Inspirato Incorporated

Good day and thank you for standing by. Welcome to the Inspirato fourth quarter 2023 earnings conference call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 1 again. 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. Please go ahead. Thank you, and good morning.

On today's call, we have CEO Eric Rosa and CFO Robert Kaden. Yesterday afternoon, we issued our press release announcing our fourth quarter and full year 2023 results, which is available on the investor relations page of our website at investor.inspirato.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. 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. 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 Rosa.

Thanks, Kyle, and good morning, everyone. On our last call, we spent much of the time reinforcing the pillars of Inspirato's value proposition. Our world-class portfolio of luxury residences and the first-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 fourth 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. Inspirato has always been a name you can trust. When you travel with us, you trust you'll get first-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 second 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. Looking back, the second half of 2023 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&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. We were also successful in reducing our cash operating expenses. For the full year, we stripped out more than $20 million 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 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 re-energizing our member base. 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 three decisive actions. First, 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. Each of these were aimed not only at 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, Inspirata Rewards has been a hit. Since its launch in August, nearly half our members have gained reward status based on their 2023 spend. As a reminder, our lowest status tier starts at $20,000 of annual spend. This is proof of our loyal and engaged member base. Second, we're raising the bar to entry and exit from Inspirato by focusing on selling multi-year memberships and renewals. This aligns with our desire to make Inspirato 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. For reference, in 2023, over 90% of our new club sales were for at least one year and more than 75% were for two 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. 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 six to nine 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 million and income of $5 million. Meanwhile, we expect total revenue between $275 and $305 million, a decrease compared to 2023 due primarily to headwinds related to continued decreases in our past subscriptions. 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 right-sizing 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. Are we offering the right products? Are they complementary to each other? Are they priced appropriately? And are we targeting the right traveler? Inspirato has a deeply rooted brand that resonates with a large core audience. 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. Inspirato Pass is a great example of an area we can refine. Over the past year, we've seen meaningful churn for many reasons, including life changes, the macro environment, and perhaps a 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 past nights. The map simply won't work, and as a result, Pass has not been profitable. Ultimately, it's apparent that we need to improve Pass's positioning. What is it designed to do? 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 luxury 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. We've embraced PASS's functionality by improving flexibility and access to short-term bookings. Since implementing these changes in mid-February, we've booked approximately 300 flex trips and 1,200 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 PATH that were costly to Inspirato and infrequently used by members. And finally, we're planning to manage the number of PATH memberships in conjunction with overall inventory and market placement. These changes will simplify PATHs, improve the engagement and experience for our members, and ultimately make PATHs more profitable for Inspirato. 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. 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.