Q2 2021 Clear Secure Inc Earnings Call

[music].

Yeah.

Good morning, welcome to the clear second quarter 2021 earnings conference call, we have with US here Ms. Karen Seidman Becker co founder Chairman and Chief Executive Officer.

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 Karen Seidman Becker co founder Chairman and Chief Executive Officer of clear Karen.

Thank you good morning, everyone. Thank you for joining us today for clearance first earnings call as a public company. This morning, we released the shareholder letter along with our earnings on our website I hope you've all had a chance to review that this was a quarter of <unk>, including record enrollment and a record number of members engaging with the clear mobile app for friction.

With experiences with our sports Entertainment and health pass products.

The dual growth engine that we talked about on our road show, our Bdcs subscription based travel business and our <unk> enterprise platform business are both seeing strong growth travel is re accelerating as seen in our subscription clear plus business and there are significant traction on the platform side. We are pleased with our second quarter and the strength, we are seeing into the third.

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 path product has quickly become a leading solution in the testing vaccination space with over 2 million users. We were recently recognized by the Washington post as the most flexible and useful App, a testament to our obsession with Dave 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 fear health path to the states travel safe program to avoid quarantine requirement.

700000 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 are growing member base and acceptance network built on our secure identity platform is bringing frictionless all in one experience is 2 million.

It is why on Friday, the city of San Francisco announced they're trusting clearer solution to validate vaccination status for local businesses and residents.

San Francisco joined New York City, and New York State and others and leveraging clear.

Well, 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 total addressable market addition.

Really 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 unclear touchless or frictionless experience.

With that let's turn it over to Q&A.

Thank you.

At this time I'd like to ask a question you May press star one from your telephone keypad and a confirmation tone will indicate your line. This is the question queue.

You May press star two if you'd like to move your question from the queue.

So I'm just as you are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please while we assemble the queue for questions.

Thank you. Our first question is from the line of Brian Essex with Goldman Sachs. Please proceed with your questions.

Hi, This is Charlotte Phoenix on for Brian. Thanks for taking the question. So I was wondering how do you envision the market for the vaccine apps to unfold do you think the health care I T vendors like Athena health net back maybe better position for to offer Federated App or.

Have you seen or are you guys also in consideration of that.

So.

And hi 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 it does go far beyond that and our partners are looking for trusted partners any secured turnkey solution and so what we're seeing is that health path, which is proven ready scalar.

<unk> 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 vaccines status, but going into your office. You were you Europe employee Youre building active card and your vaccine status. So this is about again the power of the secure.

Identity platform and creating all in one solutions I think theres a lot of different apps out there and our focus is creating trusted scalable all in one solutions that drive the customer experience and the partner experience.

Great and I guess as a follow up could you help us better understand how much helicopter biscuit accounting for this quarter.

So we're not breaking out specific lines of business within within revenue.

As noted we are gaining significant traction on that line of business.

I would also just point out what you saw today, we announced 7 million members that we cross that number yesterday and so obviously the accelerated member growth is being driven from both the travel side as well as the platform side.

Great. Thank you so much I'll reenter the queue.

Okay.

Our next question is from the line of Michael <unk> with Wells Fargo Securities. Please proceed with your questions.

Hey, there. Thanks good morning, Congrats on the first earnings report here, you mentioned enrollment growth.

<unk>, 26% in the quarter reached 7 million it looks like just yesterday can you just add more commentary around how you would expect that enrollment growth to try it or you're finding conversion rates or 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 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 high.

Have you on the call this morning.

There has never been a more we said it in the note, but it is with intended has never been a more important time to be a secure identity platform what youre seeing in travel on both the.

Gross AD side conversion retention win back is that people want touch list and frictionless experiences and are looking to clear for that and predictable rate. 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.

It's helpful.

And then maybe maybe.

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 bottle what's assumed from a macro perspective, just any additional color you can add just around the overall guidance philosophy I think it's useful given up your first touch point here with that with investors.

Thank you.

Sure Yeah, so in general.

It's a continuation of the trends that we're seeing today.

Our best estimate based on what the visible today and as you know we have backlog for retention. So we have good visibility into renewals from prior year backlog as well as we have.

The 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.

Also point out that the American Express partnership which launched on July one.

Launched quite strong and continues to have a nice tail of membership growth as well and so we expect that to continue as well.

That's great. Thank you.

Our next question is from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.

Good morning, and congratulations on the nice results and rebound can you talk a little bit about.

On all different areas what are you seeing in the REIT in the rebound any way to see leisure versus business travel and what you just mentioned on American Express can any of the other partnerships anything to note, particularly regarding health path and potentially new business sign ups or given it it's essentially.

The essential need thank you.

So Dana I'll start and then I'll turn it over to Ken from what we're seeing in the airport really important and we talked about it in the release rate are 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 rates are driving a great NPS for our members as well as being available to ship to share the clear capabilities, whether it be the home to gate app or the clearer lane.

Other assets with potential travelers or potential members and so it really does start with our people and the brand. We are seeing you know you've seen numbers come back a little bit of late up to $2.2 million travelers coming through airports. This summer I think thats 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 the leisure traveler, we just know that there 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.

But we are seeing a deeper appreciation for touchless or frictionless predictable and so we have been gaining share in the airports and that has continued every month from a clear volume perspectives and and also through the past year and changed the technology has gotten better the offering has become more robust.

That's really meaningful to travelers. So we're seeing a very strong rebound in a bigger need.

What's clear is offering and a great team out there from the clear ambassadors perspective, bringing the technology and the experience to life and just a little qualitative color I mean, we definitely are.

Going 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 hardcore business traveler necessarily only we are definitely seeing more diverse membership base today.

In 2019.

And then Dana you ask something on the health Tech piece would you mind, just repeating that sorry sure Unhealth path. How are you seeing the customer base for that expand.

Any different traction in terms of what you expect for health path from what you from when you started to clear how do you see that developing and evolving.

We're really seeing a fairly widespread demand.

In terms of leaving.

Leaving 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 too busy.

Business is two venues and so we're seeing fairly strong incoming demand for our solution.

And I would just add to that I think two pieces relative to what we'd started from an expectation having great partners and being able to help those partners reopen safely is really important the ability to upload Europe and digitize. Your vaccine card is separate and apart from partner. So I think it's become more of a two sided.

Business, hence the acceleration in enrollment because you may not be using it tonight at the we partnered with the Brooklyn NAV for the Yankees or the math, but you might just want to have your vaccine current 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.

<unk> seamless integration through API is also really important and so.

Do you think that is a positive guidance the direct to consumer organic upload of your vaccine cars. It's a clear app is not something I think that we expected early on.

Thank you.

The next question is from the line of Ananda Baruah with loop capital. Please proceed with your questions.

Hi, Good morning, guys. Thanks for taking the question congrats on the very solid execution.

A gate.

Yeah, I guess a couple for me. The first is on clear plus did you guys see any surprises as you moved through the quarter, either positive or negative or otherwise what might be for cleared plus some of the key initiation.

You can find those.

For the remainder of the year and then I have a follow up thanks.

Well I think in general clear plus was very very strong and it was really broad based.

So everything from the American Express partnership launching extremely strong and continuing.

To drive nice growth.

Geographically fairly diverse representation, we had a number of markets that were actually up versus 2019, and so we achieve these results.

With some markets that are up versus 2019, but many of them are actually still down versus 2019 and so.

The extent that the.

The geographic the geographies that are still lagging.

Start to catch up to the other markets theres potential for future acceleration from here I would add to that sort of the tale of two cities or two regions trade. There is parts of the country that were quite strong and then part that were still down.

More coastal than 2019, and so I think that you know.

It was probably a little surprising although maybe we shouldnt be when you see what's going on.

I also think when back so you hope that anybody who left in 2019 or 2020 would Miss you and wanted 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 tick up in.

With you guys sort of called platform uses and the shareholder.

Letter.

The biggest in a while and I guess the question is how broad based was that sounds like health has is doing really well.

Are you seeing that also nicely occur beyond health pass and I guess, just any context, you could give there would be helpful. Thanks.

Sure on the platform utilization it is fairly broad based but 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 up it has been trending positively.

Really sequentially every quarter for the past several quarters into this recovery there is still a long ways to go from a utilization perspective from existing members. We also saw an acceleration in clear cost throughout the quarter and so many new members came on towards the end of the quarter.

And therefore, they didnt have an opportunity to use clear more than a handful of times just given the timing in the quarter.

And then on the platform side.

It's a range of use cases, if you are 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.

Then theres many use cases that are more recurring so going back into the office, we might do that every day.

And then there are some one time events that we did like the VW conference Sorry concert for example, whereas the onetime use and so you're enrolling in using it once and then obviously part of our strategy, which is bringing.

Bring on events bring on new members, which drive new partners, which drives new use cases, which is that flywheel that Karen talked about earlier I do think it goes back to what we talked about in the Roadshow, which is really wanting to become part of your daily habit and go from 12 times, a year, which is what people were using it on average in airports to 12 times, a day and if you're going in.

Using it to get into your office that is in fact, a daily habit, if youre going to a sporting event through you know clearly 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 partnership.

One time partnership like the Abu Dhabi or heavy duty not sure.

And Walmart races, the power of broad based partnership Hawaii safe travel, both with United and Delta and then with the state of Hawaii. So these are obviously enormous partnership with big opportunities that you have a lot of the big drivers is little drivers.

That's really helpful context, I appreciate it thanks.

Thank you.

Thank you so much.

You May press star one to ask a question.

The next question is from Paul Chung with Jpmorgan. Please proceed with your question.

Hi, Thanks for taking my questions and welcome to the public markets. So first off.

Pretty pretty strong acceleration in subs in Q2.

And bookings Scott kind of points to a very nice pace.

You want to travel so how.

How should we think about that patient you know Delta continues to linger I know that's tough to quantify and then separately as we hit fiscal year 'twenty two comps get tougher.

I'm kind of a nice pace today in <unk>. How are you guys thinking about sub add pizza in 'twenty, two and factoring, possibly some pent up demand here in the summer.

Follow up.

Yes.

I'll start and then turn it over to Ken which is a bigger.

Work 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 it still big opportunity to penetrate the total addressable market. These are still early days and travel.

And so we've mapped all of those out as we look at 'twenty. The rest of 2021 and 2022 in terms of yeah and right now, we're giving guidance for Q3.

And we also made the comment that we're not seeing any impact from the Delta Varian today, but we're thoughtful of it and we've seen southwest in particular had.

Bookings commentary last week and so we are thoughtful in looking at it but we are not seeing anything today.

That's it thanks for that 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 paths are those.

Those discussions with other airports accelerating thank you.

Yeah, So we're not giving guidance on specific numbers.

This year versus next we do have a pipeline of airports and our practice will be to announce those airports. After we signed the contracts.

Yeah.

Thank you.

Our next question is from the line of Brian Essex with Goldman Sachs. Please proceed with your questions.

Hi, again this is Charles on for Brian Ethic quick question on TSA pre check I know during the road show you mentioned that it was going to launch in the second half of 2021 and now you announced today with excel.

It's expected to launch in Q4 have you experiencing delays any hiccup. So just can you give us any color around what's the anticipated rollout.

No specific delays.

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 is still on track, we're working hard and we're partnering with TSA to hit the long to get the program launch as quickly as possible.

Great. Thank you.

Thank you there are no more questions on the line and I will turn the call back to Karen cited in Becker for closing remarks.

Thank you and thank you everybody for joining us today, we appreciate it and 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 and we thank you for your participation.