Inspirato Announces Second Quarter Results and Updates Full-Year 2023 Guidance

DENVER, Aug. 08, 2023 (GLOBE NEWSWIRE) -- Inspirato Incorporated (“Inspirato” or the “Company”) ( ISPO), the innovative luxury travel subscription brand, today announced its 2023 second quarter financial and operating results, entry into a definitive agreement for a new $25 million convertible note investment from Capital One Ventures and updated its full-year 2023 financial guidance.

Except as otherwise stated, all financial results discussed below are presented in accordance with generally accepted accounting principles in the United States of America, or GAAP. As supplemental information, we have provided certain additional non-GAAP financial measures in this press release’s supplemental tables, and such supplemental tables include a reconciliation of these non-GAAP measures to our GAAP results. The sum of individual metrics may not always equal total amounts indicated due to rounding.

Recent Highlights:

• Announced entry into a definitive agreement for a new $25 million convertible note investment from Capital One Ventures, forging a new strategic partnership.
• Launched Inspirato Rewards, the Company’s first ever member loyalty program offering savings and additional travel benefits based on tiered status levels.
• Continued broad-based cost-cutting measures, including portfolio optimization through early termination of leases and a 6% reduction in force in July, each aimed at aligning future spend with the Company’s profitability objectives.
  

2023 Second Quarter Highlights:

• Second quarter 2023 total revenue of $84 million, flat compared to the second quarter of 2022.
• Total Nights Delivered of 47,400, a year-over-year increase of 1%, driven primarily by increased Pass nights and hotel nights, partly offset by a decrease in paid residence nights delivered.
• Residence occupancy was 72% compared to 82% in the second quarter of 2022 and residence average daily rate (“ADR”) was $1,750 in the second quarter of 2023 compared to $1,700 in the comparable 2022 period.
• Total Active Subscriptions of approximately 15,200 were comprised of approximately 12,200 Inspirato Club subscriptions and approximately 3,000 Inspirato Pass subscriptions. Inspirato Club and Pass subscriptions as of June 30 represent a year-over-year increase of 1% and decrease of 18%, respectively.
• Inspirato for Good (“IFG”) and Inspirato for Business (“IFB”) second quarter contracted sales of $3.7 million and $3.9 million, respectively. Year-to-date, IFG has sold approximately 2,000 travel and membership packages, approximately 1,200 of which were sold in the second quarter. Sales are allocated between subscription revenue and travel revenue and will be recognized as subscription revenue over the life of the contract and travel revenue at the time of travel.
• Removed 60 residences in the second quarter due to non-renewal and/or early terminations, resulting in a net decrease of 39 residences compared to the first quarter of 2023. Controlled Accommodations as of June 30 totaled 663, a year-over-year decrease of 6% and a sequential quarterly decrease of 9%.
• Net loss of $47 million in the second quarter of 2023, which includes the impact of a $30 million non-cash asset impairment, compared to a net loss of $5.0 million in the comparable 2022 period. Adjusted EBITDA loss, a non-GAAP financial measure defined below, of $12 million in the second quarter of each 2023 and 2022.
  

Management Commentary

Co-Founder and Chief Executive Officer Brent Handler commented, “Our team continues to execute on a number of initiatives aimed at maintaining and elevating the value proposition and experience of our members. Our newly created Inspirato Rewards program is a perfect example of our commitment to our loyal and engaged members. We’re also incredibly excited about the investment from Capital One Ventures; this will enable us to set a global standard for luxury travel.”

“We’ve made tremendous progress in optimizing our portfolio over the past few months,” added Chief Financial Officer Robert Kaiden. “Though we won’t begin to see meaningful benefit from these actions until the fourth quarter, we’re demonstrating the strength of our asset-light operating model by renegotiating terms within our existing portfolio and terminating underperforming properties. This approach, plus a continued focus on both reducing overhead and investing in the member experience, has us well-positioned to achieve our future profitability goals.”

2023 Revised Guidance

In the second quarter of 2023, the Company delivered fewer than anticipated paid residence nights and lower than expected residence occupancy. Further, bookings made year-to-date – a strong indicator of future travel revenue – averaged a shorter length of stay and were more biased toward hotels when compared to prior years. These trips typically deliver less revenue and gross margin per trip compared to residence-based travel. As a result of these trends, the Company is updating its 2023 guidance.

For full-year 2023, Inspirato anticipates total revenue between $320 million and $340 million. The decrease in total revenue compared to prior guidance is primarily attributable to the aforementioned travel dynamics. The Company anticipates a full-year 2023 Adjusted EBITDA loss between $30 million and $45 million. The decrease in Adjusted EBITDA loss compared to prior guidance is due to reduced revenue expectations partially offset by a reduction in operating expenses. The revised revenue and Adjusted EBITDA guidance do not contemplate any potential benefit from Inspirato Rewards or the Capital One Ventures partnership.

In July 2023, the Company had a reduction in force resulting in a decrease in total headcount of approximately 6%. Total 2023 operating expenses, excluding equity-based compensation, are expected to be between $125 million and $130 million*.

* Includes general and administrative (excluding equity-based compensation), sales and marketing, operations, and technology and development expenses.

Due to changes in booking behavior, travel mix and anticipated operating expenses, as well as the potential impacts from recent rate reductions, including the Company’s early booking discount and the launch of Inspirato Rewards as well as the timing of the pending investments led by Capital One Ventures, the Company is no longer providing guidance for its anticipated year-end cash balance.

These statements are forward-looking and actual results may differ materially. Refer to the Forward-Looking Statements section below for information on the factors that could cause Inspirato’s actual results to differ materially from these forward-looking statements.

Forward-looking Adjusted EBITDA is a forward-looking non-GAAP financial measure. The Company is unable to reconcile forward-looking Adjusted EBITDA to net income, its most directly comparable forward-looking GAAP financial measure, without unreasonable effort, as a result of the uncertainty regarding, and the potential variability of, reconciling items such as equity-based compensation expense. However, it is important to note that material changes to reconciling items could have a significant effect on Inspirato’s future GAAP results.

Capital One Ventures Investment

In August of 2023, the Company announced that it has entered into a definitive agreement for a new $25 million convertible note investment from Capital One Ventures. The capital is expected to provide broad operating flexibility to Inspirato as it continues to enhance the luxury travel experience it delivers for its members. The issuance of the convertible note is subject to certain closing conditions, including the entry into a commercial agreement between Inspirato and Capital One prior to the closing, and the receipt of Inspirato shareholder approvals.

This announcement is neither an offer to sell nor a solicitation of an offer to buy any of these securities (including the shares of Inspirato common stock, if any, into which the convertible notes will be convertible) and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful.

2023 Second Quarter Financial Results and Operational Metrics

The following table provides the components of gross margin for the periods ended June 30, 2022 and 2023:

The following table provides a breakdown of Total Nights Delivered for the periods ended June 30, 2022 and 2023:

Reconciliation of Non-GAAP Financial Measures

In addition to Inspirato’s results determined in accordance with GAAP, Inspirato uses Adjusted Net Loss, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow as part of its overall assessment of its performance, including the preparation of its annual operating budget and quarterly forecasts, to evaluate the effectiveness of its business strategies and to communicate with its board of directors concerning its business and financial performance. Inspirato believes that these non-GAAP financial measures provide useful information to investors about its business and financial performance, enhance their overall understanding of Inspirato’s past performance and future prospects, and allow for greater transparency with respect to metrics used by Inspirato’s management in their financial and operational decision making. Inspirato is presenting these non-GAAP financial measures to assist investors in seeing its business and financial performance through the eyes of management, and because Inspirato believes that these non-GAAP financial measures provide an additional tool for investors to use in comparing results of operations of its business over multiple periods with other companies in its industry.

There are limitations related to the use of these non-GAAP financial measures, including that they exclude significant expenses that are required by GAAP to be recorded in Inspirato’s financial measures. Other companies may calculate non-GAAP financial measures differently or may use other measures to calculate their financial performance, and therefore, Inspirato’s non-GAAP financial measures may not be directly comparable to similarly titled measures of other companies. Thus, these non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP and should not be considered as an alternative to any measures derived in accordance with GAAP.

Inspirato compensates for these limitations by providing a reconciliation of Adjusted Net Loss, Adjusted EBITDA, Adjusted EBTIDA Margin and Free Cash Flow to their respective related GAAP financial measures. Inspirato encourages investors and others to review its business, results of operations, and financial information in its entirety, not to rely on any single financial measure, and to view Adjusted Net Loss, Adjusted EBITDA loss, Adjusted EBITDA Margin and Free Cash Flow in conjunction with their respective related GAAP financial measures.

Adjusted Net Loss. Adjusted Net Loss is a non-GAAP financial measure that Inspirato defines as net loss and comprehensive loss less warrant fair value gains and losses and asset impairment.

The above items are excluded from Inspirato’s Adjusted Net Loss measure because management believes that these costs and expenses are not indicative of core operating performance and do not reflect the underlying economics of Inspirato’s business.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure that Inspirato defines as net income (loss) and comprehensive loss less interest, income taxes, depreciation and amortization, equity-based compensation expense, warrant fair value gains and losses, asset impairment, and public company readiness expenses.

The above items are excluded from Inspirato’s Adjusted EBITDA measure because management believes that these costs and expenses are not indicative of core operating performance and do not reflect the underlying economics of Inspirato’s business.

Free Cash Flow. Inspirato defines Free Cash Flow as net cash provided by operating activities less purchases of property and equipment and development of internal-use software. Inspirato believes that Free Cash Flow is a meaningful indicator of liquidity that provides information to management and investors about the amount of cash generated from operations, after purchases of property and equipment and development of internal-use software, that can be used for strategic initiatives. Inspirato’s Free Cash Flow is impacted by the timing of bookings because it collects travel revenue between the time of booking and 30 days before a stay or experience occurs. See below for reconciliations of non-GAAP financial measures.

Key Business and Other Operating Metrics

Inspirato uses a number of operating and financial metrics, including the following key business metrics, to evaluate its business, measure its performance, identify trends affecting its business, formulate financial projections and business plans, and make strategic decisions. Inspirato regularly reviews and may adjust processes for calculating its internal metrics to improve their accuracy.

Active Subscriptions. Inspirato uses Active Subscriptions to assess the adoption of its subscription offerings, which is a key factor in assessing penetration of the market in which it operates and a key driver of revenue. Inspirato defines Active Subscriptions as subscriptions as of the measurement date that are paid in full, as well as those for which Inspirato expects payment for renewal.

Controlled Accommodations. Controlled Accommodations includes leased residences, hotel penthouses, suites and rooms, and residences under net rate agreements, including those that have executed agreements but have not yet been released for booking by Inspirato’s members.

Total Nights Delivered. Total Nights Delivered includes all Paid, Inspirato Pass, Inspirato for Good, Inspirato for Business, employee and other complimentary nights in all residences or hotels.