Clear Secure, Inc. Q3 FY2025 earnings call

• Identity is crucial in cybersecurity, with 80% of breaches starting with compromised credentials. CLEAR is a secure identity platform.
• eGates rollout has commenced, with members verifying in ~5 seconds and moving to screening in 30 seconds, driving improvements in throughput, lane experience scores, and NPS.
• CLEAR Concierge, a premium personalized on-demand service, is live at 23 airports.
• CLEAR1 is scaling, with strong enterprise customer signings, working in healthcare (partnering with CMS and Epic) and workforce sectors.
• Product innovation like EnVe enrollment and verification Pods and mobile app enhancements are streamlining member experiences.

Third quarter revenue grew 15.5% year-over-year to $229.2 million, and total bookings grew 14.3% year-over-year to $260.1 million, both exceeding the top end of Q3 guidance. Active CLEAR+ Members grew to 7.7 million, up 7.5% year-over-year. CLEAR1 delivered its strongest quarter yet with a record number of enterprise customers signed. Cost of direct salaries and benefits represented 20.8% of revenue in Q3, an improvement of approximately 180 basis points year-over-year. G&A represented 25.7% of revenue, an improvement of approximately 150 basis points year-over-year. Operating income was $52.6 million, representing a 23% operating margin and 5.3 percentage points of margin expansion versus Q3 2024. Adjusted EBITDA was $70.1 million, representing a 30.6% adjusted EBITDA margin and 6.1 percentage points of margin expansion year-on-year.

• Q4 revenue expected $234 million to $237 million, total bookings $265 million to $270 million.
• Expect expanding adjusted EBITDA margins for full year 2025 versus 2024.
• Increase full year 2025 free cash flow guidance from $310 million to at least $320 million, reflecting eGates CapEx and cash tax benefits from the One Big Beautiful Bill Act.

• Cyber threats and identity-related incidents, as 84% of security leaders have reported such incidents.
• Impact of government shutdowns on airport experiences, though traffic remains strong.
• Dependence on partnerships and potential challenges in renewing agreements with airports and credit card partners.

Q: How should we be thinking about the strong bookings guidance for Q4?

A: We expect product and member experience improvements across all dimensions of our business, including mobile one-step enrollment, international expansion, and eGates, coupled with CLEAR1's growing traction.

Q: What about the sequential decline in gross dollar retention?

A: The decline was anticipated due to 2023 pricing changes moderating, and recent pricing increases are not materially affecting retention.

Q: How is TSA staffing issues impacting CLEAR?

A: Traffic is trending upwards despite the shutdown, and CLEAR's technology and services shine in improving the airport experience.

Q: Thoughts on eGates and their impact?

A: eGates are unlocking efficiency, freeing ambassadors for hospitality, and driving member experience improvements. CapEx for eGates is reflected in increased free cash flow guidance.

Q: Update on concierge usage?

A: Concierge is live at 23 airports, with strong member appreciation and plans to expand, focusing on awareness and repeat usage.

Q: Largest channels for adding CLEAR+ Members?

A: Member acquisition comes from airports and digital marketing, with significant success in bundling TSA PreCheck with CLEAR+