Hagerty Inc’s Earnings Call: Strong Growth Amid Challenges

Hagerty Inc Class A ((HGTY)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for Hagerty Inc Class A painted a picture of robust growth and profitability, tempered by some challenges. The company demonstrated strong revenue growth and profitability, driven by strategic partnerships and marketplace expansion. However, concerns were raised regarding increased expenses and lower attach rates for new partnerships, alongside the impact of business seasonality on profitability forecasts.

Record Revenue Growth

Hagerty Inc reported an impressive 18% increase in total revenue, reaching $380 million. This growth was fueled by gains in new business count, a 16% rise in written premium, and an 18% boost in commission and fee revenue. These figures underscore the company’s ability to expand its market presence and capitalize on new opportunities.

Strong Profitability

The company achieved a significant increase in operating margins, which rose by 590 basis points to 9%. This improvement led to a 240% surge in operating profit, amounting to $34 million, while net income grew by 143% to $46 million. These results highlight Hagerty’s effective cost management and revenue-generating strategies.

Expanded Partnerships

Hagerty announced new partnerships with Liberty Mutual and Safeco, aimed at expanding its distribution channels and engaging a broader customer base. These strategic alliances are expected to enhance the company’s market reach and drive future growth.

Marketplace Expansion

The company’s marketplace and other revenue saw a 34% increase, totaling $56 million. This growth was significantly supported by successful auctions and private sales, indicating a thriving marketplace segment.

Increased 2025 Outlook

Hagerty has raised its full-year expectations for revenue growth to 14%-15% and adjusted EBITDA to between $170 million and $176 million. This optimistic outlook reflects the company’s confidence in its strategic initiatives and market position.

Higher Expenses

Despite the positive revenue and profit figures, Hagerty faced a 17% increase in general and administrative expenses, attributed to higher software licensing costs and professional fees. This rise in expenses poses a challenge to maintaining profitability.

Lower Attach Rates for State Farm

The attach rates for Hagerty Drivers Club with State Farm policies have been lower than expected compared to the company’s standard direct process. This discrepancy highlights a potential area for improvement in partnership integration.

Seasonality and Profitability Concerns

The company anticipates seasonally tighter margins in the fourth quarter, with guidance suggesting flat EBITDA growth from the previous year. This seasonal impact on profitability remains a concern for stakeholders.

Forward-Looking Guidance

During the earnings call, Hagerty provided robust guidance, forecasting an 18% increase in total revenue for the first nine months of the year. This growth is driven by a 13% rise in written premium and a 14% increase in commission revenue, primarily due to State Farm policy conversions. The company also reported a 54% growth in membership, marketplace, and other revenue, bolstered by the launch of their European auction business. Hagerty aims to double its policies in force to 3 million by 2030, leveraging its strong brand and high Net Promoter Score of 82.

In conclusion, Hagerty Inc’s earnings call highlighted a strong performance with significant revenue and profit growth, supported by strategic partnerships and marketplace expansion. While challenges such as increased expenses and lower attach rates were noted, the company’s forward-looking guidance remains optimistic, with ambitious goals set for the future.