Clear Secure Inc (YOU) 2021 Q2 法說會逐字稿

Good morning. Welcome to the Clear second-quarter 2021 earnings conference call. We have with us here Ms. Caryn Seidman-Becker, Co-Founder, Chairman and Chief Executive Officer; Ken Cornick, Co-Founder, President and Chief Financial Officer. Please be advised 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 firsts, 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 roadshow, 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 ClearPlus 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 safe -- 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 are trusting Clear solutions 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). Brian Essex, Goldman Sachs.

This is Charlotte Bedick for Brian. Thanks for taking the questions. So, I was wondering, how do you envision the market for the vaccine apps to unfold? Do you think healthcare IT vendors like Athena Health and Epic may be better positioned to offer a federated app or are you guys also in consideration of that?

Thank you and hi. We believe that people having access to and control of their healthcare information is a global secular trend and it is vaccine status today, but does go far beyond that. And that partners are looking for trusted partners and a secure turnkey solution. And so, what we are 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 governments 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 the 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 drive 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 accounted for this quarter?

So, we are 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 as 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.

Michael Turrin, Wells Fargo Securities.

Congrats on the first earnings report here. You mentioned enrollment growth improved 26% on 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 are not going to give specific guidance on the members. We gave topline 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's never been a more -- we said it in the note, but it is with intent. There's never been a more important time to be a secure identity platform. What you are seeing in travel on both the growth 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. It really does drive that flywheel.

That's helpful. And then maybe, Ken, just on the Q3 guidance you are 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? And 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. Thank you.

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

Dana Telsey, Telsey Advisory Group.

Good morning and congratulations on the nice results and rebound. Can you talk a little bit about -- 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 in 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, can any of the other partnerships, anything to note particularly regarding Health Pass and potentially new business sign-ups for it given its essential need? Thank you.

So, Dana, I'll start and then I'll turn it over to Ken. From what we are seeing in the airports, 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.

So driving a great NPF 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 or 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 is 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 they are a traveler. And so, we can't really break that down, but from looking at what you are 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 experience to life.

Yes, and just a little qualitative color. We definitely are hopping into a more diverse from an age perspective, from an airline perspective, from a geographic perspective customer base or new member base than we have before. So, it is not the traditional hard-core business traveler necessarily only. We are definitely seeing a 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 when you started Clear? How do you see that developing and evolving?

We are really seeing fairly widespread demand coming in in terms of needing 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 are seeing fairly strong incoming demand for our solution.

And I would just add to that I think two 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 and digitize your vaccine card is separate and apart from partners, 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 Nets or the Yankees or the Mets, but you might just want to have your vaccine card available for whenever you do need it going back to having access to and control of your healthcare information.

So, you're seeing both individuals driving towards it, as well as enterprise and partners. And our ability to create these seamless integrations through APIs is also really important. And so --.

We do think that is a positive variance, the direct-to-consumer organic upload of your vaccine cards to the Clear app is not something I think that we expected early on.

Ananda Baruah, Loop Capital.

Hi, good morning, guys. Thanks for taking the questions. Congrats on the very solid execution out of the gate. Yes, I guess a couple from me. The first is on ClearPlus. Did you guys see any surprises as you moved through the quarter, either positive or negative or otherwise? And what might be for ClearPlus some of the key initiations or action signposts for the remainder of the year? And then I have a follow-up? Thanks.

I think in general ClearPlus was very, very strong and 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. We had 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 two cities or I'd call it two regions. There are 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 kickoff 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? Sounds like Health Pass 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. 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 and it 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 ClearPlus throughout the quarter. And so, many new members came on towards the end of the quarter and therefore they didn't 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, the range of use cases -- if you're loading your vaccine card up into the Clear app, it may be 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 one-time events that we did like the Ubbi Dubbi concert for example where it was a one-time use. And so, you are 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 roadshow, which is really wanting Clear 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 are 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 one-time partnerships like the Ubbi Dubbi -- or Ubi Dubi, I'm not sure which -- and Walmart.

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. So, you have a lot of big drivers as well as little drivers.

That's really helpful context. I appreciate it. Thanks.

(Operator Instructions). Paul Chung, JPMorgan.

Welcome to the public markets. So, first up, pretty strong acceleration in subs in 2Q and bookings guide points to 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 2022 comps get tougher from the nice pace today in Q2 and 3Q. How are you guys thinking about sub add pace in 2022 and 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 network, more products, more partners are the big drivers for the ClearPlus 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 20 -- the rest of 2021 and 2022 in terms of --.

Yes, and right now we are 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 are thoughtful of it and we've seen Southwest in particular had bookings commentary last week. And so, we are thoughtful and looking at it, but we are not seeing anything today.

Got you. 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 Pass, are those discussions with other airports accelerating? Thank you.

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.

Brian Essex, Goldman Sachs.

Hi. Again, this is Charlotte Bedick on for Brian Essex. A quick question on TSA pre-check. I know during the roadshow 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? Can you give us any color around the anticipated rollout?

No specific delays. It's a process -- and we said back half because we honestly didn't know the exact date it's going to launch. It is still on track. We are working hard and we are partnering with TSA to get the program launched as quickly as possible.

Thank you. There are no more questions on the line. I will turn the call back to Caryn Seidman-Becker for closing remarks.

Thank you and thank you, everybody, for joining us today. We appreciated 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.