Hagerty Reports 2023 Results; Expects Strong Growth and Margin Expansion to Continue in 2024
- None.
- None.
Insights
The reported increase in total revenue and net income for Hagerty, Inc. reflects a positive trajectory for the company's financial health. A 27% growth in total revenue and a significant rise in net income from $2.4 million to $28.2 million year-over-year demonstrate operational success and effective cost management. The expansion of the operating margin by 960 basis points signifies a robust improvement in profitability, likely attributable to operational efficiencies and economies of scale achieved as the company grows.
The forward-looking statements for 2024, projecting substantial growth in net income (116-148%) and Adjusted EBITDA (41-53%), suggest confidence in the company's future performance. However, investors should consider the macroeconomic environment and potential volatility in the insurance industry, which could affect these projections.
It's also important to note the improved policies in force retention rate and the high Net Promoter Score, which indicate strong customer loyalty and satisfaction. These factors are crucial for recurring revenue streams and can lead to increased referrals and organic growth.
The increase in written premium by 17% to $907.2 million and the retention of policies in force at 88.7% are key indicators of Hagerty's competitive positioning within the specialty vehicle insurance market. The company's focus on automotive enthusiasts and specialty vehicles gives it a niche appeal, which is reflected in the growth of its insured vehicles by 6% year-over-year.
The assignment of a Financial Strength Rating of A- (Excellent) by AM Best to Hagerty Reinsurance Limited is a strong endorsement of the company's financial stability and claims-paying ability, which can be a deciding factor for consumers when choosing an insurance provider.
The reported decrease in Marketplace revenue by 34% in the fourth quarter, despite a 109% increase for the full year, indicates potential volatility in non-insurance revenue streams. This could be a point of focus for investors interested in the diversity and stability of revenue sources.
Hagerty's strategic priorities, including enhancing member experience and expanding insurance offerings, particularly in the post-1980s collectible space, highlight the company's commitment to growth through service diversification. The emphasis on loyalty programs and the development of the Hagerty Marketplace as a trusted platform for collector car transactions are tailored to the unique needs of their target demographic.
The automotive enthusiast market is a niche but passionate segment and Hagerty's ability to cater to this audience through specialized insurance products and membership perks can be a significant growth driver. The company's plans to save driving and fuel car culture resonate with the community's values and can contribute to a strong brand identity and customer engagement.
- Fourth quarter 2023 Total Revenue increased
24% to$245.0 million 27% to$1.0 billion - Fourth quarter 2023 Written Premium increased
19% to$192.9 million 17% to$907.2 million - Fourth quarter 2023 operating margin expanded by 1550 bps and full year 2023 operating margin increased by 960 bps compared to the prior year periods.
- Fourth quarter 2023 Net Income of
$9.0 million $41.3 million $28.2 million $25.8 million - Fourth quarter 2023 Adjusted EBITDA (a non-GAAP measure) of
$9.7 million $11.7 million $88.2 million $90.1 million - Increased Policies in Force Retention to
88.7% as of December 31, 2023 from88.0% as of December 31, 2022 and achieved insurance Net Promoter Score of 82. - Hagerty Reinsurance Limited was assigned a Financial Strength Rating of A- (Excellent) by AM Best
- Shared 2024 Outlook for 15
-17% Total Revenue growth, 116-148% Net Income growth and 41-53% Adjusted EBITDA growth
TRAVERSE CITY, Mich., March 12, 2024 /PRNewswire/ -- Hagerty, Inc. (NYSE: HGTY), an automotive enthusiast brand and leading specialty vehicle insurance provider, announced today financial results for the three months and year ended December 31, 2023.
"2023 was an excellent year at Hagerty as we successfully executed on our 2023 priorities and delivered results that consistently exceeded expectations. For the full year, we grew total revenue
"Our momentum has carried over into 2024 which we expect to be another year of excellent results. We anticipate growth in total revenue of 15
Mr. Hagerty added, "As we enter our 40th year in business, Hagerty is just beginning what we believe will be a multi-year period of sustained revenue growth and strong flow-through to the bottom line. I couldn't be prouder of One Team Hagerty's work as they fuel the passion for driving and car culture by helping car enthusiasts protect, buy and sell, and enjoy their special vehicles."
YEAR ENDED 2023 FINANCIAL HIGHLIGHTS
- Fourth quarter 2023 Total Revenue increased
24% to$245.0 million 27% to$1.0 billion - Fourth quarter 2023 Written Premium increased
19% to$192.9 million 17% to$907.2 million - Fourth quarter 2023 Commission and fee revenue increased
22% to$77.5 million 19% to$365.5 million - Policies in Force Retention was
88.7% as of December 31, 2023 compared to88.0% as of December 31, 2022 and total insured vehicles increased6% year-over-year to 2.4 million.
- Policies in Force Retention was
- Fourth quarter 2023 Loss Ratio was
41.5% compared to41.2% in the prior year period. Full year 2023 Loss Ratio was41.5% compared to45.3% in the prior year period. The year-over-year improvement was due in part to better underwriting results in the current year. In addition, prior year results included$10.0 million - Fourth quarter 2023 Earned Premium increased
31% to$147.4 million 32% to$531.9 million - Earned Premium growth was driven by the strong Written Premium growth as well as the increased quota share to approximately
80% compared to70% in the prior year period. - AM Best assigned a financial strength rating of A- (Excellent) to Hagerty Reinsurance Limited.
- Earned Premium growth was driven by the strong Written Premium growth as well as the increased quota share to approximately
- Fourth quarter 2023 Membership, Marketplace and other revenue decreased
3% to$20.1 million 33% to$102.8 million - Fourth quarter 2023 Marketplace revenue decreased
34% to$3.7 million 109% to$28.6 million - Fourth quarter 2023 Membership revenue increased
4% to$12.9 million 16% to$52.5 million - Hagerty Drivers Club (HDC) paid members increased
8% to approximately 815,000 compared to the prior year period.
- Hagerty Drivers Club (HDC) paid members increased
- Fourth quarter 2023 Marketplace revenue decreased
- Fourth quarter 2023 Operating Loss of
$6.5 million $35.7 million $10.4 million $67.6 million - Fourth quarter 2023 operating margin expanded by 1550 bps and full year 2023 operating margin increased by 960 bps compared to the prior year periods.
- Full year 2023 depreciation and amortization was
$45.8 million $33.9 million $5.8 million $4.3 million - Full year 2023 and 2022 results include restructuring charges of
$8.8 million $18.3 million - Full year 2023 results include losses and impairments of
$4.0 million
- Fourth quarter 2023 Net Income of
$9.0 million $32.2 million $28.2 million $2.4 million - Full year 2023 Net Income includes a
$19.5 million
- Full year 2023 Net Income includes a
- Fourth quarter 2023 Adjusted EBITDA (a non-GAAP measure) of
$9.7 million $(2.0) million $88.2 million $(1.9) million - Fourth quarter 2023 Basic Earnings per Share was
$0.14 $0.03 $0.19 $0.09 - Fourth quarter 2023 Adjusted EPS (a non-GAAP measure) was
$(0.01) $0.04
- Fourth quarter 2023 Adjusted EPS (a non-GAAP measure) was
The definitions and reconciliations of non-GAAP financial measures are provided under the heading Key Performance Indicators and Certain Non-GAAP Financial Measures at the end of this press release.
2024 OUTLOOK — GROWTH AND PROFITABILITY
Despite the uncertain macro environment and challenging dynamics for the insurance industry with heightened inflationary pressures, we expect 2024 to be another year of strong top-line growth and margin expansion for Hagerty as the company's performance based culture powers great results for stakeholders. We remain focused on growing our Insurance, Membership and Marketplace businesses, positioning Hagerty to deliver compounding profit growth over the coming years and fund our purpose to save driving and fuel car culture for future generations.
- Key 2024 business priorities include:
- Further improve loyalty to drive renewals and referrals
- Enhance member experience in a cost effective and efficient way
- Build Hagerty Marketplace into the most trusted and preferred place to buy, sell, and finance collector cars
- Expand insurance offerings, particularly in the post 1980s collectible space
- For full year 2024, the company expects to deliver:
- Written Premium growth of 13
-14% - Total Revenue growth of 15
-17% - Net Income growth of 116
-148% - Adjusted EBITDA growth of 41
-53%
- Written Premium growth of 13
2024 Outlook | 2024 Growth | ||||||||
in thousands | 2023 Results | Low End | High End | Low End | High End | ||||
Total Written Premium | 13 % | 14 % | |||||||
Total Revenue | 15 % | 17 % | |||||||
Net Income (1) | 116 % | 148 % | |||||||
Adjusted EBITDA | 41 % | 53 % | |||||||
(1) Net income range assumes no impact from warrants |
Conference Call Details
Hagerty will hold a conference call to discuss the financial results today at 10:00 am Eastern Time. A webcast of the conference call, including the Company's Investor Presentation highlighting fourth quarter and full year 2023 financial results, will be available on Hagerty's investor relations website at investor.hagerty.com. The dial-in for the conference call is (877) 423-9813 (toll-free) or (201) 689-8573 (international). Please dial the number 10 minutes prior to the scheduled start time.
A webcast replay of the call will be available at investor.hagerty.com following the call.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts. These forward-looking statements reflect Hagerty's current expectations and projections with respect to its expected future business and financial performance, including, among other things: (i) expected operating results, such as revenue growth and increases in profit and earned premium; (ii) changes in the market for Hagerty's products and services, (iii) anticipated business objectives; and (iv) the strength of Hagerty's business model. These statements may be preceded by, followed by or include the words "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "goal," "intend," "likely," "outlook," "plan," "potential," "project," "seek," "target," "can," "could," "may," "should," "would," "will," the negatives thereof and other words and terms of similar meaning.
A number of factors could cause actual results or outcomes to differ materially from those indicated by these forward-looking statements. These factors include, among other things, Hagerty's ability to: (i) compete effectively within its industry and attract and retain members; (ii) maintain key strategic relationships with its insurance distribution and underwriting carrier partners; (iii) prevent, monitor and detect fraudulent activity; (iv) manage risks associated with disruptions, interruptions, outages with its technology platforms or third-party services; (v) accelerate the adoption of Hagerty's membership products as well as any new insurance programs and products; (vi) manage the cyclical nature of the insurance business including through any periods of recession, economic downturn or inflation; (vii) address unexpected increases in the frequency or severity of claims; (viii) comply with the numerous laws and regulations applicable to Hagerty's business, including state, federal and foreign laws relating to insurance and rate increases, privacy, the internet and accounting matters; (ix) manage risks associated with being a controlled company; (x) successfully defend any litigation, government inquiries and investigations, and (xi) other risks and uncertainties indicated from time to time in documents filed or to be filed with the Securities and Exchange Commission (the "SEC") by Hagerty.
The forward-looking statements herein represent the judgment of Hagerty as of the date of this release and Hagerty disclaims any intent or obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise. This press release should be read in conjunction with the information included in the Company's other press releases, reports and other filings with the SEC. Understanding the information contained in these filings is important in order to fully understand Hagerty's reported financial results and our business outlook for future periods.
About Hagerty, Inc. (NYSE: HGTY)
Hagerty is an automotive enthusiast brand committed to saving driving and fueling car culture for future generations. The company is a leading provider of specialty vehicle insurance, expert car valuation data and insights, live and digital car auction services, immersive events and automotive entertainment custom made for the 67 million Americans who self-describe as car enthusiasts. Hagerty also operates in
More information can be found at newsroom.hagerty.com.
Category: Financial
Source: Hagerty
Hagerty, Inc. | ||||||||
Three months ended December 31, | ||||||||
2023 | 2022 | $ Change | % Change | |||||
REVENUE: | in thousands (except percentages and per share amounts) | |||||||
Commission and fee revenue | $ 77,540 | $ 63,814 | $ 13,726 | 21.5 % | ||||
Earned premium | 147,368 | 112,342 | 35,026 | 31.2 % | ||||
Membership, marketplace and other revenue | 20,135 | 20,847 | (712) | (3.4) % | ||||
Total revenue | 245,043 | 197,003 | 48,040 | 24.4 % | ||||
OPERATING EXPENSES: | ||||||||
Salaries and benefits | 56,774 | 49,675 | 7,099 | 14.3 % | ||||
Ceding commission, net | 70,617 | 53,102 | 17,515 | 33.0 % | ||||
Losses and loss adjustment expenses | 61,197 | 46,258 | 14,939 | 32.3 % | ||||
Sales expense | 31,587 | 30,792 | 795 | 2.6 % | ||||
General and administrative services | 20,569 | 25,028 | (4,459) | (17.8) % | ||||
Depreciation and amortization | 10,916 | 9,550 | 1,366 | 14.3 % | ||||
Restructuring, impairment and related charges, net | (45) | 18,324 | (18,369) | (100.2) % | ||||
Losses and impairments related to divestitures | (99) | — | (99) | (100.0) % | ||||
Total operating expenses | 251,516 | 232,729 | 18,787 | 8.1 % | ||||
OPERATING INCOME (LOSS) | (6,473) | (35,726) | 29,253 | 81.9 % | ||||
Change in fair value of warrant liabilities | 12,962 | 4,030 | 8,932 | 221.6 % | ||||
Interest and other income (expense) | 7,144 | 2,403 | 4,741 | 197.3 % | ||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSE | 13,633 | (29,293) | 42,926 | 146.5 % | ||||
Income tax expense | (4,591) | (2,940) | (1,651) | 56.2 % | ||||
NET INCOME (LOSS) | 9,042 | (32,233) | 41,275 | 128.1 % | ||||
Net (income) loss attributable to non-controlling interest | 5,529 | 27,626 | (22,097) | (80.0) % | ||||
Accretion of Series A Convertible Preferred Stock | (1,839) | — | (1,839) | 100.0 % | ||||
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A | $ 12,732 | $ (4,607) | $ 17,339 | N/M | ||||
Earnings (loss) per share of Class A Common Stock: | ||||||||
Basic | $ 0.14 | $ (0.06) | ||||||
Diluted | $ 0.03 | $ (0.06) | ||||||
Weighted-average shares of Class A Common Stock | ||||||||
Basic | 84,588 | 83,203 | ||||||
Diluted | 347,455 | 83,203 | ||||||
N/M = Not meaningful |
Hagerty, Inc. | ||||||||
Year Ended December 31, | ||||||||
2023 | 2022 | $ Change | % Change | |||||
REVENUE: | in thousands (except percentages and per share amounts) | |||||||
Commission and fee revenue | $ 365,512 | $ 307,238 | $ 58,274 | 19.0 % | ||||
Earned premium | 531,866 | 403,061 | 128,805 | 32.0 % | ||||
Membership, marketplace and other revenue | 102,835 | 77,289 | 25,546 | 33.1 % | ||||
Total revenue | 1,000,213 | 787,588 | 212,625 | 27.0 % | ||||
OPERATING EXPENSES: | ||||||||
Salaries and benefits | 216,896 | 199,542 | 17,354 | 8.7 % | ||||
Ceding commission, net | 251,805 | 191,150 | 60,655 | 31.7 % | ||||
Losses and loss adjustment expenses | 220,658 | 182,402 | 38,256 | 21.0 % | ||||
Sales expense | 156,378 | 140,781 | 15,597 | 11.1 % | ||||
General and administrative services | 85,434 | 89,068 | (3,634) | (4.1) % | ||||
Depreciation and amortization | 45,809 | 33,887 | 11,922 | 35.2 % | ||||
Restructuring, impairment and related charges, net | 8,812 | 18,324 | (9,512) | (51.9) % | ||||
Losses and impairments related to divestitures | 4,013 | — | 4,013 | 100.0 % | ||||
Total operating expenses | 989,805 | 855,154 | 134,651 | 15.7 % | ||||
OPERATING INCOME (LOSS) | 10,408 | (67,566) | 77,974 | 115.4 % | ||||
Change in fair value of warrant liabilities | 11,543 | 41,899 | (30,356) | (72.5) % | ||||
Revaluation gain on previously held equity method investment | — | 34,735 | (34,735) | (100.0) % | ||||
Interest and other income (expense) | 22,821 | 2,028 | 20,793 | N/M | ||||
INCOME BEFORE INCOME TAX EXPENSE | 44,772 | 11,096 | 33,676 | N/M | ||||
Income tax expense | (16,593) | (7,017) | (9,576) | (136.5) % | ||||
Loss from equity method investment, net of tax | — | (1,676) | 1,676 | 100.0 % | ||||
NET INCOME | 28,179 | 2,403 | 25,776 | N/M | ||||
Net (income) loss attributable to non-controlling interest | (7,948) | 29,675 | (37,623) | (126.8) % | ||||
Accretion of Series A Convertible Preferred Stock | (3,677) | — | (3,677) | 100.0 % | ||||
NET INCOME ATTRIBUTABLE TO CLASS A | $ 16,554 | $ 32,078 | $ (15,524) | (48.4) % | ||||
Earnings (loss) per share of Class A Common Stock: | ||||||||
Basic | $ 0.19 | $ 0.39 | ||||||
Diluted | $ 0.09 | $ (0.07) | ||||||
Weighted-average shares of Class A Common Stock | ||||||||
Basic | 84,180 | 82,728 | ||||||
Diluted | 340,323 | 336,147 | ||||||
N/M = Not meaningful |
Hagerty, Inc. | ||||
December 31, | ||||
2023 | 2022 | |||
ASSETS | in thousands (except share amounts) | |||
Current Assets: | ||||
Cash and cash equivalents | $ 108,326 | $ 95,172 | ||
Restricted cash and cash equivalents | 615,950 | 444,019 | ||
Accounts receivable | 71,530 | 58,255 | ||
Premiums receivable | 137,525 | 100,700 | ||
Commissions receivable | 79,115 | 60,151 | ||
Notes receivable | 35,896 | 25,493 | ||
Deferred acquisition costs, net | 141,637 | 107,342 | ||
Other current assets | 60,239 | 45,651 | ||
Total current assets | 1,250,218 | 936,783 | ||
Notes receivable | 17,018 | 11,934 | ||
Property and equipment, net | 20,764 | 25,256 | ||
Lease right-of-use assets | 50,515 | 82,398 | ||
Intangible assets, net | 91,924 | 104,024 | ||
Goodwill | 114,214 | 115,041 | ||
Other long-term assets | 43,559 | 37,082 | ||
TOTAL ASSETS | $ 1,588,212 | $ 1,312,518 | ||
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY | ||||
Current Liabilities: | ||||
Accounts payable, accrued expenses and other current liabilities | $ 87,175 | $ 77,049 | ||
Losses payable | 62,001 | 55,516 | ||
Provision for unpaid losses and loss adjustment expenses | 136,507 | 111,741 | ||
Commissions payable | 108,739 | 77,075 | ||
Due to insurers | 79,815 | 68,171 | ||
Advanced premiums | 20,471 | 17,084 | ||
Unearned premiums | 317,275 | 235,462 | ||
Contract liabilities | 30,316 | 25,257 | ||
Total current liabilities | 842,299 | 667,355 | ||
Long-term lease liabilities | 50,459 | 80,772 | ||
Long-term debt, net | 130,680 | 108,280 | ||
Warrant liabilities | 34,018 | 45,561 | ||
Deferred tax liability | 15,937 | 12,850 | ||
Contract liabilities | 17,335 | 19,169 | ||
Other long-term liabilities | 4,139 | 11,162 | ||
TOTAL LIABILITIES | 1,094,867 | 945,149 | ||
Commitments and Contingencies | — | — | ||
TEMPORARY EQUITY (1) | ||||
Preferred stock, | 82,836 | — | ||
STOCKHOLDERS' EQUITY | ||||
Class A Common Stock, | 8 | 8 | ||
Class V Common Stock, | 25 | 25 | ||
Additional paid-in capital | 561,754 | 549,034 | ||
Accumulated earnings (deficit) | (468,995) | (489,602) | ||
Accumulated other comprehensive income (loss) | (88) | (213) | ||
Total stockholders' equity | 92,704 | 59,252 | ||
Non-controlling interest | 317,805 | 308,117 | ||
Total equity | 410,509 | 367,369 | ||
TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY | $ 1,588,212 | $ 1,312,518 | ||
(1) The Series A Convertible Preferred Stock is recorded within Temporary Equity because it has equity conversion and cash redemption features. |
Hagerty, Inc. | |||
Year Ended December 31, | |||
2023 | 2022 | ||
OPERATING ACTIVITIES: | in thousands | ||
Net income | $ 28,179 | $ 2,403 | |
Adjustments to reconcile net income to net cash from operating activities: | |||
Change in fair value of warrant liabilities | (11,543) | (41,899) | |
Loss on equity method investment | — | 1,676 | |
Revaluation gain on previously held equity method investment | — | (34,735) | |
Depreciation and amortization | 45,809 | 33,887 | |
Provision for deferred taxes | 2,921 | 2,973 | |
Impairment of operating lease right-of-use assets | 1,147 | 4,698 | |
Loss on disposals of equipment, software and other assets | 1,894 | 4,316 | |
Losses and impairments related to divestitures | 2,827 | — | |
Share-based compensation expense | 18,017 | 12,129 | |
Non-cash lease expense | 11,681 | 10,875 | |
Other | (1,459) | 533 | |
Changes in operating assets and liabilities: | |||
Accounts, premiums and commission receivable | (69,879) | (52,036) | |
Deferred acquisition costs | (34,295) | (25,807) | |
Losses payable | 6,485 | 21,034 | |
Provision for unpaid losses and loss adjustment expenses | 24,766 | 36,872 | |
Commissions payable | 31,664 | 16,472 | |
Due to insurers | 11,510 | 10,427 | |
Advanced premiums | 3,370 | 3,259 | |
Unearned premiums | 81,813 | 60,263 | |
Operating lease liabilities | (11,243) | (9,779) | |
Other assets and liabilities, net | (9,958) | (2,233) | |
Net Cash Provided by Operating Activities | 133,706 | 55,328 | |
INVESTING ACTIVITIES: | |||
Capital expenditures | (26,403) | (44,375) | |
Acquisitions, net of cash acquired | (8,683) | (15,404) | |
Purchase of previously held equity method investment | — | (15,250) | |
Issuance of note receivable to previously held equity method investment | — | (7,000) | |
Issuance of notes receivable | (24,939) | (6,123) | |
Collection of notes receivable | 10,357 | 370 | |
Purchase of fixed income securities | (10,568) | (4,234) | |
Maturities of fixed income securities | 7,468 | 1,216 | |
Other investing activities | 121 | (721) | |
Net Cash Used in Investing Activities | (52,647) | (91,521) | |
FINANCING ACTIVITIES: | |||
Payments on long-term debt | (139,850) | (122,500) | |
Proceeds from long-term debt, net of issuance costs | 161,547 | 94,367 | |
Proceeds from issuance of preferred stock, net of issuance costs | 79,159 | — | |
Contribution from non-controlling interest | 779 | 1,700 | |
Payment of capitalized transaction costs | — | (1,651) | |
Proceeds from issuance of common stock under employee stock purchase plan | 1,526 | — | |
Net Cash Provided by (Used in) Financing Activities | 103,161 | (28,084) | |
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents | 865 | (504) | |
Change in cash and cash equivalents and restricted cash and cash equivalents | 185,085 | (64,781) | |
Beginning cash and cash equivalents and restricted cash and cash equivalents | 539,191 | 603,972 | |
Ending cash and cash equivalents and restricted cash and cash equivalents | $ 724,276 | $ 539,191 | |
Hagerty, Inc.
Key Performance Indicators and Certain Non-GAAP Financial Measures
Key Performance Indicators
The tables below present a summary of our Key Performance Indicators, which include important operational metrics, as well as certain GAAP and non-GAAP financial measures as of and for the periods presented. We use these Key Performance Indicators to evaluate our business, measure our performance, identify trends against planned initiatives, prepare financial projections, and make strategic decisions. We believe these Key Performance Indicators are useful in evaluating our performance when read together with our Consolidated Financial Statements prepared in accordance with GAAP.
Three months ended | Year Ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Operational Metrics | |||||||
Total Written Premium (in thousands) | $ 192,861 | $ 162,041 | $ 907,175 | $ 776,664 | |||
Loss Ratio | 41.5 % | 41.2 % | 41.5 % | 45.3 % | |||
New Business Count — Insurance | 52,793 | 43,523 | 254,386 | 234,520 | |||
GAAP Measures | |||||||
Total Revenue (in thousands) | $ 245,043 | $ 197,003 | $ 1,000,213 | $ 787,588 | |||
Operating Income (Loss) (in thousands) | $ (6,473) | $ (35,726) | $ 10,408 | $ (67,566) | |||
Net Income (Loss) (in thousands) | $ 9,042 | $ (32,233) | $ 28,179 | $ 2,403 | |||
Basic Earnings (Loss) Per Share | $ 0.14 | $ (0.06) | $ 0.19 | $ 0.39 | |||
Diluted Earnings (Loss) Per Share | $ 0.03 | $ (0.06) | $ 0.09 | $ (0.07) | |||
Non-GAAP Financial Measures | |||||||
Adjusted EBITDA (in thousands) | $ 9,713 | $ (2,036) | $ 88,162 | $ (1,940) | |||
Adjusted Earnings (Loss) Per Share | $ (0.01) | $ (0.10) | $ 0.04 | $ (0.20) | |||
December 31, | |||
2023 | 2022 | ||
Operational Metrics | |||
Policies in Force | 1,401,037 | 1,315,977 | |
Policies in Force Retention | 88.7 % | 88.0 % | |
Vehicles in Force | 2,378,883 | 2,234,461 | |
HDC Paid Member Count | 815,007 | 752,754 | |
Net Promoter Score (NPS) | 82 | 83 | |
Non-GAAP Financial Measures
Adjusted EBITDA
We define Adjusted EBITDA as consolidated Net income excluding interest and other income (expense), income tax expense, and depreciation and amortization, adjusted to exclude (i) changes in the fair value of our warrant liabilities; (ii) share-based compensation expense; and when applicable, (iii) restructuring, impairment and related charges, net; (iv) the net gain or loss from asset disposals; (v) losses and impairments related to divestitures; (vi) the revaluation gain on a previously held equity method investment; and (vii) certain other unusual items.
We present Adjusted EBITDA because we consider it to be an important supplemental measure of the Company's performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management uses Adjusted EBITDA as a measure of the operating performance of our business on a consistent basis, as it removes the impact of items not directly resulting from our core operations.
By providing this non-GAAP financial measure, together with a reconciliation to net income (loss), which is the most comparable GAAP measure, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. However, Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as an alternative to, or a substitute for net income (loss) or other financial statement data presented in our Consolidated Financial Statements as indicators of financial performance. Hagerty's definition of Adjusted EBITDA may be different than similarly titled measures used by other companies in our industry, which could reduce the usefulness of this non-GAAP financial measure when comparing our performance to that of other companies.
The following table reconciles Adjusted EBITDA to the most directly comparable GAAP measure, which is Net income (loss):
Three months ended | Year Ended | |||||||
2023 | 2022 | 2023 | 2022 | |||||
in thousands | ||||||||
Net income (loss) | $ 9,042 | $ (32,233) | $ 28,179 | $ 2,403 | ||||
Interest and other income | (7,144) | (2,403) | (22,821) | (2,028) | ||||
Income tax expense | 4,591 | 2,940 | 16,593 | 7,017 | ||||
Depreciation and amortization | 10,916 | 9,550 | 45,809 | 33,887 | ||||
EBITDA | 17,405 | (22,146) | 67,760 | 41,279 | ||||
Restructuring, impairment and related charges, net | (45) | 18,324 | 8,812 | 18,324 | ||||
Change in fair value of warrant liabilities | (12,962) | (4,030) | (11,543) | (41,899) | ||||
Share-based compensation expense | 4,860 | 3,964 | 17,729 | 12,129 | ||||
Losses and impairments related to divestitures | (99) | — | 4,013 | — | ||||
Revaluation gain previously held equity method investment | — | — | — | (34,735) | ||||
Net loss from asset disposals | — | 1,970 | — | 1,970 | ||||
Other unusual items (1) | 554 | (118) | 1,391 | 992 | ||||
Adjusted EBITDA | $ 9,713 | $ (2,036) | $ 88,162 | $ (1,940) | ||||
(1) Other unusual items primarily includes certain legal settlement expenses (net) recognized in the three months ended and year ended December 31, 2023 and 2022, as well as certain non-restructuring severance expenses recognized in the year ended December 31, 2022. |
The following table reconciles Adjusted EBITDA for the year ended December 31, 2024 Outlook to the most directly comparable GAAP measure, which is Net income (loss):
2024 Low | 2024 High | |||
in thousands | ||||
Net income | $ 61,000 | $ 70,000 | ||
Interest and other (income) expense | (18,000) | (18,000) | ||
Income tax (benefit) expense | 17,250 | 19,250 | ||
Depreciation and amortization | 46,000 | 46,000 | ||
Change in fair value of warrant liabilities | — | — | ||
Share-based compensation expense | 17,750 | 17,750 | ||
Adjusted EBITDA | $ 124,000 | $ 135,000 | ||
Adjusted EPS
We define Adjusted Earnings (Loss) Per Share ("Adjusted EPS") as consolidated Net income (loss), less changes in the fair value of our warrant liabilities and, when applicable, the revaluation gain on a previously held equity method investment, divided by our outstanding and total potentially dilutive securities, which includes (i) the weighted-average issued and outstanding shares of Class A Common Stock; (ii) all issued and outstanding non-controlling interest units of The Hagerty Group; (iii) all unexercised warrants; (iv) all unissued share-based compensation awards; and (v) all issued and outstanding shares of our Series A Convertible Preferred Stock on an as-converted basis.
The most directly comparable GAAP measure to Adjusted EPS is basic earnings per share ("Basic EPS"), which is calculated as Net income (loss) available to Class A Common Stockholders divided by the weighted average number of Class A Common Stock shares outstanding during the period.
We present Adjusted EPS because we consider it to be an important supplemental measure of our operating performance and believe it is used by securities analysts, investors and other interested parties in evaluating the consolidated performance of other companies in our industry. We also believe that Adjusted EPS, which compares our consolidated Net income (loss) with our outstanding and potentially dilutive shares, provides useful information to investors regarding our performance on a fully consolidated basis.
Management uses Adjusted EPS:
- as a measurement of operating performance of our business on a fully consolidated basis;
- to evaluate the performance and effectiveness of our operational strategies; and
- as a preferred predictor of core operating performance, comparisons to prior periods and competitive positioning.
We caution investors that Adjusted EPS is not a recognized measure under GAAP and should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, including Basic EPS, and that Adjusted EPS, as we define it, may be defined or calculated differently by other companies. In addition, Adjusted EPS has limitations as an analytical tool and should not be considered as a measure of profit or loss per share.
The following table reconciles Adjusted EPS to the most directly comparable GAAP measure, which is Basic EPS:
Three months ended | Year Ended | |||||||
2023 | 2022 | 2023 | 2022 | |||||
in thousands (except per share amounts) | ||||||||
Numerator: | ||||||||
Net income (loss) available to Class A Common | $ 11,786 | $ (4,607) | $ 15,881 | $ 32,078 | ||||
Undistributed earnings allocated to Series A Convertible | 946 | — | 673 | — | ||||
Accretion of Series A Convertible Preferred Stock | 1,839 | — | 3,677 | — | ||||
Net income (loss) attributable to non-controlling interest | (5,529) | (27,626) | 7,948 | (29,675) | ||||
Consolidated net income (loss) | 9,042 | (32,233) | 28,179 | 2,403 | ||||
Change in fair value of warrant liabilities | (12,962) | (4,030) | (11,543) | (41,899) | ||||
Revaluation gain on previously held equity method | — | — | — | (34,735) | ||||
Adjusted consolidated net income (loss) (2) | $ (3,920) | $ (36,263) | $ 16,636 | $ (74,231) | ||||
Denominator: | ||||||||
Weighted average shares of Class A Common Stock | 84,588 | 83,203 | 84,180 | 82,728 | ||||
Total potentially dilutive securities outstanding: | ||||||||
Conversion of non-controlling interest units of The | 255,499 | 255,758 | 255,499 | 255,758 | ||||
Conversion of Series A Convertible Preferred Stock to | 6,785 | — | 6,785 | — | ||||
Total unissued share-based compensation awards | 8,385 | 6,902 | 8,385 | 6,902 | ||||
Total warrants outstanding | 19,484 | 19,484 | 19,484 | 19,484 | ||||
Potentially dilutive shares outstanding | 290,153 | 282,144 | 290,153 | 282,144 | ||||
Fully dilutive shares outstanding (2) | 374,741 | 365,347 | 374,333 | 364,872 | ||||
Basic EPS (1) | $ 0.14 | $ (0.06) | $ 0.19 | $ 0.39 | ||||
Adjusted EPS (2) | $ (0.01) | $ (0.10) | $ 0.04 | $ (0.20) | ||||
(1) Numerator and Denominator of the GAAP measure Basic EPS |
(2) Numerator and Denominator of the non-GAAP measure Adjusted EPS |
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SOURCE Hagerty
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