Inspirato rporated(ISPO) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information Filing Details Inspirato Incorporated's Q2 2025 Form 10-Q outlines its non-accelerated filer status and outstanding equity - Filing Type: Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] - Registrant Status: Non-accelerated filer, smaller reporting company, and emerging growth company[4] Securities Outstanding | Securities Type | Shares/Warrants Outstanding (as of Aug 11, 2025) | | :---------------- | :--------------------------------------------- | | Class A Common Stock | 12,469,941 | | Warrants | 8,624,792 | Table of Contents Special Note Regarding Forward-Looking Statements Forward-Looking Statements Disclaimer The Form 10-Q contains forward-looking statements subject to substantial risks, cautioning investors against undue reliance - The report contains forward-looking statements regarding future financial and operating performance, strategy, and market conditions[8] - Key areas of forward-looking statements include the pending transaction with Buyerlink, contractual relationship with Capital One, ability to service debt, and future capital requirements[8] - Investors are cautioned against undue reliance on forward-looking statements, as actual results are subject to numerous risks and uncertainties[9][11] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents Inspirato's unaudited condensed consolidated financial statements and notes for Q2 2025 and 2024 Condensed Consolidated Balance Sheets The balance sheet shows a decrease in total assets and liabilities, with a slight improvement in total equity deficit Balance Sheet Summary (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total Assets | $252,642 | $273,885 | | Total Liabilities | $382,338 | $403,737 | | Total Equity (Deficit) | $(129,696) | $(129,852) | - Total assets decreased by $21.243 million from December 31, 2024, to June 30, 2025, primarily due to decreases in cash, prepaid member travel, and property and equipment[16] - Total liabilities decreased by $21.399 million, mainly driven by a reduction in deferred revenue and current lease liabilities[16] Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss significantly decreased year-over-year, despite a decline in total revenue for both three and six-month periods Statements of Operations (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $63,108 | $67,382 | $128,997 | $147,627 | | Cost of revenue | $45,736 | $51,201 | $86,080 | $99,725 | | Gross margin | $17,372 | $16,181 | $42,917 | $47,902 | | Net loss and comprehensive loss attributable to Inspirato Incorporated | $(5,313) | $(8,707) | $(3,691) | $(7,444) | | Basic and diluted net loss per Class A share | $(0.42) | $(2.33) | $(0.30) | $(2.03) | - Net loss attributable to Inspirato Incorporated significantly decreased for both the three-month period (from $(8,707) thousand to $(5,313) thousand) and six-month period (from $(7,444) thousand to $(3,691) thousand) year-over-year[19] - Revenue decreased by 6% for the three months ended June 30, 2025, and by 13% for the six months ended June 30, 2025, compared to the same periods in 2024[19] Condensed Consolidated Statements of Equity (Deficit) Total equity deficit slightly improved, driven by an increase in Class A Common Stock shares from warrant exercises and RSU vesting Statements of Equity (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total Equity (Deficit) | $(129,696) | $(129,852) | | Class A Common Stock Shares Outstanding | 12,470 | 11,763 | | Additional Paid-in Capital | $165,170 | $161,323 | | Accumulated Deficit | $(294,867) | $(291,176) | - Total equity deficit slightly improved from $(129,852) thousand at December 31, 2024, to $(129,696) thousand at June 30, 2025[22] - The increase in Class A Common Stock shares outstanding is primarily due to the issuance of common stock upon exercise of warrants and vesting of restricted stock units[22] Condensed Consolidated Statements of Cash Flows Operating cash burn improved, and financing activities provided cash, primarily from warrant exercises, leading to a reduced net decrease in cash Statements of Cash Flows (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(5,545) | $(8,969) | | Net cash used in investing activities | $(1,749) | $(3,526) | | Net cash provided by (used in) financing activities | $2,058 | $(290) | | Net decrease in cash, cash equivalents and restricted cash | $(5,236) | $(12,785) | | Cash, cash equivalents and restricted cash – end of period | $29,769 | $29,481 | - Net cash used in operating activities decreased from $(8,969) thousand in H1 2024 to $(5,545) thousand in H1 2025, indicating improved operational cash burn[25] - Financing activities provided $2.058 million in H1 2025, a significant improvement from cash used of $(290) thousand in H1 2024, primarily due to proceeds from warrant exercises[25] Notes to Condensed Consolidated Financial Statements (unaudited) This section provides detailed notes explaining the company's accounting policies, revenue recognition, debt, leases, and other financial statement components (1) Nature of Business Inspirato, a luxury hospitality club, is undergoing a merger with Buyerlink Inc., an investment agreement, and a reorganization plan to address liquidity challenges - Inspirato is a luxury hospitality club providing access to approximately 325 private luxury vacation homes and approximately 230 luxury hotel/resort partners in over 170 destinations[26][27] - Merger Agreement: On June 25, 2025, Inspirato entered into a merger agreement with Buyerlink Inc., a related party, issuing 73,891,230 shares of Class A Common Stock and 8,262,327 shares of newly designated preferred stock to One Planet Ops as consideration[31] - Post-Merger: Inspirato will change its name to One Planet Platforms, Inc., with Buyerlink becoming a wholly-owned subsidiary and One Planet Ops designating six of the seven Board members[32][33] - Investment Agreement: One Planet Group LLC invested $10.0 million for 2.9 million shares and warrants in August 2024, with an additional $2.5 million investment in December 2024, and $2.0 million generated from warrant exercises in February 2025[29][41] - Liquidity Challenges: The company experienced declines in active paid member subscriptions and nights delivered, leading to decreased revenues and negative cash flows from operating activities, prompting a Reorganization Plan[37][38] - Debt Forbearance: Inspirato entered a twelve-month Forbearance and Amendment Agreement with Oakstone Ventures, Inc. on March 21, 2025, regarding its 8% Senior Secured Convertible Note due to liquidity threshold failures[40] (2) Significant Accounting Policies This note outlines the basis of presentation for the unaudited condensed consolidated financial statements and discusses the evaluation of new accounting pronouncements - Financial statements are prepared in accordance with GAAP and SEC rules for interim reporting, with certain information condensed or omitted[44] - Management makes estimates and assumptions affecting reported amounts; actual results may differ[47] - The company is evaluating the impact of ASU 2025-01 (Expense Disaggregation Disclosures) and ASU 2025-05 (Credit Losses for Accounts Receivable) on its financial statements[48][50] (3) Revenue Total revenue decreased due to a significant decline in subscription revenue, while deferred revenue also saw a reduction Revenue Breakdown (in thousands) | Revenue Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Residence and hotel travel | $24,922 | $29,072 | $63,203 | $73,262 | | Experiences and bespoke travel | $14,457 | $9,774 | $17,899 | $15,258 | | Total Travel | $39,379 | $38,846 | $81,102 | $88,520 | | Subscription | $19,363 | $25,240 | $40,255 | $53,305 | | Rewards and other revenue | $4,366 | $3,296 | $7,640 | $5,802 | | Total Revenue | $63,108 | $67,382 | $128,997 | $147,627 | - Subscription revenue decreased by 23% for the three months and 24% for the six months ended June 30, 2025, primarily due to a 14% decrease in the number of subscriptions[165][180] - Deferred revenue decreased from $171.5 million at December 31, 2024, to $154.5 million at June 30, 2025, with $94.7 million recognized as revenue during the six months ended June 30, 2025[53][57] (4) Prepaid Expenses and Prepaid Member Travel Prepaid expenses slightly increased, while prepaid member travel decreased, reflecting changes in future travel deposits Prepaid Expenses (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Software | $1,141 | $740 | | Property operations | $552 | $405 | | Insurance | $1,257 | $1,407 | | Operating supplies | $371 | $564 | | Total | $3,321 | $3,116 | - Prepaid member travel decreased by $1.3 million from $13.7 million at December 31, 2024, to $12.4 million at June 30, 2025[59] (5) Property and Equipment, Net Net property and equipment decreased due to accumulated depreciation, with internal-use software and furniture being major components of expense Property and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Property and equipment, gross | $43,859 | $44,551 | | Accumulated depreciation and amortization | $(33,031) | $(30,472) | | Property and equipment, net | $10,828 | $14,079 | Total Depreciation and Amortization (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | $2,277 | $2,820 | | Six Months Ended June 30, | $5,167 | $5,448 | - Internal-use software and furniture, fixtures, and equipment are the largest components of depreciation and amortization expense[60] (6) Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities increased, primarily driven by a rise in trade creditors, partially offset by decreases in occupancy taxes and compensation accruals Accounts Payable and Accrued Liabilities (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Trade creditors | $15,763 | $11,386 | | Occupancy taxes payable | $6,090 | $7,520 | | Compensation accruals | $2,948 | $3,679 | | Income and other taxes payable | $314 | $436 | | Total | $25,115 | $23,021 | - Trade creditors increased by $4.377 million, while occupancy taxes payable decreased by $1.430 million[61] (7) Debt The Convertible Note, an 8% Senior Secured Convertible Note, had an outstanding amount of $28.7 million as of June 30, 2025, with interest paid in kind - The Convertible Note is an 8% Senior Secured Convertible Note due in 2028, with an initial principal of $25.0 million[62] - Outstanding amount of the Note: $28.7 million as of June 30, 2025 (vs. $27.6 million as of December 31, 2024), with interest paid in kind[63] - Conversion price: $30 per share, convertible into Class A Common Stock, subject to BHC Act restrictions[64][65] - Fair value adjustments: A loss of $0.3 million for the three months ended June 30, 2025, and a gain of $0.2 million for the six months ended June 30, 2025, were recorded[69] Net Interest Expense (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | $488 | $373 | | Six Months Ended June 30, | $954 | $696 | (8) Leases Total lease expense decreased, and a significant gain on lease termination was recognized in 2024 from underperforming leases Total Lease Expense (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | $15,699 | $19,030 | | Six Months Ended June 30, | $32,889 | $39,059 | Operating Lease Liabilities Maturities (in thousands, as of June 30, 2025) | Fiscal Year Ending | Operating Leases | | :----------------- | :--------------- | | Remainder of 2025 | $34,966 | | 2026 | $55,849 | | 2027 | $37,708 | | 2028 | $25,736 | | 2029 | $16,540 | | 2030 and thereafter | $38,390 | | Total minimum lease payments | $209,189 | - The company recorded $0.4 million in impairment expense for a right-of-use asset during the three and six months ended June 30, 2025, due to a lease ceasing active use[76] - A $37.1 million gain on lease termination was recognized in 2024 from terminating previously impaired, underperforming leases[77] (9) Income Taxes Inspirato has a full valuation allowance against deferred tax assets, and the Tax Receivable Agreement was terminated in August 2024 Income Tax Expense (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | $87 | $56 | | Six Months Ended June 30, | $124 | $200 | - A full valuation allowance is recorded against deferred tax assets[80] - The Tax Receivable Agreement (TRA) was terminated on August 9, 2024, with a $0.3 million settlement[81] - The company is evaluating the impact of the One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025[82] (10) Equity of Inspirato Incorporated As of June 30, 2025, only Class A Common Stock is outstanding, with Investment Warrants and Public Warrants also outstanding - As of June 30, 2025, only Class A Common Stock is outstanding (12,470 thousand shares), with Class B, Class V, and Preferred Stock having no shares issued or outstanding[16][85] - Investment Warrants: 3.1 million outstanding as of June 30, 2025, exercisable at $3.43 per share, expiring in 2029, with 583,099 warrants exercised in February 2025 generating $2.0 million[87] - Public Warrants: 8.6 million outstanding as of June 30, 2025, exercisable for 0.05 shares of Class A Common Stock at $230 per share, reclassified as equity-based awards in 2024[88][112] (11) Loss Attributable to Inspirato Incorporated per Class A Share Basic and diluted net loss per Class A share significantly improved, with several anti-dilutive securities excluded from EPS computation Net Loss Per Class A Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to Inspirato Incorporated (in thousands) | $(5,313) | $(8,707) | $(3,691) | $(7,444) | | Weighted average Class A Shares outstanding, Basic and Diluted (in thousands) | 12,714 | 3,730 | 12,320 | 3,663 | | Net loss per Class A Share, Basic and Diluted | $(0.42) | $(2.33) | $(0.30) | $(2.03) | Anti-Dilutive Securities Excluded from EPS (in thousands) | Security Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Performance-based units | 683 | — | 731 | — | | Public Warrants | 431 | 431 | 431 | 431 | | Stock options | 92 | 165 | 105 | 177 | | Restricted stock units | 1,031 | 564 | 1,026 | 606 | | Investment warrants | 3,061 | — | 3,226 | — | | Note | 958 | 885 | 958 | 885 | | Total Anti-dilutive securities | 6,256 | 2,045 | 6,477 | 2,099 | (12) Equity-Based Compensation Equity-based compensation decreased year-over-year, with unrecognized RSU costs and performance-based units outstanding Total Equity-Based Compensation (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | $714 | $2,672 | | Six Months Ended June 30, | $1,789 | $5,550 | - Unrecognized compensation cost for RSUs: $3.8 million as of June 30, 2025, to be recognized over a weighted average period of 2.7 years[97] - 500,000 Share Price PBUs are outstanding, vesting if Class A Common Stock reaches $15.00 for 30 consecutive trading days by August 13, 2025[98] - Target PBUs of $0.5 million are outstanding, vesting based on specified financial targets for FY2025; no expense recognized as targets are not considered probable[99] (13) Noncontrolling Interest Following a mandatory exchange on September 30, 2024, Inspirato Incorporated now fully owns Inspirato LLC, eliminating noncontrolling interest - On September 30, 2024, a Mandatory Exchange occurred where all non-Company held units in Inspirato LLC were exchanged for Class A Common Stock, resulting in Inspirato Incorporated fully owning Inspirato LLC[102] - As a result, there is no remaining noncontrolling interest as of June 30, 2025, and December 31, 2024[102] (14) Commitments and Contingencies Inspirato faces ongoing legal proceedings, including a dispute over a Founders' Travel Benefit and a class action lawsuit, while maintaining financial guarantees - Legal dispute with former CEO and Chairman regarding a purported lifetime Founders' Travel Benefit, seeking unspecified damages, with litigation ongoing[105] - Class action lawsuit alleging violations of Section 10(b) and 20(a) of the Exchange Act due to alleged misrepresentations related to financial statement restatements, with a motion to dismiss under advisement[106] - Financial guarantees for real estate and payment processor agreements are satisfied through $30.0 million in surety bonds and restricted cash, with $13.0 million in restricted cash as of June 30, 2025[107] (15) Fair Value Measurements This note details fair value measurements for financial assets and liabilities, categorizing them into a three-tier hierarchy - Fair value hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1 prices), Level 3 (unobservable inputs)[108][113] Fair Value of Financial Assets and Liabilities (in thousands) | Category | June 30, 2025 (Total) | December 31, 2024 (Total) | | :-------------------------- | :-------------------- | :------------------------ | | Cash and cash equivalents | $16,724 | $21,845 | | Restricted cash | $13,045 | $13,160 | | Convertible note | $23,225 | $22,336 | - Convertible Note is a Level 3 measurement, valued using a binomial lattice model considering debt and stock features[114] - Public Warrants were reclassified as equity-based awards in 2024 and are no longer subject to fair value remeasurement[112] (16) Employee Benefit Plans Inspirato offers an ESPP with 86,000 shares available and a 401(k) plan, but made no matching contributions in 2024 or 2025 - Employee Stock Purchase Plan (ESPP): 86,000 shares of Class A Common Stock available for issuance as of June 30, 2025[115] - ESPP purchase price: Not less than 85% of the lesser of fair market value on offering date or purchase date[115] - 401(k) Plan: No matching contributions made during the three and six months ended June 30, 2025 and 2024[116] (17) Related Party Transactions Inspirato has significant related party transactions with One Planet Group, including a merger agreement and expense reimbursements - One Planet Group guaranteed a $6.6 million lease termination fee, receiving 177,515 shares of Class A Common Stock in lieu of cash payments[117] - Expense reimbursements with One Planet Group for executive travel and management consulting fees totaled $0.2 million for the six months ended June 30, 2025[118] - Merger Agreement with Buyerlink Inc. (related party): Inspirato will issue 73,891,230 shares of Class A Common Stock and 8,262,327 shares of preferred stock to One Planet Ops[120][121] - Agreements with Exclusive Resorts were terminated on February 28, 2025, and Exclusive Resorts is no longer a related party[122] (18) Restructuring Charges Inspirato incurred $6.4 million in restructuring charges in 2024 from a Reorganization Plan, with all remaining cash charges paid by June 30, 2025 - Reorganization Plan (Aug-Dec 2024) included lease terminations, TRA settlement, reduction in force, and cost savings[123] - Total restructuring charges: $6.4 million ($2.0 million cash, $4.4 million non-cash) incurred in 2024[124] - All remaining cash restructuring charges, including $2.6 million of the lease termination fee, were paid by June 30, 2025[124][125] (19) Segment Reporting Inspirato operates as a single member travel segment, with the CEO evaluating consolidated financial metrics to assess performance and allocate resources - Inspirato operates as one reporting segment: member travel, providing luxury vacation homes, hotels, and destinations[126] - Revenue is primarily derived from initiation fees, yearly membership fees, and individual vacation fees[126] - The CODM (CEO) uses consolidated net income/loss, gross margin, and operating expenses to evaluate segment performance and allocate resources[126][127] Revenue and Cost of Revenue Components (in thousands) | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Revenue: | | | | | | Residence and hotel travel | $24,922 | $29,072 | $63,203 | $73,262 | | Experiences and bespoke travel | $14,457 | $9,774 | $17,899 | $15,258 | | Subscription | $19,363 | $25,240 | $40,255 | $53,305 | | Rewards and other revenue | $4,366 | $3,296 | $7,640 | $5,802 | | Total revenue | $63,108 | $67,382 | $128,997 | $147,627 | | Cost of revenue: | | | | | | Lease costs | $15,699 | $19,030 | $32,889 | $39,059 | | Booking fees | $21,595 | $20,003 | $35,535 | $40,018 | | Fixed operating costs | $2,912 | $4,642 | $6,050 | $8,411 | | Variable operating costs | $2,243 | $4,050 | $5,203 | $7,314 | | Depreciation expense | $864 | $1,453 | $2,367 | $2,742 | | Other cost of revenue | $2,423 | $2,023 | $4,036 | $2,181 | | Total cost of revenue | $45,736 | $51,201 | $86,080 | $99,725 | | Gross margin | $17,372 | $16,181 | $42,917 | $47,902 | (20) Supplemental Financial Information This note provides supplemental cash flow information, including cash paid for income taxes and significant non-cash operating lease transactions Supplemental Cash Flow Information (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------------- | :----------------------------- | :----------------------------- | | Cash paid for income taxes | $195 | $106 | | Fixed assets purchased but unpaid, included in accounts payable at period end | $256 | $367 | | Operating lease right-of-use assets exchanged for lease obligations | $20,102 | $20,993 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of Inspirato's financial performance, strategic initiatives, and liquidity for the periods ended June 30, 2025 and 2024 Overview Inspirato, a luxury hospitality club, is undergoing a merger with Buyerlink Inc., an investment agreement, and a reorganization plan to enhance cost savings - Inspirato is a private, luxury hospitality club providing access to high-end vacation homes, luxury hotels, and curated travel experiences globally[132][133] - Merger Agreement: On June 25, 2025, Inspirato entered into a merger agreement with Buyerlink Inc., a related party, issuing 73,891,230 shares of Class A Common Stock and 8,262,327 shares of preferred stock to One Planet Ops as consideration[134] - Post-Merger: Inspirato will change its name to One Planet Platforms, Inc., Buyerlink will become a wholly-owned subsidiary, and One Planet Ops will designate six of the seven Board members[135] - Investment Agreement: One Planet Group LLC invested $10.0 million for 2.9 million shares and warrants in August 2024, with an additional $2.5 million investment in December 2024, and $2.0 million from warrant exercises in February 2025[139] - Reorganization Plan (Aug-Dec 2024): Included lease terminations, TRA settlement, reduction in force, new CEO/Board appointments, and cost savings initiatives, resulting in $6.4 million in restructuring charges[142][143] - Rewards Program: Inspirato Rewards program ended on June 30, 2025, with remaining performance obligations to be recognized[146] Key Business Metrics Active Subscriptions decreased, while Average Daily Rate (ADR) increased for both residences and hotels, reflecting portfolio optimization despite lower paid nights delivered Active Subscriptions | Subscription Type | June 30, 2025 | June 30, 2024 | | :---------------- | :------------ | :------------ | | Club | 9,900 | 10,800 | | Pass | 1,200 | 1,900 | | Invited | 100 | — | | Total Active Subscriptions | 11,200 | 12,700 | - Total Active Subscriptions decreased by 1,500 (12%) from June 30, 2024, to June 30, 2025, driven by a decline in Pass Subscriptions[148] Travel Operating Statistics (Three Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------- | :----- | :----- | | Residences Paid Nights Delivered | 9,700 | 13,600 | | Residences Occupancy | 57 % | 70 % | | Residences ADR | $1,957 | $1,535 | | Hotels Paid Nights Delivered | 6,100 | 8,300 | | Hotels Occupancy | 74 % | 79 % | | Hotels ADR | $1,210 | $1,035 | | Total Paid Nights Delivered | 15,800 | 21,900 | | Total Occupancy | 59 % | 71 % | | Total ADR | $1,670 | $1,346 | - Paid Nights Delivered decreased by 28% for Residences and 27% for Hotels for the three months ended June 30, 2025, year-over-year[154] - ADR increased by 27% for Residences and 17% for Hotels for the three months ended June 30, 2025, year-over-year, primarily due to portfolio optimization[154][164] Other Factors Affecting Our Performance and Trends and Uncertainties Travel revenues are seasonal, with higher revenues typically in the first and third quarters, while subscription revenue recognition has limited seasonality - Travel revenues are seasonal, with higher revenues typically in the first and third quarters[159] - Subscription services have limited seasonality in recognition due to annual or multi-year terms, but new subscriptions can follow travel trends[159] - Holidays and events generally increase travel rates and gross margin, while the majority of costs are relatively fixed[160] Results of Operations Total revenue decreased, but cost of revenue and operating expenses also declined significantly, leading to a substantial improvement in net loss Consolidated Statements of Operations (in thousands, % change) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :------------------------------------------ | :----------------------------- | :----------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Revenue | $63,108 | $67,382 | (6)% | $128,997 | $147,627 | (13)% | | Cost of revenue | $45,736 | $51,201 | 11 % | $86,080 | $99,725 | 14 % | | Gross margin | $17,372 | $16,181 | 7 % | $42,917 | $47,902 | (10)% | | Gross margin percent | 28 % | 24 % | 4 pp | 33 % | 32 % | 1 pp | | General and administrative | $10,352 | $13,994 | 26 % | $21,738 | $28,643 | 24 % | | Sales and marketing | $5,325 | $8,772 | 39 % | $10,332 | $17,498 | 41 % | | Operations | $4,182 | $4,766 | 12 % | $9,412 | $11,789 | 20 % | | Technology and development | $917 | $2,266 | 60 % | $2,204 | $4,316 | 49 % | | Net loss and comprehensive loss attributable to Inspirato Incorporated | $(5,313) | $(8,707) | 65 % | $(3,691) | $(7,444) | 72 % | - Subscription revenue decreased by $5.9 million (23%) for the three months and $13.0 million (24%) for the six months, primarily due to a 14% decrease in active subscriptions[165][180] - Cost of revenue decreased by $5.5 million (11%) for the three months and $13.6 million (14%) for the six months, driven by lower lease costs and variable operating costs[167][182] - Operating expenses (G&A, S&M, Operations, T&D) decreased significantly, primarily due to reductions in employee compensation[168][169][170][171][183][184][185][186] Liquidity and Capital Resources Inspirato expects to meet short-term cash needs through available cash and operating activities, supported by significant savings from its Reorganization Plan Cash and Cash Equivalents (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $16,724 | $21,845 | | Restricted cash | $13,045 | $13,160 | | Total | $29,769 | $35,005 | - Annualized cash savings from Reorganization Plan initiatives: approximately $18.0 million from workforce reductions, approximately $7.5 million from lease terminations, approximately $13.0 million from non-critical spend review, and approximately $4.7 million from lease portfolio optimization[197] - Net cash used in operating activities decreased from $9.0 million in H1 2024 to $5.5 million in H1 2025[202] - Net cash provided by financing activities was $2.1 million in H1 2025, primarily from $2.0 million in proceeds from Investment Warrant exercises[204][205] Future Minimum Commitments (in thousands, as of June 30, 2025) | Fiscal Year Ending | Amount | | :----------------- | :----- | | Remainder of 2025 | $39,063 | | 2026 | $58,492 | | 2027 | $38,014 | | 2028 | $45,736 | | 2029 | $16,540 | | 2030 and thereafter | $38,390 | | Total | $236,235 | Non-GAAP Financial Metrics Adjusted EBITDA significantly improved, moving from a loss to a gain, while Free Cash Flow also improved, reflecting reduced cash usage - Adjusted EBITDA excludes interest expense, income tax expense, depreciation and amortization, equity-based compensation, fair value gains/losses on financial instruments, asset impairments, and transaction costs[214] Adjusted EBITDA Reconciliation (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net loss and comprehensive loss | $(5,313) | $(15,393) | $(3,691) | $(13,144) | | Adjustments (sum of exclusions) | $4,984 | $6,237 | $8,965 | $8,061 | | Adjusted EBITDA | $(329) | $(9,156) | $5,274 | $(5,083) | | Adjusted EBITDA Margin | (0.5)% | (13.6)% | 4.1 % | (3.4)% | - Free Cash Flow is defined as net cash used in operating activities less purchases of property and equipment and development of internal-use software[217] Free Cash Flow Reconciliation (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $1,082 | $(1,767) | $(5,545) | $(8,969) | | Purchase of property and equipment | $(632) | $(1,904) | $(1,495) | $(3,170) | | Development of internal-use software | $(202) | $(120) | $(254) | $(356) | | Free Cash Flow | $248 | $(3,791) | $(7,294) | $(12,495) | Recently Adopted Accounting Pronouncements This section refers to Note 2 for information on recently adopted accounting pronouncements, indicating no new adoptions beyond prior disclosures - For information on recently adopted accounting pronouncements, refer to Note 2 – Significant Accounting Policies in the 2024 Form 10-K and the current 10-Q[219] Item 3. Quantitative and Qualitative Disclosures About Market Risk Inspirato is exposed to interest rate, foreign currency, and equity risks, with potential impacts on the Convertible Note, operations, and equity-based compensation - Interest Rate Risk: A hypothetical 10% change in interest rates would have a $1.0 million impact on the fair value of the Convertible Note[222] - Foreign Currency Risk: A hypothetical 10% change in USD value relative to foreign currencies could impact the Condensed Consolidated Statements of Operations and Comprehensive Loss by $12.0 million for the six months ended June 30, 2025[223] - Equity Risk: Fluctuations in stock price can impact equity-based compensation expense and market capitalization, especially for performance-based units tied to a $15.00 per share target[224] Item 4. Controls and Procedures Inspirato's disclosure controls were ineffective due to material weaknesses in internal control over financial reporting, but financial statements are fairly presented, and a remediation plan is underway - Disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting[226] - Despite material weaknesses, management concluded that the Condensed Consolidated Financial Statements fairly present the financial position, results of operations, and cash flows[227] - Remediation plan includes: designing and implementing ITGCs (user access, periodic reviews, change management), enhancing process-level control activities, improving documentation, and providing training[228][230] PART II. OTHER INFORMATION Item 1. Legal Proceedings Inspirato is involved in a legal dispute with a former CEO over a Founders' Travel Benefit and a class action lawsuit alleging securities fraud - Legal dispute with a former CEO and Chairman regarding a purported lifetime Founders' Travel Benefit, seeking unspecified damages, with litigation ongoing[235] - Class action lawsuit alleging violations of Section 10(b) and 20(a) of the Exchange Act due to alleged misrepresentations related to financial statement restatements, with a motion to dismiss under advisement[236] Item 1A. Risk Factors New risk factors primarily relate to the pending merger with Buyerlink, including potential dilution, differing interests, and integration challenges - Risks related to the Merger: The number of shares issued will not fluctuate with market price, potentially impacting dilution for existing stockholders[238] - Certain members of Inspirato's Board and management have interests in the Merger that differ from, or are in addition to, those of Inspirato stockholders, particularly Payam Zamani who will beneficially own approximately 92% of Class A Common Stock post-Merger[239][240] - The Merger is subject to multiple closing conditions (e.g., stockholder approval, regulatory approvals), making completion and timing uncertain[242] - Failure to complete the Merger could adversely affect Inspirato's business, financial condition, operating results, and stock price, potentially incurring termination fees and litigation costs[243][244] - Significant non-recurring costs related to the Merger and potential integration are expected, which may not be offset by anticipated synergies[245] - Business disruption and loss of key personnel are risks during the pendency of the Merger, and regulatory approvals (e.g., Nasdaq, HSR Act) may be delayed or subject to adverse conditions[248][250][251] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds to report[257] Item 3. Defaults Upon Senior Securities This section indicates that there are no defaults upon senior securities to report - Not applicable; no defaults upon senior securities[258] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Not applicable; no mine safety disclosures[259] Item 5. Other Information No director or Section 16 officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the six months ended June 30, 2025 - No director or Section 16 officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the six months ended June 30, 2025[260] Item 6. Exhibits This section lists the exhibits filed or incorporated by reference as part of this Quarterly Report on Form 10-Q - Exhibits include the Equity Distribution Agreement, Agreement and Plan of Merger, company's Certificate of Incorporation and Bylaws, and certifications from executive officers[261] SIGNATURES Signatures The report is duly signed on behalf of Inspirato Incorporated by its Chief Executive Officer and Chief Financial Officer - Report signed by Payam Zamani (CEO and Chairman) and Michael Arthur (CFO) on August 13, 2025[266]