Hagerty, Inc.

Greetings, and welcome to the Hagerty fourth quarter 2024 earnings conference 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 Koval, Senior Vice President of Investor Relations. Thank you, sir. You may begin.

Thank you, operator, and good morning, everyone. Thank you for joining us to discuss Hagerty's results for the fourth quarter of 2024. I'm joined this morning by McKeel Hagerty, Chief Executive Officer and Chairman, and Patrick McClimont, 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 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'll turn the call over to McKeel.

Thanks, Jay, and good morning, everyone. We appreciate you taking the time to join Hagerty's fourth quarter 2024 earnings call. This quarter marks the eighth straight quarter in a row of executing on our strategy to deliver high rates of top line growth while more efficiently translating that revenue into profitability and cash flow. Slide three shows how we exceeded our original expectations from a year ago in terms of both revenue and net income. Over the last two years, we added more than a half a million car lovers to the Hagerty ecosystem and grew revenue by $412 million, while increasing operating income by $134 million and tripling operating cash flow to $177 million. While these results are impressive, we have a long straightaway ahead, given only a 5% share today of the 48 million collectible car opportunity in the U.S. Let me share some highlights from the full year shown on slide four. First, our business strategy, brand, and marketing initiatives drove another year of excellent revenue gains of 20% as we welcomed a record 279,000 new members this year to Hagerty's ecosystems of products and services. Written premium gains of 15% are in line with our 10-year compound annual growth rate of 15%. This CAGR demonstrates the predictable nature of our recurring revenue model, fueled by high single-digit annual additions from net new business count plus industry-leading retention that climbed to 89% in 2024. Operating income jumped six-fold in 2024 to $66 million, despite the $27 million impact from Hurricane Helene and Milton. Cost discipline, resource prioritization, and terrific execution by One Team Hagerty powered the margin expansion of our MGA and provides the funds to reinvest in extending our leadership position. We have continued to deepen our bench strength through several strategic hires across insurance, claims, technology, and marketplace. These people bring the expertise and leadership that should position Hagerty well for our next wave of growth. Equally important, our technology and digital teams are making strong progress as we transition from our legacy technology platform to a modern cloud-based architecture that will drive future efficiency gains and scalable growth. Let me move on to slide five and walk you through Hagerty's 2025 priorities built around three themes, simpler, faster, and better integrated. First and most impactful to our long-term trajectory is to expand our specialty insurance offerings to protect more collectible vehicles. This includes launching new products and pricing with a slightly wider aperture for underwriting, particularly in the more modern enthusiast vehicle space. Second is to simplify and better integrate our membership experience across products and services, creating revenue synergies and driving cost efficiencies. We have built one team Hagerty to deliver service levels that surpass the expectations of automotive enthusiasts while simultaneously creating on-ramps for car lovers. But we want to be even better as we welcome the next million and a half members by 2030. Third is to expand our marketplace business, leveraging the trust we have built in the United States through the Broad Arrow team's work, helping members to buy and to sell their prized possessions. In May, we will host our inaugural sale at the prestigious Villa d'Este Concours on Lake Como, Italy, which should help them fuel our private party sales and financing businesses in new markets outside of the United States. We are also developing our online marketplace, given the opportunity to capitalize on the $15.7 billion worth of vehicles that Hagerty members bought and sold in 2024, up 10% from 2023. Fourth, we will continue to leverage Hagerty's unique and authentic car culture as our key differentiator for new and future members, but with further improvements to our operating capabilities through the alignment and engagement of our team. As I mentioned before, we are investing in the once-in-a-generation technology replatforming that will enable scalable growth over the coming years, delivering excellent experiences for our members with greater efficiency. Let me expound on the final priority around technology shown on slide six, as it is a meaningful near-term investment that should position us well to continue our torrid growth while improving our margin structure in 2026 and 2027. Our technology transformation began in 2022 when we brought in new IT leadership that identified several challenges and risks associated with our aging IT infrastructure, which was built in the 2000s and remains the central platform supporting our business. Most problematic was that our legacy IT would be unable to support a rapid growth trajectory. In addition to it limiting our scalability, the current technology stack was also negatively impacting our operational efficiency, creating a suboptimal user experience and inefficient workflow for our member service center team. In late 2023, we began the process to transition to Duck Creek, a leading provider of insurance software solution. which is a key part of our larger transformational program we call APEX. While these multi-year implementations are complex and expensive, APEX will simplify and improve the member experience with enhanced security and workflow automation, all while lowering marginal operating costs. Additional benefits of APEX and Duck Creek include more self-service and rule-based functionality, more modern risk rating architecture with greater segmentation, and liberating our technology team to invest in our key differentiators around personalized ratings, valuation, parts finders, repair networks, CRM, and integration with member content, to name a few. These near term investments should result in greater long term efficiency for our teams and better experiences for our members, which drives future growth and margin expansion. We are willing to make these short-term tradeoffs because we are looking to maximize shareholder value over periods of time measured in years and decades, not quarters. In total, we estimate that we will make over $20 million in elevated investments in 2025 due primarily to having two redundant systems operating with the requisite people and software expenses. This spend will remain heightened in absolute terms. but should trend down as a percent of revenue as we accelerate the top line in 2026 and 2027, not to mention realizing greater efficiency from the technology benefits as we double our policies in force to 3 million by 2030 and drive higher margins. Let me now turn the call over to Patrick to share more detail on our 2024 results and initial 2025 outlook.