Clear Secure, Inc. (YOU) Earnings Call Transcript
August 16, 2021
Earnings Call Speaker Segments
Good morning. Welcome to the Clear Second Quarter 2021 Earnings Conference Call. We have with this here Ms. Caryn Seidman-Becker, Co-Founder, Chairman and Chief Executive Officer; Ken Cornick, Co-Founder, President and Chief Financial Officer. Please be advised that today's conference is being recorded. I would also like to remind you that today's discussion will contain forward-looking statements relating to future events and expectations. You can find factors that could cause the company's actual results to differ materially from these projections in our most recent SEC filings. In addition, we've included some non-GAAP financial measures in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in today's 8-K. With that, I'll turn it over to Caryn Seidman-Becker, Co-Founder, Chairman and Chief Executive Officer of Clear. Caryn?
Thank you. Good morning, everyone. Thank you for joining us today for Clear's first earnings call as a public company. This morning, we released a shareholder letter, along with our earnings on our website. I hope you've all had a chance to review them. This was a quarter of first, including record enrollments and a record number of members engaging with the Clear mobile app for frictionless experiences with our Sports, Entertainment and Health Pass products. The dual growth engines that we talked about on our road show, our B2C subscription-based travel business and our B2B enterprise platform business are both seeing strong growth. Travel is reaccelerating as seen in our subscription Clear Plus business, and there is significant traction on the platform side. We are pleased with our second quarter and the strength we are seeing into the third quarter. That strength is reflected in our third quarter bookings guidance of $90 million to $95 million, which represents a record quarter for Clear. Our Health Pass product has quickly become a leading solution in the testing vaccination space with over 2 million uses. We were recently recognized by the Washington Post as the most flexible and useful app, a testament to our obsession with safe and frictionless experiences. We are seeing a number of new partnerships around vaccination validation from both enterprises as well as venues. I want to highlight our partnership with the state of Hawaii, where travelers can link their Clear Health Pass to the state's Travel Safe program to avoid quarantine requirements. Roughly 700,000 monthly passengers from all airlines are eligible to use the Clear Solution, and we are seeing strong uptake. Clear is a trusted brand, bringing a vertically integrated solution to our partners. Our growing member base and acceptance network built on our secure identity platform is bringing frictionless all-in-one experiences to millions. It is why on Friday, the City of San Francisco announced they're trusting Clear Solution to validate vaccination status for local businesses and residents. San Francisco joins New York City and New York State and others in leveraging Clear. While one can't predict the ebbs and flows of the virus, we are closely monitoring the Delta variant and its potential impact on travel trends. We are aware of some of the airline commentary around bookings but have not seen any impact to date on our travel business. I would also point out that we are in the very early days in our penetration of our total addressable market. Additionally, what we have seen over the past few months is that more and more businesses and institutions are focused on remaining open in a safe and efficient way and are looking to Clear for solutions, while travelers are more dependent than ever on Clear's touchless frictionless experience. With that, let's turn it over to Q&A.
[Operator Instructions] Our first question is from the line of Brian Essex with Goldman Sachs.
This is Charlotte Bedick on for Brian. So I was wondering how do you envision the market for the vaccine apps to unfold? Do you think the health care IT vendors like Athenahealth and Epic are may be better positioned for -- to offer federated app? Or as you've seen -- or are you guys also in consideration of that?
So thank you. Look, we believe that people having access to and control of their health care information is a global secular trend and it is vaccine status today, but does go far beyond that. And the partners are looking for trusted partners and a secured turnkey solution. And so what we're seeing is that Health Pass, which has proven, ready, scalable, is seeing a lot of new partner interest, and that businesses are focused on coming back better. So building a nationwide interoperable solution for private industry and state and local government is crucial, and doing it in an all-in-one way. So this isn't just about your vaccine status. But going into your office, you are you, you are an employee, you have your building access card and your vaccine status. So this is about, again, the power of a secure identity platform and creating all-in-one solutions. I think there's a lot of different apps out there. And our focus is creating trusted, scalable, all-in-one solutions that drives the customer experience and the partner experience.
Great. And I guess as a follow-up, could you help us better understand how much Health Pass basically accounts for this quarter?
So we're not breaking out specific lines of business within revenue. But as noted, we are gaining significant traction on that line of business.
I would also just point out what you saw today is we announced 7 million members that we crossed that number yesterday. And so obviously, the accelerated member growth is being driven from both the travel side as well as the platform side.
Our next question is from the line of Michael Turrin with Wells Fargo Securities.
Congrats on the first earnings report here. You mentioned enrollments growth improved 26% in the quarter. You reached 7 million, it looks like just yesterday. Can you just add more commentary around how you'd expect that enrollment growth to trend? Are you finding conversion rates are maybe higher just given more sensitivity around travel experience of late?
Yes. So in general, we're not going to give specific guidance on the members. We gave top line guidance as you saw in the release, but we have seen an acceleration throughout Q2 and into Q3, and are seeing fairly widespread strength in all of the metrics, including conversion.
Just to add to that and, hi, glad to have you on the call this morning. There has never been a more -- we said it in the note, but it is with intent. It's never been a more important time to be a secure identity platform. What you're seeing in travel on both the gross add side, conversion, retention, win back is that people want touchless and frictionless experiences and are looking to Clear for that and predictable, right? It is harder to travel than ever and so wanting that predictable experience is really important. And on the platform side of the business, more partners bring on more members and more places for our members to use it, right? It really does drive that flywheel.
Helpful. And then maybe, Ken, just on the Q3 guidance that you're providing, is there anything you can provide just to help level set in terms of just the degree of visibility you have into the model? What's assumed from a macro perspective? Just any additional color you can add just around the overall guidance philosophy, I think, is useful given your first touch point here with investors.
Yes. So in general, it's a continuation of the trends that we're seeing today. It's our best estimate based on what's visible today. And as you know, we have a backlog for retention. So we have good visibility into renewals from prior year backlog as well as we have quite a number of free trials that convert into paid. So we do have the visibility of the people that have already joined that are expected to convert into paying customers this quarter. So I would say we have fairly good visibility. I would also point out that the American Express partnership, which launched on July 1, it launched quite strong and continues to have a nice tail of membership growth as well. And so we expect that to continue as well.
Our next question is from the line of Dana Telsey with Telsey Advisory Group.
Congratulations on the nice results and rebound. Can you talk a little bit about -- what I meant rebound, the travel rebound. Can you talk a little bit about what you're seeing there? I've been in airports lately and the service has been terrific on all different areas. What are you seeing in the rebound? Any way to see leisure versus business travel? And what you just mentioned on American Express, Ken. Any of the other partnerships, anything to note particularly regarding Health Pass and potentially new business sign-ups for given its essential need?
So Dana, I'll start and then I'll turn it over to Ken. From what we're seeing in the airport, really important that -- and we talked about in the release, "Our Great People." And so really being well-staffed with ambassadors who care deeply about bringing that frictionless experience has been massively important in both enrollments and the verification experience, right? So driving a great NPS for our members as well as being available to share the Clear capabilities, whether it be the Home to Gate app or the CLEAR lane were other assets with potential travelers or potential members. And so it really does start with our people and the brand. We are seeing -- you've seen numbers, they've come back a little bit of late, up to 2.2 million travelers coming through airports this summer. I think that's off a peak of 2.7 million from 2019. That is a hefty rebound, which I think in the near term is driven by leisure, although we don't really know the difference between a business traveler and a leisure traveler. We just know that they're a traveler. And so we can't really break that down. But from looking at what you're seeing, I think it's disproportionately leisure right now. But we are seeing a deeper appreciation for touchless, frictionless predictable. And so we have been gaining share in the airports, and that has continued every month from a Clear volume perspective. And also, through the past year and change, the technology has gotten better. The offering has become more robust. And that's really meaningful to travelers. So we are seeing a very strong rebound and a bigger need for what Clear is offering, and a great team out there from the Clear ambassador's perspective, bringing the technology and the experience to life.
And just a little qualitative color. I mean we definitely are tapping into a more diverse from an age perspective, from an airline perspective, from a geographic perspective, customer base, our new member base than we have before. So it is not the traditional hard core business traveler necessarily only. We are definitely seeing more diverse membership base today than we did in 2019.
And then, Dana, you asked something on the Health Pass piece. Would you mind just repeating that? Sorry.
Sure. On Health Pass, how are you seeing the customer base for that expand? Any different traction in terms of what you expect for Health Pass from what you -- from when you started Clear, how do you see that developing and evolving?
We're really seeing a fairly widespread demand coming in, in terms of meeting our solution in order to get back to work safely, in order to open venues, in order to open restaurants. And so it really is fairly diverse from small to large enterprises to businesses to venues. And so we're seeing a fairly strong incoming demand for our solution.
And I would just add to that, I think 2 pieces relative to what we started from an expectation. Having great partners and being able to help those partners reopen safely is really important. The ability to upload your -- and digitize your vaccine card is separate and apart from partners. So I think it's become more of a 2-sided business, hence, the acceleration in enrollment because you may not be using it tonight at the -- we partnered with the Brooklyn Nets or Yankees or the Mets, but you might just want to have your vaccine card available for whenever you do need it going back to that access to -- having access to and control of your health care information. So you're seeing both individuals driving towards it as well as enterprise and partners and our ability to create these seamless integration through APIs is also really important. And so...
But I do think that is a positive variance. The direct-to-consumer organic upload of your vaccine card is a Clear app, is not something I think that we expected early on.
The next question is from the line of Ananda Baruah with Loop Capital.
Congrats on the very solid execution out of the gate. Yes, I guess a couple for me. The first is on Clear Plus. Did you guys see any surprises as you move through the quarter, either positive or negative or otherwise? And what might be for Clear Plus some of the key initiations or action signpost for the remainder of the year? And then I have a follow-up.
I think in general, Clear Plus was very, very strong and it was really broad-based. And so everything from the American Express partnership, launching extremely strong and continuing to drive nice growth. Geographically, fairly diverse representation with a number of markets that were actually up versus 2019. And so we achieved these results with some markets that are up versus 2019, but many that were actually still down versus 2019. And so to the extent that the geographies that are still lagging start to catch up to the other markets, there's potential for future acceleration from here.
I would add to that sort of the tale of 2 cities or 2 regions, right? There's parts of the country that were quite strong and then parts that were still down more coastal than 2019. And so I think that was probably a little surprising, although maybe shouldn't be when you see what's going on. I also think win backs, so you hope that anybody who left in 2019 -- or 2020 would miss you and want to come back, but in fact, they did. They did it online. They did it in the airport. And so I really think that talks to the strength of the brand and the experience that people love Clear and those who left last year have been coming back.
That's really helpful. And then just on platform bookings, really nice pickup in -- what you guys sort of called platform uses in the shareholder letter, the biggest in a while. And I guess the question is, how broad-based was that? It sounds like Health Pass is doing really well? Are you seeing that also nicely occur beyond Health Pass? And I guess just any context that you could give there would be helpful.
Sure. On the platform utilization, it is fairly broad-based. What I would say though is, from a travel perspective, many of our existing members clearly are traveling less frequently than they did in the peak in 2019. So although it is often has been trending positively really sequentially every quarter for the past several quarters into this recovery, there's still a long ways to go from a utilization perspective from existing members. We also saw an acceleration in Clear Plus throughout the quarter, and so many new members came on towards the end of the quarter. And therefore, they didn't have an opportunity Clear to use more than a handful of times just given the timing in the quarter. And then on the platform side, the range of use cases if you're loading your vaccine card up into the Clear app and maybe that you don't use it at all in the quarter, but you've enrolled, and then there's many use cases that are more recurring. So going back into the office, you might do that every day. And then there's some onetime events that we did like the Ubbi Dubbi Conference -- sorry, Concert, for example, where it's a onetime use and so you're enrolling and using it once. And then that's obviously part of our strategy, which is bring on events, bring on new members, which drive new partners, which drive new use cases, which is that flywheel that Caryn talked about earlier.
I do think it goes back to what we talked about in the road show, which is really wanting Clear to become part of your daily habit and go from 12x a year, which is what people were using it on average in airports to 12x a day. And if you're going and using it to get into your office, that is, in fact, a daily habit. If you're going to a sporting event through Clear Lane, obviously, that started coming back. So that was a driver that obviously wasn't happening over the past year. But the power of partnership, we launched a lot of partnerships, both onetime partnership like the Ubbi Dubbi or Ubbi Dubbi, not sure which, and Walmart, right? So the power of broad-based partnerships Hawaii Safe Travels, both with United and Delta and then with the State of Hawaii. So these are obviously, enormous partnerships with big opportunities that you have a lot of big drivers as well as little drivers.
[Operator Instructions] The next question is from Paul Chung with JPMorgan.
Welcome to the public markets. So first up, pretty strong acceleration in subs in 2Q, and bookings kind of points to a very nice pace, particularly in travel. So how should we think about that pace if Delta continues to linger? I know that's tough to quantify. And then separately, as we hit fiscal year '22 comps get tougher from kind of a nice pace today in 2Q and 3Q, how are you guys thinking about sub ad pace in '22, factoring possibly some pent-up demand here in the summer? And I have a follow-up.
Yes. I'll start and then turn it over to Ken, which is bigger networks, more products, more partners are the big drivers for the Clear Plus business over the next year and change. And so I think that on top of still big opportunity to penetrate the total addressable market. These are still early days in travel. And so we map all of those out as we look at -- the rest of 2021 and 2022, in terms of...
Yes. And right now, we're giving guidance for Q3, which you saw. And we also made the comment that we are not seeing any impact from the Delta variant today, but we're thoughtful of it, and we've seen Southwest, in particular, had a bookings commentary last week. And so we are thoughtful and looking at it, but we are not seeing anything today.
Got you. And then on the airport side, are you still on pace to hit 44% by the end of the year. Given the IPO and some nice media coverage here on the Health Pass are those discussions with other airports accelerating?
Yes. So we're not giving guidance on specific numbers of what we will hit this year versus next. We do have a pipeline of airports and our practice will be to announce those airports after we sign the contracts.
Our next question is from the line of Brian Essex with Goldman Sachs.
Again, this is Charlotte Bedick on for Brian Essex. Quick question on TSA PreCheck. I know during the road show, you mentioned that it was going to launch in the second half of 2021, and now you announced that it's expected to launch in Q4. Have you experienced any delays, any hiccups? So -- just can you give us any color on what the anticipated rollout?
No specific delays. It's a process and that we were -- we said back half because we didn't really, honestly, didn't know the exact date it's going to launch. It's still on track. We're working hard, and we're partnering with TSA to get the launch -- to get the TSA program launched as quickly as possible.
There are no more questions on the line. I'll turn the call back to Caryn Seidman-Becker for closing remarks.
Thank you, and thank you, everybody, for joining us today. We appreciate the welcome to the public markets, and we're excited to be here. We are pleased with our second quarter results and excited about our future. Today, the Clear vision of delivering touchless safe and frictionless experiences is more important than ever. And the demand for these experiences, as we talked about today is an enormous opportunity for us. So thank you all.
Thank you for joining us today. This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation.
Read the full transcript via the API
You're viewing the first half of this call. Get the complete Clear Secure, Inc. transcript - plus 251,000+ transcripts from 12,000+ companies, speaker segments and full-text search - through the EarningsAPI REST API or hosted MCP server.
Get an API key View API docs →For developers and AI pipelines
Programmatic access to Clear Secure, Inc. earnings transcripts and 251,000+ others is available through the
EarningsAPI REST API and the hosted MCP server.
Quarterly plans from $105 - full transcripts, speaker segments, full-text search,
and the /api/v1/transcripts/recent polling endpoint for ETL pipelines.