Clear Secure (YOU) 8 May 242024 Q1 Earnings call transcript

Good morning, and welcome to Clear's Fiscal First Quarter 2024 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 the any may statements disclaims discussed be call. company to forward-looking update that The

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

I'll turn to it that, With Caryn. over

earnings XXXX for joining our Good morning, and quarter thank you first call.

saw scaling quarter our key first on The us scaling X priorities: executing experience, member TSA improving Clear the PreCheck and Verified.

Plus IDs to improve with next-gen are and members staying Clear member through identity over upgraded highest experience the the already digital in fidelity pockets traffic Our continues getting identity at are member smoother, XX% faster. is to scale, of experience

are automation, drives and These future, lane are customer the experience the difference. upgrades the feeling security. Members seeing of which enabling and

XX% Our digital volume. are X be live We quarter. in identity covering integrations XX% the this end of should of our at by about airports

Our enrollment first pods fast a experience. be a year and will later new this for will follower where phase verification travelers short NV enjoy

pods City, no now multiple Enrollments and renew Lake in Newark, over live a to to a appointment quickly with program PreCheck our Sacramento, launch Clear LaGuardia, Seattle for are bringing are are live less places necessary. we Renewals necessary. it Clear Salt TSA lower online Orlando, and XX can proud more appointment is with more officially and day no people open enrollment at cost, Anyone nationwide. hours

capacity network. significant adds PreCheck footprint airport the Our to

coming new announced infrastructure a phased mobile and nodes nationwide new Staples. rollout product recently the months our using existing adding a for with our We through pop-ups and partnership of PreCheck expect in

or the layer experiences coffee. platform a Internet. cup of can For be the more million TSA Verified costs less X a identity Clear and Identity powering fly the year, trusted of than PreCheck times is people who XX Universal the

being market casinos experience taken We platform, X value or products offline and to Clear have top make enterprise to large-scale the to system, our more days a the cyber-attacks identity needs and for solution Identity are on on care partners. of delivering built customer now security our With universal the our frictionless. nation's consumers health that enhance

identity account Our Verified faster, only powerful recovery identity to more is one-click total Verified employees unique and enables like secure security higher both and and product cost credentials. creation customers not age product also confirms or password attributes but friction-free, reset recovery. onboarding Clear's for and lower significantly account bringing account KYC.

product in and you Our more a the power of bringing Clear joy the at have industries hotels at and to grown the Clear, is travel make key This saving and crosses in from ID important is desk, creator to check-in we network hospitals. check-in multiple places. network show effect for value your time The that our them more and members, network aggressively beyond. them stop

gap properly discounted it. across or Our value member due network. a free ARPU our reflected and is Clear model the pricing, historical deeply are the There pricing base significant not historical closing to we to committed of has partner

which attractive Clear over and and as rollout base, a are EBITDA Mobile drive gross PreCheck ability strong higher, Verified, our in Clear dollars offer flow cash will growth to drive disciplined we services and in As free yield cost other ARPU Scale confident growth. such we profit

will it over Ken. Now I to turn

Thanks, Caryn.

expense. between our In share highlight. the profitable next-gen first XX% Cost million and on benefit of we Revenues cash growth. results our COVID-related increased Adjusted $X items margins implying adjusted want incremental had results grew continued I focus EBITDA a and expenses margins were demonstrate XXX%. incurred quarter, severance EBITDA First approximately million quarter to XX%, include of of some revenue upgrades $X.X and XX%.

fourth clean share year-over-year incremental items points were we of consecutive margins OpEx high and was quarter each last of newly margin operating and are Overall, cost as continued including playing year, and and achieved positive down organizational of line earnings revenue sequentially discipline TSA margins. X,XXX down per our strong The the with revenues, launched share. we GAAP a our PreCheck On combined sequentially airports, basis, OpEx drivers percentage EBIT of QX profit and XX% down basis all was marked streamlining, that out. incremental discussed percentage ramp for over a in dollars.

disciplined. and remaining normalized free XX% deducting Cash stock remained in was flow cash invest flow cash from XX%. highly free We growth here opportunistically strong. was operations from year-over-year. After flow comp generation will grew $XX.X up Cash million while $XX.X million,

Our reducing consistent and pricing new and with our on experience member drive discounting. dollar-based focus historical ARPU metric the is to strategy our through absolute retention

the We are have was percentage dollar XX-month retention with XXX basis as year XX.X%, for year-over-year of as reflects long Plus been and active Clear we metric how run business. end period. aligned the Annual retained bookings prior who on members the points focused this the it internally gross of up has of

receive anything percent if active had bookings. If the would measures credit had of of X,XXX X,XXX from pocket. The excludes statement approximately impact on their a XX/XX/XX they we measure plan XXX which reactivations, paying credit metric members basis example, are would their were unless new family results total or card bookings as plan a the XXXX our For partner, measure a as out impact not any by points. the of total and free positively XX/XX/XX, they full of retention members a XXXX

capital we In our to continued return. opportunistic approach with QX,

IPO. the regular to X.X our in addition X/X retiring accelerated $X.XX shares about X.X repurchased dividend, activity we shares. of we shares repurchase to X% representing million have beginning by outstanding. special million have we shares, the our and the In Inception dividend date, $X.XX million retired shares, of Year-to-date, issued representing X.X

reflecting to increasing regular quarterly are the share, our share We $X.XX count. per dividend lower

had million and of million $XXX.X $XXX to net to our quarter, upside year, very strong guidance. revenue growth and we XX%, and accelerated million to bookings XX% $XXX.X a Last of bookings respectively. $XXX total in XX% adds QX, we growth, to resulting representing XX% million, this In expect

So have strong very growth comparison. a we

guidance in we of Our the early revenue modest as PreCheck sequential are nationwide stages includes growth rollout. a in

are We gross pleased contributions despite from both to start seeing to more Verified contribution profit and top TSA modest line. dollar their the

least on basis We to XXXX. expect flow free margin and year-over-year continue at versus of expansion growth cash XX% a

we Q&A, Before on want a comment proposed state senators to to California bill. I go

presence, millions and XXX We over including airports are of of extremely our employees X California proud members.

impact it of our no hard become airports. existing as bill out be carves While to the law. It latest operations Clear draft all California ensures will very this to for

by The love that to partners heard the coalition strong from airlines the and value and members. stakeholders industry our was is not powerful all represents collectively proposition evident of airports, passionate support mention opposed Clear incredible the that that Clear to bill,

let's With to that, go Q&A.

question Instructions] Your [Operator comes first from Joshua Needham. with Reilly

here. net bundle any new initial year? guidance timelines who to PreCheck this customers have rolled job rest along With up rates you the PreCheck can XXXX? attach somewhat color update now Nice sign given airports, into or the at the factoring then for with give And what that, the for of on of an the rollout quarter changed X on to airports cadence us of out the you're on PreCheck? expect And across of the balance you renew

like All into X right, on questions Josh, I it. that We're turning one.

LaGuardia, We're rollout. So Lake the X you week's of moving City airport That's me mid-summer. with network, of let X. Phase X-phase which airports PreCheck is launch summer. renewals. late Phase which Salt the the happen which It's on first Phase to rollout. of X launch we online take is then through the X a the Seattle We early yesterday, we to expect last and and the expect next XX finished now airports the official to national rest happen to And

is TSA is Of XX-XX. is which approval, but enrolled of through of and and incented PreCheck going traffic not subject course, we to highly aligned the XX-XX, to to are still today, XX% this flip XX% means all

X to really X, on moving with rollout, and Phase about it's So this X a excited Phase phase. done

by app. and terms at of just I attach very that tell and rates, results, mobile online airports we encouraged early are In our would you both

So there's in to ways Clear. engage many different

dollar-based helpful. That's has updated been for retention point? for it. last at members family then $XXX now And full versus and you year price family pricing a net are the what And seeing the that of this how point figure? impacting renewals quarter, member retention new price Got out the terms lower is at in

Sure.

perspective, of bigger a from view. just a I'll specifically talk sort give then and retention a family about picture So

XX. impact from basis from to member we've perspective, impact XX very little Specifically seen basis approximately it's, a XXX from move that point XX retention to I to would say, family,

impact insignificant fairly and pricing member significant fairly So on retention.

too look, It inexpensive cost we per it per look at use, just on cost a a perspective. use right? And on was

keep So talking narrowing from the as ARPU an we've perspective. about we taken it up, gap

And room the we perspective. still speaking, think on pleased there. of so But there's with generally a lack family go very retention to member we're from more impact

and reducing our taken and the narrowing ARPU, and discounted -- pricing discounts driving those we've metric, of memberships both we've retention terms those absolute Historically, In new on is focus through discounts. offered we're ARPU. driving really

and introduced ARPU looked demonstrates how And success, of metric we internally retention. it a in for balanced is at run so in We've our and the driving -- this it'll dollar member it the we between quarter dollar time, business. long that retention reflective retention right, we really think approach a

is where results. very we we're pleased with so and retention general, And in are strong seeing

PreCheck airport. gave Josh, the have I added in should you rollout I to schedule

morning the program. back So Clear. great more it's by great is legs we going the enrollers the in to where to they addition did enrollment arms but Staples staples to and Staples also to travelers PreCheck announce So a Staples Saturday right? network, the it's brings at stop enroll airport, be partnership to team on to And and meeting great with network, our are, a the to bringing

out stores expect with partners. the other So XXX by Staples we year do be of and also in airport end to of the

that from a open crucial a XX big on to you XX a And on to neighborhood, basis, week, a no in that you've less a can think we XX be difference a airports, when at travelers. open got it's and million monthly so closing days of talk really about XX airport for traveling, necessary, where coffee X I whether $XX on and hours people be TAM in make this experience appointment again, really are their at in really bring than the Staples the cup day, hotels,

question Telsey with next Group. Your comes Telsey from Dana

you which as moving And along? Caryn, really then that as and Ken, any about other of cadence a are about of? but the the think we should on be the member Staples, think you obviously, of member you And to incremental is mentioned we BXB that progress should leverage, enhancements, and the on that year been think margin business that where enhancing has the the updates experience, any cost about? mindful how the you focus experience, platform, the

face few technologies, from verifications see over substantially absolutely expect that months is we by more experience to make to have done and and next you're a meaningful improvements and since improving bring be trajectory future to rolling to including the a be of seen new expect first and year-end. through a efficiency, steady out seamless So you're the and hardware experience experience, year-end, going will that the we right, we Lane improvements perspective key speed February, that series should member and volume priority, accelerate. of to

was you're millions of certainly labor to hit unlock. people. is to upgrade hours when NextGen the that member XXX,XXX really Look, But a the taking experience

XX% are is We significantly Lane Clear upgraded through Over that, volume the of already through to right? NextGen. coming

done that we're the unlocking now to on So that -- with we're and experience. the and technology pretty

should continue So you impact. a meaningful to see

the said we're at at interoperability that be think quarter. of and integration of today volume by the we the second end I we digital should for XX% XX%

terms In a is Verified, time. Clear really of it exciting

put and in a it I slide was a quarters perhaps think travel we XXXX, center XXXX. to the original we're our problem. with the was company for then, identity facto a it a few tomorrow now. And in is That secure looking of reality coming ago, Today, a forth platform. de solution deck vision pitch

Now solutions. industry. looking there's see every problems And for you across that

product trusted recognition is that the of will the being about a is talking gaining be and users in to care, opportunity. you our a really so LinkedIn health and few a continues scale partners. week check-in first of unlocking Internet here-and-now value In or us see layer in so. and continue badge to more in actually in-person identity to will to Atlanta weeks, And

it for and patients it care professionals, you're seeing for recovery, you're verified check-in. account so for And for seeing health

seeing You're drop for rates which seeing problem. it are And identity precipitously. fraud is a significant retail, fraud in we

the partners are seeing our So impact.

which the now, with Right and XX% it. Clear our current using about customers ratios of then verifying the who same to members that we one-click about because scale base love partners, the a our it's to KYC. platform. continue you're and seeing verification are that's customers new our are Our XX% swap to is member one-click as we Obviously, a or powerful really expect

in space crucial, trust seeing about specifically in where We health also So you're care, physical. And safety financial the traction that. significant services, are consumer we online are acceleration. talked and but in seeing the member in

that that really platform. Clear Verified was the due saw the growth and in of quarter, You to the

Those we that A expansion. would and of margins, terms about all the of in out. number to we're And cost driving lead Yes. that on we are margin talked year Look, margins. last playing things said focused very

have through on PreCheck as next-gen half, quarter, perspective. highly a from second cost from half half cost specific by increased we we've think from we And versus first first versus come I see are So back growth look remain to I upgrades, as perspective. the And but commentary cost half. -- contribution improved back the say disciplined don't the should we will Clear Verified the up see be a half, in we we

taking planning price. on also some We're selective

back things growth strong expansion. So versus in those all as as half the for growth rate well the QX lead to in underpinning stronger the of half back margin should rates implied

from Mark Your next with comes Stifel. question Kelley

Two ones. quick

LinkedIn a of care, lot and scales, PreCheck the for then health mentioned and business. growth opportunities you just TSA As

don't a we there look and way what time horizon mix to that I right As my care all the bookings mix as choose, over time, think newer these is the out layer kind to question? of you choose? does And That's about you can revenue products that if just answer you go second the TSA non-airport wherever up Or think you can and have approve one. product? makes curious, is to you I'm completely I'm sense your for first one, it partners the in, you

question second TSA to your first. need answer I'll does approve it.

think I pragmatic people. we're

I to trusted it. aligned and conveniently frequent are approve they And to so great need where but we're it all located travelers partners, that bring good places do think to

So that's one. number

broadly the days, we gross In Clear terms and profit speaking, at Travel look how And the of mix, early business. here's Verified. dollars. then Clear

doing. look we're X you when Travel, think Clear there I So are that at things

one the Obviously, we're improving week. the -- Honolulu networks. of member experience. We're part continuing We Hawaii last launched to Maui, sorry, grow

you'll to see So continue more airports.

that in see see You'll both continue continue to to more you'll you'll lanes of the around experience, our current airport, products, top pricing on home gate that. and to see then drive experience to more and

of both it's talk think ads. So $XXX million about $XX or about the million the million, the and we renewal when and on TAM opportunity talk do we the PreCheck $XXX we new

It's scaling in after consumer And on digital. gross going large look side, Travel and the obviously, X so Clear financial members revenue services side. it how over the that And then today. on we a But Verified very and layers we're we're at smaller TAMs one, health a Clear care physical time, is and profit broad in all of piece dollars.

I think to it's that And think too think but so as I $X billion soon we opportunity. tell, a of

a significantly So be Clear growing rate we higher and we means top hope obviously, that Verified they're hope but on hope having said -- we've both the aggressively, that they're would even, that growth line. always

today, focused a margins gross dollars, which dollar line PreCheck starting to structure, on this they we would relatively really we profit Caryn profit contribute top less fixed dollars and the call, gross obviously reiterate on earlier gross materially. profit cost to a in and just are in mentioned over growth meaningful are while And drive Verified I think EBITDA PreCheck point, perspective

next Turrin comes Your Fargo. Michael question from Wells with

but Can Ken, It's great? mention much bookings you've David the can anything guide be contribution, there? not growth. I Unger you Turrin. seasonality on suggests the through at is factors please XQ that you commented for Michael play CSA XX% there step year-on-year would And know

Sure.

CAGR is The we've now. taking years CAGR. at bookings a XXXX growing XX% a levels, XX% QX for guidance back, several was QX just pre-COVID step CAGR. really look, versus sustained a So a been around the XX%

sales. XX% So and to upgrade it the next-gen has impacted getting rate priority, the been

Our enrollments we PreCheck such to more more verification they're field than opportunities products bundle and our team, back balancing drive have at pod with of that there to opportunity, as ever revenue.

our I rate would particularly was guidance XX%. to also a highlight 'XX Bookings QX we And around strong. exceeded accelerated growth year. last XX% by

strong around for then thought be behind an that's and comparison where the we be to impact. it was QX, so quite point probably for we PreCheck, is And lastly, growth month where on rollout wanted to the QX. a So would it your

a in incrementally QX, but impact So an still larger small QX small. impact in

we volumes tailwinds in the again, to look back volumes, Clear And first in PreCheck, as Verified selective and planning the contribution the additional up right, we sales from increased August frame. from back pricing see half half. the versus that some and half, time we're higher Plus higher

expectation half exceed is the that rate. QX our the growth back So would bookings growth

Okay. partnership XQ on Amex Anything the Congratulations partnership? Good for to of from into we to see positive. metrics perspective Great. from should a as penetration the Amex And we seasonality that balance further be the extension mindful the a results. sheet clearly then that. look

take talked about Amex Nothing partnership trends. about talked normalization we perspective. call, -- QX the from seasonal specific back, the starting to to a a last I year, travel for a say would of step just we

seen our so QX including guidance. continue that in And -- we've through

if of we'll So I travel normalize sort highlight trends, be thing will. of I in pre-COVID That's think only would QX, sort the year-over-year back you to there.

I to call will and of closing remarks. now reached over the the Seidman-Becker for have session, Caryn turn question-and-answer We end the

Clear executing XXXX first on quarter member scaling initiatives, improving team the Thank you. the experience, is you scaling our proud and call. Verified. am earnings our of TSA PreCheck priority I how Clear Thank for joining

call. concludes This earnings today's

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