Real-time Form 4 intelligence. Smarter insider tracking.
YoY shift: Lean -
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.40pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.40pp
Lean -
Net-tone change vs last year's 10-K.
MD&A
-0.39pp
Lean -
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
termination+5
closing+3
adversely+2
incidents+2
loss+2
Positive rising
leading+3
satisfactory+1
satisfied+1
beneficially+1
enabling+1
Risk Factors (Item 1A)
10,204 words
Item 1A. Risk Factors
This section describes circumstances or events that could have a negative effect on our financial results or operations or that could change, for the worse, existing trends in our businesses. The occurrence of one or more of the circumstances or events described below could have a material adverse effect on our financial condition, results of operations and cash flows and/or on the trading prices of our common stock. The risks and uncertainties described in this Annual Report on Form 10-K are not the only ones facing us. Additional risks and uncertainties that currently are not known to us or that we currently believe are immaterial also may adversely affect our businesses and operations.
Risks Related to Our Business and the Industry
The success of our business depends on our reputation and the strength of our brand.
Our business depends on our reputation and the strength of our brand as a provider of luxury accommodations and experiences. We believe that the strength of our brand is particularly important to our ability to attract and retain members with at least one active paid member subscription (“Subscription”) and to compete for new properties. Many factors can affect our reputation and the value of our brand, including the quality and location of our properties, the value we provide, our level of service, the safety of our members, our approach to health and cleanliness, publicized in or around our properties, our ability to protect and use our brand and trademarks, the levels of marketing and the prevalence of other luxury accommodations and experiences in the destinations we serve.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
termination+24
restructuring+17
closing+4
force+4
decline+3
Positive rising
gain+14
rewards+8
able+3
honored+3
benefit+1
MD&A (Item 7)
9,598 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our audited Consolidated Financial Statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. This section of this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2022 and 2023 are not included in this Annual Report on Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
This discussion includes both historical information and forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Unless otherwise indicated or the context otherwise requires, references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “Inspirato,” “we,” “us,” “our” and other similar terms refer to Inspirato LLC prior to the Business Combination and to Inspirato Incorporated and its consolidated subsidiaries after giving effect to the Business Combination.
In addition, we rely on partners, landlords and third-party service providers and if such partners, landlords and third parties do not perform adequately or terminate their relationships, our brand may be negatively impacted, our costs may increase and our business, financial condition and results of operations could be adversely affected.
If we fail to retain existing member s or add new member s, our business, results of operations and financial condition may be materially adversely affected.
Our ability to grow our operations and revenue is dependent on our ability to retain existing member s and add new Subscriptions, and we cannot be sure that we will be successful in these efforts or that member retention levels will not materially decline. There are a number of factors that could lead to a decline in member s or that could prevent us from increasing our member s, including:
• our failure to deliver offerings that members find attractive;
• harm to our brand and reputation;
• our failure to deliver compelling offerings to our members;
• increases in pricing and the introduction of additional costs and fees;
• members engaging with competitive products and services;
• problems affecting members’ experiences;
• a decline in the public’s interest in luxury travel or a change in economic conditions and consumer discretionary spending preferences or trends;
• an increase in inflation or to federal interest rates; and
• global macroeconomic and geopolitical factors, including political, social, or economic instability—such as conflicts in the Middle East and other geopolitical tensions—changes in the political and regulatory climate, including the policies and regulatory priorities of the new presidential administration, and events beyond our control, such as pandemics, health concerns, travel restrictions, immigration policies, trade disputes, tariffs, and the effects of climate change (e.g., severe weather, fires, floods, and natural disasters), can significantly impact our operations and broader economic conditions.
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In addition, if our platform is difficult to navigate, fails to deliver satisfactory user experiences or does not effectively engage members, we risk losing new and existing members.
As a result of these factors, we cannot be sure that our member levels will be adequate to maintain or permit the expansion of our operations. A decline in member levels could have an adverse effect on our business, financial condition and operating results.
Our member support function is critical to the success of our business, and any failure to provide high-quality service could affect our reputation and ability to retain our existing member s and attract new member s.
Our ability to provide high-quality support to our members is important for the growth of our business and any failure to maintain such standards of member care and vacation experience teams, or any perception that we do not provide high-quality service, could affect our ability to attract and retain members. Meeting the support expectations of our member s requires significant time and resources from our support team and significant investment in staffing and technology. In particular, many travel reservations made through us include planning assistance, daily housekeeping, related property services and a local concierge to assist member s during their travel. If we or our third-party service providers fail to provide these services in a high-quality manner, or these services are not commensurate with those offered by other luxury travel providers such as hotel brands, our brand may be harmed. In addition, we need to be able to provide effective support that meets member s’ expectations in a variety of countries.
Our local support is performed by a combination of our internal teams and third-party service providers. We rely on our internal teams and these third parties to provide timely, responsive and high-quality service to our members. Reliance on these third parties requires that we provide proper standards for them to meet when interacting with our members and ensure acceptable levels of quality and member satisfaction are achieved.
We rely on information provided by members and are at times limited in our ability to help members resolve issues due to our lack of information or control of local third-party staff. To the extent that member s are not satisfied with the timeliness, responsiveness or quality of our support, we may not be able to retain member s, and our reputation and brand, as well as our business, results of operations and financial condition, could be materially adversely affected.
Providing support that is timely, responsive and high-quality is costly, and such costs may rise in the future.
We may not be able to obtain sufficient new and recurring supply of luxury accommodations and experiences or to renew our existing supply of luxury accommodations and experiences.
We pursue new leases and renew and extend current leases as well as other occupancy arrangements with property owners, resorts, hotels and developers. If we fail to secure or renew leases or other occupancy arrangements for attractive luxury properties, resorts and hotels, we will not be able to expand our portfolio of locations, may not have sufficient properties to satisfy the demands of our members and may not achieve our financial forecasts.
We may not be able to add sufficient properties that meet our brand standards at an acceptable cost to meet our strategic goals and financial forecasts. Due to the number of properties that we have already secured under leases or other occupancy arrangements in many locations and our emphasis on providing a luxury travel experience, we may find it more difficult to find additional attractive properties in those markets. When we identify suitable properties, we may not be able to negotiate leases or other occupancy arrangements on commercially reasonable terms or at all or may incur additional expenses engaging local counsel to assist with lease or other occupancy arrangement negotiations. Our leases and other occupancy arrangements are often complex and require substantial time to negotiate, which makes forecasting our revenue from new properties more difficult. In certain international markets, we have less experience and may not have real estate staff, and local regulations and real estate industry practices (including customary lease provisions and governing law) may make it more difficult to identify properties that are consistent with our brand and standards.
In addition, the success of any new property will depend on our ability to integrate it into our existing operations and successfully market it to our members. Newly leased properties could be difficult or expensive to onboard, have undisclosed conditions that result in unanticipated expenses or claimsagainst us for which we may have little or no effective recourse against the landlord or otherwise may not provide their anticipated benefits.
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The relatively long-term and fixed-cost nature of our leases may limit our operating flexibility and could adversely affect our liquidity and results of operations.
We currently lease most of our properties. Our obligations to landlords under these agreements extend for periods that occasionally exceed the duration of Subscriptions, sometimes by many years although many, but not all, of our leases provide us the ability to terminate leases with appropriate notice.
Our leases generally provide for fixed monthly payments that are not tied to occupancy rates or revenues, and our leases typically contain minimum rental payment obligations. As a result, if we are unable to maintain sufficient occupancy rates, or if the rates we are able to charge are not sufficient, our lease expenses may not be sufficiently offset by our revenue from member s which may reduce our margins and cash flow.
We have limited flexibility to rapidly alter our portfolio of properties and our lease commitments in response to changing circumstances. Leases require substantial time to negotiate, and there is often a significant delay between a lease signing and the availability of a property to our members.
Moreover, our leases contain a variety of contractual rights and obligations that may be subject to interpretation and disputes with landlords, potentially resulting in costly and disruptivelitigation. Failure to meet our obligations could lead to defaults, early lease terminations, reputational damage, operational disruptions, and adverse effects on our financial condition and results of operations.
We lease our properties in a relatively concentrated number of travel destinations, both in the United States and internationally. The relative concentration of our properties in certain areas may expose us to a disproportionate level of risk relating to those areas.
The locations of our 350 properties and 220 hotels are relatively concentrated within 180 destinations. This exposes us to risks associated with local regulatory changes, changes in currency exchange rates and security risks. As a result, we may be disproportionately affected by adverse developments in those areas relative to competitors with more geographically diversified operations.
The hospitality market is highly competitive, and we may be unable to compete successfully with our current or future competitors.
The market to provide hospitality services is very competitive and highly fragmented. In addition, the barriers to entry are low and new competitors may enter. Our current or potential competitors include global hotel brands, regional hotel chains, independent hotels, online travel agencies, home-sharing and short term/vacation rental services. Our competitors may adopt aspects of our business model, which could reduce our ability to differentiate our offerings. Additionally, current or new competitors may introduce new business models or services that we may need to adopt or otherwise adapt to in order to compete, which could reduce our ability to differentiate our business or services from those of our competitors. Increased competition could result in a reduction in revenue, fewer attractive properties, higher lease rates, higher costs or reduced market share.
In addition to providing luxury accommodations, our business also depends on our ability to provide high-quality, personalized service including travel planning, on-site concierges, daily housekeeping and unique travel experiences. If we are not successful in providing high-quality, luxury experiences to our members, the perceived benefits of Subscriptions may decrease and our business, financial condition and operating results may be adversely impacted.
Our results of operations are subject to seasonal and other fluctuations.
We have experienced and may continue to experience significant fluctuations in our results of operations which make it difficult to forecast our future results. Additionally, the hospitality industry is subject to seasonal and cyclical volatility, which may contribute to fluctuations in our results of operations and financial condition. Based on historical results, we generally expect our revenues to be lower in the second quarter of each year than in each of the three other quarters. In addition, the hospitality industry is cyclical, and demand generally follows the general economy on a lagged basis.
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We rely on consumer discretionary spending and could be impacted by the broad macroeconomic environment.
Our business is particularly sensitive to trends in the travel, real estate and vacation rental markets and in the general economy, all of which are unpredictable. Travel is significantly dependent on discretionary spending levels. As a result, sales of travel services tend to decline during general economic downturns, recessions and times of political or economic uncertainty as consumers engage in less discretionary spending. Any financial or economic crisis, or perceived threat of such a crisis, including a significant decrease in consumer confidence, could materially and adversely affect our business, financial condition and results of operations.
Our success depends on our key personnel and our ability to attract, retain and motivate other highly skilled personnel.
Our success depends to a significant degree on the retention of our senior management team, key technical, financial and operations employees and other highly skilled personnel. Our success also depends on our ability to identify, hire, develop, motivate, retain and integrate highly qualified and diverse personnel for all areas of our organization. We may not be successful in attracting and retaining qualified personnel to fulfill our current or future needs. We may face challenges associated with implementing return-to-office policies as it relates to our ability to attract, retain, and motivate talent, particularly in a competitive labor market where flexible work arrangements may be valued by employees. Hiring in new markets, such as Edmonton, Canada, may present challenges if there is limited availability of specialized skills or heightened competition for skilled workers in the region.
Members of our management team or other key employees may terminate their employment with us at any time. For example, we recently experienced significant changes to our leadership team. In August of 2024, we appointed a new Executive Chairman and CEO and in October of 2024, we appointed a new Chief Financial Officer. Although we believe these leadership changes are in the best interest of our stakeholders, these changes were significant to our business. Any leadership transition and organizational changes may result in loss of personnel with deep institutional or technical knowledge and has the potential to disrupt our operations and relationships with employees and members due to added costs, operational inefficiencies, decreased employee morale and productivity, and increased turnover. If we experience turnover among our management team or other key employees, it may be difficult to find suitable replacements on a timely basis, on competitive terms or at all.
We face intense competition in local markets for highly skilled personnel to service our members and properties. To attract and retain qualified personnel, we must offer competitive compensation and benefits packages. Job candidates and existing personnel often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, it may adversely affect our ability to attract and retain highly qualified personnel. We may need to invest significant amounts of cash and equity to attract and retain new employees and expend significant time and resources to identify, recruit, train and integrate such employees, and we may never realize returns on these investments. If we are unable to effectively manage our hiring needs or successfully integrate new hires, our efficiency, ability to meet forecasts, employee morale, productivity and retention could suffer, which could adversely affect our business, financial condition and results of operations.
Our success depends on our ability to accurately and effectively update our members' experience within our technology platforms.
Our member experience sits on a technology platform that has allowed for flexibility in our product development strategy. We have invested significantly for many years in engineering, product, and design in order to build out the platform and we operate a modern technology stack that allows for rapid development and deployment as well as integrations. We rely on our own internal engineering team as well as third-party software to develop and maintain our technology platforms. We require our technology platform to adapt and scale as we develop new products or change the way current products operate within our technology platforms. If we fail to adapt appropriately or if we are unable to effectively update our technology platforms to keep up with our members’ expectations, we may be unable to provide a satisfactory user experience for our members which may result in the loss of memberships or future revenues.
We rely on third-party payment processors to process payments made by members.
We rely on a limited number of third-party payment processors and credit card issuers to process payments made by our members. If any of our third-party payment processors terminates its relationship with us, refuses to renew its agreement with us on commercially reasonable terms or places additional constraints on us, such as significant cash reserves beyond our capabilities, we may be unable to accept payments from certain credit cards or would need to find a
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replacement payment processor and may not be able to secure similar terms or replace such payment processor in an acceptable time frame. Furthermore, the software and services provided by our third-party payment processors may fail to meet our expectations, contain errors or vulnerabilities, be compromised or experience outages. Any of these risks could cause us to lose our ability to accept online payments or other payment transactions, which could adversely affect our ability to attract and retain members or disrupt our operations.
Nearly all payments made by our members are made by credit card, debit card or through third-party payment services, which subjects us to certain regulations and to the risk of fraud. We may in the future offer new payment options to members that may be subject to additional regulations and risks. We are also subject to a number of other laws and regulations relating to the payments we accept from our members, including with respect to money laundering, money transfers, privacy and information security, and these regulations may differ by locality and can be expected to change over time.
We have a history of net losses and may not be able to achieve or sustain profitability.
We incurred net losses attributable to Inspirato Incorporated of $5.4 million, $51.8 million and $24.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, we had an accumulated deficit of $291.2 million. Our accumulated deficit and net loss and comprehensive loss attributable to Inspirato Incorporated historically resulted from the substantial investments required to grow our business. We may or may not continue making investments in our business in the future. These efforts may prove more expensive than currently anticipated, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. Further, actions we are taking to review and optimize our business in alignment with our strategic priorities may not be as effective as anticipated. These or similar events may adversely affect our ability to achieve and sustain profitability.
We may become involved in claims, lawsuits and other proceedings, including those related to potential health and safety issues and hazardous substances at our properties.
We are involved in various legal proceedings relating to matters incidental to the ordinary course of our business and may be subject to additional legal proceedings from time to time. Legal proceedings can be time-consuming, divert management’s attention and resources and cause us to incur significant expenses or liabilities. The expense of litigation and the timing of this expense from period to period are difficult to estimate and subject to change and could adversely affect our financial condition and results of operations. In particular, the international nature of a portion of our operations and the number of countries in which we operate could subject us to increased risk of litigation in foreign jurisdictions, which may be lengthier, costlier or less predictable than comparable litigation in the United States. Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes even where we have meritoriousclaims or defenses. Any of the foregoing could adversely affect our business, financial condition and results of operations.
Risks Relating to Financial and Market Matters
Sales of our Class A Common Stock in the public market may cause the trading price to fall.
Sales of a substantial number of shares of our Class A Common Stock, either in the form of resales by existing stockholders or sales by us pursuant to our at-the-market offering program or otherwise, could depress the trading price of our Class A Common Stock. Such sales could also result in resales of our Class A Common Stock by our other current stockholders, potentially leading to further decreases in the trading price of the Class A Common Stock.
The price of our common stock has been and may continue to be highly volatile, which may make it difficult for stockholders to sell our common stock when desired or at attractive prices.
Historically, the market price of our stock is highly volatile and it is possible for the volatility to continue. Adverse events including volatility in our operating results, regulatory developments, changes in consumer discretionary spending, and changes in securities analysts’ estimates of our financial performance could negatively impact the market price of our common stock. General market conditions, including the level of, and fluctuations in, the trading prices of securities generally could also have a similar negative impact. Further, we are an “emerging growth company” with reduced public company reporting requirements; we have identified material weaknesses in our internal controls related to financial reporting; and we have restated our previously issued Condensed Consolidated Financial Statements for the quarterly periods ended March 31, 2022 and June 30, 2022 due to errors in our Condensed Consolidated Financial Statements. Each
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of these factors may cause reduced investor confidence, limit our ability to raise capital and increased volatility to the market price of our common stock. Similar factors could also affect the trading price of our Public Warrants.
We are substantially controlled by Payam Zamani, who is able to exert a significant degree of influence over our operations and the outcome of stockholder votes. This limits the ability of other stockholders to influence our management and policies.
As of December 31, 2024, Payam Zamani, our Executive Chairman and CEO, beneficially owns approximately 32% of our outstanding Class A common stock not including shares issuable upon the exercise of warrants and approximately 48% including shares issuable upon the exercise of warrants. Through this ownership and his role as officer and director, Mr. Zamani is able to exercise a substantial degree of control over the composition of our Board of Directors and our management and policies. Mr. Zamani's level of control could adversely affect investors' perceptions of our corporate governance, limits the ability of other stockholders to influence our Company and may have the effect of delaying or preventing a change in control of our Company even if the change in control would benefit our other stockholders.
The Company has Public Warrants that it may amend or redeem.
We have outstanding certain Public Warrants (as defined in Note 3 – Reverse Recapitalization to our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K). We may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least a majority of the then outstanding Public Warrants approve such amendment. Examples of such amendments could be amendments to, among other things, increase the exercise price of the Public Warrants, convert the Public Warrants into stock or cash, shorten the exercise period or decrease the number of warrant shares issuable upon exercise of a Public Warrant.
Further, we may redeem outstanding Public Warrants in certain circumstances. Redemption of the outstanding Public Warrants could force warrant holders (i) to exercise their Public Warrants and pay the exercise price at a time when it may be disadvantageous for them to do so, (ii) to sell their Public Warrants at the then-current market price when they might otherwise wish to hold their Public Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Public Warrants are called for redemption, is likely to be substantially less than the market value of their Public Warrants.
We have existing debt and may in the future require additional capital to continue to operate, which might not be available in a timely manner, on acceptable terms or at all. The issuance of additional securities may adversely affect existing stockholders.
We cannot be certain when or if our operations will generate sufficient cash to fund our ongoing operations or the growth of our business. We intend to make investments to support our current business and may require additional funds to respond to business challenges, including the need to develop new features or enhance our software, improve our operating infrastructure or acquire complementary businesses and technologies. Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, we may be unable to satisfy existing obligations or invest in our future growth opportunities, which could harm our business, operating results and financial condition. Holders of our debt have rights senior to holders of our Class A Common Stock to make claims on our assets. The terms of any future debt could restrict, and the Note (as defined in Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Capital One Ventures Investment and Strategic Partnership) currently restricts, our operations, including our ability to pay dividends on our Class A Common Stock. If we issue additional equity securities in the future, including pursuant to our 2021 Equity Incentive Plan (the “2021 Plan”), or our at-the-market offering program, stockholders will experience dilution, and any new class of equity securities issued could have rights senior to those of our Class A Common Stock. Because the decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future issuances of debt or equity securities. As a result, stockholders will bear the risk that future issuances of debt or equity securities will reduce the value of their Class A Common Stock and dilute their interest.
Further, servicing our existing and potential future debt, including the Note, may require a significant amount of cash, and we may not have sufficient cash flow from our business to satisfy our obligations. In particular, we may not have the ability to raise the funds necessary to repurchase the Note if and when required under the terms of the Note, and our future debt may contain limitations on our ability to repurchase the Note. The Note and related documents contain restrictions that will limit our flexibility in operating our business. In addition, the issuance of shares of Class A Common Stock upon conversion of the Note could be significantly dilutive and may depress the market price of our Class A Common Stock.
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Failure to maintain minimum liquidity requirement under the Master Services Agreement with Capital One Services LLC could adversely affect our business and financial condition.
Our Master Services Agreement with Capital One requires us to maintain a minimum liquidity balance of $10 million. On March 21, 2025, the Company entered into a twelve month Forbearance and Amendment Agreement with Oakstone Ventures, Inc. (an affiliate of Capital One), the holder of the Company’s 8% Senior Secured Convertible Note due 2028. Pursuant to the agreement, Oakstone agreed to forbear from exercising its contractual right under the Note to require redemption in the event the Company fails to meet the minimum liquidity threshold (as defined in the related commercial agreements) during the forbearance period. The agreement is intended to provide the Company with increased operational flexibility as it continues to pursue long-term strategic initiatives. All other terms of the Note remain unchanged.
If we fail to meet this liquidity requirement in the future, Capital One may exercise its contractual rights, which could include terminating the agreement, imposing additional fees, or demanding immediate payment of outstanding obligations. We do not currently have sufficient liquidity to pay those obligations if they became due and our ability to obtain such liquidity, if and when needed, in a timely manner and on acceptable terms is uncertain.
Such actions could significantly disrupt our operations, limit our access to necessary capital, and adversely affect our ability to maintain customer relationships and meet our financial obligations. Furthermore, a breach of this liquidity covenant could impair our reputation with other financial partners, leading to increased borrowing costs or reduced access to future financing.
Our ability to maintain this minimum liquidity balance depends on various factors, including our operating cash flow, capital expenditures, and other liquidity needs. If we are unable to generate sufficient cash flow from our operations or secure alternative sources of financing, we may be at risk of non-compliance with this requirement subsequent to the period covered by the forbearance.
Any inability to maintain the $10 million liquidity threshold could materially and adversely impact our financial condition, results of operations, and business prospects.
There can be no assurance that our securities will continue to be listed on Nasdaq or that will be able to comply with the continued listing standards of Nasdaq.
Our Class A Common Stock and Public Warrants are listed on Nasdaq under the symbols “ISPO” and “ISPOW,” respectively.
Operating as a public company requires us to incur substantial costs and substantial management attention. In addition, key members of our management team have limited experience managing a public company. Further, there can be no assurance that our securities will continue to be listed on Nasdaq or that we will be able to comply with the continued listing standards of Nasdaq. Although we are currently in compliance with the listing standards of Nasdaq, our ability to continue to satisfy all relevant standards is uncertain.
If Nasdaq delists the Company’s securities from trading on its exchange for failure to meet the listing standards, the Company and our stockholders could face significant negative consequences including:
• limited availability of market quotations for the Company's securities;
• a determination that our Class A Common Stock is a "penny stock" which will require brokers trading in our Class A Common Stock to adhere to more stringent rules,
• a possible reduction in the level of trading activity in the secondary trading market for shares of our Class A Common Stock;
• a limited amount of analyst coverage; and
• a decreased ability to issue additional securities or obtain additional financing in the future.
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Our management has identified material weaknesses in our internal control over financial reporting.
Our management has identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls or effective disclosure controls and procedures, which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations. Further, the material weaknesses in our internal control may result in challenges related to the completeness and accuracy of data used for internal decision making and external reporting as well as the failure to monitor key performance indicators to understand financial performance and make sound business decisions.
Due to errors in our Condensed Consolidated Financial Statements related to material weaknesses in our internal control over financial reporting, we restated our previously issued Condensed Consolidated Financial Statements for the quarterly periods ended March 31, 2022 and June 30, 2022, which resulted in unanticipated costs and may have adversely affected investor confidence, our stock price, our ability to raise capital in the future and our reputation, and has resulted in stockholder litigation and may result in more stockholder litigation or regulatory actions. In particular, on February 16, 2023, a class action lawsuit was filed in the U.S. District Court in the District of Colorado captioned Keith Koch, Individually and on behalf of all others similarly situated v. Inspirato Incorporated, Brent Handler, and R. Webster Neighbor to recover damagesallegedly caused by violations of federal securities law in connection with the restatements. Other potential plaintiffs may also file additional lawsuits in connection with the restatement. The outcome of any such litigation is uncertain. The defense or settlement of this litigation and any future additional litigation could be time-consuming and expensive, divert the attention of management away from our business, and, if any litigation is adversely resolved against us, could have a material adverse effect on our financial condition. Any additional regulatory consequences, litigation, claim or dispute, whether successful or not, could subject us to additional costs, divert the attention of our management, or impair our reputation. Each of these consequences could have a material adverse effect on our business, results of operations and financial condition.
We have entered into a related party transaction that may expose us to risks of conflicts of interest, increased scrutiny and unfavorable outcomes.
On August 12, 2024, we entered into an investment agreement (the “Investment Agreement”) with One Planet Group LLC (“One Planet Group”), a Delaware limited liability company (the “Purchaser”), to sell 2.9 million shares of Class A Common Stock at $3.43 per share, and 2.9 million warrants (the “Investment Warrants”) each redeemable for a share of Class A Common Stock, for an aggregate purchase price of $10.0 million (the “One Planet Group Financing”). At the initial closing on August 13, 2024, the Purchaser acquired the first tranche of 1,335,271 shares for $4.6 million. At the second closing on September 13, 2024, the Purchaser acquired the remaining 1,580,180 shares and the 2.9 million Investment Warrants for $5.4 million. In addition, pursuant to the Investment Agreement, on December 9, 2024, the Purchaser exercised an additional option to acquire 728,863 additional shares of Class A Common Stock and 728,863 warrants each redeemable for a share of Class A Common Stock for $3.43 per share for an aggregate purchase price of $2.5 million. Each Investment Warrant can be exercised in exchange for a share of Class A Common Stock at $3.43 per share and is exercisable for 5 years from issuance. In connection with the exercise of the Purchaser's option, the Investment Warrant Agreement was amended to increase the number of Investment Warrants issuable up to 3.6 million. The Purchaser named four new directors to the Inspirato Board of Directors pursuant to the Investment Agreement, and the size of our Board of Directors remains at seven directors.
Further, on October 22, 2024, we entered into two secondary investment agreements (collectively the “Secondary Investment Agreements”) with two investors to sell a total of 757,576 shares of Class A Common Stock at $3.96 per share, the closing price on October 22, 2024, for an aggregate purchase price of $3.0 million. On February 24, 2025, the Purchaser exercised the Investment Warrants resulting in $2.0 million of proceeds to Inspirato.
In August of 2024, the Company entered into the Lease Termination Surrender Agreement (the "Termination Agreement") of certain previously impaired, underperforming leases. Under the Termination Agreement, the Company agreed to pay a termination fee of $6.6 million, subject to certain adjustments, payable in installments from August 2024 to March 2025. As security for the Company’s obligation to pay the termination fee, One Planet Group agreed to guarantee such payment upon the occurrence of any of the following events: (i) the Company’s default in payment or performance of obligations, (ii) the Company’s voluntary petition in bankruptcy or insolvency or (iii) any proceeding filed or brought against the Company. In exchange for One Planet Group’s guarantee of the termination fee payment, the Company agreed to pay One Planet Group $0.6 million ratably over six months beginning January 2025. On December 11, 2024, the Board of Directors approved an amendment to the payment terms for One Planet Group's guarantee pursuant to which the
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Company issued to One Planet Group 177,515 shares of Class A Common Stock in lieu of the cash payments. The issuance of the shares satisfied the Company’s obligations with respect to the payments owed in exchange for One Planet Group's guarantee and the settlement was reflected within the Consolidated Statements of Equity (Deficit) for the year ended December 31, 2024.
Subsequent to the Investment Agreement with One Planet Group, the Company entered into various arrangements for expense reimbursements between One Planet Group and the Company relating to executive travel reimbursement and management consulting fees and may enter into other arrangements in the future.
These transactions could create actual or perceived conflicts of interest. While these transactions were reviewed and approved in accordance with our policies and procedures, such arrangements may not be negotiated on terms as favorable as those available in an arm’s-length transaction with an unrelated third party. Transactions such as this may expose us to additional risks, including potential operational inefficiencies, limited recourse options, and impact on financial results. Any adverse developments related to these transactions could negatively impact our business operations, financial condition, or market perception. Additionally, increased regulatory oversight or shareholder dissatisfaction resulting from such transactions could create further operational or financial challenges.
Risks Related to Our Organizational Structure
Changes in our effective tax rate could harm our future operating results.
The Company is subject to federal and state income taxes in the U.S. and in various international jurisdictions. Our provision for income taxes and our effective tax rate are subject to volatility and could be adversely affected by several factors, including:
• earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates;
• effects of certain non-tax-deductible expenses, including those arising from the requirement to expense stock-based compensation;
• changes in the valuation of our deferred tax assets and liabilities;
• adverse outcomes resulting from any tax audit, including transfer pricing adjustments with respect to intercompany transactions;
• limitations on our ability to utilize our net operating losses and other deferred tax assets; and
• changes in accounting principles or changes in tax laws and regulations, or the application of tax laws and regulations, including those relating to income tax nexus or possible U.S. changes to the deductibility of expenses attributable to foreign income or the foreign tax credit rules.
Significant judgment is required in the application of accounting guidance relating to uncertainty with respect to income taxes. If tax authorities challenge our (including Inspirato LLC’s) tax positions, any such challenges that are settled unfavorably could adversely impact our Consolidated Financial Statements.
Our structure and intercompany arrangements cause us to be subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which could materially adversely affect our business, financial condition, results of operations and prospects.
We generally conduct our international operations through wholly-owned subsidiaries and are or may be required to report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany relationships are subject to complex transfer pricing regulations administered by tax authorities in various jurisdictions. The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of such jurisdictions, including the U.S., to our international business activities, changes in tax rates, new or revised tax laws, interpretations of existing tax laws and policies and our ability to operate our business in a manner consistent with our structure and intercompany arrangements. The relevant tax authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position was not
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sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.
If existing tax laws, rules or regulations are amended, or if new unfavorable tax laws, rules or regulations are enacted, including with respect to occupancy, sales, value-added, excise, withholding or revenue-based taxes, unclaimed property or other tax laws applicable to multinational businesses, the results of these changes could increase our tax liabilities. Possible outcomes include double taxation, multiple levels of taxation, or additional obligations, prospectively or retrospectively, including the potential imposition of interest and penalties. If such costs are passed on to our members, demand for our products and services could decrease, or there could be increased costs to update or expand our technical or administrative infrastructure, or the scope of our business activities could be effectively limited should we decide not to conduct business in particular jurisdictions.
We are subject to federal, state and local income, sales and other taxes in the U.S. and income, withholding, transaction and other taxes in numerous foreign jurisdictions. Evaluating our tax positions and our worldwide provision for taxes is complicated and requires exercising significant judgment. During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination is uncertain. In addition, our tax obligations and effective tax rates could be adversely affected by changes in the relevant tax, accounting and other laws, regulations, principles, and interpretations. Although we believe our tax estimates are reasonable, the final determination of any tax audits or litigation could differ materially from our historical tax provisions and accruals, which could have an adverse effect on our results of operations or cash flows in the period or periods for which a determination is made. There is also a high level of uncertainty in today’s tax environment stemming from both global initiatives and unilateral measures being implemented by various countries due to a lack of consensus on these global initiatives.
Tax authorities may successfully assert that we should have collected, or in the future should collect, sales and use, value added or similar taxes, and we could be subject to substantial liabilities with respect to past or future sales, which could materially adversely affect our business, financial condition and results of operations.
We currently collect and remit applicable sales taxes and other applicable transfer taxes in jurisdictions where we, through our employees or economic activity, have a presence and where we have determined, based on applicable legal precedents, that our business activities are classified as taxable. We do not currently collect and remit state and local excise, utility user, or ad valorem taxes, fees or surcharges in jurisdictions where we believe we do not have sufficient “nexus.” The application of indirect taxes, such as sales and use, value added, goods and services, business, and gross receipts taxes, to businesses that transact online, such as ours, is a complex and evolving area. There is uncertainty as to what constitutes sufficient nexus for a state or local jurisdiction to levy taxes, fees and surcharges on sales made over the Internet, and there is also uncertainty as to whether our characterization of our traveler accommodations in certain jurisdictions will be accepted by state and local tax authorities. It is possible that we could face indirect tax audits and that one or more states, local jurisdictions or foreign tax authorities could seek to impose additional indirect or other tax collection and record-keeping obligations on us or may determine that such taxes should have, but have not been, paid by us.
There are substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous markets in which we conduct or may conduct business. The application of existing or future indirect tax laws, whether in the U.S. or internationally, or the failure to collect and remit such taxes, could materially adversely affect our business, financial condition and results of operations.
Risks Related to Intellectual Property and Data Privacy
We face risks related to our intellectual property.
Our intellectual property is important to our success, and we rely on domain name registrations, registered and unregistered trademarks, copyright law, trade secret protection and confidentiality and/or license agreements with our employees, third party providers, partners and others to protect our proprietary rights. We have also applied for patent rights with respect to certain aspects of our technology. We endeavor to defend our intellectual property rights diligently, but intellectual property litigation is expensive and time-consuming and may divert managerial attention and resources from our business objectives. We may not be able to successfullydefend our intellectual property rights, which could have a material adverse effect on our business, brand and results of operations.
From time to time, in the ordinary course of business, we may be subject to legal proceedings and claims relating to the intellectual property rights of others, and we expect that third parties will continue to assert intellectual property claims,
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in particular trademark claims, against us. Successfulclaimsagainst us could result in a significant monetary liability or prevent us from operating our business or portions of our business. In addition, resolution of claims may require us to obtain licenses to use intellectual property rights belonging to third parties, which may be expensive to procure, or to cease using those rights altogether. Any of these events could have a material adverse effect on our business, results of operations and financial condition.
Our technology contains third-party open-source software components, and failure to comply with the terms of the underlying open-source software licenses could restrict our ability to operate as intended or could increase our costs.
Certain of our owned and third-party technology contains software modules licensed to us by third-party authors under “open-source” licenses. Use and distribution of open-source software may entail greater risks than use of third-party commercial software, as open-source licensors generally do not provide support, warranties, indemnification or other contractual protections regarding infringementclaims or the quality of the code. In addition, the public availability of such software may make it easier for others to compromise or copy our technology.
Some open-source licenses contain requirements that could obligate us to make available source code for modifications or derivative works we create based upon the type of open-source software we use or grant other licenses to our intellectual property. If we combine our proprietary software with open-source software in a certain manner, we could, under certain open-source licenses, be required to release the source code of our proprietary software to the public. This may allow our competitors to create similar offerings with lower development time and effort and ultimately could result in a loss of our competitive advantages. Alternatively, to avoid the public release of the affected portions of our source code, we could be required to expend substantial time and resources to re-engineer some or all of our software.
Although we monitor our use of open-source software to avoid subjecting our technology to conditions we do not intend, the terms of many open-source licenses have not been interpreted by U.S. or foreign courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our technology. From time to time, there have been claimschallenging the use of open-source software against companies that incorporate open-source software into their solutions. As a result, we could be subject to lawsuits by parties claimingviolation by us of the terms of an open-source license or ownership of what such parties believe to be their open-source software. Moreover, we cannot provide assurance that our processes for controlling our use of open-source software in our technology will be effective. If we are held to have breached or failed to fully comply with all the terms and conditions of an open-source software license, we could face infringement or other liability or be required to seek costly licenses from third parties to continue providing our offerings on terms that may not be economically feasible, re-engineer our technology, discontinue or delay the provision of our offerings if re-engineering could not be accomplished on a timely basis or make generally available, in source code form, our proprietary code, any of which could adversely affect our business, financial condition and results of operations.
Our storage, use, disclosure and other processing of personal data and other sensitive information exposes us to risks of internal or external security incidents and breaches and could give rise to liabilities and/or damage to reputation.
The security of data is critical to maintaining consumer confidence. Among other things, we may collect members’ credit card data, proof of identity and other Personal Identifiable Information (“PII”) as part of our business process. Additionally, we collect and process other personal information, such as the PII of our employees and contractors, and we process and maintain other confidential and proprietary information, such as our confidential and proprietary business information.
Cyberattacks and other attempts to obtain unauthorized access to systems or data by individuals, groups of hackers and state-sponsored organizations are increasing in frequency and sophistication. The growing integration of artificial intelligence ("AI") into cyberattack methods has further heightened risks, enabling attackers to execute more targeted, automated, and adaptive attacks, such as deepfake fraud, AI-generated phishing schemes and advanced malware development. Because our members are generally high-income or high net-worth individuals, we may be particularly attractive as a target for cyberattacks and other attacks.
Internally, our use of AI-driven decision-making and predictive modeling may introduce additional risks, including potential reliance on inaccurate or biased data, unintended consequences from algorithmic decision-making and operational disruptions caused by errors or failures in AI systems. Inaccuracies or flaws in these models could result in suboptimal business decisions, reputational harm, regulatory scrutiny or financial losses. As the prevalence of AI increases, ensuring transparency, reliability and proper oversight of AI applications is critical to mitigating these risks.
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Security incidents may result from misuse of members’ PII or sensitive information by employees, contractors, or third-party service providers, which face similar risks of breaches and vulnerabilities. Any breach or cyberattack—whether internal, external, or involving third parties—or even the perception of one could harm our reputation, operations, and financial results. Advances in technology, such as AI, and evolving cyber threats like phishing, ransomware, cryptojacking, and social engineering increase these risks. As we expand and process more data, these risks are likely to grow. Despite our efforts to safeguard information, incidents may still occur, leading to business losses, reputational damage, and disruption of services. We have had security incidents primarily through phishing attempts, however, all were addressed and remediated and none of the incidents would be considered material or require disclosure.
Our existing security measures may not be successful in preventing security incidents or breaches. A party (whether internal, external, an affiliate or unrelated third party) that is able to circumvent our security systems could gainunauthorized access to our systems and steal, modify, encrypt or otherwise render unavailable, destroy, disclose or otherwise without authorization process member information, transaction data or other information. In the last several years, major companies experienced high-profile security breaches that exposed their systems and information and/or their customers’ or employees’ PII, and it is expected that these types of events will continue to occur. It is virtually impossible for us to eliminate these risks, particularly as the frequency and sophistication of cyberattacks increases. Additionally, the security risks we and our third-party service providers face are heightened by many of our respective employees and service providers working remotely. Security incidents or breaches, including ransomware attacks and other cyberattacks and attacks introducing other types of malicious code, could result in severedisruptions of and damage to our information technology infrastructure, including damage that could impair our ability to book stays, collect payments or otherwise operate our business, or the ability of consumers to make reservations or access our properties or in-room features and services, as well as loss or other unauthorized processing of member, financial or other data that could materially and adversely affect our ability to conduct our business or satisfy our commercial obligations. Cybersecurity incidents or breaches, or the perception that any of these has occurred, could also result in negative publicity, damage our reputation, expose us to risk of loss or litigation and possible liability, subject us to regulatory investigations and other proceedings, penalties and sanctions or cause consumers to lose confidence in our security and not use our services, any of which may have a negative effect on our brand, market share, results of operations and financial condition. Our insurance policies have coverage limits which may not be adequate to reimburse us for all losses caused by security incidents or breaches.
We also face risks associated with security incidents and breaches affecting third parties conducting business over the Internet. Consumers generally are concerned with security and privacy on the Internet, and any publicized security problems could negatively affect consumers’ willingness to provide private information or affect online commercial transactions generally. Additionally, our members could be affected by security incidents and breaches at third parties such as travel service providers. A security incident or breach impacting any such third party could be perceived by consumers as a security breach or incident impacting our systems and could result in negative publicity, subject us to notification requirements, damage our reputation, expose us to risk of loss or litigation and possible liability and subject us to regulatory penalties and sanctions. In addition, such third parties may not comply with applicable disclosure requirements, which could expose us to liability.
If we fail to comply with federal, state and foreign laws and regulations relating to privacy, data protection and information security, we may face potentially significant liability, negative publicity and an erosion of trust, and increased regulation could materially adversely affect our business, results of operations and financial condition.
In our processing of travel transactions and information about members and their stays, we receive and store data, including personal data and other data relating to individuals. Numerous federal, state, local and international laws and regulations relate to privacy, data protection, information security and the storing, sharing, use, transfer, disclosure protection and other processing of personal information and other content, the scope of which are changing, subject to differing interpretations, and may be inconsistent among jurisdictions or conflict with other rules. These laws and regulations relating to privacy, data protection and information security are evolving and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. For example, the General Data Protection Regulation (the “GDPR”) promulgated by the European Union (the “EU”) provides for penalties for noncompliance of up to the greater of €20 million or four percent of worldwide annual revenues. The decision by the Court of Justice of the European Union (“the CJEU”) to not recognize the U.S. – EU Privacy Shield and other future legal challenges also could result in Inspirato being required to implement duplicative, and potentially expensive, information technology infrastructure and business operations or could limit our ability to collect or process personal information in Europe or other regions, may necessitate additional contractual negotiations and may serve as a basis for our personal data handling practices, or those of our service providers or other third parties we work with, to be challenged. Any of these or
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other changes or developments impacting cross-border data transfers could disrupt our business and otherwise adversely impact our business, financial condition and operating results.
The number of data protection laws globally is rising as more jurisdictions explore new or updated comprehensive data protection regimes or propose or enact other laws or regulations addressing local storage of data or other matters.
In the U.S., the California Consumer Privacy Act (the “CCPA”) went into effect on January 1, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and afford such consumers new abilities to access and delete their personal information and to opt-out of certain sales of personal information. The California Privacy Rights Act (the “CPRA”), which became effective January 1, 2023, significantly modifies the CCPA and further aligns California privacy laws with the GDPR.
Similar legislation has been proposed or adopted in other states. For example, Virginia, Colorado, Utah, and Connecticut have all enacted omnibus privacy legislation that went into effect in 2023. These state laws in Virginia, Colorado, Utah and Connecticut share similarities with the CCPA, CPRA and legislation proposed in other states. Aspects of the CCPA, the CPRA and these other state laws and regulations, as well as their enforcement, remain unclear. Additionally, the U.S. federal government is contemplating data security and privacy legislation.
We will need to closely monitor developments, including enforcement actions or private litigation under the GDPR, CCPA, CPRA and other laws to determine whether we will need to modify our data processing practices and policies, which may result in us incurring additional costs and expenses in an effort to comply.
We are also subject to the terms of our privacy policies and contractual obligations to third parties related to privacy, data protection and information security and may be subject to other actual or asserted obligations, including industry standards, relating to privacy, data protection and information security. We strive to comply with applicable laws, regulations, policies and other legal obligations relating to privacy, data protection and information security to the extent possible. However, the regulatory frameworks for privacy, data protection and information security worldwide are evolving rapidly, and it is possible that these or other actual or alleged obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices.
Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to members or other third parties, applicable laws or regulations or any of our other legal obligations could materially adversely affect our business.
Additionally, if third parties we work with, such as subprocessors, vendors or developers, violate applicable laws or regulations, contractual obligations or our policies, or if it is perceived that such violations have occurred, such actual or perceived violations may also have an adverse effect on our business. Further, any significant change to applicable laws, regulations or industry practices regarding the collection, use, retention, security, disclosure or other processing of data, or regarding the manner in which the express or implied consent of users for the collection, use, retention, disclosure or other processing of data is obtained, could increase our costs and require us to modify our business practices.
Cybersecurity incidents could have adverse effects on our business.
We have implemented enhanced security measures to safeguard our systems and data, and we intend to continue implementing additional measures in the future. Our measures may not be sufficient to maintain the confidentiality, security, or availability of the data we collect, store, and use to operate our business. Security measures implemented by our service providers or other third parties or their service providers also may not be sufficient. Efforts to hack or circumvent security measures, efforts to gainunauthorized access to, exploit or disrupt the operation or integrity of our data or systems, failures of systems or software to operate as designed or intended, viruses, “ransomware” or other malware, “supply chain” attacks, “phishing” or other types of business communications compromises, operator error, or inadvertent releases of data could impact our information systems and records or those of our service providers or other third parties. Security measures, no matter how well designed or implemented, may only mitigate and not fully eliminate risks, and security events, when detected by security tools or third parties, may not always be immediately understood or acted upon. Our reliance on computer, Internet-based, and mobile systems and communications, and the frequency and sophistication of efforts by third parties to gainunauthorized access or prevent authorized access to such systems, have greatly increased in recent years. Our increased reliance on cloud-based services and on remote access to information systems increases our exposure to potential cybersecurity incidents. Any significant theft of, unauthorized access to, compromise or loss of, loss
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of access to, or fraudulent use of our data or our members' data could adversely impact our reputation and could result in legal, regulatory and other consequences, including remedial and other expenses, fines, or litigation.
Depending on the nature and scope of the event, compromises in the security of our information systems or those of our service providers or other third parties or other future disruptions or compromises of data or systems, could lead to future interruptions in, or other adverse effects on, the operation of our systems or those of our service providers or other third parties. This could result in operational interruptions and/or outages and a loss of profits, as well as negative publicity and other adverse effects on our business, including lost sales, loss of consumer confidence, boycotts, loss of members, litigation, diminishedsatisfaction, and/or retention and recruiting difficulties, all of which could materially affect our market share, reputation, business, financial condition and operating results.
OVERVIEW
Inspirato Incorporated and its subsidiaries (collectively, the "Company", “Inspirato”, “we”, or “our” ) is a private, luxury hospitality club that provides its members with access to an exclusive portfolio of high-end vacation homes, luxury hotels, and curated travel experiences worldwide. The club offers personalized service, dedicated trip planning, and seamless access to exceptional properties through its innovative model designed to ensure the service, certainty and value that discerning customers demand.
For members, we offer access to a diverse portfolio of curated luxury vacation options that include approximately 350 private luxury vacation homes and accommodations at over 220 luxury hotel and resort partners in over 180 destinations around the world as of December 31, 2024. Our portfolio also includes Inspirato Only experiences, which are curated, one-of-a-kind member-only experiences such as luxury safaris, cruises and other experiences, as well as Bespoke trips, which offer individualized, custom-designed “bucket list” itineraries based on the exact specifications of the member. Every Inspirato trip comes with our personalized service envelope — including pre-trip planning, on-site concierge and daily housekeeping — designed to meet the needs of discerning travelers and drive exceptional customer satisfaction.
Investment Agreement
On August 12, 2024, we entered into an investment agreement (the “Investment Agreement”) with One Planet Group LLC (“One Planet Group”), a Delaware limited liability company (the “Purchaser”), to sell 2.9 million shares of Class A Common Stock at $3.43 per share, and 2.9 million warrants (the “Investment Warrants”) each redeemable for a share of Class A Common Stock, for an aggregate purchase price of $10.0 million (the “One Planet Group Financing”). At the initial closing on August 13, 2024, the Purchaser acquired the first tranche of 1,335,271 shares for $4.6 million. At the second closing on September 13, 2024, the Purchaser acquired the remaining 1,580,180 shares and the 2.9 million Investment Warrants for $5.4 million. In addition, pursuant to the Investment Agreement, on December 9, 2024, the Purchaser exercised an additional option to acquire 728,863 additional shares of Class A Common Stock and 728,863 warrants each redeemable for a share of Class A Common Stock for $3.43 per share for an aggregate purchase price of $2.5 million. In connection with the exercise of the Purchaser's option, the Investment Warrant Agreement was amended to increase the number of Investment Warrants issuable up to 3.6 million. Each Investment Warrant can be exercised in exchange for a share of Class A Common Stock at $3.43 per share and is exercisable for 5 years from issuance. On February 24, 2025, the Purchaser exercised 583,099 Investment Warrants resulting in $2.0 million of proceeds to the Company.
The Purchaser named four new directors to the Inspirato Board of Directors pursuant to the Investment Agreement, and the size of our Board of Directors remains at seven directors. As contemplated by the Investment Agreement, Payam Zamani was appointed as our Chief Executive Officer ("CEO") and our Executive Chairman.
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Further, on October 22, 2024, we entered into two secondary investment agreements (collectively the “Secondary Investment Agreements”) with two investors to sell a total of 757,576 shares of Class A Common Stock at $3.96 per share, the closing price on October 22, 2024, for an aggregate purchase price of $3.0 million.
Reorganization Plan
During the year ended December 31, 2024, we developed a plan for a restructuring of certain aspects of our operations and organization (the “Reorganization Plan”). The Reorganization Plan included the entry into the Lease Termination Surrender Agreement on August 12, 2024 (the "Termination Agreement"), the termination and settlement of the Tax Receivable Agreement ("TRA"), a reduction in force, an issuance of securities to One Planet Group, the appointment of a new CEO and new members of our Board of Directors, and other cost savings initiatives along with a review of expenses and business processes.
The following table presents the components of restructuring charges during the year ended December 31, 2024 (in thousands):
Cash Restructuring Charges:
Severance and other employee-related benefits
Termination of the TRA
Total Cash Restructuring Charges
Non-Cash Restructuring Charges:
Acceleration of equity-based compensation
Total Restructuring Charges
Through December 31, 2024, we paid $1.6 million of the cash restructuring charges in connection with the Reorganization Plan and the remaining unpaidrestructuring charges were $0.4 million as of December 31, 2024 and are included in accounts payable and accrued liabilities within the Consolidated Balance Sheets.
Additionally, in connection with the Reorganization Plan, we also entered into the Termination Agreement to terminate certain previously impaired, underperforming leases. The termination of those leases resulted in a gain on lease termination of $37.1 million. Our gain on lease termination was recorded to (gain) on lease termination and loss on asset impairments on the Consolidated Statements of Operations and Comprehensive Loss. See Note 9 – Leases in our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.
At-the-Market Equity Offering Program
On September 24, 2024, we entered into an equity distribution agreement (the “Sales Agreement”) with Northland Securities, Inc. (“Northland”) to sell shares of Class A Common Stock from time to time through an at the market offering program under which Northland will act as sales agent or principal. We have not yet sold any Class A Common Stock under the program.
Mandatory Exchange
On August 30, 2024, the Board of Managers of Inspirato LLC approved a mandatory exchange of all units in Inspirato LLC, other than those held by the Company (the “Mandatory Exchange”). Pursuant to the Mandatory Exchange, each member of Inspirato LLC other than the Company exchanged their common units for a number of shares of Class A Common Stock of Inspirato equal to the number of common units exchanged. This exchange also involved the surrender and cancellation of the same number of outstanding shares of Class V Common Stock of Inspirato held by such members. The Mandatory Exchange occurred on September 30, 2024 and as of December 31, 2024, there is no remaining noncontrolling interest as Inspirato Incorporated fully owns Inspirato LLC. As a result of the Mandatory Exchange, the Company issued an aggregate of 2,857,635 shares of Class A Common Stock in exchange for 2,857,635 outstanding shares of Class V Common Stock.
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Inspirato Invited
In June of 2024, we launched Inspirato Invited (“ Invited ”), a ten-year Subscription that offers a fixed daily rate to our members in exchange for a substantial upfront initiation fee.
Sunsetting of Rewards
In August of 2023, we implemented a member loyalty program called Inspirato Rewards (“ Rewards ”) for members with at least one active paid member subscription (“Subscription”). Rewards was designed to incentivize repeat business by rewarding members with exclusive discounts and benefits based on their activity with us. Members who earned one of the three Rewards statuses could be entitled to, depending on their status, extra savings on Club bookings; early access to new property releases, new Experiences and year-end festive dates; and complimentary nights, among other benefits . On October 28, 2024, we announced to members that the Rewards program will sunset in 2025; however, status earned through December 31, 2024 will still be honored and members with one of the status levels will be able to utilize those benefits through June 30, 2025.
Reverse Stock Split
On September 26, 2023, our stockholders approved a proposal to adopt a series of alternative amendments to our certificate of incorporation to effect a reverse stock split of our common stock. Our Board of Directors subsequently approved a final reverse stock split ratio of 1-for-20 of our Class A Common Stock, Class B Common Stock and Class V Common Stock; the authorized shares of each class following the reverse stock split is set forth in Note 11 – Equity of Inspirato Incorporated in our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. The reverse stock split became effective as of October 16, 2023 and immediately after the reverse stock split, each stockholder's percentage ownership interest in us and proportional voting power remained unchanged, except for minor changes resulting from the treatment of fractional shares. The impact of the reverse stock split has been reflected within our Consolidated Financial Statements for all periods presented.
Capital One Ventures Investment and Strategic Partnership
In August of 2023, we entered into an investment agreement with Oakstone Ventures, Inc. ("Oakstone"), an affiliate of Capital One Services, LLC (“Capital One”), relating to the sale and issuance to Oakstone of an 8% Senior Secured Convertible Note due 2028 in a principal amount of $25.0 million (the “Note”). On September 29, 2023 , we issued the Note. The total net proceeds from this offering were $23.1 million, after deducting $1.9 million of debt issuance costs.
The Note is an unsubordinated secured obligation of Inspirato . The Note is secured by a first priority security interest in substantially all of Inspirato Incorporated’s and its domestic subsidiaries’ assets. The Note is fully and unconditionally guaranteed by certain existing and future domestic subsidiaries of Inspirato . The Note bears interest at a fixed rate of 8% per annum. Interest on the Note is due quarterly on the last business day of each calendar quarter following the issuance of the Note and we have elected to pay interest in kind by increasing the outstanding principal amount of the Note by the amount of interest payable on such interest payment date. The Note will mature on September 29, 2028, subject to earlier conversion, redemption or repurchase.
The current conversion price of the Note is $30 per share, which has been adjusted for the September 26, 2023 reverse stock split, and continues to be subject to customary adjustments upon additional certain extraordinary events, including any dividend of Company securities or other property, stock split, stock combination, reclassification, consolidation, merger or a sale of all or substantially all of our assets.
Additionally, our strategic partnership with Capital One is expected to provide us with a long-term partner with the ability to deliver increased demand for travel services as well as highly qualified lead generation opportunities for our Inspirato Club (" Club "), Inspirato Pass (" Pass ") and Invited Subscription offerings, while providing Capital One a highly differentiated and exclusive luxury travel benefit for its consumers. During 2024, we have completed the required technology updates to facilitate reservations within Capital One's booking portal and we are currently working with Capital One on identifying when to begin allowing reservations.
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Key Business Metrics
We review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and business plans, and make strategic decisions.
Active Subscriptions
We define Active Subscriptions as Subscriptions that are paid in full and those for which we expect payment for renewal. We use Active Subscriptions to assess the adoption of our Subscription offerings, which is a key factor in assessing our penetration of the market in which we operate and a key driver of revenue. Members can have one or more Active Subscriptions. The following table shows our approximate total number of Active Subscriptions as of December 31, 2024 and 2023 :
December 31,
Legacy
Club
Pass
Invited
Total Active Subscriptions
Inspirato Legacy Subscriptions, an offering we no longer sell, had substantial initiation fees and have historically had annual dues that are lower than annualized dues for Club Subscriptions. Club and Pass Subscriptions are available through monthly, semi-annual, annual, and multi-year contracts. Invited Subscriptions are available through ten-year contracts and were launched in June of 2024. The majority of our Subscriptions are annual or multi-year contracts.
Subscription revenue is comprised of initiation fees and recurring dues, net of discounts and travel incentives provided to members. We typically bill upfront for Subscriptions and Subscription payments are non-refundable. Our Subscription agreements typically auto-renew after the initial term. Our agreements are generally cancellable by providing 30 days’ notice. Amounts that have been billed are initially recorded as deferred revenue until the revenue is recognized. Revenue is recognized ratably over the related contractual term, generally beginning on the date that our platform is made available to a member. Our Subscription revenue and operating results are impacted by our ability to attract and retain members.
Average Daily Rates and Total Occupancy
Average daily rate (“ADR”) is defined as the total paid travel revenue, divided by total paid nights in leased residences or hotel rooms and suites. ADR does not include Pass nights utilized. Occupancy is defined as all paid, Pass and other 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.
We monitor (i) paid nights delivered, (ii) ADR and (iii) Occupancy for our leased residences and hotels as we bear the financial responsibility in these properties and can more closely control both the nightly rates and costs as compared to our net-rate hotel partners. Average rates at our hotel partners are typically lower than our residences, as our residences are typically larger and accommodate more guests than hotel rooms and suites.
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The combination of ADR and Occupancy provides us insights regarding how effectively we are utilizing our at-risk properties. Below we have summarized our travel operating statistics:
Year ended December 31,
Residences
Paid Nights Delivered
Total Nights Delivered
Occupancy
ADR
Hotels
Paid Nights Delivered (1)
Total Nights Delivered (1)
Occupancy (2)
ADR (1)
Total
Paid Nights Delivered (1)
Total Nights Delivered (1)
Occupancy (2)
ADR (1)
(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.
Travel revenue is generally recognized when travel occurs. Amounts that have been billed are initially recorded as deferred revenue until recognized when travel occurs. We derive our travel revenue by charging a nightly rate for stays at our portfolio of residences and hotels. For residence and hotel stays, a service charge is also included. Travel revenue also includes amounts collected from fees when a trip is cancelled. A portion of travel revenue comes from customers who do not have paid Subscriptions; these customers receive trial Subscriptions and are primarily from Inspirato for Good and Inspirato for Business or are customers who are under promotions with partners. We also earn revenue from Inspirato Only experiences and Bespoke trips.
Our travel revenue and operating results are impacted by the number of trips that we are able to deliver to our members as well as the rates we charge for stays. Our revenue management team establishes nightly rates to optimize desired occupancy and revenue.
Other Factors Affecting Our Performance and Trends and Uncertainties
We believe that the growth and future success of our business depend on many factors, including those from the Key Business Metrics discussed above. While each of these factors presents significant opportunities for our business, they also pose important challenges that we have to successfully address in order to grow our business and improve our results of operations.
Cost and Expense Management
Cost of revenue includes costs directly related to delivering travel to our members as well as depreciation and amortization related to leasehold improvements and equipment at residences. These direct costs include payments for properties we lease, booking fees which are made up of costs paid to our hotel partners for member stays as well as costs paid to vendors to deliver Inspirato Only experiences and Bespoke trips, and fixed and variable operating and maintenance costs which are those costs to operate and maintain our properties, including on-site service personnel costs. We generally expect cost of revenue to vary as a percentage of revenue from period to period based on the number of properties that we have under lease, and the mix of Subscription and travel revenue that we earn. We expect cost of revenue to decrease in the
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near-term due to the cost savings achieved from the review of unfavorable leases completed as part of the Reorganization Plan.
Our operating results are impacted by our ability to manage these costs and expenses and achieve a balance between making investments to retain and grow members and driving increased profitability. We are working on finding more opportunities to enhance gross margin and operate more efficiently, including reducing costs by taking additional operational and portfolio optimization actions. Among the other cost savings initiatives from the Reorganization Plan implemented during the year ended December 31, 2024, we conducted a workforce reduction in August of 2024 which resulted in approximately $15.0 million in annualized cash savings and the Termination Agreement resulted in the removal of $57.0 million in future lease payments through 2032. For further discussion, see Liquidity and Capital Resources — Overview below. Further, during the year ended December 31, 2023, we conducted a 12% workforce reduction in January of 2023 and a 6% workforce reduction in July of 2023 in order to manage costs.
Macroeconomic and Geopolitical Conditions
The travel industry is affected by economic cycles and trends. Travel is typically discretionary and may be affected by negative trends in the economy. Adverse macroeconomic and geopolitical conditions have impacted our business and may impact us in future periods. In recent periods, we have been affected by, among other things, inflation, labor shortages, fluctuations in fuel prices, changes in governmental regulations, safety concerns, foreign currency fluctuations, weather related incidents, rising interest rates and reduced consumer confidence resulting in lower consumer spending.
Seasonality
Our travel revenues are seasonal, reflecting typical travel behavior patterns of travelers over the course of the calendar year. In a typical year, the first, third, and fourth quarters have higher travel revenues than the second quarter. Our Subscription services are seasonal to the extent that interest from potential new members tends to also follow travel revenue. However, Subscription revenues from existing members are not impacted by seasonality.
Our results, including total revenues, Adjusted EBITDA and Free Cash Flow (as defined below), are impacted by the timing of holidays and other events. Holidays and other events generally increase the rates we are able to charge for travel which results in higher gross margin. The majority of our costs are relatively fixed across quarters.
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Results of Operations
The following table sets forth our Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024 and 2023 (in thousands, other than percentages):
Year ended December 31,
Amount of
increase
(decrease)
Percent
change
favorable
(unfavorable)
Revenue
Cost of revenue
(Gain) on lease termination and loss on asset impairments
Gross margin
Gross margin percent
General and administrative
Sales and marketing
Operations
Technology and development
Depreciation and amortization
Interest, net
(Gain) on fair value instruments
Restructuring charges
Other (income) expense, net
Loss and comprehensive loss before income taxes
Income tax expense
Net loss and comprehensive loss
n/m – non-meaningful
pp – percentage point
Comparison of the years ended December 31, 2024 and 2023 :
Revenue. Total revenue decreased $49.2 million from $329.1 million for the year ended December 31, 2023 to $279.9 million for the year ended December 31, 2024, a decrease of 15%. Disaggregated revenue for the years ended December 31, 2024 and 2023 is as follows (in thousands, other than percentages):
Year ended December 31,
Amount of
increase
(decrease)
Percent
change
favorable
(unfavorable)
Travel
Subscription
Rewards and other revenue
Total
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Travel revenue decreased by $24.4 million from $190.3 million for the year ended December 31, 2023 to $165.8 million for the year ended December 31, 2024 , a decrease of 13% , primarily as a result of a 12% decrease in paid nights delivered due to fewer members resulting in a decrease of $22.5 million . This decrease was partially offset by a 2% increase in ADR recognized for those paid nights resulting in $3.9 million increase in travel revenue . Travel revenue further decreased $3.6 million for the Rewards program which was not launched until the third quarter of 2023. Therefore, previously recognizable travel revenues are deferred until the respective Rewards benefits are utilized, which did not occur during the full year ended December 31, 2023. Further declines in travel revenue were caused by net decreases in service fee revenue, cancellation fee revenue, partner commission revenue and other travel revenue of $2.3 million .
Subscription revenue decreased by $36.4 million from $137.6 million for the year ended December 31, 2023 to $101.2 million for the year ended December 31, 2024 , a decrease of 26% . The decrease is primarily due to a 13% decrease in the average number of Subscriptions during the year ended December 31, 2024 as compared to the year ended December 31, 2023, resulting in a $17.7 million decrease to Subscription revenue as well as a $16.3 million decrease from a decline in the revenue recognized per Subscription due primarily to the decline in Pass Subscriptions. Additionally, Subscription revenue further declined by $2.5 million for deferrals for the Rewards program that was launched in August of 2023.
Rewards and other revenue increased by $11.6 million from $1.2 million for the year ended December 31, 2023 to $12.9 million for the year ended December 31, 2024, an increase of 952% . The increase was primarily the result of estimated usage related to our Rewards program. We expect revenues from Rewards to decline in 2025 as we announced to members that the Rewards program will sunset in 2025; however, status earned through December 31, 2024 will still be honored and members with one of the status levels will be able to utilize those benefits through June 30, 2025.
Cost of revenue . Cost of revenue decreased $43.4 million from $233.9 million for the year ended December 31, 2023 to $190.5 million for the year ended December 31, 2024 , a decrease of 19% . The decrease is primarily a result of decreases in booking fees of $23.0 million driven by fewer bookings, decreases in lease costs of $11.3 million , decreases in variable operating costs of $5.6 million from lower housekeeping, property management and resort fees, a $3.9 million decrease in fixed operating costs and a $1.1 million decrease in other cost of revenue. The decreases were partially offset by an increase of $1.5 million in depreciation expense within cost of revenue .
(Gain) on lease termination and loss on asset impairments . (Gain) on lease termination and loss on asset impairments changed $70.7 million from asset impairments of $40.8 million for the year ended December 31, 2023 to a $29.9 million net gain on lease termination for the year ended December 31, 2024 . During the year ended December 31, 2023, we identified 63 leases for which the right-of-use assets and related property and equipment had net carrying values that exceeded their estimated fair value as determined by their estimated discounted future cash flows. Most of these leases were related to one group of underperforming properties in a single geographic location. Based on this information, we recorded right-of-use asset impairments of $40.5 million and property plant and equipment impairments of $0.3 million for the year ended December 31, 2023. During the year ended December 31, 2024, we entered into the Termination Agreement in order to terminate certain previously impaired, underperforming leases and those terminations resulted in a decrease to our right-of-use assets of $4.6 million and a decrease to our operating lease liabilities of $41.7 million, resulting in a gain on lease termination of $37.1 million. The gain was partially offset by a termination fee of $6.6 million as well as the payment of $0.6 million to One Planet Group in consideration of a guarantee of the Company's lease obligations provided by One Planet Group. No asset impairments were identified for the year ended December 31, 2024.
General and administrative . General and administrative expenses decreased $12.9 million from $72.1 million for the year ended December 31, 2023 to $59.2 million for the year ended December 31, 2024 , a decrease of 18% . The decrease is primarily a result of a decrease in payroll-related expenses of $8.0 million due to lower headcount from the reductions in force that took place during 2023 and in August of 2024 as well as a decrease of $6.3 million from lower corporate costs. The remaining decrease is due to lower professional fees of $1.3 million and decreased cloud software amortization of $0.5 million. These decreases were partially offset by an increase of $3.2 million due to higher equity‑based compensation expense.
Sales and marketing . Sales and marketing expenses decreased $2.5 million from $32.9 million for the year ended December 31, 2023 to $30.4 million for the year ended December 31, 2024 , a decrease of 8%. The decrease is primarily a result of lower employee compensation of $0.6 million and a net decrease of $0.4 million in spending on software purchases and license fees, online advertising and events. The remaining decrease is due to lower print marketing material expenses of $0.4 million, decreased referrals expense of $0.3 million, decreased corporate partnership expenses of $0.3 million, lower travel and entertainment and other expenses of $0.3 million and decreased consumer research and photography expense of $0.2 million.
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Operations . Operations expenses decreased $5.9 million from $28.1 million for the year ended December 31, 2023 to $22.2 million for the year ended December 31, 2024 , a decrease of 21% , primarily due to a decrease of $3.4 million from the net transition of certain employees from cost of revenue into operations and from operations to sales and marketing, a decrease of $1.7 million from lower spend due to decreases in events expense, mileage and meals and other cost savings initiatives and a decrease in commission expense of $0.8 million.
Technology and development . Technology and development expenses decreased $3.9 million from $11.3 million for the year ended December 31, 2023 to $7.4 million for the year ended December 31, 2024 , a decrease of 35% , primarily due to the reductions in force that took place during 2023 and in August of 2024.
Depreciation and amortization . Depreciation and amortization expenses increased $0.3 million from $3.8 million for the year ended December 31, 2023 to $4.0 million for the year ended December 31, 2024 , an increase of 7% , primarily due to an increase in amortization of purchased software of $1.4 million and an increase in depreciation of tenant improvement allowance of $0.3 million, partially offset by a decrease in general depreciation and amortization of $1.3 million .
Interest, net . Interest, net increased $0.5 million from $1.1 million for the year ended December 31, 2023 to $1.6 million for the year ended December 31, 2024. We incurred interest expense on the Note of $2.1 million during the year ended December 31, 2024 as compared to debt issuance costs and interest expense of $2.4 million during the year ended December 31, 2023 . The interest expense was offset by interest income from our banking relationship of $0.5 million for the year ended December 31, 2024 as compared to $1.3 million for the year ended December 31, 2023 .
(Gain) on fair value instruments . Gain on fair value instruments increased $1.2 million from $2.4 million for the year ended December 31, 2023 to $3.6 million for the year ended December 31, 2024. Public Warrant fair value gains and losses decreased from a gain of $0.8 million for the year ended December 31, 2023 to a loss of less than $0.1 million for the year ended December 31, 2024, a decrease of $0.8 million. The fair value gain recognized on the Note increased from $1.6 million during the year ended December 31, 2023 to $3.6 million during the year ended December 31, 2024, an increase of $2.0 million, primarily due to changes in discount rates. The Note was issued on September 29, 2023.
Restructuring charges . Restructuring charges were $6.4 million for the year ended December 31, 2024. There were no restructuring charges for the year ended December 31, 2023. The increase is the result of $4.4 million acceleration of equity‑based compensation expense and $2.0 million cash restructuring charges that were incurred during the year ended December 31, 2024.
Other (income) expense, net. Other (income) expense, net changed from other expense, net of $0.5 million for the year ended December 31, 2023 to other income, net of $0.2 million for the year ended December 31, 2024. The change is primarily due to $0.3 million lower loss on retirement of fixed assets during the year ended December 31, 2024 as compared to the year ended December 31, 2023 and insurance recoveries of $0.4 million during the year ended December 31, 2024 that were not received during the year ended December 31, 2023.
Income tax expense. Income tax expense decreased $0.1 million from $0.7 million for the year ended December 31, 2023 to $0.6 million for the year ended December 31, 2024, primarily due to lower amounts owed to state and foreign taxing authorities .
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Liquidity and Capital Resources
Overview
As of December 31, 2024 , we had $21.8 million of cash and cash equivalents and $13.2 million of restricted cash . Further, as a result of the Reorganization Plan entered into in conjunction with the closing of the One Planet Group Financing, we have engaged in several initiatives that together are expected to result in the following cash savings on an annual basis:
• We performed a reduction in force on August 12, 2024, which resulted in approximately $15.0 million in annualized cash savings. Additional headcount reductions from the planned elimination of positions as employees departed Inspirato after August 12, 2024 through December 31, 2024 has resulted in approximately $3.0 million in additional annualized cash savings.
• The Termination Agreement resulted in the removal of $57.0 million in future lease payments through 2032 resulting in annualized cash savings of approximately $7.5 million. The Termination Agreement also resulted in a $6.6 million termination fee paid in installments from August 2024 to March of 2025.
• We have reviewed and negotiated non-critical spend such as professional fees, software and noncritical marketing, which has resulted in annualized savings of approximately $10.0 million.
• We reviewed our lease portfolio to either renegotiateunfavorable leases or to exit unprofitable properties, a process has resulted in approximately $4.7 million in annualized savings.
• On March 21, 2025, the Company entered into a twelve month Forbearance and Amendment Agreement with Oakstone Ventures, Inc. (an affiliate of Capital One), the holder of the Company's 8% Senior Secured Convertible Note due 2028. Pursuant to the agreement, Oakstone agreed to forbear from exercising its contractual right under the Note to require redemption in the event the Company fails to meet the minimum liquidity threshold (as defined in the related commercial agreements) during the forbearance period. The agreement is intended to provide the Company with increased operational flexibility as it continues to pursue long-term strategic initiatives. All other terms of the Note remain unchanged.
Together, these strategic initiatives and the new capital transactions we have completed support our belief that our cash and cash equivalents on hand will be sufficient to meet our projected working capital and capital expenditure requirements for a period of at least the next twelve months.
We are operating in an uncertain economic environment, however, and we cannot make assurances that our Reorganization Plan will result in the cash savings we anticipate, that our business will generate sufficient cash flow from operations or that financing will be available to us and in amounts sufficient to enable us to fund our other liquidity needs. If cash generated from our operations is not sufficient or available to meet our liquidity requirements, then we may be required to obtain additional financing in the future. There can be no assurances that equity or debt financing will be available to us if or when we need it or, if available, the terms will be satisfactory to us.
Our principal sources of liquidity have historically consisted of cash flow from financing activities, including the transactions contemplated by the Investment Agreement and the Note during the years ended December 31, 2024 and 2023, respectively, as well as operating activities, primarily from revenue related to travel and Subscriptions.
We have generally maintained a working capital deficit, meaning that our current liabilities exceed our current assets, primarily due to our significant deferred revenue and operating leases. Deferred revenue relates primarily to travel, Subscriptions and travel credits purchased, all of which are paid to us in advance but are not yet taken or consumed and accordingly do not represent an obligation to make future cash payments other than to fund trip-related expenses, and to a lesser extent Rewards , which is an accounting allocation to defer a portion of members’ spend. As of December 31, 2024 , deferred revenue included $66.9 million , $75.7 million , $17.8 million and $11.1 million for travel, Subscriptions, travel credits and Rewards , respectively. Also, as of December 31, 2024 , our current operating lease liabilities totaled $53.5 million and our noncurrent operating lease liabilities totaled $130.2 million . Our cash needs vary from period to period primarily based on the timing of travel and sales promotions.
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Additionally, on September 24, 2024, we entered into an equity distribution agreement (the “Sales Agreement”) with Northland Securities, Inc. (“Northland”) to sell shares of the Company’s Class A Common Stock, from time to time, through an “at the market offering” program under which Northland will act as sales agent or principal. We have an aggregate offering of up to $17,582,393 of Class A Common Stock for sale under the Sales Agreement. At our discretion, we have the ability to sell shares through the Sales Agreement for incremental liquidity.
On February 24, 2025, the Purchaser exercised 583,099 of their 3,644,314 Investment Warrants resulting in $2.0 million of proceeds to the Company.
Our future capital requirements will depend on many factors including our rate of member and revenue growth, travel bookings, change in the number of properties, our ability to improve operating efficiencies and overall economic conditions.
The following table presents summarized information from our Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 (in thousands):
Year ended December 31,
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net decrease in cash, cash equivalents and restricted cash
Cash Flows
Comparison of the years ended December 31, 2024 and 2023
Cash flows used in operating activities. Cash used in operating activities decreased $35.6 million from $51.4 million during the year ended December 31, 2023 to $15.8 million during the year ended December 31, 2024, a decrease of 69% . This decrease was driven by a reduction of net loss and comprehensive loss of $85.1 million which was primarily due to a $70.7 million change in (Gain) on lease termination and loss on asset impairments from the Company incurring an impairment during the year ended December 31, 2023 as compared to a gain on lease termination during the year ended December 31, 2024. The other non-cash benefit in cash flows used in operations was driven by an increase in equity‑based compensation of $4.8 million driven primarily by accelerations in equity‑based compensation due to the restructuring incurred during the year ended December 31, 2024. Further benefits in cash flows from operations from changes in operating asset and liabilities were due to both the $6.5 million change in prepaid member travel and the $1.6 million change in prepaid expenses from the Company better managing over its operating cash along with the $7.6 million change in deferred revenue being driven off of our decrease in booked travel due to our decrease in subscriber count.
Cash flows used in investing activities . Cash used in investing activities decreased from $12.1 million during the year ended December 31, 2023 to $6.0 million during the year ended December 31, 2024, a decrease of 50% . The decrease was driven by lower expenditures for property and equipment of $0.8 million and lower expenditures related to ongoing internal software development projects of $5.3 million.
Cash flows provided by financing activities . Cash provided by financing activities decreased from $23.8 million during the year ended December 31, 2023 to $14.5 million during the year ended December 31, 2024, a decrease of 39% . The decrease was primarily due to proceeds from the $25.0 million Note that was issued during the year ended December 31, 2023, a decrease in payments for financing costs of the Note of $1.4 million and a decrease in proceeds from option exercises of $0.8 million. These decreases were partially offset by proceeds from the Investment Agreement of $10.0 million, proceeds from the Secondary Investment Agreements of $3.0 million and proceeds of $2.5 million from the exercise of One Planet Group's additional option to acquire Class A Common Stock and Investment Warrants .
Use of Cash and Contractual Obligations
We expect to meet our cash requirements for the next twelve months through use of our available cash and cash equivalents and cash flows from operating activities. We expect to meet our long-term cash requirements with cash flows
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from operating and financing activities, including, but not limited to, potential future issuances of debt or equity. Our primary uses of cash are for operating expenses, lease payments and capital expenditures.
Our future commitments consist of the following :
• Our outstanding obligations under the Note payable in 2028 (including principal and coupon interest). The Note is an unsubordinated secured obligation of Inspirato . The Note is secured by a first priority security interest in substantially all of Inspirato Incorporated’s and its domestic subsidiaries’ assets. The Note is fully and unconditionally guaranteed by certain existing and future domestic subsidiaries of Inspirato . The Note bears interest at a fixed rate of 8% per annum. Interest on the Note is due quarterly on the last business day of each calendar quarter following the issuance of the Note and we have elected to pay interest in kind by increasing the outstanding principal amount of the Note by the amount of interest payable on such interest payment date. The Note will mature on September 29, 2028, subject to earlier conversion, redemption or repurchase. In October 2020, we obtained a revolving credit facility. The revolving credit facility had no amounts drawn as of December 31, 2022 and we terminated the facility in March of 2023. See Note 8 – Debt in our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
• Our operating leases liabilities, primarily for vacation properties, and our corporate headquarters. The leases may require us to pay taxes, insurance, utilities and maintenance costs. We have been undergoing a lease optimization process to decrease our cash commitments related to operating leases, whereby we have renegotiated certain leases and terminated certain leases, depending on the individual lease situation. As of December 31, 2024, we were party to 6 leases that had not yet commenced. Future payments under these leases were $9.7 million at December 31, 2024. See Note 9 – Leases in our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
• Our other multi-year obligations primarily from software and other long-term contracts
Future minimum annual commitments as of December 31, 2024 are as follows (in thousands):
Years ending
December 31,
2030 and thereafter
Total future minimum commitments
Non-GAAP Financial Metrics
In addition to our results determined in accordance with GAAP, we use Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our Board concerning our business and financial performance. We believe that these non-GAAP financial measures provide useful information to investors about our business and financial performance, enhance their overall understanding of our past performance and future prospects, and allow for greatertransparency with respect to metrics used by our management in their financial and operational decision making. We are presenting these non-GAAP financial measures to assist investors in seeing our 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 our 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
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financial performance prepared in accordance with GAAP and should not be considered as an alternative to any measures derived in accordance with GAAP.
We provide a reconciliation of Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow to their respective related GAAP financial measures. We encourage 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 EBITDA, Adjusted EBITDA Margin and Free Cash Flow in conjunction with their respective related GAAP financial measures.
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as net loss and comprehensive loss less interest, net, income tax expense, depreciation and amortization, equity‑based compensation, (gain) on fair value instruments, restructuring charges, other non-recurring professional fees and (gain) on lease termination and loss on asset impairments. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenue for the same period.
The above items are excluded from our Adjusted EBITDA measure because our management believes that they are not indicative of our core operating performance and do not reflect the underlying economics of our business. The following table represents a reconciliation of our net loss and comprehensive loss, the closest GAAP measure, to Adjusted EBITDA (in thousands, other than percentages):
Year ended December 31,
Net loss and comprehensive loss
Interest, net
Income tax expense
Depreciation and amortization (1)
Equity-based compensation (2)
(Gain) on fair value instruments
Restructuring charges
Other non-recurring professional fees (3)
(Gain) on lease termination and loss on asset impairments
Adjusted EBITDA
Adjusted EBITDA Margin (4)
(1) Depreciation and amortization is included within cost of revenue, general and administrative and depreciation and amortization within the Consolidated Statements of Operations and Comprehensive Loss.
(2) Excludes equity‑based compensation included in restructuring charges.
(3) Included in general and administrative on the Consolidated Statements of Operations and Comprehensive Loss.
(4) We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenue for the same period.
Free Cash Flow
We define Free Cash Flow as net cash used in operating activities less development of internal-use software and purchases of property and equipment. We believe that Free Cash Flow is a meaningful indicator of liquidity that provides information to our management and investors about the amount of cash generated from operations, after development of internal-use software and purchases of property and equipment, that can be used for strategic initiatives, if any.
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The following table presents a reconciliation of our net cash used in operating activities, the closest GAAP measure, to Free Cash Flow (in thousands):
Year ended December 31,
Net cash used in operating activities
Purchase of property and equipment
Development of internal-use software
Free Cash Flow
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities at the date of our Consolidated Financial Statements. We evaluate our estimates and assumptions on an ongoing basis. The estimates and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, impacting our reported results of operations and financial condition. We believe that of our significant accounting policies, which are described in Note 2 – Significant Accounting Policies to our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, the following accounting estimates involve a greater degree of judgment and complexity. Accordingly, these are the estimates we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition, results of operations and cash flows.
Revenue Recognition - Loyalty Program
In August of 2023, we implemented a member loyalty program, Rewards . Rewards member s accumulate rewards based on their activity with us. Member s who earn one of the three Rewards statuses may be entitled to, depending on their status, extra savings on Club bookings; early access to new property releases, new Experiences and year-end festive dates; and complimentary nights, among other benefits, which provide them with a material right to free or discounted goods or services in the future. As of December 31, 2024 and 2023, our total Rewards deferred revenue was $11.1 million and $10.7 million, respectively.
When member s spend with Inspirato, we defer a portion of the member s’ total spend to Rewards , representing the deferred revenue value of the program’s separate performance obligation. To determine the amount of deferral necessary from members’ spend, we determine the standalone selling price of the identified performance obligations related to Rewards based on the aggregate estimated value of usage of individual benefits within the program in relation to total member spend. Revenues related to Rewards are then recognized over time based upon historical travel patterns and member s’ average life, which includes an estimate of Rewards benefits that will expire or will not be used during the benefit period of the Rewards material rights (up to 30 months). These inputs towards the Rewards deferral require us to forecast future spend for our member s, usage of each of the earned performance obligations and the standalone value of each of the identified performance obligations which are limited as there is limited historical information and require management’s estimation. Any changes in the assumptions outlined above would impact the allocation of consideration received from our member s and the resulting timing of when revenues from each of the specific performance obligations would be recognized. The Rewards program is being sunset in 2025; however, status earned through December 31, 2024 will still be honored and members with one of the status levels will be able to utilize those benefits through June 30, 2025.
For the year ended December 31, 2024, holding other factors constant, a 10% change in our estimated future spend for each membe r would have resulted in a change to Rewards revenue of approximately $0.1 million, or a 0.03% percent change in revenue.
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Intangible and Tangible Asset Impairment Assessment
Goodwill is not amortized, but rather is assessed annually for impairment in the fourth quarter and when events and circumstances indicate that the fair value of a reporting unit with goodwill has been reduced below its carrying value. We have determined that we have one reporting unit. The impairment test requires that we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, we then perform a quantitative impairment test. Otherwise, the quantitative impairment test is not required. Under the quantitative impairment test, we would compare the estimated fair value of each reporting unit to its carrying value. For the year ended December 31, 2024, we could not conclude qualitatively that the fair value of goodwill is greater than its carrying value and, as such, we utilized a quantitative test and determined that no goodwill impairment charges were necessary.
For our other finite-lived, long-term assets, our property, plant and equipment and operating lease right-of-use (“ROU”) assets, an impairment assessment is necessary when facts and circumstances indicate that the carrying values of such assets may not be recoverable. Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities which, for us, is generally at a property level. When evaluating a selected property for impairment, we first compare the carrying value of the asset to the asset’s estimated future undiscounted cash flows. If the estimated undiscounted future cash flows associated with each asset are less than the carrying value of the asset, we determine if we have an impairmentloss by comparing the carrying value of the asset to the asset's estimated fair value and recognize an impairment charge when the asset’s carrying value exceeds its estimated fair value. The adjusted carrying amount of the asset becomes its new cost basis and is amortized over the asset's remaining useful life. We utilized a quantitative test for the year ended December 31, 2023 and determined that an impairment of the Company’s ROU assets was necessary and a $40.5 million impairment charge was recorded. There were no impairments of the Company's ROU assets during the year ended December 31, 2024.
Our impairment calculations, when utilized, contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values. Key assumptions used in estimating future cash flows and asset fair values include projected revenue growth and operating expenses, as well as forecasting asset useful lives and, when utilizing a discounted cash flow, selecting an appropriate discount rate. For the Company’s properties, estimates of revenue growth and operating expenses are based on internal projections and consider the property’s historical performance, the local market economics and the business environment impacting the property’s performance. The fair value of a property’s ROU asset is estimated using the property’s expected future net cash flows excluding the property’s lease payments. When a discount rate is utilized, the discount rate is selected based on what we believe a buyer would assume when determining the purchase price of the property. These estimates are subjective and our ability to realize future cash flows and asset fair values is affected by factors such as ongoing maintenance and improvement of the assets, changes in economic conditions and changes in operating performance.
If actual forecasted income varies materially from those utilized in the impairment assessments above, the amount of calculated impairment could be more or less depending on the direction of the adjustments necessary. There can be no assurance that the projections utilized will not materially change in the future given the inherent difficulty in forecasting future revenues and costs, especially at the specific property-level when utilized; however, the estimates utilized were the best available at the time the financial statements were issued.
Valuation of Note
We have elected to carry our Note at fair value. On a quarterly basis, we calculate the fair value of our Note, adjust its valuation on the Consolidated Balance Sheets and record the complementary fair value adjustment to (gain) loss on fair value instruments within our Consolidated Statements of Operations and Comprehensive Loss. As of December 31, 2024, the fair value of the Note was $22.3 million. As a result of the fair value adjustment, we recorded a gain of $3.6 million to (gain) loss on fair value instruments within our Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2024.
In calculating the fair value of the Note, we utilize a binomial lattice model where we consider both the debt and stock features of the Note. In reviewing the debt features of the Note, we considered our scheduled coupon and principal payments and compared them to those of instruments currently outstanding in the market of companies with similar credit ratings as well as the risk-free rate. In considering the stock features of the Note, we considered the value and volatility of our own stock, in addition to considering volatility of similar instruments in the marketplace as well as the conversion
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feature of the Note which is discounted at the risk-free rate. These inputs to the binomial lattice model are subjective and our ability to properly assess these inputs could have a material impact on the ultimate valuation of the Note.
If our calculated fair value of our Note differs materially from the actual fair value, the Company could have a materially different fair value of our Note on our Consolidated Balance Sheets with an equal offset against (gain) loss on fair value instruments within the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2024.
Incremental Borrowing Rate
On a quarterly basis we calculate our Incremental Borrowing Rates (“IBRs”) as none of our leases provide an implicit rate of return. The Company’s IBRs are utilized as the discount rate when calculating our initial lease liabilities, modifications to our lease liabilities and complementary right-of-use assets leases greater than one year.
The IBRs are calculated for leases based on their term length and risk profile. The Company considers both the risk-free rate as well as the associated debt rates for companies with a similar credit profile as ours as well as the term of the complementary note of each rate. We also consider company-specific risk factors such as our asset risks, foreign currency risks and locational risks when assessing the IBRs for one of our managed and controlled vacation homes.
If our actual IBRs vary materially from those utilized, the Company could have materially different balances for the capitalized ROU assets and complementary lease liabilities for the year ended December 31, 2024.
Recently Adopted Accounting Pronouncements
For further information on recently adopted accounting pronouncements, see Note 2 – Significant Accounting Policies within our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
