Clear Secure (YOU) 28 Feb 242023 Q4 Earnings call transcript

Good morning, and welcome to CLEAR's Fiscal Fourth 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, and Form and website. is non-GAAP XX-K. 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, With turn over the Caryn. to I'll call

financial fourth results growth CLEAR's and quarter focus and year XXXX our morning. on reflect Good in free full continued cash bookings members, flow.

million This customers. quarter, more we on focused on an exceeded joining are platform who XX important members milestone. means the creating partners CLEAR members More friction-free their platform, as our for value the experience

operating deliver the to experience have revenues by and expect. XX% expanded [indiscernible] points. members XXXX, over inland consistently XXXX, basis grew we not come in and margins that our did X,XXX In

continues is side love. rely members Bringing come great you digital coat read CLEAR think $X.XX of December, out enrollment first every should who working Life have [indiscernible] absolute and it. our this and for by they a CLEAR the and members Future. TSA want to [indiscernible] [indiscernible] side experience only such is have we CLEAR be been program operationalizing experience As for the labor of as love to unlock their coffee, excitement they leaders accessible and is it, in the and The well technologies keep to Identity. standardized the expect traveler to with at-scale the great is predictable that, on. and win creating Travel and launched across the that strong to CLEAR the [indiscernible] to for laptop year rolling bag. our enrollment and In the lane identity, of doesn't passion NextGen CLEAR. And incredible a Lane new deliver span an and know, out the of their country with ambassadors both than which firsthand PreCheck travelers our by has saw key our ambassadors are future. cup as to easy per We provided have in others. at from making shoes here [indiscernible] month, on It less the have our The series of

our expectation happen. We are and are One working the hand consumer is this [indiscernible] Today, with necessary. customer partners hand experiences make in Touch, to that

we later, spot. to they less before Newark, week and walked excited X to was them, were and in sunrise, than enrollee serve minutes enroll on right thrilled opened The Last our up. first team the

travel safer for say, is travelers. of we done, And am easier cannot and wait is proud work the and our I hard make and often bring I job getting As it this our nationwide. to harder. that all has to team

CLEAR to Verified gain continues momentum.

the trusted a problems universal goods today systems whether cannot of the down or need stolen for are online online media, is on entire verification it's and or solution. up reading that age the can caused where marketplaces going paper the challenges about solve, You sold, pick digital without social fraud identity by anonymity identity go because

value significant identity finding systems hospital care, health In in our platform.

identity Internet. is increase the uniquely trusted creation positioned layer password the reduce of costs, to operating become account customers. conversion products Our delight and reset, check-in and CLEAR

our continue financials. [indiscernible] or year This of discussion

incremental CAGR year-over-year. operations $XX.X revenue In a flow grew million, Thanks, million, generating and XX% long-term was from XX% was strong Cash maintained margins. $XX.X free cash while Caryn. we and QX, XX%, flow bookings up

flow year. We our and million after full XX% shareholders for in $XXX cash count. XX%. grew free full share deducting the while QX normalized comp, million year, Pro of full the $XXX $XXX operating of flow stock the forma up free cash returned quarter million cash of For generated we in year, capital in shrinking million to $XXX the and XX% and flow,

Active were XX%. Plus million, up members CLEAR X.X

continued usage Xx last year. difference growth Plus non-airline was sequentially seen is CLEAR as X.X% a channels, expanded of [indiscernible] channel versus down member We usage have non-airline and Airline members X.Xx, And we've the driving numbers. partner there ARPU Mix have is which our utilization matters. about decline. the

$X.X QX, million items actions $X.X million announced $XXX,XXX. That marketing to R&D and highlight. impacted the a streamlining and severance expense I our some want We results we last related G&A $X.X include sales In quarter. incurred cash by by to by million, of

R&D incur in of to severance additional some completed expect We as $XXX,XXX streamlining expense hitting additional we month. QX, primarily this

incremental the $X.X $X expense, which incurred will related representing to XXX,XXX of we put consuming hours December. similar upgraded on already we of should $XXX,XXX surge verification also through of upgrade, around expenses. direct a million NextGen NextGen volume, In NextGen as ambassador amount million XX% of by in operating year. hours QX, our consisting this expenses line enrollment Identity To of We see we salaries strong members, progress perspective, millions expect and since labor April. of of leverage have We normalize the

stock $XX.X Award from comp quarter, was departed year-over-year. the stock to of XX% units. members down expiration reversal and million, Performance Normalized previously pre-IPO comp the In also of we $X.X relating million the benefited a of team expensed

a our operating items, OpEx was incremental XX% of we these down and around X,XXX margins. achieved basis Excluding percentage revenue, points as

pricing and standard at first almost was took retention in for airline net we for Annual after family members. significant retention. CLEAR in retention is years, dollar member both XX.X% pricing and plus look We the This XX taking important quarter. the when particularly member no XXXX

experienced was on dollar reduced digits discount up frequent around mid-single are For available the where channel we between a the these increases, that only and to modest airline retention pricing retention we to was flyers, specifically, and impact XX% member And XX%. our given we year-over-year XX%. up pleased

the by the settling our all prioritization win-back in the Lane the focus trend. below reactivations in or happen our impacted activity. metric Lane Typically, organically with of is and upgrade, X/X retention reactivations remains of Net member retention net temporarily member around Our in expectation. are NextGen reactivations

we the several below before are $XX Over levels member expect than On month, and mix is us an CLEAR pricing, paying NextGen rebounding. the less which those cumulative compelling members per next of will average, impact bring value. incredibly quarters,

focus We dollar will member retention retention continue free and we and bookings to on cash growth. drive flow as

XX% In to of expect QX, at million, $XXX million revenue represents we growth. midpoint the which year-over-year $XXX

expect versus CAGR. larger QX, XX% pricing renewal down a pool Consistent sequential $XXX lower a midpoint the prior which represents also with million growth year-over-year this total QX $XXX reflecting of QX, in We and a long-term years, million, bookings are sequentially to and bookings versus at benefit. XX% year, QX

online just we in-person While guidance revenue, PreCheck our enrollment incremental just last opened first renewals in and January keep Newark. in includes week location mind, began at

are as to new and from move continue guidance to As stage we another. are ramp, widening like differences range Plus, our Verified CLEAR can X relative timing early to CLEAR they bookings quarter PreCheck businesses as small

Q&A. With the expect cash to strong go year revenue full XXXX, XX%. flow free expanding at For and deliver least we growth, of let's total margins growth to that, bookings and

line [Operator Instructions] Reilly of Joshua comes question Our Needham. the from first from

of Can versus just NextGen impacting of based travel the up upgrade mentioned you the retention. Maybe more normalization the trends of it. year the calculation is Maybe with magnitude some how this a and impacting dollars ID on versus those just sense that of each people give of figure of also items. in some member maybe start in the discuss on finishing here. since the detail, just you it's can terms net starting Maybe nuances

Sure. Thanks, Josh.

on couple the a One based So I of highlight going on retention focused public metric is dollars. just things We're members, focused would right? we're on. both also is that on

around year-over-year in As mid-single opening, mentioned was the up XX%. dollar I retention our digits to

performance mentioned, pleased is the with metric, trailing there. we're a public metric. you really The So XX-month as

And growth there. components, And there's so the gross net. of trend there's X also matters and

members About reactivations due is and then retention the reactivations. retained. And or reactivation of how performance in X/X piece. our net win and of happen definitely the the gross to the the year-over-year process back are running upgrade many gross activity the a trend between low we difference would NextGen be the So on Lane, are

And a XXXX. mix as lower lap so percentage tend in mature as a to much renewals larger next as the we we we business, lap every like carry also had X retentions And quarters mix, just XXXX versus more through We the year few cycle factor. those is of than pricing and subscription cohorts.

So a as we be more it will normalized cycle those, through rate.

net-net, XXs happy very there. We the would performance expect there. so probably what be with in quarters. it And I the the And to -- few that's next say upper over

to working as And with processes their playing then the security see the articles based it. well? airlines within competitive the the landscape landscape biometric on press seen data you How here more out own do the on lane. and changing TSA changing all Got efficient we've develop

And XXXX, biometrics it's and and in technology going Josh, safer important Yes. with believe XXXX, to more X was million been CT airports, started were Caryn. is the PreCheck checkpoint right? make the since by always TSA There they to we Look, it it's we and safer the for do airports AIT, consistently coming and mainstream the airlines brought most solution easier. for easier, scanners. that the because the travelers for through

They CLEAR, been So product, has American coming biometrics are for I thing At travelers expected. think and security. checkpoint feature. good the biometrics a a to And right? it's the for aren't

reason about from continue you year, it the travel is an experience about it's on make going a great week, a have home to the And publicly is they to travelers so travelers. are, have about it more this to once focused been XXXX. us impact I and on sure we travel we're to quarter. would can Identity. but NextGen or on that and whether going last to that talking to from rolled But we've all last delivering experience it products meeting know, predictable they out since We where have also talking as once It's that deliver loved working started what a year. guys really see frictionless you're to gate been year we've

multiple on digital what travelers So focused universal, because use is airlines. we're and interoperable, airports identity

then you biometrics, But no side status, or next right? checkpoint it's you're that get customer safer be of entire unbelievable CLEAR's experience. which predictably the holistically. either it's It's using which off and expect, on few you're to checkpoint that easier. and So on delivering to, the the show the the again, should But quickly airport services experience adding NextGen through years, your up matter over is airline and we flying Identity

question of comes Cory next JPMorgan. with Our from Carpenter the line

with mixed I you're messages this demand from to We've what of companies. seeing the some year. travel ask travel heard wanted some

and are outlook? bookings your seeing curious how you So what is XQ then impacting all that

be never to growth say have bullish coming much. normalization few is Business focus very off travel. continue airports. be been charts consumer our with years And we that went number look I the a what seen have people XXX but like really spot and board mix remains of their leisure, If cities points really the since it in there's would for sound you of I up like to strong. at of record bright airports. Airports out and or kind across the continue year, But is was I through travel on we of business of premium there's past then a putting broken over growth volume it verification, We on basis rebounding. that year-over-year. travel pretty spend. are Austin data in just a the last public, records experiences

pricing we drivers volume that are be and Travel see unless many airlines impacting part of it. really it has the that whether become there see. so or So the don't we extreme, in it's really of hotels,

travel at And biometrics in going checkpoints. Denver specifically So we continue be Plus airports airport think, lot business, lane. builds through back are expectations. security think on to I CLEAR see also launched said people the bullish again, a I and and mainstream, what going travelers for of coming you to very that to up launches, new new showing of new I higher Joshua, with

And they have see You're seeing technology. seeing current more expectations the of the airports. of people customer you I easier, friction-free really the outside the you're travel. do what is think that new more That meeting [indiscernible] concessions, will

the what look And quick New person and you're you on enrollment rollout renewals from cross just could you're York follow-up. now provide in online? in that have a Any color to able like here TSA

PreCheck. Oh, you mean

sorry. Yes, PreCheck,

want you Okay. Do to...

Yes.

add So TSA a is that approval. subject to -- to over here the And are country then of to we year, going we the the roll from airports rollout out rest coming to weeks. throughout expect plan add the few the all next

our about for obviously been Newark, exciting. on provided years. say it's will We've CLEAR around TSA excitement by talking enrollment I incredibly PreCheck several

see by CLEAR week, days multiple we're open hours you X ambassadors. staffed you'll day a that pods If with a XX Newark, go to friendly

how So for increasing Newark. are over both is when at the the pending you to we the this appointment early American this by and and is really and capacity no the opportunity travelers, country TSA and incredibly across think roll online required encouraged of time the very approval accessibility results, enrollment out exciting,

Our Sachs. next with Ben Miller Goldman question comes from of the line

if can. two, I Maybe

First, just retention lower, it were gross on little the a better. the implies being maybe adds

So any you that's on shift any can the And impact from in out call partner? then color strength travel particular or just on implied quantify Easter the share patterns guide? an the channel just the airport and/or color to on guide, either to

So the I'll start with guide.

higher much retention a So QX QX. backlog of generally we versus in speaking, have

QX had from totally benefit perspective sequentially. a larger to is from much decline sequential year, the a QX typical. we Last pricing So

at took So year look very We every big basically price pricing. a XXXX, if was cohort. on it for you

And at and -- 'XX standard so versus when renewals. QX airline of family, had you benefit 'XX, QX channel of QX the look we

if similar more to change much sequential that QX you QX. really back so impact, And have a you out from

would teams airport think don't the think And I performed and Easter I in marketing the don't -- our I I well channels. say on some guide. in what extremely comment have of a that's the in channels, So QX then about shift of both terms specific there.

a marketing see sequential in did spend. You uptick

the opportunities from gross accelerate ability So where the adds we took perspective. saw that some we to

of channel strong in just QX. across obviously, specific So execution but board strength, the no

Advisory question comes with Telsey next Telsey Our Dana Group. from

Nice the to see progress.

we As mentioned handheld doing? enhancements we will for speed year as through When year? making, thing, also through out? and be the go for experience rolled with this the looking new overall, the year as are go are but Obviously, it? PreCheck, any talked that the What you what the the And definitely about that should you be you're at just are we one you mindful should those devices. there of TSA how you And then expenses see model? we

year. then take talk and the can the Ken rollout data, technology about I'll PreCheck this

last So the PreCheck incremental carrying for probably we've perspective, overhead about, think, talked been quarters that's optimistic from I expenses a PreCheck over we're X so margins. on why we've and high that our

bullish expansion overhead. we on for carrying is in XXXX, reasons a -- been the we of One are of because margin have lot

So the staffing, from you'd as and really see around PreCheck we incremental would some been be carrying well. have expenses staffing extra

well. meaningful, So I don't -- be product I wouldn't say that high you're believe going lead marketing to certainly as see margins. should that we fairly incremental do anything But PreCheck the to

of which from year, can rollout, And I about see of I yet pods should technology see face CLEAR a new you they are about, that are will And can't enrollment this are Dana, is and of in we pods. talk that pods. which first the terms We're can faced they talk some them have Envy, and and verification. some first calling faster. are which slimmer, so combination They more of you

important power capture, then identity of of transmit camera, a is things into TSA really digital transmit those a and digital From from pods nature. to that there, that's tap so it the identities these to the the And system. handhelds,

randomization from so remain pockets. passes perspective. not a And have any fairly their IDs There first, to of will always and members stride boarding out be or will face take security break

only experience those speed and and And contribute efficiency, will so to security. things member really not but

question from Kelley Stifel. the next line Mark Our comes with of

of cannot your the on this of does you're come of mind, control starting just There's or can made can the things more your out see we staffing are rolling reliant important then a If that you in there, upgrading? the or things X some of expand And machines is control, of the -- outlined get ID you lot on a things the like folks CAT user to that in little the do some what's the control maybe you you terms initiatives, the like you that P&L and XXX% second in of things I I maybe can on couple one out. points directly? around search bit experience. the quarter last NextGen just Caryn, that's guess more

Yes.

-- In million staffing, second we in about I'll QX. does in talked the similar And and first. QX, surge answer terms of I that, that question would The the amount out. a $X say come

Now still growing and verification we're of growth. footprint, course, we our right, still have

from but So strong to throughout salaries we see to it's do line operating necessarily go direct not XXXX. down leverage sequentially, going the expect

easier And this can is is across screening control airports I they are bringing a to as technology as public-private going in partners many say from that the and biometrics what passengers and and alignment that And stakeholders, freak, partnerships got that possible, airlines, control mainstream which perspective, comes you all people from solution the your powerful. safer terms is deep would of experiences. most to what you importantly, want a great control. question, are PreCheck That there is and that government, physical that a

it's everybody drive we're and by think back, that, XXXX, around think in sees so that wants everybody There's an more I airports through happen, and million And XXXX. and day does that single everyone alignment and travelers working going I every right? I this coming Again, timing keep it. to together

So it's just not far that away.

rolling be these out You've got to technologies.

I so And ensure help the the alignment think outcomes.

comes And with the our from line Unger of next Wells Fargo. David question

about -- you than you I average ARPU shouldn't per the but less $XX Guys, paying increase, month. increase. mentioned talked members say

increases. the should just the annually, wondering we years? couple $XXX increases over it's and say let's how pricing ARPU So next about about know think But we pricing of

value you value these I to values a to value the will do than when well you PreCheck as value drive for a say, Plus, I And month when when the less about $X.XX CLEAR that, there's of lot about to opportunity less pricing around think travel. the when Before that month, the for Ken talks are as about think that, you incredible the opportunities. $XX continue return for think about than on for time technicals you And a creates over challenges time, customers. think

Yes.

when about [ And retail average, we obviously, $X.XX point the price so ]. our talk is

$XX airline family We planned for have now pricing.

wide members and so card So of partners, -- a those variety our don't anything. pay credit there's

price opportunities but we're very that, And a business. what And that's and elasticity we focused to as that take price we deliver this also them. customer to We evaluate continue we'll this modest opportunities on need evaluate experience, in we so to on think great see have deliver as we we will appropriately. year.

And again, continue the of to home to add from gate. experience side to either

guys, just then, a And Okay. follow-up.

So XXXX comment and XXXX. you. shareholder in increase at expectations member there on X% about guide exiting is letter maybe more Ken, we for us versus Is growth for way XXXX? look travel think the a this When year full the to for

I we for free So manage would for that bookings the cash for members flow. and say business

And pull so there's a lot of here. levers to

so free experience. great our flow. want And just really to cash we driving we're to going a we obviously, is grow look And mentioned. We're focused deliver base, but I member opportunities, at pricing ultimately want what as on to

and growth there's talk to lot is be. to the to specifically a going member look at that and so we're optimize not And business, to the what about going of going ways

opened airports XXXX. in We X

immature and well the when as maybe I XXXX is the as we're to about good mature. openings, continue would new on XXXX picture. call Those comp still growth to We But not are talk very this have as opportunities Ken expect years growth. And well. overall continue you And year. X, them necessarily more Obviously, and our airports. mature, focused mature and XX incredible have said, X again, airports, airports, to network obviously launch airports grow

session. the we And of I'll the Seidman-Becker now question-and-answer over reached remarks. back turn call have to closing Caryn the end for

is we am a Thank foundational. our on CLEAR our here of you you day. executing huge members quarter proud now. It how and say to behalf fourth for growing our XXXX and every call. are earnings joining our and of products Identity partners is team, team. want I to the I thank

it seeing in beyond. You're travel and

joining for today. So thank you

today's concludes earnings call. This

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