Executive Summary

Q1 2025 was stronger-than-expected: revenue up 17.6% YoY to $319.6M, Net Income up 232.9% to $27.3M, and Adjusted EBITDA up 44.9% to $39.6M; operating margin expanded ~360 bps, aided by robust Marketplace activity and expense discipline .
Clear beats vs S&P Global consensus: revenue beat by ~6.5% ($319.6M vs $299.9M), Primary EPS beat by ~$0.06 ($0.08 vs $0.022), and EBITDA beat materially (GAAP EBITDA $35.2M vs $14.1M)*; management reaffirmed FY 2025 guidance (12–13% revenue, 30–40% net income, 21–29% Adjusted EBITDA growth) .
Marketplace revenue surged 176% YoY to $29.0M (driven by inventory sales incl. Academy of Art University collection) and contributed attractive contribution margins (~30–35%) per CFO; Hagerty Drivers Club paid members rose 7% YoY to ~889k .
Key catalysts: back-half acceleration from State Farm “Classic Plus” conversions (letters sent in first four states; ~25 states by year-end), expanding European auctions (Villa d’Este in May), and Enthusiast Plus launch later in 2025 .

What Went Well and What Went Wrong

What Went Well

Operating leverage: operating income more than doubled to $25.7M with ~360 bps margin expansion; Adjusted EBITDA up 45% to $39.6M; Net Income up 233% to $27.3M .
Marketplace momentum: revenue up 176% YoY to $29.0M driven by inventory and live auctions; CFO highlighted contribution profit margins of ~30–35% for successful sales; Broad Arrow’s Amelia auction achieved $61.7M sales in March, its highest-value car sale to date .
Durable franchise metrics: retention 89.0%, vehicles in force +8% YoY to 2.61M, HDC paid members +7% YoY to ~889k, and written premium +11.9% to $244.3M .

Management quote: “We expanded our margins and are making substantial technology investments to become even more efficient...we are well‑positioned for accelerating growth as we move into 2026.” — CEO McKeel Hagerty .

What Went Wrong

Catastrophes weighed on risk results: Q1 loss ratio 42.0% included ~~6.7 pts from SoCal wildfires (~~$10.4M pre-tax); ex-cat, seasonally low Q1 losses imply mid-30s, but management books to full-year assumptions in H1 .
Slightly slower start in new business than planned: weather, wildfire “cooling effect,” and internal quote-flow friction dampened early growth; management expects ramp as driving season progresses and State Farm conversions begin .
Elevated 2025 opex/investment still a margin drag: ~$20M of tech and growth investments (Duck Creek/Apex, Europe marketplace build-out, State Farm staffing) are not one-time; they set a higher baseline with leverage expected over time .

Financial Results

Headline P&L and Insurance Margin (sequential trend)

Metric	Q3 2024	Q4 2024	Q1 2025
Total Revenue ($M)	$323.374	$291.731	$319.593
Operating Income ($M)	$10.089	$6.038	$25.728
Net Income ($M)	$19.007	$8.440	$27.293
Adjusted EBITDA ($M)	$24.165	$19.868	$39.608
Basic EPS (GAAP)	$0.03	$0.01	$0.07
Adjusted EPS (non-GAAP)	$0.05	$0.02	$0.08
Loss Ratio (%)	60.0%	42.8%	42.0%

Year-over-Year Q1 comparison (mix and profitability)

Metric	Q1 2024	Q1 2025	YoY
Commission & Fee Revenue ($M)	$88.840	$100.287	+12.9%
Earned Premium ($M)	$151.619	$169.355	+11.7%
Membership, Marketplace & Other ($M)	$31.249	$49.951	+59.8%
Total Revenue ($M)	$271.708	$319.593	+17.6%
Operating Income ($M)	$12.224	$25.728	+110.5%
Net Income ($M)	$8.199	$27.293	+232.9%
Adjusted EBITDA ($M)	$27.327	$39.608	+44.9%
Basic EPS (GAAP)	$(0.04)	$0.07	N/M
Adjusted EPS (non-GAAP)	$0.04	$0.08	+100%
Loss Ratio (%)	41.1%	42.0%	+0.9 pts

Revenue segments (sequential mix)

Segment Revenue ($M)	Q3 2024	Q4 2024	Q1 2025
Commission & Fee	$116.161	$89.423	$100.287
Earned Premium	$165.686	$168.407	$169.355
Membership, Marketplace & Other	$41.527	$33.901	$49.951

Marketplace revenue trend

Marketplace Revenue ($M)	Q3 2024	Q4 2024	Q1 2025
Amount	$21.6	$16.0	$29.0

KPIs and growth drivers

KPI	Q3 2024	Q4 2024	Q1 2025
Total Written Premium ($M)	$287.609	$217.4	$244.327
Policies in Force	1,494,510	1,506,451	1,524,927
Vehicles in Force	2,553,589	2,576,700	2,609,209
HDC Paid Member Count	867,596	875,822	889,390
Retention	88.8%	89.0%	89.0%

Guidance Changes

Metric	Period	Previous Guidance (3/4/25)	Current Guidance (5/7/25)	Change
Total Written Premium	FY 2025	$1.180B–$1.191B (13–14%)	$1.180B–$1.191B (13–14%)	Maintained
Total Revenue	FY 2025	$1.344B–$1.356B (12–13%)	$1.344B–$1.356B (12–13%)	Maintained
Net Income	FY 2025	$102M–$110M (30–40%)	$102M–$110M (30–40%)	Maintained
Adjusted EBITDA	FY 2025	$150M–$160M (21–29%)	$150M–$160M (21–29%)	Maintained
Wildfire loss assumption (pre-tax)	FY 2025	~+$11M headwind	~+$10M headwind	Slightly lowered

Context: 2025 includes ~$20M elevated tech investments (Duck Creek/Apex) and growth spend; these compress margins in 2025 before leverage in 2026–27 .

Earnings Call Themes & Trends

Topic	Q3 2024	Q4 2024	Q1 2025	Trend
Technology platform (Duck Creek/Apex)	Transformation underway; 2025 will be an investment year	Apex rationale, benefits, and ~$20M elevated 2025 spend detailed	On schedule/on budget; licenses paid now; spend roughly ratable through year	Investment steady; leverage expected in 2026–27
State Farm “Classic Plus” rollout	Positioned for early 2025 launch	Expect acceleration; conversion of 520k antique vehicles over time	In 7 states (adding), letters sent in first 4 states; ~25 states by YE25	Ramping; back-half weighted growth
Marketplace economics	Strong Monterey; YTD +54% (9M’24)	Building EU capability for 2025	Contribution margins ~30–35% on strong sales; AAU and Amelia buoyed Q1	Expanding, highly profitable when active
Loss ratio/cat exposure	Helene drove 60% Q3 LR; combined ratio ~94% YTD with cats	FY LR 46% incl. ~6 pts cats; ROE 24% at Hagerty Re	42.0% LR incl. ~6.7 pts SoCal wildfires; book to annual LR in H1	Cat headwinds easing vs Q3; seasonal normalization
Tariffs/macro	Shopping tailwind from higher auto rates	Tariff impact muted due to fragmented parts supply	Tariffs expected to be muted; 25+ yr cars remain 2.5% tariff	Minimal direct impact expected
Seasonality/shopping	Elevated industry shopping; Hagerty value prop strong	Seasonal ramp starts late March	Slightly slower start; expect ramp with driving season and State Farm conversions	Improving into summer
New products (Enthusiast Plus)	Launch targeted early 2025	Supports wider underwriting aperture	Launching in CO later 2025; addresses modern enthusiast cars	Adds growth vector
International expansion	EU specialist hires	European buildout for Villa d’Este	Villa d’Este auction in May; team in place	New market opening

Management Commentary

Strategic posture: “Hagerty enjoys the enviable position of operating in an industry that has historically performed well regardless of the economic cycle…we are well‑positioned for accelerating growth as we move into 2026.” — CEO .
Margin narrative: “Operating margin jumped another 360 basis points…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 million by 2030.” — CEO .
Marketplace profitability: “Before overhead allocation…designed that if they go well, they should be quite profitable…contribution profit margins, 30%–35% type numbers.” — CFO .
Investment cadence: “It’s not a one‑time concept…technology licenses and heads don’t go away…we’re spending dollars now in advance of revenue; leverage over time.” — CFO .
Tariffs: “We think it will be relatively muted for us…25+ year cars remain at a 2.5% tariff.” — CFO .

Q&A Highlights

Marketplace margins and mix: CFO quantified contribution margins at ~30–35% for live auctions that go well; Q1 benefitted from AAU and Amelia sales .
Loss ratio mechanics: Q1 books to full-year LR assumption; ex-cat actual experience seasonally in the 30s, with adjustments typically in 2H as cat season and driving season resolve .
Slower early demand, ramp expected: Slightly slower growth than plan due to weather/cat effects and internal friction; State Farm conversions and seasonal demand expected to accelerate into summer; ~25 states by YE25 .
2025 spend phasing: ~$20M annual elevated spend, ~15% in Q1 and gradually increasing; tech licenses already in place .
Enthusiast Plus underwriting aperture: New program widens approval for modern enthusiast cars (e.g., higher usage Miatas) while targeting similar loss performance; launch in Colorado later in 2025 .

Estimates Context

Metric (Q1 2025)	S&P Global Consensus	Actual	Surprise
Revenue ($M)	$299.916M (2 est.)*	$319.593M	+$19.68M / +6.6%
Primary EPS ($)	$0.022 (3 est.)*	$0.08 (Adjusted EPS)	+$0.058 / >200%
EBITDA ($M)	$14.069M*	$35.216M (GAAP EBITDA)	+$21.15M / >150%

Notes: Primary EPS compares to the company’s Adjusted EPS (0.08) which aligns with S&P’s primary EPS convention. Revenue estimates based on 2 analysts; EPS based on 3 analysts. Values retrieved from S&P Global.*

Implications: Expect upward revisions to FY EBITDA/EPS given sizable beats and reaffirmed guidance; fewer covering estimates suggest outsized stock sensitivity to guidance cadence.

Key Takeaways for Investors

Quality beat: Strong top-line and bottom-line beats with broad-based strength (Marketplace, MGA) and margin expansion despite cat headwinds .
Guidance intact: FY25 outlook reaffirmed (12–13% revenue, 30–40% net income, 21–29% Adj. EBITDA growth) with slightly lower wildfire drag; signals confidence in 2H acceleration .
Marketplace is an earnings lever: High-contribution auctions (30–35% contribution margins) drove Q1 upside; Villa d’Este (May) and Monterey (Aug) are catalysts .
Back-half skew: State Farm conversions (letters sent; ~25 states by YE) and Enthusiast Plus launch should drive accelerating written premium and operating leverage into 2H and 2026 .
Watch loss volatility but context matters: Q1 LR included ~6.7 pts from SoCal wildfires; seasonality and booking convention can mask underlying low-30s loss experience in H1 .
Investment drag now, leverage later: ~$20M 2025 elevated spend is structural (licenses/people), but scalability should lift margins as revenue ramps in 2026–27 .
Tactical setup: With small consensus sample sizes and visible catalysts (auctions, conversions), estimate revisions and narrative momentum could be favorable if execution continues.*

Appendix: Additional Quantitative Details

Operative cost lines (Q1)

Operating Expenses ($M)	Q1 2024	Q1 2025	YoY
Salaries & Benefits	$56.116	$59.103	+5.3%
Ceding Commissions, net	$70.930	$77.333	+9.0%
Losses & LAE	$62.356	$71.130	+14.1%
Sales Expense	$39.660	$54.626	+37.7%
G&A	$19.862	$22.185	+11.7%
D&A	$10.560	$9.488	-10.2%

Balance sheet and liquidity (Q1)

Cash & equivalents $127.7M; Total debt $147.0M (incl. $32M back leverage for Broad Arrow Capital loans); unsecured revolver upsized to $375M, lower cost, matures 2030 .

Marketplace context during Q1

Broad Arrow’s Amelia Auction (Mar 7–8) delivered $61.7M total sales, with the top sale a 1959 Ferrari 250 GT LWB California Spider Competizione at $9.465M .

Footnote: Values marked with an asterisk (*) are retrieved from S&P Global (Capital IQ) consensus via GetEstimates.

Hagerty, Inc. (HGTY)·Q1 2025 Earnings Summary