Increases 2024 Outlook for Revenue and Profit Growth

  • Second quarter 2024 Total Revenue increased 20% year-over-year to $313.2 million, and year-to-date 2024 Total Revenue increased 22% year-over-year to $584.9 million
  • Second quarter 2024 Written Premium increased 16% year-over-year to $321.2 million, and year-to-date 2024 Written Premium increased 18% year-over-year to $539.5 million
  • Second quarter 2024 Operating Income margin expanded by 560 bps compared to the prior year period, and year-to-date 2024 Operating Income margin expanded by 840 bps compared to the prior year period
  • Second quarter 2024 Net Income of $42.7 million, an increase of $27.1 million compared to the prior year period, and year-to-date 2024 Net Income of $50.9 million, an increase of $50.3 million compared to the prior year period
  • Second quarter 2024 Adjusted EBITDA of $53.1 million, an increase of $18.7 million compared to the prior year period, and year-to-date 2024 Adjusted EBITDA of $80.4 million, an increase of $39.4 million compared to the prior year period
  • Delivered Policies in Force Retention of 89% and maintained a Net Promoter Score of 82
  • Increased 2024 growth outlook for Total Revenue to 16-18%, Written Premium of 14-15%, Net Income of 170-198% and Adjusted EBITDA of 47-59%
  • Completed warrant exchange offer and mandatory exchange in July 2024, whereby the Company issued 3.9 million shares of Class A Common Stock in exchange for 19.5 million warrants

TRAVERSE CITY, Mich., Aug. 6, 2024 /PRNewswire/ -- Hagerty, Inc. (NYSE: HGTY), an automotive enthusiast brand and leading specialty vehicle insurance provider, announced today financial results for the three and six months ended June 30, 2024.

Hagerty (PRNewsfoto/Hagerty)

"We delivered excellent top line growth and margin expansion during the first half of 2024 as our differentiated business model delivers sustained, compounding growth," said McKeel Hagerty, Chief Executive Officer and Chairman of Hagerty. "Total revenue gains of 22% were fueled by written premium growth of 18% as our vehicle count increased 8% over the prior year. High rates of growth, combined with more efficient and effective business processes drove operating margin expansion of 840 basis points."

"This laser focus on profitability resulted in Net Income of $51 million and Adjusted EBITDA of $80 million during the first six months of 2024, ahead of expectations," continued Mr. Hagerty.

"Given the strong start to the year and continued business momentum, we have increased our 2024 growth outlook," added Mr. Hagerty. "We now expect written premium growth of 14-15% for the year, powered by strong new business count. Operating margin expansion is expected to drive net income growth of 170-198% and Adjusted EBITDA growth of 47-59% as we help car enthusiasts protect, buy and sell, and enjoy their special vehicles."

SECOND QUARTER 2024 FINANCIAL HIGHLIGHTS

  • Second quarter 2024 Total Revenue increased 20% year-over-year to $313.2 million, and year-to-date 2024 Total Revenue increased 22% year-over-year to $584.9 million
  • Second quarter 2024 Written Premium increased 16% year-over-year to $321.2 million, and year-to-date 2024 Written Premium increased 18% year-over-year to $539.5 million
  • Second quarter 2024 Commission and fee revenue increased 17% year-over-year to $128.8 million, and year-to-date 2024 Commission and fee revenue increased 18% year-over-year to $217.7 million
    • Policies in Force Retention was 89% as of June 30, 2024 compared to 88% in the prior year period and total insured vehicles increased 8% year-over-year to 2.5 million
  • Second quarter 2024 Loss Ratio was 41.1% compared to 42.0% in the prior year period, and year-to-date 2024 Loss Ratio was 41.1% compared to 41.7% in the prior year period
  • Second quarter 2024 Earned Premium increased 24% year-over-year to $157.6 million, and year-to-date 2024 Earned Premium increased 26% year-over-year to $309.2 million
  • Second quarter 2024 Membership, marketplace and other revenue increased 14% year-over-year to $26.8 million, and year-to-date 2024 Membership, marketplace and other revenue increased 16% year-over-year to $58.0 million
    • Second quarter 2024 Marketplace revenue increased 20% year-over-year to $6.3 million, and year-to-date 2024 Marketplace revenue increased 41% year-over-year to $16.8 million
    • Second quarter 2024 Membership revenue increased 7% year-over-year to $14.1 million, and year-to-date 2024 Membership revenue increased 7% year-over-year to $27.6 million
      • Hagerty Drivers Club (HDC) paid members increased 8% year-over-year to approximately 854,000 compared to 792,000
  • Second quarter 2024 Operating Income of $38.1 million, an increase of $20.8 million compared to the prior year period, and year-to-date 2024 Operating Income of $50.3 million, an increase of $49.5 million compared to the prior year period
    • Second quarter 2024 Operating Income margin expanded by 560 bps compared to the prior year period, and year-to-date 2024 Operating Income margin expanded by 840 bps compared to the prior year period
    • Cost containment and resource prioritization initiatives held general and administrative growth to only 0.3% and salary and benefits growth to 7.7% in the second quarter 2024. Year-to-date 2024 general and administrative services declined 3.4% and salary and benefits increased only 4.6%
    • Second quarter 2024 depreciation and amortization was $10.0 million compared to $10.4 million in the prior year period, and year-to-date 2024 depreciation and amortization was $20.6 million compared to $24.1 million in the prior year period. The year-to-date decrease was primarily driven by the prior year's $3.8 million impairment of digital media content assets
    • Second quarter 2023 results included restructuring charges of $2.8 million, and year-to-date 2023 results included restructuring charges of $8.4 million. The prior year period's charges were primarily associated with a reduction in force and the impairment and related charges associated with operating lease assets and cost containment initiatives
  • Second quarter 2024 Net Income of $42.7 million, an increase of $27.1 million compared to the prior year period, and year-to-date 2024 Net Income of $50.9 million, an increase of $50.3 million compared to the prior year period
    • Second quarter 2024 Net Income includes an $8.6 million increase in interest and other income, and year-to-date 2024 Net Income includes a $10.2 million increase in interest and other income, primarily due to the diversification of Hagerty Re's investment portfolio which resulted in investing in higher yielding fixed maturity securities. In addition, Net Income includes a $1.9 million loss from the change in fair value of warrant liabilities
    • Completed warrant exchange offer and mandatory exchange in July 2024, whereby the Company issued 3.9 million shares of Class A Common Stock in exchange for 19.5 million warrants
  • Second quarter 2024 Adjusted EBITDA (a non-GAAP measure) of $53.1 million, an increase of $18.7 million compared to the prior year period, and year-to-date 2024 Adjusted EBITDA of $80.4 million, an increase of $39.4 million compared to the prior year period
  • Second quarter 2024 Basic and Diluted Earnings per Share was $0.09, and year-to-date 2024 Basic and Diluted Earnings per Share was $0.06
    • Second quarter 2024 Adjusted EPS (a non-GAAP measure) was $0.12, and year-to-date 2024 Adjusted EPS was $0.16

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.

INCREASED 2024 OUTLOOK FOR GROWTH AND PROFITABILITY

Despite the uncertain macro environment and challenging dynamics for the insurance industry with heightened inflationary pressures, 2024 is on track to be another year of strong top-line growth and margin expansion for Hagerty as our performance-based culture powers great results for stakeholders. We remain focused on growing our Insurance, Membership and Marketplace businesses, positioning us to deliver sustained, compounding profit growth over the coming years and fund our purpose to save driving and to 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 increased its outlook:
    • Written Premium growth of 14-15%
    • Total Revenue growth of 16-18%
    • Net Income growth of 170-198%
    • Adjusted EBITDA growth of 47-59%



Prior 2024 Outlook 1


Revised 2024 Outlook

in thousands

2023 Results


Low End


High End


Low End


High End

Total Written Premium

$907,175


$1,025,000


$1,034,000


$1,034,000


$1,043,000

Total Revenue

$1,000,213


$1,150,000


$1,170,000


$1,160,000


$1,180,000

Net Income 2

$28,179


$61,000


$70,000


$76,000


$84,000

Adjusted EBITDA 3

$88,162


$124,000


$135,000


$130,000


$140,000



1

Prior 2024 Outlook shared on the Company's first quarter earnings call on May 7th, 2024. 

2

Net income range assumes no impact from warrants. Fully diluted share count post warrant exchange of ~360 million including Class A Common Stock, Class V Common Stock, Series A Convertible Preferred Stock, and share-based compensation awards.

3

See Non-GAAP Financial Measures below for additional information regarding this non-GAAP financial measure.

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 second quarter 2024 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 insurance policy holders and paid HDC subscribers; (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 its business outlook for future periods.

About Hagerty, Inc. (NYSE: HGTY)
Hagerty is an automotive enthusiast brand committed to saving driving and to 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 Canada and the U.K. and is home to Hagerty Drivers Club, a community of over 850,000 who can't get enough of cars. As a purpose-driven organization, Hagerty Impact aims to be a catalyst for positive change across the issues that matter most to our teams, our members, the broader automotive community, our shareholders and the planet at large. For more information, please visit www.hagerty.com or connect with us on Facebook, Instagram, Twitter and LinkedIn.

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

Category: Financial
Source: Hagerty

Hagerty, Inc.

Condensed Consolidated Statements of Operations (Unaudited)




Three months ended June 30,



2024


2023


$ Change


% Change










REVENUE:


in thousands (except percentages and per share amounts)

Commission and fee revenue


$     128,816


$     110,187


$       18,629


16.9 %

Earned premium


157,612


127,482


30,130


23.6 %

Membership, marketplace and other revenue


26,797


23,575


3,222


13.7 %

Total revenue


313,225


261,244


51,981


19.9 %

OPERATING EXPENSES:









Salaries and benefits


57,693


53,572


4,121


7.7 %

Ceding commissions, net


73,446


60,350


13,096


21.7 %

Losses and loss adjustment expenses


64,729


53,564


11,165


20.8 %

Sales expense


47,990


41,941


6,049


14.4 %

General and administrative


21,373


21,318


55


0.3 %

Depreciation and amortization


10,014


10,397


(383)


(3.7) %

Restructuring, impairment and related charges, net


2,849


(2,849)


(100.0) %

Gain related to divestiture

(87)



(87)


— %

Total operating expenses


275,158


243,991


31,167


12.8 %

OPERATING INCOME


38,067


17,253


20,814


120.6 %

Change in fair value of warrant liabilities


(1,941)


(1,754)


(187)


10.7 %

Interest and other income (expense)


12,342


3,770


8,572


N/M

INCOME BEFORE INCOME TAX EXPENSE

48,468


19,269


29,199


151.5 %

Income tax expense


(5,811)


(3,730)


(2,081)


55.8 %

NET INCOME


42,657


15,539


27,118


174.5 %

Net income attributable to non-controlling interest

(32,279)


(13,134)


(19,145)


145.8 %

Accretion of Series A Convertible Preferred Stock

(1,839)



(1,839)


— %

NET INCOME ATTRIBUTABLE TO CLASS A
COMMON STOCKHOLDERS

$         8,539


$         2,405


$         6,134


N/M










Earnings per share of Class A Common Stock:








Basic


$           0.09


$           0.03





Diluted


$           0.09


$           0.03














Weighted average shares of Class A Common Stock outstanding:








Basic


85,687


84,371





Diluted


85,687


85,563





____________________

N/M = Not meaningful

 

Hagerty, Inc.

Condensed Consolidated Statements of Operations (Unaudited)




Six months ended June 30,



2024


2023


$ Change


% Change










REVENUE:


in thousands (except percentages and per share amounts)

Commission and fee revenue

$     217,656


$     184,799


$       32,857


17.8 %

Earned premium

309,231


244,713


64,518


26.4 %

Membership, marketplace and other revenue

58,046


50,084


7,962


15.9 %

Total revenue


584,933


479,596


105,337


22.0 %

OPERATING EXPENSES:









Salaries and benefits


113,809


108,804


5,005


4.6 %

Ceding commissions, net


144,376


115,775


28,601


24.7 %

Losses and loss adjustment expenses


127,085


101,976


25,109


24.6 %

Sales expense


87,650


77,054


10,596


13.8 %

General and administrative


41,235


42,699


(1,464)


(3.4) %

Depreciation and amortization


20,574


24,140


(3,566)


(14.8) %

Restructuring, impairment and related charges, net


8,384


(8,384)


(100.0) %

Gain related to divestiture

(87)



(87)


— %

Total operating expenses


534,642


478,832


55,810


11.7 %

OPERATING INCOME


50,291


764


49,527


N/M

Change in fair value of warrant liabilities


(8,081)


(2,269)


(5,812)


N/M

Interest and other income (expense)


19,586


9,417


10,169


108.0 %

INCOME BEFORE INCOME TAX EXPENSE

61,796


7,912


53,884


N/M

Income tax expense


(10,940)


(7,398)


(3,542)


47.9 %

NET INCOME


50,856


514


50,342


N/M

Net income attributable to non-controlling interest

(41,829)


(208)


(41,621)


N/M

Accretion of Series A Convertible Preferred Stock

(3,677)



(3,677)


— %

NET INCOME ATTRIBUTABLE TO CLASS A
COMMON STOCKHOLDERS

$         5,350


$            306


$         5,044


N/M










Earnings per share of Class A Common Stock:








Basic


$           0.06


$             —





Diluted


$           0.06


$             —














Weighted average shares of Class A Common Stock outstanding:








Basic


85,171


83,820





Diluted


86,072


84,424





____________________

N/M = Not meaningful

 

Hagerty, Inc.

Condensed Consolidated Balance Sheets (Unaudited)




June 30,


December 31,



2024


2023






ASSETS


in thousands (except share amounts)

Current Assets:





Cash and cash equivalents


$                   120,936


$                   108,326

Restricted cash and cash equivalents


194,586


615,950

Investments


65,444


10,946

Accounts receivable


88,365


71,530

Premiums receivable


221,788


137,525

Commissions receivable


17,719


79,115

Notes receivable


60,285


35,896

Deferred acquisition costs, net


159,307


141,637

Other current assets


84,371


49,293

Total current assets


1,012,801


1,250,218

Investments


404,799


5,526

Notes receivable


1,291


17,018

Property and equipment, net


19,899


20,764

Lease right-of-use assets


47,219


50,515

Intangible assets, net


82,838


91,924

Goodwill


114,165


114,214

Other long-term assets


46,619


38,033

TOTAL ASSETS


$                1,729,631


$                1,588,212

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY





Current Liabilities:





Accounts payable, accrued expenses and other current liabilities


$                     76,509


$                     87,175

Losses payable and provision for unpaid losses and loss adjustment expenses


217,545


198,508

Commissions payable


101,100


108,739

Due to insurers


139,099


79,815

Advanced premiums


36,839


20,471

Unearned premiums


362,509


317,275

Contract liabilities


36,614


30,316

Total current liabilities


970,215


842,299

Long-term lease liabilities


46,689


50,459

Long-term debt, net


98,029


130,680

Warrant liabilities


42,099


34,018

Deferred tax liability


17,997


15,937

Contract liabilities


16,335


17,335

Other long-term liabilities


2,961


4,139

TOTAL LIABILITIES


1,194,325


1,094,867

Commitments and Contingencies



TEMPORARY EQUITY 1





Preferred stock, $0.0001 par value (20,000,000 shares authorized, 8,483,561 Series A Convertible Preferred
Stock issued and outstanding as of June 30, 2024 and December 31, 2023)

80,913


82,836

STOCKHOLDERS' EQUITY





Class A Common Stock, $0.0001 par value (500,000,000 shares authorized, 85,703,286 and 84,588,536 issued
and outstanding as of June 30, 2024 and December 31, 2023, respectively)

8


8

Class V Common Stock, $0.0001 par value (300,000,000 authorized, 251,033,906 shares issued and outstanding
as of June 30, 2024 and December 31, 2023)

25


25

Additional paid-in capital


555,040


561,754

Accumulated earnings (deficit)


(459,968)


(468,995)

Accumulated other comprehensive income (loss)


(667)


(88)

Total stockholders' equity


94,438


92,704

Non-controlling interest


359,955


317,805

Total equity


454,393


410,509

TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY


$                1,729,631


$                1,588,212

____________________

1

The Series A Convertible Preferred Stock is recorded within Temporary Equity because it has equity conversion and cash redemption features.

 

Hagerty, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)



Six months ended June 30,


2024


2023





OPERATING ACTIVITIES:

in thousands

Net income

$                    50,856


$                         514

Adjustments to reconcile net income to net cash from operating activities:




Change in fair value of warrant liabilities

8,081


2,269

Depreciation and amortization

20,574


24,140

Provision for deferred taxes

1,984


3,480

Share-based compensation expense

8,926


8,222

Non-cash lease expense

4,038


6,300

Other

(5)


3,433

Changes in operating assets and liabilities:




Accounts, premiums and commission receivable

(39,306)


(93,549)

Deferred acquisition costs, net

(17,670)


(32,756)

Losses payable and provision for unpaid losses and loss adjustment expenses

19,037


4,876

Commissions payable

(7,639)


24,664

Due to insurers

59,470


60,174

Advanced premiums

16,399


17,043

Unearned premiums

45,234


68,123

Operating lease liabilities

(4,531)


(5,960)

Other assets and liabilities, net

(43,193)


(20,416)

Net Cash Provided by Operating Activities

122,255


70,557

INVESTING ACTIVITIES:




Capital expenditures

(11,936)


(16,251)

Acquisitions, net of cash acquired

(3,843)


(7,084)

Issuance of notes receivable

(32,136)


(11,015)

Collection of notes receivable

19,354


6,235

Purchases of fixed maturity securities

(455,766)


(6,172)

Proceeds from sales of fixed maturity securities

7,570


Proceeds from maturities of fixed maturity securities

5,596


2,964

Purchases of equity securities

(9,407)


Other investing activities

631


22

Net Cash Used in Investing Activities

(479,937)


(31,301)

FINANCING ACTIVITIES:




Payments on long-term debt

(60,757)


(99,250)

Proceeds from long-term debt, net of issuance costs

25,482


71,590

Proceeds from issuance of Series A Preferred Stock, net of issuance costs


79,159

Contribution from non-controlling interest


600

Distributions paid to non-controlling interest unit holders

(5,320)


Payment of Series A Preferred Stock dividends

(5,600)


Funding of employee tax obligations upon vesting of share-based payments

(4,588)


Proceeds from issuance of Class A Common Stock under employee stock purchase plan


906

Net Cash Provided by (Used in) Financing Activities

(50,783)


53,005

Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents

(289)


909





Change in cash and cash equivalents and restricted cash and cash equivalents

(408,754)


93,170

Beginning cash and cash equivalents and restricted cash and cash equivalents

724,276


539,191

Ending cash and cash equivalents and restricted cash and cash equivalents

$                  315,522


$                  632,361

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 accounting principles generally accepted in the United States of America ("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 Condensed Consolidated Financial Statements prepared in accordance with GAAP.


Three months ended

June 30,


Six months ended
June 30,


2024


2023


2024


2023

Operational Metrics








Total Written Premium (in thousands)

$  321,173


$  275,895


$  539,459


$  458,745

Loss Ratio

41.1 %


42.0 %


41.1 %


41.7 %

New Business Count Insurance

89,049


80,140


148,335


131,902









GAAP Measures








Total Revenue (in thousands)

$  313,225


$  261,244


$  584,933


$  479,596

Operating Income (in thousands)

$    38,067


$    17,253


$    50,291


$        764

Net Income (in thousands)

$    42,657


$    15,539


$    50,856


$        514

Basic Earnings Per Share

$        0.09


$        0.03


$        0.06


$          —

Diluted Earnings Per Share

$        0.09


$        0.03


$        0.06


$          —









Non-GAAP Financial Measures








Adjusted EBITDA (in thousands)

$    53,113


$    34,367


$    80,440


$    41,072

Adjusted Earnings Per Share

$        0.12


$        0.05


$        0.16


$        0.01



June 30,


December 31,


2024


2023

Operational Metrics




Policies in Force

1,468,612


1,401,037

Policies in Force Retention

88.7 %


88.7 %

Vehicles in Force

2,510,566


2,378,883

HDC Paid Member Count

853,564


815,007

Net Promoter Score (NPS)

82


82

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, further 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) gains, losses and impairments related to divestitures; and (v) 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. 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, 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 or other financial statement data presented in our Condensed Consolidated Financial Statements as indicators of financial performance.Hagerty's Our 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:



Three months ended

June 30,


Six months ended
June 30,



2024


2023


2024


2023












in thousands

Net income

$       42,657


$       15,539


$       50,856


$            514

Interest and other (income) expense 1

(12,342)


(3,770)


(19,586)


(9,417)

Income tax expense

5,811


3,730


10,940


7,398

Depreciation and amortization

10,014


10,397


20,574


24,140

EBITDA

46,140


25,896


62,784


22,635

Restructuring, impairment and related charges, net


2,849



8,384

Change in fair value of warrant liabilities

1,941


1,754


8,081


2,269

Share-based compensation expense

4,383


4,018


8,926


7,934

Gain related to divestiture

(87)



(87)


Other unusual items 2

736


(150)


736


(150)

Adjusted EBITDA

$       53,113


$       34,367


$       80,440


$       41,072

____________________

1

Excludes interest expense related to the BAC Credit Facility, which is recorded within "Sales expense" on the Condensed Consolidated Statements of Operations.

2

Other unusual items includes $0.7 million of professional fees associated with the exchange offer related to our warrants for the three and six months ended June 30, 2024 and a net legal settlement recovery for the three and six months ended June 30, 2023.

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:



2024 Low


2024 High








in thousands

Net income

$            76,000


$            84,000

Interest and other (income) expense 1

(30,000)


(30,000)

Income tax expense

20,000


22,000

Depreciation and amortization

46,000


46,000

Change in fair value of warrant liabilities


Share-based compensation expense

18,000


18,000

Adjusted EBITDA

$           130,000


$           140,000

____________________

1

Excludes interest expense related to the BAC Credit Facility, which is recorded within "Sales expense" on the Condensed Consolidated Statements of Operations.

Adjusted EPS

We define Adjusted Earnings Per Share ("Adjusted EPS") as consolidated Net income, less changes in the fair value of our warrant liabilities, 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 THG; (iii) all issued and outstanding shares of our Series A Convertible Preferred Stock on an as-converted basis; (iv) all unissued share-based compensation awards; and (v) all unexercised warrants.

The most directly comparable GAAP measure to Adjusted EPS is basic earnings per share ("Basic EPS"), which is calculated as Net income 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 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

June 30,


Six months ended

June 30,



2024


2023


2024


2023












in thousands (except per share amounts)

Numerator:








Net income available to Class A Common Stockholders 1

$         7,912


$         2,388


$         4,955


$            305

Accretion of Series A Convertible Preferred Stock

1,839



3,677


Undistributed earnings allocated to Series A Convertible
Preferred Stock

627


17


395


1

Net income attributable to non-controlling interest

32,279


13,134


41,829


208

Consolidated net income

42,657


15,539


50,856


514

Change in fair value of warrant liabilities

1,941


1,754


8,081


2,269

Adjusted consolidated net income 2

$       44,598


$       17,293


$       58,937


$         2,783









Denominator:








Weighted average shares of Class A Common Stock
outstanding — basic 1

85,687


84,371


85,171


83,820

Total potentially dilutive securities outstanding:








Non-controlling interest units

255,368


255,499


255,368


255,499

Series A Convertible Preferred Stock, on an as-converted
basis

6,785


6,785


6,785


6,785

Total unissued share-based compensation awards

8,228


7,022


8,228


7,022

Total warrants outstanding 3

3,876


19,484


3,876


19,484

Potentially dilutive shares outstanding

274,257


288,790


274,257


288,790

Fully dilutive shares outstanding 2

359,944


373,161


359,428


372,610










Basic EPS 1

$           0.09


$           0.03


$           0.06


$             —










Adjusted EPS 2

$           0.12


$           0.05


$           0.16


$           0.01

____________________

1

Numerator and Denominator of the GAAP measure Basic EPS.

2

Numerator and Denominator of the non-GAAP measure Adjusted EPS.

3

For the three and six months ended June 30, 2024, the dilutive impact of the outstanding warrants included in the calculation of Adjusted EPS represents the number of Class A Common Stock shares issued in relation to the warrant exchange transaction that closed in July 2024.

 

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SOURCE Hagerty

Copyright 2024 PR Newswire

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