Yahoo Finance Hagerty Inc (HGTY) Q1 2024 Earnings Call Transcript Highlights: A Robust Start with Strong ...
Total Revenue: Grew 24% to $272 million.
Net Income: Improved by $23 million, reaching $8 million compared to a loss of $15 million in the previous year.
Adjusted EBITDA: Increased by $21 million to $27 million.
Commission and Fee Revenue: Increased 19% to $89 million.
Membership, Marketplace, and Other Revenue: Rose 18% to $31 million.
Earned Premium: Grew 29% to $152 million.
Operating Profit: Reported at $12 million, a $29 million improvement year-over-year.
Operating Margin: Jumped 1,200 basis points to 4.5%.
Loss Ratio: Stable at 41.1%.
Written Premium: Increased by 19%.
Retention Rate: Improved to 89% from 88% year-over-year.
2024 Revenue Growth Guidance: Reaffirmed at 15% to 17%.
2024 Net Income Guidance: Projected to be $61 million to $70 million, up 116% to 148%.
2024 Adjusted EBITDA Guidance: Forecasted at $124 million to $135 million, up 41% to 53%.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Hagerty Inc (NYSE:HGTY) reported a 24% growth in total revenue to $272 million in the first quarter.
Commission revenue and insurance rates increased by 19% and 3% respectively, contributing to overall financial growth.
The company achieved a significant improvement in operating margins, which jumped 1,200 basis points, leading to a $23 million increase in net income.
Hagerty Inc (NYSE:HGTY) saw a robust new business count and improved retention rate of 89%, up from 88% the previous year.
The company's marketplace and auction platforms showed strong performance, with the Amelia live auction marketplace achieving over $15 million in sales.
Negative Points
Despite overall growth, certain segments like the garage and social results partially offset strong marketplace results.
The company is still in the early stages of significant initiatives like the State Farm Classic Plus program and the launch of the Enthusiast Plus product, which may pose risks if not executed well.
Hagerty Inc (NYSE:HGTY) reported a net income attributable to Class A common shareholders of negative $3 million due to earnings attribution to noncontrolling interest and accretion on preferred stock.
The company's operating margin, while improved, is still relatively low at 4.5%.
There are ongoing challenges with the balance of supply and demand in the marketplace, which could affect the sell-through rate and overall marketplace growth.
Q & A Highlights
Q: Could you talk about the PIP growth, the policy count growth on. You talked a lot about your performance marketing initiatives and other strategies to grow. Policy count. Seems like your rate of posture, low single digits, pretty attractive relative to the broader market, as you say, how should we think about the prospects for policy count growth? A: Patrick McClymont - Hagerty Inc - Chief Financial Officer: Yes, we're pleased so far this year and last year we had north of a quarter of a million new customers. We expect this year to be something in that same neighborhood. We're a little bit ahead of that pace as we got through the first quarter. And what we're seeing in the marketplace right now is a pretty meaningful increase in daily driver insurance prices is driving a lot of shopping activity and we're benefiting from that or as you described there, our prices are only up low single digits relative to a market that we think will be up about 10% this year. And so that's just putting more people at the top of our funnel. And then we're doing a really good job converting. And so we expect to have similar on an absolute basis similar growth this year to what we had last year and then in the marketplace.
Q: So you described the five cars per day is it something that is a steady build or in the model? Is there some point where there is a potential inflection where the but the network effect takes over and you have more of a step function activity there? A: Mckeel Hagerty - Hagerty Inc - Chief Executive Officer, Director: Well, thanks, Mark. And the keel on. Yes, it's for now it's the steady build. And it's this really delicate balance between supply and demand that we actually have quite a wait list of cars wanting to be listed and as part of the marketplace and to go on with one of the live auctions. But if you go if you dump too many cars into the mix and demand drops, then your sell-through rate it lowers. And so it's this really steady build at this point. But yes. I mean, the team sitting out there thinking, okay, out in the future, once we get past this sort of first big phase of the steady build, you should start seeing greater acceleration there. And we're really pleased with is that the in the digital product teams that are out there, building the marketplace or adding features to this every two weeks and we just have this great steady supply kind of coming out of our customer base. So we're excited for the future, but it's a steady build for now.
Q: Yes. And then what's the latest update on State Farm. A: Mckeel Hagerty - Hagerty Inc - Chief Executive Officer, Director: So latest updates with State Farm is we're live in the four states, which are we've talked about before, and it's actually going very, very well in those four states, a little bit ahead of plan lots and lots of testing going on that before we can add the additional states, but a lot of optimism on both sides, and we're just continuing to work through this startup phase. So we're here we wish it was a lot more states right now, but we're also happy that the tests in these first for doing so.
Q: Growth in insured values and price increases contributed more than 13 points of our written premium growth this quarter. Right. And I think that was up from last year. And do you think the current this current level is sustainable and what are your what assumption is embedded, Bill. A: Mckeel Hagerty - Hagerty Inc - Chief Executive Officer, Director: Yes. So for us, the key drivers are going to be new customer growth rate growth and then changes in value and all three have been contributing as we just answered the previous call with sort of low to mid-single digits on premium. And then the balance is kind of split between changes in value and new customer growth. And right now after kind of four plus months into the year and momentum has remained strong. And so as we look for the balance of this year, we're very comfortable and reaffirmed our guidance. We're very comfortable with that as we get beyond and into 2025 and 2026 in the core business right now, it looks as though that kind of growth will continue and what we'll be accelerating, our growth in '25 and '26 is the ramp up of State Farm, which begins in earnest in 2025. And then also the enthusiast plus product we talked about, which we're not going to start selling until early 20, 25. And so those two years should have even higher growth because of those two new programs and airline core business, we continue to see very attractive growth and nothing that leads us to believe that that's slowing down
Q: On the enthusiast product and any way to size how that will ramp up beginning 25, but it's a new product, obviously itself a big part of the classic car market that you're you're not, I think, full potential yet today, but so your thoughts on how that business might ramp the next few years. A: Patrick McClymont - Hagerty Inc - Chief Financial Officer: We're going to take a sort of an appropriate and deliberate pace to it because it is a new product. And so we'll be launching in four states initially in the early part of next year, we'll use that to do some learning to make sure that we've got the product right, which we've got the pricing right, and then we'll start to add incremental states over the course of 2025. My guess is it won't be until 2026 that were kind of fully rolled out some. We're excited about it, but it is new. It's an evolution of our existing product and we want to make sure we do it thoughtfully.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
