Hagerty Reports Full Year 2022 Results

Rhea-AI Summary

Hagerty, Inc. (NYSE: HGTY) reported strong financial results for Q4 and full year 2022, with total revenue up by 28% year-over-year to $197 million and 27% to $788 million, respectively. Written premium also increased by 15% for both periods, totaling $162 million in Q4 and $777 million for the year. The company highlighted a projected total revenue growth of 22-26% for 2023, driven by continued premium growth. Despite a net loss of $32.2 million in Q4, Hagerty anticipates improved profitability and adjusted EBITDA between $40 million and $60 million in 2023 due to cost containment measures. The acquisition of Broad Arrow Group contributed significantly to revenue.

Positive

• Total Revenue increased 27% year-over-year to $788 million.
• Written Premium grew by 15% year-over-year, reaching $777 million.
• Projected Total Revenue growth of 22-26% for 2023.
• Increased insurance Net Promoter Score (NPS) to 83.
• Customer retention rate improved to 88%, indicating strong loyalty.
• Acquisition of Broad Arrow Group contributed $13.7 million in revenue.

Negative

• Net Loss increased to $32.2 million in Q4 compared to the prior year.
• Operating Income deteriorated, delivering a loss of $35.7 million in Q4.
• Full Year Adjusted EBITDA was negative at $(1.9) million, significantly down from $25.4 million the previous year.
• Loss Ratio for the full year increased to 45.3%, attributed to Hurricane Ian and higher reserves.

Provides 2023 Outlook for 22-26% Total Revenue Growth

• Fourth quarter 2022 Total Revenue increased 28% year-over-year to $197.0 million, and full year 2022 Total Revenue increased 27% year-over-year to $787.6 million
• Fourth quarter 2022 Written Premium increased 15% year-over-year to $162.0 million, and full year 2022 Written Premium increased 15% year-over-year to $776.7 million
• Delivered $13.7 million in Marketplace full year 2022 revenue, fueled by the Broad Arrow Group acquisition
• Increased insurance Net Promoter Score (NPS) to 83 and achieved customer retention of 88%

TRAVERSE CITY, Mich., March 14, 2023 /PRNewswire/ -- Hagerty, Inc. (NYSE: HGTY), an automotive lifestyle brand and a leading specialty insurance provider focused on the global automotive enthusiast market, today announced financial results for the three months and year ended December 31, 2022.

"We delivered industry-leading revenue growth of 27% during fiscal 2022, fueled by auto enthusiasts love of their cars despite a weakening macroeconomic environment," said McKeel Hagerty, Chief Executive Officer of Hagerty. "These impressive results were powered by consistent 15% written premium growth throughout the year, higher quota share in Hagerty Re, as well as $14 million in revenue from Marketplace."

Mr. Hagerty continued, "We expect to maintain our business momentum into 2023, with 22-26% growth in total revenue powered by sustained double-digit growth in written premium. We have spent the last several decades building Hagerty into one of the most beloved consumer brands in the auto enthusiast space, and believe our affinity model positions us to provide our members with the necessary resources to enjoy their passion.

Importantly, we took decisive action during the fourth quarter to position Hagerty for significantly improved profitability in 2023 as our cost containment and efficiency programs take hold. We have aligned our teams around the 2023 plan to deliver improved margins and profitability despite the continued investments in our Marketplace platform and the State Farm partnership that is on track to launch in 2023."

FULL YEAR 2022 FINANCIAL HIGHLIGHTS

• Fourth quarter Total Revenue increased 28% to $197.0 million compared to the prior year period, and full year Total Revenue increased 27% to $787.6 million compared to the prior year period.
• Fourth quarter Written Premium increased 15% to $162.0 million compared to the prior year period, and full year Written Premium increased 15% to $776.7 million compared to the prior year period.
• Fourth quarter Commission and fee revenue grew 11% to $63.8 million compared to the prior year period, and full year Commission and fee revenue grew 13% to $307.2 million compared to the prior year period.
• Policies in Force Retention was 88% as of December 31, 2022 compared to 89% as of December 31, 2021. Total insured vehicles increased 7% year-over-year to 2.2 million compared to the prior year period.
• Fourth quarter Loss Ratio was 41.2% compared to 41.3% in the prior year period. Full year Loss Ratio was 45.3% compared to 41.3% in the prior year period.
• The full year Loss Ratio of 45.3% includes the $10.0 million impact from Hurricane Ian (2.5%) as well as the third quarter increase in accident year 2022 loss reserves of $6.5 million (1.6%) due to higher liability claims within Hagerty Re. These higher reserves are being managed by rate filings taking effect in 2023.
• Fourth quarter Earned premium increased 35% to $112.3 million compared to the prior year period, and full year Earned premium increased 36% to $403.1 million compared to the prior year period.
• Earned premium growth was driven by the 15% written premium growth as well as the increased quota share of 70% compared to 60% in the prior year period.
• Fourth quarter Membership, marketplace and other revenue increased 56% to $20.8 million compared to the prior year period, and full year Membership, marketplace and other revenue increased 50% to $77.3 million compared to the prior year period.
• The recently acquired Broad Arrow Group helped drive $5.7 million in Marketplace revenue during the fourth quarter and $13.7 million during the year.
• Hagerty Driver's Club (HDC) paid members increased 5% to approximately 753,000 compared to 719,000 as of December 31, 2021.
• Fourth quarter Operating Income (Loss) was $(35.7) million compared to $(21.0) million in the prior year period, and full year Operating Income (Loss) was $(67.6) million compared to $(10.1) million in the prior year period.
• The Company recognized restructuring charges of $18.3 million during the fourth quarter of 2022, which primarily consisted of expenses of $12.2 million related to the Company's voluntary retirement program and reduction in force, and $6.2 million related to operating lease asset impairments and related leasehold disposals.
• Fourth quarter Net Income (Loss) was $(32.2) million compared to $(66.5) million in the prior year period, and full year Net Income (Loss) was $2.4 million compared to $(61.4) million in the prior year period.
• Net Income (Loss) includes the impact from the change in fair value of warrant liabilities, the revaluation gain on previously held equity method investment, as well as the restructuring charges.
• Fourth quarter Adjusted EBITDA was $(2.0) million compared to $(2.6) million in the prior year period, and full year Adjusted EBITDA was $(1.9) million compared to $25.4 million in the prior year period.
• Full year Adjusted EBITDA was negatively impacted by Hurricane Ian and the Company's decision to increase 2022 loss reserves, as well as $29.8 million of pre-revenue costs related to scaling our infrastructure, newly-developed digital platforms and legacy systems, human resources and occupancy to accommodate our alliance with State Farm and other potential distribution partnerships as well as to further develop our Marketplace transactional platform.
• Fourth quarter Basic Earnings (Loss) per Share was $(0.06) and Diluted Earnings per Share was $(0.06), and full year Basic Earnings (Loss) per Share was $0.39 and Diluted Earnings per Share was $(0.07).
• Fourth quarter Adjusted EPS was $(0.10), and full year Adjusted EPS was $(0.20).

FULL YEAR 2022 BUSINESS HIGHLIGHTS

• Reached 1.3 million paid members as of December 31, 2022, with an HDC attach rate of over 75%, and launched new HDC digital onboarding journey.
• Acquired the Broad Arrow Group and transacted $86 million in total vehicle sales, helping drive year-to-date Marketplace revenue of $13.7 million. The acquisition was accretive to earnings in 2022.
• Acquired Speed Digital to establish relationships with dealer partners and augment automotive intelligence data.
• Launched Online Auctions, developed Classifieds, and enhanced HDC Membership offerings.
• Digital and technology teams are progressing through the testing phase and regulatory approval process for the State Farm partnership.
• Generated over 100 million views on Hagerty's YouTube channel and ended the year with over 4.7 million followers on social media.
• U.S. and U.K. reinsurance quota share increased to 70%, further increasing our share of profit.
• Acquired RADwood and hosted multiple events serving 12,000 attendees.
• Announced a multi-year commercial partnership with Exxon Mobil1.
• Announced a partnership with Hendrick Motorsports focused on increasing member benefits and value.
• Environmental, Social and Governance program assessment completed and introduced ECO (Enthusiast Carbon Offset) program.

2023 OUTLOOK - PIVOT TO PROFITABLE GROWTH

Hagerty has excellent business momentum entering 2023 and we are focused on positioning the Company for sustained profitable growth over the coming years. We are confident that the opportunities we have identified to monetize our significant addressable market will expand our share. We are thoughtfully prioritizing our growth initiatives in 2023 with a heightened focus on significantly improving our profitability to fund our purpose to save driving and car culture for future generations. For full year 2023, we anticipate:

• Total Revenue growth of 22-26% powered by Written Premium growth of 11-13%
• Sustain double-digit Written Premium growth trajectory
• Deliver an unmatched online and live Marketplace experience
• Drive loyalty, referrals and incremental revenue and profit from Membership
• Continued evolution into an Integrated Insurance Business
• Increase Hagerty Re's quota share reinsurance agreement in the U.S. and U.K. to ~80%
• Significantly improved profitability ($40 million to $60 million in Adjusted EBITDA) through Cost Containment measures and Operational Efficiencies

 

			2023 Outlook				2023 Change vs 2022
	2022 Actuals		Low End Range		High End Range		Low End Range		High End Range
Total Revenue (in thousands)	$787,588		$961,000		$993,000		22 %		26 %
Total Written Premium (in thousands)	$776,664		$862,000		$878,000		11 %		13 %
Net Income (Loss) (in thousands)	$2,403		$(20,000)		$—		$(22,403)		$(2,403)
Adjusted EBITDA (in thousands)	$(1,940)		$40,000		$60,000		$41,940		$61,940

 

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.

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 2022 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 earned premium; (ii) changes in the market for Hagerty's products and services, (iii) Hagerty's plans to expand market share, including planned investments and partnerships; (iv) anticipated business objectives; and (v) 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, but are not limited to: (i) Hagerty's ability to compete effectively within its industry and attract and retain members; (ii) its dependence on a limited number of insurance distribution and underwriting carrier partners; (iii) Hagerty's ability to prevent, monitor and detect fraudulent activity, including its reliance on a limited number of payment processing services; (iv) disruptions, interruptions, outages with its technology platforms or third-party services; (v) the limited operating history of some of Hagerty's membership products and the success of any new insurance programs and products; (vi) adverse impacts from the COVID-19 pandemic and current and future variants of the virus; (vii) the cyclical nature of the insurance business including through any periods of recession, economic downturn or inflation; (viii) unexpected increases in the frequency or severity of claims; (ix) compliance 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; (x) whether investors or securities analysts view Hagerty's stock structure unfavorably, particularly its dual-class structure; (xi) the fact that Hagerty is a controlled company; and (xii) 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)

Based in Traverse City, Michigan, Hagerty's purpose is to save driving and car culture for future generations and its mission is to build a global business to fund that purpose. Hagerty is an automotive enthusiast brand offering integrated membership products and programs as well as a specialty insurance provider focused on the global automotive enthusiast market. Hagerty is home to Marketplace, Broad Arrow Group, Hagerty Drivers Club, Hagerty Drivers Club magazine, Hagerty Drivers Foundation, Hagerty DriveShare, Hagerty Valuation Tools, Hagerty Media, MotorsportReg, Hagerty Garage + Social, The Amelia, the Detroit Concours d'Elegance, the Greenwich Concours d'Elegance, the California Mille, Motorlux and more. For more information on Hagerty, please visit www.hagerty.com, or connect with us on Facebook, Instagram and Twitter.

More information can be found at newsroom.hagerty.com.

 

Hagerty, Inc. Consolidated Statements of Operations (Unaudited)
	Three Months Ended December 31,
	2022		2021		$ Change		% Change
REVENUE:	in thousands (except percentages and per share amounts)
Commission and fee revenue	$       63,814		$       57,567		$         6,247		10.9 %
Earned premium	112,342		83,453		28,889		34.6 %
Membership, marketplace and other revenue	20,847		13,363		7,484		56.0 %
Total revenue	197,003		154,383		42,620		27.6 %
OPERATING EXPENSES:
Salaries and benefits	49,675		49,767		(92)		(0.2) %
Ceding commission	53,102		39,721		13,381		33.7 %
Losses and loss adjustment expenses	46,258		34,437		11,821		34.3 %
Sales expense	30,792		26,672		4,120		15.4 %
General and administrative services	25,028		17,930		7,098		39.6 %
Depreciation and amortization	9,550		6,862		2,688		39.2 %
Restructuring, impairment and related charges, net	18,324		—		18,324		100.0 %
Total operating expenses	232,729		175,389		57,340		32.7 %
OPERATING INCOME (LOSS)	(35,726)		(21,006)		(14,720)		(70.1) %
Change in fair value of warrant liabilities	4,030		(42,540)		46,570		109.5 %
Interest and other income (expense)	2,403		(951)		3,354		352.7 %
INCOME (LOSS) BEFORE INCOME TAX EXPENSE	(29,293)		(64,497)		35,204		54.6 %
Income tax benefit (expense)	(2,940)		(1,962)		(978)		(49.8) %
NET INCOME (LOSS)	(32,233)		(66,459)		34,226		51.5 %
Net loss (income) attributable to non-controlling interest	27,626		194		27,432		14,140.2 %
Net loss (income) attributable to redeemable non- controlling interest	—		19,907		(19,907)		(100.0) %
NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST	$       (4,607)		$     (46,358)		$       41,751		90.1 %
Earnings (loss) per share of Class A Common Stock:
Basic	(0.06)		(0.56)
Diluted	(0.06)		(0.56)
Weighted-average shares of Class A Common Stock outstanding:
Basic	83,203		82,327
Diluted	83,203		82,327

 

Hagerty, Inc. Consolidated Statements of Operations
	Year Ended December 31,
	2022		2021		$ Change		% Change
REVENUE:	in thousands (except percentages and per share amounts)
Commission and fee revenue	$     307,238		$     271,571		$       35,667		13.1 %
Earned premium	403,061		295,824		107,237		36.3 %
Membership, marketplace and other revenue	77,289		51,684		25,605		49.5 %
Total revenue	787,588		619,079		168,509		27.2 %
OPERATING EXPENSES:
Salaries and benefits	199,542		171,901		27,641		16.1 %
Ceding commission	191,150		140,983		50,167		35.6 %
Losses and loss adjustment expenses	182,402		122,080		60,322		49.4 %
Sales expense	140,781		107,483		33,298		31.0 %
General and administrative services	89,068		64,558		24,510		38.0 %
Depreciation and amortization	33,887		22,144		11,743		53.0 %
Restructuring, impairment and related charges, net	18,324		—		18,324		100.0 %
Total operating expenses	855,154		629,149		226,005		35.9 %
OPERATING INCOME (LOSS)	(67,566)		(10,070)		(57,496)		571.0 %
Change in fair value of warrant liabilities	41,899		(42,540)		84,439		198.5 %
Revaluation gain on previously held equity method investment	34,735		—		34,735		100.0 %
Interest and other income (expense)	2,028		(1,993)		4,021		201.8 %
INCOME (LOSS) BEFORE INCOME TAX EXPENSE	11,096		(54,603)		65,699		120.3 %
Income tax benefit (expense)	(7,017)		(6,751)		(266)		(3.9) %
Income (loss) from equity method investment, net of tax	(1,676)		—		(1,676)		(100.0) %
NET INCOME (LOSS)	2,403		(61,354)		$       63,757		103.9 %
Net loss (income) attributable to non-controlling interest	29,675		398		29,277		7,356.0 %
Net loss (income) attributable to redeemable non- controlling interest	—		14,598		(14,598)		(100.0) %
NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST	$       32,078		$     (46,358)		$       78,436		169.2 %
Earnings (loss) per share of Class A Common Stock:
Basic	$           0.39		$         (0.56)
Diluted	$         (0.07)		$         (0.56)
Weighted-average shares of Class A Common Stock outstanding:
Basic	82,728		82,327
Diluted	336,147		82,327

 

Hagerty, Inc. Consolidated Balance Sheets
	December 31, 2022		December 31, 2021
ASSETS	in thousands (except share amounts)
Current Assets:
Cash and cash equivalents	$                   95,172		$                 275,332
Restricted cash and cash equivalents	444,019		328,640
Accounts receivable	58,255		46,729
Premiums receivable	100,700		75,297
Commission receivable	60,151		57,596
Prepaid expenses and other current assets	45,651		30,155
Notes receivable	25,493		—
Deferred acquisition costs, net	107,342		81,535
Total current assets	936,783		895,284
Long-Term Assets:
Prepaid expenses and other non-current assets	37,082		30,565
Notes receivable	11,934		—
Property and equipment, net	25,256		28,363
Lease right-of-use assets	82,398		—
Intangible assets, net	104,024		76,171
Goodwill	115,041		11,488
Total long-term assets	375,735		146,587
TOTAL ASSETS	$              1,312,518		$             1,041,871
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$                   16,282		$                     9,084
Losses payable	55,516		34,482
Provision for unpaid losses and loss adjustment expenses	111,741		74,869
Unearned premiums	235,462		175,199
Commissions payable	77,075		60,603
Due to insurers	68,171		58,031
Advanced premiums	17,084		13,867
Contract liabilities	25,257		21,723
Current lease liabilities	7,556		—
Accrued expenses and other current liabilities	53,211		47,960
Total current liabilities	667,355		495,818
Long-Term Liabilities:
Accrued expenses	7,952		13,166
Contract liabilities	19,169		19,667
Long-term lease liabilities	80,772		—
Long-term debt	108,280		135,500
Deferred tax liability	12,850		10,510
Warrant liabilities	45,561		89,366
Other long-term liabilities	3,210		7,043
Total long-term liabilities	277,794		275,252
TOTAL LIABILITIES	$                 945,149		$                 771,070
			(continued)

 

Hagerty, Inc. Consolidated Balance Sheets
	December 31, 2022		December 31, 2021
	in thousands (except share amounts)
Commitments and Contingencies
Redeemable non-controlling interest	$                          —		$                 593,277
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value (20,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and 2021, respectively)	—		—
Class A common stock, $0.0001 par value (500,000,000 shares authorized, 83,202,969 and 82,327,466 shares issued and outstanding as of December 31, 2022 and 2021, respectively)	8		8
Class V common stock, $0.0001 par value (300,000,000 shares authorized, 251,033,906 shares issued and outstanding as of December 31, 2022 and 2021)	25		25
Additional paid-in capital	549,034		160,189
Accumulated earnings (deficit)	(489,602)		(482,276)
Accumulated other comprehensive income (loss)	(213)		(1,727)
Total stockholders' equity:	59,252		(323,781)
Non-controlling interest	308,117		1,305
Total equity	367,369		(322,476)
TOTAL LIABILITIES AND EQUITY	$              1,312,518		$              1,041,871
			(concluded)

 

Hagerty, Inc. Consolidated Statements of Cash Flows
	Year Ended December 31,
	2022		2021
OPERATING ACTIVITIES:	in thousands
Net income (loss)	$              2,403		$           (61,354)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Change in fair value of warrant liabilities	(41,899)		42,540
Loss on equity method investment	1,676		—
Revaluation gain on previously held equity method investment	(34,735)		—
Impairment of operating lease right-of-use assets	4,698		—
Depreciation and amortization expense	33,887		22,144
Provision for deferred taxes	2,973		3,038
Loss on disposals of equipment, software and other assets	4,316		2,425
Stock-based compensation expense	12,129		—
Non-cash lease expense	10,875		—
Other	533		155
Changes in assets and liabilities:
Accounts receivable	(24,059)		(13,449)
Premiums receivable	(25,403)		(22,669)
Commission receivable	(2,574)		(3,005)
Prepaid expenses and other assets	(12,021)		(18,523)
Deferred acquisition costs	(25,807)		(22,963)
Accounts payable	10,834		(2,890)
Losses payable	21,034		12,502
Provision for unpaid losses and loss adjustment expenses	36,872		19,882
Unearned premiums	60,263		50,491
Commissions payable	16,472		16,805
Due to insurers	10,427		8,883
Advanced premiums	3,259		124
Contract liabilities	(2,285)		2,049
Operating lease liabilities	(9,779)		—
Accrued expenses and other current liabilities	1,239		6,096
Net Cash Provided by Operating Activities	55,328		42,281
INVESTING ACTIVITIES:
Purchases of property, equipment and software	(44,375)		(43,370)
Acquisitions, net of cash acquired	(15,404)		(14,609)
Purchase of previously held equity method investment	(15,250)		—
Issuance of note receivable to previously held equity investment	(7,000)		—
Issuance of notes receivable	(6,123)		—
Proceeds from notes receivable	370		—
Purchase of fixed income securities	(4,234)		(12,246)
Maturities of fixed income securities	1,216		1,183
Other investing activities	(721)		48
Net Cash Used in Investing Activities	$           (91,521)		$           (68,994)
			(continued)

 

Hagerty, Inc. Consolidated Statements of Cash Flows
	Year Ended December 31,
	2022		2021
FINANCING ACTIVITIES:	in thousands
Payments on long-term debt	$         (122,500)		$           (42,500)
Proceeds from long-term debt	94,367		109,000
Contribution from non-controlling interest	1,700		1,580
Distributions	—		(4,056)
Deferred financing costs	—		(962)
Cash received in Business Combination	—		789,661
Cash consideration to HHC at Closing of Business Combination	—		(489,661)
Payment of capitalized transaction costs	(1,651)		(30,991)
Net Cash Provided by (Used in) Financing Activities	(28,084)		332,071
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents	(504)		(464)
Change in cash and cash equivalents and restricted cash and cash equivalents	(64,781)		304,894
Beginning cash and cash equivalents and restricted cash and cash equivalents	603,972		299,078
Ending cash and cash equivalents and restricted cash and cash equivalents	$           539,191		$           603,972
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchase of property, equipment and software	$              1,592		$              4,668
Broad Arrow acquisition	$            73,253		$                   —
Other acquisitions	$              8,273		$              3,774
Warrant liabilities recognized in Business Combination	$                   —		$            46,826
CASH PAID FOR:
Interest	$              4,868		$              2,502
Income taxes	$              5,253		$              2,160
			(concluded)

 

The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents as presented for the years ended December 31, 2022 and 2021:

	2022		2021
	in thousands
Cash and cash equivalents	$            95,172		$           275,332
Restricted cash and cash equivalents	444,019		328,640
Total cash and cash equivalents and restricted cash and cash equivalents on the      Consolidated Statements of Cash Flows	$           539,191		$           603,972

 

Hagerty, Inc.
Key Performance Indicators and Certain Non-GAAP Financial Measures

Key Performance Indicators

In addition to the measures presented in our Consolidated Financial Statements, we use the following key performance indicators and certain non-GAAP financial measures to evaluate our business, measure our performance, identify trends in our business against planned initiatives, prepare financial projections and make strategic decisions. We believe these financial and operational measures are useful in evaluating our performance when read together with our financial results prepared in accordance with GAAP. The following tables present these metrics as of and for the periods presented:

	Three Months Ended December 31,				Year Ended December 31,
	2022		2021		2022		2021
Operational Metrics (period of time)
Total Written Premium (in thousands)	$162,041		$140,416		$776,664		$674,305
Loss Ratio	41.2 %		41.3 %		45.3 %		41.3 %
New Business Count (Insurance)	43,523		47,589		234,520		244,478
Operational Metrics (point in time)
Policies in Force					1,315,977		1,247,056
Policies in Force Retention					88.0 %		89.1 %
Vehicles in Force					1,974,196		1,842,443
HDC Paid Member Count					752,754		718,583
Net Promoter Score					83.0		82.0
GAAP Measures
Total Revenue (in thousands)	$197,003		$154,385		$787,588		$619,079
Operating Income (Loss) (in thousands)	$(35,726)		$(21,006)		$(67,566)		$(10,070)
Net Income (Loss) (in thousands)	$(32,233)		$(66,459)		$2,403		$(61,354)
Basic Earnings (Loss) Per Share	$(0.06)		$(0.56)		$0.39		$(0.56)
Non-GAAP Measures
Adjusted EBITDA (in thousands)	$(2,036)		$(2,632)		$(1,940)		$25,350
Adjusted Earnings (Loss) Per Share	$(0.10)		$(0.07)		$(0.20)		$(0.05)

 

Non-GAAP Financial Measures

Adjusted EBITDA

We define Adjusted EBITDA as consolidated net income (loss) (the most directly comparable GAAP measure) before interest and other income (expense), income tax (expense) benefit, and depreciation and amortization, adjusted to exclude (i) restructuring, impairment and related charges, net, (ii) changes in the fair value of warrant liabilities, (iii) stock-based compensation expense, (iv) the revaluation gain on a previously held equity method investment, (v) expense associated with the accelerated vesting of incentive plans, (vi) net gains and losses from asset disposals and (vii) certain other unusual items. We present Adjusted EBITDA because we consider it to be an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry.

Our management uses Adjusted EBITDA:

• as a measurement of operating performance of our business on a consistent basis, as it removes the impact of items not directly resulting from our core operations;
• for planning purposes, including the preparation of our internal annual operating budget and financial projections;
• to evaluate the performance and effectiveness of our operational strategies;
• to evaluate our capacity to expand our business;
• as a performance factor in measuring performance under our executive compensation plan; and
• as a predictor of core operating performance, comparisons to prior periods and competitive positioning.

By providing this non-GAAP financial measure, together with a reconciliation to net income (loss), which is the most directly 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 Adjusted EBITDA may be determined or calculated differently than similarly titled measures of 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 December 31,				Year Ended December 31,
		2022		2021		2022		2021
		in thousands
Net income (loss)		$      (32,233)		$      (66,459)		$         2,403		$      (61,354)
Interest and other (income) expense		(2,403)		952		(2,028)		1,993
Income tax (benefit) expense		2,940		1,962		7,017		6,751
Depreciation and amortization		9,550		6,862		33,887		22,144
Restructuring, impairment and related charges, net		18,324		—		18,324		—
Change in fair value of warrant liabilities		(4,030)		42,540		(41,899)		42,540
Stock-based compensation expense		3,964		—		12,129		—
Revaluation gain on previously held equity method investment		—		—		(34,735)		—
Accelerated vesting of incentive plans		—		9,321		—		9,321
Net (gain) loss from asset disposals		1,970		—		1,970		1,764
Other unusual items (1)		(118)		2,191		992		2,191
Adjusted EBITDA		$        (2,036)		$        (2,631)		$        (1,940)		$       25,350

(1)	Other unusual items in 2021 relates to expenses incurred relates to the Business Combination. Other unusual items in 2022 relates to certain severance and legal settlement expenses.

 

Net income (loss) and Adjusted EBITDA for the year ended December 31, 2022 include $10.0 million of estimated net losses related to Hurricane Ian. Additionally, we strengthened reserves for U.S. auto liability by $6.5 million for the 2022 accident year. Both of these events adversely impacted the 2022 results compared to the year ended December 31, 2021.

We incurred $5.7 million and $7.7 million during the three months ended December 31, 2022 and 2021, respectively, and $29.8 million and $31.0 million during the years ended December 31, 2022 and 2021, respectively, for certain pre-revenue costs related to scaling our infrastructure, newly-developed digital platforms and legacy systems, human resources and occupancy to accommodate our alliance with State Farm and other potential distribution partnerships as well as to further develop our Marketplace initiatives. These costs were not included in the Adjusted EBITDA reconciliation above.

Pursuant to a defined set of activities and objectives, these expenses are adding entirely new capabilities for us, integrating our new and legacy policyholder, membership and Marketplace systems with State Farm's legacy policy and agent management systems and other third-party platforms.

Adjusted EPS

We define Adjusted Earnings (Loss) Per Share ("Adjusted EPS") as consolidated Net income (loss) attributable to both our controlling and non-controlling interest, less the change in fair value of our warrants and the revaluation gain on previously held equity method investment, divided by our outstanding and total potentially dilutive securities. The total potentially dilutive securities includes (1) the weighted-average issued and outstanding shares of Class A Common Stock, (2) all issued and outstanding non-controlling interest Hagerty Group Units, (3) all unexercised warrants and (4) all unissued stock-based compensation awards.

In the third quarter of 2022, we began removing (1) the change in fair value of our warrants and (2) the revaluation gain on previously held equity method investment from consolidated Net income (loss) attributable to both our controlling and non-controlling interest for purposes of calculating Adjusted EPS. For comparability, references to prior period non-GAAP measures have been updated to show the effect of removing the change in the fair value of our warrants from Adjusted EPS. We believe this updated presentation of Adjusted EPS enhances investors' understanding of our financial performance from activities occurring in the ordinary course of our business.

The most directly comparable GAAP measure is basic earnings per share ("Basic EPS"), which is calculated as Net income (loss) attributable to controlling interest divided by the weighted average of Class A Common Stock 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 investors and securities analysts in evaluating the consolidated performance of other companies in our industry. We also believe that Adjusted EPS, which compares our consolidated Net income (loss) (which includes our controlling and non-controlling interest) with our outstanding and potentially dilutive shares, provides useful information to investors regarding our performance on a fully consolidated basis.

Our 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;
• to evaluate our capacity to expand our business; 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 December 31,				Year Ended December 31,
		2022		2021		2022		2021
		in thousands (except per share amounts)
Numerator:
Net income (loss) attributable to controlling interest(1)		$        (4,607)		$      (46,358)		$       32,078		$      (46,358)
Net income (loss) attributable to non-controlling interest		(27,626)		(194)		(29,675)		(398)
Net income (loss) attributable to redeemable non- controlling interest		—		(19,907)		—		(14,598)
Consolidated net income (loss)		$      (32,233)		$      (66,459)		$         2,403		$      (61,354)
Change in fair value of warrant liabilities		(4,030)		42,540		(41,899)		42,540
Revaluation gain on previously held equity method investment		—		—		(34,735)		—
Adjusted consolidated net income (loss)(2)		$      (36,263)		$      (23,919)		$      (74,231)		$      (18,814)
Denominator:
Weighted-average shares of Class A Common Stock outstanding — Basic(1)		83,203		82,327		82,728		82,327
Total potentially dilutive securities outstanding:
Conversion of non-controlling interest Hagerty Group Units to Class A Common Stock		255,758		251,034		255,758		251,034
Total warrants outstanding		19,484		20,006		19,484		20,006
Total unissued stock-based compensation		6,902		—		6,902		—
Potentially dilutive shares outstanding		282,144		271,040		282,144		271,040
Fully dilutive shares outstanding(2)		365,347		353,367		364,872		353,367
Basic EPS = (Net income (loss) attributable to controlling interest / Weighted-average shares of Class A Common Stock outstanding)(1)		$          (0.06)		$          (0.56)		$           0.39		$          (0.56)
Adjusted EPS = (Adjusted consolidated net income (loss) / Fully dilutive shares outstanding)(2)		$          (0.10)		$          (0.07)		$          (0.20)		$          (0.05)

(1)	Numerator and Denominator of the GAAP measure Basic EPS
(2)	Numerator and Denominator of the non-GAAP measure Adjusted EPS

 

View original content:https://www.prnewswire.com/news-releases/hagerty-reports-full-year-2022-results-301770907.html

SOURCE Hagerty

FAQ

What were Hagerty's total revenue figures for 2022?

Hagerty's total revenue for 2022 was $788 million, marking a 27% year-over-year increase.

What is Hagerty's projected revenue growth for 2023?

Hagerty anticipates total revenue growth of 22-26% for 2023.

How much did Hagerty's written premium increase in 2022?

Hagerty's written premium increased by 15% year-over-year to $777 million in 2022.

What impact did Hurricane Ian have on Hagerty's financials?

Hurricane Ian negatively impacted Hagerty's loss ratio for the full year, increasing it to 45.3%.

What is the expected Adjusted EBITDA for Hagerty in 2023?

Hagerty projects Adjusted EBITDA in the range of $40 million to $60 million for 2023.