Inspirato Announces Third Quarter Financial and Operating Results
Implemented reorganization plan, including consolidating dual class share structure, refreshing Board of Directors and executing plans with more than $40 million in annualized cost savings
Relentless focus on operating efficiencies in third quarter contributed to significant year-over-year Adjusted EBITDA improvement
DENVER, Oct. 28, 2024 (GLOBE NEWSWIRE) -- Inspirato Incorporated ("Inspirato" or the "Company") (NASDAQ:ISPO), the premier luxury vacation club, today announced its 2024 third quarter financial and operating results.
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.
2024 Third Quarter Financial and Operating Results:
Third quarter 2024 total revenue of $69.1 million, a sequential increase of 3% from the second quarter and year-over-year decrease of 16% compared to the third quarter of 2023.
Gross Margin of $49.4 million, or 71% of revenue, compared to a gross margin of $20.6 million, or 25% of revenue in the third quarter of 2023. Gross margin included a non-recurring net gain of $29.9 million and asset impairment of $4.3 million in the third quarters of 2024 and 2023, respectively.
Net income of $6.6 million in the third quarter of 2024, compared to a net loss of $25.4 million in the comparable 2023 period.
Adjusted EBITDA loss, a non-GAAP measure defined below, of $3.4 million in the third quarter of 2024 compared to an Adjusted EBITDA loss of $9.2 million in the comparable 2023 period. Adjusted EBITDA loss improved by 63% year-over-year due to lower operating expenses.
Ended the quarter with approximately 11,700 members comprised of approximately 10,200 Inspirato Club members and approximately 1,500 Inspirato Pass members.
Management Commentary
Chairman and Chief Executive Officer, Payam Zamani, commented, "Inspirato is truly a great company with an incredible value proposition and mission of delivering exceptional experiences for our members and their families. Over the past few years, we got in our own way and lost focus on some of the fundamentals of operating a truly sustainable business while continually building on our foundation as a luxury travel club. In just a few short months since I joined as the CEO, we have made strides towards realigning this focus and we have also added a fresh and diverse perspective to our boardroom. Additionally, we optimized our cost structure, achieving more than $40 million in annualized savings to better align expenses with revenue. This provides us the flexibility needed to continue enhancing the quality of services for our members. I expect these changes, as well as a relentless focus on gross margin and EBTIDA margin expansion, will support profitability and positive free cash flow starting in 2025."
2024 Guidance
Consistent with the prior quarter, the Company has removed 2024 financial guidance.
2024 Third Quarter Financial Results and Operational Metrics
The following table provides the components of gross margin for the three and nine months ended September 30, 2024 and 2023:
Three Months Ended September 30,
Nine Months Ended September 30,
(Unaudited, in millions other than percentages)
2024
2023
% Change
2024
2023
% Change
Travel revenue
$
42.6
$
49.1
(13.2
)%
$
131.1
$
152.2
(13.9
)%
Subscription revenue
23.0
33.3
(31.0
)%
76.3
105.9
(27.9
)%
Rewards and other revenue
3.5
0.2
1,775.7
%
9.3
0.3
3,323.8
%
Total revenue
69.1
82.6
(16.3
)%
216.7
258.4
(16.1
)%
Cost of revenue
49.6
57.7
(14.0
)%
149.3
182.5
(18.2
)%
Asset impairments and (gain) on lease termination
(29.9
)
4.3
n/m
%
(29.9
)
34.3
n/m
%
Gross margin
$
49.4
$
20.6
140.0
%
$
97.3
$
41.5
134.2
%
Gross margin (%)
71
%
25
%
47
pp
45
%
16
%
29
pp
n/m = not meaningful pp = percentage points
The following table provides a breakdown of Nights Delivered, Occupancy and ADR for the three and nine months ended September 30, 2024 and 2023:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Residences
Paid Nights Delivered
15,600
16,100
46,100
47,300
Total Nights Delivered
23,200
29,500
70,500
87,200
Occupancy
71
%
73
%
73
%
74
%
ADR
$
1,624
$
1,618
$
1,724
$
1,866
Hotels
Paid Nights Delivered (1)
7,900
10,300
25,300
32,300
Total Nights Delivered (1)
12,300
16,900
42,100
57,200
Occupancy (2)
82
%
70
%
76
%
72
%
ADR (1)
$
1,105
$
832
$
1,063
$
938
Total
Paid Nights Delivered (1)
23,500
26,500
71,400
79,600
Total Nights Delivered (1)
35,600
46,300
112,600
144,400
Occupancy (2)
73
%
72
%
73
%
73
%
ADR (1)
$
1,449
$
1,311
$
1,492
$
1,490
(1)
Includes net rate hotel nights.
(2)
Excludes net rate hotel nights as we purchase individual nights but do not have a total number of nights obligation.
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 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 concerning our 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 our past performance and future prospects, and allow for greater transparency with respect to metrics used by its 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 we believe that these non-GAAP financial measures provide an additional tool for investors to use in comparing results of operations of our business over multiple periods with other companies in our 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, our 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 provides 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 our 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, 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 income (loss) and comprehensive income (loss) less fair value gains and losses on financial instruments, asset impairments and (gain) on lease termination, restructuring charges and other non-recurring professional fees.
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 income (loss) less interest, income taxes, depreciation and amortization, equity-based compensation expense, fair value gains and losses on financial instruments, asset impairments and (gain) on lease termination, restructuring charges and other non-recurring professional fees. Adjusted EBITDA Margin is defined as Adjusted EBITDA as a percentage of total revenue for the same period.
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 used in 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, if any.
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.
Average Daily Rates ("ADR") and Total Occupancy. Inspirato defines ADR as the total paid travel revenue, divided by total paid nights, which includes Inspirato for Good ("IFG") and Inspirato for Business ("IFB"), in both leased residences or hotel rooms and suites. ADR does not include Pass nights utilized. Occupancy is defined as all paid, Pass, IFG, IFB, employee and complimentary nights in all at-risk properties divided by the total number of at-risk nights available. Net-rate hotel partners are excluded from Hotel Occupancy as these are dependent on the hotel having capacity for Inspirato requests.
Inspirato Incorporated Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (in thousands, except per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Revenue
$
69,114
$
82,598
$
216,741
$
258,390
Cost of revenue (including depreciation of $1,677 and $2,323 during the three months ended September 30, 2024 and 2023, respectively, and $4,418 and $4,054 during the nine months ended September 30, 2024 and 2023, respectively)
49,620
57,726
149,345
182,498
Asset impairments and (gain) on lease termination
(29,895
)
4,294
