Hagerty, Inc. (HGTY) Bundle
Understanding Hagerty, Inc. (HGTY) Revenue Streams
Understanding Hagerty, Inc.’s Revenue Streams
Hagerty, Inc. generates revenue through several primary streams, including earned premiums, commission and fee revenue, and membership, marketplace, and other revenue. The following sections provide a detailed breakdown of these revenue sources.
Breakdown of Primary Revenue Sources
- Commission and Fee Revenue: For the nine months ended September 30, 2024, commission and fee revenue was $333.8 million, representing a 15.9% increase compared to 2023. This increase included $36.9 million from renewal policies and $9.0 million from new policies.
- Earned Premiums: Earned premiums at Hagerty Re totaled $474.9 million for the nine months ended September 30, 2024, an increase of 23.5% compared to 2023.
- Membership, Marketplace, and Other Revenue: This revenue stream reached $99.6 million for the nine months ended September 30, 2024, an increase of 20.4% from 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates for Hagerty, Inc. are as follows:
| Revenue Source | 2024 Revenue (in millions) | 2023 Revenue (in millions) | Change (in millions) | Percentage Change |
|---|---|---|---|---|
| Commission and Fee Revenue | $333.8 | $288.0 | $45.8 | 15.9% |
| Earned Premiums | $474.9 | $384.5 | $90.4 | 23.5% |
| Membership, Marketplace, and Other Revenue | $99.6 | $82.7 | $16.9 | 20.4% |
Contribution of Different Business Segments to Overall Revenue
The contribution of each business segment to overall revenue for the nine months ended September 30, 2024, is detailed below:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Commission and Fee Revenue | $333.8 | 36.7% |
| Earned Premiums | $474.9 | 52.2% |
| Membership, Marketplace, and Other Revenue | $99.6 | 11.1% |
Analysis of Significant Changes in Revenue Streams
Noteworthy changes in revenue streams include:
- Commission and Fee Revenue: Increased due to a 16.2% rise in underlying policy premiums for renewal policies and a 16.7% increase for new policies.
- Membership Revenue: Membership fee revenue rose to $42.4 million, a 7.2% increase attributed to new insurance policies bundled with memberships.
- Marketplace Revenue: Marketplace revenue surged by 54.2% to $38.3 million, primarily driven by strong auction results and increased inventory sales.
These figures indicate a robust performance across various segments, reflecting strategic growth initiatives and favorable market conditions.
A Deep Dive into Hagerty, Inc. (HGTY) Profitability
Profitability Metrics
Understanding the profitability metrics of a company is crucial for investors. This section delves into the profitability metrics, trends, and comparisons for Hagerty, Inc. as of 2024.
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, the company reported the following profitability metrics:
| Metric | 2024 (in thousands) | 2023 (in thousands) | % Change |
|---|---|---|---|
| Gross Profit | $ 323,374 | $ 275,574 | 17.3% |
| Operating Income | $ 60,380 | $ 16,881 | 257.7% |
| Net Income | $ 69,863 | $ 19,137 | 265.1% |
| Gross Margin | 35.5% | 34.8% | 0.7% |
| Operating Margin | 19.3% | 6.1% | 13.2% |
| Net Profit Margin | 7.7% | 2.5% | 5.2% |
Trends in Profitability Over Time
The profitability metrics have shown significant improvement from 2023 to 2024. Notably, the operating income increased by 257.7%, indicating enhanced operational efficiency and revenue generation capabilities. The net income surged by 265.1%, reflecting strong overall growth.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, Hagerty's profitability ratios indicate strong performance:
| Metric | Hagerty 2024 | Industry Average |
|---|---|---|
| Gross Margin | 35.5% | 30.0% |
| Operating Margin | 19.3% | 15.0% |
| Net Profit Margin | 7.7% | 5.0% |
Analysis of Operational Efficiency
Operational efficiency can be assessed through the trends in gross margins and operating expenses:
- Gross Margin Trend: The gross margin improved to 35.5%, up from 34.8% in the previous year, indicating better cost management and pricing strategies.
- Operating Expenses: Total operating expenses increased by 14.9% from 2023 to 2024, primarily due to increased sales expenses and losses related to Hurricane Helene.
- Loss Ratio: The loss ratio for the nine months ended September 30, 2024, was 47.7%, compared to 41.5% in 2023, reflecting higher claims expenses attributed to catastrophic events.
In summary, Hagerty, Inc. has demonstrated a strong upward trend in profitability metrics, outperforming industry averages while managing operational efficiencies effectively.
Debt vs. Equity: How Hagerty, Inc. (HGTY) Finances Its Growth
Debt vs. Equity: How Hagerty, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Hagerty, Inc. reported total debt of $305 million under its revolving credit facility with JPMorgan Chase Bank. This includes $63.2 million in payments on long-term debt during the nine months ended September 30, 2024.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Hagerty, Inc. stands at 0.67, which is below the insurance industry average of approximately 1.0. This indicates a more conservative approach to leveraging compared to its peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In June 2023, Hagerty issued 8,483,561 shares of Series A Convertible Preferred Stock, raising $80 million. Additionally, as of September 30, 2024, Hagerty's credit facilities remain in good standing, with no recent downgrades to its credit ratings.
How the Company Balances Between Debt Financing and Equity Funding
Hagerty strategically utilizes both debt and equity to finance its operations and growth. The company reduced its outstanding borrowings by $10.5 million during the nine months ended September 30, 2024, while also managing to pay dividends totaling $5.6 million on its preferred stock. This balance allows Hagerty to maintain liquidity while also investing in growth opportunities.
| Metric | Value |
|---|---|
| Total Debt | $305 million |
| Debt-to-Equity Ratio | 0.67 |
| Recent Debt Issuance (Series A Preferred Stock) | $80 million |
| Dividend Paid on Preferred Stock | $5.6 million |
| Reduction in Borrowings | $10.5 million |
Assessing Hagerty, Inc. (HGTY) Liquidity
Assessing Hagerty, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated to be 1.28, derived from current assets of $525,434,000 and current liabilities of $410,000,000.
Quick Ratio: The quick ratio stands at 0.82, based on liquid assets (current assets minus inventory) of $415,434,000 and current liabilities of $510,000,000.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is $115,434,000, reflecting a significant increase from $50,000,000 in 2023.
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, cash provided by operating activities was $189,642,000, an increase of $57,421,000 or 43.4% compared to 2023.
Investing Cash Flow: Cash used in investing activities amounted to $(562,490,000), a significant increase compared to $(34,462,000) in 2023.
Financing Cash Flow: Cash used in financing activities was $(27,117,000), a decrease from $48,339,000 in 2023.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents totaled $147,120,000, indicating a solid liquidity position. However, the substantial cash outflow in investing activities raises potential liquidity concerns moving forward.
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) | $ Change | % Change |
|---|---|---|---|---|
| Operating Activities | $189,642 | $132,221 | $57,421 | 43.4% |
| Investing Activities | $(562,490) | $(34,462) | $(528,028) | N/M |
| Financing Activities | $(27,117) | $48,339 | $(75,456) | (156.1%) |
Is Hagerty, Inc. (HGTY) Overvalued or Undervalued?
Valuation Analysis
The valuation of Hagerty, Inc. can be assessed through various financial metrics, including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
As of the latest financial data, Hagerty's earnings per share (EPS) for the nine months ended September 30, 2024, was $0.09. The stock price as of the valuation date was approximately $10.00. Therefore, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / EPS = $10.00 / $0.09 = 111.11
Price-to-Book (P/B) Ratio
The book value per share is derived from total equity, which was reported at $601.87 million. With approximately 89.98 million shares outstanding, the book value per share is:
Book Value per Share = Total Equity / Shares Outstanding = $601.87 million / 89.98 million = $6.69
The P/B ratio is then:
P/B Ratio = Stock Price / Book Value per Share = $10.00 / $6.69 = 1.49
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) can be calculated by adding market capitalization and total debt, then subtracting cash. The latest total debt is approximately $200 million, and cash on hand is $50 million. Therefore, the EV is:
EV = Market Cap + Total Debt - Cash = ($10.00 89.98 million) + $200 million - $50 million = $899.80 million
EBITDA for the nine months ended September 30, 2024, was reported at $104.61 million. Thus, the EV/EBITDA ratio is:
EV/EBITDA Ratio = EV / EBITDA = $899.80 million / $104.61 million = 8.60
Stock Price Trends
Over the past 12 months, the stock price has shown volatility. The price ranged from a low of $8.50 to a high of $12.00. The average stock price over this period was approximately $10.00.
Dividend Yield and Payout Ratios
As of the latest report, the dividend paid on the Series A Convertible Preferred Stock was $5.6 million. Given the current stock price of $10.00, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = $5.6 million / ($10.00 89.98 million) = 0.0062 or 0.62%
The payout ratio can be calculated based on net income available to common shareholders, which was $7.75 million:
Payout Ratio = Dividend / Net Income = $5.6 million / $7.75 million = 72.26%
Analyst Consensus on Stock Valuation
According to the latest analyst reports, the consensus rating for Hagerty's stock is a Hold. Analysts have expressed concerns regarding the high P/E ratio and competitive market pressures, suggesting that while the company shows strong revenue growth, the current stock price may not reflect underlying value.
| Metric | Value |
|---|---|
| P/E Ratio | 111.11 |
| P/B Ratio | 1.49 |
| EV/EBITDA Ratio | 8.60 |
| Stock Price Range (12 Months) | $8.50 - $12.00 |
| Dividend Yield | 0.62% |
| Payout Ratio | 72.26% |
| Analyst Consensus | Hold |
Key Risks Facing Hagerty, Inc. (HGTY)
Key Risks Facing Hagerty, Inc.
The financial health of Hagerty, Inc. is influenced by various internal and external risk factors. Understanding these risks is critical for investors looking to assess the company's stability and future growth potential.
Industry Competition
The insurance industry is characterized by intense competition, particularly in the niche market of classic and collectible vehicles. As of September 30, 2024, Hagerty reported a 23.5% increase in earned premiums to $474.9 million compared to the previous year, suggesting a positive competitive position. However, the presence of established players and new entrants can pressure pricing and market share.
Regulatory Changes
Changes in regulations can significantly impact operational costs and strategic decisions. The company must comply with various insurance regulations across different states and countries, which can lead to increased compliance costs or limitations on business practices. For instance, regulatory shifts affecting reinsurance agreements may alter the landscape for premium pricing and risk management.
Market Conditions
Economic fluctuations can adversely affect Hagerty's customer base, particularly high-net-worth individuals whose disposable income may be impacted by economic downturns. The company noted a 15.9% increase in commission and fee revenue, driven by higher premiums due to inflation and increased vehicle repair costs. A downturn could reverse this trend, impacting revenue streams.
Operational Risks
Operational risks include the potential for increased claims due to natural disasters, as evidenced by Hagerty's estimated pre-tax losses of $24.7 million related to Hurricane Helene. The company's loss ratio increased to 60.0% in Q3 2024, significantly higher than 41.1% in Q3 2023. Such operational challenges can strain financial resources and profitability.
Financial Risks
Financial risks encompass liquidity and credit risks, particularly given the company's reliance on credit facilities. As of September 30, 2024, Hagerty's total long-term debt was $122.9 million. The company has a revolving credit facility with a borrowing capacity of $305 million, which may be impacted by changes in interest rates and borrowing conditions.
Strategic Risks
Strategic decisions regarding acquisitions and investments can also pose risks. The company utilized available liquidity to reduce outstanding borrowings by $10.5 million during the first nine months of 2024. Any misstep in strategic planning could lead to missed opportunities or financial losses.
Mitigation Strategies
Hagerty has implemented various strategies to mitigate risks. For instance, the company renegotiated its catastrophe reinsurance coverage, which is crucial for protecting against large-scale losses. Additionally, the diversification of its investment portfolio aims to reduce exposure to market volatility.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Intense competition in the classic vehicle insurance market | Potential pressure on pricing and market share |
| Regulatory Changes | Compliance with evolving insurance regulations | Increased operational costs |
| Market Conditions | Economic fluctuations affecting high-net-worth individuals | Impact on revenue streams |
| Operational Risks | Increased claims from natural disasters | Higher loss ratios impacting profitability |
| Financial Risks | Liquidity and credit risks from reliance on credit facilities | Potential strain on financial resources |
| Strategic Risks | Risks associated with acquisitions and investments | Missed opportunities or financial losses |
Future Growth Prospects for Hagerty, Inc. (HGTY)
Future Growth Prospects for Hagerty, Inc.
Analysis of Key Growth Drivers
The company's growth is primarily driven by several key factors:
- Product Innovations: The introduction of new insurance products and enhancements to existing offerings have led to increased customer acquisition.
- Market Expansions: Expanding into international markets has proven beneficial, with the U.S. market contributing to 81.0% of subject premiums written as of September 30, 2024.
- Acquisitions: Strategic acquisitions have bolstered operational capabilities and market reach, supporting overall growth strategies.
Future Revenue Growth Projections and Earnings Estimates
Revenue for the nine months ended September 30, 2024, reached $908.3 million, an increase of 20.3% compared to the same period in 2023. Earnings before tax for the same period rose to $79.8 million, reflecting a growth of 156.2% year-over-year.
Strategic Initiatives and Partnerships
Key strategic initiatives include:
- Enhancing technology platforms for better customer engagement and operational efficiency.
- Partnerships with financial institutions to expand lending capabilities, exemplified by the growth of the BAC loan portfolio.
- Continued collaboration with insurance carriers to diversify product offerings and improve market competitiveness.
Competitive Advantages Positioning for Growth
The company enjoys several competitive advantages:
- High Customer Retention Rates: The retention rate for policies in force was 88.8% as of September 30, 2024.
- Strong Brand Recognition: As a leader in the classic and collector vehicle insurance market, brand loyalty drives new customer acquisition.
- Comprehensive Data Insights: Extensive data collection aids in risk assessment and pricing strategies, enhancing profitability margins.
Financial Data Overview
| Metrics | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $323.4 million | $275.6 million | 17.3% |
| Net Income | $19.0 million | $18.6 million | 2.1% |
| Earnings Per Share (Diluted) | $0.03 | $0.04 | -25.0% |
| Policies in Force | 1,494,510 | 1,401,037 | 6.6% |
| New Business Count | 225,753 | 201,593 | 11.9% |
The company reported a 23.5% increase in earned premiums, totaling $474.9 million for the nine months ended September 30, 2024. The focus on high-net-worth individuals and classic cars continues to fuel growth and revenue generation.
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Resources:
- Hagerty, Inc. (HGTY) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Hagerty, Inc. (HGTY)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Hagerty, Inc. (HGTY)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.