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Equity-Based Compensation
12 Months Ended
Dec. 31, 2023
Equity-Based Compensation  
Equity-Based Compensation

(13) Equity-Based Compensation

During the years ended December 31, 2021, 2022 and 2023, the Company recognized $3.3 million, $8.8 million and $13.7 million, respectively, of equity-based compensation. The following table details where equity-based compensation is recognized on the Company’s Consolidated Statements of Operations (in thousands):

    

Year Ended December 31, 

   

2021

  

2022

  

2023

Cost of revenue

$

$

39

$

65

General and administrative

2,567

6,226

9,569

Sales and marketing

190

828

1,499

Operations

 

489

 

1,105

 

1,734

Technology and development

 

12

 

604

 

785

Total equity-based compensation

$

3,258

$

8,802

$

13,652

The Company also recognized income tax benefits from stock compensation of $0.0 million, $0.9 million and $1.7 million for the years ended December 31, 2021, 2022 and 2023, respectively.

Unit Option Plan

Prior to the Business Combination, the Board of Inspirato LLC maintained an equity-based compensation plan (the “Unit Option Plan”), which provided for the grant of options to purchase the Inspirato LLC’s common units, by Inspirato LLC’s employees, directors and consultants. No issuances under the Unit Option Plan have been made since January 2021 and the Unit Option Plan was terminated in connection with the Business Combination.

Options under the Unit Option Plan were granted at a price per unit equal to the fair value of the underlying common units at the date of grant. Options under the Unit Option Plan generally had a 10-year contractual term and vested over a three-year to five-year period starting from the date specified in each applicable option agreement. Each Inspirato LLC option from the Unit Option Plan that was outstanding immediately prior to the Business Combination, whether vested or unvested, was converted into an option to purchase a number of shares of the Class A Common Stock based on the Exchange Ratio (the “Exchanged Options”). Except as specifically provided in the Business Combination Agreement, following the Business Combination, each Exchanged Option has continued to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Inspirato LLC option immediately prior to the consummation of the Business Combination.

The following table represents nonqualified stock option activity for the years ended December 31, 2022 and 2023:

Number of options (in thousands)

Weighted average exercise price

Outstanding at December 31, 2021

 

391

 

$

15.60

Exercised

 

(92)

 

 

15.60

Forfeited

 

(21)

 

 

15.60

Expired

 

(6)

 

 

15.60

Outstanding at December 31, 2022

 

273

 

15.60

Exercised

 

(36)

15.60

Forfeited

 

(33)

15.60

Outstanding at December 31, 2023

 

204

 

$

15.60

Exercisable at December 31, 2023

204

$

15.60

There were no options granted during the years ended December 31, 2022 or 2023. As of December 31, 2023, all of the remaining option expense had been recognized and the aggregate intrinsic value of outstanding options was $0.0 million. Additionally, as of December 31, 2023, exercisable options and outstanding options both have a remaining weighted-average contractual term of five years.

Profits Interests

Prior to the Business Combination, Inspirato LLC granted awards of profits interests to certain key employees. In connection with the Business Combination, the profits interests were treated like other units in Inspirato LLC with respect to the consideration received as part of the Business Combination.

Each award of profits interests vests over the time period set forth in each individual profits interest award agreement underlying the award, subject to the applicable executive’s continued service and, upon the vesting of each award, the newly vested New Common Units become available to be converted from Class V shares to Class A shares. If an executive terminated service, any unvested profits interests held by such executive would be forfeited to Inspirato LLC.

As of December 31, 2022 and 2023, there were 465,000 and 355,000, respectively, as-converted profits interests issued and outstanding and all have been fully vested as of December 31, 2023. No profits interests have been issued since the consummation of the Business Combination.

2021 Plan

In connection with the Business Combination, the Company’s Board of Directors and stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan became effective upon the consummation of the Business Combination. Under the 2021 Plan, the Company may grant options, stock appreciation rights, restricted stock, restricted stock units (“RSU”) and performance awards to employees, directors and consultants. Subject to the adjustment provisions contained in the 2021 Plan and the evergreen provision described below, the maximum number of shares of Class A Common Stock that may be issued pursuant to awards under the 2021 Plan is (i) 795,000 shares of Class A Common Stock plus (ii) any shares subject to stock options or other awards that were assumed in the Business Combination and expire or otherwise terminate without having been exercised in full, are tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or are forfeited to or repurchased by the Company due to failure to vest, with the maximum number of shares to be added to the 2021 Plan pursuant to clause (ii) equal to

373,000 shares of Class A Common Stock. The 2021 Plan also includes an evergreen provision that provides for an automatic annual increase to the number of shares of Class A Common Stock available for issuance under the 2021 Plan on the first day of each fiscal year beginning with the 2022 fiscal year, equal to the least of: (x) 995,000 shares of Class A Common Stock, (y) 5% of the total number of shares of all classes of the Company’s common stock as of the last day of the Company’s immediately preceding fiscal year and (z) such lesser amount determined by the 2021 Plan’s administrator. The 2021 Plan provides that the evergreen provision will operate only until the 10th anniversary of the earlier of the board or stockholder approval of the 2021 Plan. The RSUs vest subject to each employee’s continued employment with the Company. The vesting start date for RSUs issued to existing employees as part of the first grant is January 1, 2022. Once granted, the RSUs vest ratably over a period of one to four years. RSUs typically have a cliff vesting on the first anniversary and continue to vest quarterly thereafter.

The following table represents RSU activity for the years ended December 31, 2022 and December 31, 2023:

Number of units (in thousands)

Weighted average grant date fair value

Outstanding at December 31, 2021

 

 

$

Granted

 

289

 

 

121.20

Vested

 

(5)

 

 

61.80

Forfeited

 

(8)

 

 

70.40

Outstanding at December 31, 2022

 

275

 

124.60

Granted

 

797

 

 

27.11

Vested

 

(174)

 

 

96.58

Forfeited

 

(171)

 

 

46.64

Outstanding at December 31, 2023

 

727

 

$

41.42

At December 31, 2023, there was $20.6 million of unrecognized compensation cost related to RSUs which is expected to be recognized over a weighted average period of 2.4 years.