Inspirato Incorporated Price & Performance (ISPO)

With that, like to turn the call over to our Chairman and CEO, [indiscernible] Thank you, Kyle, and good morning, everyone. I'm really excited for today's call for a number of reasons. First, we get to share with you our results for Q4 and how our efforts over the past six months have been strengthening our foundation evidenced by what may be the strongest Q4 results in Insprado history as a public company. And second, our refined long term vision for the company, including key goals for 2025 that will set us up for lasting success. In a moment, you will hear about how we delivered profitability and positive free cash flow in Q4. Along with our plans to achieve full year profitability in 2025. These are important milestones that indicate our efforts of producing the desired results. [indiscernible] we're just getting started. We are at the beginning of a multiyear journey And while we have made great progress, real opportunity lies ahead. Driving sustainable profitable growth and elevating Insprado into an even more sought after brand. The great news is that we are in a good position to make this happen. We're operating in a large market with incredible potential, backed by strong well recognized brand a portfolio of world class homes and a loyal and engaged member base.

We serve over 11,000 members but the opportunity is far greater. By our estimate, there are millions of households around the globe that fit our potential member profile, including a substantial and untapped domestic market. And our mission is clear, find them, engage them, show them the undeniable value of Insprado. It is not just about short term growth, it is about attracting and retaining the right members who will drive long term success. To make this happen, we're making bold investments. We're elevating our brand to be synonymous with true luxury. We're enhancing our platform to create a seamless, intelligent and highly personalized experience. We've strengthened our leadership team with recent hires of SVP Marketing and Chief Technology Officer. We have launched a sophisticated rebrand modernizing our look and feel and we are revamping our website and user interface to be more intuitive and predictive based on our members travel habits. At the same time, we are focused on improving our operating efficiencies We now have the right people in the right seats and we're investing our time and dollars into initiatives that will have the biggest impact. As Michael will discuss shortly, this focus is expected to drive further improvements in gross margin cost structure and profitability.

Of course, while many of our homes are iconic and much of our service is world class, we know there's always room to improve. There's an opportunity we embrace In 2025, we're investing in refreshing our homes decor in more than half of our portfolio and standardizing concierge ensure every member enjoys the same high quality experience every time they travel with us. And that brings me to one of our greatest strengths. And why I'm so optimistic about our future and that's our members. At the end of the day, everything we do is about exceeding their expectations. When we consistently deliver we are not only reinforcing a decision to save with Insprado, also deepen their connection to the incredible community we're building. That is what excites me the most about the future of this business. On that note, I want to highlight some of the 2024 financial results which are the first signs that our strategy is working and will continue to play out over the next twelve to twenty four months. We finished the year with total revenue of $2.80 adjusted EBITDA loss of $6,500,000 both within our original guidance ranges. While revenue was down nearly $50,000,000 year over year, EBITDA improved $20,000,000 and we ended 2024 with a profitable fourth quarter.

Even more exciting, we generated $6,900,000 in net cash from operating activities in Q4, the first for each product as a public company. Michael will dive deeper into these numbers in a moment. Looking ahead to 2025, our focus remains on achieving full year profitability in a way that strengthens ability to serve our members. We expect to be profitable in 2025 and deliver between $235,000,000 and $255,000,000 in revenue, which is consistent with our fourth quarter annualized revenue. But beyond the numbers, here's why I see here's how I see the future. The luxury travel and experiences market is vast. And it is growing. And it's ripe for true leadership. No company has firmly established itself as the brand that defines this category. And there's no reason why Desk shouldn't be its product. We have the foundation, the vision and the expertise to lead the way. Setting the standard for what luxury hospitality should be and the ability to reach a target audience as effectively as possible. That's what brought me to ExpravaDawan. That's what drives me every day as we build something truly ordinary. In my initial six months at Insprado, we did the necessary work to course correct.

Now the multiyear effort to build a leading luxury travel and experiences company begins. To achieve our goals, we have a three pronged approach.

A, we will tirelessly focus on operational efficiencies. This will be a never ending endeavor. [indiscernible] we will double our focus on the luxury aspect of our services and [indiscernible] C, we will turn Insprado into a luxury travel and experiences company built on scalable technology and highly effective and world class digital marketing platform. Vastly reshaping our reach. This is what I know well is what I've done for decades as one of the pioneers in performance based marketing on the Internet. We're excited about the road ahead and believe we have the right talent and the right strategy to deliver what we have set out to achieve. I will be sharing more with you as we make progress in 2025. Before I turn it over to Michael, I want to thank our team their incredible dedication and hard work. And our members for their continued trust and support. I'm thrilled about what is ahead and I look forward to connecting again soon to share our first quarter results. Thank you. Thanks, Bhaiam. I'd like to echo your comments and I'm also really pleased with the progress we've made in the last quarter. I'm especially pleased to see the team's efforts reflect in our financial performance, which I'd like to highlight.

We delivered approximately $2,000,000 of positive EBITDA in Q4, a $7,000,000 year over year improvement and our best fourth quarter performance since going public. This marks our fourth consecutive quarter of year over year EBITDA improvement reinforcing the impact of our strategic decisions. And for the full year, our adjusted EBITDA loss was $6,500,000 represents a $23,000,000 or 78% year over year improvement in addition, we generated a positive free cash flow of approximately $6,000,000 in the fourth quarter, a $13,000,000 improvement compared to last year. As a reminder, this includes $3,000,000 of one time non recurring payments related to lease terminations of underperforming leases. Excluding these payments, free cash flow and adjusted normalized base would be roughly $9,000,000 for the quarter. We reduced our cash burn by 66% for the full year and our cash position increased by $11,000,000 quarter over quarter ended the year with $35,000,000 And lastly, we ended 2024 beating or within the previously provided guidance ranges of revenue, EBITDA and cash operating expenses. Now let me provide additional context on the fourth quarter and full year results before sharing our outlook for 2025. Gross margin and a rebalanced more efficient cost structure. For the fourth quarter, we grew adjusted gross margin dollars, which excludes asset impairment and lease termination by 14 percent $20.20 $22,000,000 or 35% of revenue compared to $19,000,000 or 27% of revenue in Q4 twenty twenty three For the full year, we also expanded gross margin to 32% of revenue or $89,000,000 compared to 29% of revenue in 2023.

The significant improvement in gross margin expansion in the fourth quarter and the full year was driven by lower cost of revenue, as we continue to benefit from our portfolio optimization efforts. Fourth quarter cost of revenue was approximately $41,000,000 which is a 20% improvement compared to Q4 twenty twenty three of $51,000,000 driven primarily by lower leased and fixed costs within cost of revenue. In Q4, we achieved a 23% reduction in operating expenses, reflecting a more efficient cost structure aligned with revenue growth. For the full year, cash operating expenses came in at $104,000,000 well below our initial guidance and a substantial improvement from 2023 levels of 130,000,000 twenty percent reduction We have made significant progress in aligning expenses with our current revenue levels including payroll reductions and rationalization of non payroll spend. We expect to see further improvements in the coming quarters helping us move towards a more sustainable run rate in 2025. As Brian mentioned, we have been very focused on margins and profits and we believe gross come once sustained profitability is achieved. In Q4, total revenue was $63,000,000 This represents 11% decrease year over year. For the year, we reported total revenue of $280,000,000 similar to the Q4 trends, full year revenue decreased by 15% year over year Each of the quarterly and annual revenue declines were a result of deliberate strategic decisions to reduce our pass number base.

While Pass remains a strategic product with a defined role on our business model, it's previous structure was not well aligned with our long term objectives, In response, we refined the product to better fit our overall business strategy and prioritize a more balanced mix of club and pass members.

This included a strategic shift away from emphasizing new pass sales in 2024 As of the end of Q4, we had approximately 1,500 ActivePass subscriptions and 10,000 active club subscriptions.

From a travel perspective, we have seen relatively consistent travel patterns from our members. Total occupancy for the for the year of 72% was flat compared to 2023, However, with our focus on optimizing our lease portfolio, we have experienced an improved mix in occupancy to paid delivered nights as opposed to pass.

Paid occupancy increased to 65% in 2024 compared to 56% in 2023, driving improved gross margin as previously mentioned. In total, ended the quarter with approximately $35,000,000 in cash, up $11,000,000 from Q3 This includes $6,000,000 in positive free cash flow and $5,500,000 raising capital. In 2024, our cash balance decreased by $7,000,000 compared to a $40,000,000 decrease in 2023 Excluding financing activities in both years, our true operating cash burn for the year improved $42,000,000 despite a $50,000,000 decrease in revenue.

It's clear that the strategic decisions made over the past year have put us on a stronger footing with a better trajectory towards sustainable and profitable growth. We have driven improved performance in 2024 by focusing our strategy and by operating with expense disciplines across the business. Have seen constraints breathe creativity and drive continuous improvement in how we serve our members. Intend to build upon our execution in 2024 and our excited about the momentum heading into 2025. Our goal in the year ahead is to make sure we are balancing investments for future profitable growth with increased efficiency across our organization With our key focus areas on elevating the Inspire brand, and the experience our members have when traveling with us. With this, we expect to take the next step forward in our path to profitability as evidenced by our full year adjusted EBITDA range of $0 to $5,000,000 From a cash operating expense standpoint, we expect to invest between $80,000,000 to $90,000,000 an improvement of approximately 15% compared to 2020 Meanwhile, total revenue is expected to be between $235,000,000 and $255,000,000 consistent with our fourth quarter annualized revenue. Similar to 2024, the revenue decrease is primarily associated with decreased past subscription revenue.

We're excited about our progress and we look forward to updating you further throughout the year And with that, we're happy to take any questions. Operator?

The first question for today will be coming from the line of Mike Grandal of Northland Capital.

Your line is open. Hey, thanks guys.

Kind of a two part question.

One, What do you think it's going to take kind of in terms of type of investment, Changes to current member programs and maybe sales and marketing dollars to to get to an inflection and kind of member count? How should we think about that? So Mike, thank you. Thank you for the question. This is Tayom. I think that this is More of a U shaped expectation, I would Seth, meaning that as our number of past members deliberately have gone down and we have focused more on our club members We have of course dealt with that headwind. But now as we [indiscernible] growing our sales force and then just to give you an idea, we have almost double the size of our sales force or they will be actually doubled by the end of March.

We are rebuilding our ability to be able to reach the wider audience that is interested in our offering as we attempt to grow the club. So I I think that inflection point that you're talking about is not that far away. It's probably a couple of quarters away, maybe two to three quarters away. But it's something that we expect will happen fairly soon And but the other thing that we should keep in mind is that going after growing the member base is one thing. But ensuring that we are signing up the right members so the growth in our membership base will result in growth in revenue is something that we are very much focused on. We don't end up in a situation that we've been in the last year, year and half as we have with the past member Got it. And did I hear it right 1,500 pass members and 10,600 club?

This is Michael. Yes, you have that right. And we'll still see a little bit of decline in both in 2025 as we alluded. We're getting to the healthier mix that we expect going forward in terms of past Got it. Great.

And then the next question is just Pam, what are one or two areas that are going to be a key focus for you in 2025? Sure.

Those are the three items that I mentioned towards the end of my remarks.

That as you know, when I arrived here, we our expenses, our overhead by over $40,000,000 That was necessary in order for us to course correct. And now as we think about operational efficiencies, we're focused on building a highly efficient machine an organization that is as efficient as any organization can be as we prepare for growth. Want to make sure that that foundation is highly efficient. So this is a difficult part of in a sense ensuring that we have built the right infrastructure And this will take time. But we are highly focused on operational efficiencies as an area of core competency. The second thing is as members come to us, because we represent a luxury service and delivering on that luxury promise is something that we are very focused on. And whether it comes to the core of our homes or the kinds of homes that we bring to our portfolio and the homes that we choose to remove from our portfolio All of that will result in hopefully a brand more of a commitment luxury aspect of the service.

The third and frankly the one that I'm excited about all of these But the third one is some is this one that I think can have a significant long term impact is the idea of revamping our technology, making it more scalable, and Building the right infrastructure, so we as a company become digital marketing enabled. Today as a company, we don't spend Enough on marketing. I mean, frankly, we spent very little on marketing. We spend very little in digital marketing. And I come from a school of thought that when twenty some odd years ago, we learned how to spend marketing dollars in a way that you could measure every dollar spent It opens up a massive opportunity for organizations to be able to take advantage of that and grow. And that is something I pioneered back in the 90s and still a company I own. That does that very well. So we're going to bring that core confidence because [indiscernible] So we are able to spend in a highly profitable way marketing dollars digital marketing dollars to be able to vastly grow the audience and the reach of Insprado as we get ready for growth. Got it.

And then Any quarterly revenue or EBITDA to maybe call out as we work through '25, Are we going to see the seasonality we've we've seen in prior years?

Hey, Mike, this is Michael. Yes, I would expect with the same seasonality as in prior year. So Q1 is is a really big quarter for us as we have Key destinations like ski that's always heavy for us, but also spring break in March is a big time.

So Q1 a big really big quarter both on revenue and EBITDA. And then Q3 in the summer period is also a really big quarter for us. From a total travel perspective, Where there's revenue that's a little bit more episodic is around experiences. Those can fall into different quarters depending on when we when we put on those experiences. Sometimes there can be timing variances year over year. And we do expect some of that this year, primarily some experiences more falling into Q2 versus Q1 But aside from that, expect the same level of seasonality versus prior years.

Got it. Okay. Hey, thank you.

Yes. Thank you.

Thank you. One moment for the next question. And our next question will be coming from the line of Rommel Deanna Sowell of Angus Capital. Your line is open.

Thanks for taking my question. Good morning. In the prior presentation, you guys talked about targeting, I think it was back in August, dollars 40,000,000 in annualized cost savings from a cost reduction program, months from leases, 15 payroll, $10,000,000 from operations. Could you just maybe update us in terms of the progress you've made there Are you guys kind of tracking in line with that plan? And and also some plans going forward, especially with regards to on the leases side. Hey, Rommel. Thank you for the question. Yes, we as we laid out back in August, our goal originally was to to identify and execute on $25,000,000 of cost savings. We identified 40,000,000 and we primarily have already actions on all $40,000,000 So as in our guidance that all is all reflected. There's not incremental work or cost savings that we have to get after to get to the $40,000,000 And you kind of named it, we had one, the termination of a large under significant improvement or part of the 40,000,000 on an annualized basis, that alone contributed about $8,000,000 of EBITDA loss. And in addition to that, we're continuing to optimize the portfolio mode of continuing to reduce, but there's still opportunity to drive efficiencies in that portfolio that would drive somewhere between $4,000,000 to $5,000,000 of continued lease savings in that bucket.

And then we continue to just be really diligent on driving operational efficiencies, both in personnel costs and in corporate overhead costs things like software and professional services fees, things like that. But again reiterate that $40,000,000 has already been identified and actioned and in our guidance, but we actually [indiscernible] As you've heard in our prepared remarks, we still think there's quite a bit of opportunity for us to continue to get efficient across the organization.

Great. That's very helpful and congratulations on the progress of the quarter. Thanks.

Yes. Thank you.

Thank you. And that does conclude today's Q and A session. I would like to go ahead and turn the call back over to CEO, Pam Zemanin. Go ahead please.

Thank you so much. Appreciate it. And thank you to all those who joined this call today. I really appreciate your time. As you've heard from us, we're really excited about the progress that we made and we have a long road ahead of us. And we are really excited to meet with you again in just about a month and a half or two months and share with you our results in Q1.

Call. You may all disconnect.