Inspirato Incorporated

Good day and thank you for standing by and welcome to Inspirado third quarter 2024 earnings 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'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To draw your question, please press star 11 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 Sork, Investor Relations. Please go ahead.

Thank you, and good morning. On today's call, we have Chairman and CEO Payam Zamani, CFO Robert Kaden, President David Callery, and our incoming CFO, Michael Arthur. Yesterday afternoon, we issued our press release announcing our third quarter 2024 results. As a reminder, some of today's comments are forward-looking statements. These statements are based on assumptions, and actual results could differ materially. In addition, during the call, we 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 a financial result prepared in accordance with GAAP. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release. With that, I'd like to turn the call over to our Chairman and CEO, Payam Zamani.

Thank you, Kyle, and thank you, everyone, for joining us this morning. As I sit here today, nearly three months into my tenure as CEO, it's time that I provide my impressions of the business, as well as outline some of our plans for the company moving forward. After countless conversations with employees and members, both new and long-tenured, as well as experiencing a sprawl away of luxury travel firsthand, my original investment thesis has not only been validated, but reinforced. Esprado is a great company with an incredible value proposition and mission of delivering exceptional experiences for our members and their families. However, I believe the company got in its own way over the past few years. It became fixated on new product offerings, obsessed with running a subscription business, and committed to growing purely for growth sake. This led to a more transient member base. who have often been offered a luxury experience at a discounted price deviating from the financial requirements of a true luxury club experience. And for a long time, this has been coupled with an overblown cost structure. These decisions impact our financial performance while also overshadowing a number of meaningful accomplishments. For instance, year to date, we brought on 11 new luxury homes, we created signature hotel partner shoes with iconic luxury brands such as Montage, The Waldorf Astoria, and Fairmont. And most importantly, we've maintained an industry-leading NPS score of approximately 70 amongst our members staying in our homes and enjoying our Escuadro-only experiences. Since I joined, we've greatly improved the foundation from which we operate. We've refreshed our boardrooms. Including myself, four of our seven board members are new, and they bring a fresh and diverse perspective. We've cleaned up our capital structure and improved our trading fundamentals by converting all of our Class B shares into Class A. I really cannot reiterate enough how important this has been. We've regained compliance with NASDAQ listing requirements. And we've taken immediate action to better align our cost structure with our revenue. On our last call, as we mentioned, we had identified cost-cutting measures expected to result in approximately $25 million of annual life savings. To date, that number has grown to more than $40 million. We'll give more details on this in a moment, but I think it's really important to mention that the reason this turned out to be a much higher number is simple. As I started digging in with the team, it was clear that we had a much larger opportunity to reduce expenses than I had anticipated. With these meaningful changes that are complete now and many of the cost-cutting initiatives implemented, we can turn our attention to the future and our 2025 plans in which our primary focus will be to operate as a profitable luxury travel club. Within the construct of operating a luxury club, we will undertake several key initiatives. First, the focus of our sales efforts will be on our flagship offering, Inspirada Club, though we will continue to offer Inspirada Pass and Invited as complementary products for our members. As we look to improve our retention and member LTV, we will no longer offer month-to-month and other short-duration subscriptions. Instead, we will return to offering a club membership with initiation fees and annual dues, similar to how most clubs operate. This is the way we operated for our first 10 years and is incredibly important in helping us attract and retain the right type of members. We also have a proven track record of growth and high retention under this model. Second, we will act like the luxury brand we are. We will continue to deliver value through our first-class services and world-class portfolio as opposed to luxury offering discounts in multiple different ways. As part of this, We will be replacing our existing rewards program, which is basically a program designed to discount our offering to a new loyalty program in the coming months. The new loyalty program will be focused on enhancing the experience of our best member clients. Finally, one thing we won't change is our focus on the member experience. In fact, we plan to make investments to enhance it. Esprada will be the best-in-class luxury club. Our new approach and our anticipated financial strength will give us the ability to make the investments needed to remain a cutting-edge offering in a very exciting and growing space. Profitability represents a lifeblood of all well-run businesses, and with that in mind, we will have a relentless focus on improving our margins. I'm less concerned with top-line growth. In fact, I don't expect it next year. However, I do expect meaningful gross margin and EBITDA margin expansion that will position us for sustained profitability. Our success will ultimately be measured by our ability to provide a great service to our members while being a highly profitable company. At this point, I can say with confidence that we intend to be profitable on an adjusted EBITDA basis in Q1, and we will also expect to be cash flow positive. Finally, before turning the call over to discuss the results for the quarter, I'd like to thank Robert for the incredible work he's done at CFO over the past few years. While his list of accomplishments and contributions is too lengthy to go through at this moment, among the finest was the training and succession planning of our new CFO, Michael Arthur. Robert.