Hagerty, Inc. · NYSE:HGTY
Hagerty — Aldel Financial — SPAC Merger (November 2021)
63 slides from Hagerty's SPAC merger presentation, Nov 17, 2021
Slide 1: Capital Markets Showcase November 17, 2021
Capital Markets Showcase November 17, 2021
Slide 2: Disclaimer - Safe Harbor Statement
Disclaimer - Safe Harbor Statement This presentation (“Presentation”) is provided for informational purposes only and has been prepared in connection with the t ran sactions (the “Business Combination”) contemplated by that certain Business Combination Agreement, dated as of August 17, 202 1 ( the “
Slide 3: Presenting Today
Presenting Today Favorite car : 196 7 P orsche 911 S – owned since 1980 McKeel Hagerty Founder & Chief Executive Officer Favorite car : 2021 Chevrolet Corvette C8 – owned since 2021 Fred Turcotte Chief Financial Officer 3
Slide 4: Agenda
4 Agenda Company Overview and Purpose Hagerty Membership Ecosystem Hagerty’s Unique Business Model Deal Update Financial Performance Highlights Capital Allocation Future Growth Priorities Q+A McKeel Fred McKeel McKeel, Fred & Rob Kauffman
Slide 5: Our Purpose and Mission
5 Save driving and car culture for future generations. Our Purpose Hagerty is guided by our purpose & mission Build a global business to fund our purpose, create a space where team members thrive; and drive positive impact in the world. Our Mission
Slide 6: A people story. A passion story. A growth story.
6 A people story. A passion story. A growth story. 6
Slide 7: A highly differentiated membership-based growth story
A highly differentiated membership - based growth story 1 NPS is defined as “Net Promoter Score”, a leading measure of customer experience and satisfaction with companies and brands Large & underpenetrated market opportunity Tapping underserved passion - led automotive enthusiast market Unique membe
Slide 8: Hagerty is an automotive lifestyle brand and leading specialty insurance provider
Hagerty is an automotive lifestyle brand and leading specialty insurance provider focused on the global automotive enthusiast ma rket Source: Hagerty company reports based on aggregated data of various sources , SNL Financial, NAIC, Insurance Information Institute; 1 As of 12/31/20; 2 Per Hagerty co
Slide 9: How We Operate
• Think and build for the long - term. • Put enthusiasts at the center of our strategy. • Create a culture built upon improving every day. How We Operate Using our Flywheel, we: 9
Slide 10: The car community is vibrant and growing
The car community is vibrant and growing Vast Passionate Growing Estimated written premium TAM (US) 3 U.S. Insurable Collectible Cars 2 Global car enthusiasts 1 Vehicles turning 25 years old in 2022 5 New vehicles eligible as insurable collectible vehicles in 2022 4 Category spending on par with or
Slide 11: Hagerty is at the interplay of two attractive sectors
Hagerty is at the interplay o f t wo a ttractive s ectors Financial Services Consumer Discretionary How we make money today How we will unleash our full potential over time 11
Slide 12: For Car Lovers, the Automobile is a Way of Life
12 For Car Lovers, the Automobile is a Way of Life
Slide 13: Cars have always been about more than just mobility
Cars have always been about more than just mobility A B Competition Fun Family Ritual Community Status 13
Slide 14: Every car and enthusiast has a story to tell
Every car and enthusiast has a story to tell 14
Slide 15: Jamie the Commuter and Sam the Collector
“Jamie the Commuter” Connection Two different Mustang clubs, Social media car lover groups Enjoyment, pleasure + community Focus on mobility “Sam the Collector” $ $$$$ The automotive enthusiast has vastly different lifetime value and opportunity Over 2 - 3 Years Over 10 Years 15 Car lease Monthly pa
Slide 16: The Hagerty Membership Ecosystem: How We Drive Engagement
16 T he Hagerty Membership Ecosystem: How We Drive Engagement 16
Slide 17: Our Member Commitment
• We offer a truly integrated membership ecosystem • We deliver community instead of a product offering • We engage through a shared love and passion for cars . Our Member Commitment Enthusiasts are at the center of everything we do 17
Slide 18: Membership and Garage + Social
Garage + Social World’s first network of storage and member social facilities . Recurring Revenue Strategy Monetizes Member’s Passion Membership Strong and sustainable growth trajectory 18 1.8 2.0 2.5 3.2 3.7 4.2 2020 2021E 2022E 2023E 2024E 2025E Total Member Count (mm) 1 Represents member count CA
Slide 19: Insurance: enthusiast vehicle coverage
On average 34% lower than a stated value policy 2mm insured vehicles in the US, UK and Canada Insurance Enthusiast vehicle coverage with strong value proposition 19 1 Based upon 2020 consumer data collected by Hagerty on single car quotes, with premiums $5000 and under, from several daily dri ver (o
Slide 20: Hagerty Media + Entertainment
Hagerty Media + Entertainment Multiple points of high - touch engagement 20 1 As of July 2021; 2 As of November 2021 20
Slide 21: Valuation tool, digital innovation and marketplace
Trusted & dynamic valuation data that is extremely difficult to replicate or to compete with . Hagerty Valuation Tool Digital Innovation & Technology Leveraging data to enhance the member experience and optimize growth Platform for connecting car lovers . Marketplace World’s first peer - to - peer r
Slide 22: Corporate Citizenship and Hagerty Impact
Fueling our purpose to save driving, support our communities and be a positive force in the world. Because it is good business when business is a force for both growth and good. Corporate Citizenship Hagerty Drivers Foundation Culture of Belonging Governance & Accountability People Planet Prosperity
Slide 23: Membership ecosystem drives value
Media + Newsletters + Events + Emails + Hagerty Insider Hagerty Net Promoter Score 3 84 Retention Rates 1 90% Loss Ratio 2 41% Industry Average NPS 39 Multiple Points of Engagement Membership ecosystem drives value Strong engagement, competitive advantage & brand loyalty Compelling Advantages Strong
Slide 24: Hagerty's Unique Business Model
24 Hagerty’s Unique Business Model 24
Slide 25: Integrated business model is a key value driver
+ + Steady cash flow High Member Engagement High share of the profit Mining Data Across the Business Attractive Customer Acquisition Cost: LTV/CAC 1 > 10:1 Steady fee - based income Ownership of pricing model Upside from underwriting Multiple points of economic capture Drives recurring revenue Monet
Slide 26: Our Data Advantage
Rich source of first - party data (Insurance + Membership) • Valuation data • Claims data • Live events & auctions • Driver usage behavior • Engagement patterns • Media buying habits Multi - dimensional data advantage • Engaging, seamless member experience • Effective pricing of risk to maintain low
Slide 27: Omni-channel distribution
• 9 of the top 10 auto insurers including new partners 1 • Top 5 partners each report double - digit growth and segment acceleration • Over 45,000 agents • 10 of the top 10 brokers by revenue 2 • State of the art call centers • Sales agents in 25 states and 3 countries 23% 32% 45% Sales Agent Locati
Slide 28: Turnkey insurance solution for carrier partners
Compelling Partner Benefits • High intimacy model • Protects the bundle • Claims handling / parts finder • Valuation tools • Expert repair network Total Insurance Solution • Product development • Pricing • Sales & services • Underwriting & claims • Proprietary technology • Team of passionate experts
Slide 29: Partnerships are a key strategic growth driver
• 9 of the top 10 insurance companies • State Farm & Markel have, or will, invest significant capital in Hagerty • Deeper penetration in existing partner markets • Long runway with existing contracts – term varies by partner • Adding new partners ADD IMAGERY Expanding Invested Poised to Grow Partner
Slide 30: Partnerships evolve over time
Partnership Phase Year 1 to 2 Implementation Phase Year 2 to 3 e.g. 10% of opportunity Partnerships evolve over time A long runway for incremental organic growth Roll - out Phase MGA MGA + Quota Share + Membership Revenue Stream MGA + Quota Share +++ Membership Year 3 to 4 e.g. 15 - 20% of opportuni
Slide 31: Large and Growing Addressable Market
31 Large and Growing Addressable Market 31
Slide 32: Hagerty is a scaled player in a fragmented market
U.S. Car Enthusiasts 69 mm U.S. Insurable Collectible Cars 2 4 3mm Hagerty Member 3 1.8 mm Late t eens / 20s 30s 40s 50s 60s 70s & beyond High net worth individuals Age groups & demographics Hobbyists at home Industry professionals Source: Hagerty company reports based on aggregated data of various
Slide 33: Opportunity to disrupt collectibles market with membership model
Source: Polk, National Ski Areas Association, Outdoor Foundation, Statista, MRI; Note: Bubbles represent estimated number of par ticipants; ¹ U.S. collectible vehicles 69mm U.S. Car Enthusiasts Membership models 3mm Surfing 9mm Skiing 24mm Golf 43mm Collectible Vehicles 1 42mm Outdoor 60mm Fitness O
Slide 34: The market opportunity is large and growing
Type Total market (cars, mm) Hagerty penetration >0.1 12.9% 3.5 2.3% 8.6 2.8% Collectible vehicles by year 1 Type Total market (cars, mm) Hagerty penetration 10.8 11.9% 32.2 1.3% Total ~43.0 3.9% Pre - 1981 classics Post - 1980 collectibles Collectible vehicles by sub - category 1 Supercars / Exotic
Slide 35: International expansion presents further upside
Market Year Established Offerings / Position TAM 2009 Growing Market Position • Insurance + membership • Available in 10 provinces • Memorable events & engagement 4mm 2006 Comprehensive Car Insurance & More • Insurance • Premier classic car valuation tool • Engaging automotive content Memorable even
Slide 36: Economic value of the car enthusiast
36 Events + Gaming Economic value of the car enthusiast Extends beyond asset value of the vehicle to additional products and services 36 69 Million U.S. Car Enthusiasts Gaming Buy - sell - rent Storage Events Media Insurance Affinity Groups Aftermarket
Slide 37: Financial Overview
37 Financial Overview 37
Slide 38: Transaction recap & update
Transaction recap & update Key Updates Since Merger Announcement • SEC review - completed • Proxy filed - November 10, 2021 • Shareholder vote - December 1, 2021 • Expected Closing - December 2, 2021 • Expected Trading - December 3, 2021 38 Pro forma valuation ($mm) Implied market capitalization $3,
Slide 39: Integrated business model drives multiple revenue streams
MGA fees & commissions Hagerty Re underwriting income Membership fees & affinity revenue Revenue Streams + + Omni - Channel Distribution Risk Management & Reinsurance Subscription & Membership Hagerty’s integrated business model drives multiple revenue streams 39
Slide 40: Strong economics of insurance model
41% 76% 49% 23% 10% 1% 0% Hagerty Auto insurance Underwriting profit Loss ratio Expense ratio Illustrative Insurance economic model 1 Source: SNL Financial, NAIC, Insurance Information Institute; 1 Does not include membership or fee - based revenues, Loss ratios represents results of auto insurance
Slide 41: Illustrative unit economics of a Hagerty insurance policy
41% 49% 10% 0% Hagerty Loss ratio Average Hagerty vehicle insurance policy ($300 / year) 1 1 Excludes membership revenue, $300 based on average Hagerty insurance policy for one vehicle, an average Hagerty policy is gre at er than $300 due to multiple vehicles within a policy, ratios reflect Hagerty
Slide 42: Economics of Hagerty's membership model
$45 $59 $70 $84 $99 $4 $16 $24 $25 $11 $35 $47 $62 $78 0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100 104 108 112 116 120 124 128 132 136 140 144 148 152 156 160 164 168 172 176 180 184 188 192 196 200 204 208 212 2021 2022 2023 2024 2025 HDC New Distribution Partnership
Slide 43: Hagerty Total Revenue
0% 60,000% 120,000% 180,000% 2018 2019 2020 2021E 2022E 2023E 2024E 2025E Commissions, fees & membership Existing partnership premium revenue Contractual Quota Share Expansion New partnerships 43 Hagerty Total Revenue ($mm) $302 $397 $500 $626 $853 $1,114 $1,357 $1,627 Total revenue ($mm) 1 Represen
Slide 44: EBITDA and EBITDA margin
$17 $23 $28 $38 $85 $172 $240 $322 $74 $121 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 6% 6% 6% 12% 14% 15% 18% 20% EBITDA margin excluding operating expenses supporting new partnerships (%) 2 6% 6% 6% 6% 10% 15% 18% 20% EBITDA margin (%) EBITDA and EBITDA margin ($mm) 1 1 Defined as income before
Slide 45: Capital Allocation Priorities
Capital Allocation Priorities - Invest in Growth • Digital platform build • Refactor proprietary insurance system • Partnership integrations • Product & pricing development • Events & entertainment assets • International expansion Sources of Capital • Hagerty Re underwriting structure • MGA Commissi
Slide 46: Wrap Up
46 Wrap Up
Slide 47: Strategic growth drivers
Strategic growth drivers Digital Innovation Accelerate digital innovation and leverage data advantage to grow membership base Expand Partnerships Broaden and deepen partnerships to grow insurance business International Expansion Capture growth in untapped international markets Expand the Ecosystem I
Slide 48: Leadership team who will execute our strategy
Leadership team who will execute our strategy Soon Hagerty Senior Vice President of Brand Larry Webster Senior Vice President of Content Kelly Smith Chief Strategy Officer Coco Champagne Chief Operations Officer McKeel Hagerty Chief Executive Officer Barbara Matthews General Counsel Fred Turcotte Ch
Slide 49: Supported by experienced Board of Directors
Supported by experienced Board of Directors Michael E. Angelina Independent Director, Chairman of the Board, and Chair of Nominating & Governance Committee McKeel Hagerty CEO & Director Sabrina Kay Independent Director Mika Salmi Independent Director William H. Swanson Independent Director Michael L
Slide 50: A highly differentiated membership-based growth story
A highly differentiated membership - based growth story 1 NPS is defined as “Net Promoter Score”, a leading measure of customer experience and satisfaction with companies and brands Large & underpenetrated market opportunity Tapping underserved passion - led automotive enthusiast market Unique membe
Slide 51: Q&A
McKeel Hagerty Hagerty Founder & CEO Fred Turcotte Hagerty Chief Financial Officer Rob Kauffman Aldel Financial Chairman & CEO Q&A 51
Slide 52: Appendix
52 Appendix
Slide 53: Superior financial profile and attractive initial valuation relative to peers
Superior financial profile and attractive initial valuation relative to high - growth peer group High growth distribution High growth carriers 18.3x 62.6x 19.3x Hagerty GSHD BRP 53 FV / 2023E EBITDA 102% 54% 35% Hagerty GSHD BRP 2023E EBITDA growth 2.8x 4.3x 5.2x Hagerty KNSL PLMR FV / 2023E revenue
Slide 54: Growth buys down the EBITDA multiple quickly
Hagerty’s exceptional rate of growth “buys down” the EBITDA multiple quickly 25.9x 1 18.3x 13.0x 9.7x 2022E 2023E 2024E 2025E 54 Source: FactSet, company filings, I/B/E/S estimates, equity research; Note: Market data as of 8/16/2021; 1 2022E EBITDA excludes $36mm of operating expenses related to inf
Slide 55: Public trading comparables
55 Public trading comparables (for reference) Source: FactSet, SNL, company filings, equity research; Note: Market data as of 8/16/2021; 1 Represents latest share price multiplied by diluted shares outstanding for public companies; 2 Calculated as market capitalization plus net debt, pro - forma for
Slide 56: Reconciliation of non-GAAP metrics - EBITDA
Reconciliation of non - GAAP metrics - EBITDA 56 ($mm) 2020 2021E 2022E 2023E 2024E 2025E Insurance and affinity revenue $463 $581 $790 $1,028 $1,249 $1,503 Membership revenue 37 45 63 86 108 124 Total revenue (GAAP) $500 $626 $853 $1,114 $1,357 $1,627 Income Before Taxes $15 $12 $39 $117 $185 $268
Slide 57: Operating expense supporting new partnerships
Operating expense supporting new partnerships 57 • New partnership leaders / transformation management ($2.0mm) • Increase in sales professionals / marketing ($4.4mm) • Increase in service professionals ($4.1mm) • Increase in technology professionals - outsourced ($9.5mm) • Increase in technology pr
Slide 58: Total revenue
Total r evenue $302 $397 $500 $626 $853 $1,114 $1,357 $1,627 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 58 9% 8% 7% 7% 7% 8% 8% 8% Membership revenue as a % of total revenue (%) Total revenue ($mm) Majority of revenue is tied to premiums ; premium growth assumptions are underpinned by: • Consist
Slide 59: Hagerty 6/30/21 balance sheet summary
Hagerty 6/30/21 balance sheet summary 59 1 Pro forma for transaction, includes $275mm of cash to balance sheet from the Aldel transaction and ~$31mm of cash and cash equivalents from the most rec ent standalone auditor reviewed financials (as of 6/30/2021) excluding restricted cash and cash equivale
Slide 60: Hagerty consolidated income statements
Hagerty consolidated income statements 60 ($mm) 2018FY 2019FY 2020FY Revenues: Commission and fee revenue $174 $202 $236 Earned premium 97 157 221 Membership and other revenue 30 38 43 Total revenues $302 $397 $500 Operating expenses: Salaries and benefits $97 $114 $138 Ceding commission 47 76 106 L
Slide 61: Hagerty consolidated balance sheets
Hagerty consolidated balance sheets 61 Assets ($mm) 12/31/19 12/31/20 Liabilities and equity ($mm) 12/31/19 12/31/20 Current assets: Current liabilities: Cash and cash equivalents $22 $38 Accounts payable $7 $12 Restricted cash and cash equivalents 199 261 Losses payable 17 22 Accounts receivable 20
Slide 62: Hagerty consolidated statements of cash flows
Hagerty consolidated statements of cash flows 62 ($mm)$ 2018FY 2019FY 2020FY 2018FY 2019FY 2020FY Operating activities: Net income $8 $4 $10 Investing activities: Adjustments to reconcile net income to net cash Purchases of property and equipment and software ($8) ($9) ($38) from operating activitie
Slide 63: Important Information and Where To Find It
TM Important Information and Where To Find It Aldel Financial Inc. (“Aldel”) has entered into that certain Business Combination Agreement, dated as of August 17, 2021 (the “Business Combination Agreement”), by and among Aldel, Aldel Merger Sub LLC, a Delaware limited liability company and wholly own