Inspirato Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 6, 2024

There are 6 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Inspirato 4th Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kyle Swart.

Operator

Please go ahead.

Speaker 1

Thank you and good morning. On today's call, we have CEO, Eric Grossa and CFO, Robert Caton. Yesterday afternoon, we issued our press release announcing our Q4 and full year 2023 results, which is available on the Investor Relations page of our website at investor. Inspirado.com. Before we begin our formal remarks, we remind everyone that some of today's comments are forward looking statements, including, but not limited to, our expectations of future operating results and financial position, guidance and growth prospects, business strategy and plans, and market position and potential market opportunities.

Speaker 1

These statements are based on assumptions and we assume no obligation to update them. Actual results could differ materially. We refer you to our SEC filings for a more detailed discussion of additional risks. In addition, during the call, management will discuss non GAAP measures, which are useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

Speaker 1

Reconciliations of these measures to the most directly comparable GAAP measure are included in our earnings release. With that, I'll turn the call over to our CEO, Eric Grossa.

Speaker 2

Thanks, Kyle, and good morning, everyone. On our last call, we spent much of the time reinforcing the pillars of Inspirado's value proposition, our world class portfolio of luxury residences and the 1st class service we provide to ensure each trip is remarkable and memorable. Today, I'll review some of our successes from 2023 as well as our strategic priorities and plans for 2024 before turning it over to Robert to cover our 2023 results and 2024 guidance in more detail. Before jumping in, I do want to highlight that we are reporting 4th quarter results in line with our internal expectations and within our 2023 full year revenue guidance range. For adjusted EBITDA, we are slightly favorable to our guidance range.

Speaker 2

Inspirato has always been a name you can trust. When you travel with us, you trust you'll get 1st class service at a world class property. In 2024, it is amongst our highest priorities to earn that same level of trust and credibility with our shareholders. Q4 marks the 2nd consecutive quarter of delivering results in line with our plan and we're excited for the opportunity to build a real track record of execution in 2024 through clear and transparent communication. We believe that doing so will unlock significant value for both our members and our shareholders.

Speaker 2

Looking back, the second half of twenty twenty three was largely defined by a heightened focus on execution and operating efficiencies. We took meaningful steps to streamline our cost structure and improve member engagement, each aimed at accelerating our path to profitability and positioning us for sustainable future growth. From an expense standpoint, the largest item in our P and L is our leases. The team has done a tremendous job aligning our portfolio with our member base and the new post pandemic normal of leisure travel. This included a detailed property level analysis of our portfolio with an emphasis on unit economics, regional scale and member satisfaction.

Speaker 2

We were also successful in reducing our cash operating expenses. For the full year, we stripped out more than $20,000,000 of expenses, a year over year reduction of approximately 15%. As you'll hear in a moment, we expect to continue to realize incremental savings in 2024 based on the actions we took in 2023 and most importantly feel that we have the right people in the right processes to handle future growth when the time comes. Next, I want to discuss the steps we've taken to improve our member experience. Although we pride ourselves in our member satisfaction as documented and highlighted by our best in class NPS scores of approximately 70, we've recently placed more emphasis on increasing member engagement and reenergizing our member base.

Speaker 2

During periods of rapid growth in the past, we would monitor positive trends in total nights booked and total nights delivered with less focus on who was booking and where they were going. So to address this midway through 2023, we took 3 decisive actions. 1st, we reorganized around a member success team dedicated to serving members and helping them book travel. Next, we lowered the asking prices for our nightly rates. And most recently, we launched a loyalty program.

Speaker 2

Each of these were aimed not only in increasing our nights per member, but our paid nights per member at our managed and controlled properties. These nights are the most accretive in our portfolio. This approach has led to a series of small wins and has a few recent trends that we have our eye on. First, Inspirada rewards has been a hit. Since its launch in August, nearly half our members have gained reward status based on their 2023 spend.

Speaker 2

As a reminder, our lowest status tier starts at $20,000 of annual spend. This is proof of our loyal and engaged member base. 2nd, we're raising the bar to entry and exit from Inspirado by focusing on selling multi year memberships and renewals. This aligns with our desire to make Inspirado more of a club and less of a product. It has resulted in fewer but better sales and should continue to improve our member retention engagement.

Speaker 2

For reference, in 2023, over 90% of our new club sales were for at least 1 year and more than 75% were for 2 years or more. Finally, we saw an uptick in the number of reservations and nights booked per member to end 2023 and to begin 2024. However, and this is a small data set, in February those trends have normalized reverting to or even slightly below 2023 levels. Our team has a sharp eye on this very recent information and we analyze both our engagement strategy as well as our travel trends at large. Look for updates on this throughout the year.

Speaker 2

As it pertains to our expected results in 2024, this has caused a slightly wider range of potential outcomes, although we are once again prioritizing our path to profitability. I'm confident that the progress we have made as an organization over the last 6 to 9 months has led to a significant improvement in our ability to recognize, analyze and react in real time and I'm excited about our 2024 plans ahead of us. For the full year, we remain focused on reaching breakeven of adjusted EBITDA and are expecting between a loss of $15,000,000 and income of 5,000,000 dollars Meanwhile, we expect total revenue between $275,000,000 $305,000,000 a decrease compared to 2023 due primarily to headwinds related to continued decreases in our pass subscription. I'll let Robert cover some of the details of the plan in a few moments, but would first like to highlight our 2024 strategic initiatives that position us to be a true turnaround story. After rightsizing our cost structure and improving our operating efficiencies in 2023, we are shifting our focus in 2024 to our product offerings and customer acquisition strategy.

Speaker 2

Are we offering the right products? Are they complementary to each other? Are they priced appropriately? And are we targeting the right traveler? Inspirado has a deeply rooted brand that resonates with a large core audience.

Speaker 2

Over the last few years, we've grown our member base and our portfolio substantially. We've launched several new products with varying degrees of success. Our goal in 2024 is to simplify Inspirato for both current members and prospective members as well. We want to return to our roots and operate as a true travel club, while reinstilling a sense of community amongst our members and importantly continuing to deliver exceptional vacations. Inspirado Pass is a great example of an area we can refund.

Speaker 2

Over the past year, we've seen meaningful churn for many reasons, including life changes, the macro environment and perhaps the past focus on the quantity of new member sales as opposed to ensuring the proper fit of a prospective member. At the same time, in 2023, while approximately 20% of our members were pass holders, nearly 40% of our nights delivered were pass nights. The math simply won't work and as a result, pass has not been profitable. Ultimately, it's apparent that we need to improve Pass' positioning. What is it designed to do?

Speaker 2

What is it targeted towards? And how does it coexist with club? Just last month, we announced changes to our Inspirato Pass. Today, it will function as the love travel offering for the frequent and flexible traveler. That means great value for an amazing number of trip options, equitable rates to that of our club members for smaller numbers of premium trips and unparalleled access and value for last minute bookings.

Speaker 2

We've embraced Pass' functionality by improving flexibility and access to short term bookings. Since implementing these changes in mid February, we have booked approximately 300 Flex trips and 1200 nights at properties that may have otherwise spoiled. Importantly, 60% of these reservations were for stays within 30 days at the time of booking. We've also removed non core features of Pass that were costly to Inspirado and infrequently used by members. And finally, we're planning to manage the number of pass memberships in conjunction with overall inventory and market placement.

Speaker 2

These changes will simplify pass, improve the engagement and experience for our members and ultimately make Pass more profitable for Insprado. Next, the team will take a fresh look at our other offerings to make sure they align with our strategic priorities while also providing tremendous value to our current and future members. Like any good brand that delivers value to its consumers and creates value for its shareholders, Inspirato's success will be driven by our ability to drive member engagement and advocacy. In order to do what we do best, deliver exceptional service and value, we need to do so from a position of operational strength with a solid foundation. At the end of the day, our mission is to inspire lasting memories and relationships by enriching the way our members experience the world.

Speaker 2

I'm fully confident that by staying true to our core values, care, collaboration, courage, curiosity, we will achieve just that in 2024. Before turning the call over to Robert, I'd like to thank our employees for their incredible work in 2023. With continued focus on execution, I believe we are set up for a much improved 2024. And with that, I'll turn the call over to Robert. Thanks, Eric.

Speaker 2

Before giving more color on our 2024 plan, I'd like to

Speaker 3

quickly cover our Q4 and full year 2023 results. In the Q4, we generated total revenue of $71,000,000 a gross margin of $13,000,000 and a gross margin of $19,000,000 excluding the impact of asset impairments. Although 4th quarter revenue decreased 18% year over year, it's important to note that it was in line with our internal expectations. The year over year decrease in revenue is due to decrease in both subscription and travel revenue. From a subscription revenue standpoint, we've seen a decline in both the number of pass and club subscriptions.

Speaker 3

However, due to the higher price point of a pass subscription, Pass has been the primary driver of the decrease in subscription revenue. At year end, we had 13,800 active subscriptions consisting of approximately 2,500 pass and 11,300 club subscriptions. This compares to 16,100 active subscriptions consisting of 3,600 pass and 12,500 club subscriptions at year end 2022. Keep in mind, we've invested significant sales resources in our Inspirater for Good and Inspirater for Business platforms, which combined generated approximately $25,000,000 of contracted sales in 2023. Further, Inspirater for Good sold more than 3,000 travel memberships last year that are not included in our subscription counts.

Speaker 3

While there is no recurring revenue from these sales, we feel they are a strong pre qualified prospects that we're excited to introduce to the Inspirater experience and hope to convert to a full membership over time. As far as travel revenue, the year over year decrease is primarily due to a decrease in the number of total nights delivered, specifically our paid nights delivered in large part due to a decline in the number of club subscriptions as well as the timing of our experiences and the deferral of some revenue due to the accounting treatment for rewards programs. In the Q4, we delivered approximately 41,000 total nights with a residence occupancy of 65% compared to 47,000 total nights with 73% residence occupancy in the Q4 of 2022. ADRs were approximately $1700 in the Q4 of 2023 compared to approximately $1900 in the Q4 of 2022 with the year over year decrease due to us lowering our ADRs midway through 2023. Meanwhile, when comparing full year performance, residents' ADRs were relatively flat year over year at approximately $1800 and we delivered a similar number of total nights in each of 20222023.

Speaker 3

At the same time, our residents occupancy decreased in 2023 to 72% from 81% in 20 22, primarily due to increased availability. As a reminder, increased availability was due to new leases committed to in 2022 or before that were added in 2023, while our portfolio optimization efforts in 2023 will start to have a more significant impact moving forward. In 2024, we believe the combination of lower nightly rates and fewer nights available will help us find the proper supply and demand balance to improve our operating efficiencies. For the full year, we generated $329,000,000 of revenue, which is around the midpoint of our guidance range of $320,000,000 to $340,000,000 The year over year decrease in total revenue of approximately $15,000,000 or 5% was due to decreases in each of subscription and travel revenue. The majority of the subscription revenue decrease was due to fewer pass subscriptions, while traveling revenue was mostly impacted by a reduced number of paid nights delivered in our residences, a product of both fewer club subscriptions and more hotels travel.

Speaker 3

Moving down the P and L, our 4th quarter gross margin was $13,000,000 or 18 percent of revenue compared to $25,000,000 or 29% of revenue in the Q4 of 2022. Absent the impact of asset impairments, Q4 2023 gross margin would have been $19,000,000 or 27% of revenue. For the full year, our gross margin was $54,000,000 or 17% of revenue compared to $116,000,000 or 34% of revenue in 2022. Absent the impact of asset impairments of approximately $41,000,000 for the full year, our gross margin would have been $95,000,000 or 29 percent of revenue. Of note, these impairments were associated with leases predominantly in one geographic location.

Speaker 3

Cutting one level deeper, our 4th quarter cost of revenue was approximately 51,000,000 dollars a 15% decrease compared to cost of revenue in the Q4 of 2022. This is consistent with our efforts to better manage our booking fees and it also includes a small amount of lease expense savings. As I'll touch on in a minute, we expect to continue this positive trend in 2024. Total cash operating expenses were approximately $27,000,000 in the Q4 of 2023 compared to approximately $36,000,000 in the Q4 of 2022. While the Q4 of 2023 did include a favorable intra year period adjustment of $1,800,000 related to operations, I'm proud of the progress we've made and I'm confident that we can reach a sustainable run rate for 2024.

Speaker 3

For the full year, our cash operating expenses totaled approximately $131,000,000 compared to $153,000,000 in 2022. As a reminder, our guidance range for 2023 of $125,000,000 to $130,000,000 did not include our 3rd quarter reduction in force, executive management changes and associated severance payments. Finally, as Eric mentioned, I'm proud to report that our adjusted EBITDA loss of $29,000,000 for 2023 ended the year slightly favorable compared to our previous guided range of a loss between $30,000,000 45,000,000 dollars This compares to a 2022 adjusted EBITDA loss of $32,000,000 with 4th quarter adjusted EBITDA losses in 2023 and 2022 of $5,400,000 $9,500,000 respectively. Equally important, we ended the year with a cash balance of approximately $42,000,000 which was slightly ahead of our internal expectations and represents a slowdown in our quarterly cash burn compared to the rest of 2023. Overall, I'm incredibly proud of how the team performed in the past year, specifically these past 6 months where our results such as improved adjusted EBITDA are beginning to reflect the changes and efforts we've made.

Speaker 3

Turning to 2024, I expect continued improvement. For the full year, we expect adjusted EBITDA approaching breakeven, more specifically between a loss of $15,000,000 and income of $5,000,000 and total revenue between $275,000,000 $305,000,000 Our number one financial priority in 2024 is reaching breakeven on an adjusted EBITDA basis. While total revenue is obviously important, it is merely an output of what we believe is a very achievable plan grounded on reasonable assumptions. As I'll cover in a minute, we expect a decrease in past subscription revenue, lower ADRs in our residents and fewer total members to be the main drivers of our decreased revenue. From a member standpoint, we're assuming club subscriptions to be relatively flat year over year, while pass subscriptions are expected to decrease by a similar absolute number in 2024 as they did in 2023.

Speaker 3

As Eric mentioned, we're confident that recent changes to Pass will improve the member experience and overall functionality of Pass. However, we also expect most of our sales focus to be on club as it's the true foundation of Inspirado and increasing our club membership ultimately enables increased past memberships in the future. For club itself, we plan to continue targeting longer term stickier sales. We expect this to result in an increase in our club member base, which will be offset by the natural attrition of our legacy members. The net result in 2024 is once again expected to be a declining member base with a decrease in pass alone expected to create a subscription revenue headwind of nearly $30,000,000 From a travel standpoint, fewer members equate to fewer total nights delivered.

Speaker 3

However, we're expecting improvements in terms of total occupancy and the mix between paid nights and past nights as well as residence nights and hotel nights. As Eric mentioned, we have seen mixed results from a booking perspective despite lower pricing, Inspirato rewards and a member success team. As a result, our current range assume similar paid travel behavior per members 2023 plus or minus 5%. For residences, we're currently assuming rates slightly below $17.50 per night on average for the year, which compares to slightly above $1800 per night received in 2023. On the hotel side, we expect a decrease our total nights delivered in 2024 compared to 2023, though much of this is expected to be attributable to fewer pass nights.

Speaker 3

Overall, we currently expect travel revenue to account for approximately 65% of total revenue, whereas in 2023 account for less than 60%. In terms of our cost structure, I've spent much of the past few quarters outlining our portfolio optimization plans and I'm excited to begin realizing the benefits. In 2024, we expect approximately $30,000,000 of lease expense savings compared to 2023. Coupled with our emphasis on reducing our booking fees, we expect to realize meaningful gross margin expansion beginning in the Q1. Finally, I alluded to our Q4 2023 operating expenses serving as a good run rate moving forward.

Speaker 3

Our full year range of cash operating expenses in 2024 is between $115,000,000 $125,000,000 which represents an improvement of 5% to 12% compared to 2023. All in, we expect to drive a meaningful year over year improvement in our adjusted EBITDA, driven by a focus on improved efficiencies. We expect cost efficiencies in our leases, fixed and variable costs, booking expenses and operating expenses, and we expect operating efficiencies in our travel mix and more focused sales efforts. Overall, I'm pleased with the plan we've put together. Time and again on this call, we've referenced hitting our guidance range and our intention is to continue building a track record of execution in 2024.

Speaker 3

Though we don't provide quarterly guidance, we believe this plan will deliver periods of positive adjusted EBITDA and ultimately improve our financial strength in the long term. With that, let me turn it over to the operator for Q and

Operator

A. Thank you. Our first question comes from Mike Grondahl with Northland Securities. Your line is now open.

Speaker 4

Hey guys, thanks. It sounds like you retooled the pass membership quite a bit. And if I heard you right, it fell from like 3,600 to 2,500 and it sounds like it's going to fall by a like amount in 2024 to about 1400 units or subscriptions. What does the new pass look like? And do you think you've gotten that to breakeven or making a profit for you?

Speaker 4

If you could answer that, that would be great.

Speaker 2

Terrific. Thanks Mike for your question. This is Eric. What I can do is talk a little bit about what PaaS looks like and the changes we've made to it. And then I can pass it over to Robert to walk through the implications of what that means from a 2024 perspective.

Speaker 2

In terms of what pass looks like and the changes, really what we wanted to do is to provide a big benefit to our pass holders and to enable last minute travel much more so with Pass going forward with the concept that we're calling Flex Trips, which really opens up significantly more high value inventory that likely would otherwise go unsold. And as we noted, since we've made this change, about 60% of the Flex trips that we've sold are under 30 days of departure, which is a really good sign for us because it shows that we can really drive demand towards that close in piece that otherwise might spoil. And what we're also doing in addition to providing this benefit, the significant benefit to pass holders, is also to streamline the product and to make it simpler. So that's why we sunsetted capabilities within pass that were pretty unpopular with pass holders and were frankly pretty inefficient and expensive for us to operate like an example of this would be beyond travel as well as past cruises. So in net, what we've got is I think a much simpler service and a much simpler to communicate product that has really, really strong value proposition to the right path holder, the one that is spontaneous, the one that is flexible, the one that is open for last minute travel and also provides a very, very valuable niche in our overall product portfolio.

Speaker 2

So that it's a profitable product and can really contribute to Inspivado's success as a whole.

Speaker 3

Great. Mike, yes, I'll just this is Robert. I'll take it a little bit further on the financial side of the house there. Pass was just to be very clear unprofitable for us in 2020 3 and before that. As Eric said before, 40% of our nights with only 20% of our members was going towards Pass.

Speaker 3

And moreover, a lot of Pass members were booking a lot of third party hotels, which had a lot of booking costs associated with them as well. So a combination of between taking out some of those non profitable areas, non core non profitable areas of PaaS, getting our members who are PaaS members to get them a great opportunity for inventory that's really last minute and would otherwise spoil, it's a win win. They're able to get inventory that's at a great price, great inventory at a great price and we're able to use some of that inventory. Those are some of the benefits that we see and so pass is in a much better financial position in 2024 and forward.

Speaker 4

Got it. And then a second question, just on the gross margin impairments related to the leases. I think you said it was 6,000,000 in 4Q and about $40,000,000 in $23,000,000 Would you say that's cleaned up now? Do we have to worry about those 1Q, 2Q?

Speaker 3

Yes. Thanks for the question, Mike. Absolutely, we feel like we're in a good place now. We've known about these impairments for some time now. And the reason they've been rolling in quarter over quarter is because under, again, this group of arrangements we have for a certain number of properties, we've been rolling them in over time.

Speaker 3

And so every time we've rolled them in from an accounting perspective is the first time we could take an impairment charge on them. So those are all now rolled into our portfolio. Those are all at fair value. Like any company, it could be a small one off impairment here or there, but we're not expecting any sort of large impairments on a go forward basis.

Speaker 4

Got it. Got it. And then maybe lastly, any update on Capital One? I think that partnership sounds like it starts in the second half and they kind of have to roll it out. How have you baked that into 2024?

Speaker 4

And what can that look like over 2025 maybe?

Speaker 2

Sure. Thanks, Mike. Look, we're I think we've been very clear that we're tremendously excited about our Capital One partnership, mainly because our respective strengths are so well suited for one another. I mean, what we're very good at is finding and managing a pretty world class portfolio of high end residences and giving our members a pretty first class experience when they travel with us. And Cap One amongst other things is a pretty world class demand aggregator.

Speaker 2

And they're really focused on becoming a very major player in travel. So that dynamic I think creates a win win situation for both of us, which is why Capital One was so excited about our partnership and why they invested in this last fall. So what we're doing right now is working very hard on all the technical integration work between ourselves and Capital One and their technology partner Hopper. And we really expect to be operational in the first phase of our partnership in the second half of this year. In terms of forecast, it's always difficult to predict what a large new partnership will bring.

Speaker 2

And so in the near term, I'd say we've been always probably a little bit more cautious in how that partnership will perform and grow out of the blocks. But when you take a look at Capital One's size, commitment to travel and breadth, and then you look at it relative to our size, I think it's pretty clear definitely over the medium to longer term this can be a game changer for us.

Speaker 4

Sure. It looks like they may get discovered too, which would maybe even make them bigger.

Speaker 2

Good point.

Speaker 4

Do you think it's June or July before you have a better feel? Is it September? Like when do you think you'll get, I don't know, a better sense of what it looks like roughly when during the year?

Speaker 2

Well, I would say that, that I mean Q3 is when we're launching it. So we'll have sort of an initial data points then. Going into the 4th quarter, which typically tends to be a stronger seasonal period for us, we should have a better idea. So I think it's fair to say that our confidence will increase over the course of the year. Sure.

Speaker 2

Thanks.

Operator

Thank you. One moment for our next question. Our next question comes from Shweta Kajuria with Evercore ISI. Your line is now open.

Speaker 5

Hey, this is Luke on for Shweta. Just two questions if I could. Can you just go over any low hanging fruit on the operating expense side where you can drive efficiencies? And then how should we think about the seasonality of your revenue and EBITDA throughout 2024? Could you just help us kind of think about how to model that?

Speaker 5

Thanks.

Speaker 2

Sure. With respect to expense efficiencies, this is one where I want to give credit to the team on what we've done. Over the course of the last 6 to 9 months, we have done a lot of work to basically streamline our business to make us more operationally efficient so that we can be successful and get to profitability on a wider range of outcomes. So that really starts with our portfolio, our real estate portfolio. Robert's led a tremendous effort to right size that part of our business.

Speaker 2

And also as a result of shifting demand really towards our risk properties, we'll be able to we're able to make meaningful improvements on our COGS line as well. And when you combine that with the OpEx improvements we've made just in terms of becoming more operationally efficient, both in terms of personnel as well as process, you're looking at a year over year swing in excess of $50,000,000 So that is really important to us being able to say that we have a shot and we have line of sight to get to breakeven. Maybe I'll hand it over to Robert to handle to answer your question around seasonality.

Speaker 3

Yes. And maybe, Luke, thanks, Just to contextualize just a bit more on some of the things that Eric talked about. When it comes to our overall costs, and we think about 2024, like we've been talking about in these last few calls, there are things that we've done already and that's much of the savings that we'll have in 2024 are things that are done and done. So for instance, we've talked a lot about our portfolio optimization, which will have savings year over year savings of approximately $30,000,000 Those are agreements that we terminated in 2023, where there was just a period of time that needed to pass before we were fully out of those leases. A lot of those were 6 months and some of them were 12 months.

Speaker 3

So we're starting to see really in Q1 the impact of the ones that we're rolling off in 6 months coming off the books And then there'll be a and that'll be our biggest quarterly decline in terms of the number of leases or the dollar of leases. And then we'll see an additional gradual decline throughout the rest of the year. When it comes to the operating expenses, we've taken a lot of actions already. So as you know, we had a reduction in force, first in January of last year and then in July of last year. And we'll get the full year benefit of that second reduction in force when we move into 2024.

Speaker 3

Moreover, as we were going through our planning cycle back in the fall, there was a lot of other things we looked at in operating expenses. How could we be more efficient in our software spend? Lots of little areas that in total piled up and amounted to the savings that we're talking about. You'll see this is part of like a 3 year trend. We went from 100 and approximately $155,000,000 in 2022 to approximately $135,000,000 in 20 20 3 and now we're coming down to $115,000,000 to $125,000,000 So I think we've kind of optimized on what we can do from an operating expense savings perspective.

Speaker 3

As it relates to your question on seasonality on revenue and EBITDA, we've had somewhat fairly consistent seasonality over time and it really starts with the revenue because most of our costs are fairly straight line across the year. And so as our revenue goes for a particular quarter, so goes our EBITDA as well. When I look at our revenue, you break it down into 2 pieces, the subscription revenue and then there's travel revenue. As it relates to subscription revenue, that is generally fairly straight line as well. Although as we talked about before, we'll see a decline in our past number of subscriptions as we go through the year.

Speaker 3

So there will be a decline over time in subscription revenue. You could think of that fairly straight line across the year. When it comes to travel, we have our periods where we have folks traveling more and we have periods where people actually book travel more. And so typically Q1, Q3 and Q4 are heavier travel periods relative to Q2. Q2 is you just don't see as much in that April to June timeframe, but it's also a time where there's more bookings generally to prepare for either the summer season or even to prepare, to start getting ready for year end travel again.

Speaker 3

So expect that revenues will follow for travel, something along those paths between Q1, 3 and 4, there's a little bit of seasonality even within those. But overall, we'd say that's when we'll see the higher revenue because it's when people take the trips that we recognize the revenue.

Speaker 5

Thank you.

Operator

Thank you. I'm showing no further questions at this time. I would now like to turn it back to CEO, Eric Gross, for closing remarks.

Speaker 2

Terrific. Well, Terrific. Well, thanks everyone for listening and participating in our Q4 call. Look, we're committed to keeping our lines of communication open and look forward to next earnings call for the Q1, which will be in May. In the meantime, thanks very much and talk soon.

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Key Takeaways

  • Inspirato delivered Q4 and full‐year 2023 revenue in line with guidance and posted an adjusted EBITDA slightly favorable to expectations, ending 2023 with a $42 million cash balance.
  • The company cut over $20 million (≈15%) in cash operating expenses in 2023 through portfolio optimization and staffing reductions, and expects an additional $30 million in lease savings in 2024.
  • To boost member engagement, Inspirato launched a dedicated member success team, lowered nightly rates, and rolled out the Inspirato Rewards loyalty program, with nearly half of members attaining status since its August launch.
  • 2024 targets include reaching adjusted EBITDA breakeven (-$15 million to +$5 million) alongside revenues of $275–305 million, despite headwinds from declining Pass subscriptions.
  • The company is streamlining its offerings by refocusing on its core travel club model and retooling the Pass product into a simpler “Flex Trips” solution for last-minute inventory to drive profitability.
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Earnings Conference Call
Inspirato Q4 2023
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