Hagerty, Inc. [HGTY] Filings

10-Q 1 hgty-20240630.htm 10-Q hgty-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _______

Commission file number: 001-40244

HAGERTY, INC.

(Exact name of registrant as specified in its charter)


Delaware		86-1213144
(State of incorporation)		(I.R.S. Employer Identification No.)

121 Drivers Edge, Traverse City, Michigan		49684
(Address of principal executive offices)		(Zip code)

	(800) 922-4050
	Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbols

Name of each exchange on which registered

Class A common stock, par value $0.0001 per share

HGTY

The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had 89,811,069 shares of Class A Common Stock outstanding and 251,033,906 shares of Class V Common Stock outstanding as of July 26, 2024.

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Table of Contents


Title						Page
Forward Looking Statements						4

Part I – Financial Information						5
Item 1. Financial Statements (Unaudited)						5
Condensed Consolidated Statements of Operations						5
Condensed Consolidated Statements of Comprehensive Income						6
Condensed Consolidated Balance Sheets						7
Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity						8
Condensed Consolidated Statements of Cash Flows						12
Notes Accompanying the Condensed Consolidated Financial Statements						13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						47
Item 3. Quantitative and Qualitative Disclosures About Market Risk						66
Item 4. Controls and Procedures						66

Part II – Other Information						67
Item 1. Legal Proceedings						67
Item 1A. Risk Factors						67
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						67
Item 3. Defaults Upon Senior Securities						67
Item 4. Mine Safety Disclosures						68
Item 5. Other Information						68
Item 6. Exhibits						68
Signatures						71

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Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this "Quarterly Report"), as well as information included in oral statements or other written statements made by us, contain statements that constitute "forward-looking statements" within the meaning of the federal securities laws. All statements other than statements of historical fact, are forward-looking statements, including those regarding our future operating results and financial position, our business strategy and plans, products, services, and technology offerings, market conditions, growth and trends, expansion plans and opportunities, and our objectives for future operations. The words "anticipate," "believe," "envision," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," "ongoing," "contemplate," and similar expressions, and the negative of these expressions, are intended to identify forward-looking statements.

The future events and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in our forward-looking statements. Factors that could cause actual results to differ include the risks and uncertainties described in Part II, Item 1A. of this Quarterly Report and Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023 (our "Annual Report"), which highlight, among other risks our ability to:

•compete effectively within our industry and attract and retain our insurance policyholders and paid HDC subscribers (collectively, "Members");

•maintain key strategic relationships with our insurance distribution and underwriting carrier partners;

•prevent, monitor, and detect fraudulent activity;

•manage risks associated with disruptions, interruptions, outages or other issues with our technology platforms or our use of third-party services;

•accelerate the adoption of our membership products as well as any new insurance programs and products we offer;

•manage the cyclical nature of the insurance business, including through any periods of recession, economic downturn or inflation;

•address unexpected increases in the frequency or severity of claims;

•comply with the numerous laws and regulations applicable to our business, including state, federal and foreign laws relating to insurance and rate increases, privacy, the internet, and accounting matters;

•manage risks associated with being a controlled company; and

•successfully defend any litigation, government inquiries, and investigations.

You should not rely on forward-looking statements as predictions of future events. We operate in a very competitive and rapidly changing environment and new risks emerge from time to time. The forward-looking statements in this Quarterly Report represent our views as of the date hereof. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report or to conform these statements to actual results or revised expectations.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, as well as any amendments to those reports, are available free of charge through our website at investor.hagerty.com after we file them with, or furnish them to, the SEC. We use our investor relations website, investor.hagerty.com, as a means of disclosing information which may be of interest or material to our investors and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our investor relations website, in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media channels. Information contained on or accessible through, including any reports available on, our website or social media channels is not a part of, and is not incorporated by reference into, this Quarterly Report or any other report or document we file with the SEC. Any reference to our website in this Quarterly Report is intended to be an inactive textual reference only.

Unless the context indicated otherwise, the terms "we," "our," "us," "Hagerty," and the "Company" refer to Hagerty, Inc., and its consolidated subsidiaries including The Hagerty Group, LLC ("THG").

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Hagerty, Inc.

Condensed Consolidated Statements of Operations (Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023

REVENUE:	in thousands (except per share amounts)
Commission and fee revenue	$	128,816	$	110,187	$	217,656	$	184,799
Earned premium	157,612		127,482		309,231		244,713
Membership, marketplace and other revenue	26,797		23,575		58,046		50,084
Total revenue	313,225		261,244		584,933		479,596
OPERATING EXPENSES:
Salaries and benefits	57,693		53,572		113,809		108,804
Ceding commissions, net	73,446		60,350		144,376		115,775
Losses and loss adjustment expenses	64,729		53,564		127,085		101,976
Sales expense	47,990		41,941		87,650		77,054
General and administrative	21,373		21,318		41,235		42,699
Depreciation and amortization	10,014		10,397		20,574		24,140
Restructuring, impairment and related charges, net	—		2,849		—		8,384
Gain related to divestiture	(87)		—		(87)		—
Total operating expenses	275,158		243,991		534,642		478,832
OPERATING INCOME	38,067		17,253		50,291		764
Change in fair value of warrant liabilities	(1,941)		(1,754)		(8,081)		(2,269)

Interest and other income (expense)	12,342		3,770		19,586		9,417
INCOME BEFORE INCOME TAX EXPENSE	48,468		19,269		61,796		7,912
Income tax expense	(5,811)		(3,730)		(10,940)		(7,398)

NET INCOME	42,657		15,539		50,856		514
Net income attributable to non-controlling interest	(32,279)		(13,134)		(41,829)		(208)

Accretion of Series A Convertible Preferred Stock	(1,839)		—		(3,677)		—
NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCKHOLDERS	$	8,539	$	2,405	$	5,350	$	306

Earnings per share of Class A Common Stock:
Basic	$	0.09	$	0.03	$	0.06	$	—
Diluted	$	0.09	$	0.03	$	0.06	$	—

Weighted average shares of Class A Common Stock outstanding:
Basic	85,687		84,371		85,171		83,820
Diluted	85,687		85,563		86,072		84,424

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 21 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023

	in thousands
Net income	$	42,657	$	15,539	$	50,856	$	514
Other comprehensive income (loss), net of tax:
Change in net unrealized gain on available-for-sale investments	748		—		748		—
Foreign currency translation adjustments	(196)		1,110		(827)		1,347
Change in unrealized gain (loss) on interest rate swap	(2,271)		330		(2,234)		(148)
Other comprehensive income (loss)	(1,719)		1,440		(2,313)		1,199
Comprehensive income	40,938		16,979		48,543		1,713
Comprehensive income attributable to non-controlling interest	(30,991)		(14,220)		(40,095)		(1,112)

Accretion of Series A Convertible Preferred Stock	(1,839)		—		(3,677)		—
Comprehensive income attributable to Class A Common Stockholders	$	8,108	$	2,759	$	4,771	$	601

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 21 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Condensed Consolidated Balance Sheets (Unaudited)


	June 30,		December 31,
	2024		2023

ASSETS	in thousands (except share amounts)
Current Assets:
Cash and cash equivalents	$	120,936	$	108,326
Restricted cash and cash equivalents	194,586		615,950
Investments	65,444		10,946
Accounts receivable	88,365		71,530
Premiums receivable	221,788		137,525
Commissions receivable	17,719		79,115
Notes receivable	60,285		35,896
Deferred acquisition costs, net	159,307		141,637
Other current assets	84,371		49,293
Total current assets	1,012,801		1,250,218
Investments	404,799		5,526
Notes receivable	1,291		17,018
Property and equipment, net	19,899		20,764
Lease right-of-use assets	47,219		50,515
Intangible assets, net	82,838		91,924
Goodwill	114,165		114,214
Other long-term assets	46,619		38,033
TOTAL ASSETS	$	1,729,631	$	1,588,212
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities	$	76,509	$	87,175
Losses payable and provision for unpaid losses and loss adjustment expenses	217,545		198,508

Commissions payable	101,100		108,739
Due to insurers	139,099		79,815
Advanced premiums	36,839		20,471
Unearned premiums	362,509		317,275
Contract liabilities	36,614		30,316
Total current liabilities	970,215		842,299
Long-term lease liabilities	46,689		50,459
Long-term debt, net	98,029		130,680
Warrant liabilities	42,099		34,018
Deferred tax liability	17,997		15,937
Contract liabilities	16,335		17,335
Other long-term liabilities	2,961		4,139
TOTAL LIABILITIES	1,194,325		1,094,867
Commitments and Contingencies (Note 22)	—		—
TEMPORARY EQUITY
Preferred stock, $0.0001 par value (20,000,000 shares authorized, 8,483,561 Series A Convertible Preferred Stock issued and outstanding as of June 30, 2024 and December 31, 2023)	80,913		82,836
STOCKHOLDERS' EQUITY
Class A Common Stock, $0.0001 par value (500,000,000 shares authorized, 85,703,286 and 84,588,536 issued and outstanding as of June 30, 2024 and December 31, 2023, respectively)	8		8
Class V Common Stock, $0.0001 par value (300,000,000 authorized, 251,033,906 shares issued and outstanding as of June 30, 2024 and December 31, 2023)	25		25
Additional paid-in capital	555,040		561,754
Accumulated earnings (deficit)	(459,968)		(468,995)
Accumulated other comprehensive income (loss)	(667)		(88)
Total stockholders' equity	94,438		92,704
Non-controlling interest	359,955		317,805
Total equity (Note 16)	454,393		410,509
TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY	$	1,729,631	$	1,588,212

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 21 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity (Unaudited)


					Three months ended June 30, 2024
	Temporary Equity			Stockholders' Equity
	Series A Convertible Preferred Stock			Class A Common Stock			Class V Common Stock			Additional Paid in Capital		Accumulated Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity		Non-controlling Interest		Total Equity
in thousands	Shares	Amount		Shares	Amount		Shares	Amount
Balance at March 31, 2024	8,484	$	84,674	84,656	$	8	251,034	$	25	$	564,082	$	(470,346)	$	(236)	$	93,533	$	327,286	$	420,819
Net income	—	—		—	—		—	—		—		10,378		—		10,378		32,279		42,657
Accretion of Series A Preferred Stock	—	1,839		—	—		—	—		(1,839)		—		—		(1,839)		—		(1,839)
Dividends related to Series A Preferred Stock	—	(5,600)		—	—		—	—		—		—		—		—		—		—
Other comprehensive income (loss)	—	—		—	—		—	—		—		—		(431)		(431)		(1,288)		(1,719)
Issuance of shares under employee plans, net of shares withheld for employee taxes	—	—		916	—		—	—		(4,588)		—		—		(4,588)		—		(4,588)
Share-based compensation	—	—		—	—		—	—		4,383		—		—		4,383		—		4,383
Conversion of THG units to Class A Common Stock	—	—		131	—		—	—		1,172		—		—		1,172		(1,172)		—
Distributions paid to non-controlling interest THG unitholders	—	—		—	—		—	—		—		—		—		—		(5,320)		(5,320)
Reallocation between controlling and non-controlling interest	—	—		—	—		—	—		(8,170)		—		—		(8,170)		8,170		—
Balance at June 30, 2024	8,484	$	80,913	85,703	$	8	251,034	$	25	$	555,040	$	(459,968)	$	(667)	$	94,438	$	359,955	$	454,393

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 21 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity (Unaudited)


					Six months ended June 30, 2024
	Temporary Equity			Stockholders' Equity
	Series A Convertible Preferred Stock			Class A Common Stock			Class V Common Stock			Additional Paid in Capital		Accumulated Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity		Non-controlling Interest		Total Equity
in thousands	Shares	Amount		Shares	Amount		Shares	Amount














Balance at December 31, 2023	8,484	$	82,836	84,589	$	8	251,034	$	25	$	561,754	$	(468,995)	$	(88)	$	92,704	$	317,805	$	410,509
Net income	—	—		—	—		—	—		—		9,027		—		9,027		41,829		50,856
Accretion of Series A Preferred Stock	—	3,677		—	—		—	—		(3,677)		—		—		(3,677)		—		(3,677)
Dividends related to Series A Preferred Stock	—	(5,600)		—	—		—	—		—		—		—		—		—		—
Other comprehensive income (loss)	—	—		—	—		—	—		—		—		(579)		(579)		(1,734)		(2,313)
Issuance of shares under employee plans, net of shares withheld for employee taxes	—	—		983	—		—	—		(4,588)		—		—		(4,588)		—		(4,588)
Share-based compensation	—	—		—	—		—	—		8,926		—		—		8,926		—		8,926
Conversion of THG units to Class A Common Stock	—	—		131	—		—	—		1,172		—		—		1,172		(1,172)		—
Distributions paid to non-controlling interest THG unitholders	—	—		—	—		—	—		—		—		—		—		(5,320)		(5,320)
Reallocation between controlling and non-controlling interest	—	—		—	—		—	—		(8,547)		—		—		(8,547)		8,547		—
Balance at June 30, 2024	8,484	$	80,913	85,703	$	8	251,034	$	25	$	555,040	$	(459,968)	$	(667)	$	94,438	$	359,955	$	454,393

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 21 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity (Unaudited)


					Three months ended June 30, 2023
	Temporary Equity			Stockholders' Equity
	Series A Convertible Preferred Stock			Class A Common Stock			Class V Common Stock			Additional Paid in Capital		Accumulated Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity		Non-controlling Interest		Total Equity
in thousands	Shares	Amount		Shares	Amount		Shares	Amount
Balance at March 31, 2023	—	$	—	83,339	$	8	251,034	$	25	$	554,049	$	(491,701)	$	(272)	$	62,109	$	294,607	$	356,716
Net income	—	—		—	—		—	—		—		2,405		—		2,405		13,134		15,539
Other comprehensive income	—	—		—	—		—	—		—		—		355		355		1,085		1,440
Issuance of shares under employee plans, net of shares withheld for employee taxes	—	—		926	—		—	—		906		—		—		906		—		906
Share-based compensation	—	—		—	—		—	—		4,109		—		—		4,109		—		4,109
Conversion of THG units to Class A Common Stock	—	—		141	—		—	—		1,266		—		—		1,266		(1,266)		—
Issuance of Series A Preferred Convertible Stock, net of issuance costs	8,484	79,159		—	—		—	—		—		—		—		—		—		—
Non-controlling interest issued capital	—	—		—	—		—	—		—		—		—		—		100		100
Reallocation between controlling and non-controlling interest	—	—		—	—		—	—		(3,735)		—		—		(3,735)		3,735		—
Balance at June 30, 2023	8,484	$	79,159	84,406	$	8	251,034	$	25	$	556,595	$	(489,296)	$	83	$	67,415	$	311,395	$	378,810

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 21 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity (Unaudited)


					Six months ended June 30, 2023
	Temporary Equity			Stockholders' Equity
	Series A Convertible Preferred Stock			Class A Common Stock			Class V Common Stock			Additional Paid in Capital		Accumulated Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity		Non-controlling Interest		Total Equity
in thousands	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2022	—	$	—	83,203	$	8	251,034	$	25	$	549,034	$	(489,602)	$	(213)	$	59,252	$	308,117	$	367,369
Net income	—	—		—	—		—	—		—		306		—		306		208		514
Other comprehensive income	—	—		—	—		—	—		—		—		296		296		903		1,199
Issuance of shares under employee plans, net of shares withheld for employee taxes	—	—		943	—		—	—		906		—		—		906		—		906
Share-based compensation	—	—		—	—		—	—		8,222		—		—		8,222		—		8,222
Conversion of THG units to Class A Common Stock	—	—		260	—		—	—		2,311		—		—		2,311		(2,311)		—
Issuance of Series A Preferred Convertible Stock, net of issuance costs	8,484	79,159		—	—		—	—		—		—		—		—		—		—
Non-controlling interest issued capital	—	—		—	—		—	—		—		—		—		—		600		600
Reallocation between controlling and non-controlling interest	—	—		—	—		—	—		(3,878)		—		—		(3,878)		3,878		—
Balance at June 30, 2023	8,484	$	79,159	84,406	$	8	251,034	$	25	$	556,595	$	(489,296)	$	83	$	67,415	$	311,395	$	378,810

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 21 for information regarding Related-Party Transactions.

TABLE OF CONTENTS

Hagerty, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Six months ended June 30,
	2024		2023

OPERATING ACTIVITIES:	in thousands
Net income	$	50,856	$	514
Adjustments to reconcile net income to net cash from operating activities:
Change in fair value of warrant liabilities	8,081		2,269


Depreciation and amortization	20,574		24,140
Provision for deferred taxes	1,984		3,480



Share-based compensation expense	8,926		8,222
Non-cash lease expense	4,038		6,300
Other	(5)		3,433
Changes in operating assets and liabilities:
Accounts, premiums and commission receivable	(39,306)		(93,549)
Deferred acquisition costs, net	(17,670)		(32,756)
Losses payable and provision for unpaid losses and loss adjustment expenses	19,037		4,876
Commissions payable	(7,639)		24,664
Due to insurers	59,470		60,174
Advanced premiums	16,399		17,043
Unearned premiums	45,234		68,123
Operating lease liabilities	(4,531)		(5,960)
Other assets and liabilities, net	(43,193)		(20,416)
Net Cash Provided by Operating Activities	122,255		70,557
INVESTING ACTIVITIES:
Capital expenditures	(11,936)		(16,251)
Acquisitions, net of cash acquired	(3,843)		(7,084)

Issuance of notes receivable	(32,136)		(11,015)
Collection of notes receivable	19,354		6,235
Purchases of fixed maturity securities	(455,766)		(6,172)
Proceeds from sales of fixed maturity securities	7,570		—
Proceeds from maturities of fixed maturity securities	5,596		2,964
Purchases of equity securities	(9,407)		—
Other investing activities	631		22
Net Cash Used in Investing Activities	(479,937)		(31,301)
FINANCING ACTIVITIES:
Payments on long-term debt	(60,757)		(99,250)
Proceeds from long-term debt, net of issuance costs	25,482		71,590
Proceeds from issuance of Series A Preferred Stock, net of issuance costs	—		79,159
Contribution from non-controlling interest	—		600

Distributions paid to non-controlling interest unit holders	(5,320)		—
Payment of Series A Preferred Stock dividends	(5,600)		—
Funding of employee tax obligations upon vesting of share-based payments	(4,588)		—
Proceeds from issuance of Class A Common Stock under employee stock purchase plan	—		906
Net Cash Provided by (Used in) Financing Activities	(50,783)		53,005
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents	(289)		909

Change in cash and cash equivalents and restricted cash and cash equivalents	(408,754)		93,170
Beginning cash and cash equivalents and restricted cash and cash equivalents	724,276		539,191
Ending cash and cash equivalents and restricted cash and cash equivalents	$	315,522	$	632,361

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 21 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Notes To Condensed Consolidated Financial Statements (Unaudited)

1 — Basis of Presentation and Accounting Policies

In these Notes to the Condensed Consolidated Financial Statements, the terms "Hagerty," and "the Company" refer to Hagerty, Inc. and its consolidated subsidiaries, including The Hagerty Group, LLC ("THG") unless the context requires otherwise. In addition, the Company's insurance policyholders and paid Hagerty Drivers Club ("HDC") subscribers are collectively referred to herein as "Members".

Description of Business — Hagerty is a market leader in providing insurance for classic cars and enthusiast vehicles. Through Hagerty's insurance model, the Company acts as a Managing General Agent ("MGA") by underwriting, selling, and servicing classic car and enthusiast vehicle insurance policies. The Company then reinsures a large portion of the risks written by its MGA subsidiaries through its wholly owned subsidiary, Hagerty Reinsurance Limited ("Hagerty Re"). In addition, Hagerty offers HDC memberships, which can be bundled with its insurance policies and give subscribers access to an array of products and services, including Hagerty Drivers Club Magazine, automotive enthusiast events, Hagerty's proprietary vehicle valuation tool, emergency roadside assistance, and special vehicle-related discounts. Lastly, to complement its insurance membership offerings, the Company offers Hagerty Marketplace ("Marketplace"), where car enthusiasts can buy, sell, and finance collector cars.

These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Basis of Presentation — The Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the regulations of the Securities and Exchange Commission and include the accounts of Hagerty, Inc., which is comprised of THG and its consolidated subsidiaries. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as permitted by such rules and regulations.

The Condensed Consolidated Financial Statements reflect all normal recurring adjustments and accruals that are, in the opinion of management, necessary for a fair statement of the Company's financial position and results of operations for the interim periods presented.

Principles of Consolidation — The Condensed Consolidated Financial Statements contain the accounts of Hagerty, Inc. and its majority-owned or controlled subsidiaries.

As of June 30, 2024 and December 31, 2023, Hagerty, Inc. had economic ownership of 25.1% and 24.9%, respectively, of THG and is its sole managing member. Hagerty, Inc. reports a non-controlling interest representing the economic interest in THG held by other parties.

The financial statements of THG are consolidated by the Company under the voting interest method in accordance with Accounting Standards Codification ("ASC") Topic 810, Consolidations ("ASC 810"). Non-controlling interest is presented separately on the Condensed Consolidated Statements of Operations, the Condensed Consolidated Statements of Comprehensive Income, the Condensed Consolidated Balance Sheets, and the Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity.

All intercompany accounts and transactions have been eliminated in consolidation.

Variable Interest Entities — Broad Arrow Capital LLC ("BAC") and certain of its subsidiaries transfer notes receivable to wholly owned, bankruptcy-remote, special purpose entities (each, an "SPE") to secure borrowings under the BAC Credit Agreement (as defined in Note 14 — Long-Term Debt).

These SPEs are considered to be variable interest entities (each, a "VIE") under GAAP and their financial statements are consolidated by BAC, which is the primary beneficiary of the SPEs and is also a consolidated subsidiary of the Company. BAC is considered to be the primary beneficiary of the SPEs because it has (i) power over the significant activities of the SPEs through its role as servicer of the notes receivable used to secure borrowings under the BAC Credit Agreement and (ii) the obligation to absorb losses or the right to receive returns that could be significant through its interest in the residual cash flows of the SPEs.

Refer to Note 5 — Notes Receivable and Note 14 — Long-Term Debt for additional information.

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The following table presents the assets and liabilities of the Company's consolidated variable interest entities as of June 30, 2024 and December 31, 2023:


	June 30,		December 31,
	2024		2023

ASSETS	in thousands
Cash and cash equivalents	$	842	$	83
Restricted cash and cash equivalents	6,712		961
Accounts receivable	—		190
Notes receivable	47,597		30,125
Other assets	2,514		2,900
TOTAL ASSETS	$	57,665	$	34,259
LIABILITIES
Accounts payable, accrued expenses and other current liabilities	$	2,094	$	1,881
Long-term debt, net	41,466		25,782
TOTAL LIABILITIES	$	43,560	$	27,663

Emerging Growth Company — The Company currently qualifies as an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012 and can delay the adoption of new or revised accounting standards until those standards would apply to private companies.

The Company intends to avail itself of this extended transition period and, therefore, the Company may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or have opted out of using such extended transition period. As of June 30, 2024, the Company has not delayed the adoption of any new or revised accounting standards despite qualifying as an emerging growth company.

Reclassifications — Certain prior period operating lease balances on the Condensed Consolidated Statements of Cash Flows originally reported within changes in "Other assets and liabilities, net" are now reported within "Non-cash lease expense" to conform to the current year presentation.

Further, in conjunction with Hagerty Re's investment diversification in the second quarter of 2024, prior period fixed maturity investment balances have been reclassified from "Other current assets" and "Other long-term assets" to "Investments" on the Condensed Consolidated Balance Sheets to conform to the current year presentation. Refer to Note 3 — Investments for additional information related to the Company's investment portfolio.

These reclassifications had no effect on the Company's previously reported operating income, net income, earnings per share, cash flows or retained earnings.

Use of Estimates — The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements, as well as the reported amounts of revenue and expenses during the reporting period. Although the estimates are considered reasonable, actual results could materially differ from those estimates.

Significant estimates made by management include, but are not limited to: (i) the provision for unpaid losses and loss adjustment expenses, including incurred but not reported claims (see Note 11); (ii) the valuation of the Company's deferred income tax assets (see Note 20); (iii) the amount of the liability associated with the Tax Receivable Agreement ("TRA") (see Note 20); (iv) the fair values of the reporting units used in assessing the recoverability of goodwill; (v) the valuation and useful lives of intangible assets (see Note 10); and (vi) the fair value of the Company's warrant liabilities (see Note 4 and Note 17). Although some variability is inherent in these estimates, management believes that the current estimates are reasonable in all material respects. These estimates are reviewed regularly and adjusted, as necessary. Adjustments related to changes in estimates are reflected in the Company's results of operations in the period during which those estimates changed.

Segment Information — The Company has one operating segment and one reportable segment. The Company's Chief Operating Decision Maker ("CODM") is the Chief Executive Officer ("CEO"), who makes resource allocation decisions and assesses performance based on consolidated financial information. The Company's segment presentation reflects a management approach that utilizes a decision making framework with its Members and customers at the center of all decisions, which requires the CODM to have a consolidated view of the Company's results.

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Foreign Currency Translation — The Company translates its foreign currency denominated assets and liabilities into United States ("U.S.") dollars at current rates of exchange as of the balance sheet date, and foreign currency denominated income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in "Foreign currency translation adjustments", a component of "Accumulated other comprehensive income (loss)" on the Condensed Consolidated Balance Sheets. Foreign currency transaction gains and losses are recorded within "Interest and other income (expense)" in the Condensed Consolidated Statements of Operations.

Investments — Fixed maturity securities are classified as available-for-sale and recorded on the Condensed Consolidated Balance Sheets at their fair value, with those having maturity dates within one year of the balance sheet date classified within "Current Assets". On a quarterly basis, fixed maturity securities with unrealized losses are reviewed to determine whether the decline in fair value is attributable to a material credit loss. If a material credit loss is noted, an allowance is established and the credit loss is recorded in the Condensed Consolidated Statements of Operations.

Unrealized gains and losses on fixed maturity securities are recorded within "Change in net unrealized gain on available-for-sale investments", a component of "Accumulated other comprehensive income (loss)" on the Condensed Consolidated Balance Sheets. Realized investment gains or losses from sales of available-for-sale investments are recorded within "Interest and other income (expense)" in the Condensed Consolidated Statements of Operations.

Interest on fixed maturity securities is recorded within "Interest and other income (expense)" in the Condensed Consolidated Statements of Operations. Premiums and discounts are amortized or accreted, respectively, over the lives of the related fixed maturity securities as an adjustment to the yield using the effective interest method.

Equity securities are recorded on the Condensed Consolidated Balance Sheets at their fair value and are classified within "Current Assets". Dividend income, as well as realized and unrealized gains and losses on equity securities are recorded within "Interest and other income (expense)" in the Condensed Consolidated Statements of Operations.

Refer to Note 3 — Investments and Note 4 — Fair Value Measurements for additional information regarding the Company's investment portfolio.

Supplemental Cash Flow Information — The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents as of June 30, 2024 and 2023:


	June 30,
	2024		2023

	in thousands
Cash and cash equivalents	$	120,936	$	114,252
Restricted cash and cash equivalents	194,586		518,109
Total cash and cash equivalents and restricted cash and cash equivalents	$	315,522	$	632,361

The table below presents information regarding the Company's non-cash investing activities, as well as the cash paid for interest and taxes for the six months ended June 30, 2024 and 2023:


	Six months ended June 30,
	2024		2023

NON-CASH INVESTING ACTIVITIES:	in thousands
Issuance of notes receivable (1)	$	2,474	$	4,054
Collection of notes receivable (1)	$	6,478	$

Hagerty, Inc. [HGTY] Filings
Hagerty, Inc. [HGTPW] Filings
10-Q	[2024-08-06]
10-Q	[2024-05-07]
10-K	[2024-03-12]
10-Q	[2023-11-08]
10-Q	[2023-08-08]
10-Q	[2023-05-09]
10-K	[2023-03-14]
10-Q	[2022-11-10]
10-Q	[2022-08-10]
10-Q	[2022-05-09]
10-K	[2022-03-24]
S-1	[2021-12-21]
10-Q	[2021-11-12]
10-Q	[2021-08-10]
10-Q	[2021-05-13]
S-1	[2021-02-16]

Hagerty, Inc. [HGTY] Filings

Hagerty, Inc. [HGTPW] Filings