Thank you all for joining us to discuss Hagerty's results for the first quarter of twenty twenty five. I'm joined this morning by Mikhail Hagerty, Chief Executive Officer and Chairman and Patrick McClimate, Chief Financial Officer. During this morning's conference call, we will refer to an accompanying presentation that is available on Hagerty's Investor Relations section of the company's corporate website at investor.haagerty.com. Our earnings release, slides and letter to stockholders covering this period are also posted on the IR website as well as our eight ks filing. Today's discussion contains forward looking statements and non GAAP financial metrics. As described further on Slide two of the earnings presentation. Forward looking statements include statements about our expected future business and financial performance, and are not promises or guarantees of future performance. They are subject to a variety of risks and uncertainties that could cause the actual result to differ materially from our expectations. For a discussion of material risks and important that could affect our actual results, please refer to those contained in our filings with the SEC, which are also available on our Investor website and at sec.gov. The appendix of the presentation also contains reconciliations of our non GAAP metrics to the most directly comparable GAAP measures that are further supplemented by this morning's eight ks filing.

And with that, I will turn the call over to Mikhail.

Thanks, Jay, and good morning, everyone.

We appreciate you taking the time to join Hagerty's first quarter twenty twenty five earnings call. Northern Michigan is known for its long snowy winters, and this year was no exception. As the last of the snowbanks have finally melted, our Hagerty members are busy preparing preparing their toys for the driving season, and we will be there to help them protect and enjoy their special cars. We are also ready to welcome a record number of new members who are buying their first enthusiast vehicle or transitioning their vehicle coverage to Hagerty, given our guaranteed value proposition, and the excellent service from Hagerty's passionate team of auto enthusiasts.

One team Hagerty loves your cars as much as you do. And it shows in our results with yet another solid quarter of of top and bottom line growth during the first three months of 2025. So let me start by thanking our 1,700 Hagerty team members for their great execution as we position Hagerty to create value for shareholders for many years to come. Let me dig into the key highlights from our first quarter shown on slide three.

Where total revenue increased 18% new business count fueled a 12% increase in written premium, and a 13% growth in our commission revenue. Earned premium from our risk taking entity, Hagerty Reinsurance, increased 12% and membership, marketplace, and other revenue jumped 60% propelled by successful auctions at the Emilia Conqueror and the Academy of Arts University in February. Moving to profitability, during the first three months of this year, our operating margin jumped another three sixty basis points, resulting in net income gains of 233% and adjusted EBITDA growth of 45%. Over a two year period, first quarter net income increased by 42,000,000 and adjusted EBITDA by 33,000,000 And we believe the best is yet to come for our margin expansion story, thanks to increasing economies of scale, as we double our policies in force, to 3,000,000 by 2030. Let's move on to slide four and remind you of our 2025 strategic priorities built around three themes, simpler, faster, and better integrated. First and most impactful to our long term trajectory is to expand our specialty insurance offerings to protect more of the collectible vehicle TAM including the modern enthusiast vehicle space.

Second is to simplify and better integrate our membership experience across products and services, creating revenue synergies and driving cost efficiencies.

Third is to expand our Marketplace business internationally.

Leveraging the trust we have built in The United States. This includes our upcoming auction at the Villa D'Este Concourso at Lake Como, Italy, the first of our multiyear partnership with BMW at this prestigious event.

Fourth, we will continue to leverage Hagerty's unique and authentic car culture as a key differentiator for future members.

The engagement and excellence from one team Hagerty creates a repeatable winning formula for stakeholders.

We are investing in the major technology platforming that will enable scalable growth while delivering excellent experiences for our members with greater efficiency.

Slide five goes into more detail, around the investments we are making in our technology transformation. Including the transition to the cloud based insurance platform Duck Creek, We are pleased to report that our 2025 technology investments are running on schedule and on budget. As we discussed at length last quarter, these near term investments should result in greater long term efficiency for our teams and better experiences for our members, which should enable future growth margin expansion.

Our technology spend should trend down as percent of revenue, as we accelerate the top line in twenty twenty six twenty twenty seven and drive margins higher.

Before Patrick digs into the numbers, I want to highlight a few more reasons why we believe that we are such a compelling investment opportunity. Hagerty is a US centric company with over 90% of our generated in The United States, positioning us well to weather noise from tariffs. And we operate on a highly regulated and mandated industry that enjoys great defensive characteristics.

This creates predictable revenue streams, especially given our excellent retention and persistent share gains for the Hagerty brand.

Our track record speaks to a highly differentiated business model that can thrive regardless of the economic cycle.

Our compound annual growth rate in written premiums since 02/2005 is over 13%, But even during the darkest moments of the great financial crisis, we maintained high single digit written premium growth.

While volatile market conditions might make consumers think twice about buying another special car this year, or cause consumers to forgo a vacation. The extra time spent at home creates opportunities to enjoy their existing enthusiast vehicles.

Pull it all together, we believe that we are well positioned to deliver high rates of profitable growth for many years to come. Let me now turn the call over to Patrick to share more details on our first quarter results and our reaffirmed 2025 outlook. Thank you, and good morning, everyone. Let me dig to the first quarter in more detail.

Shown on slide six and seven. In the first quarter, we delivered 18% growth in total revenue to $320,000,000 New business count gains combined with industry leading retention of 89% drove a 12% jump in written premium. Mission and fee revenue jumped 13% to over 100,000,000 in line with written premium gains on stable underwriting results.

Earned premium grew 12% to 169,000,000 Our loss ratio of 42% incorporates $10,000,000 in losses from the Southern California wildfires. And membership marketplace and other revenue increased 60% to $50,000,000 Our BroadHour team delivered excellent results at both Amelia and the American Academy of Art University sale. I would note that the no reserve AAU auction epitomized the power of the Hagerty ecosystem. We utilized the strength of our live auction platform and team of specialists our valuation expertise, and our strong balance sheet to acquire the collection and sell 105 vehicles in a jam packed room over 500 registered bidders present. In just our third year, we have quickly established ourselves as a leading auction house with unparalleled automotive expertise across Hagerty's products. Focused on cultivating trusted long term relationships with our customers. Needless to say, we are very excited about our upcoming auction at historic Villa De Estes Concord, the first of many auctions to be held outside of The United States. Turning now to profitability shown on Slide eight, We reported an operating profit of $26,000,000 in the first quarter. A 110% increase as operating margins jumped three sixty basis points to 8% in the seasonally small quarter for us.

While there were some modest timing items that benefit the quarter, we are maintaining tight discipline on the cost structure of our MGA to efficiently translate our double digit commission gains, into profit growth. G and A increased 12% due primarily to higher software licensing costs from our technology transformation and salaries and benefits grew 5% due to merit increases. Our MGA membership and marketplace businesses accounted for nearly half of our total revenue in the quarter, with rapidly expanding margins. One team Hagerty is making great strides forward on our long term growth opportunities, including the rollout of the State Farm Classic Plus program to 25 states by the end of twenty twenty five. Which should power accelerated commission revenue growth for MGA into 2026 and 2027. We are also tracking well to launch Enthusiast Plus in Colorado later this year as we target more of the modern Enthusiast vehicles we are currently declining. Adjusted EBITDA increased 45% to 40,000,000 and is up six fold from the first quarter of twenty twenty three. Adjusted EBITDA margins continued their steady march higher, surpassing 12% in the quarter, as we improved the efficiency of our business model. Our growing capital base at Hagerty Re and balanced investment strategy resulted in $7,000,000 investment income despite the market volatility.

In total, delivered first quarter net income of 27,000,000 compared to $8,000,000 a year earlier an increase of 233%. Net income attributable to Class A common shareholders was million after attribution of earnings to the non controlling interest and accretion on the preferred stock. And GAAP basic and diluted earnings per share was $07 based on 90,000,000 shares of Class A common stock outstanding. We ended the quarter with $128,000,000 in cash, $147,000,000 of total debt, which includes $32,000,000 in back leverage for our profitable portfolio of loans to customers that are collateralized by collectible cars. We also increased the capacity of our unsecured credit agreement to $375,000,000 in the quarter adding BMO to the syndicate. The amended facility has lower borrowing costs, and a maturity of 02/1930. Let me wrap up with our 2025 outlook shown on slide nine. Given the solid first quarter results and business momentum, we are reaffirming our 2025 guidance for the top line revenue growth of 12% to 13%. Powered by 13% to 14% gains in written premium. We expect to deliver strong operating leverage to the bottom line, with net income of $102,000,000 to $110,000,000 up 30% to 40%. And adjusted EBITDA of 150 to $160,000,000 up 21% to 29% In summary, we are executing well against our twenty twenty five strategic priorities and positioning Hagerty for high rates of compounding profit growth.

With that, us now open the call to your questions.

Before pressing the star keys. One moment please while we poll for questions. And the first question comes from the line of Pablo Singel with JPMorgan. Please proceed.

Hi, good morning. Patrick, you touched on this a bit in your comment, but I was wondering if you could provide a refresh on the relative margins you generate on marketplace revenues versus the rest of Hagerty? I'd assume in that quarter like this one where you saw strong growth in marketplace, probably got a decent amount of mix benefit with respect to margins just on top of normal operating leverage.

So if you could just maybe parse out the relative contribution of marketplace this quarter or whether in terms of dollar EBITDA or basis points margins, that would be helpful. Thank you.

Sure. Good morning, Pablo. Thanks for the call for the question. Yes, we've talked about the driver in this quarter really was the live auction business. And so we had the AU Sale That Went Quite Well. We Had Amelia Island. And so we really we benefited from strong sales in both of those. I think what we talked about is the way we think about those sales really on a contribution profit basis. And so you kind of design a sale where you know what your costs are to put on that sale. Then you try to put together a book of business that you in a position where you're going to cover all those costs and produce reasonable margins. And so before you get to sort of overhead allocation, those kind of things, these are designed that if they go well, they should be quite profitable. So contribution profit margins, you know, 30%, 35% type numbers. And so when you have two good sales, that's the kind of contribution we were getting in the first quarter. And then, of course, there's overhead and central costs and those kind of things that you've got to burden the business for.

But it is quite profitable. And when you compare that to the other parts of our business, risk taking business is about a 10% profit margin business.

The outside of risk taking in insurance, we're sort of mid to high single digits right now. But expanding. That will continue to grow over time. The nature of the marketplace business is it when working well, it will be a very profitable business on a margin basis. Hopefully, that's helpful.

Yes, it was. Thanks for the detail. And then just jumping to another topic, strong risk result this quarter, right, with the threshold coming in the low 40s even with the catastrophe. So if you ex out those catastrophes, that puts your loss ratio in the mid-30s, right, which I think is much lower than where you've historically run. So if you could just provide perspective on what happened ex catastrophes with respect to the loss ratio? Thank you.

Well, the first thing is just how we think about seasonality and losses. And so we think about it is we going into a year, we come up with what we assume will be our full year loss ratio. And then we book to that So typically in the first and second quarter, we're just booking to that full year loss ratio even though that those are those typically seasonally low quarters for us from a loss perspective, And then in the third quarter and fourth quarter, we'll either keep booking to that estimate that we had at the beginning of the year or we'll make adjustments one way or the other. The reason why this all makes sense for us is we're so seasonal. The driving activity happens late Q2 and Q3. So it's not until we get to the end of Q3 that we've got a sense what the driving season look like And then that's also of Q3, you're kind of right in the midst of what cat season. And so that's when we'd make any adjustment. Way to think about what happened in the first quarter is we booked to our annual number It includes what happened in California with cats.

And so you're right, if you stripped out those cats, you would be down in the 30s. And typically, first quarter is a much lower loss ratio quarter for us. So the actual experience is going to be in the 30s. We book to something that's more or less what we think the full year estimate will be. That that's the mechanics behind it. Did that answer the question?

Yes. It does. Thanks again.

You bet. Thanks, Pablo.

The next question comes from the line of Matt Carletti with JPM Securities. Please proceed. This is David on for Matt. Had a couple questions, if that's alright. First, if you could just provide an update on the impact of tariffs A large peer earlier this reporting season suggested a onetime mid to high single digit loss loss cost impact, presumably slightly higher in auto. And lower in home. So how would the entity impact on Hagerty's book compare? Sure. Thanks for the question, David. Good morning. The way we're thinking about tariffs, we don't see it as having what I call a direct impact on our business. We can start with the insurance business. And the way that we think about it is over time, you would expect that it would create some sort of upward pressure on claims costs related to severity The tricky part for us is, so many vehicles are big dispersion in terms of the types of vehicles and the age of vehicles. And the supply chains for parts for each of those vehicles can be very different. And oftentimes, a lot of these things [indiscernible] these are not on the run parts. Right? These are things that are being manufactured in small batches, and oftentimes, they're manufactured domestically.

And so while there should be over time some upward pressure, we think it will be quite muted for our business. So really hard to predict because of the nature of the supply chains for the different cars that we're we're serving. But we think it will be pretty muted for us. We also think about it in terms of the marketplace business. And our interpretation of the rules, and obviously things are moving around. But our interpretation is that cars that are 252.5% tariff. It's still a 2.5% tariff. So we think about high value cars being imported into The United States. And those are the kind of cars that we're helping people sell at auction or privately. No change from tariffs on that side. So we'll watch and see. We're monitoring it closely, but we think it will be relatively muted for us.

That's very helpful. Thank you. And just one more question. Last quarter, you spoke a bit about how your business is seasonal. Start seeing more shopping activity come March or April. You also mentioned how the LA fires were having a cooling effect in that activity. A bit, similar to what you've seen in other events or cold weather events. So sitting here now in May, can you update us on what you've seen over the past thirty to sixty days with respect to shopping behavior? Sure. Yeah. Good question. You know, it's interesting.

There's industry wide, you're seeing a lot of shopping activity right now. You're seeing some of the large daily driver insurers really leaning in from a marketing perspective. And driving that shopping activity. Some of that flows through us. Just activity creates more at the top of the funnel. So our quote volume continues to be strong. And that has held up over the course of the first quarter into the second quarter as well. We have seen a little bit slower growth than what we had anticipated and planned for. And we did our diagnostic of that, there's a few things going on. Some is the factors you described, right? When there are these large events that typically results in a pause, particularly for our type of vehicle, Some of it can be weather related, and it was a long winter and sort of a tough winter where people were not able to get their cars out on the road early. And so that can tamp down some of the activity for our type of cars And then there's a number of changes that we've made internally to make sure that we're taking friction out of, you know, sort of our quote flow.

And so we're trying different things to make sure that we're driving the right level of activity. A little bit slower than what we would have anticipated. We've always talked about 2025 being an interesting year where it's very back end loaded in terms of new customer growth. And a lot of that is related to State Farm, which ramps up now in seven states with State Farm. We entered three more states in the last quarter. We're going to start the process of doing conversion of State Farm's existing customers The letters for our first four states have already gone out. So that means by summertime, we'll be converting those customers And then we'll do the same with the three states that we've just entered. The end of this year, we think we'll be in a around 25 or more states with State Farm. And so that really drives a lot of the growth that we are seeing occur this year. It will be in the second half. So off to a solid but sort of not as quick start as we anticipated for 2025. But we think that it will ramp up quite quickly as we get into the driving season and particularly the State Farm activity.

Thank you.

Ladies and gentlemen, And the next question comes from the line of Mark Hughes with Tru Securities. Please proceed.

Yes, thank you. Good morning.

The Hey, Mark. Membership of good morning. Membership and marketplace revenue up very strong this quarter. 60%. Sounds like you've got some good events in the pipeline. Any sense or visibility for what it might be for the full year in terms of the growth there?

Yes. As we said on the call, we've affirmed our guidance and you should interpret that to be across the entire business. Good start to the year in live auctions. We've got scheduled for the balance of the year We had one additional auction that happened in the second quarter, which was a good outcome. That was our Porsche only sale that we did at Air and Water a couple of weeks ago. And so that came kind of in line with what we did in the previous year. As always, Monterrey is big for us, and so that will be in August. We've got the new sale coming up in Italy. All that's baked into our guidance. And so off to a good start, but it's a little bit early for us conclude that we need to change our guidance on it. But we're pleased with the outcome so far. Very good. You had mentioned the enthusiast cards that you've been declining you know, but you're taking steps, I think, to like, to open up that opportunity. Could you expand on that? What was your your point there? Oh, Mark, it's Mikhail. I'll comment on that. As we've talked about we're launching really a new program that will operate in parallel with our core program We're referring to it as Enthusiast Plus.

And this is really in response to this changing both I guess, kind of demographic and vehicle preference trends that we've been tracking for a number of years, where as younger buyers and collectors get into the space, they're interested in newer newer cars that our core classic collector car insurance program and pricing structure didn't entirely contemplate. So we get a lot of that interest today. And we turn a lot of it away for pricing or underwriting reasons. And so our this whole effort to acquire and stand up the driver's edge insurance company, our Duck Creek Apex technology platform, is really in response to that. So we can widen the aperture of our underwriting funnel and to be able to write more of the business that's already coming our way. So excited about it, but it's complicated long process to get one of these new programs and insurance companies up and running, we're excited to get that going a little bit later this year and starting in Colorado. And then we'll be in my view, off to the races. It's a dream of ours to get it going, to be able to bring more people into the Hagerty world and and that's how we're going to do it.

Yeah.

Are these cars are are they, kind of, more in the border? They they're more like daily drivers or people drive them more often.

But they're they still are older, more classic vehicles. Is that the complication?

Well, I like to remind people that the Mazda Miata is now over 30 years old, has a type of car that we get a lot of interest in. And these are $10.15 $20,000 cars that are beloved by the people that own them And yes, they can be driven more. Many of them wasn't that long ago that they were still under warranty but they are the special two seater convertible that you can go out and enjoy on a sunny afternoon. So the usage profile generally matches that we've been doing for all of these decades, but the car is a little bit more modern. A little bit more reliable. And yes, sometimes you will see them driven more than 500, 600, 800 miles a year. But still, we think within a very under under writable, a very pricing target that we can get similar kind of results that we've been able to achieve through the years. So we write some of this business today. We've kind of stretched our pricing and rating models about as far as we can with those, and that's why we're standing up the new program.

Understood. And Patrick, on the Duck Creek spending, in your reaffirmed outlook, highlight again $10,000,000 from the wildfires and then $20,000,000 from the Duck Creek technology spend When we roll that forward into 2026, how much of that recurs? Or would be ongoing? Or does that just isolated to 2025? If you could remind me on that, that would be great.

Sure. So the $20,000,000 that we talked about about two thirds of that is technology related. And really is what we call Apex, which is the biggest part of Apex is Duck Creek, but it's also the other changes in technology and integrations as part of the modernization of our stack. And so that twothree is technology related The other third really is people related. And some of that is standing up the team that we need to take on our European expansion within marketplace. Not just doing one auction over there. We're going to be in business over there. And so we're building out a team and and capabilities So it's related to all the volume that will be coming online for State Farm. Step up for some of that activity. So that's how we got to that 20,000,000 And [indiscernible] the intent was to help people understand that that is a that compresses our margins in 2025. We are spending those dollars now in support of growing our business. And we're spending those dollars, in some cases, in advance of the revenue. Right? So we're hiring up a team in Europe We're having our first auction in May.

We won't be at a full schedule for a couple of years. So it's a margin drag. As we get to that stabilization. Same concept with State Farm, right? We've got hire those people and and we're onboarding them before the full revenue comes online. And, obviously, the case for technology that was the intent is to give people a way to bridge sort of the margin story. Our our margins have expanded quite rapidly. The rate of expansion slows in 2025. Largely because of this 20,000,000 We're not signaling that it's a one time, right? Those dollars don't go away. The technology spend we spend a bunch of capital dollars that turn into depreciation, and then we'll be paying for the licenses for the new technology platform. And the heads obviously don't go away because we've got a bigger book of business on a go forward basis. So not a onetime concept. It's more of a a bridge concept.

Is that helpful?

It is. Yeah. It becomes kind of the baseline of expenses, but then you're layering on the revenue associated with that and leveraging that over time. It sounds like the way to think about that. Yep. So that's it. Yeah. Okay.

Very good.

Thank you.

And the last question will come again from the line of Pablo Singel with JPMorgan. Please proceed.

Hi. Thanks for taking my follow-up. So I just wanted to follow-up quickly on the $20,000,000 of annual expenses. How much of that showed up this quarter? And how should that phase into the year? Thank you.

Pretty ratably, actually, because the the technology, we signed up all those licenses. We're we're paying for them now. Some of the some of the work is still construction in progress and it hasn't fully been put into action, and therefore, we haven't started depreciation on it.

Then maybe a little bit of wrap up that over the course of the year. The people [indiscernible] most of the hiring happens in [indiscernible] 1 and Q2 for that. So I would say it's probably of that $20,000,000 there's probably 15% -ish was in the first quarter. Then just kind of gradually increase it from there. [indiscernible] ballpark? Let's good way to think about it.

Okay. Thank you.

Thank you. This will conclude the question and answer session. I'd like to hand the call back Mikhail Hagerty for closing remarks.

Thank you, operator, and thanks to all of you for your continued support and interest in Hagerty. Driving season is here and so is show season. Our Greenwich Connecticut Concorde delegates weekend is coming up on May 31 and June 1, Greenwich, Connecticut. And we will also be hosting our annual investor event on Friday, May 30 at the Del Mar Greenwich Harbor right there on the site. Of the Concord event. So hopefully, some of you will be interested in joining us there, and we look forward to seeing you We hope you will be able to learn more about us as think about positioning our company to double our PIF count 3,000,000 by 02/1930, through our highly differentiated business model. The entire Greenwich Concourse weekend should be a lot of fun and hope you can attend. And for those of you who happen to find yourselves in Italy, the weekend before, we would love to have you join us at the Villa D'Este auction in Concord on May. Until then, never stop driving.

This concludes today's conference. You may disconnect your lines at this time. Enjoy the rest of your day.