Earnings call transcript: Hagerty Q1 2025 beats expectations, stock surges 9.46%

Hagerty Inc. (HGTY) reported its first-quarter 2025 earnings, showcasing a robust financial performance that surpassed Wall Street’s expectations. The company reported earnings per share (EPS) of $0.08, doubling the forecasted $0.04. Revenue reached $319.6 million, exceeding the anticipated $259.17 million. Following the earnings announcement, Hagerty’s stock surged 9.46%, closing at $9.72, reflecting investor optimism. According to InvestingPro analysis, the company is currently trading below its Fair Value, suggesting potential upside opportunity. With a solid financial health score rated as "GOOD" by InvestingPro, the company shows promising fundamentals.

Key Takeaways

• EPS and revenue significantly surpassed forecasts, indicating strong operational execution.
• Stock price surged by 9.46% post-earnings, reflecting positive investor sentiment.
• Net income increased by 233%, highlighting improved profitability.
• Strategic initiatives include the launch of new products and international expansion plans.

Company Performance

Hagerty demonstrated impressive growth in the first quarter of 2025, with total revenue increasing by 18% year-over-year, building on its strong last twelve months revenue growth of 19.98%. The company’s net income saw a substantial jump of 233% to $27 million, while adjusted EBITDA rose by 45% to $40 million. These results underscore Hagerty’s ability to capitalize on its niche market of collectible vehicle insurance and expand its product offerings. InvestingPro data reveals a robust gross profit margin of 56.66%, highlighting the company’s operational efficiency. For deeper insights into Hagerty’s financial metrics and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Financial Highlights

• Revenue: $319.6 million, up 18% year-over-year.
• Earnings per share: $0.08, exceeding the forecast by 100%.
• Net income: $27 million, a 233% increase.
• Adjusted EBITDA: $40 million, a 45% increase.
• Operating margin expanded by 360 basis points to 8%.

Earnings vs. Forecast

Hagerty’s EPS of $0.08 doubled the forecast of $0.04, while revenue of $319.6 million surpassed the expected $259.17 million. This strong performance marks a significant earnings beat, reinforcing the company’s growth trajectory and operational efficiency.

Market Reaction

The company’s stock price rose by 9.46%, closing at $9.72, following the earnings release. This increase reflects investor confidence in Hagerty’s strategic direction and financial health. The stock’s rise is notable within its 52-week range, suggesting a positive market reception.

Outlook & Guidance

Hagerty has set ambitious targets for 2025, projecting revenue growth of 12-13% and a written premium increase of 13-14%. Net income is expected to rise by 30-40%, reaching $102-110 million. The company aims to double its policies in force to 3 million by 2030, emphasizing its commitment to long-term growth. InvestingPro has identified several additional growth indicators and investment considerations, with 6 more exclusive ProTips available to subscribers. The platform’s analysis shows the company maintains a healthy return on invested capital of 6%, suggesting effective capital allocation strategies.

Executive Commentary

"We are executing well against our 2025 strategic priorities and positioning Hagerty for high rates of compounding profit growth," stated Patrick McClima, CFO. CEO Mikhail Hagerty added, "The Mazda Miata is now over 30 years old... These are $45,000 cars that are beloved by the people that own them." These comments highlight the company’s strategic focus and market potential.

Risks and Challenges

• Rising general and administrative expenses, particularly from software licensing.
• Increased salaries and benefits due to merit increases.
• Potential hurdles in international market expansion.
• Seasonal fluctuations in the specialty insurance market.
• Industry-wide shifts in insurance shopping activity.

Q&A

During the earnings call, analysts inquired about marketplace revenue margins, which are expected to contribute 30-35%. Discussions also covered technology investments and the minimal expected impact from tariffs, providing insights into Hagerty’s strategic priorities and risk management.

Full transcript - Hagerty Inc (HGTY) Q1 2025:

Conference Operator: Greetings, and welcome to the Hagerty First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. Question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It’s now my pleasure to introduce Jay Cobalt, Senior Vice President of Investor Relations.

Please go ahead.

Jay Cobalt, Senior Vice President of Investor Relations, Hagerty: Thank you, operator, and good morning, everyone. 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 McClima, 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 results to differ materially from our expectations. For a discussion of material risks and important factors that could affect our actual results, please refer to those contained in our filings with the SEC, which are also available on our Investor Relations 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.

Mikhail Hagerty, Chief Executive Officer and Chairman, Hagerty: 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 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 top and bottom line growth during the first three months of twenty twenty five. 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, AgriLife Reinsurance, increased 12%. And membership marketplace and other revenue jumped 60%, propelled by successful auctions at the Amelia Contour 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 Concorso on 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 OneTeam Hagerty creates a repeatable winning formula for stakeholders. We are investing in the major technology replatforming 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 and margin expansion. Our technology spend should trend down as a percent of revenue as we accelerate the top line in 2026 and 2027 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 revenue generated in The United States, positioning us well to weather noise from tariffs. And we operate in 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 premium 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 forego a vacation, the extra time spent at home creates opportunities to enjoy their existing enthusiast vehicles. Pull it all together, and 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.

Patrick McClima, Chief Financial Officer, Hagerty: Thank you, and good morning, everyone. Let me dig into the first quarter in more detail shown on slide six and seven. In the first quarter, we delivered 18% growth in total revenue to three twenty million dollars 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 with 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 our 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 that 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, we 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 $6,000,000 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 and $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 $150,000,000 to $160,000,000 up 21% to 29%. In summary, we are executing well against our 2025 strategic priorities and positioning Hagerty for high rates of compounding profit growth.

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

Conference Operator: And the first question comes from the line of Pablo Singel with JPMorgan. Please proceed.

Pablo Singel, Analyst, JPMorgan: Hi, good morning. Patrick, you touched on this a bit in your comments, but I was wondering if you could provide a refresh on the relative margins you generate on marketplace revenues versus the rest of Haggerty. I’d assume in a quarter like this one where you saw strong growth in marketplace, you 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, whether in terms of dollar EBITDA or basis points of margins that would be helpful? Thank you.

Patrick McClima, Chief Financial Officer, Hagerty: 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. And 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, and then you try to put together a book of business that puts 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, 30%, thirty five % 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, our risk taking business is about a 10% profit margin business.

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

Pablo Singel, Analyst, JPMorgan: 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. Well,

Patrick McClima, Chief Financial Officer, Hagerty: the first thing is just how we think about seasonality and losses. And so the way 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. And so typically in the first and second quarter, we’re just booking to that full year loss ratio even though that those are typically seasonally low quarters for us from a loss perspective. And then in the third quarter and fourth quarter, we’ll either keep looking to that estimate that we had at the beginning of the year or we’ll make adjustments one way or the other. And the reason why this all makes sense for us is we’re so seasonal, right?

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 end of Q3, you’re kind of right in the midst of cat season. And so that’s when we’d make any adjustment. So the 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, you know, down in the thirties. And typically, the first quarter is a much lower loss ratio quarter for us. So the the actual experience is going to be in the thirties.

We book to something that’s more or less than what we think the full year estimate will be. So that’s the mechanics behind it. Did that answer the question?

Pablo Singel, Analyst, JPMorgan: Yes. It does. Thanks again.

Patrick McClima, Chief Financial Officer, Hagerty: You bet. Thanks, Pablo.

Conference Operator: And the next question comes from the line of Matt Carletti with JMP Securities. Please proceed.

Mikhail Hagerty, Chief Executive Officer and Chairman, Hagerty: Hi. Yes, this is David on for Matt. I had a couple of questions, if that’s all right. 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 cost impact, slightly higher in auto and lower in home.

So how would the anticipated impact on Hagerty’s book compare?

Patrick McClima, Chief Financial Officer, Hagerty: 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 claims costs related to severity. The tricky part for us is so many vehicles are it’s a 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, 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 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 25 years old and older, there’s no change in the tariff regime. It was a 2.5% 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.

Mikhail Hagerty, Chief Executive Officer and Chairman, Hagerty: That’s very helpful. Thank you. And just one more question. Last quarter, you spoke a bit about how your business is seasonal and start seeing more shopping activity come March or April. You also mentioned how the L.

A. Flyers were having a cooling effect on that activity a bit, similar to what you’ve seen in other cat 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?

Conference Operator: Sure.

Patrick McClima, Chief Financial Officer, Hagerty: Yeah. Good question. 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 to 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 as 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 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 sort of our quote flow. And so we’re trying different things to make sure that we’re driving the right level of activity.

It’s 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. We’re 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. And 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. By the end of this year, we think we’ll be in 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 particularly the State Farm activity.

Conference Operator: And the next question comes from the line of Mark Hughes with Tru Securities. Please proceed.

Mark Hughes, Analyst, Tru Securities: Thank you. Good morning. Good morning. Membership and marketplace revenue up very strong this quarter, up 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 the growth there?

Patrick McClima, Chief Financial Officer, Hagerty: 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 to schedule 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 to conclude that we need to change our guidance on it. But we’re pleased with the outcome so far.

Mark Hughes, Analyst, Tru Securities: Very good. You had mentioned the enthusiast cards that you’ve been declining, but you’re taking steps, I think, it sounds like to open up opportunity. Could you expand on that? What was your point there?

Mikhail Hagerty, Chief Executive Officer and Chairman, Hagerty: 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 trend 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 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 we’re excited about it, but it’s a complicated, long process to get one of these new programs and insurance companies up and running, and we’re excited to get that going a little bit later this year and starting in Colorado. And then we’ll be, in in my view, off to the races.

It’s been a it’s been a dream of ours to get it 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.

Mark Hughes, Analyst, Tru Securities: Yeah. So 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?

Mikhail Hagerty, Chief Executive Officer and Chairman, Hagerty: Well, I you know, I’d like to remind people that the, you know, 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 $45,000 cars that are beloved by the people that own them. And yes, they can be driven more. There are many of them it 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 everything 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 five six hundred, eight hundred miles a year. But still, we think within a very underwriteable, 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.

Mark Hughes, Analyst, Tru Securities: Understood. And, Patrick, on the Duck Creek spending in your reaffirmed outlook, you highlight again the $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 is that, just isolated to 2025? If you could remind me on that, that’d be great.

Patrick McClima, Chief Financial Officer, Hagerty: Sure. So the 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, you know, the modernization of our stack. And so that two thirds is technology related. The other third really is people related, and some of that is, you know, standing up the team that we need to take on our European expansion within marketplace. We’re 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’ll be coming online for State Farm, kind of step up for some of that activity. So that’s how we got to that 20,000,000. And the 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, and so it’s a margin drag as we get to that stabilization. Same concept with State Farm.

Right? We’ve got to hire those people, and and we’re onboarding them before the full revenue comes online, and obviously, the case for technology. So 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 that it’s a onetime. Right? Those dollars don’t go away. The technology spend we’ve spent 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 it’s not a onetime concept. It’s more of a a bridge concept.

Mark Hughes, Analyst, Tru Securities: 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. Sounds like the way to think about that.

Yes. So that’s it. Yes. Okay. Very good.

Thank you.

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

Pablo Singel, Analyst, JPMorgan: 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 pace into the year?

Pretty

Patrick McClima, Chief Financial Officer, Hagerty: ratably, actually, because the technology we signed up all those licenses. We’re paying for them now. Some of the work is still construction in progress and it hasn’t fully, you know, 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 most of the hiring happens in Q1 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 and then just kind of gradually increase it from there. Is that Jay, is that ballpark? That’s

Mark Hughes, Analyst, Tru Securities: Good way to think about it.

Pablo Singel, Analyst, JPMorgan: Okay. Thank you.

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

Mikhail Hagerty, Chief Executive Officer and Chairman, Hagerty: 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 Deligance Weekend is coming up on May 31 and June 1 in 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, 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 we think about positioning our company to double our PIF count to 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 Concourse on May 2425. Until then, never stop driving.

Conference Operator: This concludes today’s conference. You may disconnect your lines at this time. Enjoy the rest of your day.

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