Clear Secure (YOU) 2 Aug 232023 Q2 Earnings call transcript

Good morning and welcome to Clear's Fiscal Second Quarter 2023 Conference Call.

We have with us today, Caryn Seidman-Becker, Co-Founder, Chairman and Chief Executive Officer; and Ken Cornick, Co-Founder, President and Chief Financial Officer.

As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in the company's reports on file with the SEC, including today's shareholder letter. obligation during any this any may statements disclaims discussed be call. company to forward-looking update that The

During this to Investor on call, in Form and website. is non-GAAP XX-Q. the Clear's in Relations the company will measures. provided can annual reconciliation section discuss most A These recently of of report shareholder items the GAAP today's non-GAAP filed measures financial financial letter both on GAAP found be

that, Caryn. With will call turn to over I the

morning. Good

for quarter Clear. The second strong quarter a was

Our margins cash free shareholders quarterly while bookings flow while cash new strong accelerated generated We expanded. a and to returned dividend. initiating

are testing and We launch on good making progress timelines. PreCheck

On of the Verified power our CLEAR platform. to are platform side, rebranding the to better represent we

year, Nadella, proud were CEO, results Eight and hear delivered Microsoft's are earnings their their I highlight to am we incredibly of to We to LinkedIn this working excited Satya with to post IPO call. expand this recent the identity commitment quarters quarter. on team later other our markets

Our and products, the seeing of we Clear leading for serve the that and that growing foundational. is suite members in Clear beyond. years are here an are reflection of power and been It the XX now. of Identity support today we is a you has and platform. that identity partners travel

to and reporting. our want points to security some inaccurate At put enhancing after focus first, members four live There make. set speak has than louder mission the are key believe innovation of always Clear on But actions straight we been travelers. words and to media I I record our philosophy and delighting our want

stellar a Clear First, Homeland enhances with security track Security record.

founding since million XXX over verified biometrically passengers in our XXXX. have We

are of industry a have proud. leading remarkable We which record we track incredibly

airports, Homeland processes verification for tech Both our are and of our Security. enrollment anti-terrorism travelers. Our Department force are team certified multipliers members TSA by and qualified the technology as and

having human nothing XXXX biometric our to result the the verification has of mischaracterized. conflate do technology wrong. error was been unfortunate Second, just a It to with incident July a is two

in digitally their with false implemented the a back as went have small can our had as requirements. process enrollee There standing this last ID we we enrollment technology, this technology context, proactively caused rare them. our do members in year by in face To policy enrollees review. safeguard match damaged There this, on technology, XXXX to security the of the added picture multi-layer a beyond and of who manager to against pool of and security they our been manager or a review nothing enrolled We with the review characterize to compare to discontinued the can this regulatory process front face negatives say and required live To to was This one-to-one document process. matching reiterate, manager they quality has completing is instances to ID and human vulnerability error above from XXXX, re-enroll. in through false. absolutely July prevent the For comparing be be are is which lighting, IDs, who enrollment. someone the

Clear the has Clear tool but Clear. across information, of in randomly employed security members XXXX. deemed Third, subject rates randomization sensitive entire checkpoint, alone to not can't have passengers. just since Randomization is reverified the We been varying millions disclose XXXX it's a TSA percentages to as actual

for vision government’s travelers. digital and even letter, since in we our Finally, win-win, at more bringing talked scale to This creating on the seamless been we future XXXX. as is while faster life integration a an working about have identity experience

the coming on travelers. of now strengthens smooth millions is it exactly is travelers that travel years, That airport million focused day through but make the than ever. to and what for Clear is security challenging obsessed X the sure more Travel this within are all experience and with important enhances transition with technology is We is and to few experience, that conversations in next airports more passengers. continued is do every for state-of-the-art customer on we delivering security, booming, will continue

I to it discuss over will financials. to turn Ken

Thanks, Caryn.

comps. while a quarter points. Margins to XX%, increased and This X,XXX basis growth by easier was Revenue from bookings strong XX%. We’ve operating lapped top leverage the accelerated increased perspective. line grew over to expenses COVID XX%, already operating

So talked the in the travel shift in seamless structural growth experiences. demanding experiencing our more about demand that as as travelers reflects we we letter, are well

XXXX Plus Active well Plus the reference. X.X driven up would markets. at channels Active be CLEAR we to as Member new CLEAR continues we We launches. back CLEAR growth million, quarter Annual new Members history by airport When Members CLEAR and time. growth were over said quarterly of Usage. adding we driven by XX% included two went for metrics diversity We Plus and evaluate our ended on as same-store KPIs KPIs, public, to these quarterly Plus

Our less as was partner QX slightly QX a levels. credit and channels airline drove down XX% bookings of our percentage of partners in and new card versus than total

times approximately our Retention every six expectations. X% Annual annually up or year-over-year. long-term at XX% utilization. The is most CLEAR Plus Usage remains retention Member of was weeks, one above significant strong driver X.X use

service overall remain As strong. travel is levels booming, our

and peak We periods. certain number during There a and expansion. lanes, equipment, locations estate solutions of are are additional including process engineering constrained real capacity addressing the

over it is an remains this all operational and priority. team Our

XX% we our laid long-term in letter, in roadshow. adjusted the out margin discussed committed EBITDA our IPO we target to As remain

PreCheck the these high while slow growth materially. was incremental in quarter in future and ramp, we This investments a good bookings expect as launches, platform start margins

EBITDA was approximately was our $XX and EBITDA margin XX%. adjusted million quarter incremental This

since going where QX public first positive reported addition, time marked income. In the operating we

cash million quarter XX%. of dividends. million for flow normalized the million, flow $XX and year-over-year. finished cash Free cash free $XX XX% $XXX was $XX using million, for $XX million share special After repurchase up after stock We with comp, of grew

$XX.XX, X.X million we the an price In outstanding. approximately of X% shares of average quarter, purchased at representing shares

use flow quarterly of holders Given and cash our Class dividend declared Class established A have our and a to stock. quarterly position, quarterly we and with annual regular cash shareholders dividend as regular goal an to special performance to a increasing dividends return purchase a cash on return B the common basis. total policy dividend and share cash of opportunistic We’ll $X.XX levers

the returned In about we’ve months, million XX prior to shareholders. $XXX

bookings are $XXX million we million QX, of million. For $XXX $XXX guiding revenue to to to of million $XXX and

not include contribution Third TSA PreCheck. quarter from does guidance any

partners make progress dates launch We’ll to certainty. we We with collaboratively public announce this we have continue launch the TSA work year. at our and soft launch as towards when

leverage cash flow we XXXX, in to fiscal free compared year to continued operating and For growth demonstrate expect year as fiscal XXXX.

go We’ll to Q&A. now

question will you. Thank comes time, [Operator this we from At the Josh Needham. Instructions] of Reilly Your question-and-answer first session. conduct

open. call Your is

anything ultimately to that is recent further more in there do here from Hi, to work my historical could of there. discussions and topic sense is taking you your rate press beginning the get ID randomization, give job that Thanks here? Can a a Nice this on questions. just article increase a given the levels, for August that current on can And something alludes up. back to random XXX% checks our starting the here. quarter just indicate you levels? us that Maybe are checks

Yes. Thanks, Josh.

identity randomization the be members TSA transmitted the the of integration, credentials all in to when about future terms In hardware. digital question, will talk state, we

to in In varied physical show meantime, So as new. no been the years. It there a be will said, ID. have you physical XXXX, the since re-verification, is over need and the not ID has place rates

great unfortunately. But point, specific what about about growth And years. think what looks But been so experience been you're I over this And for your customer really absolutely consistent is Again, evidenced we've is years. percentages has MPSs. deliver and can't a future to by the six talk to this like. we the theme asking a our can of what the checkpoint say throughout is we security retention able

So take step me to step let back forward. take a a

launched cards, use enroll and Then smart cloud went you the enroll. We weeks XXXX in to to which we could took immediately. it and with

integrated identity our the partners standalone system and we've fully So years, XX phase. and for is over digital into evolved next

shareholder your the going so speak the did your biometric of We'll transmit to electronically next-gen in the CLEAR And ID. When show a lane, we use identity. TSA's need our letter. future without hardware for the enter to you're to face ID about lane you physical

be lanes next is been going on and process So better And better that faster travel will this with the driving a throughput. this that step about, working and an we've all lane since call together we're customer XXXX. as Ken the surging, really this – in be excited importantly, and experience. And of talked –

make the a the standards industry, travelers. to next-gen so out good roll that's starting more going thing to TSA finalized with for and being seamless And is this by all new digital experience identity hardware

the then here so step in operating That's expenses, there's of less in it. in bit Got QX. And helpful. a a up little terms QX,

allude bigger getting increase PreCheck shareholder You get in the in use those cases think How spend PreCheck the to cost going platform and factor in on up What's of do versus the in we to the about letter. expenses? investment running? the the overall the operating

the the – definitely PreCheck I more material expenses in experience been PreCheck investments. think platform have

material. both they're However,

I those expect been XXXX. as because and scale revenues bookings forward significant and we scale, leverage think as PreCheck that's operating making revenues since So and go where we BXB as bookings and we've investments

in operating leverage factors So they're the important both business. of the future

have maybe then Clear those you quick then separately on first? any you given – Or for one on are are going more PreCheck. be on in system the PreCheck just timing know the members at But of renewals and the can't synergies potential launch. easily question member that And already selling on for going to launch, Clear? going to of up to sign their PreCheck the we to us there renewal? be bundle kind Got give is one PreCheck exact the And it. information update of of are an Obviously, you combined a day

we're the question your to need then But so what happens one, working finish roll line day after good Yes, your look, the progress. renewals perspective, making we to No one, physical dates. at that. out with collaboratively event. with footfall day year a footprint on really this we on on the from with TSA. It's and timing We're to point start exact

near-term that's in revenue don't it's a in the certainly but have possible. so And for guidance QX We that, any event.

why every been be to that, to add day. just PreCheck is TSA we've can what I we so if for this a is excited incredibly enrollment because Josh, partner And do

XX:XX exactly This We open what predictable thousands are make we to of till by help the Clear beloved and large travel more X:XX night, staffed in for travelers. friction and who footprint is at ambassadors, free excited a have morning nationwide do. at friendly

basis. excited a are been journey on and we're And and out it's basis long bundled and both it ready so standalone we bring incredibly a a to

from comes question Dana Telsey next Group. of Your Telsey

open. is line Your

Good morning everyone, and KPIs and congratulations results with you very the helpful new two that also on the provided.

how industry you. you it letter, about as does TAM we talked move which you in the what this much and you the that in investments need achieve terms ago, industries? there's growth had new certain in goes quarter, the – looks can in line to services. And a is leverage? healthcare, sustainable through? could I operating you Where What this order Thank looks Or have new top leverage going think there? had an the you about that to spend hit like financial rates – are of another keep As that opportunity think while these expanding in mean

commitment the backwards our operating Well, talked margins the I'll about roadshow. leverage. XX% to the We long-term IPO – start on in reiterated back we EBITDA start that we'll

we This had margins. obviously XX% incremental quarter

the order growth that that's forward. investments And a we've core we margins expect in the there. incremental perspective function the lot really the The of we get aviation margin booking rate upside have letter cited to think higher which would we from so we in business. to is and ramping is materially, then slowing And a going also made. a XX%, But of in

over And sort turn of So which to to ways healthcare the forward. going expect question there I'll multiple Caryn. we is achieve that,

Sure.

Act because Cures see Cures starting healthcare, platform we new focused to compliance continue really around fines important and on being fruition. identity and with partners to on is there to their compliance the with So are there. Act extremely of piece for Companies an that lack the of part progress come of

now access having for marketplace the a place been focus and have compute years their that XX and even in think Act solve So healthcare and outcomes. of as been the better consumerization healthcare moment it. do company to think healthcare. catalyst Cures AI their for the of people the as piece a The activity in to to as information, that's is of been I think that connecting has here talk though seven when say in I years. is And identity healthcare every drive literally access can here and they've trying you people well there And real to data, on top control I really then an the well

think, healthcare, in people about I come experiences, team the about identity again, and is allows why a to So important you're talk we've clip sign healthcare more our and as signed which then partners about Clear their that that in life, partners ever seeing we our included a more than talking which is partners of letter partner. one to

listen encourage to it. to So I you

be identity, about of that gaming where So is financial broadly, of not right? where nature banking, could services, things KYC and right? just terms In look, identity It important it's we matter. that and incredibly think

tuned just from I say stay that perspective. a So product front on would

Thank you.

of Your Scott next question comes Devitt Wedbush. from

is open. line Your

I had you. three. Thank

term Caryn, and preferences is the one. noted influences airports and Southwest experiences enplanements add could for you for The was JetBlue ability a longer the driver travel million recently, preferences or as if short-term. in wondering down dynamics would a More domestic continued by the going traveler and just travelers drivers well. I kind short-term up [indiscernible]? marry seamless evolving mentioned have that first in some up question weakness influence more you assume one, of That's airports in Alaska, growth. with in post-pandemic to And the I those XXXX

number XXXX. a XX same-store the you it'd quarter think to in whatever the if relative sales comparable I same-store something you quarterly, is year but that's in then don't IPO, was so, think, Caryn, that up the had bookings sales It number. referenced fourth be quarter to, And you to at the third, two, good know what relative keep I question know now. you if same airports. is The the

you I now at have at you're of you're and think coverage Do XX%. that sense was coverage, that you. Thank XX% in the enplanements a now?

I'll to with Okay, turn then it Ken. start me let the and trends travel over

So to people's is be about you're continuing reported talked to last right still I who in the desire to XX% travel travel. U.S. now, through of and In XX% checkpoint month have think XX% up we agree to up see strong June. Airlines second up quarter, from incredibly half this in our up And week and May. all capacity, came to expected over we XX% experienced strongest second verifications in a July in and in accelerated XX% of June, traffic CLEAR growth passenger the in our lane, XX% airports year. for airport

think think So there coming people or first and about I domestic economy, is when I that trend ahead someone that any at talking international continue. class airports or you or that more through premium time will holistically are look

the into there but and puts for any and any think travel incredibly a travelers. you cohorts strong when year, desire I is to quarter or lot of we go see an takes continue to in

We again, absolutely expect. environment, that still in don't even travel could which we're So double we at a XX% flat today.

room So right, partners. to days we the and not just, early These and of have are the grow. network, lots the just products not

us So then our announce to people traveling a you partnership better also Alaska. experience are it's with saw the expect from who gate. home And

do I new And our we see could people so home to quarter. services, gate at every only a add the but checkpoint, and up, you not more plug

better quarter, you used should, you If gets haven't every it, it right?

bags XXX,XXX to so each them because it security is bags parking trying bags exact the million to a can if holistic it's with we in How to to of you are could people, and and two, XX% way. have drive But better up come people with with it's And do here, have of looking from have number we're bags? have an you can do And with concessions whole what a you more it's – with we're the What Ultimately rental more a going traffic, cars? you do Uber. those? reserve to spot? that a experience

experiences. the the deserve They are better, travelers. of We on predictable, side American friction-free

We wanting we and more expect expect experiences. more of better them of them

put same-store think XX% around large the large a XX% for of the we up existing would airports. on to piece, portion. from the around same-store way [ph] about is airports it bookings top so be line to XX% very have we perspective, the a And base of And

strong have line in can’t growing growth are still you top XXXX. we a growth, seen long double so And and tail significant digits. XX% over Denver we’ve same-store without that. opened And Those a driving very of Orlando

we long a terms And employment estimate, but an of to coverage So see in low there. it’s it’s of the of very terms coverage, the in we’re growth from mid-XXs domestically, then estimate perspective. same-store in we around in tail a

Okay. Thank you.

Turrin next question Your of Wells comes from Michael Fargo.

open. is line Your

Hi, Turrin. Engel Great, thank on Michael for this you. is David [ph]

question color Amex, Would would any understand about more appreciate just give the can First three Thanks. beyond? cardholder investors see offering adoption, building year is of potential to say great awareness think to in and even looking on you the I how two. momentum of partnership the incremental can drive love to into year

Sure. great partnership. Look, it’s think We it’s a a been win-win.

We obviously a very perspective. have strong adoption, uptake from

get member a growing to I and they fair our continue we that job of think share their do card that. great base,

the of combination additional from come continuing I on to a execute then So and growth penetration will think growth strategy. their

and win-win are both about a partnership. the it’s think I So parties excited

They stats given of Okay, in Thanks. forward usage And they’re power the demonstrate clearly value great. the going draw Anything can member product. terms strong. stats? of these are then, the we pricing

year. some We’ve little plan. it. Look, a earlier on price took We’ve this family the I think that we on taken We power. have bit of of pricing standard exercised price

it’s think future. can We retention look at we that we something power. and pricing the that have we So in high have

be on And and we’ve adding that it’s a But business people XXX? I product why airport to It’s or there’s whether think and at there’s and going that Ken at good, travel, very one And also popular and your But to we’re $XXX. predictable did. experiences from lanes, working alone, that, you now before aren’t point and right some on I always always XXX all have that a leisure, family. like, we joining with being better XX family to or for and I add value perspective. experiences. think consumers my we think some them and your price one airport, just started want XXX taken and were I I’ll for best, they do innovation feature really want to Clear better, of back

continue grow, again think product So ways the it gives to as we the side, to to different you on capabilities, gate pricing. many think about home I

the all Appreciate you. detail. Thank

Your next Stifel. from comes question with Mark Kelley

is Your line open.

everyone. Good I wanted the talked back now. rolling Thank it’s Great. you go the TSA hardware, about. to out you. machines saw two that I morning, [ph] CAT newer to

was of right have at of and And kind deployed Denver to or it those know the that’s going And that very saw not PreCheck, first, machines even flagged show their are you once machines okay. once to they’re to not it to happens within access the the already across user might electronically. about sounds those add to those if TSA will about then to end airports a ID think guess some way place, think they’re the right to being get one safe because quick I take of all assume it way for with time that, I just Is I one last that all on that Is it? think frictionless. of the year. that in machines your it’s technology the that is communicate deployed,

start two I’ll the front. on CAT Yes,

rollout. So integration the the before happens

is sure in secure can so with XXXX, that’s making privacy on what digital other and working each right. we’ve them that talk and a seamless way, since our to And systems been protected

then that a with will that’s And mean And you’re and friction that CLEAR your going free hope traveler you’ll right is we which enrollment absolutely breaks stride. So through there number the also the one. experience, barely lane face, talk a about, first the be should experiences be the will easier, be faced handoff.

if is cards would though this period a people ID, they physical world have purely we’re talking about, would carry So credit a of right? probably digital digital still would a even they have wallet, assume a of purely terms but needed, digital the some ID time, In world. it’s for I like

is be, won’t to say there later, there’ll rolled like for out? sure Okay. I’m airports fully that All a right. until Perfect. be sure those timeframe some maybe machines change rough machines And I’ll often. I’m smaller those them but don’t then get

you know be helpful. that rollout, I if terms draw in of So that timing there’s but upon history don’t can of that any would

Yes.

to think rollout love question I the them, in but accelerate would asked that way possible. is help to better any we

if own fair. a you quick once about started PreCheck, if just I $XX talking That’s Clear, Can All discounted mind? by you TSA running? price a product that Okay. is in updated think, price about we there on right. since And one price their have there’s from that then an lowered I remember the expect – that’s still TSA up correctly. and curious was I

You can the side the expect is your and Clear and on traveler consumer, are accurate. so the always expectations of that

Thanks Okay. All very I right. appreciate it. much.

comes question next of Loop Capital. Baruah from Your Ananda

Your line open. is

taking morning for Yes. Good questions. Thanks, guys. and the thanks

to of going actually your to both the of slow higher forward, of where entered suited investment. that start where company you sort now down back the could. going invest if to couple is say have the sort Just getting going we margins you’re incremental relative Actually maybe to answer of the you’re a that scale are to both comments period to that off – I entered about – the the Ken, has now this.

you in period So now? are that

kind enplanement of still you sounds like to way long a guys have like, I go coverage. coverage, to does And Caryn, low maybe for it mean, sound mid-XXs on

have thing us, leverage get a the squaring of the sense can kind quick growth so follow-up… of just and whole so a we for And And be Thanks. I that may how balanced?

will investments we that the in materially. time PreCheck it’s platform that of the And and matter said we’ve for those the the a fact cost slow now a perspective, that function you’re will investments. From making investments our harvest in the that been letter that’s and Yes. right to

to just to about the fact owners. then long launch, four the the term ready can and for we – right and those Ken’s that invested of investments Pass, Ken’s part for in term. the the launched platform investments We’ve into into And mobile probably are in years, place letter, company. responsible now Ken’s investments. If ahead long our launched the of PreCheck add which we harvest I the put will the investment. line think and Health people company we point. who’ve we which to In we’ve talked past on put three And we’re are were team if rational to place of and I’m top you those economic about

get the couldn’t You one other. without

coverage, it’s that the partners network of products terms about In and and is consistent.

average. We a grow about on we Coming lane, in of drive CLEAR through our volume we checkpoint have have airports opportunities the opportunities XX% that. to talked network, as to

products new new drive to opportunities have and partners. We

travelers. think seen in been that on COVID. continue obviously, and has expectations and shift you’ve I travel we coming then emphasize structural is of think that. I what extremely And we’ve and demand each do. in bullish We bullish structural travel, out and of enough, the that we can’t a absolutely shift do that pre will And COVID a to year

they else, experiencing huge And travelers. expectations a place We leverage innovation growing because travelers’ security travel what is it shifting every for and the experience, with opportunity to delight us. enhance are and enhance travel to

we them. have but We the products, trusted have large still a we opportunities brand, have the we a of base, a member to team, lot grow have

are great were they – and biometrics. in early We we have partners

an because of how now a necessity option is is It’s you It’s need The this not time travel innovation. growing. anymore.

all And with to with positioned built of behalf have consumers, so hospitals well in these to be with bring to TSA, ID incredibly life. And places. airports, with it interoperable airlines, universal, we all on because should it’s are use once only CLEAR enroll and innovations these you we’ve to

excited what’s and well. incredibly outside we are So happening of in happening travel travel by what’s as

– appreciate dividend Yes. the guys. one what That’s context, you thoughts all super on that’s on growth Appreciate give can might I dividend, one, quick philosophy really just helpful early Quick it? it. any Thanks. it. us be and more

basis cash repurchase. our an total it’s dividend, in going regular be shareholders, opportunistic, special so dividends form right return So to we’re of goal share be annual cash will the grow to and or on the to the whether

to we’re three flex levers. So be opportunistic and we’ll going those

Thanks. it. Got

there this further back closing remarks. to call Caryn for like any time, At questions. are no the I’d over to turn

Thank we’re growing and call. quarter is you team for the how joining our and XXXX our earnings how proud I partners. of Clear executing products am second

I identity It are As today, in said several beyond. that travel you times and now, seeing is and foundational. is here and

CLEAR in about and of our excited us We’re the businesses. CLEAR for both front opportunities Travel Verified

trust. Thank a members and partners As always, and brand you. free we remain to build focused on growing members bookings love and cash flow continuing while that

earnings today’s call. concludes This

at disconnect this for lines your Thank participation. your may time. you You