses during the first three quarters, including, of course, Helene. This resulted in operating income of $60 million and adjusted EBITDA of $105 million. Slides four and five are reminders of the 2024 priorities that are driving our operational efficiencies, including, first, improving loyalty to drive retention and referrals. Second, enhancing the member experience in a cost-effective and efficient way. Third, building Hagerty Marketplace into the most trusted place to buy, sell, and finance collectible vehicles. And fourth, increasing our flexibility and control over our underwriting profits as we look to launch our Enthusiast Plus business in early 2025 through our newly acquired insurance company, which closed during the third quarter. Let me now turn to our updated 2024 outlook. Given our underlying results during the first nine months and strong business momentum into the fourth quarter, we are increasing our full-year revenue outlook. We now expect total revenue of approximately $1.18 billion on written premium growth of 15%. Our underlying profit outlook is in line with prior expectations, and our new outlook, including estimated losses from Helene and Milton of $30 million, is for net income of $65 to $74 million and adjusted EBITDA of $110 to $120 million. Our focus and execution on top-line growth and margin initiatives should result in the profitability that allows us to lengthen our leadership position. Patrick will cover the outlook in more detail, but I believe the headline numbers don't adequately reflect the underlying profitability of our business, particularly as we invest in key growth initiatives such as the State Farm Rollout the launch of Enthusiast Plus, and the build-out of Hagerty Marketplace into 2025, all of which should pave the way for sustained profit growth and value creation for shareholders over the coming years. Let me now turn the call over to Patrick.