Q2 2024 Inspirato Inc Earnings Call

August 14, 2024

Edgar Como. Thanks for listening.

Unknown Executive: Good day, and thank you for standing by. Welcome to the Inspirato second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.

Operator: Michael Grondahl, Brett Knoblauch, David Kallery, Inspirato Khajuria, David Kallery Good day and thank you for standing by. Second Quarter 2024 Earnings. At this time, all participants are on a list. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one one on your remote control. You will then hear an automated message advising you that your hand is raised.

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Speaker Change: Good day, and thank you for standing by. Welcome to the Inspirato Second Quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.

Unknown Executive: After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again.

Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised.

Unknown Executive: Please be advised that today's conference is being recorded.

Speaker Change: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kyle Sourk, Investor Relations. Please go ahead.

Kyle Sourk: I would now like to hand the conference over to your speaker today, Kyle Sourk, Investor Relations. Please go ahead. Thank you and good morning.

Operator: To withdraw your question, please press star 11. Please go ahead. Thank you and good morning. On today's call, we have Chairman and CEO, Payam Zomani, and President, Dave Kallery. CFO, Robert Yesterday afternoon, we issued our press release announcing our second quarter 2024 results and the closing of our previously announced share purchase agreement and CDO transition. These statements are based on assumptions and actual results. In addition, during the call, we will discuss non-GAD and evaluate the company's operations, and the measures should not be considered tonight or as a substitute for financial results prepared. Reconciliations, and a directly comparable gap.

Kyle Sourk: On today's call, we have Chairman, CEO, Pyam Zomani, President, State, Calorie, and CFO, Robert Kaiden. Yesterday afternoon, we issued our press release announcing our second quarter 2024 results and the closing of our previously announced share budget agreement and CEO.

Speaker Change: Thank you and good morning. On today's call we have Chairman and CEO Pai Mzumani, President Dave Callery, and CFO Robert Kaiden. Yesterday afternoon we issued our press release announcing our second quarter 2024 results and the closing of our previously announced share purchase agreement.

Kyle Sourk: Before we move to the comments, these statements are based on assumptions, and actual results fit different material. In addition, during the call, we will discuss non-GAAP measures, which are useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Reconciliation of these measures directly comparable gap measures are included in our earnings release.

Speaker Change: and CDO

Speaker Change: Muito obrigado e até mais

Speaker Change: These statements are based on assumptions and actual results fit different materials.

Speaker Change: In addition, during the call we will discuss non-GAAP measures, which are useful in evaluating the company's operating performance.

Speaker Change: These measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Reconciliations of these measures, directly comparable GAAP measures, are included in our earnings release.

Pyam Zomani: With that, I would like to turn the call over to our new Chairman, CEO, Pyam Zomani. Thank you, Kyle, and thank you everyone for joining us this morning. I'm incredibly excited for today's call as you welcome a new era at Inspirado, one field with promising opportunities. Tell us how to accomplish these goals and further solidify our footing. I'm personally injecting $10 million of new capital into the company in Q3. In addition to the investment, I'm also personally guaranteeing an additional $6.6 million as part of a lease termination agreement. Important to note that when I say, personally, it means through my entity one-sided group.

Operator: Part of Pluted Inner, I'd like to turn the call over to our new Chairman and CEO, Pai Amin. Thank you, Kyle. And thank you everyone for joining us this morning. I'm incredibly excited for today's call as we welcome a new era at Inspirato, one filled with promising opportunities. To help us accomplish these goals and further solidify our footing, I'm personally injecting $10 million of new capital into the company in Q3. In addition to the investment, I'm also personally guaranteeing an additional $6.6 million as part of a lease termination agreement. Important to note that when I say personally, it means through my entity, One Planet Group.

Speaker Change: With that, I'd like to turn the call over to our new Chairman and CEO, Payam Samadhi.

Payam Samadhi: Thank you, Kyle, and thank you everyone for joining us this morning. I'm incredibly excited for today's call as we welcome a new era at Inspirato.

Payam Samadhi: One filled with promising opportunities

Payam Samadhi: To help us accomplish these goals and further solidify our footing, I am personally injecting $10 million of new capital into the company in Q3. In addition to the investment, I am also personally guaranteeing an additional $6.6 million as part of a lease termination agreement.

Pyam Zomani: These investments not only strengthen our liquidity position and improve our financial outlook, but also demonstrate to our current and prospective members that our business is in a stronger position than it was just a few days ago. We're now better equipped to achieve profitability while remaining committed to delivering exceptional service and world-class experiences for all of our members and their loved ones.

Payam Zamani: These investments not only strengthen our liquidity position and improve our financial outlook, but also demonstrate to our current and prospective members that our business is in a stronger position than it was just a few days ago. We are now better equipped to achieve profitability while remaining committed to delivering exceptional service and world-class experiences for all of our members and their loved ones. Having said that, this transition has also brought about a number of difficult decisions.

Payam Samadhi: It's important to note that when I say personally, it means through my Entity OnePlanet group.

Payam Samadhi: These investments not only strengthen our liquidity position and improve our financial outlook, but also demonstrate to our current and prospective members that our business is in a stronger position than it was just a few days ago.

Payam Samadhi: We are now better equipped to achieve profitability while remaining committed to delivering exceptional service and world-class experiences for all of our members and their loved ones.

Pyam Zomani: Having said that, this transition has also brought about a number of difficult decisions. Namely, our plan to reduce headcount by 15%. While losing team members is not an action I take lightly, it was a necessary action given the current size of the business. Upon reviewing the cost structure, requires further actions in order to make this business sustainable. To better support these goals and fully demonstrate my alignment with our shareholders, I have elected to a $1 to take a $1 salary in the form of cash at CEO. and Chairman, and no cashfulness for the next year, and will instead perform my duties solely compensated; it shares much of its performance-based.

Payam Samadhi: Having said that, this transition has also brought about a number of difficult decisions.

Payam Zamani: Namely, our plan to reduce headcount by 15%. While losing team members is not an action I take lightly, it was a necessary action given the current size of the business. Upon reviewing Inspirato's business plan and projections, it became clear that our current cost structure required further action, in order to make this business sustainable. To better support these goals and fully demonstrate my alignment with our shareholders, I have elected to a one-dollar.., to take a $1 salary in the form of cash as CEO, and Chairman and no cash bonus for the next year and will instead perform my duty solely compensate that it shares much of its performance.

Payam Samadhi: Namely, our plan to reduce headcount by 15%.

Payam Samadhi: While losing team members is not an action I take lightly, it was a necessary action given the current size of the business.

Speaker Change: Upon reviewing Inspirato's business plan and projections, it became clear that our current cost structure required further actions in order to make this business sustainable.

Speaker Change: To better support these goals and fully demonstrate my alignment with our shareholders, I have elected to take a $1 salary in the form of cash as CEO.

Speaker Change: and Chairman and no cash bonus for the next year and will instead perform my duties solely compensated it shares much of it performance-based.

Pyam Zomani: Finally, in my role at Chairman, I will be naming three new directors to bring valuable experience, a fresh perspective, and diversity of thought to the in-sprout of boardroom as we look to reshape our future.

Payam Zamani: Finally, in my role as chairman, I will be naming three new directors to bring valuable experience, fresh perspective, and diversity of thought to the Inspirato boardroom as we look to reshape our future. With that, I'd like to turn the call over to our president, David Kallery, to review some of the recent initiatives the company has on its hands. Thank you, Paia.

Unknown Executive: Good day and thank you for standing by.

Speaker Change: Finally, in my role as chairman, I will be naming three new directors to bring valuable experience, a fresh perspective, and diversity of thought to the Inspirado boardroom as we look to reshape our future.

Unknown Executive: Welcome to the Inspirato Second Quarter 2024 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need a press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again. Please be advised to today's conference is being recorded.

David Kallery: With that, I like to turn the call over to our president, David Kallery, to review some of the recent initiatives the company has undertaken. Thank you, Piem. Before reviewing the in-sprout of platform and successful repositioning, I've done over the last few year quarters, I want to express how truly excited I am to begin a new chapter at Inspirato.

Speaker Change: With that, I'd like to turn the call over to our President, David Callery, to review some of the recent initiatives the company has undertaken.

David Kallery: Before reviewing the Inspirato platform and the successful repositioning we've done over the last few years quarters, I want to express how truly excited I am to begin a new chapter at Inspirato. Time has an illustrious career and has created tremendous value for investors and shareholders at each stop along the way. Prior to my time at Inspirato, I had the pleasure of working with him in the past and can personally attest to his work ethic, his vision, and his cultural fit for both Inspirato and the members we serve.

David Callery: Thank you, Payam.

David Callery: Before reviewing the Inspirado platform and the successful repositioning we've done over the last few quarters, I want to express how truly excited I am to begin a new chapter at Inspirado.

Kyle Sourk: I would now like to hand the conference over to your speaker today, Kyle Sourk, investor relations. Please go ahead. Thank you and good morning.

David Kallery: Piem has an illustrious career and has created tremendous value for investors and shareholders at each stop along the way. Prior to my time at Inspirato, I had the pleasure of working with him in the past and can personally attest to his work ethic, his vision, and his cultural fit for both Inspirato and the members we serve. Piem is an entrepreneur, an investor, and a founder of One-Planet Group, a firm with a mission to support strong business ideas while building an ethos that helps improve society and give back to communities, which is also very closely aligned with our mission of inspiring lasting memories and relationships by enriching the way our members experience the world.

David Callery: Payam has an illustrious career and has created tremendous value for investors and shareholders at each stop along the way.

Kyle Sourk: On today's call, we have chairman, CEO, Pyam Zomani, president, state, calorie, and CFO, Robert Kaiden. Yesterday afternoon, we issued our press release announcing our second quarter 2024 results and the closing of our previously announced share budget agreement and CEO. Before we move to the comments, these statements are based on assumptions and actual results fit different material. In addition, during the call, we will discuss non-gab measures, which are useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for financial results prepared in accordance with gap. Reconciliation of these measures directly comparable gap measures are included in our earnings release.

Payam Samadhi: Prior to my time at Inspirado, I had the pleasure of working with him in the past, and can personally attest to his work ethic, his vision, and his commitment to the work that he does.

David Kallery: Payam is an entrepreneur, an investor, and the founder of OnePlanet Group, a firm with a mission to support strong business ideas while building an ethos that helps improve society and give back to communities, which is also very closely aligned with our mission of inspiring lasting memories and relationships by enriching the way our members experience the world.

Speaker Change: and his cultural fit for both Inspirato and the members we serve.

Time: Time is an entrepreneur, an investor, and the founder of OnePlanet Group, a firm with a mission to support strong business ideas while building an ethos

Speaker Change: that helps improve society and give back to communities, which is also very closely aligned with our mission of inspiring lasting memories and relationships by enriching the way our members experience the world.

David Kallery: Over the past year, we've made some incredible progress in improving our offerings that have laid the foundation for this transformation.

David Kallery: Over the past year, we've made some incredible progress in improving our offerings that have laid the foundation for this transformation. First, we've returned to our roots as a luxury travel club and moved away from a high-churn, transaction-based subscription model. Since the beginning of 2023, more than 75% of our new sales for Inspirato Club, which is the foundation of the company, have been for two years or more. Second, we re-imagined Inspirato Pass to serve as the perfect complimentary offering to Club and to cater to a frequent and highly flexible traveler. Next in June, just started to introduce Inspirato by Invited. Invited offers 10 years of Inspirato club access combined with a two-year booking window and the ability to prepay fixed nightly rates on an annual basis.

Speaker Change: Over the past year we've made some incredible progress in improving our offerings that have laid the foundation for this transformation.

Payam Zomani: With that, I would like to turn the call over to our new chairman, CEO, Pyam Zomani. Thank you, Kyle, and thank you everyone for joining us this morning. I'm incredibly excited for today's call as you welcome a new era at Inspirado, one field with promising opportunities. Tell us how to accomplish these goals and further solidify our footing. I'm personally injecting $10 million of new capital into the company in Q3. In addition to the investment, I'm also personally guaranteeing an additional $6.6 million as part of a lease termination agreement.

David Kallery: First, we returned to our roots as a luxury travel club and moved away from a high-turn transaction-based subscription model. Since the beginning of 2023, more than 75% of our new sales for Inspirato Club, which is the foundation of the company, have been for two years or more. Second, we re-imagined Inspirato Pass to serve as the perfect complimentary offering to club and a cater to a frequent and highly flexible traveler.

Speaker Change: FIRST!

Speaker Change: We've returned to our roots as a luxury travel club and moved away from a high-churn, transaction-based subscription model. Since the beginning of 2023, more than 75% of our new sales for Inspirado Club, which is the foundation of the company, have been for two years or more.

Speaker Change: Second, we reimagined Inspirato Path to serve as the perfect complementary offering to Club and to cater to a frequent and highly flexible traveler.

Payam Zomani: Important to note that when I say, personally, it means through my entity one-sided group. These investments not only strengthen our liquidity position and improve our financial outlook, but also demonstrate to our current and prospective members that are business in a stronger position than it was just a few days ago. We're now better equipped to achieve profitability while remaining committed to delivering exceptional service and world-class experiences for all of our members and their loved ones.

Speaker Change: Next, in June ...

Speaker Change: We just started to introduce Inspirato by Invited. Invited offers 10 years of Inspirato Club access combined with a two-year booking window and the ability to prepay fixed nightly rates on an annual basis.

David Kallery: While it's still very early, we've seen interest and excitement for this new offering. Since our limited introduction of this product in June, we've already generated over $4 million in new cash flow. And finally, our strategic partner with Capital One, where we're reaching the tail end of the tech and system integration work and plan to be able to take reservations by the fourth quarter. We expect this partnership to increase Inspirato's brand recognition, serve as a demand driver for paid nights, generate new membership sales, and ultimately be a key contributor to Inspirato's future growth.

Speaker Change: While it's still very early, we've seen interest and excitement for this new offering. Since our limited introduction of this product in June, we've already generated over $4 million in new cash flow.

Payam Zomani: Having said that, this transition has also brought about a number of difficult decisions. Namely, our plan to reduce headcount by 15%. While losing team members is not an action I take lightly, it was a necessary action given a current size of the business. Upon reviewing the cost structure requires further actions in order to make this business sustainable.

David Kallery: And finally, our strategic partner with Capital One, where we're reaching the tail end of attack and system integration work and plan to be able to take reservations by the fourth quarter. We expect this partnership to increase Inspirato's brand recognition, serve as a demand driver for paid nights, generate new membership sales, and ultimately be a key contributor to Inspirato's future growth.

Speaker Change: And finally, our strategic partner with Capital One, where we're reaching the tail end of the tech and system integration work and plan to be able to take reservations by the fourth quarter. We expect this partnership to increase Inspirato's brand recognition.

Speaker Change: serve as a demand driver for paid nights, generate new membership sales, and ultimately be a key contributor to Inspirato's future growth. In summary, our team has put in tremendous amount of work.

David Kallery: In summary, our team has put in a tremendous amount of work to set the stage for what we feel will be a true inflection point for the company, and I'm very confident that in the next few years of Inspirato will be our most successful under PIMS' watchful eye in steady leadership.

David Kallery: In summary, our team has put in tremendous amount of work, to set the stage for what we feel will be a true inflection point for the company. And I'm very confident that in the next few years of Inspirato, will be our most successful under Payam's watchful eye and steady leadership. And with that, I'd like to turn the call over to Robert to discuss the financials for the quarter. Robert.

Payam Zomani: To better support these goals and fully demonstrate my alignment with our shareholders, I have elected to a $1 to take a $1 salary in the form of cash at CEO, and Chairman, and no cashfulness for the next year, and will instead perform my duties solely compensated, it shares much of its performance-based.

Speaker Change: to set the stage for what we feel will be a true inflection point for the company. And I'm very confident that in the next few years of Inspirato, we'll be our most successful under Payam's watchful eye and steady leadership.

Robert Kaiden: And with that, I'd like to turn the call over to Robert to discuss the financials for the quarter. Robert? Thanks, David.

Payam Zomani: Finally, in my role at Chairman, I will be naming three new directors to bring valuable experience, a fresh perspective and diversity of thought to the in-sprout of boardroom as we look to reshape our future.

Speaker Change: And with that, I'd like to turn the call over to Robert to discuss the financials for the quarter. Robert? Thanks, David. Before reviewing our second quarter results, I want to highlight what I feel is currently our most important financial metric, liquidity.

Robert: Thanks, David. Before reviewing our second quarter results, I want to highlight what I feel is currently our most important financial metric, liquidity following the 10 million dollar capital infusion. Second quarter performance liquidity, including cash, cash equivalents, and restricted cash, was $30 million compared to $30 million at the end of the first quarter. We've also made significant progress in our cash burn, which has improved by twenty-three million dollars, or 64 percent, in the first half of this year compared to the first half of 2023.

Robert Kaiden: Before reviewing our second quarter results, I want to highlight what I feel is currently our most important financial metric: liquidity. Following the $10 million capital infusion, second quarter performer liquidity, including cash, cash equivalence, and restricted cash, was $39 million compared to $33 million at the end of the first quarter. We've also made significant progress in our cash burn, which has improved by $23 million or 64% in the first half of this year compared to the first half of 2023. In addition to the $10 million capital injection in Q3 to bolster liquidity, we have taken the following actions. First, we implemented additional cost-cutting measures that we expect to result in approximately $25 million of annualized savings. As Paya mentioned, this includes a 15% reduction in force implemented earlier this week. It's important to note these cuts were not made to member-facing roles as we are capturing efficiencies without sacrificing our member experience. Second, we entered into a chart termination agreement of previously impaired under-performing leases. As part of this agreement, we will decrease our total committed future minimum lease payments by $57 million. Total cash savings from the termination of this agreement will be approximately $50 million from 2025 through 2031 after the lease termination payment of $6.6 million from August 2024 through March 2025. In terms of our quarterly results, in the second quarter we generated a total revenue of $67 million, a 20% decrease year over year. Much of the decrease was planned for and can be attributed to lower subscription revenue through a 35% decrease in the number of past members and a 10% decrease in club members. In total, we exited the second quarter with approximately 12,000 members and nearly 12,700 subscriptions, approximately 85% of which were clothed subscriptions. From a travel revenue perspective, there are a number of factors that contributed to the 19% year over year decrease. First, we saw a 12% decrease in our residence revenue primarily due to ADRs of $1,535 coming in below quarters. While lowering our ADRs from previous highs is a part of a strategy to deliver value to members, we did not see an associated uptick in the number of paid nights delivered that we would have hoped for given the reduced rates. Second, hotel revenue decreased primarily from fewer nights delivered, not quite offsetting a modest increase in ADRs. Occupying our lease hotel rooms increased to 79% in the second quarter from 76% last year as we continued to risk adjust our portfolio by removing underperforming lease hotels. Cost of revenue for the quarter was approximately $51 million, a 21% improvement from the prior year. Similar to the first quarter, reduced lease expenses as well as their associated fixed costs were the single biggest driver in the year over year improvement. Given the seasonality of travel revenue, gross margin in the second quarter typically reflects the low water mark for the year. We believe that to be the case in 2024 as well as our 24% growth margin for the quarter to pay a favorably to 2023 but is a bit below our expectations and reflects the impact of a declining subscription revenue base. Our cash operating expenses in Q2 were approximately $27 million compared to approximately $32 million in the second quarter of 2023. As PM and David alluded to, we are planning for a further improvement in future operating expenses as a result of our reduced headcount and other cost reduction activities. We'll see modest cost savings in the third quarter given severance payments and an acceleration in cost savings thereafter. In total, we generated an adjusted EBITDA loss of $9.1 million in the second quarter compared to a loss of $11.7 million in the second quarter of 2023. Year-to-date, our adjusted EBITDA loss of approximately $5 million compares favorably to a loss of approximately $15 million in 2023. In fact, we have been seeing consistent year-over-year improvements in our quarterly EBITDA figures for three-ton-second quarters. This is despite revenue decreasing over the same time span. I called this out to emphasize that improvements we've made from both a product profitability and efficiency standpoint have been paying off. While much of our declines in revenue are planned, driven by a focus on product profitability, revenue trends are not where we want them to be.

David Kallery: With that, I like to turn the call over to our president, David Kallery, to review some of the recent initiatives the company has undertaken. Thank you, Piem. Before reviewing the in-sprout of platform and successful repositioning, we've done over the last few year quarters, I want to express how truly excited I am to begin a new chapter at Inspirato. Piem has an illustrious career and has created tremendous value for investors and shareholders at each stop along the way.

Robert: Following the $10 million dollar capital infusion, second quarter performance liquidity including cash, cash equivalents, and restricted cash.

Robert: with $39 million compared to $33 million at the end of the first quarter. We've also made significant progress in our cash burn, which has improved by $23 million, or 64 percent, in the first half of this year compared to the first half of 2023.

Robert: In addition to the $10 million capital injection in Q3 to bolster our liquidity, we have taken the following actions. First, we implemented additional cost-cutting measures that we expect to result in approximately $25 million of annualized savings. As Payam mentioned, this includes a 15% reduction in force implemented earlier this week. It's important to note these cuts were not made to member-facing roles as we are capturing efficiencies without sacrificing our member experience. Second, we entered into a termination agreement of previously impaired underperforming leases. As part of this agreement, we will decrease our total committed future minimum lease payments by $57 million.

Robert: In addition to the $10 million capital injection in Q3 to Bolsoro Liquidity, we have taken the following actions.

David Kallery: Prior to my time at Inspirato, I had the pleasure of working with him in the past and can personally attest to his work ethic, his vision, and his cultural fit for both Inspirato and the members we serve. Piem is an entrepreneur, an investor, and a founder of one-planet group, a firm with a mission to support a strong business ideas while building an ethos that helps improve society and give back to communities, which is also very closely aligned with our mission of inspiring lasting memories and relationships by enriching the way our members experience the world. Over the past year, we've made some incredible progress in improving our offerings that have laid the foundation for this transformation.

Robert: First, we implemented additional cost-cutting measures that we expect to result in approximately $25 million of annualized savings.

Speaker Change: As Payam mentioned, this includes a 15% reduction in force implemented earlier this week. It's important to note these cuts were not made to member-facing roles as we are capturing efficiencies without sacrificing our member experience.

Robert: Total cash savings from the termination of this agreement will be approximately $50 million from 2025 through 2031 after the lease termination payment of $6.6 million from August 2024 through March 2025. In terms of our quarterly results, in the second quarter, we generated total revenue of $67 million, a 20% decrease year over year. Much of the decrease was planned for and can be attributed to lower subscription revenue due to a 35% decrease in the number of past members and a 10% decrease in club members.

Payam Samadhi: Second, we entered into a termination agreement of previously impaired underperforming leases. As part of this agreement, we will decrease our total committed future minimum lease payments by $57 million.

Payam Samadhi: Total cash savings from the termination of this agreement will be approximately $50 million from 2025 through 2031 after the lease termination payment of $6.6 million from August 2024 through March 2025.

David Kallery: First, we returned to our roots as a luxury travel club and moved away from a high-turn transaction based subscription model. Since the beginning of 2023, more than 75% of our new sales for Inspirato Club, which is the foundation of the company, have been for two years or more. Second, we re-imagined Inspirato Pass to serve as the perfect complimentary offering to club and a cater to a frequent and highly flexible traveler.

Robert: In total, we exited the second quarter with approximately 12,000 members and nearly 12,700 subscriptions, approximately 85% of which were club subscriptions. From a travel revenue perspective, there are a number of factors that contributed to the 19% year-over-year decrease.

Payam Samadhi: In terms of our quarterly results, in the second quarter we generated total revenue of $67 million, a 20% decrease year-over-year. Much of the decrease was planned for and can be attributed to lower subscription revenue due to a 35% decrease in the number of past members and a 10% decrease in club members.

Payam Samadhi: In total, we exited the second quarter with approximately 12,000 members and nearly 12,700 subscriptions, approximately 85% of which were club subscriptions.

Payam Samadhi: From a travel revenue perspective, there are a number of factors that contributed to the 19% year-over-year decrease.

Robert: First, we saw a 12% decrease in our residents' revenue, primarily due to ADRs of $1,535 coming in below quarters. While lowering our ADRs from previous highs is a part of a strategy to deliver value to members, we do not see an associated uptick in the number of paid nights delivered that we would have hoped for given the reduced rate. Second, hotel revenue decreased primarily from fewer nights delivered, not quite offsetting a modest increase in ADRs.

Payam Samadhi: First, we saw a 12% decrease in our residence revenue primarily due to ADRs of $1,535 coming in below quarters.

Payam Samadhi: While lowering our ADRs from previous highs is a part of a strategy to deliver value to members, we do not see an associated uptick in the number of paid nights delivered that we would have hoped for given the reduced rates.

Payam Samadhi: Second, hotel revenue decreased primarily from fewer nights delivered, not quite offsetting a modest increase in ADRs.

Robert: Occupancy in our leased hotel rooms increased to 79% in the second quarter from 76% last year as we continue to risk adjust our portfolio by removing underperforming leased hotels. Cost of revenue for the quarter was approximately $51 million, a 21% improvement from the prior year. Similar to the first quarter, reduced lease expenses as well as their associated fixed costs were the single biggest driver in the year-over-year improvement. Given the seasonality of travel revenue, gross margins in the second quarter typically reflect the low water mark for the year.

Hockenstein: Occupancy in our leased hotel rooms increased to 79% in the second quarter from 76% last year as we continue to risk adjust our portfolio by removing underperforming leased hotels.

Hockenstein: Cost of revenue for the quarter was approximately $51 million, a 21% improvement from the prior year. Similar to the first quarter, reduced lease expenses as well as their associated fixed costs were the single biggest driver in the year-over-year improvement.

David Kallery: In summary, our team has put in tremendous amount of work to set the stage for what we feel will be a true inflection point for the company, and I'm very confident that in the next few years of Inspirato will be our most successful under PIMS watchful eye in steady leadership.

Hockenstein: Given the seasonality of travel revenue, gross margins in the second quarter typically reflect the low water mark for the year.

Robert: We believe that to be the case in 2024 as well, as our 24% gross margin for the quarter compares favorably to 2023, but is a bit below our expectations and reflects the impact of a declining subscription revenue base. Our cash operating expenses in Q2 were approximately $27 million compared to approximately $32 million in the second quarter of 2023.

Hockenstein: We believe that to be the case in 2024 as well, as our 24% gross margin for the quarter compares favorably to 2023, but is a bit below our expectations and reflects the impact of a declining subscription revenue base.

Robert Kaiden: And with that, I'd like to turn the call over to Robert to discuss the financials for the quarter. Robert? Thanks, David.

Robert Kaiden: Before reviewing our second quarter results, I want to highlight what I feel is currently our most important financial metric, liquidity. Following the $10 million capital infusion, second quarter performer liquidity, including cash, cash equivalence, and restricted cash, was $39 million compared to $33 million at the end of the first quarter. We've also made significant progress in our cash burn, which has improved by $23 million or 64% in the first half of this year compared to the first half of 2023.

Hockenstein: Our cash operating expenses in Q2 were approximately $27 million compared to approximately $32 million in the second quarter of 2023.

Robert: As Payam and David alluded to, we are planning for a further improvement in future operating expenses as a result of our reduced headcount and other cost reduction activities. We'll see modest cost savings in the third quarter given severance payments and an acceleration in cost savings thereafter. For more information visit www.fema.gov, In total, we generated an adjusted EBITDA loss of $9.1 million in the second quarter compared to a loss of $11.7 million in the second quarter of 2023.

Speaker Change: As Payam and David alluded to, we are planning for a further improvement in future operating expenses as a result of our reduced headcount and other cost reduction activities. We'll see modest cost savings in the third quarter given severance payments and an acceleration in cost savings thereafter.

Robert Kaiden: In addition to the $10 million capital injection in Q3 to bolsoil liquidity, we have taken the following actions First, we implemented additional cost-cutting measures that we expect to result in approximately $25 million of annualized savings As Paya mentioned, this includes a 15% reduction in force implemented earlier this week It's important to note these cuts were not made to member-facing roles as we are capturing efficiencies without sacrificing our member experience Second, we entered into a chart The termination agreement of previously impaired under-performing leases as part of this agreement will decrease our total committed future minimum lease payments by $57 million Total cast savings from the termination of this agreement will be approximately $50 million from 2025 through 2031 after the lease termination payment of $6.6 million from August 2024 through March 2025 In terms of our quarterly results, in the second quarter we generated a total revenue of $67 million, a 20% decrease year over year Much of the decrease was planned for and can be attributed to lower subscription revenue through a 35% decrease in the number of past members and a 10% decrease in club members In total, we exited the second quarter with approximately 12,000 members and nearly 12,700 subscriptions, approximately 85% of which were clothed subscriptions From a travel revenue perspective, there are a number of factors that contributed to the 19% year over year decrease First, we saw a 12% decrease in our residence revenue primarily due to ADRs of $1,535 coming in below quarters While lowering our ADRs from previous highs is a part of a strategy to deliver value to members, we did not see an associated uptick in the number of paid nights delivered that we would have hoped for given the reduced rates Second, hotel revenue decreased primarily from fewer nights delivered, not quite offsetting a modest increase in ADRs Occupying our lease hotel rooms increased to 79% in the second quarter from 76% last year as we continued to risk adjust our portfolio by removing underperforming lease hotels Cost of revenue for the quarter was approximately 51 million, a 21% improvement from the prior year Similar to the first quarter, reduced lease expenses as well as their associated fixed costs with a single biggest driver in the year over year improvement Given the seasonality of travel revenue, rose margin in the second quarter typically reflects the low water mark for the year We believe that to be the case in 2024 as well as our 24% growth margin for the quarter to pay a favorably to 2023 but is a bit below our expectations and reflects the impact of a declining subscription revenue base Our cash operating expenses in Q2 were approximately $27 million compared to approximately 32 million in the second quarter of 2023 As PM and David alluded to, we are planning for a further improvement in future operating expenses as a result of our reduced headcount and other cost reduction activities We'll see modest cost savings in the third quarter given severance payments and an acceleration in cost savings thereafter In total, we generated an adjusted EBITDA loss of $9.1 million in the second quarter compared to a loss of $11.7 million in the second quarter of 2023 Year-to-date are adjusted EBITDA loss of approximately $5 million compares favorably to a loss of approximately $15 million in 2023 In fact, we have been seeing consistent year-over-year improvements in our quarterly EBITDA figures for three-ton-second quarters This is despite revenue decreasing over the same time span I called this out to emphasize that improvements we've made from both a product profitability and efficiency standpoint have been paying off While much of our declines in revenue are planned, driven by a focus on product profitability, revenue trends are not where we want them to be. However, we are beginning to see some improvements in underlying KPIs in our different product offerings related to our product positioning work we embarked on earlier in 2024.

Speaker Change: In total, we generated an adjusted EBITDA loss of $9.1 million in the second quarter compared to a loss of $11.7 million in the second quarter of 2023.

Speaker Change: Year-to-date, our adjusted EBITDA loss of approximately $5 million compares favorably to a loss of approximately $15 million in 2023. In fact, we have been seeing consistent year-over-year improvements in our quarterly EBITDA figures for three consecutive quarters.

Payam Zamani: I call this out to emphasize that improvements we've made from both a product profitability and efficiency standpoint have been paying off. However, while much of our declines in revenue were planned, driven by a focus on product profitability, revenue trends are not where we want them to be. However, we are beginning to see some improvements in underlying KPIs in our different product offerings related to the product positioning work we embarked on earlier in 2024.

Speaker Change: This is despite revenue decreasing over the same time span. I call this out to emphasize that improvements we've made from both a product profitability and efficiency standpoint have been paying off.

Speaker Change: While much of our declines in revenue are planned driven by a focus on product profitability, revenue trends are not where we want them to be.

Robert Kaiden: However, we are beginning to see some improvements in underlying KPIs in our different product offerings related to our product positioning work we embarked on earlier in 2024. While it's still early, we remain optimistic these are the right choices for the business. Looking at costs, our growth margin are up through the first half of the year, driven by the portfolio optimization to actions taken in the first part of the year. And we've driven operating efficiencies not only within gross margin, but also in the operating expenses. These changes are reflected in our approved EBITDA and EBITDA margins and significantly improved cash burn versus 2023.

Speaker Change: However, we are beginning to see some improvements in underlying KPIs in our different product offerings related to our product positioning work we embarked on earlier in 2024. While it's still early, we remain optimistic these are the right choices for the business.

Payam Zamani: While it's still early, we remain optimistic these are the right choices for the business. Looking at costs, our gross margin are up through the first half of the year, driven by the portfolio optimization actions taken in the first part of the year, and we've driven operating efficiencies not only within gross margin, but also in the operating expenses. These changes are reflected in our approved EBITDA and EBITDA margins and significantly improved cash burn versus 2023.

Speaker Change: Looking at costs, our gross margin are up through the first half of the year, driven by the portfolio optimization actions taken in the first part of the year, and we've driven operating efficiencies not only within gross margin, but also in the operating expenses.

Speaker Change: These changes are reflected in approved EBITDA and EBITDA margins and significantly improved cash burn versus 2023.

Robert Kaiden: Finally, through the change in leadership and the renewed cost reduction efforts we are undertaking, we are removing our 2024 guidance, and we'll look to update you on our plans in the future.

Payam Zamani: Finally, through the change in leadership and the renewed cost reduction efforts we are undertaking, we are removing our 2024 guidance and will look to update you on our plans in the future. Before turning the call over to the operator for Q&A, I'd like to turn it back to Payam for some closing remarks. Thank you, Robert. As many of you will soon find, I aim to be transparent and direct when communicating, and these results are simply disappointing.

Speaker Change: Finally, through the change in leadership and the renewed cost reduction efforts we are undertaking, we are removing our 2024 guidance and will look to update you on our plans in the future.

Pyam Zomani: Before turning the call over to the operator for Q&A, I'd like to turn it back to Payam for some closing remarks. Thank you, Robert.

Prime: Before turning the call over to the operator for Q&A, I'd like to turn it back to Payam for some closing remarks.

Pyam Zomani: As many of you will soon find, I aim to be transparent and direct when communicating, and these results are simply disappointing. While there certainly have been improvements in recent quarters, in Sprouto is not where I want it to be or where it should be as an organization. The past several years have been riddled with far too many challenges and, frankly, for failures.

Prime: Thank you Robert. As many of you will soon find, I aim to be transparent and direct when communicating and these results are simply disappointing.

Payam Zamani: While there certainly have been improvements in recent quarters, Inspirato is not where I want it to be or where it should be as an organization. The past several years have been riddled with far too many challenges and, frankly put, failures. That said, I'm incredibly excited about the future and confident that we are on the cusp of great things. When I evaluate businesses, there are three things that matter to me the most. The culture of the company, profits, and growth. But profits are by far more important than growth. It's quite simple.

Speaker Change: While there certainly have been improvements in recent quarters, Inspirado is not where I want it to be, or where it should be as an organization.

Speaker Change: The past several years have been riddled with far too many challenges and, frankly put, failures.

Pyam Zomani: That said, I'm incredibly excited about the future and confident that we are on the cusp of great things. When I evaluate businesses, there are three things that matter to me the most. The culture of the company, profits, and growth. But profits is far more important than growth. It's quite simple. I firmly believe that you cannot cut your way to prosperity, and it's time to once again invest in our growth. But again, first comes profitability.

Speaker Change: That said, I'm incredibly excited about the future and confident that we are on the cusp of great things.

Speaker Change: When I evaluate businesses, there are three things that matter to me the most.

Speaker Change: The culture of the company, profits, and growth.

Speaker Change: But profits is by far more important than growth. It's quite simple.

Operator: I firmly believe that you cannot cut your way to prosperity, and it's time to once again invest in our growth. But again, first comes profitability. As we approach this next chapter, my promise is that we will continue to innovate and learn as we go, but we will also be nimble enough to react and respond accordingly. I look forward to connecting with you and further articulating our future plans in the coming quarters.

Speaker Change: I firmly believe that you cannot cut your way to prosperity, and it is time to once again invest in our growth. But again, first comes profitability.

Pyam Zomani: As the approach is next chapter, my promise is that we will continue to innovate and learn as we go, but we will also be nimble enough to react and respond accordingly.

Speaker Change: As we approach this next chapter, my promise is that we will continue to innovate and learn as we go, but we will also be nimble enough to react and respond accordingly. I look forward to connecting with you and further articulating our future plans in the coming quarters.

Pyam Zomani: I look forward to connecting with you and further articulating our future plans in the coming quarters.

Unknown Executive: With that, I'd like to call over to our operator for Q&A. Thank you. As a reminder to ask a question at this time, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment while we compile our Q&A roster.

Operator: With that, I'd like to call over to our operator for Q&A. Thank you. As a reminder, to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11.

Speaker Change: With that, I'd like to call over to our operator for Q&A.

Speaker Change: Thank you. As a reminder, to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment while we compile our Q&A roster.

Operator: One moment while we compile our Q&A room. And our first question is going to come from the line of Mike Grondahl with Northland. Your line is open. Please go ahead.

Mike Grindel: And our first question is going to come from the line of Mike Grindel with Northland. Your line is open. Please go ahead. Hey, thank you. Hey, Pam, I wanted to ask you kind of a two-part question.

Sourk Sourk: Sourk Sourk.

Speaker Change: Thank you.

Speaker Change: And our first question is going to come from the line of Mike Grondahl with Northland. Your line is open. Please go ahead.

Mike Grondahl: Hey, thank you. Um, hey, Pam, I wanted to ask you, kind of a two-part question. One, what attracted you to Inspirato? And two, what is your vision for Inspirato if you look out like three plus years? Hi, Mike. Great question. I've been watching Inspirato for many years, and I do travel a lot. I don't come from the hospitality industry, but I've been to many, many countries. I don't know exactly how many, but probably 60 to 70 countries.

Mike Grindall: Hey, thank you. Hey Pam, I wanted to ask you kind of a two-part question. One, what attracted you to Inspirato? And two, what is your vision for Inspirato if you look out like three plus years?

Mike Grindel: One, what attracted you to Inspirato, and two, what is your vision for Inspirato if you look out like three plus years?

Pyam Zomani: Hi, Mike. Great question. I've been watching Inspirato for many years, and I do travel a lot. I don't come from the hospitality industry, but I've been to many, many countries. I don't exactly have hotels, Airbnb, which I don't necessarily enjoy, and other options out there. So it's probably something I've kept an eye on for a long time, and I really like the business model. I love the concept of a subscription model with... 12,000 members that represent some of the most successful people in our country and beyond. So that by itself is extremely interesting. And looking at this business, to me it felt simple from the perspective that the company has significant revenue, but it's definitely spending more than what it should.

Pam: Hi, Mike.

Pam: Great question.

Pam: I've been watching Esprado for many years and I do travel a lot, I don't come from the hospitality industry.

Pam: I've been to many, many countries. I don't know exactly how many, but probably 60 to 70 countries.

Payam Zamani: I'm a big consumer of hotels, Airbnb, which I don't necessarily enjoy, and other options out there. It's probably something I've kept an eye on for a long time, and I really like the business model. I love the concept of a subscription model. 12,000 members that represent some of the most successful people in our country and beyond.

Pam: I'm a big consumer of hotels, Airbnb, which I don't necessarily enjoy, and other options out there. So it's probably something I've kept an eye on for a long time, and I really like the business model.

Robert Kaiden: While it's still early, we remain optimistic these are the right choices for the business. Looking at costs, our growth margin are up through the first half of the year, driven by the portfolio optimization to actions taken in the first part of the year. And we've driven operating efficiencies not only within gross margin, but also in the operating expenses. These changes are reflected in our approved EBITDA and EBITDA margins and significantly improved cash burn versus 2023.

Pam: I love the concept of a subscription model with...

Speaker Change: 12,000 members that represent some of the, you know, most successful people in our country and beyond.

Payam Zamani: So that by itself is extremely interesting. And looking at this business, to me felt simple, from the perspective that, The company has significant revenue, but it's definitely spending more than what it should. So it seemed to me that the challenge wasn't as big as probably it felt like by some of the people who've been around this business for a very long time. At the end of the day, it felt like here's a company with significant revenue, but it's spending about 10% more than it should at this point in time. I know it's been higher before. So that's really what attracted me.

Speaker Change: So, that by itself is extremely interesting and looking at this business, to me, it felt simple from the perspective that...

Robert Kaiden: Finally, through the change in leadership and the renewed cost reduction efforts we are undertaking, we are removing our 2024 guidance and we'll look to update you on our plans in the future.

Pyam Zomani: So it seemed to me that the challenge wasn't as big as probably it felt like by some of the people who've been around this business for a very long time. At the end of the day, it felt like here's the company with significant revenue, but it's spending about 10% more than it should at this point in time. I know it's been higher before. So that's really what attracted me. The company with a significant opportunity that it should really rise.

Speaker Change: The company has significant revenue, but it's definitely spending more than what it should.

Speaker Change: So, it seemed to me that the challenge wasn't as big as probably it felt like by some of the people who've been around this business for a very long time.

Payam Zomani: Before turning the call over to the operator for Q&A, I'd like to turn it back to Payam for some closing remarks. Thank you, Robert.

Payam Zomani: As many of you will soon find, I aim to be transparent and direct when communicating, and these results are simply disappointing. While there certainly have been improvements in recent quarters, in Sprouto is not where I want it to be or where it should be as an organization. The past several years have been riddled with far too many challenges and frankly for failures. That said, I'm incredibly excited about the future and confident that we are on the cusp of great things.

Speaker Change: At the end of the day, it felt like here's a company with significant revenue, but it's spending about 10% more than it should, at this point in time. I know it's been higher before.

Payam Zamani: A company with a significant opportunity that it should really rise. So what do I think the next three years will look like? I like to make this business boring.

Speaker Change: So, that's really what attracted me, a company with a significant opportunity that it should really right-size.

Pyam Zomani: So what do I think the next three years will look like? I like to make this business boring. I like to make this business one that has no drama, that it does the same thing but does it over and over again and does it very well. I want us to do more of the kinds of things that work, simplify our products, and just become very, very good at selling our products. There are plenty of people we can sell this to. So really, I mean, you're not going to find necessarily a whole lot of innovation, but rather innovation in the form of doing a better job, growing the kinds of things that we already have in place.

Speaker Change: So, what do I think the next three years will look like? I like to make this business boring.

Speaker Change: I like to make this business one that has no drama, that it does the same thing but does it over and over again and does it very well.

Payam Zomani: When I evaluate businesses, there are three things that matter to me the most. The culture of the company, profits and growth. But profits is far more important than growth. It's quite simple. I firmly believe that you cannot cut your way to prosperity and it's time to once again invest in our growth. But again, first comes profitability. As the approach is next chapter, my promise is that we will continue to innovate and learn as we go, but we will also be nimble enough to react and respond accordingly.

Speaker Change: I want us to do more of the kinds of things that work, simplify our products.

Speaker Change: and just become very, very good at selling our product. There are plenty of people we can sell this to.

Speaker Change: So, you know, really, I mean, you're not going to find necessarily a whole lot of innovation, but rather innovation in the form of doing a better job, growing the kinds of things that we already have in place, maybe optimizing them. But I don't want to confuse the market.

Pyam Zomani: Maybe optimizing them, but I don't want to confuse the market.

Mike Grindel: Fair enough. And I guess the follow-up question is, what are you going to focus the sales team on? In the past, we've heard about the core product, then in Spirato for Business, in Spirato for Good, now in Spirato Invited, all interesting things. But what do you anticipate you'll focus the sales group on over the next six to 12 months?

Payam Zamani: I better, Fair enough, and I guess a follow up question is, what are you going to focus the sales team on? You know, in the past, we've heard about the, you know, the core product, then Inspirato for Business, Inspirato for Good, now Inspirato Invited, you know, all interesting things, but what do you anticipate you'll focus the sales group on, you know, over the next six to 12 months? Mike, this is David Kallery.

Payam Zomani: I look forward to connecting with you and further articulating our future plans in the coming quarters.

Speaker Change: Fair enough.

Speaker Change: I guess the follow-up question is what are you going to focus the sales team on? You know in the past we've heard about the you know

Speaker Change: The core product, then Inspirato for Business, Inspirato for Good, now Inspirato Invited. All interesting things, but what do you anticipate you'll focus the sales group on over the next 6-12 months?

David Kallery: Mike, this is David Calorie. I would tell you that we're going to primarily focus the team on selling Club. Club is the heart of what we offer. We think 80 to 85% of the prospects we engage with are attracted to that product. It's a very straightforward way to access the complete portfolio in all of our services. About 10% of our members, or excuse me, prospects, are very, very attracted to PAS. If you remember from prior conversations, PAS is highly flexible. You know, last-minute inventory that provides great value. And there's a consumer set out there that are looking for luxury, but they're looking for value.

David Kallery: I would tell you that we're going to primarily focus the team on selling Club. Club is the the heart of what we offer. We think 80 to 85% of the prospects that we engage with are attracted to that product. It's a very, Straightforward way to access the complete portfolio and all of our services.

Speaker Change: Mike, this is David Callery. I would tell you that we're going to primarily focus the team on selling club. Club is the heart of what we offer. We think 80 to 85% of the prospects that we engage with are attracted to that product. It's a very

Payam Zomani: One, what attracted you to Inspirato and two, what is your vision for Inspirato if you look out like three plus years? Hi, Mike. Great question. I've been watching Inspirato for many years, and I do travel a lot. I don't come from the hospitality industry, but I've been to many, many countries. I don't exactly have hotels, Airbnb, which I don't necessarily enjoy, and other options out there. So it's probably something I've kept an eye on for a long time, and I really like the business model.

Speaker Change: It's a straightforward way to access the complete portfolio and all of our services.

David Kallery: About 10% of our members, or excuse me, prospects are very, very attracted to PaaS. If you remember from prior conversations, PaaS is highly flexible, you know, last minute inventory that provides great value. And there's a consumer set out there that are looking for luxury, but they're looking for value. And then about 5% of our memberships going forward are going to be invited. We tested Invited last year, Mike, in a beta format. No pomp and circumstance.

Speaker Change: About 10% of our members, or excuse me, prospects, are very, very attracted to PATH.

Speaker Change: If you remember from prior conversations, PATH is highly flexible.

Speaker Change: Last Minute Inventory that provides great value, and there's a consumer set out there that are looking for luxury, but they're looking for value. And then about 5% of our memberships going forward are going to be invited.

David Kallery: And then about 5% of our memberships going forward are going to be invited. We tested invited last year, Mike, in a beta format. No pump and circumstance. We sold it to about 60 different members, watched the way they interacted with it. And there's a couple features about that product that we think are very, very attractive. The fact that the pricing is flat, the same nightly rate for all trips was definitely something that consumers are attracted to. And then the two-year booking calendar that they have access to is another feature that we think the invited prospects are going to be attracted to.

David Kallery: We sold it to about 60 different members, and we watched the way they interacted with it. And there are a couple features about that product that we think are very, very attractive. The fact that the pricing is flat, the same nightly rate for all, all trips, was definitely something that consumers are attracted to. And then the two-year booking calendar that they have access to is another feature that we think the invited prospects are going to be attracted to. This offering is a lot more expensive than some of our other offerings.

Speaker Change: We tested INVITED last year, Mike, in a beta format.

Mike Grindall: No pomp and circumstance, we sold it to about 60 different members, watched the way they interacted with it, and there's a couple features about that product that we think are very very attractive. The fact that the pricing is flat, the same nightly rate for all.

Payam Zomani: I love the concept of a subscription model with... 12,000 members that represent some of the most successful people in our country and beyond. So that by itself is extremely interesting. And looking at this business, to me it felt simple from the perspective that the company has significant revenue, but it's definitely spending more than what it should. So it seemed to me that the challenge wasn't as big as probably it felt like by some of the people who've been around this business for a very long time.

Mike Grindall: all trips.

Payam Zomani: At the end of the day, it felt like here's the company with significant revenue but it's spending about 10% more than it should at this point in time. I know it's been higher before. So that's really what attracted me. The company with a significant opportunity that it should really rise.

Mike Grindall: was definitely something that consumers are attracted to. And then the two-year booking calendar that they have access to is another feature that we think the invited prospects are going to be attracted to. The offering is a lot more expensive than some of our other offerings. We're selling it in a, you know, sort of a charter

David Kallery: The offering is a lot more expensive than some of our other offerings. We're selling it in a charter mode right now for $150,000 up front, and then they get the fixed pricing on the nightly rates after that. It's a very attractive product for a segment of the total population.

David Kallery: We're selling it in a, you know, sort of a charter mode right now for $150,000 up front, and then they get the fixed pricing on the nightly rates after that. It's a very attractive product for a segment of the total population. So I'd summarize by saying 80%, 85% club, approximately 10% pass, and maybe 5% invited.

Mike Grindall: Mode right now for $150,000 up front, and then they get the fixed pricing.

Mike Grindall: on the nightly rates after that. It's a very attractive product for a segment of the total population. So I'd summarize by saying 80%, 85% club, approximately 10% pass, and maybe 5% invited.

David Kallery: So I'd summarize by saying 80%, 85%, club, approximately 10% pass, and maybe 5% invited.

Mike Grindel: Thank you. Got it. Yeah, and the 4 million you mentioned since June of Casual from invited. That's a big number. That's great.

David Kallery: Got it. Yeah, and the four million you mentioned since June of cash flow from invited that that's a big number. That's great. Um, Hey, maybe my last question is just any updated thoughts on Capital One. Um, you know, that's something we've been looking forward to that integration. It sounds like 4Q, you can start accepting reservations. Any new thinking on how that may or may not drive the business? This is Mike.

Speaker Change: got it yeah and the four million you mentioned since June of cash flow from invited that that's a big number that's great

Payam Zomani: So what do I think the next three years will look like? I like to make this business boring. I like to make this business one that has no drama, that it does the same thing but does it over and over again and does it very well. I want us to do more of the kinds of things that work, simplify our products and just become very, very good at selling our products. There are plenty of people we can sell this to.

Mike Grindel: Um, hey, maybe my last question is just any updated thoughts on Capitol One. Um, you know, that's something we've been looking forward to: that integration. It sounds like for you. You can start accepting reservations. Any new thinking on how that mayor may not drive the business. This is Mike.

Payam Zomani: So really, I mean, you're not going to find necessarily a whole lot of innovation but rather innovation in the form of doing a better job, growing the kinds of things that we already have in place. Maybe optimizing them, but I don't want to confuse the market. Fair enough.

Speaker Change: Hey, maybe my last question is just any updated thoughts on Capital One?

Speaker Change: You know, that's something we've been looking forward to, that integration. It sounds like 4Q, you can start accepting reservation. Any new thinking on how that may or may not drive the business?

David Kallery: This is David again. Look, we're very, very excited about having the technical work done. There was a big lift there. Capital One uses Hopper as their technical platform. The team there was outstanding to work with, but it was a lot of work for us. And it's taken a few quarters. We're on the one yard line on finishing that work.

David Kallery: This is David again. Look, I, I, we're very, very excited about having the technical work done. There was a big lift there. Um, Capital One uses Hopper as their technical platform. The team there was outstanding to work with, but it was a lot of work for us. Um, and it's taken a few quarters. We're on the one yard line on finishing that work. We're actually done with the actual development work, and we're just doing some testing. So the last couple of weeks.

Speaker Change: This is Mike, this is David again.

Speaker Change: Look, we're very, very excited about having the technical work done. There was a big lift there. Capital One uses Hopper as their technical platform. The team there was outstanding to work with.

Speaker Change: But it was a lot of work for us, and it's taken a few quarters. We're on the one-yard line on finishing that work. We're actually done with the actual development work, and we're just doing some testing.

Mike Grindel: And I guess the follow-up question is, what are you going to focus the sales team on? In the past, we've heard about the core product, then in Spirato for Business, in Spirato for Good, now in Spirato invited, all interesting things.

David Kallery: We're actually done with the actual development work, and we're just doing some testing. So, over the last couple weeks, we've moved back into discussions about the way we'll present and market the offering. Look, we're very, very excited. I mean, Capital One, I'd argue, is one of the most prolific companies, definitely in the United States, today in North America, around demand. You can't really watch the Olympics or just about any other sporting event without seeing them.

David Kallery: We've moved back into discussions about the way we'll present in market the offering. Look, we're very, very excited. I mean, Capitol one. I'd argue is one of the most prolific companies. Definitely in the United States today in North America around demand. You can't really watch, you know, the Olympics or just about any other sporting event without seeing them. Um, and we think they're going to make an amazing partner.

Speaker Change: So, over the last couple weeks, we've moved back into discussions about

Speaker Change: the way we'll present and market the offering. Look, we're very, very excited. I mean, Capital One, I'd argue, is one of the most prolific companies.

Mike Grindel: But what do you anticipate you'll focus the sales group on over the next six to 12 months?

Speaker Change: definitely in the United States, today in North America, are on demand.

Speaker Change: You can't really watch, you know, the Olympics or just about any other sporting event without seeing them. And we think they're going to make an amazing partner.

David Kallery: Mike, this is David Calorie. I would tell you that we're going to primarily focus the team on selling club. Club is the heart of what we offer. We think 80 to 85% of the prospects we engage with are attracted to that product. It's a very straightforward way to access the complete portfolio in all of our services. About 10% of our members, or excuse me prospects, are very, very attracted to PAS. If you remember from prior conversations, PAS is highly flexible.

David Kallery: And we think they're going to make an amazing partner. I don't want to talk too much about what the future might look like, because obviously, this is very new for us. But we're very, very excited. We've put in a lot of the hard work and we're ready to begin transacting in Q4. Definitely something we'll keep you updated on in the future. Okay, hey, thank you.

David Kallery: I don't want to talk too much about, you know, what the future might be. It looked like because obviously this is very new for us, but we're very, very excited. We've put in a lot of the hard work, and we're ready to do, uh, to begin transacting in, uh, in Q4.

Speaker Change: I don't want to talk too much about what the future might look like, because obviously this is very new for us, but we're very, very excited. We've put in a lot of the hard work, and we're ready to begin transacting in Q4. Definitely something we'll keep you updated on in the future.

Mike Grindel: Definitely, something will keep you updated on in the future. Okay.

Unknown Executive: Hey, thank you. Thank you on one moment for our next question.

Operator: Thank you, and one moment for our next question. And our next question is going to come from the line of Brett Knoblauch with Cantor Fitzgerald. Your line is open. Please go ahead.

Speaker Change: Okay, hey, thank you.

Brett Knoblauch: And our next question is going to come from the line of Brett Nob Launch with Cantor Fitzgerald. Your line is open. Please go ahead.

Speaker Change: Thank you, and one moment for our next question.

Speaker Change: And our next question is going to come from the line of Brett Nablaunch with Cantor Fitzgerald. Your line is open, please go ahead.

Brett Knoblauch: Hi. I thank for. For taking my questions. I guess we may just start on the control of accommodation portfolio. You know, I think we embarked down this route of optimizing the accommodations, um, almost kind of two years ago at this point. Has there been an increase in the number of underperforming locations? You know, we've already taken call it 200, 300 accommodations out of portfolio. Now we're looking to take more. So I guess has a number of other performing locations. Increase or how do we think about this? The constant reduction of control accommodation? Yeah.

Brett Knoblauch: Hi guys. Thanks for taking the time to answer my questions. I guess we could maybe just start on the controlled accommodation portfolio? Yeah, I think we've embarked down this route of The Accommodation almost kind of two years ago at this point. Has there been an increase in the number of underperforming locations? You know, we've already taken call it 200, 300 accommodations out of the portfolio. Now we're looking to take more, so I guess the number of underperforming low increases. Or how should we think about this, the constant reduction of controlled accommodation?

David Kallery: You know, last-minute inventory that provides great value. And there's a consumer set out there that are looking for luxury, but they're looking for value. And then about 5% of our memberships going forward are going to be invited. We tested invited last year, Mike, in a beta format. No pump and circumstance. We sold it to about 60 different members, watched the way they interacted with it. And there's a couple features about that product that we think are very, very attractive.

Brett Nablaunch: Hi, guys. Thanks for taking my questions. I guess, could we maybe just start on the controlled accommodation portfolio? I think we've embarked down this route of optimizing the accommodations.

Speaker Change: almost kind of two years ago at this point.

Speaker Change: Has there been an increase to the number of underperforming locations? You know, we've already taken, call it, 200.

Speaker Change: Eric Grosse, Kyle Sourk

David Kallery: The fact that the pricing is flat, the same nightly rate for all trips was definitely something that consumers are attracted to. And then the two-year booking calendar that they have access to is another feature that we think the invited prospects are going to be attracted to. The offering is a lot more expensive than some of our other offerings. We're selling it in a charter mode right now for $150,000 up front, and then they get the fixed pricing on the nightly rates after that. It's a very attractive product for a segment of the total population.

Robert: Yeah, hey, Brett, thanks for the question. It's Robert here. So we embarked, starting in Q2 of last year, so just a little bit over a year ago, on taking some of the portfolio out. When we did that, there were a number of reasons for it. One was that we had seen that our demand didn't match our supply, and we were oversupplied. And because of that, in part, we were also seeing that, you know, we had occupancy rates that were lower than we'd like. And so we started that process then. As you recall, you know, it takes time for us to exit some of our leases. So it's usually six months to 12 months before you get out.

Robert Kaiden: Hey, Brett. Thanks for the question. It's Robert here. Um, so we embarked starting in Q2 of last year. So just a little bit over a year ago on taking some of the portfolio out. Um, when we, when we did that, there was a number of reasons for it. One was we had seen that our demand didn't match our supply, and we were oversupplied. And because of that, in part, we were also seeing that, you know, we had occupancy rates that were lower than we'd like. And so we started that process. Then, as you may recall, you know, it takes time for us to exit some of our leases.

Speaker Change: Yeah, hey Brett, thanks for the question. It's Robert here.

Speaker Change: So, we embarked starting in Q2 of last year, so just a little bit over a year ago, on taking some of the portfolio out.

Speaker Change: When we did that, there was a number of reasons for it. One was we had seen that our demand didn't match our supply, and we were oversupplied.

Robert: So you give a notice, which we started to do in Q2 and did in Q3 of last year. And so we started to see really in Q1 of this year, where we started to see some pickup on that lease expense and saw some benefits to our overall occupancy rates. Q2 is a challenging quarter from an occupancy rate perspective. It's our lowest traveling quarter of the year.

Speaker Change: And because of that, in part, we were also seeing that we had occupancy rates that were lower than we'd like, and so we started that process then.

Mike Grindel: So I'd summarize by saying 80%, 85%, club, approximately 10% pass, and maybe 5% invited. Thank you. Got it. Yeah, and the 4 million you mentioned since June of Casual from invited. That's a big number. That's great.

Speaker Change: As you may recall, it takes time for us to exit some of our leases, so it's usually six months to 12 months before you get out. So you give a notice, which we started to do in Q2 and did in Q3 of last year. And so we started to see really in Q1 of this year where we started to see some pickup on that lease expense and saw some benefits to our overall occupancy rates.

Robert Kaiden: So it's usually six months to 12 months before you get out. So you give a notice, which we started doing Q two and did in Q three of last year. And so we started to see really in Q one of this year where we started to see some pickup on that lease expense and saw some benefits to our overall occupancy rates. Q2's a challenging quarter from an occupancy rate perspective; that's our lowest traveling quarter of the year. So, you know, I'm not reading too much into those occupancy rates for this quarter.

David Kallery: Um, hey, maybe my last question is just any updated thoughts on Capitol one. Um, you know, that's something we've been looking forward to that integration. It sounds like for you. You can start accepting reservation. Any new thinking on how that mayor may not drive the business. This is Mike. This is David again. Look, I, I, we're very, very excited about having the technical work done. There was a big lift there. Um, Capitol one uses hopper as their technical platform.

Robert: So, you know, I'm not reading too much into those occupancy rates for this quarter. But we are, we continue now, you know, as compared to the one big bang where we took out about 100 of our residences last year, we'll continue to optimize the portfolio. So last year, when we did this, we said, what do we think the number of residences and our members will want to need next year? And we targeted towards that number. Since then, we continue to look across our portfolio. And we're making decisions such as, you know, are there certain residents that are still underperforming? And quite honestly, some of those residents might be new.

Speaker Change: Q2 is a challenging quarter from an occupancy rate perspective. It's our lowest traveling quarter of the year so

Speaker Change: I'm not reading too much into those occupancy rates for this quarter, but we continue now, as compared to the one big bang where we took out about 100 of our residences last year, we're continuing to optimize the portfolio. So last year when we did this, we said, what do we think the number of residences and our members

Robert Kaiden: But we are, we continue now, you know, as compared to the one big bang where we took out about a hundred of our residences last year. We're continuing to optimize the portfolio. So last year when we did this, we said, what do we think the number of residences and our members will want to need next year, and we targeted towards that number? Since then, we continue to look across our portfolio, and we're making decisions such as, you know, are there certain residents that are still underperforming, and quite honestly, some of those residents might be new.

David Kallery: The team there was outstanding to work with, but it was a lot of work for us. Um, and it's taken a few quarters. We're on the one yard line on finishing that work. We're actually done with the actual development work and we're just doing some testing. So the last couple of weeks. We've moved back into discussions about the way we'll present in market the offering. Look, we're very, very excited. I mean, Capitol one.

Speaker Change: will want and need next year, and we targeted towards that number.

Speaker Change: Since then, we continue to look across our portfolio, and we're making decisions such as are there certain residents that are still underperforming, and quite honestly, some of those residents might be new. We're still picking up a limited number of residences.

Robert Kaiden: We're still picking up a limited number of residences that relate back to deals that we cut in 2022. And so, as we go through the first year with them, we're assessing what their profitability looked like, how much do our members really enjoy the experience with those locations, and what are occupancy rates. And so we're continuing to refine the portfolio. We did exit one group of properties, as we mentioned earlier just now in Q three. That will be; that's approximately 37 units, so that's a big haircut there. And then we are kind of reworking our entire portfolio for other properties that, you know, may not be, you know, achieving the results that we want.

Speaker Change: that relate back to deals that we cut in 2022. And so as we go through the first year with them, we're assessing what does their profitability look like, how much do our members really enjoy the experience at those locations, what are our occupancy rates.

David Kallery: I'd argue is one of the most prolific companies. Definitely in the United States today in North America around demand. You can't really watch, you know, the Olympics or just about any other sporting event without seeing them. Um, and we think they're going to make an amazing partner.

Robert: And so we're continuing to refine the portfolio. We did exit one group of properties, as we mentioned earlier, just now in Q3. That will be, that's approximately 37 units. So that's a big haircut there.

Speaker Change: and so we're continuing to refine the portfolio.

Speaker Change: We did exit one group of properties, as we mentioned earlier, just now in Q3. That's approximately 37 units, so that's a big haircut there. And then we are kind of reworking our entire portfolio for other properties that may not be achieving the results that we want. And at the same time, we continue to look at where the locations that we wound up for whatever reason to be under-invested in that our members really want to go to and that we want to do a little bit more of a lift.

David Kallery: I don't want to talk too much about, you know, what the future might be. It looked like because obviously this is very new for us, but we're very, very excited. We've put in a lot of the hard work and we're ready to do, uh, to begin transacting in, uh, in Q four. Definitely something will keep you updated on in the future. Okay. Hey, thank you.

Unknown Executive: Thank you on one moment for our next question.

Robert: And then we are kind of reworking our entire portfolio for other properties that, you know, may not be, you know, achieving the results that we want. And at the same time, we continue to look at where the locations that we've wound up for whatever reason to be underinvested in that our members really want to go to. And then we want to do a little bit more of a lift.

Robert Kaiden: And at the same time, we continue to look at where the locations that we're, you know, we've wound up for whatever reason to be under-invested in that our members really want to go to. And then we want to do a little bit more of a left.

Brett Knoblauch: And our next question is going to come from the line of Brett nob launch with Cantor Fitzgerald. Your line is open. Please go ahead.

Robert: The other thing I'd say is that from a hotel perspective, you know, the residence is obviously a big piece, and we're down, you know, close to 20% of residences. From a hotel perspective, we've also changed the mix there over the last 12 months or so. We had a bunch of leased hotels in our portfolio, and we had some really differentiated types of profitability on them. We kept the ones that were profitable and the ones that weren't profitable.

Robert Kaiden: The other thing I'd say is that from a hotel perspective, you know, residents is obviously a big piece, and we're down, you know, close to 20% of residences. From a hotel perspective, we've also changed the mix there over the last 12 months or so. We had a bunch of least hotels in our portfolio, and we had some really differentiated type of profitability on them. We've kept the ones that were profitable and the ones that weren't profitable. We've replaced them with, you know, what we described as net rate hotel arrangements, meaning, you know, we pay on a per-night basis.

Brett Knoblauch: Hi. I thank for. For taking my questions. I guess we may just start on the control of accommodation portfolio. You know, I think we embarked down this route of optimizing the accommodations, um, almost kind of two years ago at this point has there been an increase the number of underperforming locations. You know, we've already taken call it 200 300 accommodations out of portfolio. Now we're looking to take more. So I guess has a number of other performing locations. Increase or how do we think about this? The constant reduction of control accommodation? Yeah.

Speaker Change: The other thing I'd say is that from a hotel perspective, residence is obviously a big piece and we're down close to 20 percent of residences. From a hotel perspective, we've also changed the mix there over the last 12 months or so.

Speaker Change: We had a bunch of leased...

Speaker Change: hotels in our portfolio, and we had some really differentiated type of profitability on them. We've kept the ones that were profitable and the ones that weren't profitable, we've replaced them with what we describe as net rate hotel arrangements, meaning we pay on a per night basis, so our members still get to go to all the great places they want to, but it doesn't have the same level of exposure for us.

Robert: We've replaced them with, you know, what we describe as net rate hotel arrangements, meaning, you know, we pay on a per-night basis, so our members still get to go to all the great places they want to, but it doesn't have the same level of exposure for us. And we will continue to invest in leased hotels, but we – knowing that we've got the net rate hotels out there, we'll only do that when we get, you know, really attractive rates that we can pass on to our members in locations that they really want to be and in the best of hotels.

Robert Kaiden: So our members still get to go to all the great places they want to, but it doesn't have the same level of exposure for us. And we will continue to invest in least hotels, but we, knowing that we've got the net rate hotels out there, we'll only do that when we get, you know, really attractive rates that we can pass on to our members in locations that they really want to be. And in the best of hotels, hope that helps. It does not. It's 37 units. When will they, when will the lease expense fall if they can save it there?

Robert Kaiden: Hey, Brett. Thanks for the question. It's Robert here. Um, so we embarked starting in Q two of last year. So just a little bit over a year ago on taking some of the portfolio out. Um, when we, when we did that, there was a number of reasons for it. One was we had seen that our demand didn't match our supply and we were oversupplied. And because of that in part, we were also seeing that, you know, we had occupancy rates that were lower than we'd like.

Robert Kaiden: And so we started that process. Then as you may recall, you know, it takes it time for us to exit some of our leases. So it's usually six months to 12 months before you get out. So you give a notice, which we started doing Q two and did in Q three of last year. And so we started to see really in Q one of this year where we started to see some pickup on that lease expense and saw some benefits to our overall occupancy rates. Q two's a challenging quarter from an occupancy rate perspective that's our lowest traveling quarter of the year. So, you know, I'm not reading too much into those occupancy rates for this quarter.

Speaker Change: And we will continue to invest in leased hotels, but knowing that we've got the net rate hotels out there, we'll only do that when we get really attractive rates that we can pass on to our members in locations that they really wanna be and in the best of hotels. Hope that helps.

Speaker Change: It does help, the 37 units, when will they, when will the lease expense fall off the income statement there?

Brett Knoblauch: When will they? When will the lease expense fall off the income statement? Yeah, so we are where we just entered into a termination arrangement will be will be let me do it from a more from a cash perspective, which is that we will be paying through end of March for those and then after March of 2025, those will fully drop off the books. Got it.

Robert Kaiden: Yeah, so we are, where we just enter into intermination arrangement, we'll be, we'll be, let me do it more from a cash perspective, which is that we're, we'll be paying through end of March for those, and then after March of 2025, those will fully drop off the books.

Speaker Change: Yeah, so we are, where we just entered into a termination arrangement, we'll be, we'll be, let me do it from a, more from a cash perspective, which is that we're, we'll be paying through end of March.

Speaker Change: for those, and then after March of 2025, those will fully drop off the books.

Brett Knoblauch: I guess when I look at the subscriber count, you know, I think it declined a little less than we expected this quarter, which is nice. I guess ultimately for, you know, the business to return to growth, club subscribers need to return to growth and give that's where you guys' emphasis is on.

Brett Knoblauch: I guess when I look at the subscriber count, I think it declined a little less than we expected this quarter, which is nice. I guess, ultimately, for the business to return to growth. Club subscribers need to return to growth, given that's where you guys are. Have you guys tinkered with different pricing models for clubs, maybe lowering it to "Easy Attractiveness to a Broader Set of Consumers," or how should we think about that, or is that something you guys haven't thought about? This is David, Brett.

Speaker Change: I guess when I look at the subscriber count, you know, I think it declined a little less than we expected this quarter, which is nice.

Speaker Change: I guess ultimately for, you know, the business to return to growth, club subscribers need to return to growth and given that's where your guys emphasis is on. Have you guys tinkered with, you know,

Brett Knoblauch: But we are, we continue now, you know, as compared to the one big bang where we took out about a hundred of our residences last year, we're continuing to optimize the portfolio. So last year when we did this, we said, what do we think the number of residences and our members will want to need next year and we targeted towards that number? Since then, we continue to look across our portfolio and we're making decisions such as, you know, are there certain residents that are still under performing and quite honestly, some of those residents might be new.

Brett Knoblauch: Have you guys tinkered with, you know, different pricing models, four club, maybe well, or it's, you know, easy attractiveness to a broader set of consumers, or how should we think about that, or is that something you guys haven't looked at? This is David, Brett, so we're absolutely over the last 24 months, but really with high focus over the last 12 months, we're really trying to guide new club subscribers toward multi-year deals, and we're doing that by really making a multi-year deal from a, from a cost on an annual basis much more attractive. So I think you're, you know, we're, you're going to start to see, and you're already seeing some of the improvement that you're seeing is as a result of us selling these multi-year arrangements. The typical person is buying something today that's probably close to two and a half years when you look at the number of folks that are buying two-year memberships, three, and five-year memberships.

Speaker Change: you know, different pricing models for Club, maybe lowering it to, you know, easy attractiveness to a broader set of consumers or how should we think about that? Or is that something you guys haven't looked at?

David Kallery: So, absolutely, over the last 24 months, but really, with high focus over the last 12 months, we're really trying to guide new club subscribers toward multi-year deals. And we're doing that by really making a multi-year deal from a cost on an annual basis much more attractive. So I think you're, you know, we're, you're going to start to see, you're already seeing some of the improvement that you're seeing is as a result of us selling these multi-year arrangements.

Speaker Change: This is David, Brett. So, absolutely, over the last...

Brett Nablaunch: 24 months, but really with high focus over the last 12 months, we're really trying to guide new club subscribers toward multi-year deals. We're doing that by really making a multi-year deal from a cost on an annual basis much more attractive.

Brett Knoblauch: We're still picking up a limited number of residences that relate back to deals that we cut in 2022. And so as we go through the first year with them, we're assessing what their profitability looked like, how much do our members really enjoy the experience with those locations, what are occupancy rates. And so we're continuing to refine the portfolio. We did exit one group of properties as we mentioned earlier just now in Q three.

Brett Nablaunch: So, I think you're, you know, you're going to start to see, you're already seeing some of the improvement that you're seeing is as a result of us selling these multi-year

David Kallery: The typical person is buying something today that's probably close to two and a half years when you look at the number of folks that are buying two-year memberships, three and five-year memberships. So we see over time that that will continue to improve with the, with the multi-year memberships and the, you know, the economics associated with those. Got it.

Brett Nablaunch: arrangements. The typical person is buying something today that's probably close to two and a half years when you look at the number of folks that are buying two-year memberships, three, and five-year memberships.

Brett Knoblauch: That will be, that's approximately 37 units, so that's a big haircut there. And then we are kind of reworking our entire portfolio for other properties that, you know, may not be, you know, achieving the results that we want. And at the same time, we continue to look at where the locations that we're, you know, we've wound up for whatever reason to be under invested in that our members really want to go to.

Brett Knoblauch: So we see over time that that will continue to improve with the, with the multi-year memberships and the, you know, the economics associated with those.

Brett Nablaunch: So we see over time that that will continue to improve with the multi-year memberships and the economics associated with those.

Brett Knoblauch: Got it.

Robert: And I know you got kind of, Unknown you know, the back half of the year. So we think seasonality is somewhat consistent with years in the past with Q3 being somewhat higher than Q2 and Q4 maybe a little bit lower. Q2, or I guess any way to just give us some color on what we should be expecting for the four-year. Yeah, but I think that's exactly right.

Brett Knoblauch: And I know you guys kind of have taken away guidance for, you know, the somewhat consistent with years in the past, with, you know, Q3 being somewhat higher than Q2 and Q4 may be a little bit lower than Q2 or I guess any way to just give us some color on what we should be expecting for the four-year. Yeah, but I think that's exactly right. You know, we've seen a year-over-year decline, which has been, you know, fairly consistent in the first two quarters of the year. You should expect to see that trend continue, and certainly Q3 and Q4, from a revenue perspective, are definitely, and which also means from a margin perspective, are typically and will be stronger quarters than Q2.

Speaker Change: got it and I know you got kind of

Speaker Change: taking away guidance for, you know, the back half of the year. But, you know, so we think seasonality is somewhat consistent with years in the past.

Brett Knoblauch: And then we want to do a little bit more of a left. The other thing I'd say is that from a hotel perspective, you know, residents is obviously a big piece and we're down, you know, close to 20% of residences. From a hotel perspective, we've also changed the mix there over the last 12 months or so. We had a bunch of least hotels in our portfolio, and we had some really differentiated type of profitability on them.

Speaker Change: with call it, you know, Q3 being somewhat higher than Q2 and Q4 maybe a little bit lower than Q2 or I guess any way to just give us some color on what we should be expecting for the full year

Speaker Change: Yeah, Brett, I think that's exactly right. You know, we've seen a year-over-year decline, which has been, you know, fairly consistent in the first two quarters of the year. You should expect to see that trend continue, and certainly Q3 and Q4 from a revenue perspective are definitely, and which also means from a margin perspective, are typically and will be stronger quarters than Q2.

Brett Knoblauch: We've kept the ones that were profitable and the ones that weren't profitable. We've replaced them with, you know, what we described as net rate hotel arrangements, meaning, you know, we pay on our per-night basis. So our members still get to go to all the great places they want to, but it doesn't have the same level of exposure for us. And we will continue to invest in least hotels, but we, knowing that we've got the net rate hotels out there, we'll only do that when we get, you know, really attractive rates that we can pass on to our members in locations that they really want to be.

Brett Knoblauch: Perfect.

Brett Knoblauch: And if we're looking at, you know, occupancy rates for this quarter, they step down quite meaningfully from last quarter and we're, you know, down year over year despite the, maybe, pricing initiatives you guys have put in place, would you expect occupancy rates to improve going into the, you know, end of the year? Yeah, I think we certainly will see an improvement in occupancy rates. Those units that we referenced, you know, those units that we just took out are very much seasonal units, and so the benefits of those you see in Q3 and other parts of the years; they really have a downward impact on our occupancy.

Robert: If we're looking at, you know, occupancy rates for this quarter, they stepped down quite meaningfully from last quarter, and we're down year over year, despite the maybe pricing initiatives you guys have put in place, would you expect, to improve going into the end of the year? Yeah, I think we certainly will see an improvement in occupancy rates. Those units that we referenced, we, you know, those units that we just took out are very much seasonal units.

Speaker Change: Perfect. End.

Speaker Change: If we're looking at, you know, occupancy rates for this quarter, they stepped down quite meaningfully from last quarter and we're down year-over-year despite the maybe pricing initiatives you guys have put in place. Would you expect occupancy rates to improve going into the end of the year?

Brett Knoblauch: And in the best of hotels, hope that helps. It does not. It's 37 units. When will they, when will the lease expense fall if they can save it there? Yeah, so we are, where we just enter into intermination arrangement, we'll be, we'll be, let me do it more from a cash perspective, which is that we're, we'll be paying through end of March for those, and then after March of 2025, those will fully drop off the books.

Speaker Change: Yeah, I think we certainly will see an improvement in occupancy rates. Those units that we referenced

Speaker Change: We, you know, those units are that we just took out are very much seasonal units and so the benefits of those

Robert: And so the benefits of those you see in Q3 and other parts of the years, they really have a downward impact on our occupancy. We did not have in 2023 all those units in our portfolio yet. Those are newer units.

Brett Knoblauch: We did not have in 2023 all those units in our portfolio; yet, those are newer units, and so they hit us, you know, in a full effect in 2024, really with a drag on our Q2 occupancy. And then just a more broad comment about the occupancy that you're asking about with the quarters. You know, if you just think about the seasons of the year, you know, Q2 is April, May, and June, and there's not a lot of holidays, and there's a little bit of summer. It really depends on how the year falls. And that's why that quarter is a lot weaker than the summer quarter, or the holiday quarter, or the ski quarter.

Speaker Change: You see in Q3 and other parts of the years, they really have a downward impact on our occupancy.

Speaker Change: We did not have in 2023 all those units in our portfolio yet, those are newer units and so they hit us in a full effect in 2024, really with a drag on our Q2 occupancy.

Robert: And so they hit us, you know, in a full effect in 2024, really with a drag on our Q2 occupancy. And then just a more broad comment about the occupancy that you're asking about with the quarters. You know, if you just think about the seasons of the year, you know, Q2 is, you know, April, May, and June, and there's not a lot of holidays in there. There's a little bit of summer. It really depends on how the year falls.

Robert: And that's why that quarter is a lot weaker than the summer quarter or the holiday quarter or the ski quarter. So this is just, there's just a lot of seasonality that goes into Q2. And therefore, there can be a little bit of variability in occupancy goes a long way there in terms of having an impact on our margins as well. Perfect. Got it.

Speaker Change: And then just a more broad comment about the occupancy that you're asking about with the quarters. You know, if you just think about the seasons of the year, you know, Q2 is, you know, April , May, and June , and there's not a lot of holidays in there. There's a little bit of summer. It really depends on how the year falls, and that's why that quarter is a lot weaker than the summer quarter or the holiday quarter or the ski quarter. So this is just, there's just a lot of seasonality that goes into Q2, and therefore there can be a little bit of variability in occupancy goes a long way there in terms of having an impact on our margins as well.

Brett Knoblauch: So this is just a lot of seasonality goes into Q2, and therefore there can be a little bit of variability in occupancy goes a long way there in terms of having an impact on our margins as well.

Brett Knoblauch: Perfect, got it.

Unknown Executive: Thank you, guys. I really appreciate it.

Pyam Zomani: Thank you, and I would now like to turn the conference back to Chairman and CEO. I am the money for closing remarks. Well, thank you very much, and I, you know, we are really looking forward to sharing with you whatever progress that we make in the coming months and quarters. Thank you.

Operator: Thank you guys really appreciate, Thank you and I would now like to turn the conference back to Chairman and CEO Payam Zamani for closing remarks. Well, thank you very much. And I, you know, we're really looking forward to sharing with you whatever progress that we make in the coming months and quarters. This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone have a great day.

Speaker Change: Perfect, got it. Thank you guys, really appreciate it.

Speaker Change: Thank you. And I would now like to turn the conference back to Chairman and CEO Payam Zamani for closing remarks.

Brett Knoblauch: So I think you're, you know, we're, you're going to start to see and you're already seeing some of the improvement that you're seeing is as a result of us selling these multi-year arrangements, the typical person is buying something today that's probably close to two and a half years when you look at the number of folks that are buying two-year memberships, three and five-year memberships. So we see over time that that will continue to improve with the, with the multi-year memberships and the, you know, the economics associated with those.

Speaker Change: Thank you very much. Thank you.

Payam Zamani: Well thank you very much and I you know we're really looking forward to sharing with you whatever progress that we make in the coming months and quarters.

Unknown Executive: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone have a great day. Thank you very much.

Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone have a great day.

Brett Knoblauch: Got it. And I know you guys kind of have taken away guidance for, you know, the somewhat consistent with years in the past, with, you know, Q3 being somewhat higher than Q2 and Q4 may be a little bit lower than Q2 or I guess any way to just give us some color on what we should be expecting for the four-year. Yeah, but I think that's exactly right. You know, we've seen a year over year decline, which has been, you know, fairly consistent in the first two quarters of the year.

Operator: Composed by Brett Knoblauch, Shweta Khajuria, Kyle Sourk, Unknown Executive, Jed Kelly, Robert Kallery, Eric Grosse, David Kallery, Inspirato, [music] Good day and thank you for standing by. Second Quarter 2024 Earnings, At this time, all participants are in a, After the speaker's presentation, there will be a question and answer session, to ask a question during this session, you will need to press star one one on your. You will then hear an automated message advising you your hand is raised.

Brett Knoblauch: You should expect to see that trend continue and certainly Q3 and Q4 from a revenue perspective are definitely, and which also means from a margin perspective are typically and will be stronger quarters than Q2. Perfect. And if we're looking at, you know, occupancy rates for this quarter, they step down quite meaningfully from from last quarter and we're, you know, down year over year despite the, maybe, pricing initiatives you guys have put in place, would you expect occupancy rates to improve going into the, you know, end of the year?

Brett Knoblauch: Yeah, I think we certainly will see an improvement in occupancy rates, those units that we referenced, you know, those units that we just took out are very much seasonal units and so the benefits of those, you see in Q3 and other parts of the years, they really have a downward impact on our occupancy. We did not have in 2023 all those units in our portfolio yet they, those are newer units and so they hit us, you know, in a full effect in 2024, really with a drag on our Q2 occupancy.

Speaker Change: [inaudible]

Brett Knoblauch: And then just a more broad comment about the occupancy that you're asking about with the quarters, you know, if you just think about the seasons of the year, you know, Q2 is April, May and June and there's not a lot of holidays and there's a little bit of summer, it really depends on how the year falls. And that's why that quarter is a lot weaker than the summer quarter or the holiday quarter or the ski quarter.

Speaker Change: [inaudible]

Brett Knoblauch: So this is just a lot of seasonality goes into Q2 and therefore there can be a little bit of variability in occupancy goes a long way there in terms of having an impact on our margins as well. Perfect, got it.

Speaker Change: Thanks for watching!

Unknown Executive: Michael Grondahl, Brett Knoblauch, Shweta Kallery, Inspirato. Michael Grondahl, Brett Knoblauch, Shweta Kallery, Inspirato. Michael Grondahl, Brett Knoblauch, Shweta Kallery, Good day and thank you for standing by.

Operator: To withdraw your question, please press star 111. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kyle Sourk, Investor Relations. Please go ahead.

Unknown Executive: Welcome to the Inspirato second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again. Please be advised that the day's conference is being recorded.

Speaker Change: Good day and thank you for standing by. Welcome to the Inspirato Second Quarter 2024 Earnings Conference Call.

Speaker Change: At this time, all participants are in a listen-only mode.

Speaker Change: To withdraw your question, please press star 11 again. Please say goodbye to today's conference as being recorded. I would now like to hand the conference over to your speaker today, Kyle Sourk, Investor Relations. Please go ahead.

Unknown Executive: I would now like to hand the conference over to your staff.

Kyle Sourk: The speaker today, Kyle Sourk, and best of relations. Please go ahead. Thank you. Good morning.

Operator: CFO, Robert Yesterday afternoon, we issued our press release announcing our second quarter 2024 results and the closing of our previously announced share purchase agreement and CDO training. These statements are based on assumptions and actual results. In addition, during the call, we will discuss non-GAAP measures for an evaluating company. Measures should not be considered an item or as a substitute for financial results prepared.

Kyle Sourk: On today's call, we have Chairman, CEO, Pai Amzumani, President, State Gallery, and CFO, Robert Kaiden. Yesterday afternoon, we issued our press release announcing our second quarter 2024 results and the closing of our previously announced share purchase agreement and CDO.

Speaker Change: Thank you, and good morning. On today's call, we have Chairman and CEO, Piam Zumani, President State Calorie and CFO Robert Kaiden. Yesterday afternoon, we issued our press release announcing our second quarter 2020 short results and the closing of our previously announced share purchase agreement.

Kyle Sourk: Before we comment, these statements are based on assumptions, and actual results fit different material. In addition, during the call, we will discuss non-GAB measures, which are useful in evaluating the company's operating performance. These measures should not be considered in isolation, or as a substitute for financial results prepared in accordance with GAAP. Reconciliation of these measures, directly comparable GAB measures, is included in our earnings release.

Speaker Change: and Sea to Ocean.

Speaker Change: Before we...

Speaker Change: These statements are based on assumptions and actual results fit different materials.

Speaker Change: In addition, during the call, we will discuss non-GAAP measures, which are useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Reconciliations of these measures to directly comparable GAAP measures are included in our earnings release.

Pyam Zomani: With that, I would like to turn the call over to our new Chairman and CEO, Pai Amzumani. Thank you, Kyle, and thank you everyone for joining us this morning. I'm incredibly excited for today's call as you welcome a new era at Inspirado, one field with promising opportunities. To help us accomplish these goals and further solidify our footing, I'm personally injecting $10 million of new capital into the company in Q3. In addition to the investment, I'm also personally guaranteeing an additional $6.6 million as part of a lease termination agreement. It's important to know that when I say personally, it means through my entity, One Planet Group.

Operator: Reconciliations, Directly Comparable Gap. Part of the included inter- With that, I'd like to turn the call over to our new Chairman and CEO, Pai Aung San Suu, Thank you, Kyle. And thank you everyone for joining us this morning. I'm incredibly excited for today's call as we welcome a new era at Inspirato, one filled with promising opportunities. To help us accomplish these goals and further solidify our footing, I'm personally injecting $10 million of new capital into the company in Q3. In addition to the investment, I'm also personally guaranteeing an additional $6.6 million as part of a lease termination agreement. It's important to know that when I say personally, it means through my entity One Planet Group.

Speaker Change: With that, I'd like to turn the call over to our new Chairman and CEO , Payam Samadhi.

Pia: Thank you, Kyle, and thank you, everyone, for joining us this morning. I'm incredibly excited for today's call as we welcome a new era at Inspirato.

Speaker Change: One failed with promising opportunities

Pia: To help us accomplish these goals and further solidify our footing, I am personally injecting $10 million of new capital into the company in Q3. In addition to the investment, I am also personally guaranteeing an additional $6.6 million as part of a lease termination agreement.

Pyam Zomani: These investments not only strengthen our liquidity position and improve our financial outlook, but also demonstrate to our current and prospective members that our business is in a stronger position than it was just a few days ago. We are now better equipped to achieve profitability while remaining committed to delivering exceptional service and world-class experiences for all of our members and their loved ones.

Payam Zamani: These investments not only strengthen our liquidity position and improve our financial outlook but also demonstrate to our current and prospective members that our business is in a stronger position than it was just a few days ago. We are now better equipped to achieve profitability while remaining committed to delivering exceptional service and world-class experiences for all of our members and their loved ones. Having said that, this transition has also brought about a number of difficult decisions.

Pia: Important to know that when I said personally it means through my entity one planet group.

Pia: These investments not only strengthen our liquidity position and improve our financial outlook, but also demonstrate to our current and prospective members that our business is in a stronger position than it was just a few days ago.

Pia: We are now better equipped to achieve profitability while remaining committed to delivering exceptional service and world-class experiences for all of our members and their loved ones.

Pyam Zomani: Having said that, this transition has also brought about a number of difficult decisions. Namely, our plan to reduce headcount by 15 percent. While losing team members is not an action I take lightly, it was a necessary action given the current size of the business. Upon reviewing its brother's business plan and projections, it became clear that our current cost structure required further actions in order to make this business sustainable.

Pia: Having said that, this transition has also brought about a number of difficult decisions.

Payam Zamani: Namely, our plan to reduce headcount by 15%. While losing team members is not an action I take lightly, it was a necessary action given the current size of the business. Upon reviewing Inspirato's business plan and projections, it became clear that our current cost structure required further action in order to make this business sustainable. To better support these goals and fully demonstrate my alignment with our shareholders, I have elected to take a $1 salary in the form of cash as CEO and Chairman and no cash bonus for the next year and will instead perform my duties solely compensated in shares, much of it performance.

Pia: Namely, our plan to reduce headcount by 15%.

Pia: While losing team members is not an action I take lightly, it was a necessary action given the current size of the business.

Speaker Change: Upon reviewing Insprado's business plan and projections, it became clear that our current cost structure required further actions in order to make this business sustainable.

Pyam Zomani: To better support these goals and fully demonstrate my alignment with our shareholders, I have elected to a $1 to take a $1 salary in the form of Kasia CEO and Chairman and no cash bonus for the next year and will instead perform my duties solely compensated and shares much of its performance-based.

Speaker Change: To better support these goals and fully demonstrate my alignment with our shareholders, I have elected to take a $1 salary in the form of cash as CEO.

Speaker Change: and Chairman and no cash bonus for the next year and will instead perform my duties solely compensate that it shares much of its performance base.

Pyam Zomani: Finally, in my role at Chairman, I will be naming three new directors to bring valuable experience, that fresh perspective, and diversity of thought to the in-sprout of boardroom as we look to reshape our future.

Payam Zamani: Finally, in my role as chairman, I will be naming three new directors to bring valuable experience, fresh perspective, and diversity of thought to the Inspirato boardroom as we look to reshape our future. With that, I'd like to turn the call over to our President, David Kallery, to review some of the recent initiatives the company has undertaken. Thank you, Paia.

Speaker Change: Finally, in my role as chairman, I will be naming three new directors to bring valuable experience, fresh perspective, and diversity of thought to the Inspirato boardroom as we look to reshape our future.

Brett Knoblauch: Thank you guys really appreciate it.

David Kallery: With that, I'd like to turn the call over to our president, David Calleray, to review some of the recent initiatives the company has undertaken. Thank you, Pya. Before reviewing the in-sprout of platform and successful repositioning with down over the past few year quarters, I want to express how truly excited I am to begin a new chapter at Inspirato.

Speaker Change: With that, I'd like to turn the call over to our President, David Kallery, to review some of the recent initiatives the company has undertaken.

David Kallery: Before reviewing the Inspirato platform and the successful repositioning we've done over the last few years and quarters, I want to express how truly excited I am to begin a new chapter at Inspirato. Payam has an illustrious career and has created tremendous value for investors and shareholders at each stop along the way. Prior to my time at Inspirato, I had the pleasure of working with him in the past, and I can personally attest to his work ethic, his vision, and his cultural fit for both Inspirato and the members we serve.

Payam: Thank you, Payam.

Payam: Before reviewing the Inspirato platform and the successful repositioning we've done over the last few quarters, I want to express how truly excited I am to begin a new chapter at Inspirato.

David Kallery: Pya has an illustrious career and has created tremendous value for investors and shareholders at each stop along the way. Prior to my time at Inspirato, I had the pleasure of working with him in the past and can personally attest to his work ethic, his vision, and his cultural fit for both Inspirato and the members we serve. Pya is an entrepreneur, an investor, and a founder of One Planet Group, a firm with a mission to support strong business ideas while building an ethos that helps improve society and give back to communities, which is also very closely aligned with our mission of inspiring lasting memories and relationships by enriching the way our members experience the world.

Payam: Payam has an illustrious career and has created tremendous value for investors and shareholders at each stop along the way.

Payam: Prior to my time at Inspirato, I had the pleasure of working with him in the past, and can personally attest to his work ethic, his vision.

David Kallery: PYM is an entrepreneur, an investor, and the founder of One Planet Group, a firm with a mission to support strong business ideas while building an ethos that helps improve society and give back to communities, which is also very closely aligned with our mission of inspiring lasting memories and relationships by enriching the way our members experience the world.

Payam: and is cultural fit for both Inspirato and the members we serve.

Payam: Time is an entrepreneur, an investor, and a founder of OnePlanet Group.

Speaker Change: a firm with a mission to support a strong business ideas while building an ethos that helps improve society and give back to communities which is also very closely aligned with our mission of inspiring lasting memories and relationships by enriching the way our members experience the world

David Kallery: Over the past year, we have made some incredible progress in improving our offerings that have laid the foundation for this transformation. First, we have returned to our roots as a luxury travel club and moved away from a high-turn transaction-based subscription model. Since the beginning of 2023, more than 75% of our new sales for Inspirato Club, which is the foundation of the company, have been for two years or more. Second, we re-imagined Inspirato Pass to serve as the perfect complimentary offering to club and a catered to a frequent and highly flexible traveler.

David Kallery: Over the past year, we've made some incredible progress in improving our offerings that have laid the foundation for this transformation. First, we have returned to our roots as a luxury travel club and moved away from a high-churn, transaction-based subscription model. Since the beginning of 2023, more than 75% of our new sales for Inspirato Club, which is the foundation of the company, have been for two years or more. Second, we re-imagined Inspirato Path to serve as the perfect complementary offering to Inspirato Club and to cater to a frequent and highly flexible traveler. Next, in June, they just started to introduce Inspirato by Invited. Invited offers 10 years of Inspirato club access combined with a two-year booking window and the ability to prepay fixed nightly rates on an annual basis.

Speaker Change: Over the past year, we've made some incredible progress in improving our offerings that have laid the foundation for this transformation.

Payam Zomani: Thank you and I would now like to turn the conference back to Chairman and CEO, I am the money for closing remarks. Well, thank you very much and I, you know, we are really looking forward to sharing with you whatever progress that we make in the coming months and quarters. Thank you.

Speaker Change: First, we return to our roots as a luxury travel club and move away from a high-turn transaction-based subscription model.

Unknown Executive: This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone have a great day. Thank you very much. Michael Grondahl, Brett Knoblauch, Shweta Kallery, Inspirato Michael Grondahl, Brett Knoblauch, Shweta Kallery, Inspirato Michael Grondahl, Brett Knoblauch, Shweta Kallery, Good day and thank you for standing by.

Speaker Change: Since the beginning of 2023, more than 75% of our new sales for Inspirato Club, which is the foundation of the company, have been for two years or more.

Speaker Change: Second, we reimagined Inspirato Path to serve as the perfect complimentary offering to club and to cater to a frequent and highly flexible traveler.

David Kallery: Next, in June, we just started to introduce Inspirato by invited. Invited offers 10 years of Inspirato Club access, combined with a two-year booking window and the ability to prepay fixed-nightly rates on an annual basis. While it's still very early, we've seen interest and excitement for this new offering. Since our limited introduction of this product in June, we've already generated over $4 million in new cash flow. And finally, our strategic partner with Capital One, where we're reaching the tail end of the tech and system integration work, and plan to be able to take reservations by the Ford's quarter.

Speaker Change: next in June

Speaker Change: We just started to introduce Inspirato by Invited. Invited offers 10 years of Inspirato club access combined with a two-year booking window and the ability to prepay fixed nightly rates on an annual basis.

Speaker Change: While it's still very early, we've seen interest and excitement for this new offering. Since our limited introduction of this product in June , we've already generated over $4 million in new cash flow.

David Kallery: We expect this partnership to increase Inspirato's brand recognition, which can serve as a demand driver for paid nights, generate new membership sales, and ultimately be a key contributor to Inspirato's future growth. In summary, our team has put in a tremendous amount of work to set the stage for what we feel will be a true inflection point for the company.

Speaker Change: Generate new membership sales and ultimately be a key contributor to Inspirato's future growth. In summary, our team has put in tremendous amount of work.

David Kallery: In summary, our team has put in tremendous amount of work, to set the stage for what we feel will be a true inflection point for the company. And I'm very confident that in the next few years of Inspirato, we'll be our most successful under Payam's watchful eye and steady leadership. And with that, I'd like to turn the call over to Robert to discuss the financials for the quarter. Robert.

David Kallery: And I'm very confident that in the next few years of Inspirato will be our most successful under PIMES watchful eye in steady leadership.

PIM: to set the stage for what we feel will be a true inflection point for the company. And I'm very confident that in the next few years of Inspirato, we'll be our most successful under Payam's watchful eye and steady leadership.

Robert Kaiden: And with that, I'd like to turn the call over to Robert to discuss the financials for the quarter. Robert, thanks, David. Before reviewing our second quarter results, I want to highlight what I feel is currently our most important financial metric: liquidity. Following the $10 million capital infusion, second quarter performance liquidity, including cash, cash equivalence, and restricted cash, with $39 million compared to $33 million at the end of the first quarter. We've also made significant progress in our cash burn, which has improved by $23 million, or 64%, in the first half of this year compared to the first half of 2023.

Robert: And with that, I'd like to turn the call over to Robert to discuss the financials for the quarter. Robert. Thanks, David. Before reviewing our second quarter results, I want to highlight what I feel is currently our most important financial metric, liquidity.

Robert: Thanks, David. Before reviewing our second quarter results, I want to highlight what I feel is currently our most important financial metric, liquidity. Following the $10 million capital infusion, second quarter pro forma liquidity, including cash, cash equivalents, and restricted cash, was $39 million compared to $33 million at the end of the first quarter. We've also made significant progress in our cash burn, which has improved by $23 million or 64 percent in the first half of this year compared to the first half of 2023.

Robert: Following the $10 million dollar capital infusion, second quarter performer liquidity including cash, cash equivalents, and restricted cash.

Kyle Sourk: I would now like to hand the conference over to your staff. The speaker today, Kyle Sourk, and best of relations. Please go ahead. Thank you. Good morning.

Kyle Sourk: On today's call, we have chairman, CEO, Pai Amzumani, president, state gallery, and CFO, Robert Kaiden. Yesterday afternoon, we issued our press release announcing our second quarter 2024 results, and the closing of our previously announced share purchase agreement and CDO.

Robert: with $39 million compared to $33 million at the end of the first quarter. We've also made significant progress in our cash burn, which has improved by $23 million or 64% in the first half of this year compared to the first half of 2023.

Robert Kaiden: In addition to the $10 million capital injection in Q3 to bolster liquidity, we have taken the following actions. First, we implemented additional cost-cutting measures that we expected results in approximately $25 million of annualized savings. As PIME mentioned, this includes a 15% reduction in force implemented earlier this week. It's important to note these cuts were not made to member-facing roles, as we are capturing efficiencies without sacrificing our member experience.

Robert: In addition to the $10 million capital injection in Q3 to bolster our liquidity, we have taken the following actions.

Robert: First, we implemented additional cost-cutting measures that we expect to result in approximately $25 million of annualized savings.

Pi: As Payam mentioned, this includes a 15% reduction in force implemented earlier this week. It's important to note these cuts were not made to member-facing roles as we are capturing efficiencies without sacrificing our member experience.

Robert Kaiden: Second, we entered into a termination agreement of previously impaired underperforming leases. As part of this agreement, we will decrease our total committed future minimum lease payments by $57 million. Total cash savings from the termination of this agreement will be approximately $50 million from 2025 through 2031 after the lease termination payment of $6.6 million from August 2024 through March 2025.

Pi: Second, we entered into a termination agreement of previously impaired underperforming leases. As part of this agreement, we will decrease our total committed future minimum lease payments by 57 million dollars.

Pi: Total cash savings from the termination of this agreement will be approximately $50 million from 2025 through 2031 after the lease termination payment of $6.6 million from August 2024 through March 2025.

Robert Kaiden: In terms of our quarterly results, in the second quarter, we generated total revenue of $67 million, a 20% decrease year over year. Much of the decrease was planned for and can be attributed to lower subscription revenue through a 35% decrease in the number of past members and a 10% decrease in club members. In total, we exited the second quarter with approximately 12,000 members and nearly 12,700 subscriptions, approximately 85% of which were club subscriptions.

Pi: In terms of our quarterly results, in the second quarter we generated total revenue of $67 million, a 20% decrease year-over-year. Much of the decrease was planned for and can be attributed to lower subscription revenue due to a 35% decrease in the number of past members and a 10% decrease in club members.

Pi: In total, we exited the second quarter with approximately 12,000 members and nearly 12,700 subscriptions, approximately 85% of which were club subscriptions.

Robert Kaiden: From a travel revenue perspective, there are a number of factors that contributed to the 19% year-over-year decrease. First, we saw a 12% decrease in our residence revenue, primarily due to ADRs of $1,535 coming in below quarters. While lowering our ADR from previous highs is a part of a strategy to deliver value to members, we did not see an associated uptick in the number of paid nights delivered that we would have hoped for given the reduced rates. Second, hotel revenue decreased primarily from fewer nights delivered, not quite offsetting a modest increase in ADR. I can see in our lease hotel rooms increased to 79% in the second quarter from 76% last year as we continue to risk-adjust our portfolio by removing underperforming lease hotels.

Pi: From a travel revenue perspective, there are a number of factors that contributed to the 19% year-over-year decrease.

Robert: First, we saw a 12% decrease in our residents' revenue, primarily due to ADRs of $1,535 coming in below expectations. While lowering our ADRs from previous highs is a part of our strategy to deliver value to members, we do not see an associated uptick in the number of paid nights delivered that we would have hoped for given the reduced rate. Second, hotel revenue decreased primarily from fewer nights delivered, not quite offsetting a modest increase in ADRs.

Pi: First, we saw a 12% decrease in our residence revenue primarily due to ADRs of $1,535 coming in below quarters.

Speaker Change: While lowering our ADRs from previous highs is a part of a strategy to deliver value to members, we do not see an associated uptick in the number of paid nights delivered that we would have hoped for given the reduced rates.

Speaker Change: Second, hotel revenue decreased primarily from fewer nights delivered, not quite offsetting a modest increase in ADRs.

Speaker Change: Occupancy in our leased hotel rooms increased to 79% in the second quarter from 76% last year as we continue to risk adjust our portfolio by removing underperforming leased hotels.

Robert Kaiden: Cost of revenue for the quarter was approximately 51 million, a 21% improvement from the prior year. Similar to the first quarter, reduced lease expenses as well as their associated fixed costs, with a single biggest driver in the year for your improvement.

Speaker Change: Cost of revenue for the quarter was approximately $51 million, a 21% improvement from the prior year. Similar to the first quarter, reduced lease expenses as well as their associated fixed costs were the single biggest driver in the year-over-year improvement.

Robert Kaiden: Given the seasonality of travel revenue, gross margin in the second quarter typically reflects the low water mark for the year. We believe that to be the case in 2024, as well as our 24% gross margin for the quarter, to pay a favorably to 2023, but is a bit below our expectations and reflects the impact of a declining subscription revenue base.

Speaker Change: Given the seasonality of travel revenue, gross margins in the second quarter typically reflect the low water mark for the year.

Speaker Change: We believe that to be the case in 2024 as well, as our 24% gross margin for the quarter compares favorably to 2023, but is a bit below our expectations and reflects the impact of a declining subscription revenue base.

Kyle Sourk: Before we comment, these statements are based on assumptions and actual results fit different material. In addition, during the call, we will discuss non-GAB measures, which are useful in evaluating the company's operating performance. These measures should not be considered in isolation, or as a substitute for financial results prepared in accordance with GAB. Reconciliation of these measures, directly comparable GAB measures, are included in our earnings release.

Payam Zomani: With that, I would like to turn the call over to our new chairman and CEO, Pai Amzumani. Thank you, Kyle, and thank you everyone for joining us this morning. I'm incredibly excited for today's call as you welcome a new era at Inspirado, one field with promising opportunities. To help us accomplish these goals and further solidifier footing, I'm personally injecting $10 million of new capital into the company in Q3. In addition to the investment, I'm also personally guaranteeing an additional $6.6 million as part of a lease termination agreement.

Payam Zomani: It's important to know that when I say personally it means through my entity one planet group. These investments not only strengthen our liquidity position and improve our financial outlook, but also demonstrate to our current and prospective members that are business in a stronger position than it was just a few days ago. We are now better equipped to achieve profitability while remaining committed to delivering exceptional service and work-class experiences for all of our members and their loved ones.

Robert Kaiden: Our cash operating expenses in Q2 were approximately 27 million dollars compared to approximately 32 million in the second quarter of 2023. As PM and David alluded to, we are planning for a further improvement in future operating expenses as a result of our reduced headcount and other cost reduction activities. We'll see modest cost savings in the third quarter, giving severance payments and an acceleration in cost savings thereafter.

Speaker Change: Our cash operating expenses in Q2 were approximately $27 million compared to approximately $32 million in the second quarter of 2023.

Robert Kaiden: In total, we generated an adjusted EBITDA loss of 9.1 million in the second quarter compared to a loss of 11.7 million in the second quarter of 2023. Year-to-date, our adjusted EBITDA loss of approximately 5 million compares favorably to a loss of approximately 15 million in 2023. In fact, we have been seeing consistent year-over-year improvements in our quarterly EBITDA figures for three consecutive quarters. This is despite revenue decreasing over the same time span. I call this out to emphasize that improvements we've made from both a product profitability and efficiency standpoint have been paying off.

Speaker Change: In total, we generated an adjusted EBITDA loss of $9.1 million in the second quarter compared to a loss of $11.7 million in the second quarter of 2023.

Robert: Year-to-date, our adjusted EBITDA loss of approximately $5 million compares favorably to a loss of approximately $15 million in 2023. In fact, we have been seeing consistent year-over-year improvements in our quarterly EBITDA figures for three consecutive quarters. This is despite revenue decreasing over the same time span. I call this out to emphasize that improvements we've made from both a product profitability and efficiency standpoint have been paying off. While much of our declines in revenue were planned, driven by a focus on product profitability, revenue trends are not where we want them to be.

Speaker Change: Year to date are adjusted even to the loss of approximately 5 million compares favorably to the loss of approximately 15 million in 2023. In fact, we have been seeing consistent year-over-year improvements in our quarterly EBITDA figures for three-second-of-porters.

Payam Zomani: Having said that, this transition has also brought about a number of difficult decisions. Namely, our plan to reduce headcount by 15 percent. While losing team members is not an action I take lightly, it was a necessary action given a current size of the business. Upon reviewing its brother's business plan and projections, it became clear that our current cost structure required further actions in order to make this business sustainable.

Robert Kaiden: While much of our declines in revenue are planned, driven by a focus on product profitability, revenue trends are not where we want them to be. However, we are beginning to see some improvements in underlying KPIs in our different product offerings related to our product positioning work we embarked on earlier in 2024. While it's still early, we remain optimistic these are the right choices for the business.

Speaker Change: While much of our declines in revenue are planned driven by a focus on product profitability, revenue trends are not where we want them to be.

Robert: However, we are beginning to see some improvements in underlying KPIs in our different product offerings related to the product positioning work we embarked on earlier in 2024. While it's still early, we remain optimistic these are the right choices for the business. Looking at costs, our gross margin is up through the first half of the year, driven by the portfolio optimization actions taken in the first part of the year. And we've driven operating efficiencies not only within gross margin but also in operating expenses.

Robert Kaiden: Looking at costs, our growth margin are up through the first half of the year driven by the portfolio optimization to actions taken in the first part of the year, and we've driven operating efficiencies not only within growth margin but also in the operating expenses. These changes are reflected in our approved EBITDA and EBITDA margins and significantly improved cash burn versus 2023.

Speaker Change: Looking at costs, our gross margin are up through the first half of the year, driven by the portfolio optimizations actions taken in the first part of the year, and we've driven operating efficiencies not only within gross margin, but also in the operating expenses.

Robert: These changes are reflected in our approved EBITDA and EBITDA margins and significantly improved cash burn versus 2023. Finally, through the change in leadership and the renewed cost reduction efforts we are undertaking, we are removing our 2024 guidance and will look to update you on our plans in the future. Before turning the call over to the operator for Q&A, I'd like to turn it back to Payam for some closing remarks. Thank you, Robert.

Speaker Change: These changes are reflected in our approved EBITDA and EBITDA margins and significantly improved cash burn versus 2023.

Pyam Zomani: Before turning the call over to the operator for Q&A, I'd like to turn it back to Payam for some closing remarks. Thank you, Robert.

Speaker Change: Before turning the call over to the operator for Q&A, I'd like to turn it back to Payam for some closing remarks.

Payam Zamani: As many of you will soon find, I aim to be transparent and direct when communicating, and these results are simply disappointing. While there certainly have been improvements in recent quarters, Inspirato is not where I want it to be or where it should be as an organization. The past several years have been riddled with far too many challenges and, frankly put, failures. That said, I'm incredibly excited about the future and confident that we are on the cusp of great things. When I evaluate businesses, there are three things that matter to me the most. The culture of the company, profits, and growth. But profits is by far more important than growth. It's it's quite simple.

Pyam Zomani: As many of you will soon find, I aim to be transparent and direct when communicating, and these results are simply disappointing. While there certainly have been improvements in recent quarters in Sprouto, it is not where I want it to be or where it should be as an organization. The past several years have been riddled with far too many challenges and, frankly put, failures.

Robert: Thank you, Robert.

Payam: As many of you will soon find, I aim to be transparent and direct when communicating, and these results are simply disappointing.

Payam: While there certainly have been improvements in recent quarters, Inspirato is not where I want it to be or where it should be as an organization.

Payam: The past several years have been riddled with far too many challenges and, frankly put, failures.

Pyam Zomani: That's it.

Pyam Zomani: I'm incredibly excited about the future and confident that we are on the cusp of great things. When I evaluate businesses, there are three things that matter to me the most. The culture of the company, profits, and growth. But profits is by far more important than growth. It's quite simple. I firmly believe that you cannot cut your way to prosperity, and it's time to once again invest in our growth. But again, first comes profitability. As the approaches next chapter, my promise is that we will continue to innovate and learn as we go, but we will also be nimble enough to react and respond accordingly.

Payam: That said, I'm incredibly excited about the future and confident that we are on the cusp of great things.

Speaker Change: When I evaluate businesses, there are three things that matter to me the most.

Speaker Change: The culture of the company, profits, and growth.

Speaker Change: But profit is by far more important than growth. It's quite simple.

Operator: I firmly believe that you cannot cut your way to prosperity, and it is time to once again invest in our growth. But again, first comes profitability. As we approach this next chapter, my promise is that we will continue to innovate and learn as we go, but we will also be nimble enough to react and respond accordingly. I look forward to connecting with you and further articulating our future plans in the coming quarters.

Speaker Change: I firmly believe that you cannot cut your way to prosperity, and it is time to once again invest in our growth. But again, first comes profitability.

Pyam Zomani: I look forward to connecting with you and further articulating our future plans in the coming quarters.

Unknown Executive: With that, I'd like to call over to our operator for Q&A. Thank you. As a reminder to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment while we compile our Q&A raster.

Speaker Change: With that, I'd like to call over to our operator for Q&A.

Operator: One moment while we compile our Q&A room. And our first question is going to come from the line of Mike Grondahl with Northland. Your line is open. Please go ahead.

Mike Grindel: And our first question is going to come from the line of Mike Grindel with Northland.

Speaker Change: David Kallery, David Knoblauch,

Mike Grindel: Your line is open. Please go ahead. Hey, thank you.

Speaker Change: And our first question is going to come from the line of Mike Grindahl with Northland. Your line is open. Please go ahead.

Mike Grindel: Hey, Pam, I wanted to ask you kind of a two-part question. One, what attracted you to Inspirato, and two, what is your vision for Inspirato? If you look out like three plus years.

Mike Grindahl: Hey, thank you. Hey Pam, I wanted to ask you kind of a two-part question. One, what attracted you to Inspirato? And two, what is your vision for Inspirato if you look out like three plus years?

Pyam Zomani: Hi, Mike. Great question. You know, I've been watching Inspirato for many years. And, you know, I do travel a lot. I don't come from the hospitality industry, but I've been to many, many countries. I don't exactly how many, but probably 60 to 70 countries. And I'm a big consumer. I'm a big consumer of hotels, Airbnb, which I don't necessarily enjoy, and other options out there. So, it's probably something I've kept an eye on for a long time. And I really like the business model. I love the concept of a subscription model with 12,000 members that represent some of the, you know, most successful people in our country and beyond.

Mike: Hi, Mike.

Mike: Good question.

Pam: You know, I've been watching Inspirato for many years and, you know, I do travel a lot. I don't come from the hospitality industry.

Speaker Change: I've been to many, many countries. I don't know exactly how many, but probably 60 to 70 countries.

Pam: I'm a big consumer of hotels, Airbnb, which I don't necessarily enjoy, and other options out there. So, it's probably something I've kept an eye on for a long time, and I really like the business model.

Pam: I love the concept of a subscription model with

Speaker Change: 12,000 members that represent some of the, you know, most successful people in our country and beyond.

Pyam Zomani: So, that by itself is extremely interesting. And looking at this business, to me it felt simple from the perspective that the company has significant revenue, but it's definitely spending more than what it should. So, it seemed to me that the challenge wasn't as big as probably it felt like by some of the people who've been around this business for a very long time. At the end of the day, it felt like here's the company with significant revenue, but it's spending about 10% more than it should. At this point in time, I know it's been higher before.

Payam Zamani: So that by itself is extremely interesting. And looking at this business, to me felt simple, from the perspective that, The company has significant revenue, but it's definitely spending more than what it should. So it seemed to me that the challenge wasn't as big as probably it felt like by some of the people who've been around this business for a very long time. At the end of the day, it felt like here's the company with significant revenue, but it's spending about 10% more than it should at this point in time. I know it's been higher before. So that's really what attracted me.

Speaker Change: So, that by itself is extremely interesting and looking at this business, to me it felt simple from the perspective that...

Speaker Change: The company has significant revenue, but it's definitely spending more than what it should.

Speaker Change: So, it seemed to me that the challenge wasn't as big as probably it felt like by some of the people who've been around this business for a very long time.

Payam Zomani: To better support these goals and fully demonstrate my alignment with our shareholders, I have elected to a $1 to take a $1 salary in the form of Kasia CEO and Chairman and no cash bonus for the next year and will instead perform my duties solely compensated and shares much of its performance-based.

Speaker Change: At the end of the day, it felt like here's the company with significant revenue, but it's spending about 10-person more than you should. At this point in time, I know it's been higher before.

Pyam Zomani: So, that's really what attracted me. A company with a significant opportunity that it should really right size.

Payam Zomani: Finally, in my role at Chairman, I will be naming three new directors to bring valuable experience, that fresh perspective and diversity of thought to the in-sprout of boardroom as we look to reshape our future.

Payam Zamani: A company with a significant opportunity that it should really take. So what do I think the next three years will look like? I like to make this business boring.

Speaker Change: So, that's really what attracted me, a company with a significant opportunity that it should be the right size.

Pyam Zomani: So, what do I think the next three years will look like? I like to make this business boring. I like to make this business one that has no drama, that it does the same thing, but does it over and over again and does it very well. I want us to do more of the kinds of things that work, simplify our product, and just become very, very good at selling our product.

Speaker Change: So, what do I think the next three years will look like? I like to make this business boring.

Speaker Change: I like to make this business one that has no drama, that it does the same thing but does it over and over again and does it very well.

Speaker Change: I want us to do more of the kinds of things that work, simplify our products.

Speaker Change: and just become very very good at selling our product. We have plenty of people we can sell this to.

David Kallery: I don't want to confuse the market. Fair enough, and end of- I guess a follow up question is, what are you going to focus the sales team on, you know, in the past, we've heard about the, you know, the core product, then Inspirato for Business, Inspirato for Good, now Inspirato Invited, you know, all interesting things, but what do you anticipate you'll focus the sales group on, you know, over the next six to 12 months? Mike, this is David Kallery.

Mike Grindel: Fair enough. And I guess the follow-up question is, what are you going to focus the sales team on?

Speaker Change: Fair enough. And

Speaker Change: I guess the follow-up question is what are you going to focus the sales team on? You know in the past we've heard about the you know

David Kallery: You know, in the past, we've heard about the, you know, the core product, then Inspirato for Business, Inspirato for Good, now Inspirato Invited, you know, all interesting things, but what do you anticipate you'll focus the sales group on, you know, over the next six to twelve months?

David Kallery: Mike, this is David Kallery. I would tell you that we're going to primarily focus the team on selling Club. Club is the heart of what we offer. We think 80 to 85 percent of the prospects that we engage with are attracted to that product. It's a very straightforward way to access the complete portfolio and all of our services. About 10 percent of our members, or excuse me, prospects, are very, very attracted to past. If you remember from prior conversations, past is highly flexible; you know, last-minute inventory that provides great value. And there's a consumer set out there that are looking for luxury, but they're looking for value.

Speaker Change: Mike, this is David Callery. I would tell you that we're going to primarily focus the team on selling Club. Club is the heart of what we offer. We think 80 to 85% of the prospects that we engage with are attracted to that product. It's a very

David Kallery: Prior to my time at Inspirato, I had the pleasure of working with him in the past and can personally attest to his work ethic, his vision, and his cultural fit for both Inspirato and the members we serve. Pya is an entrepreneur, an investor, and a founder of One Planet Group, a firm with a mission to support a strong business ideas while building an ethos that helps improve society and give back to communities, which is also very closely aligned with our mission of inspiring lasting memories and relationships by enriching the way our members experience the world.

Speaker Change: It's a straightforward way to access the complete portfolio and all of our services.

David Kallery: About 10% of our members, or excuse me, prospects, are very, very attracted to PaaS. If you remember from prior conversations, PaaS is highly flexible, you know, last minute inventory that provides great value. And there's a consumer set out there that is looking for luxury, but they're looking for value. And then about 5% of our memberships going forward are going to be invited. We tested Invited last year, Mike, in a beta format, no pomp and circumstance.

Speaker Change: About 10% of our members, or excuse me, prospects, are very, very attracted to PATH.

David Kallery: Over the past year, we have made some incredible progress in improving our offerings that have laid the foundation for this transformation. First, we have returned to our roots as a luxury travel club and moved away from a high turn transaction-based subscription model. Since the beginning of 2023, more than 75% of our new sales for Inspirato Club, which the foundation of the company, have been for two years or more. Second, we re-imagined Inspirato Pass to serve as the perfect complimentary offering to club and a catered to a frequent and highly flexible traveler.

Speaker Change: If you remember from prior conversations, PATH is highly flexible.

David Kallery: Next, in June, we just started to introduce Inspirato by invited. Invited offers 10 years of Inspirato Club access combined with a two-year booking window and the ability to prepay fixed-nightly rates on an annual basis. While it's still very early, we've seen interest and excitement for this new offering. Since our limited introduction of this product in June, we've already generated over $4 million in new cash flow. And finally, our strategic partner with Capital One, where we're reaching the tail end of the tech and system integration work, and plan to be able to take reservations by the Ford's quarter.

David Kallery: We expect this partnership to increase Inspirato's brand recognition, which can serve as a demand driver for paid nights, generate new membership sales, and ultimately be a key contributor to Inspirato's future growth. In summary, our team has put in tremendous amount of work to set the stage for what we feel will be a true inflection point for the company. And I'm very confident that in the next few years of Inspirato will be our most successful under PIMES Watchful Eye in Steady Leadership.

Speaker Change: You know, last minute inventory that provides great value, and there's a consumer set out there that are looking for luxury, but they're looking for value. And then about 5% of our memberships going forward are going to be invited.

Robert Kaiden: And with that, I'd like to turn the call over to Robert to discuss the financials for the quarter. Robert, thanks David.

David Kallery: And then about 5 percent of our memberships going forward are going to be invited.

Robert Kaiden: Before reviewing our second quarter results, I want to highlight what I feel is currently our most important financial metric, liquidity. Following the $10 million capital infusion, second quarter, performance liquidity, including cash, cash equivalence, and restricted cash with $39 million compared to $33 million at the end of the first quarter. We've also made significant progress in our cash burn, which has improved by $23 million or 64% in the first half of this year compared to the first half of 2023.

David Kallery: We sold it to about 60 different members and watched the way they interacted with it. And there are a couple features about that product that we think are very, very attractive. The fact that the pricing is flat, the same nightly rate for all, All Trips was definitely something that consumers are attracted to, and then the two-year booking calendar that they have access to is another feature that we think the invited prospects are going to be attracted to. This offering is a lot more expensive than some of our other offerings.

David Kallery: We tested invited last year, Mike, in a beta format. No pump and circumstance. We sold it to about 60 different members, watched the way they interacted with it. And there's a couple features about that product that we think are very, very attractive. The fact that the pricing is flat, the same nightly rate for all trips, was definitely something that consumers are attracted to. And then the two-year booking calendar that they have access to is another feature that we think the invited prospects are going to be attracted to. The offering is a lot more expensive than some of our other offerings.

Speaker Change: We tested invited last year Mike in a beta format.

Speaker Change: No pomp and circumstance. We sold it to about 60 different members, watched the way they interacted with it. And there's a couple features about that product that we think are very, very attractive. The fact that the pricing is flat.

Speaker Change: The same nightly raid for all.

Robert Kaiden: In addition to the $10 million capital injection in Q3 to bolster liquidity, we have taken the following actions. First, we implemented additional cost-cutting measures that we expected results in approximately $25 million of annualized savings. As PIME mentioned, this includes a 15% reduction in force implemented earlier this week. It's important to note these cuts were not made to member-facing roles as we are capturing efficiencies without sacrificing our member experience.

Speaker Change: All trips.

Speaker Change: was definitely something that consumers are attracted to. And then the two-year booking calendar that they have access to is another feature that we think the invited prospects are going to be attracted to. The offering is a lot more expensive.

David Kallery: We're selling it in a, you know, sort of a charter mode right now for $150,000 up front. And then they rate the rates after that. It's a very attractive product for a segment of the total population.

Speaker Change: than some of our other offerings. We're selling it in a.

Speaker Change: You know, sort of a charter.

Speaker Change: mode right now for $150,000 up front, and then they get the fixed pricing on the nightly rates after that. It's a very attractive product for a segment of the total population. So I'd summarize by saying 80%, 85% club.

David Kallery: We're selling it in a sort of a charter mode right now for $150,000 up front, and then they get the fixed pricing on the nightly rates after that. It's a very attractive product for a segment of the total population, so I'd summarize by saying 80%, 85% club, approximately 10% pass, and maybe 5% invited. Got it. Yeah, and the four million you mentioned since June of cash flow from invited that that's a big number.

Mike Grindel: So I summarized by saying 80 percent, 85 percent club, approximately 10 percent pass, and maybe 5 percent inviting. Got it. Yeah, and the 4 million you mentioned since June of Casual from invited, that's a big number. That's great.

Robert Kaiden: From a travel revenue perspective, there are a number of factors that contributed to the 19% year over year decrease. First, we saw a 12% decrease in our residence revenue primarily due to ADRs of $1,535 coming in below quarters. While lowering our ADR from previous highs is a part of a strategy to deliver value to members, we did not see an associated uptick in the number of paid nights delivered that we would have hoped for given the reduced rates.

Robert Kaiden: Second, hotel revenue decreased primarily from fewer nights delivered, not quite offsetting a modest increase in ADR. I can see in our lease hotel rooms increased to 79% in the second quarter from 76% last year as we continue to risk adjust our portfolio by removing underperforming lease hotels.

Speaker Change: Approximately 10% pass and maybe 5% invited.

Speaker Change: Got it. Yeah, and the 4 million you mentioned since June of Casual from invited. That's a big number. That's great. Um...

David Kallery: That's great. Um, Hey, maybe my last question is just any updated thoughts on Capital One. You know, that's something we've been looking forward to, that integration. Sounds like 4Q, you can start accepting reservations. Any new thinking on how that may or may not drive the business? This is Mike.

Mike Grindel: Maybe my last question is just any updated thoughts on Capital One. You know, that's something we've been looking forward to: that integration. It sounds like 4Q. You can start accepting reservations. Any new thinking on how that may or may not drive the business?

Speaker Change: Hey, maybe my last question is just any updated thoughts on Capital One?

Speaker Change #100: Um, you know, that's something we've been looking forward to that integration. It sounds like for you, you can start accepting reservation. Any new thinking on how that may or may not drive the business?

David Kallery: This is Mike.

David Kallery: This is David again. Look, we’re very, very excited about having the technical work done. There was a big lift there. Capital One uses Hopper as their technical platform. The team there was outstanding to work with, but it was a lot of work for us. And it's taken a few quarters. We're on the one-yard line on finishing that work. We're actually done with the actual development work, and we're just doing some testing. So the last couple of weeks, we've moved back into discussions about the way we'll present and market the offering. Look, we're very, very excited.

Speaker Change #100: This is, Mike, this is David again.

Speaker Change #101: Look, we're very very excited about having the technical work done. There was a big lift there. Capital One uses Hopper as their technical platform.

Speaker Change #102: The team there was on standing to work with but it was a lot of work for us and it's taken a few quarters. We're on the one yard line on finishing that work, we're actually done with the actual development work and we're just doing some testing.

Speaker Change #102: So over the last couple of weeks, we've moved back into discussions about the way we'll present and market the offering. Look, we're very, very excited. I mean, Capital One, I'd argue, is one of the most prolific companies, definitely in the United States, today in North America, around demand.

David Kallery: I mean, Capital One, I'd argue, is one of the most prolific companies. It's definitely in the United States today in North America around demand. You can't really watch the Olympics or just about any other sporting event without seeing them, and we think they're going to make an amazing partner. I don't want to talk too much about what the future might look like, because obviously this is very new for us, but we're very, very excited. We've put in a lot of the hard work, and we're ready to begin transacting in Q4.

Speaker Change #102: You can't really watch the Olympics or just about any other sporting event without seeing them and we think they're going to make an amazing partner. I don't want to talk too much about what the future might look like because obviously this is very new for us.

Robert Kaiden: Cost of revenue for the quarter was approximately 51 million, a 21% improvement from the prior year. Similar to the first quarter reduced lease expenses as well as their associated fixed costs with a single biggest driver in the year for your improvement. Given the seasonality of travel revenue, gross margin in the second quarter typically reflects the low water mark for the year. We believe that to be the case in 2024 as well as our 24% gross margin for the quarter to pay a favorably to 2023 but is a bit below our expectations and reflects the impact of a declining subscription revenue base.

Robert Kaiden: Our cash operating expenses in Q2 were approximately 27 million dollars compared to approximately 32 million in the second quarter of 2023. As PM and David alluded to, we are planning for a further improvement in future operating expenses as a result of our reduced headcount and other cost reduction activities. We'll see modest cost savings in the third quarter giving severance payments and an acceleration in cost savings thereafter.

Robert Kaiden: In total, we generated an adjusted EBITDA loss of 9.1 million in the second quarter compared to a loss of 11.7 million in the second quarter of 2023. Year-to-date are adjusted EBITDA loss of approximately 5 million compares favorably to a loss of approximately 15 million in 2023. In fact, we have been seeing consistent year-over-year improvements in our quarterly EBITDA figures for three consecutive quarters. This is despite revenue decreasing over the same time span.

Robert Kaiden: I call this out to emphasize that improvements we've made from both a product profitability and efficiency standpoint have been paying off. While much of our declines in revenue are planned driven by a focus on product profitability, revenue trends are not where we want them to be.

Speaker Change #102: But we're very, very excited. We've put in a lot of the hard work and we're ready to begin transacting in Q4. Definitely something will keep you updated on in the future.

David Kallery: Definitely, something will keep you updated on in the future.

Mike Grindel: Okay, hey, thank you.

Unknown Executive: Thank you on one moment for our next question.

Operator: Thank you, and one moment for our next question. And our next question is going to come from the line of Brett Knoblauch with Cantor Fitzgerald. Your line is open. Please go ahead.

Speaker Change #103: Okay, hey, thank you.

Brett Knoblauch: And our next question is going to come from the line of Brett Knoblauch with Cantor Fitzgerald. Your line is open; please go ahead. Hi guys, thanks for taking my questions. I guess let me just start on the control to combination portfolio. Yeah, I think we've embarked down this route of optimizing the accommodations almost kind of two years ago at this point. Has there been an increase to the number of underperforming locations? You know, we've already taken, call it, 200 300 accommodations out of portfolio, and now we're looking to take more. So I guess has a number of underperforming locations increased, or how should we think about just the constant reduction of control to combination?

Speaker Change #104: Thank you and one moment for our next question.

Speaker Change #105: And our next question is going to come from the line of Brett Knoblauch with Cantor Fitzgerald. Your line is open. Please go ahead

Brett Knoblauch: Hi guys, thanks for taking my questions. I guess could we maybe just start on the controlled accommodation portfolio. You know I think we've embarked down this route of optimizing the accommodations.

Speaker Change #107: Almost kind of two years ago at this point.

Speaker Change #108: Has there been an increase to the number of underperforming locations? You know, we've already taken, call it, 200, 300 accommodations out of the portfolio. Now we're looking to take more. So I guess, has the number of underperforming locations increased? Or how should we think about this, the constant reduction of controlled accommodations?

Brett Knoblauch: Yeah, hey, but thanks for the question. It's Robert here. So we embarked starting in Q2 of last year. So just a little bit over a year ago on taking some of the portfolio out. When we did that, there was a number of reasons for it. One was we had seen that our demand didn't match our supply, and we oversupply. And because of that, in part, we were also seeing that we had occupancy rates that were lower than we'd like. And so we started that process then. As you may recall, you know, it takes time for us to exit some of our leases.

Robert: So we embarked, starting in Q2 of last year, so just a little bit over a year ago, on taking some of the portfolio out. When we did that, there were a number of reasons for it. One was that we had seen that our demand didn't match our supply, and we were oversupplied. And because of that, in part, we were also seeing that, you know, we had occupancy rates that were lower than we'd like. And so we started that process then. As you recall, you know, it takes time for us to exit some of our leases. So it's usually six months to 12 months before you get out.

Speaker Change #108: Yeah, hey Brett, thanks for the question. It's Robert here. So we embarked starting in Q2 of last year, so

Speaker Change #108: just a little bit over a year ago on taking some of the portfolio out.

Speaker Change #108: When we when we did that there was a number of reasons for it. One was we had seen that our demand didn't match our supply and we were oversupplied.

Speaker Change #108: And because of that, in part, we were also seeing that we had occupancy rates that were lower than we'd like, and so we started that process then.

Speaker Change #108: As you may recall, it takes time for us to exit some of our leases, so it's usually six months to 12 months before you get out. So you give a notice, which we started to do in Q2 and did in Q3 of last year. And so we started to see really in Q1 of this year where we started to see some pickup on that lease expense and saw some benefits to our overall occupancy rates.

Robert Kaiden: So it's usually six months to 12 months before you get out. So you give a notice, which we started doing Q2 and did in Q3 of last year. And so we started to see really in Q1 of this year where we started to see some pickup on that lease expense and saw some benefits to our overall occupancy rates. Q2s, a challenging quarter from an occupancy rate perspective that's our lowest traveling quarter of the year. So, you know, I'm not reading too much into those occupancy rates for this quarter. But we are we continue now, you know, as you've heard of the one big bang where we took out about a hundred of our residences last year.

Speaker Change #108: Q2 is a challenging quarter from an occupancy rate perspective. It's our lowest traveling quarter of the year so

Speaker Change #108: I'm not reading too much into those occupancy rates for this quarter, but we continue now, as compared to the one big bang where we took out about 100 of our residences last year, we'll continue to optimize the portfolio. So last year when we did this, we said, what do we think the number of residences and our members

Robert Kaiden: We're continuing to optimize the portfolio. So last year, when we did this, we said, what do we think the number of residences and our members will want the need next year, and we targeted towards that number? Since then, we continue to look across our portfolio, and we're making decisions such as, you know, are there certain residents that are still underperforming? And quite honestly, some of those residences might be new. We're still picking up a limited number of residences that relate back to deals that we cut in 2022. And so, as we go through the first year with them, we're assessing what is their profitability?

Robert: Since then, we continue to look across our portfolio. And we're making decisions such as, you know, are there certain residents that are still underperforming? And quite honestly, some of those residents might be new.

Speaker Change #108: will want and need next year, and we targeted towards that number.

Speaker Change #108: Since then, we continue to look across our portfolio, and we're making decisions such as are there certain residents that are still underperforming, and quite honestly, some of those residents might be new. We're still picking up a limited number of residences.

Robert: We're still picking up a limited number of residences that relate back to deals that we cut in 2022. And so as we go through the first year with them, we're assessing what their profitability look like. How much do our members really enjoy the experience at those locations? What are our occupancy rates? And so we're continuing to refine the portfolio. We did exit one group of properties, as we mentioned earlier, just now in Q3. That will be, that's approximately 37 units. So that's a big haircut there.

Speaker Change #108: that relate back to deals that we cut in 2022. And so as we go through the first year with them, we're assessing what does their profitability look like, how much do our members really enjoy the experience at those locations, what are our occupancy rates.

Robert Kaiden: Look like how much do our members really enjoy the experience with those locations? What are our occupancy rates? And so we're continuing to refine the portfolio. We did exit one group of properties as we mentioned earlier, just now in Q3. That will be, that's approximately 37 units. So that's a big haircut there. And then we are kind of reworking our entire portfolio for other properties that, you know, may not be, you know, achieving the results that we want. And at the same time, we continue to look at where the locations that we're, you know, we've wound up for whatever reason to be under-invested in that our members really want to go to.

Speaker Change #108: And so we're continuing to refine the portfolio. We did exit one group of properties, as we mentioned earlier, just now in Q3. That's approximately 37 units, so that's a big haircut there. And then we are kind of reworking our entire portfolio for other properties that may not be achieving the results that we want. And at the same time, we continue to look at where the locations that we wound up, for whatever reason, to be under-invested in that our members really want to go to, and that we want to do a little bit more of a lift.

Robert: And then we are kind of reworking our entire portfolio for other properties that, you know, may not be, you know, achieving the results that we want. And at the same time, we continue to look at where the locations that we're, you know, we've wound up for whatever reason to be underinvested in that our members really want to go to. And then we want to do a little bit more of a lift.

Robert Kaiden: And then we want to do a little bit more of a lift. The other thing I'd say is that from a hotel perspective, you know, residents is obviously a big piece, and we're down, you know, close to 20% of residences. From a hotel perspective, we've also changed the mix there over the last 12 months or so. We had a bunch of least hotels in our portfolio, and we had some really differentiated type of profitability on them. We've kept the ones that were profitable and the ones that weren't profitable. We've replaced them with, you know, what we described as net rate hotel arrangements, meaning, you know, we pay on a per-night basis.

Robert: The other thing I'd say is that from a hotel perspective, you know, residence is obviously a big piece, and we're down, you know, close to 20% of residences. From a hotel perspective, we've also changed the mix there over the last 12 months or so. We had a bunch of leased hotels in our portfolio, and we had some really differentiated type of profitability on them. We've kept the ones that were profitable, and the ones that weren't profitable, we've replaced them with, you know, what we describe as net rate hotel arrangements, meaning, you know, we pay on a per-night basis, so our members still get to go to all the great places they want to, but it doesn't have the same level of exposure for us.

Speaker Change #108: The other thing I'd say is that from a hotel perspective, you know, residence is obviously a big piece and we're down, you know, close to 20 percent of residences. From a hotel perspective, we've also changed the mix there over the last 12 months or so.

Payam Zomani: Before turning the call over to the operator for Q&A, I'd like to turn it back to Payam for some closing remarks. Thank you, Robert.

Speaker Change #109: We had a bunch of leased...

Speaker Change #109: hotels in our portfolio, and we had some really differentiated type of profitability on them. We've kept the ones that were profitable and the ones that weren't profitable. We've replaced them with what we describe as net rate hotel arrangements, meaning, you know, we pay on a per night basis. So our members still get to go to all the great places they want to, but it doesn't have the same level of exposure for us.

Payam Zomani: As many of you will soon find I aim to be transparent and direct when communicating and these results are simply disappointing. While there certainly have been improvements in recent quarters in Sprouto is not where I want it to be or where it should be as an organization. The past several years have been riddled with far too many challenges and frankly put failures.

Robert Kaiden: So our members still get to go to all the great places they want to, but it doesn't have the same level of exposure for us. And we will continue to invest in least hotels, but we're knowing that we've got the net rate hotel out there. We'll only do that when we get, you know, really attractive rates that we can pass on to our members in locations that they really want to be and then the best of hotels. Hope that helps.

Payam Zomani: That's it. I'm incredibly excited about the future and confident that we are on the cusp of great things. When I evaluate businesses there are three things that matters to me the most. The culture of the company, profits and growth. But profits is by far more important than growth. It's quite simple. I firmly believe that you cannot cut your way to prosperity and it's time to once again invest in our growth. But again, first comes profitability. As the approaches next chapter, my promise is that we will continue to innovate and learn as we go, but we will also be nimble enough to react and respond accordingly.

Robert: And we will continue to invest in leased hotels, but we – knowing that we've got the net rate hotels out there, we'll only do that when we get, you know, really attractive rates that we can pass on to our members in locations that they really want to be and in the best of hotels. Hope that helps.

Payam Zomani: I look forward to connecting with you and further articulating our future plans in the coming quarters.

Speaker Change #109: And we will continue to invest in leased hotels, but knowing that we've got the net rate hotels out there, we'll only do that when we get really attractive rates that we can pass on to our members in locations that they really wanna be and in the best of hotels. Hope that helps.

Payam Zomani: One, what attracted you to Inspirato and two, what is your vision for Inspirato? If you look out like three plus years. Hi, Mike. Great question. You know, I've been watching Inspirato for many years. And, you know, I do travel a lot. I don't come from the hospitality industry, but I've been to many, many countries. I don't exactly how many, but probably 60 to 70 countries. And I'm a big consumer. I'm a big consumer of hotels, Airbnb, which I don't necessarily enjoy, and other options out there.

Robert Kaiden: It does have to, it's 37 units. When will they, when will the lease expense fall if they can save it there? Yeah, so we are, where we just enter into intermination arrangement, we'll be, we'll be, let me do it more from a cash perspective, which is that we will be paying through end of March for those. And then after March of 2025, those will fully drop off the books.

Robert: It does have the 37 units went when will they when will the lease expense fall off the income statement? Yeah, so we are where we just entered into a termination arrangement will be will be let me do it from a more from a cash perspective, which is that we will be paying through end of March for those and then after March of 2025, those will fully drop off the books. I guess when I look at the subscriber count.

Speaker Change #110: It does help. The 37 units, when will they, when will the lease expense fall off the income statement there?

Speaker Change #111: Yeah, so we are, where we just entered into a termination arrangement, we'll be, we'll be, let me do it from a more from a cash perspective, which is that we're, we'll be paying through end of March for those, and then after March of 2025, those will fully drop off the books.

Brett Knoblauch: Got it. It, it, I guess when I look at the subscriber count, you know, I think it declined a little less than we expected this quarter, which is nice. I guess ultimately for, you know, the business return to growth, club subscribers need to return to growth, given that's where you guys' emphasis is on.

Speaker Change #111: Got it.

Speaker Change #111: Um, um,

Brett Knoblauch: I think it declined a little less than we expected this quarter, which is nice. I guess, ultimately, for the business to return to growth. Club subscribers need to return to growth, given that's where you guys are. Have you guys tinkered with different pricing models for clubs, maybe lowering it to easy attractiveness to a broader set of consumers, or how should we think about that, or is that something you guys haven't thought about? This is David, Brett.

Speaker Change #112: I guess when I look at the subscriber count, you know, I think it declined a little less than we expected this quarter, which is nice.

Speaker Change #113: I guess, ultimately, for the business to return to growth.

Speaker Change #114: Club subscribers need to return to growth and given that's where your guys emphasis is on Have you guys tinkered with?

Brett Knoblauch: Have you guys tinkered with, you know, different pricing models for club? Maybe well, or it's, you know, easy attractiveness to a, a broader set of consumers, or how should we think about that, or is that something you guys haven't looked at?

Kyle Sourk: Kyle Sourk

David Kallery: This is David, Brett. So I absolutely, over the last 24 months, but really, with high focus over the last 12 months, we're really trying to guide new club subscribers toward multi-year deals. And we're doing that by really making a multi-year deal from a, from a cost on an annual basis much more attractive. So I think you're, you know, we're, you're going to start to see, and you're already seeing some of the improvement that you're seeing is as a result of us selling these multi-year arrangements. The typical person is buying something today that's probably close to two and a half years when you look at the number of folks that are buying two-year memberships, three- and five-year memberships.

Kyle Sourk: This is David, Brett. So, absolutely, over the last 24 months, but really with high focus over the last 12 months, we're really trying to guide new club subscribers toward multi-year deals. And we're doing that by really making a multi-year deal from a cost on an annual basis much more attractive.

Kyle Sourk: So I think you're going to start to see, and you're already seeing, some of the improvement that you're seeing is as a result of us selling these multi-year...

Kyle Sourk: Arrangements. The typical person is buying something today that's probably close to two and a half years.

Brett Knoblauch: So we see over time that that will continue to improve with the multi-year memberships and the, you know, the economics associated with those. Got it.

Kyle Sourk: When you look at the number of folks that are buying two-year memberships, three, and five-year memberships. So we see over time that that will continue to improve with the multi-year memberships and the economics associated with those.

Robert: And I know you guys kind of have Unknown in the back half of the year. You know, so we think seasonality is somewhat consistent with years in the past, with call it, you know, Q3 being somewhat higher than Q2 and Q4 maybe a little bit lower than Q5. Q2, or I guess any way to just give us some color on what we should be expecting for the four-year. Yeah, but I think that's exactly right.

Brett Knoblauch: And I know you guys kind of have taken away guidance for, you know, the back half of the year, but, you know, so we think seasonality is somewhat consistent with years in the past, with, you know, Q3 being somewhat higher than Q2 and Q4 may be a little bit lower than Q2. Or, I guess, any way to just give us some color on what we should be expecting for the four-year. Yeah, but I think that's exactly right. You know, we've seen a year-over-year decline, which has been, you know, fairly consistent in the first two quarters of the year.

Kyle Sourk: David Knoblauch, David Knoblauch,

Speaker Change #116: Got it. And I know you guys kind of have...

Speaker Change #117: taking away guidance for you know the back half of the year but you know so we think seasonality is somewhat consistent with years in the past

Speaker Change #118: with call it, you know, Q3 being somewhat higher than Q2 and Q4 maybe a little bit lower than Q2 or I guess any way to just give us some color on what we should be expecting for the full year

Robert: You know, we've seen a year over year decline, which has been, you know, fairly consistent in the first two quarters of the year. You should expect to see that trend continue. And certainly Q3 and Q4, from a revenue perspective, are definitely and which also means from a margin perspective, are typically and will be stronger quarters than Q2. Perfect. And, If we're looking at, you know, occupancy rates for this quarter, they stepped down quite meaningfully from from last quarter, and we're down year over year, despite the maybe pricing initiatives you guys have put in place, would you expect? to improve going into the end of the year.

Speaker Change #119: Yeah, but I think that's exactly right. You know, we've seen a year over year decline, which has been, you know, fairly consistent in the first two quarters of the year. You should expect to see that trend continue, and certainly a Q3 and Q4 from a revenue perspective are definitely, and which also means from a margin perspective are typically and will be stronger quarters than Q2.

Brett Knoblauch: You should expect to see that trend continue, and certainly Q3 and Q4, from a revenue perspective, are definitely, and which also means from a margin perspective, are typically and will be stronger quarters than Q2. Perfect.

Brett Knoblauch: And if we're looking at, you know, I can see rates for this quarter. They step down quite meaningfully from, from last quarter and we're, you know, down year over year despite the maybe pricing initiatives you guys have put in place. Would you expect to see rates to improve going into the, you know, end of the year? Yeah, I think we certainly will see an improvement in occupancy rates. Those units that we referenced, you know, those units that we just took out are very much seasonal units. And so the benefits of those, you see in Q3 and other parts of the years, they really have a downward impact on our occupancy.

Speaker Change #120: Perfect. And if we're looking at, you know, occupancy rates for this quarter, they stepped down quite meaningfully from from last quarter and we're down year over year, despite the maybe pricing initiatives you guys have put in place. Would you expect occupancy rates to improve going into the end of the year?

Robert: Yeah, I think we certainly will see an improvement in occupancy rates. Those units that we referenced, we, you know, those units that we just took out are very much seasonal units. And so the benefits of those you see in Q3 and other parts of the year really have a downward impact on our occupancy. We did not have in 2023 all those units in our portfolio yet. Those are newer units.

Speaker Change #121: Yeah, I think we certainly will see an improvement in occupancy rates.

Speaker Change #122: Those units that we referenced

Speaker Change #123: We, you know, those units that we just took out are very much seasonal units. And so the benefits of those you see in Q3 and other parts of the years, they really have a downward impact on our occupancy. We did not have in 20...

Brett Knoblauch: We did not have in 2023 all those units in our portfolio; yet, those are newer units. And so they hit us, you know, in full effect in 2024, with really a drag on our Q2 occupancy.

Robert: And so they hit us, you know, in full force in 2024, really with a drag on our Q2 occupancy. And then just a more broad comment about the occupancy that you're asking about with the quarters. You know, if you just think about the seasons of the year, Q2 is, you know, April, May, and June, and there's not a lot of holidays in there. There's a little bit of summer.

Speaker Change #124: 23, all those units in our portfolio yet, those are newer units. And so they hit us in a full effect in 2024, really with a drag on our Q2 occupancy.

Payam Zomani: So, it's probably something I've kept an eye on for a long time. And I really like the business model. I love the concept of a subscription model with 12,000 members that represent some of the, you know, most successful people in our country and beyond. So, that by itself is extremely interesting. And looking at this business, to me it felt simple from the perspective that the company has significant revenue, but it's definitely spending more than what it should.

Brett Knoblauch: And then just a more broad comment about the occupancy that you're asking about with the quarters. You know, if you just think about the seasons of the year, you know, Q2 is April, May, and June. And there's not a lot of holidays, and there's a little bit of summer; it really depends on how the year falls. And that's why that quarter is a lot weaker than the summer quarter, or the holiday quarter, or the ski quarter. So this is just, there's just a lot of seasonality goes into Q2 and therefore there can be a little bit of variability in occupancy goes a long way there in terms of having an impact on our margins as well.

Payam Zomani: So, it seemed to me that the challenge wasn't as big as probably it felt like by some of the people who've been around this business for a very long time. At the end of the day, it felt like here's the company with significant revenue, but it's spending about 10% more than it should. At this point in time, I know it's been higher before. So, that's really what attracted me.

Speaker Change #124: And then just a more broad comment about the occupancy that you're asking about with the quarters. You know, if you just think about the seasons of the year, you know, Q2 is, you know, April, May, and June, and there's not a lot of holidays in there. There's a little bit of summer. It really depends on how the year falls, and that's why that quarter is a lot weaker than the summer quarter or the holiday quarter or the ski quarter. So this is just—there's just a lot of seasonality that goes into Q2, and therefore, there can be a little bit of variability in occupancy goes a long way there in terms of having an impact on our margins as well.

Robert: It really depends on how the year falls. And that's why that quarter is a lot weaker than the summer quarter or the holiday quarter or the ski quarter. So this is just, there's just a lot of seasonality that goes into Q2. And therefore, there can be a little bit of variability in occupancy goes a long way there in terms of having an impact on our margins as well.

Payam Zomani: A company with a significant opportunity that it should really right size. So, what do I think the next three years will look like? I like to make this business boring. I like to make this business one that has no drama that it does the same thing, but does it over and over again and does it very well. I want us to do more of the kinds of things that work, simplify our product and just become very, very good at selling our product. Fair enough.

David Kallery: And I guess the follow-up question is, what are you going to focus the sales team on? You know, in the past, we've heard about the, you know, the core product, then Inspirato for business, Inspirato for good, now Inspirato invited, you know, all interesting things, but what do you anticipate you'll focus the sales group on, you know, over the next six to 12 months? Mike, this is David Kallery. I would tell you that we're going to primarily focus the team on selling club.

Brett Knoblauch: Perfect, got it.

Operator: Perfect. I've got it. Thank you guys, I really appreciate it, Thank you, and I would now like to turn the conference back to Chairman and CEO Payam Zamani for closing remarks. Well, thank you very much. And I'm, you know, we're really looking forward to sharing with you whatever progress that we make in the coming months and quarters. This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone have a great day.

Brett Knoblauch: Thank you, guys. I really appreciate it. Thank you.

David Kallery: Club is the heart of what we offer. We think 80 to 85 percent of the prospects that we engage with are attracted to that product. It's a very straightforward way to access the complete portfolio and all of our services. About 10 percent of our members, or excuse me prospects, are very, very attracted to past. If you remember from prior conversations, past is highly flexible, you know, last-minute inventory that provides great value.

Pyam Zomani: And I would now like to turn the conference back to the Chairman and CEO.

Speaker Change #125: Perfect. Got it. Thank you guys. Really appreciate it.

Pyam Zomani: I am the money for closing remarks. Thank you very much. Well, thank you very much. And I, you know, we're really looking forward to sharing with you whatever progress that we make in the coming months and quarters.

Speaker Change #125: Thank you, and I would now like to turn the conference back to Chairman and CEO Payam Zamani for closing remarks.

David Kallery: And there's a consumer set out there that are looking for luxury, but they're looking for value. And then about 5 percent of our memberships going forward are going to be invited. We tested invited last year, Mike, in a beta format. No pump and circumstance. We sold it to about 60 different members, watched the way they interacted with it. And there's a couple features about that product that we think are very, very attractive.

Speaker Change #126: Burma, Shweta Khajuria, David Knoblauch, David Knoblauch, David Knoblauch,

Speaker Change #127: I appreciate that.

Payam Zamani: Well, thank you very much and we're really looking forward to sharing with you whatever progress that we make in the coming months and quarters.

David Kallery: The fact that the pricing is flat, the same nightly rate for all trips, was definitely something that consumers are attracted to. And then the two-year booking calendar that they have access to is another feature that we think the invited prospects are going to be attracted to. The offering is a lot more expensive than some of our other offerings. We're selling it in a, you know, sort of a charter mode right now for $150,000 up front. And then they rate the rates after that. It's a very attractive product for a segment of the total population.

That concludes today's conference call. Thank you for participating, and you may now disconnect everyone. Have a great day.

Speaker Change #128: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone have a great day.

David Kallery: Maybe my last question is just any updated thoughts on Capital One. You know, that's something we've been looking forward to that integration. It sounds like 4Q. You can start accepting reservation. Any new thinking on how that may or may not drive the business? This is Mike. This is David again. Look, we're very, very excited about having the technical work done. There was a big lift there. Capital One uses Hopper as their technical platform.

Speaker Change #128: [inaudible]

David Kallery: The team there was outstanding to work with, but it was a lot of work for us. And it's taken a few quarters. We're on the one-yard line on finishing that work. We're actually done with the actual development work, and we're just doing some testing. So the last couple weeks, we've moved back into discussions about the way we'll present and market the offering. Look, we're very, very excited. I mean, Capital One, I'd argue, is one of the most prolific companies.

David Kallery: It's definitely in the United States today in North America around demand. You can't really watch the Olympics or just about any other sporting event without seeing them, and we think they're going to make an amazing partner. I don't want to talk too much about what the future might look like, because obviously this is very new for us, but we're very, very excited. We've put in a lot of the hard work, and we're ready to begin transacting in Q4.

Unknown Executive: Definitely something will keep you updated on in the future. Okay, hey, thank you. Thank you on one moment for our next question.

Brett Knoblauch: And our next question is going to come from the line of Brett Knoblauch with Cantor Fitzgerald. Your line is open, please go ahead. Hi guys, thanks for taking my questions. I guess let me just start on the control to combination portfolio. Yeah, I think we've embarked down this route of optimizing the accommodations almost kind of two years ago at this point. Has there been an increase to the number of underperforming locations, you know, we've already taken call it 200 300 accommodations out of portfolio and now we're looking to take more.

Brett Knoblauch: So I guess has a number of underperforming locations increased or how should we think about just the constant reduction of control to combination? Yeah, hey, but thanks for the question. It's Robert here. So we embarked starting in Q2 of last year. So just a little bit over a year ago on taking some of the portfolio out. When we when we did that, there was a number of reasons for it. One was we had seen that our demand didn't match our supply and we oversupply.

Brett Knoblauch: And because of that in part, we were also seeing that we had occupancy rates that were lower than we'd like. And so we started that process then. As you may recall, you know, it takes a time for us to exit some of our leases. So it's usually six months to 12 months before you get out. So you give a notice, which we started doing Q2 and did in Q3 of last year.

Brett Knoblauch: And so we started to see really in Q1 of this year where we started to see some pickup on that lease expense and saw some benefits to our overall occupancy rates. Q2s, a challenging quarter from an occupancy rate perspective that's our lowest traveling quarter of the year. So, you know, I'm not reading too much into those occupancy rates for this quarter. But we are we continue now, you know, as you've heard of the one big bang where we took out about a hundred of our residences last year.

Brett Knoblauch: We're continuing to optimize the portfolio. So last year, when we did this, we said, what do we think the number of residences and our members will want the need next year and we targeted towards that number? Since then, we continue to look across our portfolio and we're making decisions such as, you know, are there certain residents that are still underperforming? And quite honestly, some of those residences might be new. We're still picking up a limited number of residences that relate back to deals that we cut in 2022.

Brett Knoblauch: And so as we go through the first year with them, we're assessing what is their profitability? Look like how much do our members really enjoy the experience with those locations? What are our occupancy rates? And so we're continuing to refine the portfolio. We did exit one group of properties as we mentioned earlier just now in Q3. That will be, that's approximately 37 units. So that's a big haircut there. And then we are kind of reworking our entire portfolio for other properties that, you know, may not be, you know, achieving the results that we want.

Brett Knoblauch: And at the same time, we continue to look at where the locations that we're, you know, we've wound up for whatever reason to be under-invested in that our members really want to go to. And then we want to do a little bit more of a lift. The other thing I'd say is that from a hotel perspective, you know, residents is obviously a big piece and we're down, you know, close to 20% of residences.

Brett Knoblauch: From a hotel perspective, we've also changed the mix there over the last 12 months or so. We had a bunch of least hotels in our portfolio and we had some really differentiated type of profitability on them. We've kept the ones that were profitable and the ones that weren't profitable. We've replaced them with, you know, what we described as net rate hotel arrangements, meaning, you know, we pay on our per-night basis. So our members still get to go to all the great places they want to, but it doesn't have the same level of exposure for us.

Brett Knoblauch: And we will continue to invest in least hotels, but we're knowing that we've got the net rate hotel out there. We'll only do that when we get, you know, really attractive rates that we can pass on to our members in locations that they really want to be and then the best of hotels. Hope that helps. It does have to, it's 37 units, when will they, when will the lease expense fall if they can save it there?

Brett Knoblauch: Yeah, so we are, where we just enter into intermination arrangement, we'll be, we'll be, let me do it more from a cash perspective, which is that we will be paying through end of March for those. And then after March of 2025, those will fully drop off the books. Got it. It, it, I guess when I look at the subscriber count, you know, I think it declined a little less than we expected this quarter, which is nice.

Brett Knoblauch: I guess ultimately for, you know, the business return to growth, club subscribers need to return to growth, given that's where you guys emphasis is on. Have you guys tinkered with, you know, different pricing models for club? Maybe well, or it's, you know, easy attractiveness to a, a broader set of consumers, or how should we think about that, or is that something you guys haven't looked at? This is David, Brett. So I absolutely, over the last 24 months, but really, with high focus over the last 12 months, we're really trying to guide new club subscribers toward multi-year deals.

Brett Knoblauch: And we're doing that by really making a multi-year deal from a, from a cost on an annual basis much more attractive. So I think you're, you know, we're, you're going to start to see and you're already seeing some of the improvement that you're seeing is as a result of us selling these multi-year arrangements. The typical person is buying something today that's probably close to two and a half years when you look at the number of folks that are buying two-year memberships, three and five-year memberships.

Brett Knoblauch: So we see over time that that will continue to improve with the multi-year memberships and the, you know, the economics associated with those. Got it. And I know you guys kind of have taken away guidance for, you know, the back half of the year, but, you know, so we think seasonality is somewhat consistent with years in the past, with, you know, Q3 being somewhat higher than Q2 and Q4 may be a little bit lower than Q2 or, I guess, any way to just give us some color on what we should be expecting for the four-year.

Brett Knoblauch: Yeah, but I think that's exactly right. You know, we've seen a year over year decline which has been, you know, fairly consistent in the first two quarters of the year. You should expect to see that trend continue and certainly Q3 and Q4 from a revenue perspective are definitely, and which also means from a margin perspective are typically and will be stronger quarters than Q2. Perfect. And if we're looking at, you know, I can see rates for this quarter.

Brett Knoblauch: They step down quite meaningfully from, from last quarter and we're, you know, down year over year despite the maybe pricing initiatives you guys have put in place. Would you expect to see rates to improve going into the, you know, end of the year? Yeah, I think we certainly will see an improvement in occupancy rates, those units that we referenced, you know, those units that we just took out are very much seasonal units.

Brett Knoblauch: And so the benefits of those, you see in Q3 and other parts of the years, they really have a downward impact on our occupancy. We did not have in 2023 all those units in our portfolio yet they, those are newer units. And so they hit us, you know, in a full effect in 2024, with really with a drag on our Q2 occupancy. And then just a more broad comment about the occupancy that you're asking about with the quarters.

Brett Knoblauch: You know, if you just think about the seasons of the year, you know, Q2 is April, May and June. And there's not a lot of holidays and there's a little bit of summer, it really depends on how the year falls. And that's why that quarter is a lot weaker than the summer quarter or the holiday quarter or the ski quarter. So this is just, there's just a lot of seasonality goes into Q2 and therefore there can be a little bit of variability in occupancy goes a long way there in terms of having an impact on our margins as well. Perfect, got it. Thank you guys really appreciate it. Thank you.

Payam Zomani: And I would now like to turn the conference back to Chairman and CEO.

Payam Zomani: I am the money for closing remarks. Thank you very much. Well, thank you very much. And I, you know, we're really looking forward to sharing with you whatever progress that we make in the coming months and quarters.

Unknown Executive: That concludes today's conference call. Thank you for participating and you may now disconnect everyone.

Unknown Executive: Have a great day.

Q2 2024 Inspirato Inc Earnings Call

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