Hagerty, Inc. · NYSE:HGTY
Hagerty — The Hagerty Group — SPAC Merger (August 2021)
44 slides from Hagerty's SPAC merger presentation, Aug 18, 2021
Slide 1: For People Who Love Cars
Proprietary and Confidential For People Who Love Cars Proprietary and Confidential
Slide 2: Disclaimer
Proprietary and Confidential Disclaimer This presentation (“Presentation”) is provided for informational purposes only and has been prepared to assist interested par tie s in making their own evaluation with respect to a potential business combination transaction between Aldel Financial Inc., a sp e
Slide 3: Presenting today
Proprietary and Confidential Favorite car : 196 7 P orsche 911 S - owned since 1980 Favorite car : 2021 Chevrolet Corvette C8 - owned since 2021 Fred Turcotte CFO, Hagerty McKeel Hagerty Founder & CEO, Hagerty Presenting today 3 Favorite car : 1931 Bugatti Type 51 - owned since 2017 Rob Kauffman Cha
Slide 4: Introduction / Investment thesis
Proprietary and Confidential 4 Introduction / Investment thesis
Slide 5: Complementary ecosystems and investment thesis
Proprietary and Confidential Deep collector automotive industry knowledge of both principals = powerful complementary eco - systems 1 Aldel’s public company experience will be beneficial to the Hagerty management team 2 Aldel relationships will help drive accelerated growth for Hagerty in key market
Slide 6: Hagerty is a leading specialty insurance provider for automotive enthusiasts
Proprietary and Confidential Hagerty is a leading specialty insurance provider focused on the automotive enthusiast market Scaled player in fragmented market 1 6 2mm vehicles insured 1 43mm Total U.S. Insurable Collectible Cars 2 84 NPS 3 >10 LTV / CaC 4 90% Retention 1 41% Loss Ratio 5 27% 2020 - 2
Slide 7: Aldel is a strategic partner
Proprietary and Confidential 7 Aldel is a strategic partner Mr. Kauffman was a co - founder, principal and member of the board of directors of Fortress Investment Group LLC from its founding in 1998 until 2012 Since his departure from Fortress in 2012, notable private automotive investments include:
Slide 8: Transaction summary
Proprietary and Confidential Transaction summary Key highlights 8 Capital structure $306mm pro forma cash held on balance sheet 1 Sponsor CEO investment: $40mm Sponsor Shares: 3.4mm Sponsor Warrants: 1.6mm warrants (0.5% of total shares at closing) 17% granted if closing share price above $15.00 83%
Slide 9: Investment highlights
Proprietary and Confidential 2 Visionary thought leadership, culture and management team • Over three decades of Hagerty family leadership • Management is as passionate as its members about cars 9 Investment highlights Large and growing total addressable market (TAM) 1 • Large TAM – 43mm U.S. collec
Slide 10: Key performance indicators (KPIs)
Proprietary and Confidential Key performance indicators (KPIs) Scale 2021E Revenue mm $ 64 Total insured value 1 bn Brand loyalty 9 0% Retention 2 1.8 Members 2 mm 10 Growth + Profitability 29% 2018 - 2020 revenue CAGR 41 % 2018 - 2020 average l oss r atio 1 As of June 2021; 2 As of 12/31/20 Valuati
Slide 11: Company overview
Proprietary and Confidential 11 Company overview
Slide 12: What we do
Proprietary and Confidential 12 What we do Hagerty is a leading specialty insurance provider focused on the automotive enthusiast market. There are tens of millions of auto lifestyle enthusiasts for which Hagerty is uniquely positioned to provide a scalable platform for their enjoyment, passion and
Slide 13: The Hagerty Flywheel
Proprietary and Confidential We think and act long - term, put members at the center of our strategy and create a culture built on improving each and every day. T h e H a g e r t y Flywheel Growth 2. Impactful purpose 3. Network effect Purpose Save driving and car culture Best at Authentic community
Slide 14: Our customers and our market
Proprietary and Confidential Proprietary and Confidential Our customers and our market 14 U.S. Car Enthusiasts 69 mm U.S. Insurable Collectible Cars 4 3 mm Global Car Enthusiasts 1 Late Teens / 20’s 30’s 40’s 50’s 60’s 70’s & beyond High Net Worth Individuals Age groups & demographics Hobbyists at h
Slide 15: Massive and growing total addressable market
Proprietary and Confidential 15 Massive and growing total addressable market Collectible vehicles by year 1 Secular growth drivers x Early 2000s cars becoming modern collectibles x Increasing focus on collectible cars as an asset class x Baby boomer retirements / millennial household formations x Co
Slide 16: Unique membership subscription model appeals to car enthusiasts
Proprietary and Confidential Unique membership subscription model appeals to car enthusiasts 16 Philosophy – Be the “Go - To” source Results Internally developed content Distribute through owned channels Members Shared with other members 1 As of July 2021; 2 Represents membership revenue CAGR from 2
Slide 17: Omni-channel distribution unlocks the entire TAM
Proprietary and Confidential Omni – channel distribution unlocks the entire TAM, allowing Hagerty to interact with members • 9 of the top 10 auto insurers 1 • Each of our top 5 partners reports double - digit growth and segment acceleration • Recent new partnerships National insurance p artners Valu
Slide 18: Strong economic model
Proprietary and Confidential Proprietary and Confidential Strong economic model 18 41% 76% 69% 49% 23% 29% 10% 1% 2% 0% Hagerty Auto insurance Homeowners insurance Underwriting profit Loss ratio Expense ratio Illustrative insurance economic model 1 Source: SNL Financial, NAIC, Insurance Information
Slide 19: Illustrative economics of a Hagerty insurance policy
Proprietary and Confidential Proprietary and Confidential Illustrative economics of a Hagerty insurance policy 19 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 poli
Slide 20: Financial overview
Proprietary and Confidential 20 Financial overview
Slide 21: Revenue is driven by organic and contractual growth
Proprietary and Confidential Revenue is driven by a combination of organic and contractual growth 0% 60,000% 120,000% 180,000% 2018 2019 2020 2021E 2022E 2023E 2024E 2025E Commissions and fees Existing partnership premium revenue Contractual partnership premium revenue New partnerships 21 Hagerty To
Slide 22: EBITDA and EBITDA margin
Proprietary and Confidential EBITDA $17 $23 $28 $38 $85 $172 $240 $322 $74 $121 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 22 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 ma
Slide 23: Operating benchmarking and comparables
Proprietary and Confidential 23 Operating benchmarking and comparables
Slide 24: Superior financial profile and attractive valuation relative to peers
Proprietary and Confidential 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 24 FV / 2023E EBITDA 102% 54% 35% Hagerty GSHD BRP 2023E EBITDA growth 2.8x 4.3x 5.2x Hagerty
Slide 25: Growth buys down the EBITDA multiple quickly
Proprietary and Confidential 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 25 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 oper
Slide 26: Hagerty investment highlights
Proprietary and Confidential 26 • Massive and growing total addressable market • Collectible vehicles are a sleeping giant • Strong U.S. presence with significant international opportunity • Proven track record of disruptive growth • Leading financial profile with promising path to continued growth
Slide 27: Appendix
Proprietary and Confidential 27 Appendix Proprietary and Confidential 27
Slide 28: Total revenue
Proprietary and Confidential Total r evenue $302 $397 $500 $626 $853 $1,114 $1,357 $1,627 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 28 9% 8% 7% 7% 7% 8% 8% 8% Membership revenue as a % of total revenue (%) Total revenue ($mm) Majority of revenue is tied to premiums ; premium growth assumptions ar
Slide 29: Collectible vehicles are a sleeping giant
Proprietary and Confidential 29 Source: Company investor presentations, Polk, National Ski Areas Association, Outdoor Foundation, Statista, MRI; Note: Bubble s r epresent estimated number of participants; ¹ U.S. only Collectible vehicles are a sleeping giant, representing a differentiated approach t
Slide 30: Strong US presence with significant international upside
Proprietary and Confidential 30 Strong US presence bolstered by significantly more international upside ahead Established in 2009, our policies are underwritten by a leading global underwriter, Aviva. Growing market position HAGERTY CANADA (4mm TAM) Memorable events and engagements HAGERTY UK (3mm T
Slide 31: Hagerty Re – architecting the economic capture
Proprietary and Confidential Proprietary and Confidential Hagerty Re – architecting the economic capture 31 Reinsurance model + distribution enables greater share of profit, capital efficiency and ecosystem leverage Premiums Members Hagerty MGA /MGU Insurance carrier Fees and commissions shared with
Slide 32: Public trading comparables
Proprietary and Confidential 32 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 p
Slide 33: Reconciliation of non-GAAP metrics - EBITDA
Proprietary and Confidential Reconciliation of non - GAAP metrics - EBITDA 33 ($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 Taxe
Slide 34: Operating expense supporting new partnerships
Proprietary and Confidential Operating expense supporting new partnerships 34 • 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 ($9.5mm
Slide 35: Hagerty 6/30/21 balance sheet summary
Proprietary and Confidential Hagerty 6/30/21 balance sheet summary 35 Hagerty capitalization ($mm) 6/30/21 PF for Aldel Transaction Cash & cash equivalents 1 $306 Debt outstanding 86 Market value of equity 3,354 Implied firm value $3,134 Memo: Select balance sheet items ($mm) 6/30/21 Description Res
Slide 36: Hagerty consolidated income statements
Proprietary and Confidential Hagerty consolidated income statements 36 ($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 $138
Slide 37: Hagerty consolidated balance sheets
Proprietary and Confidential Hagerty consolidated balance sheets 37 Assets ($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 $12 Restricted cash and cash equivalents 199 261 Losses payable
Slide 38: Hagerty consolidated statements of cash flows
Proprietary and Confidential Hagerty consolidated statements of cash flows 38 ($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) (
Slide 39: Summary of risks
Proprietary and Confidential Summary of risks 39 Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors on the following slides, which will apply to our business and operations following the completion of the Business Combination, together with t
Slide 40: General Risks Related to Hagerty's Business
Proprietary and Confidential General Risks Related to Hagerty’s Business 40 • Hagerty’s future growth and profitability may be affected by new entrants into the market or current competitors developing p ref erred offerings. • As of June 2021, a large percentage of Hagerty’s products and services ar
Slide 41: Risks Related to Hagerty's Insurance Services
Proprietary and Confidential Risks Related to Hagerty’s Insurance Services 41 • The insurance products that Hagerty develops and sells for our underwriting carriers are subject to regulatory approval, and Hag erty may incur significant expenses in connection with the development and filing of new pr
Slide 42: Legal, Regulatory and Political Risks
Proprietary and Confidential Legal, Regulatory and Political Risks 42 • The legal and regulatory requirements applicable to Hagerty’s business are extensive. If the company is not able to comply, it could have an adverse effect on the company. Extensive regulation and potential further restrictive r
Slide 43: Risks Related to an Investment in Hagerty
Proprietary and Confidential Risks Related to an Investment in Hagerty 43 • Following the consummation of the Business Combination, Hagerty will incur significant increased expenses and administrative bur dens as a public company, which could negatively impact its business, financial condition and r
Slide 44: Proprietary and Confidential
Proprietary and Confidential