Clear Secure, Inc. (YOU) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reflects strong financial performance with 27.4% EBITDA margin and 38.2% member growth. The Q&A reveals positive sentiment, highlighting growth in travel demand, product innovation, and strategic pricing. Despite some uncertainties in international rollout adoption, the company's strong cash position and shareholder returns, coupled with optimistic guidance, suggest a positive stock price reaction. The market cap indicates a moderate reaction, likely in the 2% to 8% range.

Key Financial Performance

Revenue $219.5 million, representing 17.5% growth year-over-year. The growth was driven by product innovation and experience attracting new members to the CLEAR Plus service.

Total Bookings $222.9 million, representing 13.1% growth year-over-year. This growth reflects the continued strength of the travel business and the expansion of the member base.

Free Cash Flow $117.9 million, up 7.1% year-over-year. The growth was impacted by higher cash taxes after utilizing the majority of the NOL balance in 2024.

Active CLEAR Plus Members 7.6 million, up 7.5% year-over-year. Growth was driven by the expansion of CLEAR Plus to international travelers and pricing adjustments.

Gross Dollar Retention 87.3%, up 20 basis points sequentially. This was influenced by member retention and pricing actions.

Operating Income $42.6 million, representing a 19.4% operating margin and over 300 basis points of margin expansion year-over-year. This was driven by efficiencies from EnVe verification Pods and disciplined expense management.

Adjusted EBITDA $60.1 million, representing a 27.4% adjusted EBITDA margin and approximately 200 basis points of margin expansion year-over-year. This reflects operational efficiencies and product innovation.

Total Members 33.5 million, up 38.2% year-over-year. This growth demonstrates the increasing adoption of the CLEAR platform.

Net Cash Provided by Operating Activities $123 million, up 7.3% year-over-year. Growth was influenced by operational efficiencies and higher cash taxes.

Cash and Marketable Securities $609 million at the end of the quarter, after returning $42.7 million of capital to shareholders through share repurchases and dividends.

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Operating Highlights

CLEAR Plus: Achieved record travel volume in Q2 2025, with members passing through CLEAR Lane in under 3 minutes on average. Enhanced with EnVe verification Pods and Apple Pay for digitized onboarding.

CLEAR ID: Certified as a REAL ID issuer by the Department of Homeland Security, enabling U.S. travelers to upload passports via the CLEAR app for a free digital REAL ID.

CLEAR Concierge: Introduced a premium on-demand service connecting members with dedicated ambassadors for seamless travel assistance.

ClearOne: Launched partnerships with Greenhouse, Epic, and Docusign to enhance identity verification in workforce, healthcare, and digital agreements.

International Expansion: CLEAR Plus now available to travelers from the U.K., Canada, Australia, and New Zealand, with plans to add more countries by 2026.

TSA PreCheck: Expanded to 231 enrollment locations, nearly doubling from Q1, and bundled with CLEAR Plus for complementary services.

Operational Efficiency: EnVe verification Pods verify members 5x faster than legacy pods, driving cost leverage and ambassador optionality.

Financial Performance: Achieved $219.5 million in revenue (17.5% growth) and $117.9 million in free cash flow in Q2 2025. Operating income margin expanded by 300 basis points.

Strategic Partnerships: Collaborated with TSA and aviation community to modernize travel experience. Partnered with CMS for healthcare initiatives and Docusign for digital workflows.

Pricing Strategy: Increased standard pricing for CLEAR Plus from $199 to $209 and family pricing from $119 to $125.

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Risk or Challenges

Threat environment and AI acceleration: The evolving threat environment and the acceleration of AI increase the need for secure identity solutions, posing challenges to maintaining security and trust.

Regulatory compliance: The company must comply with the REAL ID mandate and other regulatory requirements, which could increase operational complexity and costs.

Fraud and cybersecurity risks: Global industries face elevated risks and costs of fraud, with predictions of increased fraudulent job applicants and breaches starting with compromised credentials.

Healthcare data security: The healthcare industry faces challenges in safeguarding sensitive health information, which is critical for partnerships like the CMS initiative and Epic integration.

Operational efficiency: The company is focused on streamlining operations and driving efficiency, but achieving further cost leverage and ambassador optionality may be challenging.

Market expansion risks: Expanding CLEAR Plus to international travelers and new markets introduces risks related to execution, adoption, and competition.

Seasonal travel demand: Seasonal fluctuations in travel demand impact member renewals and net additions, which could affect revenue and growth projections.

Pricing adjustments: Recent pricing increases for CLEAR Plus and family plans may impact member retention and gross dollar retention over time.

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Guidance & Outlook

Revenue Guidance for Q3 2025: The company expects revenue of $223 million to $226 million, representing 13.1% growth at the midpoint.

Total Bookings Guidance for Q3 2025: The company anticipates total bookings of $253 million to $258 million, representing 12.3% growth at the midpoint.

Full-Year Free Cash Flow Guidance: The company reaffirms its guidance of at least $310 million in free cash flow for the full year 2025.

Adjusted EBITDA Margins: The company expects expanding adjusted EBITDA margins on a year-over-year basis for the full year 2025.

TSA PreCheck Expansion: The company plans to continue expanding TSA PreCheck enrollment locations, which have nearly doubled in Q2 2025 compared to Q1 2025.

CLEAR Plus International Expansion: CLEAR Plus will be available to travelers from the U.K., Canada, Australia, and New Zealand starting this week, with additional countries expected to be added heading into 2026.

CLEAR Concierge Service: The company is expanding its CLEAR Concierge service, which is currently live in 14 airports, to drive increased revenue per member over time.

ClearOne Health Care Integration: The company plans to integrate with Epic's toolbox by the end of 2025, enabling 325 million patients to access their electronic health records securely.

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Shareholder Return Plan

Dividends and Distributions: Approximately $18.1 million was returned to shareholders in the form of dividends and distributions during Q2 2025.

Share Repurchase Program: Approximately $24.6 million was returned to shareholders under the share repurchase program during Q2 2025.

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Key Q&A

Q:How does the enrollment process work for international travelers, and does it require working directly with each country?

A:The enrollment process for international travelers is the same as the domestic one-step enrollment. The ePassport or e-chip capability on passports enables this process. It does not require working directly with each country, as it is a blanket opportunity for all countries. Travelers can enroll on their phone or at the Pod, with phone enrollment coming later this year. International travelers will have access to CLEAR Lanes in the U.S.

Q:What is the company's approach to the latest round of price increases, and how does it impact retention?

A:The latest price increases, effective July 1, were more coordinated across membership categories. Retention has been as expected so far. The company aims for a disciplined and consistent pricing strategy, focusing on optimizing bookings and improving the member experience. There is continued runway for pricing adjustments, including bringing discounted members closer to standard pricing and introducing new products like Concierge.

Q:What is the administration's focus on improving the airport experience, and how does CLEAR fit into this?

A:The administration values public-private partnerships and innovation without taxpayer costs. CLEAR shares revenues with federal, state, and local governments, contributing over $100 million this year. The administration focuses on security, traveler satisfaction, privacy, and supporting Made in America companies. CLEAR's biometrics and initiatives align with these goals, and the company is excited to partner with the administration to modernize airports and enhance the travel experience.

Q:What are the drivers behind the sequential increase in gross dollar retention (GDR), and did REAL ID impact the business?

A:REAL ID did not have a meaningful impact on the business. The GDR increase to 87.3% is influenced by retention and pricing, with pricing having a growing impact as price increases annualize. A modest 20 basis points benefit was observed last quarter due to next-generation ID upgrades.

Q:What is the expected adoption and pricing for the international rollout, and how does it differ from the U.S. market?

A:Pricing for the international rollout will be the same as in the U.S. market. Adoption is expected to be driven by partnerships with airlines, hotels, and other channels. The rollout starts with a few countries and will expand over time. The focus is on outbound traffic through CLEAR Lanes, not inbound traffic.

Q:How is the company viewing travel demand for the second half of the year, given flat to down forecasts from airlines?

A:Despite flat travel volumes, CLEAR had record travel volume in the quarter and grew its member base by 7.5%. The company sees opportunities to penetrate the U.S. travel population further and expand internationally. The industry has become more optimistic about travel demand, and CLEAR remains confident in its growth opportunities.

Q:What is driving the increased cadence of product innovation and launches, and how does it impact growth?

A:The increased cadence of product innovation, including CLEAR ID, international rollout, and Concierge, is the result of years of development. These products enhance the travel experience but have not yet driven the growth seen in the quarter. The focus is on improving the travel experience and member loyalty through new products and services.

Q:How is the company planning member retention and pricing strategies, and what role does AI play?

A:Member retention is driven by a great experience and new products. Pricing strategies aim to be methodical and intentional, with potential for annual or biannual adjustments. AI is used to enhance identity integrity, drive productivity, and personalize the travel experience. It supports faster product launches, efficiency, and margin improvements.

Q:Review of Unclear Management Responses

A:Management avoided providing specific adoption estimates for the international rollout, stating they would wait for evidence post-launch. They also did not provide detailed plans for AI advancements, only mentioning its general benefits for productivity and personalization.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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