Inspirato Q3 2025 Earnings Call - Nearly Doubling Adjusted EBITDA Amid Subscription Stabilization and Pass Program Relaunch

Conference Call Operator: Greetings and welcome to Inspirato’s third quarter 2025 conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. I would now like to turn the call over to your host, Inspirato’s Chief Marketing Officer, Bita Milanian. Please go ahead.

Bita Milanian, Chief Marketing Officer, Inspirato: Thank you, Operator, and good morning. Joining us for today’s presentation are Inspirato’s Chairman and CEO, Payam Zamani, and CFO, Michael Arthur. Before we begin, please note that today’s call is being webcast live and will also be archived on the Investor Relations section of our website at inspirato.com. You can also find our press release and the supplemental materials currently available there for your reference. As a reminder, some of today’s comments are forward-looking statements. These statements are based on assumptions, and actual results could differ materially. For discussion of these risks and uncertainties, please refer to our filings with the SEC, including our most recent annual report on Form 10-K and our subsequent third-quarter report on Form 10-Q. In addition, during the call, management 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 our financial results prepared in accordance with GAAP. Reconciliations of these measures to the most directly comparable GAAP measures are included in our press release. With that, I’d like to turn the call over to Inspirato’s Chairman and CEO, Payam Zamani. Payam?

Payam Zamani, Chairman and CEO, Inspirato: Thank you and good morning, everyone. Yesterday afternoon, we issued a press release announcing our financial and operational results for the third quarter. I encourage all listeners to review the press release, which has been posted to our Investor Relations website as it contains information relevant to today’s call. I’m proud of the accomplishments we’ve made this quarter and a testament that we’re heading in the right direction. This quarter, we delivered a 97% year-over-year improvement in adjusted EBITDA, reflecting meaningful progress in reducing fixed commitments while maintaining the exceptional experience our members expect. Year to date, adjusted EBITDA is up $13.2 million, and operating cash flow has improved by $15 million, showing the lasting impact of our disciplined approach. We’ve reviewed and renegotiated hundreds of vendor contracts, driving $4 million in additional annual savings, another important step in strengthening our foundation.

During the quarter, we also began pre-sale of our new pass membership, launching in January. It’s redesigned to create a more flexible, innovative way to travel while delivering greater value for our members and advancing our mission to reinvent luxury travel. Since pre-selling began, we have added more new pass members in less than three months than in the prior 12 months combined. The progress we’ve made over the past year has positioned Inspirato for efficient growth in 2026 and beyond. Although we are not yet providing formal guidance for 2026, we fully expect continued improvement in our EBITDA margin as our transformation efforts take hold. At the same time, we are transforming the business and investing in a more robust digital marketing and technology platform, one that’s designed to build a scalable, durable, and efficient growth model for the future.

As part of this broader transformation, we announced the proposed business combination with BuyerLink in June 2025. The goal of that transaction was to accelerate our digital strategy and platform evolution, helping us unlock this growth faster. However, we mutually agreed with BuyerLink to terminate the agreement in September. While the BuyerLink transaction is no longer moving forward, our strategy and business transformation initiatives have not changed. The rationale behind the proposed combination was not to alter our direction, but to speed up our progress toward becoming a leading platform for luxury travel. We remain deeply committed to this vision, continuing to modernize and strengthen our technology and digital foundation to elevate the member experience enabled by the talent and dedication of our existing team. I remain incredibly confident in the path ahead and believe Inspirato’s best days are yet to come.

We expect to share additional updates on this strategic initiative beginning next year. Now, onto updates for the quarter. As you know by now, our strategy has been focused on four pillars that are the foundation for our business. As a reminder, these pillars are: one, operational efficiency; two, brand elevation; three, member experience; four, digital platform. First, we are focused on driving operational efficiency. Since I joined the business, we have been making changes to position the business for profitable growth through discipline, cost management, and organizational right-sizing. We’ve achieved adjusted EBITDA profitability on a trailing 12-month basis in Q2 and again Q3. This quarter, we completed a comprehensive review of our vendor agreements, evaluating hundreds of partnerships to ensure alignment with our current strategy and future objectives. As a result, we were able to identify $4 million in annualized savings.

To be clear, these changes were made without any impact to the quality of service that our members expect. These are the types of improvements we have made over the last year that led to our 97% year-over-year adjusted EBITDA improvement in the quarter. We expect that the changes we made this quarter, along with a combined focus on operational efficiency, will help us manage costs effectively in the quarters ahead. We also know that the changes position us to scale efficiently as we build out our luxury travel technology platform. Turning to brand elevation, we’re continuing to push Inspirato forward and elevate our brand status. This quarter, we relaunched Inspirato Magazine, featuring our best properties and content tailored to our key customer demographic. The magazine captured strong media attention, amplifying brand recognition and reinforcing our image as a premier travel brand.

We also expanded our social media presence to ensure we are both present and consistent across all platforms. This cohesive storytelling builds our audience and elevates our brand. Our goal is to create a clear, unified experience the first time people encounter our brand across any channel. Inspirato is synonymous with quality, luxury, and service. Third, we’re continuing to build on and enhance the member experience. This quarter, we launched our redesigned Pass Program. While the program was historically a successful draw for new members, as previously constructed, it had several limiting restrictions for our guests and ultimately wasn’t a long-term profitable program for us. We’ve now redesigned the product to deliver exceptional value. Members can maintain two active reservations at any time, each up to seven nights, from our exclusive curated portfolio of properties. Every stay features consistent quality and white-glove service, no matter the destination.

For a single fee of $40,000, members enjoy travel with no lightning taxes, rates, or additional fees throughout the year. The program is ideal for discerning travelers who value flexibility and want to maximize both luxury and value from their vacation experiences. We’re excited to see members take full advantage of the opportunities our Pass Program offers. Pre-sale began in August, and since we’ve sold more memberships in that time than we did in the prior 12 months combined. The newly revamped program has been extremely well received. We see this as another way to build a best-in-class member experience. Additionally, we continue to develop experiences and partnerships that retain existing members and attract new audiences. For example, we recently expanded our Inspirato sports collection to include a center court experience at the 2026 Wimbledon finals.

Golf at four of the best courses around Spain, and a family adventure exploring three of Utah’s iconic national parks. These curated experiences continue to resonate strongly with members who value shared moments of celebration and discovery. As we’ve scaled our business, we now offer more than 25 member-only journeys annually. We also recently added a partnership with Aero to provide our guests with additional flying options to our marquee destinations. These semi-private flight options will help us provide a more cohesive travel experience for our guests. I’ve always believed that a vacation begins the moment you leave home, and this partnership helps bring that idea to life. Finally, we also made several strategic property enhancements to strengthen member satisfaction, drive higher occupancy, and reinforce our brand as a leader in curated luxury travel.

We have additional improvements to more of our locations planned in the year ahead, which we will share as we go along. Lastly, we’re building a robust technology and digital marketing platform that will unlock massive potential for Inspirato. With the cost improvements and other enhancements we’ve made, we now have the right business operations in place to invest in growth. We believe the foundational technology investments we are making will help transform Inspirato into the leader in luxury travel. We will create a world-class platform that allows us to reach, target, and convert high-value travelers that have scaled previously impossible for us. This will expand our total addressable market and fuel our growth for years to come. In closing, we continue to successfully execute our long-term business strategy third quarter, which has us well-positioned to meet our financial and operational targets for the year.

Over the past 15 months, we’ve made tremendous strides to elevate the business while laying the operational groundwork to scale efficiency as we lean into our technology platform strategy. I want to thank our team for their relentless focus and our members for their trust and loyalty. I believe we are at the start of something extraordinary, and our results prove it. I can’t wait to share more progress with you in the quarters ahead. I’d like to also share that yesterday we announced the upcoming departure of our CFO, Michael Arthur, who has decided to pursue another opportunity. Michael will remain with Inspirato through the end of 2025 to ensure a smooth transition while we conduct the search for his successor. Michael has been an exceptional partner and leader, helping to strengthen our financial foundation and advance our long-term strategic goals.

On behalf of the entire company and our board of directors, I want to thank him for his many contributions and wish him continued success in his next chapter. With that, I’ll turn it over to Michael to discuss our financial performance and outlook for the remainder of the year. Michael.

Michael Arthur, CFO, Inspirato: Thank you, Payam. Good morning, everyone. I’d first like to begin by expressing my gratitude to the team at Inspirato for the opportunity to lead this organization as CFO. Together, we’ve strengthened the company’s financial foundation and advanced key strategic priorities that position Inspirato for long-term growth and profitability. I’m confident in the company’s future and committed to ensuring a smooth transition. Now, turning to our financial performance, as Payam outlined, we continue to make operational improvements to create a more efficient business, and we’re excited about the progress we’re making. In the third quarter, total revenue was approximately $56 million, down 20% year-over-year. Despite the decline, we delivered a 97% improvement in adjusted EBITDA to negative $0.1 million, a clear reflection of the operational progress we’ve made across the business to become more efficient and drive sustained profitability. Plus, our revenue decreased 23%.

Or roughly $11.5 million, driven by our ongoing portfolio optimization efforts and continued focus on operating efficiencies. Cash operating expenses were also down approximately $7 million year-over-year, benefiting from reduced overhead and disciplined cost management as we streamline operations throughout the organization. Breaking down revenue a little further, subscription revenue was $19.4 million, down 16% year-over-year, primarily due to the expected and planned decline in pass subscription. At the end of the third quarter, we had nearly 11,000 members, which were comprised of approximately 9,500 active club members and 1,100 active pass members. Importantly, on a sequential basis, subscription revenue was flat quarter over quarter, a significant improvement versus an average quarter-over-quarter decline of 7% over the prior 10 quarters, the peak of our subscription revenue. This marks an encouraging stabilization in our subscription revenue base.

Furthermore, year to date, club and invited subscription revenue combined is up compared to the prior year. These results demonstrate that our strategy is working. Our focus on high-value, long-term club is driving a healthier and more sustainable subscription base, setting the company up for growth in the future. In looking ahead, we’re excited about the relaunch of our Pass Program on January 1. The renewed product has been redesigned to complement our club offering and strengthen the balance of our overall subscription mix. As Payam mentioned, early interest and engagement with the enhanced Pass product have been strong. Combined with club subscription revenue stabilizing, we believe we are entering an inflection point in our subscription revenue trajectory, something we noted earlier this year.

In the second half of the year, we’re starting to see the positive impacts of these strategic shifts, setting the stage for further stabilization of subscription revenue and improved profitability in 2026 and beyond. Next, the travel revenue. We delivered $33.9 million in the quarter, down 20% year-over-year. This was driven primarily by fewer members and lower occupancy of 56%, mitigated by higher ADR of 25%. The higher ADR supports the gross margin and profitability goals we set for the year. This reflects our strategy to optimize the portfolio mix, improve revenue quality, and drive strong overall profitability within our lease-controlled accommodations, evidenced by the year-to-date increase in revenue per available night or RevPAR. Turning to free cash flow, in Q3, free cash flow was negative $3 million, mainly due to net cash used in operating activities in the quarter, inclusive of transaction-related costs paid during the quarter.

Looking at year-to-date performance, EBITDA for the first nine months of 2025 was $4.8 million, a $13.2 million improvement versus the same period in 2024. This includes approximately $2 million in foreign exchange translation losses in 2025 related to euro-denominated leases. Free cash flow year-to-date is negative $10 million. As a reminder, year-to-date includes almost $4 million of non-recurring payments related to the lease termination payments and transaction-related costs in the year. On an adjusted basis for those one-time items, year-to-date free cash flow is roughly negative $6 million. On a reported and an adjusted basis, free cash flow has improved $17 million compared to the same time last year. I’d also note that the fourth quarter is historically a strong cash flow period for our business.

Year-end cash is typically a high point of the year given the timing of member bookings and receipts in December. While we continue to take steps to improve our operating free cash flow, we believe that the actions we have taken over the last 12 months will result in sustained free cash flow for the business. Additionally, after quarter end, we did unlock approximately $1.3 million of restricted cash, improving the company’s overall cash and liquidity position. Now, moving to our outlook, given the termination of the proposed merger with BuyerLink, we are reinstating our annual financial guidance for 2025 and tightening the previous ranges. We now expect EBITDA of between $2 million and $4 million, marking a significant improvement from 2024, along with full-year revenue of between $235 million and $240 million.

We also expect operating expenses of between $80 million and $85 million, reflecting a 15% year-over-year reduction as we continue to streamline the business and focus on efficiencies. Over the past year, the choices we’ve made are beginning to show up in our financial performance. By sharpening our focus and instilling strong discipline throughout the company and constantly refining how we deliver value to our members, we’ve become more agile and effective. We are now focused on strengthening Inspirato to provide our customers with even more exceptional experience in driving sustained, profitable growth for our shareholders. With that, I will turn it back to the operator for Q&A.

Conference Call Operator: Thank you. At this time, we’ll open the line for questions. Ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 11 again. We’ll pause for a moment while we compile our Q&A roster. Our first question comes from Mike Grundall with Northland. Your line is open.

Hey, guys. The new Pass, could you maybe talk about, I don’t know, two of the features that are improved or different? And maybe, what kind of goals do you have for Pass in 2026? How should we think about this?

Payam Zamani, Chairman and CEO, Inspirato: Michael, this is Payam. I’m going to take this. As we went into redesigning Pass, we were highly cognizant of the fact that, while the old version of it was popular, it was not profitable. We wanted to create a product that the more we sold, the more members who bought it took advantage of it, the happier we would become. It would be a mutually joyous occasion in a sense. One of the big aspects of the new Pass is that, while it provides significantly more travel opportunities, it does not provide access to hotels. It provides access to properties that we control. As a result, it really plays a role in better monetizing available nights rather than providing access to opportunities that we will have an out-of-pocket expense associated with.

That definitely benefits the company in a way that the more we sell, the more profitable we become. Our members will also get to travel more readily, more easily within our portfolio as defined. They are able to have two tracks of reservations in place at any given time. Imagine that you may want to book a trip for the holidays on one track, so a hard-to-get reservation for the mountains and so on, and the other track you can use on an ongoing basis for last-minute travel opportunities. It really gives a lot of flexibility to the member who joins. We have limited the number of members that we are willing to sign up for this product. That is 2,500, and that number is basically.

Based on the math that we’ve done, that 1% of our total membership, given the current size of the portfolio, can be Pass members. We have decided that 2,500 is the number. As Michael mentioned, we have about 1,100 Pass members going into this. We have about 1,400 opportunities available, maybe a little bit fewer now, as we go into 2026. Once we get to 2,500, we’ll stop selling it. People can join our waitlist, but we’ll stop selling it until and unless our portfolio grows. Then we’ll continue to basically release so many more membership opportunities. I hope that answers your question.

Yeah. No, that’s helpful. Maybe on the marketing engine. Any initial plans you can share there? Anything you’re doing today to kind of jump-start that?

Yeah. We’ve been testing that. We have had basically test landing pages that we’ve been working with. If you go back to the beginning of Q2, we were basically spending no money on search engine marketing. That has grown to probably a couple of hundred thousand dollars per quarter now. Still very small numbers, but we’ve been testing, and the early results are very promising.

Got it. And then, hey, lastly, Michael. Sorry to see you moving on. You were a lot of help. Have you guys begun a search for a new CFO? Is that just starting now, or has it been in the works a little bit?

Michael Arthur, CFO, Inspirato: Yeah. Thanks for the kind words, Mike. Obviously, here through the end of the year, so let’s stay connected. The company has just kind of started and initiated the search. We’re early in the process.

Got it. Okay. Hey, thanks, guys.

Yeah. Thank you.

Payam Zamani, Chairman and CEO, Inspirato: Thank you. Appreciate it.

Conference Call Operator: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. I am not showing any further questions at this time. I would like to turn the call back over to Mr. Zamani.

Payam Zamani, Chairman and CEO, Inspirato: Thank you. Thank you, everyone, for joining us today. I’d also like to thank our employees, members, partners, and shareholders for their continued support. Looking forward to speaking to you in Q1.

Conference Call Operator: Thank you for joining us today for Inspirato’s third quarter 2025 earnings conference call. You may now disconnect and have a wonderful day.