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What changed in Inspirato Inc's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Inspirato Inc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+419 added−820 removedSource: 10-K (2024-03-12) vs 10-K (2023-03-15)

Top changes in Inspirato Inc's 2023 10-K

419 paragraphs added · 820 removed · 273 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

77 edited+8 added−29 removed20 unchanged
Biggest changeThis research includes analysis on licensing and zoning, building code, accessibility and operations requirements, fire and life safety regulations, tax compliance, and local employment laws. Every leased property has unique characteristics, requiring further due diligence and regulatory analysis before each new lease signing. We monitor regulatory changes in each existing market on an ongoing basis.
Biggest changeBefore signing any new leases in a new market, we engage local legal counsel to help identify relevant regulatory requirements. This research includes analysis on licensing and zoning, building code, accessibility and operations requirements, fire and life safety regulations, tax compliance, and local employment laws.
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. Intellectual Property Our success depends in part on our ability to obtain, maintain, protect, defend, and enforce our intellectual property.
Holidays and other events generally increase the rates we charge for travel which results in higher gross margin. The majority of our costs are relatively fixed across quarters. Intellectual Property Our success depends in part on our ability to obtain, maintain, protect, defend, and enforce our intellectual property.
On June 30, 2021, Inspirato LLC entered into the Business Combination Agreement dated June 30, 2021 and as amended September 15, 2021 (the “Business Combination Agreement”) to become a publicly traded company through a business combination with Thayer.
Inspirato LLC entered into the Business Combination Agreement dated June 30, 2021 and as amended September 15, 2021 (the “Business Combination Agreement”) to become a publicly traded company through a business combination with Thayer.
Inspirato Pass subscribers pay a monthly subscription fee in exchange for their Pass travel and are not subject to per-trip taxes, resort fees, and other add-on charges imposed by certain hotels. This provides them with predictability and certainty regarding their travel costs and spares them the frustration of encountering unclear or undisclosed fees.
Inspirato Pass members pay a monthly subscription fee in exchange for their Pass travel and are not subject to per-trip taxes, resort fees, and other add-on charges imposed by certain hotels. This provides them with predictability and certainty regarding their travel costs and spares them the frustration of encountering unclear or undisclosed fees.
We actively work to dismantle inequities within our policies, systems, programs and services to ensure that Inspirato is a space where everyone feels welcome and comfortable with their identity. We continuously aspire to be a more equitable, safe, and welcoming work environment for all of our team members, and a better advocate to the communities we serve.
We actively work to dismantle inequities within our policies, systems, programs and services to ensure that Inspirato is a space where everyone feels welcome and comfortable with their identities. We continuously aspire to be a more equitable, safe, and welcoming work environment for all of our team members, and a better advocate to the communities we serve.
By managing and controlling these assets directly, including staffing them with Inspirato team members, we are able to deliver a consistent experience comparable to top luxury hospitality resort brands, versus a “vacation roulette” experience that is dependent on the expertise and attention of the individual homeowner or a local property management company. 7 Table of Contents ● Rate and Calendar Control.
By managing and controlling these assets directly, including staffing them with Inspirato team members, we are able to deliver a consistent experience comparable to top luxury hospitality resort brands, versus a “vacation roulette” experience that is dependent on the expertise and attention of the individual homeowner or a local property management company. ● Rate and Calendar Control.
We believe our culture is real, valued, deeply ingrained, and sustained in part by robust and scalable training that helps create consistently positive subscriber interactions and experiences. We are committed to hiring a diverse workforce.
We believe our culture is real, valued, deeply ingrained, and sustained in part by robust and scalable training that helps create consistently positive member interactions and experiences. We are committed to hiring a diverse workforce.
They foster a culture of dialogue, collaboration, recognition, achievement, and sense of family that contributes to our long-term success. We engage and empower our team with ongoing career and learning and development opportunities.
They foster a culture of dialogue, collaboration, recognition, achievement, and sense of community that contributes to our long-term success. We engage and empower our team with ongoing career and learning and development opportunities.
We rely on a mix of tactics to generate demand for each of these revenue lines, using a full-funnel approach to reach its audiences at multiples stages within each consideration process.
We rely on a mix of tactics to generate demand for each of these revenue lines, using a full-funnel approach to reach our audiences at multiples stages within each consideration process.
We control access to, and use of, our solutions and other confidential and proprietary information through the use of internal and external controls, including contractual protections with employees, contractors, customers, partners, and other third parties.
We control access to, and use of, our solutions and other confidential and proprietary information through the use of internal and external controls, including contractual protections with employees, contractors, members, partners, and other third parties.
Fostering a growth mindset facilitates a culture where all voices are heard and team members can take informed risks, make mistakes, ask questions, and seek creative solutions to tough problems. This approach helps us build a strong bench of leaders for tomorrow’s business challenges.
Fostering a growth mindset facilitates a culture where all voices are heard and team members can take informed risks, make mistakes, ask questions, and seek creative solutions to challenges and opportunities. This approach helps us build a strong bench of leaders for tomorrow’s business challenges.
In addition, after each guest checks out from a stay, we perform a detailed walkthrough to ensure it is ready for the next arrival, thus ensuring a consistent quality experience for our members. 6 Table of Contents ● Certainty of high-quality personalized service.
In addition, after each member checks out from a stay, we perform a detailed walkthrough to ensure it is ready for the next arrival, thus ensuring a consistent quality experience for our members. 6 Table of Contents ● High-quality personalized service.
We seek to foster an inclusive environment where everyone feels welcome to be their authentic selves and all voices are heard — an environment that is aligned with our values and that reflects our global community. 9 Table of Contents Our culture is also one of inclusion.
We seek to foster an inclusive environment where everyone feels welcome to be their authentic selves and all voices are heard — an environment that is aligned with our values and that reflects our global community. Our culture is also one of inclusion.
Through this new platform, we partner with nonprofit organizations to sell luxury travel packages (consisting of an Inspirato Club subscription and luxury vacation) at live and silent auctions, paddle raises, and other giving channels.
Through this platform, we work with nonprofit organizations to sell travel packages (consisting of an Inspirato Club subscription and luxury vacation) at live and silent auctions, paddle raises, and other giving channels.
Continued growth and success will depend on the performance of our current and future employees, including certain key employees. Recruitment and retention of these individuals is vital to growing our business and meeting our business plans. We espouse the principal that all Inspirato team members can bring their whole selves to work and thrive.
Continued growth and success will depend on the performance of our current and future employees, including certain key employees. Recruitment and retention of these individuals is vital to growing our business and meeting our business plans. We espouse the principle that all Inspirato team members can bring their whole authentic selves to work each day and thrive.
Design has been at the core of everything we do, and it has enabled us to create an intuitive and attractive user interface. Inspirato uses customer feedback to optimize the platform and have employees dedicated to supporting subscribers through the booking process.
Design has been at the core of everything we do, and it has enabled us to create an intuitive and attractive user interface. Inspirato uses member feedback to optimize the platform and have employees dedicated to supporting members through the booking process.
We control the booking calendar for the majority of our Inspirato residences, giving us visibility into actionable metrics such as how often and what times of year homes are typically used. This provides us greater control over proactive property maintenance planning and necessary repairs and upgrades.
We control the booking calendar for our Inspirato residences, giving us visibility into actionable metrics such as how often and what times of year homes are typically used. This provides us greater control over proactive property management planning and coordinating repairs and upgrades.
These include print, digital, video and television buys to build general brand awareness; performance marketing tactics such as direct mail, paid digital media, and paid search; multiple brand urgency campaigns each year to help drive predictable results; and a highly trained team of Sales and Care team professionals.
These include print, digital and video to build general brand awareness; performance marketing tactics such as direct mail, paid digital media, and paid search; multiple brand urgency campaigns each year to help drive predictable results; and a highly trained team of sales and member success professionals.
On February 11, 2022 (the “Closing Date”), Thayer and Inspirato LLC consummated the transaction contemplated in the Business Combination Agreement whereby amongst other transactions, a subsidiary of Thayer merged within and into Inspirato LLC with Inspirato LLC as the surviving company (the “Business Combination”), resulting in Inspirato LLC becoming a subsidiary of Thayer.
On February 11, 2022, Thayer and Inspirato LLC consummated the transaction contemplated in the Business Combination Agreement whereby, among other transactions, a subsidiary of Thayer merged with and into Inspirato LLC with Inspirato LLC as the surviving company (the “Business Combination”), resulting in Inspirato LLC becoming a subsidiary of Thayer.
With all of our performance marketing programs for new subscriber acquisition, we use iterative data-driven models developed in partnership with leading data providers to help us target high net worth individuals as potential new customers.
With all our performance marketing programs for new member acquisition, we use iterative data-driven models developed in partnership with leading data providers to help us target high net worth individuals as potential new members.
We revenue manage these rates to achieve occupancy and average daily rate goals while also delivering value to drive subscriber satisfaction. Inspirato Pass Launched in 2019, Inspirato Pass subscribers pay an enrollment fee and a monthly or annual subscription that is inclusive of nightly rates, taxes, and fees for Pass trips.
We manage these rates to achieve occupancy and average daily rate goals while also delivering value to drive member satisfaction. Inspirato Pass Launched in 2019, Inspirato Pass members pay an enrollment fee and a monthly, semi-annual, annual, or multi-year subscription that is inclusive of nightly rates, taxes and fees for Pass trips.
In addition to their monthly or annual subscription, subscribers pay members-only nightly rates to book the trips of their choice. Inspirato Club subscribers can book vacations up to one year in advance. Every Club trip includes first-class, personalized service from a team of hospitality experts, including pre-trip planning, on-site concierge, and daily housekeeping.
In addition to their monthly or annual subscription, members pay members-only nightly rates to book the trips of their choice. Inspirato Club members can book vacations up to one year in advance. Every Club trip includes personalized service, including pre-trip planning, on-site concierge, and daily housekeeping.
The scope of many of these laws and regulations are changing, subject to differing interpretations, and may be inconsistent among jurisdictions or conflict with other laws and regulations.
The scope of these laws and regulations may change, be subject to differing interpretations, and may be inconsistent among jurisdictions or conflict with other laws and regulations.
Our subscription services are seasonal to the extent that interest from potential new subscribers tends to also follow travel revenue, however revenues from existing subscribers are not impacted by seasonality. Our key metrics, including total revenues, Adjusted EBITDA and Free Cash Flow, are also impacted by the timing of holidays and other events.
Our subscription services are seasonal to the extent that interest from potential new member s tends to also follow travel revenue; however, predictable subscription revenues from existing member s are not impacted by seasonality. 9 Table of Contents Metrics including total revenues, Adjusted EBITDA and Free Cash Flow are also impacted by the timing of holidays and other events.
Incentives for upfront prepayment of monthly subscription fees, typically in the form of a waived enrollment fee, travel credit or a free trip, ensure that new subscribers remain customers for a minimum period of time, and enhance retention. ● Multiple Customer Journeys. Inspirato trips can only be booked through our website, iOS application, or Care teams.
Incentives for upfront prepayment of monthly subscription fees, typically in the form of a waived enrollment fee, travel perks or a free trip, ensure that new members remain paid-members for a minimum period of time, and enhance retention. ● Multiple Member Journeys. Inspirato trips can only be booked through our website, iOS application, or member success teams.
They cannot be booked through online travel agencies or other third-party channels. In addition, our Care teams and on-site concierge staff help with trip planning, which is a service many hotel companies do not offer.
They cannot be booked through online travel agencies or other third-party channels. In addition, our member success teams and vacation experience teams, which include our on-site concierge staff, assist with trip planning, which is a service many hotel companies do not offer.
We manage nightly rates and calendar availability for our residences and leased hotel inventory, without owner interference.
We manage nightly rates and calendar availability for our residences and leased hotel inventory.
Inspirato is a hospitality company, rather than an online booking platform, with an expert team of dedicated professionals that offer personalized service comparable to the finest hotel and resort brands. Every Inspirato trip includes pre-trip itinerary planning, on-site concierge service, and daily housekeeping.
Inspirato is a hospitality company with an expert team of dedicated professionals that offer personalized service comparable to the top-tier hotel and resort brands. Every Inspirato trip includes pre-trip itinerary planning, on-site concierge service, and daily housekeeping.
Inspirato for Business Inspirato for Business is our new business-to-business channel through which we sell subscription and travel products directly to businesses seeking to leverage luxury accommodations to recruit, retain, and reward their employees.
Inspirato for Business Launched in 2022, Inspirato for Business is a business-to-business channel through which we sell subscription and travel products directly to businesses seeking to leverage luxury accommodations to recruit, retain, and reward their employees.
We have also made significant investment in leading marketing technology such as Salesforce Marketing Cloud, as well as leading marketing customer relationship management practices designed to drive sales and marketing alignment. Human Capital Our People and Culture Inspirato’s culture is embodied by our three core values: We Care. We Inspire. We Dream Big.
We have also made significant investment in leading marketing technology such as Salesforce Marketing Cloud, as well as leading marketing member relationship management practices designed to drive sales and marketing alignment. Human Capital Our People and Culture Inspirato’s culture is embodied by our core values: Care, Collaboration, Courage and Curiosity.
As of December 31, 2022, our selection of Inspirato residences included 523 private luxury vacation homes in 135 destinations. These residences include leased properties where we directly manage, maintain, and operate the asset, as well as resort-based properties where we work closely with resort partners to ensure an exceptional subscriber experience.
As of December 31, 2023, our selection of Inspirato residences included approximately 450 private luxury vacation homes. These residences include leased properties where we directly manage, maintain, and operate the asset, as well as resort-based properties where we work closely with resort partners to ensure an exceptional member experience.
We believe our subscription model and partnerships with hospitality suppliers lead to reduced rates versus comparable luxury vacation alternatives, while saving our subscribers from the hassle of scouring travel websites to confirm whether they have found the best rate or value for their stay. ● Simple, transparent fee structure.
We believe our favorable lease agreements and partnerships with hospitality suppliers enable us to offer reduced rates versus comparable luxury vacation alternatives, while saving our members from the hassle of scouring travel websites to confirm whether they have found the best rate or value for their stay. ● Simple, transparent fee structure.
Inventory Management and Expansion Overall Approach We are highly disciplined in our overall approach to growing and managing our luxury vacation portfolio. ● We carefully choose new destinations, accommodations, and experiences based on market trends, booking results, subscriber feedback, and other factors to align our additions with demand. ● We only seek to partner with hotels and resorts that align well with the Inspirato luxury hospitality brand and offer service commensurate with our own, to ensure that every trip booked through our platform meets or exceeds our subscribers’ expectations.
Inventory Management and Expansion Overall Approach ● We choose destinations, accommodations, and experiences based on market trends, booking results, member feedback, and other factors to align our additions with demand. ● We only seek to partner with hotels and resorts that align well with the Inspirato luxury hospitality brand and offer service commensurate with our own, to ensure that every trip booked through our platform meets or exceeds our members’ expectations.
Managing our Residences Since our founding over ten years ago, we have developed a highly flexible, asset-light approach to controlling and managing our residences. The central tenet of this approach is that we lease our homes, paying the owners fixed rental income, rather than buying them.
Managing our Residences Since our founding over a decade ago, we have developed a highly flexible, asset-light approach to controlling and managing our residences. We lease our homes, paying the owners fixed rental income, rather than buying them.
In particular, our on-site staff are available to our subscribers to assist with their needs during their stay, to ensure we provide the level of confidence and assurance that luxury travelers expect. ● Confidence with regard to value.
Additionally, our on-site staff are available to our members to assist with their needs during their stay, to ensure we provide the level of service and assurance that discerning travelers expect. ● Confidence with regard to value.
Our subscribers vary in age and technological sophistication, and we believe that our user interface is built for a broad subscriber base. ​ Sales and Marketing Our sales and marketing strategy is designed to support new subscriber acquisition, subscriber upgrades, subscriber bookings, and subscriber retention.
Our members vary in age and technological sophistication, and we believe that our user interface is built for a broad member base. 8 Table of Contents Sales and Marketing Our sales and marketing strategy is designed to support new member acquisition, member bookings, and member retention.
Inspirato Pass subscribers have full access to all the benefits of Inspirato Club, including the ability to pay members-only nightly rates to book trips of their choice, access to our booking promotions, and personalized service on every trip. Inspirato Select Launched in 2022, Inspirato Select subscribers pay an enrollment fee and annual subscription.
Inspirato Pass members have full access to all the benefits of Inspirato Club , including the ability to pay members-only nightly rates to book trips of their choice, access to our booking promotions, and personalized service on every trip.
We believe we compete primarily on the basis of the quality of our residences, the variety and attractiveness of our residences, and our high-quality subscriber experience that is a result of the luxe services provided by our care teams, concierges and planners.
We believe we compete primarily on the basis of the quality of our residences, the variety and attractiveness of our residences, and our high-quality member experience that is a result of the services provided by our member success teams and vacation experience teams, which include dedicated concierges and planners.
Led by our Sales and Care team professionals, we foster a long-term, personal rapport with each Inspirato family, not only to promote our customer satisfaction and retention goals, but also to fulfill our mission of inspire lasting memories and relationships by changing the way family and friends experience the world.
We foster a long-term, personal rapport with each Inspirato family, not only to promote our member satisfaction and retention goals, but also to fulfill our mission to inspire lasting memories and relationships by enriching the way our members experience the world.
In addition to trademark protection, we reserve and registers domain names when and where deemed appropriate and are the registered holder of more than 176 domain names, including “inspirato.com.” As of December 31, 2022, we have two U.S. patents issued covering our subscription-based booking and service tailoring technology.
In addition to trademark protection, we reserve and register domain names when and where deemed appropriate and are the registered holder of approximately 180 domain names, including “www.Inspirato.com.” As of December 31, 2023, we have 2 U.S. patents issued covering our subscription-based booking and service tailoring technology.
Inspirato Club subscribers are charged a flat rate for taxes and fees for trips purchased a la carte. ● Safe, private luxury residences.
Inspirato Club members are charged a flat rate for taxes and fees for trips purchased a la carte.
This allows us to revenue-manage each inventory unit to (i) help maximize occupancy by ensuring our rates are competitive with comparable accommodations in the applicable market, (ii) help reduce spoilage, and (iii) leverage availability to increase subscriber engagement and retention through booking promotions, “surprise and delight” outreach, and other tactics. ● Control Over Bookings and Property Maintenance.
This allows us to revenue-manage each inventory unit to (i) help maximize occupancy by ensuring our rates are competitive with comparable accommodations in the applicable market, (ii) help reduce spoilage, and (iii) leverage availability to increase member engagement and retention. 7 Table of Contents ● Control Over Bookings and Property Management.
For example, when we onboard luxury vacation homes into our portfolio, we typically outfit them with premium linens, kitchenware, technology, and other amenities and then refresh them at regular intervals to ensure they meet our standards.
All Inspirato subscriptions provide exclusive access to a portfolio of properties that we directly manage to our high standards. For example, when we onboard luxury vacation homes into our portfolio, we typically outfit them with premium linens, kitchenware, technology, and other amenities and then refresh them at regular intervals to ensure they meet our standards.
Our current or potential competitors include: ● global hotel chains such as Hyatt Hotels Corporation, Intercontinental Hotel Group, Marriott International, Radisson Hotel Group and Wyndham Hotels & Resorts as well as boutique hotel chains and independent hotels; ● online travel agencies such as Booking Holdings and Expedia Group; and ● home-sharing and rental services and short-term vacation rentals such as Airbnb, Vacasa, Sonder, AvantStay, Evolve, and Awaze.
Our current or potential competitors include: ● home-sharing and rental services and short-term vacation rentals such as Airbnb, Vacasa, Sonder, AvantStay, Evolve, Awaze, and Exclusive Resorts; ​ ● global hotel chains such as Hyatt Hotels Corporation, Intercontinental Hotel Group, Marriott International, Radisson Hotel Group, and Wyndham Hotels & Resorts as well as boutique hotel chains and independent hotels; and ● online travel agencies such as Booking Holdings and Expedia Group. ​ 11 Table of Contents Corporate Information Our principal executive offices are located at 1544 Wazee Street, Denver, Colorado 80202.
For travelers, we offer access to a diverse portfolio of curated luxury vacation options that, as of December 31, 2022, included 523 private luxury vacation homes available to our subscribers, and accommodations at 350 luxury hotel and resort partners in more than 225 destinations around the world.
For travelers, we offer access to a diverse portfolio of vacation options that includes approximately 450 private luxury vacation homes available to our customers, and accommodations at over 250 luxury hotel and resort partners in over 180 destinations around the world as of December 31, 2023.
For more information, see the section titled “Risk Factors – Risks Related to Our Intellectual Property.” Regulatory Compliance Our overall business approach and strategy includes rigorous attention to regulatory compliance, as our operations are subject to regulations in the following principal areas, across a wide variety of jurisdictions. 10 Table of Contents Property and Accommodations Regulation Our business is subject to U.S. and foreign federal, state and local laws and regulations that vary widely by city, country and property type.
For more information, see the section titled “Risk Factors – Risks Related to Intellectual Property and Data Privacy”. Regulatory Compliance Our overall business approach and strategy includes rigorous attention to regulatory compliance, as our operations are subject to regulations in the following principal areas, across a wide variety of jurisdictions.
Our Value Proposition We provide exceptional vacations with outstanding value for luxury travelers (who drive demand) and attractive economics and certainty for hospitality suppliers including hotels, resorts and luxury vacation rental property owners (who drive supply). Value Proposition for Luxury Travelers Inspirato addresses the following core marketplace problems faced by luxury travelers: ● Inconsistent quality of accommodations.
Our Value Proposition We provide exceptional vacations with outstanding value for luxury travelers (who drive demand) and attractive economics and certainty for hospitality suppliers including hotels, resorts and luxury vacation rental property owners (who we work with to provide supply). Our subscription offerings are intended to solve travel pain points by offering the following benefits: ● Certainty of accommodations.
We believe our deep involvement in these twin customer journeys gives us greater influence and impact over their customer experience than luxury hospitality companies that do not utilize our service approach or a subscription platform. ● Trusted Luxury Brand, Proprietary Database .
We believe our deep involvement in these processes gives us greater influence and impact over their member experience than luxury hospitality companies that do not utilize our service approach or a subscription platform. ● Trusted Luxury Brand, Proprietary Database. Since 2011, we have made significant investments to build a one-of-a-kind luxury hospitality brand anchored by an innovative subscription platform.
We believe that this algorithm will enable us to efficiently manage trips with scale to optimize profitability of the inventory. 8 Table of Contents Our subscriber experiences sit on a technology platform that has allowed for maximum flexibility in our product development strategy.
It was built to scale and operates through a patented algorithm, which can be adjusted depending on business needs. We believe that this algorithm will enable us to efficiently manage trips with scale to optimize profitability of the inventory. Our member experiences sit on a technology platform that has allowed for flexibility in our product development strategy.
We believe both Inspirato for Good and Inspirato for Business will significantly expand our target addressable market and accelerate growth at a lower customer acquisition cost. 4 Table of Contents Corporate History and Background Inspirato was incorporated in Delaware on July 31, 2020 as Thayer Ventures Acquisition Corporation (“Thayer”); a special purpose acquisition company formed for the purpose of effecting a merger with one or more operating businesses.
Corporate History and Background Inspirato was incorporated in Delaware on July 31, 2020 as Thayer Ventures Acquisition Corporation (“Thayer”), a special purpose acquisition company formed for the purpose of effecting a merger with one or more operating businesses.
For more information, see the section titled “Risk Factors – Risks Related to Intellectual Property and Data Privacy – 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.” Employment We are also subject to laws governing our relationship with employees, including laws governing wages and hours, benefits, immigration, workplace safety and health, and hotel-specific ordinances.
For more information, see the section titled “Risk Factors – Risks Related to Intellectual Property and Data Privacy – 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.” Other Regulation Our business is subject to various other laws and regulations, involving matters such as income tax and other taxes, consumer protection, online messaging, advertising and marketing, the U.S.
As of December 31, 2022, we employed a total of approximately 900 team members globally. These employees are highly concentrated in Operations (470 employees) and Sales and Marketing (189 employees). Our focus on customer-facing employees helps us to provide luxury service to our subscribers that we believe is industry-leading.
As of December 31, 2023, we employed approximately 630 team members globally. These employees are highly concentrated in Operations and Sales and Marketing. Our focus on member-facing employees helps us to provide luxury service to our members that we believe is industry-leading. Importantly, our values and the culture they inspire extend to our relationships with every Inspirato member.
For example, because Inspirato Pass does not show nightly rates, it provides an opaque distribution channel through which luxury hotels, resorts, and vacation homeowners can generate revenue from their excess inventory — unoccupied hotel rooms or vacation rentals — without undercutting rates on their own website and other brand assets, which can lead to customer complaints, refund requests, and harm to their overall brand reputations.
For example, Inspirato provides an opaque distribution channel through which luxury hotels, resorts, and vacation homeowners can generate revenue from their unoccupied hotel rooms and suites or vacation rentals without undercutting rates on their own.
As such, the consolidated financial statements presented herein represent the operating results, assets and liabilities of Inspirato LLC before and Inspirato Incorporated and its subsidiaries, including Inspirato LLC, after the Closing. See Note 3 – Reverse Recapitalization in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information.
As such, the Consolidated Financial Statements presented herein represent the operating results, assets and liabilities of Inspirato LLC before, and Inspirato Incorporated and its subsidiaries including Inspirato LLC after, the Closing.
Americans with Disabilities Act and other laws and regulations relating to accessibility, and to laws, regulations and standards in other areas such as zoning and land use, licensing, permitting and registrations, fire and life safety, environmental and other property condition matters, staffing and employee training, cleaning protocols and other COVID-19 requirements, and property “star” ratings where required.
Hospitality and transient accommodations operations are also subject to compliance with laws and regulations relating to accessibility, zoning and land use, licensing, permitting and registrations, fire and life safety, environmental and other property condition matters, staffing and employee training and property “star” ratings where required.
Our portfolio also includes Inspirato Only, featuring one-of-a-kind luxury safaris, cruises, and other experiences, and Bespoke, which offers custom-designed “bucket list” itineraries. 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 affluent travelers and drive exceptional customer satisfaction.
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 .
Additionally, our real estate owners are also responsible for their own compliance with laws, including with respect to their employees, property maintenance and operations, environmental laws and other matters. Before signing any new leases in a new market, we engage local legal counsel to help identify relevant regulatory requirements.
Additionally, our real estate owners are also responsible for their own compliance with laws, including with respect to their employees, property maintenance and operations, environmental laws and other matters. We monitor regulatory changes in each existing market on an ongoing basis.
Seasonality Our travel revenues are seasonal, reflecting typical travel behavior patterns of travelers over the course of the calendar year. While results were less predictable as a result of COVID-19 and related travel restrictions, in a typical year, the first, third, and fourth quarters have higher travel revenues than the second quarter.
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. In addition, some locations may experience a greater impact from seasonality, or different seasonality, than those in other locations.
As a result, we engage with our subscribers throughout the entire booking journey on every trip they take, from consideration, to booking, planning, in-residence, checkout, and post-trip feedback. We also engage with them through a parallel renewal journey, pro-actively marketing booking promotions, subscriber benefits, upgrade opportunities, and other aspects of our value proposition to maximize retention.
We also engage with them through a parallel renewal journey, pro-actively marketing booking promotions, member benefits, upgrade opportunities, and other aspects of our value proposition to maximize their membership value and retention.
Information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K. The U.S. Securities and Exchange Commission (“SEC”) maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
Securities and Exchange Commission (“SEC”) maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
Subscriptions Inspirato Club Launched in 2011, Inspirato Club subscribers pay an enrollment fee and monthly or annual subscription for access to our portfolio of branded Inspirato luxury vacation homes, luxury hotels, and five-star resort partners, Inspirato Only experiences, and custom Bespoke itineraries.
See Note 3 – Reverse Recapitalization in the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for more information. 5 Table of Contents Our Luxury Travel Subscriptions and Other Offerings Luxury Travel Subscriptions Inspirato Club Launched in 2011, Inspirato Club members pay an enrollment fee and monthly, semi-annual, annual, or multi-year subscription fees for access to our portfolio of branded Inspirato luxury vacation homes, luxury hotels, and five-star resort partners, Inspirato Only experiences and custom Bespoke itineraries.
We maintain an expert sales and service organization, including sales professionals to welcome new subscribers, relationship-driven Care teams to create the overall Inspirato experience, and on-site concierge teams to deliver memorable vacations. Each of these teams undergoes regular training to enrich their expertise as hospitality specialists and ambassadors of the Inspirato brand.
We maintain an expert sales and service organization, including sales professionals to welcome new members, relationship-driven member success teams to create the overall Inspirato experience, and vacation experience teams, which includes our planners and on-site concierge teams, to deliver memorable vacations.
We provide luxury vacation homeowners with a simplified, hassle-free ownership experience by providing a fixed monthly lease payment, expert property management services, and flexible usage benefits in exchange for leasing their home to us for inclusion within our portfolio.
We also have arrangements with hotels and resort partners to lease rooms under long-term agreements, providing them with fixed income for inventory versus uncertain occupancy-based income. For luxury vacation homeowners we offer fixed monthly lease payment, expert property management services, and flexible usage benefits in exchange for leasing their home to us for inclusion within our portfolio.
Further, in addition to leasing individual luxury vacation homes, we also lease inventory from hotel and resort partners with flexible termination provisions. Together, these approaches enable us to tailor our overall inventory cost structure to meet changing demand. ● Expert Sales and Service Teams.
Together, these approaches enable us to tailor our overall inventory cost structure to meet changing demand. ● Expert Sales and Service Teams.
We believe the high-quality service they deliver is a key differentiator separating Inspirato from other hospitality companies. ● Predictable Subscription Revenue. Our subscriber base provides predictable, consistent cash flow and stability relative to many traditional hospitality and revenue models. Subscription fees generate recurring revenue.
Our member base provides predictable, consistent cash flow and stability relative to many traditional hospitality and revenue models. Subscription fees generate recurring revenue.
Our leases typically permit us to terminate within one years’ notice, giving us the ability to remove underperforming residences as well as curate the portfolio generally in response to market opportunities and travel demand trends. Many of our leases also have a “force majeure” clause in anticipation of impossible-to-predict disruptive market events.
Our leases typically permit us to terminate with 180 days to one years notice, giving us the ability to remove underperforming residences as well as curate the portfolio in response to market opportunities and travel demand trends. In addition to traditional leases, we also use other flexible arrangements to secure less than 10% of our residences.
Other Regulation Our business is subject to various other laws and regulations, involving matters such as income tax and other taxes, consumer protection, online messaging, advertising and marketing, the U.S. Foreign Corrupt Practices Act and other laws governing bribery and other corrupt business activities, and regulations aimed at preventing money laundering or prohibiting business activities with specified countries or persons.
Foreign Corrupt Practices Act and other laws governing bribery and other corrupt business activities, and regulations aimed at preventing money laundering or prohibiting business activities with specified countries or persons. As we expand into additional markets, we will be subject to additional laws and regulations.
For additional information regarding the laws and regulations that affect our business, see Part I, Item 1A. “Risk Factors” of this Annual Report on Form 10-K . Competition 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.
Competition 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.
In many cities, local regulations affect our ability to offer accommodations for specified durations or in certain neighborhoods. Hospitality and transient accommodations operations are also subject to compliance with the U.S.
Property and Accommodations Regulation Our business is subject to U.S. and foreign federal, state and local laws and regulations that vary widely by city, country and property type. In many cities, local regulations affect our ability to offer accommodations for specified durations or in certain neighborhoods.
Some relevant laws and regulations are inconsistent and ambiguous, and could be interpreted by regulators and courts in ways that could adversely affect our business, results of operations, and financial condition. Moreover, certain laws and regulations have not historically been applied to an innovative hospitality provider such as us, which often makes their application to our business uncertain.
The regulatory environment in each market is often complex and evolving, and can be subject to significant change. Some relevant laws and regulations are inconsistent and ambiguous, and could be interpreted by regulators and courts in ways that could adversely affect our business, results of operations, and financial condition.
Technology Our technology platform was built for the unique needs of our subscribers; it allows us to quickly adapt to what our subscribers require and delivers deep business intelligence insights to help us manage our platform. It was built to scale and operates through a patented algorithm, which can be adjusted depending on business needs.
At the same time, we have used data-driven marketing to build a proprietary database of affluent individuals who have demonstrated interest in Inspirato. Technology Our technology platform was built for the unique needs of our members; it allows us to quickly adapt to what our members require and delivers deep business intelligence insights to help us manage our platform.
Inspirato Pass subscribers book Pass trips from the Inspirato Pass trip list, which is a constantly updated selection that, as of December 31, 2022 was comprised of more than 2.1 million vacations, ranging from Inspirato residences and hotel partners to custom experiences such as luxury cruises and safaris.
Inspirato Pass members book pass trips from the Inspirato Pass trip list, which is a constantly updated selection that includes vacations at Inspirato residences and hotel partners.
Our leases and other inventory agreements, as well as our overall strategic property mix, provide us with flexibility to respond to changes in travel demand and events beyond our control. For example, as of December 31, 2022, 93% of our leases included a “force majeure” clause in the event of severe unexpected business disruption.
Our leases and other inventory agreements, as well as our overall strategic property mix, provide us with flexibility to respond to changes in travel demand and events beyond our control. Our individual leased vacation homes, as well as our leased inventory from hotel and resort partners oftentimes include flexible termination provisions.
Privacy and Data Protection Regulation In processing travel transactions and information about guests and their stays, we receive and store a large volume of data, including a large volume of personal information.
Every leased property has unique characteristics, requiring further due diligence and regulatory analysis before each new lease signing. ​ 10 Table of Contents Privacy and Data Protection Regulation In processing travel transactions and information about members and their stays, we receive and store data, including personal information.
Corporate Information Our principal executive offices are located at 1544 Wazee Street, Denver, CO 80202. The transfer agent and registrar for our common stock and the warrant agent for our warrants is Computershare Trust Company, N.A. Available Information Our website address is www.inspirato.com.
The transfer agent and registrar for our common stock and the warrant agent for our warrants is Computershare Trust Company, N.A. Available Information Our website address is www.Inspirato.com. Information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K. The U.S.
Our portfolio of luxury vacation options is accessed through our subscription platform, which creates a frictionless booking journey for discerning travelers seeking accommodations and experiences that they know will meet their high standards. We currently offer three subscriptions, Inspirato Club, Inspirato Pass, and Inspirato Select.
Our portfolio of luxury vacation options is accessed through our subscription platform in which we currently offer two paid subscription models for members to choose from, Inspirato Club and Inspirato Pass .
Item 1. Business Inspirato Incorporated and its subsidiaries (the “Company” or “Inspirato”) is an innovative luxury travel subscription company on a mission to inspire lasting memories and relationships by changing the way family and friends experience the world.
Item 1. Business Inspirato Incorporated and its subsidiaries (collectively the “Company”, “Inspirato”, “we”, or “our”) is a subscription-based luxury travel company that provides exclusive access to a managed and controlled portfolio of curated vacation options, delivered through an innovative model designed to ensure the service, certainty and value that discerning customers demand.
Removed
Inspirato is a subscription-based luxury travel company that provides unique solutions for (i) affluent travelers seeking superior service and certainty across a wide variety of accommodations and experiences and (ii) hospitality suppliers who want to solve pain points that include monetizing excess inventory and efficiently outsourcing the hassle involved in managing rental properties.
Added
The Inspirato portfolio includes branded luxury vacation homes, accommodations at five-star hotel and resort partners and custom travel experiences.
Removed
All three offer travelers (i) the ability to book trips of their choice within our luxury vacation portfolio up to one year in advance, (ii) the full Inspirato service experience, and (iii) access to Inspirato benefits such as member events, luxury travel agent services, and partner benefits.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThere are a number of factors that could lead to a decline in subscribers or that could prevent us from increasing our subscribers, including: ● our failure to deliver offerings that subscribers find attractive; ● our ability to achieve and sustain market acceptance, particularly with respect to Inspirato Pass; ● harm to our brand and reputation; ● pricing and perceived value of our offerings; ● subscribers engaging with competitive products and services; ● problems affecting subscribers’ experiences; ● a decline in the public’s interest in luxury travel; ● deteriorating general economic conditions or a change in consumer discretionary spending preferences or trends , including inflation and increases to federal interest rates in response; ● political, social or economic instability, such as the ongoing geopolitical tensions related to Russia’s actions in Ukraine, resulting sanctions imposed by the U.S. and other countries and retaliatory actions taken by Russia in response to such sanctions; and ● events beyond our control such as the COVID-19 pandemic, other pandemics and health concerns, increased or continuing restrictions on travel, immigration, trade disputes and the impact of climate change on travel, including fires, floods, severe weather and other natural disasters and the impact of climate change on seasonal destinations.
Biggest changeThere 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 member s find attractive; ● our ability to achieve and sustain market acceptance, particularly with respect to Inspirato Pass ; ● harm to our brand and reputation; ● pricing and perceived value of our offerings; ● member s engaging with competitive products and services; ● problems affecting member s’ experiences; ● a decline in the public’s interest in luxury travel; ● deteriorating general economic conditions or a change in consumer discretionary spending preferences or trends, including inflation and increases to federal interest rates; ● political, social or economic instability, such as the ongoing geopolitical tensions related to conflicts in the Middle East, Russia’s actions in Ukraine, and other geopolitical events; and ● events beyond our control such as global or regional pandemics and health concerns, increased or continuing restrictions on travel, immigration restrictions, trade disputes and the impact of climate change on travel, including fires, floods, severe weather and other natural disasters and the impact of climate change. 13 Table of Contents In addition, if our platform is not easy to navigate; member s have unsatisfactory sign-up, search, booking or payment experiences on our platform; the content on our platform is not displayed engagingly to member s; we are not effective in engaging member s across our various offerings and tiers; or we fail to provide an experience in a manner that meets rapidly changing demand, we could fail to acquire first-time member s and fail to retain our existing member s.
Our storage, use, disclosure and other processing of personal data exposes us to risks of internal or external security breaches and incidents and could give rise to liabilities and/or damage to reputation. The security of data when engaging in electronic commerce is essential to maintaining consumer confidence.
Our storage, use, disclosure and other processing of personal data 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 when engaging in electronic commerce is essential to maintaining consumer confidence.
Additionally, we make use of third-party service providers to store and otherwise process data on our behalf, and they face similar risks of security breaches and incidents and may suffer from security vulnerabilities or malicious code and may introduce them to our systems.
Additionally, we make use of third-party service providers to store and otherwise process data on our behalf, and they face similar risks of security incidents and breaches and may suffer from security vulnerabilities or malicious code and may introduce them to our systems.
Any security breach, cyberattack or other security incident, whether instigated internally or externally on our systems or third-party systems, or the perception that any such breach or incident has occurred, could significantly harm our reputation and therefore our business, brand, market share and results of operations.
Any security incident, breach or other cyberattack, whether instigated internally or externally on our systems or third-party systems, or the perception that any such breach or incident has occurred, could significantly harm our reputation and therefore our business, brand, market share and results of operations.
A security breach or incident impacting any such third party could be perceived by consumers as a security breach or incident impacting our systems and in any event 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.
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.
Security breaches or incidents, including ransomware attacks and other cyberattacks and attacks introducing other types of malicious code, could result in severe disruptions 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 subscriber, financial or other data that could materially and adversely affect our ability to conduct our business or satisfy our commercial obligations.
Security incidents or breaches, including ransomware attacks and other cyberattacks and attacks introducing other types of malicious code, could result in severe disruptions 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.
When the Company acquires New Common Units from Members of Inspirato LLC prior to the Closing other than blocker corporations affiliated with certain institutional investors (the “Blockers” and the other Members of Inspirato LLC, the “Continuing Inspirato Members”) through these exchanges or redemptions, anticipated tax basis adjustments are likely to increase (for tax purposes) our depreciation and amortization deductions and therefore reduce the amount of income tax we would be required to pay in the future in the absence of this increased basis.
When the Company acquires New Common Units from Members of Inspirato LLC other than blocker corporations affiliated with certain institutional investors (the “Blockers”, and the other Members of Inspirato LLC, the “Continuing Inspirato Members”) through these exchanges or redemptions, anticipated tax basis adjustments are likely to increase (for tax purposes) our depreciation and amortization deductions and therefore reduce the amount of income tax we would be required to pay in the future in the absence of this increased basis.
Any default, claim or dispute regarding our leases or our other occupancy arrangements could result in litigation, damage to our reputation, disruption of operations and our subscribers’ experiences at the affected property, a requirement that we exit the property earlier than planned and damages or other legal remedies against us, any of which could have a material and adverse effect on our business, results of operations and financial condition.
Any default, claim or dispute regarding our leases or our other occupancy arrangements could result in litigation, damage to our reputation, disruption of operations and our members’ experiences at the affected property, a requirement that we exit the property earlier than planned and damages or other legal remedies against us, any of which could have a material and adverse effect on our business, results of operations and financial condition.
Although we monitor our use of open-source software to avoid subjecting our technology to conditions we does 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.
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.
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, ● 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.
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; 19 Table of Contents ● 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.
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 and are constantly evolving. Because our subscribers are generally high-income or high net-worth individuals, we may be particularly attractive as a target for cyberattacks and other attacks.
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 and are constantly evolving. 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.
Newly leased properties could be more difficult or expensive to onboard, have undisclosed conditions that result in unanticipated expenses or claims against us for which we may have little or no effective recourse against the landlord or otherwise may not provide their anticipated benefits. 19 Table of Contents 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.
Newly leased properties could be difficult or expensive to onboard, have undisclosed conditions that result in unanticipated expenses or claims against us for which we may have little or no effective recourse against the landlord or otherwise may not provide their anticipated benefits. 14 Table of Contents 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.
Nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore may accelerate payments due under the Tax Receivable Agreement.
Nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore may accelerate additional payments due under the Tax Receivable Agreement.
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 subscribers could be affected by security breaches and incidents at third parties such as travel service providers.
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.
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 would allow our competitors to create similar offerings with lower development effort and time and ultimately could result in a loss of our competitive advantages.
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.
As a result of the foregoing and other climate-related issues, we may be unable to provide properties in certain areas due to climate change, and we may lose both landlords and guests, which could have a material adverse effect on our business, results of operations and financial condition.
As a result of the foregoing and other climate-related issues, we may be unable to provide properties in certain areas due to climate change, and we may lose both landlords and members, which could have a material adverse effect on our business, results of operations and financial condition.
Nearly all payments made by our subscribers 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 subscribers that may be subject to additional regulations and risks.
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.
If such costs are passed on to our subscribers, 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.
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.
A party (whether internal, external, an affiliate or unrelated third party) that is able to circumvent our security systems could gain unauthorized access to our systems and steal, modify, encrypt or otherwise render unavailable, destroy, disclose or otherwise without authorization process subscriber information, transaction data or other information.
A party (whether internal, external, an affiliate or unrelated third party) that is able to circumvent our security systems could gain unauthorized 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.
Risk Related to the Restatement of our Financial Statements Due to errors in our 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.
Due to errors in our 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 certain international markets, we have less experience and fewer 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 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.
As a result of these factors, we cannot be sure that our subscriber levels will be adequate to maintain or permit the expansion of our operations. A decline in subscriber levels could have an adverse effect on our business, financial condition and operating results.
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.
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 subscribers.
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.
As such, we have no independent means of generating revenue or cash flow, and our ability to pay taxes and operating expenses, including payments under a tax receivable agreement (the “Tax Receivable Agreement”), or declare and pay dividends in the future, if any, are dependent upon the results of operations and cash flows of Inspirato LLC and its consolidated subsidiaries and distributions we receive from Inspirato LLC.
As such, we have no independent means of generating revenue or cash flow, and our ability to pay taxes and operating expenses, including payments under the tax receivable agreement discussed below (the “Tax Receivable Agreement”), or declare and pay dividends in the future, if any, are dependent upon the results of operations and cash flows of Inspirato LLC and its consolidated subsidiaries and distributions we receive from Inspirato LLC.
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.
Any of these events could have a material adverse effect on our business, results of operations and financial condition. 23 Table of Contents 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.
Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to subscribers or other third parties, applicable laws or regulations or any of our other legal obligations could materially adversely affect our business.
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.
Meeting the support expectations of our subscribers 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 subscribers during their travel.
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.
Our insurance policies have coverage limits and deductibles and may not be adequate to reimburse us for all losses caused by security breaches and incidents. We also face risks associated with security breaches and incidents affecting third parties conducting business over the Internet.
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.
Additionally, if third parties we work with, such as sub-processors, 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.
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.
As a result, payments could be made under the Tax Receivable Agreement in excess of the tax savings that the Company realizes in respect of the attributes to which the Tax Receivable Agreement relate.
As a result, payments could be required under the Tax Receivable Agreement in excess of the tax savings that the Company realizes in respect of the attributes to which the Tax Receivable Agreement relate.
Accordingly, we may amend the terms of the Warrants in a manner adverse to a holder if holders of at least a majority of the then outstanding Warrants approve of such amendment.
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 of such amendment.
To the extent that subscribers are not satisfied with the timeliness, responsiveness or quality of our support, we may not be able to retain subscribers, and our reputation and brand, as well as our business, results of operations and financial condition, could be materially adversely affected.
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.
Even where 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.
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 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.
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.
In addition, the public availability of such software may make it easier for others to compromise or copy our technology. 37 Table of Contents Some open-source licenses contain requirements that could obligate us to make available source code for modifications or derivative works we creates based upon the type of open-source software we use or grant other licenses to our intellectual property.
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.
We are a holding company and have no material assets other than our ownership of limited liability company interests of Inspirato LLC following the Business Combination (“New Common Units”).
We are a holding company and have no material assets other than our ownership of limited liability company interests of Inspirato LLC (the “New Common Units”).
Many factors can affect our reputation and the value of our brand, including our level of service, safety of our subscribers, our approach to health and cleanliness, publicized incidents in or around our properties, ability to protect and use our brand and trademarks, levels of marketing, and the prevalence of other luxury accommodations and experiences in the destinations we serve.
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 incidents 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.
Our ability to provide high-quality support to our subscribers is important for the growth of our business and any failure to maintain such standards of subscriber support, or any perception that we do not provide high-quality service, could affect our ability to retain and attract subscribers.
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 support, or any perception that we do not provide high-quality service, could affect our ability to attract and retain members.
Even where we succeed in signing a lease for a new property, the landlord or developer may be unable or unwilling to deliver the property at the time provided for, or we may encounter other unforeseen delays, such as constructions delays in the case of new developments or in preparing the property for initial subscriber stays.
Where we succeed in signing a lease for a new property, the landlord or developer may be unable or unwilling to deliver the property at the time provided for, or we may encounter other unforeseen delays, such as construction delays in the case of new developments or in preparing the property for initial member stays.
If adequate funds are not available on acceptable terms, we may be unable to invest in our future growth opportunities, which could harm our business, operating results and financial condition. If we incur debt, the debt holders could have rights senior to holders of our Class A Common Stock to make claims on our assets.
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.
Redemption of the outstanding Warrants could force you (i) to exercise your Public Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your Public Warrants at the then-current market price when you might otherwise wish to hold your 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 your Public Warrants.
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.
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, in particular trademark claims, against us, particularly as we expand the complexity and scope of our business.
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, in particular trademark claims, against us.
Third parties may also attempt to take over subscribers’ accounts by using passwords, usernames and other personal information obtained elsewhere. We have experienced targeted and organized phishing and account takeover attacks and may experience more in the future. These risks are likely to increase as we expand our business and store and process more data, including personal information.
Third parties may also attempt to take over members’ accounts by using passwords, usernames and other personal information obtained elsewhere (“social engineering”). We have experienced targeted and organized phishing and social engineering attacks and may experience more in the future. These risks are likely to increase as we expand our business and store and process more data, including personal information.
It is possible that computer circumvention capabilities, new discoveries or advances or other developments, including our own acts or omissions, could result in a compromise or systems used in our business or a security breach or incident impacting breach of subscriber data or other data stored or processed by us or on our behalf.
It is possible that computer circumvention capabilities, new discoveries or advances (e.g., Artificial Intelligence (“AI”)) or other developments, including our own acts or omissions, could result in a compromise of systems used in our business or a security incident or breach impacting member data or other data stored or processed by us or on our behalf.
We rely on information provided by subscribers and are at times limited in our ability to provide adequate support or help subscribers resolve issues due to our lack of information or control of local third-party staff.
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.
In particular, the international nature 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 U.S.
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.
Providing support that is timely, responsive and high-quality is costly, and we expect such cost to continue to rise in the future as we grow our business. 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.
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.
Security breaches and cyberattacks or other security incidents, 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 choose to stay with our competitors, any of which would have a negative effect on our brand, market share, results of operations and financial condition.
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.
Among other things, we may collect subscribers’ credit card data, proof of identity and other personal information as part of the booking process. Additionally, we collect and process other personal information, such as personal information of our employees and contractors, and we process and maintain other confidential and proprietary information, such as our confidential and proprietary business information.
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.
Under the Tax Receivable Agreement, we generally will be required to pay to the shareholders of the Blockers (the “Blocker Shareholders”) or Continuing Inspirato Members, as applicable, 85% of the tax savings that we realized as a result of increases in tax basis in Inspirato LLC’s assets resulting from the sale of New Common Units for the consideration paid pursuant to the Business Combination Agreement and the exchange of New Common Units for shares of our Class A Common Stock (or cash) pursuant to the A&R Inspirato LLCA, and certain pre-existing tax attributes of the Blocker Shareholders, as well as certain other tax benefits related to entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement.
Under the Tax Receivable Agreement, we generally will be required to pay to the stockholders of the Blockers (the “Blocker Stockholders”) or Continuing Inspirato Members, as applicable, 85% of the tax savings that we realized as a result of increases in tax basis in Inspirato LLC’s assets resulting from the sale of New Common Units for the consideration paid pursuant to the Business Combination Agreement (as that term is defined in Note 1 to our Consolidated Financial Statements) and the exchange of New Common Units for shares of our Class A Common Stock (or cash), and certain pre-existing tax attributes of the Blocker Stockholders, as well as certain other tax benefits related to entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement.
A small number of stockholders have substantial control over the Company, and this significant concentration of ownership may have a negative impact on the trading price for our Class A Common Stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders.
A small number of stockholders have substantial control over the Company, and this significant concentration of ownership may have a negative impact on the trading price for our Class A common stock, par value $0.0001 per share (“Class A Common Stock”) because investors often perceive disadvantages in owning stock in companies with controlling stockholders.
Moreover, we cannot assure you that our processes for controlling our use of open-source software in our technology will be effective.
Moreover, we cannot provide assurance that our processes for controlling our use of open-source software in our technology will be effective.
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 and may not achieve our growth and financial forecasts.
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.
As a result, stockholders will bear the risk of future issuances of debt or equity securities reducing the value of their Class A Common Stock and diluting their interest.
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.
In our processing of travel transactions and information about subscribers and their stays, we receive and store a large volume of data, including personal data and other data relating to individuals.
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.
Security breaches and incidents may also occur due to misuse or misappropriation of subscribers’ personal data by employees or third-party contractors.
Security incidents and breaches may also occur due to misuse or misappropriation of members’ PII by employees or third-party contractors.
This CJEU decision or 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.
The Court of Justice of the European Union (“the CJEU”) decision 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.
Our efforts to protect information from unauthorized access may be unsuccessful or may result in the rejection of legitimate attempts to book reservations, each of which could result in lost business and have a material adverse effect on our business, reputation and results of operations. 38 Table of Contents Our existing security measures may not be successful in preventing security breaches and other security incidents.
Our efforts to protect information from unauthorized access may be unsuccessful or may result in the rejection 24 Table of Contents of legitimate attempts to book reservations, each of which could result in lost business and have a material adverse effect on our business, reputation and results of operations.
Risks Related to Our Reliance on Third Parties We rely on partners and third-party service providers and if such third parties do not perform adequately or terminate their relationships, our costs may increase and our business, financial condition and results of operations could be adversely affected.
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.
Additionally, the U.S. federal government is contemplating privacy legislation. 40 Table of Contents 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 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.
As the markets for our offerings mature, as we create new offerings or as new competitors introduce competing offerings, we may be unable to attract new subscribers or retain existing subscribers at the same price or based on the same pricing model as we have used historically.
As the markets for our offerings mature, as we create new offerings or as new competitors introduce competing offerings, we may be unable to attract new member s or retain existing member s at the same price or based on the same pricing model we have used historically. We may not be successful in operating our member loyalty program, Rewards.
There is also a high level of uncertainty in today’s tax environment stemming from both global initiatives put forth by the Organization for Economic Co-operation and Development (“OECD”) and unilateral measures being implemented by various countries due to a lack of consensus on these global initiatives.
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.
As a result, we may have to pay higher taxes in countries where such rules are applicable. 45 Table of Contents 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.
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.
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 subscribers and to compete for attractive new properties.
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 attractive new properties.
In addition, such third parties may not comply with applicable disclosure requirements, which could expose us to liability. 39 Table of Contents 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.
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.
Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes even where we have meritorious claims or defenses. Any of the foregoing could adversely affect our business, financial condition and results of operations. 28 Table of Contents Our properties are relatively concentrated in a limited number of travel destinations.
Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes even where we have meritorious claims or defenses. Any of the foregoing could adversely affect our business, financial condition and results of operations.
Moreover, our leases contain a variety of contractual rights and obligations that may be subject to interpretation. Our interpretations of our leases are sometimes disputed by landlords, which result in expensive and disruptive litigation in some instances.
Moreover, our leases contain a variety of contractual rights and obligations that may be subject to interpretation. Our interpretations of our leases have been, or may be, disputed by landlords, which may result in expensive and disruptive litigation in some instances. Our failure to satisfy our contractual obligations in these leases could result in defaults under the leases.
We have limited experience with our pricing models, particularly for Inspirato Pass, Inspirato for Good, Inspirato for Business and Inspirato Select, and may not accurately predict the long-term rate of subscriber adoption or renewal or the impact these will have on our revenue or results of operations.
We have limited experience with our pricing model for newer products, for example Inspirato Pass , IFG , and IFB , and may not accurately predict the long-term rate of member adoption or renewal or the impact these will have on our revenue or results of operations.
In the last several years, major companies experienced high-profile security breaches that exposed their systems and information and/or their consumers’ or employees’ personal information, and it is expected that these types of events will continue to occur.
In the last several years, major companies experienced high-profile security breaches that exposed their systems and information and/or their consumers’ 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.
This concentration of ownership could limit stockholders’ ability to influence corporate matters and may have the effect of delaying or preventing a change in control, including a merger, consolidation or other business combination or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change in control would benefit the other stockholders. 48 Table of Contents 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.
This concentration of ownership could limit other stockholders’ ability to influence corporate matters and may have the effect of delaying or preventing a change in control, including a merger, consolidation or other business combination or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change in control would benefit the other stockholders.
If any of our third-party payment processors terminates its relationship with us or refuses to renew its agreement with us on commercially reasonable terms, we would need to find an alternate payment processor and may not be able to secure similar terms or replace such payment processor in an acceptable time frame.
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 replacement payment processor and may not be able to secure similar terms or replace such payment processor in an acceptable time frame.
If we or our third-party services 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 would be harmed.
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.
We generate revenue primarily from travel bookings and subscriptions to our Inspirato Club and Inspirato Pass offerings. Our subscriptions provide varying degrees of travel booking rights, and additional bookings and travel-related services are available on an ad-hoc basis.
Our Subscriptions provide varying degrees of travel booking rights, and additional bookings and travel-related services are available on an ad-hoc basis.
Our success depends to a significant degree on the retention of our founders, 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.
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.
If we are unable to effectively manage our hiring needs or successfully integrate new hires, our efficiency, ability to meet forecasts and employee morale, productivity and retention could suffer, which could adversely affect our business, financial condition and results of operations. 20 Table of Contents Our business depends on our reputation and the strength of our brand, and any deterioration could adversely impact our business, financial condition or results of operations.
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 member’s experience within our technology platforms.
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.
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.
We expect to continue making significant 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.
Our accumulated deficit and net losses attributable to Inspirato Incorporated historically resulted in part from the substantial investments required to grow our business. We expect to 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.
If we are not successful in providing high-quality, luxury experiences to our subscribers, the perceived benefits of subscriptions may decrease and our business, financial condition and operating results may be adversely impacted.
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. 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.
The terms of any debt could restrict our operations, including our ability to pay dividends on our Class A Common Stock. If we issue additional equity securities in the future, stockholders will experience dilution, and the new equity securities could have rights senior to those of 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”), stockholders will experience dilution, and the new equity securities could have rights senior to those of our Class A Common Stock.
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 and home-sharing and rental services and short term/vacation rental.
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 rental services and short term/vacation rental services. Our competitors may adopt aspects of our business model, which could reduce our ability to differentiate our offerings.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings . From time to time, we may become involved in litigation or other legal proceedings arising in the ordinary course of our business. We are not currently a party to any material litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business operations.
Biggest changeExcept as described below, we are not currently a party to any material litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business.
Mine Safety Disclosures . Not applicable. ​ 56 Table of Contents PART II
Mine Safety Disclosures Not applicable. ​ 28 Table of Contents PART II
The complaint generally alleges that certain of our prior public statements about our results of operations and financial condition were materially false and misleading because they misrepresented and failed to disclose adverse facts pertaining to the restatement of our unaudited condensed consolidated financial statements as of and for the Non-Reliance Periods. ​ 55 Table of Contents Item 4.
The complaint generally alleges that certain of our prior public statements about our results of operations and financial condition were materially false and misleading because they misrepresented and failed to disclose adverse facts pertaining to the restatement of our unaudited Consolidated Financial Statements as of and for the three months ended March 31, 2022 and June 30, 2022. Item 4.
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Item 3. Legal Proceedings From time to time, we may become involved in litigation or other legal proceedings arising in the ordinary course of our business.
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The complaint seeks certification as a class action and an unspecified amount of damages, attorneys' fees, expenses, and other costs.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Record As of March 1, 2023, there were approximately 32 holders of record of our Class A Common Stock and 39 holders of record of our Class V common stock, par value $0.0001 per share (“Class V Common Stock”) and 1 holder of record of our Public Warrants.
Biggest changeHolders of Record As of March 8, 2024, there were approximately 35 holders of record of our Class A Common Stock, par value $0.0001 per share, 35 holders of record of our Class V common stock, par value $0.0001 per share (“Class V Common Stock”), 1 holder of record of our Warrants and no holders of record of our Class B Non-Voting common stock, par value $0.0001 per share (“Class B Non-Voting Common Stock”).
Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act. 57 Table of Contents The graph below compares the cumulative total stockholder return on our Class A Common Stock with the cumulative total return on the S&P 500 Index (S&P 500) and the S&P 500 Information Technology Index (S&P 500 IT).
Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act. 29 Table of Contents The graph below compares the cumulative total stockholder return on our Class A Common Stock with the cumulative total return on the S&P 500 Index (S&P 500) and the S&P 500 Information Technology Index (S&P 500 IT).
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock has been listed on the NASDAQ Global Select Market under the symbol “ISPO”. There is no public market for our Class V Common Stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock has been listed on the NASDAQ Global Select Market under the symbol “ISPO”. There is no public market for our Class B or Class V Common Stock.
The graph assumes $100 was invested at the market close on February 10, 2021, which was the first day our Class A Common Stock began trading (which, prior to the Closing were shares of Class A common stock of Thayer). Data for the S&P 500 Index and S&P 500 Information Technology Index assume reinvestment of dividends.
The graph assumes $100 was invested at the market close on February 11, 2022, which was the first day our Class A Common Stock began trading (which, prior to the Closing were shares of Class A common stock of Thayer). Data for the S&P 500 Index and S&P 500 Information Technology Index assume reinvestment of dividends.
The graph uses the closing market price on February 10, 2021 of $10.34 per share as the initial value of our Class A Common Stock. The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our Class A Common Stock. ​ Item 6. [Reserved] ​
The graph uses the closing market price on February 11, 2022 of $191.00 per share as the initial value of our Class A Common Stock. The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our Class A Common Stock. ​ Item 6. [Reserved]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] ​ 58 ​ ​ ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 58 ​ ​ ​ Item 7A. Quantitative and Qualitative Disclosures About Market Risk ​ 73 ​ ​ ​ Item 8. Financial Statements and Supplementary Data ​ 73 ​ ​ ​
Biggest changeItem 6. [Reserved] ​ 30 ​ ​ ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 30 ​ ​ ​ Item 7A. Quantitative and Qualitative Disclosures About Market Risk ​ 43 ​ ​ ​ Item 8. Financial Statements and Supplementary Data ​ 44 ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of operations The following table sets forth our consolidated results of operations for the years ended December 31, 2020, 2021, and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of ​ Percent change ​ ​ ​ Amount of ​ Percent change ​ ​ ​ ​ ​ ​ ​ ​ increase ​ favorable ​ ​ ​ increase ​ favorable ​ ​ ​ For the year ended December 31, ​ ​ (decrease) ​ (unfavorable) ​ ​ ​ (decrease) ​ (unfavorable) ​ ​ 2020 2021 2022 ​ 2020 to 2021 ​ ​ 2021 to 2022 ​ ​ ​ (in thousands, except percentages) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ $ 165,590 ​ $ 234,747 ​ $ 345,530 ​ $ 69,157 ​ 42 % ​ $ 110,783 ​ 47 % Cost of revenue ​ ​ 100,599 ​ ​ 152,747 ​ ​ 229,287 ​ ​ 52,148 ​ (52) % ​ ​ 76,540 ​ (50) % Gross margin ​ ​ 64,991 ​ ​ 82,000 ​ ​ 116,243 ​ ​ 17,009 ​ 26 % ​ ​ 34,243 ​ 42 % Gross margin percent ​ ​ 39 % ​ 35 % ​ 34 % ​ (4) pp (11) % ​ ​ (1) pp (4) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ General and administrative (including equity-based compensation of $2,790, $3,258 and $8,802 in 2020, 2021 and 2022, respectively) ​ ​ 25,940 ​ ​ 50,477 ​ ​ 68,383 ​ ​ 24,537 ​ (95) % ​ ​ 17,906 ​ (35) % Sales and marketing ​ ​ 14,764 ​ ​ 27,821 ​ ​ 38,540 ​ ​ 13,057 ​ (88) % ​ ​ 10,719 ​ (39) % Operations ​ ​ 18,814 ​ ​ 26,814 ​ ​ 41,267 ​ ​ 8,000 ​ (43) % ​ ​ 14,453 ​ (54) % Technology and development ​ ​ 2,787 ​ ​ 4,914 ​ ​ 13,615 ​ ​ 2,127 ​ (76) % ​ ​ 8,701 ​ (177) % Depreciation and amortization ​ ​ 2,898 ​ ​ 2,619 ​ ​ 3,191 ​ ​ (279) ​ 10 % ​ ​ 572 ​ (22) % Interest, net ​ ​ 542 ​ ​ 635 ​ ​ 188 ​ ​ 93 ​ (17) % ​ ​ (447) ​ 70 % Warrant fair value (gains) losses ​ ​ (214) ​ ​ 456 ​ ​ 1,696 ​ ​ 670 ​ (313) % ​ ​ 1,240 ​ (272) % Gain on forgiveness of debt ​ ​ — ​ ​ (9,518) ​ ​ — ​ ​ (9,518) ​ n/m ​ ​ ​ 9,518 ​ (100) % Other income, net ​ ​ — ​ ​ — ​ ​ (355) ​ ​ — ​ n/m ​ ​ ​ (355) ​ n/m ​ Loss and comprehensive loss before income taxes ​ ​ (540) ​ ​ (22,218) ​ ​ (50,282) ​ ​ (21,678) ​ n/m % ​ ​ (28,064) ​ (126) % Income tax expense ​ ​ — ​ ​ — ​ ​ 799 ​ ​ — ​ n/m ​ ​ ​ 799 ​ n/m ​ Net loss and comprehensive loss ​ $ (540) ​ $ (22,218) ​ $ (51,081) ​ $ (21,678) ​ n/m % ​ ​ (28,863) ​ (130) % ​ n/m - non-meaningful pp – percentage point 64 Table of Contents Comparison of the years ended December 31, 2021 and 2022: Revenue.
Biggest changeThe majority of our costs are relatively fixed across quarters. ​ 34 Table of Contents Results of operations The following table sets forth our Consolidated Statements of Operations for the years ended December 31, 2022 and 2023 (in thousands, other than percentages): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of ​ change ​ ​ ​ Year ended December 31, ​ increase ​ favorable ​ ​ ​ 2022 2023 (decrease) (unfavorable) ​ Revenue ​ $ 345,530 ​ $ 329,100 ​ $ (16,430) ​ (5) % Cost of revenue ​ ​ 228,401 ​ ​ 233,942 ​ ​ 5,541 ​ (2) % Asset impairments ​ ​ 925 ​ ​ 40,844 ​ ​ 39,919 ​ n/m ​ Gross margin ​ $ 116,204 ​ $ 54,314 ​ $ (61,890) ​ (53) % Gross margin percent ​ ​ 34% ​ ​ 17% ​ ​ (17) pp (51) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ General and administrative (1) ​ $ 65,807 ​ $ 72,117 ​ $ 6,310 ​ (10) % Sales and marketing (1) ​ ​ 39,368 ​ ​ 32,884 ​ ​ (6,484) ​ 16 % Operations (1) ​ ​ 42,372 ​ ​ 28,125 ​ ​ (14,247) ​ 34 % Technology and development (1) ​ ​ 14,219 ​ ​ 11,330 ​ ​ (2,889) ​ 20 % Depreciation and amortization ​ ​ 3,191 ​ ​ 3,773 ​ ​ 582 ​ (18) % Interest, net ​ ​ 188 ​ ​ 1,133 ​ ​ 945 ​ (503) % (Gain) loss on fair value instruments ​ ​ 1,696 ​ ​ (2,368) ​ ​ (4,064) ​ 240 % Other (income) expense, net ​ ​ (355) ​ ​ 457 ​ ​ 812 ​ (229) % Loss and comprehensive loss before income taxes ​ ​ (50,282) ​ ​ (93,138) ​ ​ (42,856) ​ (85) % Income tax expense ​ ​ 799 ​ ​ 721 ​ ​ (78) ​ 10 % Net loss and comprehensive loss ​ $ (51,081) ​ $ (93,859) ​ $ (42,778) ​ (84) % ​ n/m - non-meaningful pp – percentage point (1) Note the balances presented for cost of revenue, general and administrative, sales and marketing, operations and technology and development for the year ended December 31, 2022 have been adjusted to reflect the current year’s presentation of the allocation of stock-based compensation.
Non-GAAP Financial Metrics In addition to our results determined in accordance with GAAP, we use Adjusted Net Loss, 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 of directors concerning our business and financial performance.
Non-GAAP Financial Metrics In addition to our results determined in accordance with GAAP, we use Adjusted Net Loss, 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 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.
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.
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.
Under the quantitative impairment test, we would compare the estimated fair value of each reporting unit to its carrying value.
Cost of revenue Cost of revenue includes costs directly related to delivering travel to our subscribers and guests as well as depreciation and amortization related to leasehold improvements and equipment at residences.
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.
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. Revenue Recognition The Company recognizes revenue from monthly or annual subscription fees over time.
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.
Recently Adopted Accounting Pronouncements For further information on recently adopted accounting pronouncements, see Note 2(h) - Leases to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 72 Table of Contents
Recently Adopted Accounting Pronouncements For further information on recently adopted accounting pronouncements, see Note 2 within our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Cost of revenue may 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 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 near-term as we reduce our portfolio of properties.
Free Cash Flow We define Free Cash Flow as net cash provided by operating activities less purchases of property and equipment and additions to capitalized software.
Free Cash Flow We define Free Cash Flow as net cash provided by (used in) operating activities less purchases of property and equipment and development of internal-use software.
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.
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.
These costs include payments for properties we lease, operating and maintenance costs of those properties, including on-site service personnel costs as well as costs paid to our hotel partners for subscriber stays.
These direct costs include payments for properties we lease, operating and maintenance costs of those properties, including on-site service personnel costs, costs paid to our hotel partners for member stays, and booking costs from Inspirato Only experiences and Bespoke trips.
Active Subscriptions and Active Subscribers 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.
Active Subscriptions We define Active Subscriptions as Subscriptions that are paid in full, as well as 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.
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.
All historical share and per share amounts have been adjusted to reflect the Reverse Stock Split for all periods presented. 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.
The above items are excluded from our Adjusted EBITDA measure because management believes that these costs and expenses are not indicative of our core operating performance and do not reflect the underlying economics of our business.
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.
Thus, these non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP and should not be considered as an alternative to any measures derived in accordance with GAAP.
Thus, these non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP and should not be considered as an alternative to any measures derived in accordance with GAAP. 39 Table of Contents We provide a reconciliation of Adjusted Net Loss, Adjusted EBITDA, Adjusted EBTIDA Margin and Free Cash Flow to their respective related GAAP financial measures.
Revenue from travel is recognized when performance obligations are met, generally over the period of the stay. 71 Table of Contents Goodwill 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.
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 above items are excluded from our Adjusted Net Loss measure because management believes that these costs and expenses are not indicative of our core operating performance and do not reflect the underlying economics of our business.
Adjusted Net Loss We define Adjusted Net Loss as net loss and comprehensive loss less fair value gains and losses on financial instruments and asset impairments. The above items are excluded from Adjusted Net Loss because our management believes that they are not indicative of our core operating performance and do not reflect the underlying economics of our business.
Revenue is recognized ratably over the related contractual term generally beginning on the date that our platform is made available to a subscriber. We typically bill in advance for monthly and annual contracts. Amounts that have been billed are initially recorded as deferred revenue until the revenue is recognized.
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 portfolio also includes Inspirato Only, featuring one-of-a-kind luxury safaris, cruises and other experiences and Bespoke, which offers custom-designed “bucket list” itineraries. 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 affluent travelers and drive exceptional customer satisfaction.
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.
These conditions include but are not limited to the Russian invasion of Ukraine, inflation, labor shortages, fluctuations in fuel prices, changes in governmental regulations, safety concerns, foreign currency fluctuations, and rising interest rates and reduced consumer confidence resulting in lower consumer spending.
In recent periods, we have been affected by, among other things, the Russian invasion of Ukraine, the war between Israel and Hamas, inflation, labor shortages, fluctuations in fuel prices, changes in governmental regulations, safety concerns, foreign currency fluctuations, rising interest rates and reduced consumer confidence resulting in lower consumer spending.
We maintain a valuation allowance against the full value of our net deferred tax assets because we believe it is more likely than not that the recoverability of these deferred tax assets will not be realized.
We continue to maintain a valuation allowance against the full value of our net deferred tax assets because we believe it is more likely than not that the recoverability of these deferred tax assets will not be realized. 37 Table of Contents Liquidity and Capital Resources Overview As of December 31, 2023, we had $36.6 million of cash and cash equivalents and $5.7 million of restricted cash.
Providing incentives or promotions for booking travel can and has historically increased our liquidity. We believe 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 12 months.
We believe 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. Our principal sources of liquidity have historically consisted of cash flow from financing activities as well as operating activities, primarily from Subscription and travel revenue.
The following table represents a reconciliation of our net loss to Adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2020 2021 2022 ​ ​ (in thousands) ​ Net loss and comprehensive loss ​ $ (540) ​ $ (22,218) ​ $ (51,081) ​ Public company readiness costs ​ ​ — ​ ​ 7,511 ​ ​ 1,092 ​ Equity-based compensation ​ ​ 2,790 ​ ​ 3,258 ​ ​ 8,802 ​ Depreciation and amortization ​ ​ 4,632 ​ ​ 4,275 ​ ​ 5,436 ​ Interest, net ​ ​ 542 ​ ​ 635 ​ ​ 188 ​ Warrant fair value (gains) losses ​ ​ (214) ​ ​ 456 ​ ​ 1,696 ​ Asset impairment ​ ​ — ​ ​ — ​ ​ 925 ​ Gain on forgiveness of debt ​ ​ — ​ ​ (9,518) ​ ​ — ​ Income taxes ​ ​ — ​ ​ — ​ ​ 799 ​ Adjusted EBITDA ​ $ 7,210 ​ $ (15,601) ​ $ (32,143) ​ Adjusted EBITDA Margin (1) ​ ​ 4.4 % ​ (6.6) % ​ (9.3) % (1) We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenue for the same period.
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, ​ ​ ​ ​ ​ ​ 2022 ​ 2023 ​ Net loss and comprehensive loss ​ ​ ​ ​ $ (51,081) ​ $ (93,859) ​ Interest, net ​ ​ ​ ​ ​ 188 ​ ​ 1,133 ​ Income tax expense ​ ​ ​ ​ ​ 799 ​ ​ 721 ​ Depreciation and amortization ​ ​ ​ ​ ​ 5,436 ​ ​ 10,553 ​ Equity-based compensation ​ ​ ​ ​ ​ 8,802 ​ ​ 13,652 ​ (Gain) loss on fair value instruments ​ ​ ​ ​ ​ 1,696 ​ ​ (2,368) ​ Asset impairments ​ ​ ​ ​ ​ 925 ​ ​ 40,844 ​ Public company readiness costs ​ ​ ​ ​ ​ 1,092 ​ ​ — ​ Adjusted EBITDA ​ ​ ​ ​ $ (32,143) ​ $ (29,324) ​ Adjusted EBITDA Margin (1) ​ ​ ​ ​ ​ (9.3) % ​ (8.9) % (1) We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenue for the same period.
The following table represents a reconciliation of our net loss and comprehensive loss to Adjusted Net Loss: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2020 ​ 2021 2022 ​ ​ ​ ​ ​ (in thousands) Net loss and comprehensive loss ​ $ (540) ​ $ (22,218) ​ $ (51,081) Warrant fair value (gains) losses ​ ​ (214) ​ 456 ​ 1,696 Gain on forgiveness of debt ​ ​ — ​ (9,518) ​ — Adjusted Net Loss ​ $ (754) ​ $ (31,280) ​ $ (49,385) ​ 69 Table of Contents Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) before interest expense, interest income, taxes, depreciation and amortization, equity-based compensation expense, warrant fair value gains and losses, asset impairment, public company readiness expenses and gain on forgiveness of debt.
The following table presents a reconciliation of our net loss and comprehensive loss, the closest GAAP measure, to Adjusted Net Loss (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ ​ ​ ​ 2022 2023 Net loss and comprehensive loss ​ ​ ​ ​ $ (51,081) ​ $ (93,859) Asset impairments ​ ​ ​ ​ ​ 925 ​ ​ 40,844 (Gain) loss on fair value instruments ​ ​ ​ ​ ​ 1,696 ​ ​ (2,368) Adjusted Net Loss ​ ​ ​ ​ $ (48,460) ​ $ (55,383) ​ Adjusted EBITDA and Adjusted EBITDA Margin We define Adjusted EBITDA as net loss and comprehensive loss less interest, income taxes, depreciation and amortization, equity-based compensation expense, fair value gains and losses on financial instruments, asset impairments and public company readiness expenses.
Depreciation and amortization expenses increased $0.6 million from $2.6 million for the year ended December 31, 2021 to $3.2 million for the year ended December 31, 2022, an increase of 22%, primarily due to recent property and equipment purchases in conjunction with furnishing a growing leased property portfolio over the year ended December 31, 2022. Interest expense, net.
Depreciation and amortization expenses increased $0.6 million from $3.2 million for the year ended December 31, 2022 to $3.8 million for the year ended December 31, 2023, an increase of 18%, due to continued investment in the upkeep of our lease portfolio. Interest, net.
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.
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. ​ ​ 30 Table of Contents OVERVIEW Inspirato Incorporated and its subsidiaries (collectively the “Company”, “Inspirato”, “we”, or “our”) is a subscription-based luxury travel company that provides exclusive access to a managed and controlled portfolio of curated vacation options, delivered through an innovative model designed to ensure the service, certainty and value that discerning customers demand.
Travel is typically discretionary for subscribers and customers 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.
Adverse macroeconomic and geopolitical conditions have impacted our business and may impact us in future periods.
In March 2023 the Company terminated the Revolver. 67 Table of Contents Since inception, we have consistently maintained a working capital deficit, in which our current liabilities exceed our current assets, primarily due to our significant deferred revenue balance. In addition, we also have significant deferred revenue related to travel that is paid in advance but not yet taken.
We have generally maintained a working capital deficit, in which our current liabilities exceed our current assets, primarily due to our significant deferred revenue related to travel and Subscriptions that are paid in advance but not yet taken or consumed. Our cash needs vary from period to period primarily based on the timing of travel and sales promotions.
Our cash needs vary from period to period primarily based on the timing of travel and sales promotions. Our future capital requirements will depend on many factors including our rate of subscriber and revenue growth, travel bookings, addition of new residences and the timing and extent of spending on residences and other growth initiatives and overall economic conditions.
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, other initiatives including the success of Rewards and overall economic conditions.
We are continually working on improving our subscription offerings and the trips available on our Inspirato Pass list to make our subscription products more appealing to current and potential subscribers. 61 Table of Contents Travel Our travel revenue and operating results are impacted by the number of trips that we are able to deliver to our subscribers and members as well as the rates we charge for stays.
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.
A portion of travel revenue comes from guests who are not Active Subscribers. These guests include individuals who receive trial subscriptions under promotions with partners, including Wheels Up, Exclusive Resorts and others.
A portion of travel revenue comes from customers who do not have Subscriptions; these customers include IFG and IFB customers as well as individuals who receive trial subscriptions under promotions with partners, such as Exclusive Resorts. We also earn revenue from Inspirato Only experiences and Bespoke trips.
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.
However, 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 following table sets forth general information derived from our consolidated statements of cash flows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2020 ​ 2021 2022 ​ ​ ​ (in thousands) ​ Net cash provided by (used in) operating activities ​ $ 11,579 ​ $ 28,755 ​ $ (45,689) ​ Net cash used in investing activities ​ ​ (3,892) ​ ​ (4,016) ​ ​ (14,270) ​ Net cash provided by (used in) financing activities ​ ​ 16,550 ​ ​ (8,787) ​ ​ 58,945 ​ Net increase (decrease) in cash and cash equivalents ​ $ 24,237 ​ $ 15,952 ​ $ (1,014) ​ ​ We may seek additional equity or debt financing in the future.
The following table presents summarized information from our Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ ​ ​ ​ 2022 2023 Net cash used in operating activities ​ ​ ​ ​ $ (45,689) ​ $ (51,393) Net cash used in investing activities ​ ​ ​ ​ ​ (14,270) ​ ​ (12,124) Net cash provided by financing activities ​ ​ ​ ​ ​ 58,945 ​ ​ 23,844 Net decrease in cash and cash equivalents ​ ​ ​ $ (1,014) ​ $ (39,673) ​ Cash Flows Comparison of the years ended December 31, 2022 and 2023 Cash flows used in operating activities.
See Note 11 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 70 Table of Contents Future minimum annual commitments under these operating leases are as follows: ​ ​ ​ ​ Year Ending December 31, Operating Leases ​ ​ (in thousands) 2023 ​ $ 87,822 2024 ​ ​ 62,361 2025 ​ ​ 49,777 2026 ​ ​ 41,455 2027 ​ ​ 27,901 Thereafter ​ ​ 64,274 Total minimum lease payments ​ $ 333,590 ​ As of December 31, 2022, the Company was party to 57 leases that had not yet commenced.
Future minimum annual commitments under these operating leases as of December 31, 2023 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ending ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ ​ ​ ​ ​ ​ $ 79,749 2025 ​ ​ ​ ​ ​ ​ ​ ​ 64,655 2026 ​ ​ ​ ​ ​ ​ ​ ​ 47,853 2027 ​ ​ ​ ​ ​ ​ ​ ​ 35,770 2028 ​ ​ ​ ​ ​ ​ ​ ​ 27,477 2029 and thereafter ​ ​ ​ ​ ​ ​ ​ ​ 70,703 Total minimum lease payments ​ ​ ​ ​ ​ ​ ​ $ 326,207 ​ As of December 31, 2023, the Company was party to 21 leases that had not yet commenced.
General and administrative expenses excluding equity-based compensation increased $12 million from $47 million for the year ended December 31, 2021 to $60 million for the year ended December 31, 2022, an increase of 26%. General and administrative employees were 152 and 147 at December 31, 2021 and 2022, respectively.
General and administrative expenses increased $6.3 million from $65.8 million for the year ended December 31, 2022 to $72.1 million for the year ended December 31, 2023, an increase of 10%.
At December 31, 2022, we had 16,051 Active Subscriptions which consisted of 9,369 legacy Inspirato Club subscriptions, 3,569 Inspirato Pass subscriptions, 45 Inspirato Select subscriptions, and 3,068 new Inspirato Club subscriptions. Legacy Inspirato Club subscriptions had substantial enrollment fees and have annual dues that are lower than annualized dues for new Inspirato Club subscriptions.
The following table shows our approximate total number of Active Subscriptions as of December 31, 2022 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ 2022 2023 Legacy ​ ​ ​ ​ ​ 9,400 ​ ​ 7,900 Pass ​ ​ ​ ​ ​ 3,600 ​ ​ 2,500 Club ​ ​ ​ ​ ​ 3,100 ​ ​ 3,400 Total Active Subscriptions ​ ​ ​ ​ ​ 16,100 ​ ​ 13,800 ​ Legacy Subscriptions, an offering we no longer sell, had substantial enrollment fees and have annual dues that are lower than annualized dues for Club Subscriptions.
Our equity-based compensation increased $0.5 million from $2.8 million for the year ended December 31, 2020 to $3.3 million for the year ended December 31, 2021, an increase of 17%, as a result of new grants made in the 2021 for which expense was recognized during the year ended December 31, 2021. Sales and marketing.
Additionally, equity-based compensation included in sales and marketing increased $0.7 million from $0.8 million for the year ended December 31, 2022 to $1.5 million for the year ended December 31, 2023 as additional awards were issued during the year ended December 31, 2023. Operations.
The Company was not in compliance with the covenants on the Revolver at December 31, 2022 and had not been in compliance since May 2022.
The Note will mature on September 29, 2028, subject to earlier conversion, redemption or repurchase. Our revolving credit facility had no amounts drawn as of December 31, 2022. The Company was not in compliance with the covenants under the facility at December 31, 2022 and had not been in compliance since May of 2022.
Warrant fair value losses increased from $0.5 million for the year ended December 31, 2021 to $1.7 million for the year ended December 31, 2022, an increase of 272%. See Note 13 - Warrants in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information. Gain on forgiveness of debt.
See the reclassification of prior year presentation footnote within Note 2 – Significant Accounting Policies in the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for more information. Comparison of the years ended December 31, 2022 and 2023: Revenue .
The leases may require us to pay taxes, insurance, utilities and maintenance costs.
Our future commitments consist of obligations under the Note (including principal and coupon interest) and operating leases, primarily for vacation properties and our corporate headquarters. The leases may require us to pay taxes, insurance, utilities and maintenance costs.
Depreciation and amortization expenses decreased $0.3 million from $2.9 million for the year ended December 31, 2020 to $2.6 million for the years ended December 31, 2021, a decrease of 10%. The decrease was primarily due to a slowing of furniture purchases during the COVID-19 pandemic and reduction in capitalized costs year over year. Interest expense, net.
Technology and development expenses decreased $2.9 million from $14.2 million for the year ended December 31, 2022 to $11.3 million for the year ended December 31, 2023, a decrease of 20%, primarily due to a decrease for salaries of $1.6 million as a result of the reductions in workforce during 2023.
Interest expense decreased 55% from $0.6 million for the year ended December 31, 2021 to $0.2 million for the year ended December 31, 2022 due to the Company’s pay-off of its Revolver early in the third quarter of 2022.
Interest expense, net increased $0.9 from $0.2 million for the year ended December 31, 2022 to $1.1 million for the year ended December 31, 2023, primarily due to debt issuance costs and interest expense of $2.4 million incurred in relation to the Note.
Travel revenue increased by $60 million from $74 million in the year ended December 31, 2020 to $134 million for the year ended December 31, 2021, an increase of 81%, primarily due to loosening of travel restrictions and increase in travel demand. Cost of revenue.
Cost of revenue increased $5.5 from $228.4 million for the year ended December 31, 2022 to $233.9 million for the year ended December 31, 2023, an increase of 2%.
Subscription revenue is comprised of a one-time enrollment fee paid at the commencement and recurring dues, net of discounts and travel incentives provided to subscribers. Our subscription agreements typically have monthly or annual contractual terms. Our agreements are generally cancellable at the end of the contract term.
Club and Pass Subscriptions are available through monthly, semi-annual, annual, and multi-year contracts. The majority of our Subscriptions are annual or multi-year contracts. Subscription revenue is comprised of enrollment fees and recurring dues, net of discounts and travel incentives provided to members. We typically bill upfront for Club and Pass Subscriptions and subscription payments are non-refundable.
Technology and development expenses increased $8.7 million from $4.9 million for the year ended December 31, 2021 to $14 million for the year ended December 31, 2022, an increase of 177%, primarily due to increased 65 Table of Contents investments in product development and strategic growth initiatives.
Operations expenses decreased $14.2 million from $42.4 million for the year ended December 31, 2022 to $28.1 million for the year ended December 31, 2023, a decrease of 34%, primarily due to a decrease in operations staff as a result of the reductions in workforce during 2023, as well as the transfer of employees from operations to sales in May of 2023. ​ 36 Table of Contents Technology and development.
Our revenue management team establishes nightly rates to achieve desired occupancy and revenue. Cost and Expense Management Our operating results are impacted by our ability to manage costs and expenses and achieving a balance between making appropriate investments to retain and grow subscribers while driving increased profitability.
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 33 Table of Contents actions.
Subscription revenue increased by $8 million from $92 million for the year ended December 31, 2020 to $100 million for the year ended December 31, 2021, an increase of 9%, as a result of launching the Inspirato Pass subscription product in late 2019 and the new Inspirato Club subscription product in 2020.
Subscription revenue decreased by $8.0 million from $145.7 million for the year ended December 31, 2022 to $137.6 million for the year ended December 31, 2023, a decrease of 6%, primarily as a result of decreases in Pass and Legacy Subscription revenue of $10.8 million and $3.6 million, respectively, partially offset by increases in IFG/IFB and Club Subscription revenue of $5.6 million and $1.3 million, respectively.
OVERVIEW Inspirato is a subscription-based luxury travel company that provides unique solutions for (i) affluent travelers seeking superior service and certainty across a wide variety of accommodations and experiences and (ii) hospitality suppliers who want to solve pain points that include monetizing excess inventory and efficiently outsourcing the hassle involved in managing rental properties. 58 Table of Contents For travelers, we offer access to a diverse portfolio of curated luxury vacation options that includes 523 private luxury vacation homes available to our subscribers, and accommodations at 350 luxury hotel and resort partners in more than 225 destinations around the world as of December 31, 2022.
For travelers, we offer access to a diverse portfolio of vacation options that includes approximately 450 private luxury vacation homes available to our customers, and accommodations at over 250 luxury hotel and resort partners in over 180 destinations around the world as of December 31, 2023.
We determined based on the qualitative assessments that it is not more likely than not that the fair value of our reporting unit is less than its carrying value, therefore no quantitative impairment tests were performed at December 31, 2021 or 2022, and no goodwill impairment charges were recognized in the years ended December 31, 2020, 2021 and 2022.
For the year ended December 31, 2023, we 41 Table of Contents 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.
ARR does not have a standardized meaning and therefore may not be comparable to similarly titled measures presented by other companies in the luxury travel industry or that have subscription-based models. Key Factors Affecting Our Performance We believe that the growth and future success of our business depend on many factors.
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 Factors discussed above.
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 purchases of property and equipment and additions to capitalized software, that can be used for strategic initiatives.
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 purchases of property and equipment and development of internal-use software, that can be used for strategic initiatives, if any. 40 Table of Contents 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, ​ ​ ​ ​ ​ 2022 2023 Net cash used in operating activities ​ ​ ​ ​ $ (45,689) ​ $ (51,393) Development of internal-use software ​ ​ ​ ​ ​ (5,420) ​ ​ (5,819) Purchase of property and equipment ​ ​ ​ ​ ​ (8,850) ​ ​ (6,305) Free Cash Flow ​ ​ ​ ​ $ (59,959) ​ $ (63,517) ​ 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.
Additionally, we incurred $0.9 million in asset impairment costs related to our leased portfolio. Our gross margin increased $34 million from $82 million for the year ended December 31, 2021 to $116 million for the year ended December 31, 2022.
Additionally, depreciation expense included in cost of revenue increased $3.9 million from $2.2 million to $6.1 million. Asset impairments. Asset impairments increased $39.9 million from $0.9 million for the year ended December 31, 2022 to $40.8 million for the year ended December 31, 2023.
Sales and marketing expenses increased $11 million from $28 million for the year ended December 31, 2021 to $39 million for the year ended December 31, 2022, an increase of 39%, due to increased spending on television advertising, digital advertising, paid search advertising, and social media advertising as well as the hiring of additional sales and marketing team members.
Sales and marketing expenses decreased $6.5 million from $39.4 million for the year ended December 31, 2022 to $32.9 million for the year ended December 31, 2023, a decrease of 16%, primarily due to reduced spending on marketing of $8.3 million as part of our cost savings initiatives.
Removed
In the third quarter 2022, we developed two new product offerings: Inspirato for Good and Inspirato for Business. Inspirato for Good is our turnkey solution assisting nonprofits in their fundraising.
Added
This section of this Annual Report on Form 10-K generally discusses 2022 and 2023 items and year-to-year comparisons between 2022 and 2023.
Removed
Through this new platform, we partner with nonprofit organizations to sell luxury travel packages (consisting of an Inspirato Club subscription and luxury vacation) at live and silent auctions, paddle raises, and other giving channels.
Added
Discussions of 2021 items and year-to-year comparisons between 2021 and 2022 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, 2022.
Removed
Inspirato for Business represents a new business-to-business channel whereby we sell subscription and travel products directly to businesses seeking to provide luxury accommodations and services to their staff and business partners. We believe both Inspirato for Good and Inspirato for Business will significantly expand our target addressable market and accelerate growth at a lower customer acquisition cost.
Added
The Inspirato portfolio includes branded luxury vacation homes, accommodations at five-star hotel and resort partners and custom travel experiences.
Removed
Business Combination On February 11, 2022, Thayer and Inspirato LLC consummated the transaction contemplated by the Business Combination Agreement whereby, amongst other transaction, a subsidiary of Thayer merged with and into Inspirato LLC with Inspirato LLC as the surviving company, resulting in Inspirato LLC becoming a subsidiary of Thayer. Thayer changed its name to “Inspirato Incorporated” upon the Closing.
Added
Our portfolio also includes Inspirato Only experiences, featuring one-of-a-kind luxury safaris, cruises and other experiences with Inspirato-only member lists along with Bespoke trips, which offer custom-designed “bucket list” itineraries.
Removed
The resulting Company organizational structure is commonly referred to as an UP-C structure (as further described in Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K). This organizational structure allows Continuing Inspirato Members to retain their equity ownership directly in Inspirato LLC.
Added
Our Loyalty Program In August of 2023, we launched Inspirato Rewards (“ Rewards ”), our member loyalty program that supports our diverse portfolio of curated luxury vacation options for members with at least one active paid member subscription (“Subscription”). Rewards is designed to incentivize repeat business by rewarding members with exclusive discounts and benefits based on their activity with us.
Removed
The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP, with Inspirato LLC identified as the accounting acquirer of Thayer. Under this method of accounting, Thayer was treated as the “acquired” company for accounting purposes.
Added
Members who earn one of the three Rewards statuses may earn, depending on their status, extra savings on Club bookings; early access to new property releases, new Experiences and year-end festive dates; and complementary nights, among other benefits.
Removed
This determination is primarily based on the fact that subsequent to the business combination, the unitholders of Inspirato LLC have a majority of the voting power of the combined company, and Inspirato LLC’s operations comprise all of the ongoing operations of the Company.
Added
Capital One Ventures Investment and Strategic Partnership In August of 2023, we entered into the Investment Agreement with an affiliate of Capital One, providing for a $25.0 million strategic investment by Capital One in the Company through the private placement of an 8% Senior Secured Convertible Note due 2028 (the “Note”).
Removed
Following the Business Combination, Inspirato LLC is managed by an eight-person board of managers designated by Inspirato Incorporated and the Continuing Inspirato Members.
Added
On September 29, 2023, we sold and issued the Note. The total net proceeds from this offering were approximately $23.1 million, after deducting $1.9 million of debt issuance costs. The Note is an unsubordinated secured obligation of the Company. The Note is secured by a first priority security interest in substantially all of Inspirato Incorporated’s and its domestic subsidiaries’ assets.
Removed
Upon the Closing, shares of Class A Common Stock were listed on Nasdaq and trade under the ticker symbol “ISPO.” As Inspirato LLC’s management team and business operations comprise Inspirato Incorporated’s management and operations, Inspirato Incorporated has and continues to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices.
Added
The Note is fully and unconditionally guaranteed by certain existing and future domestic subsidiaries of the Company. The Note bears interest at a fixed rate of 8% per annum.
Removed
We have and will continue to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.
Added
Interest on the Note is payable quarterly on the last business day of each calendar quarter and is payable at the election of the Company in cash or in kind by increasing the outstanding principal amount of the Note by the amount of interest payable on such interest payment date.
Removed
Prior to the Closing, the units representing equity interests in Inspirato LLC were held by (i) blockers, which were corporations (or entities treated as corporations for U.S. federal tax purposes) that were affiliated with certain institutional investors, and (ii) Continuing Inspirato Members, which consist of entities and individuals, including members of management and other employees of Inspirato LLC or its subsidiaries.
Added
The Note will mature on September 29, 2028, subject to earlier conversion, redemption or repurchase.
Removed
The UP-C organizational structure allowed Continuing Inspirato Members to retain their equity ownership in Inspirato LLC. Each Continuing Inspirato Member also holds a number of shares of Class V Common Stock equal to the number of New Common Units of Inspirato LLC held by such Continuing Inspirato Member.
Added
The Note is currently convertible at a conversion price of $30 per share, subject to customary anti-dilution adjustments upon certain 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 the Company’s assets.
Removed
Class V Common Stock has no economic value but entitles the holder thereof to one (1) vote per share at any meeting of the shareholders of Inspirato Incorporated. The Blocker Shareholders, by contrast, hold their equity ownership in Inspirato Incorporated in the form of Class A Common Stock.
Added
For risks related to the Note with Capital One see “Risk Factors” in Item 1A. of this report .
Removed
This structure allows the Continuing Inspirato Members to continue to realize the tax benefits associated with their ownership in an entity that is treated as a partnership for U.S. federal income tax purposes, as well as to provide potential future tax benefits to Inspirato Incorporated (85% of which the Continuing Inspirato Member will benefit from pursuant to the Tax Receivable Agreement), which are expected to arise when the Continuing Inspirato Member ultimately exchange their New Common Units and Inspirato Incorporated Class V Common Stock for Class A Common Stock. 59 Table of Contents For accounting purposes, the financial statements of Inspirato Incorporated represent a continuation of the consolidated financial statements of Inspirato LLC with the Business Combination being treated as the equivalent of Inspirato LLC issuing shares for the net assets of Thayer, accompanied by a recapitalization.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk. Our principal market risks are our exposure to interest rates and foreign currency risks. Interest Rate Risk We are exposed to interest rate risk primarily related to our outstanding debt. Changes in interest rates affect the interest earned on its total cash as well as interest paid on its debt.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk Our principal market risks are our exposure to interest rates and foreign currency risks. Interest Rate Risk Changes in interest rates affect the interest earned on total cash and cash equivalents as well as interest paid on debt.
Foreign Currency Risk We are exposed to foreign currency risk related expenditures that we incur in foreign countries. Many of our leases, which are the most significant component of operating costs in foreign countries are denominated in U.S. dollars and thus do not result in foreign currency risk.
Foreign Currency Risk We are exposed to foreign currency risk, mainly related to non-lease operating expenditures that we incur in foreign countries. Many of our leases, which are the most significant component of operating costs in foreign countries, are denominated in U.S. dollars and thus do not result in foreign currency risk.
We have not been exposed to, nor anticipate exposure to, material risks due to changes in interest rates. A hypothetical 100 basis points increase or decrease in interest rates would not have had a material impact on our consolidated financial statements as of December 31, 2022. We do not have a balance drawn on the Revolver at December 31, 2022.
We have not been exposed to, nor anticipate exposure to, material risks due to changes in interest rates. A hypothetical 100 basis point increase or decrease in interest rates would not have had a material impact on our Consolidated Financial Statements as of December 31, 2023. Our revolving credit facility was terminated in March of 2023.
In the year ended December 31, 2022, our expenditures included approximately $19 million in foreign currencies, primarily in Mexican Pesos and Euros.
In the year ended December 31, 2023, our operating expenditures denominated in foreign currencies were approximately $27.1 million, primarily in Mexican Pesos and Euros.
A hypothetical 100 basis points increase or decrease in the value of the U.S. dollar relative to the Mexican Peso and Euro would not have had a material impact on our consolidated financial statements for the year ended December 31, 2022. ​
A hypothetical 10% increase or decrease in the value of the U.S. dollar relative to the Mexican Peso and Euro would have a $2.7 million impact to our Consolidated Financial Statements for the year ended December 31, 2023. ​ ​ ​ ​ ​ 43 Table of Contents
Added
As of December 31, 2023, there was $25.0 million aggregate principal amount of the Note outstanding. We have elected to carry the Note at fair value. The fair value of the Note changes when the market price of our stock fluctuates or interest rates change.

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