GuruFocus -
- Total (EPA:TTEF) Cumulative Enrollments: Over 27 million, up 2.2 million in the quarter.
- Active CLEAR Plus Members: Increased by 55,000 in the quarter.
- Incremental Operating Income Margins: 63%.
- Incremental EBITDA Margins: 50%.
- Gross Dollar Retention: 89%, up 100 basis points year-over-year.
- Free Cash Flow Expectation for 2024: At least $280 million, up 40% year-over-year.
- Quarterly Dividend Increase: 25% to $0.125.
- Q4 Revenue Expectation: $202 million to $204 million.
- Q4 Total Bookings Expectation: $224 million to $226 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Clear Secure Inc (NYSE:YOU) reported accelerated bookings growth in the third quarter, driven by improvements in the airport channel, pricing, and strong retention.
- The company has over 27 million members and expects to reach around 30 million by the end of the year, indicating strong membership growth.
- Clear Secure Inc (NYSE:YOU) is expanding its TSA PreCheck enrollment, now live in 62 locations, including 52 airports and 10 Staples locations, enhancing convenience for travelers.
- The introduction of new CLEAR perks has shown strong early engagement, adding value to the membership experience.
- The company has formed foundational partnerships, such as with Home Depot (NYSE:HD) and LinkedIn, to enhance trust and security, which are expected to drive future growth.
- The August price increase had a modest impact on family gross additions and family member retention rates, indicating some sensitivity to pricing changes.
- Net member additions were down sequentially in Q3 compared to Q2, reflecting typical seasonal trends but also impacted by pricing adjustments.
- The company is shifting ambassador compensation from commissions to base wages, which may affect sales and marketing expenses in the short term.
- Despite strong growth, the company faces challenges in maintaining high retention rates, particularly with family memberships after price increases.
- The expansion of CLEAR Verified and TSA PreCheck is still in early stages, with significant scaling required to become a more material contributor to the P&L.
A: Kenneth Cornick, President and CFO, explained that the pricing strategy aimed to reduce discounting and drive ARPU higher, resulting in a 100 basis point increase in dollar retention year-over-year. The impact on retention was minimal, primarily affecting family memberships. The company expects Q4 net adds to be up sequentially from Q3, with continued opportunities for member growth.
Q: Can you discuss the potential impact of the Uber partnership on cumulative enrollments?
A: Caryn Seidman-Becker, CEO, highlighted the partnership's potential, emphasizing that identity and trust are foundational. The partnership enhances trust on Uber's platform, and early signals are positive. The collaboration is expected to increase utilization of CLEAR's services beyond airports, contributing to growth.
Q: Should investors expect regular annual price increases, and how does pricing affect member retention?
A: Caryn Seidman-Becker noted that pricing is part of the ongoing strategy, with opportunities to stratify and create different tiers. The focus is on delivering value through an enhanced member experience. Kenneth Cornick added that verification volume is a key driver of retention, and initiatives like perks and mobile lanes aim to increase utilization and retention.
Q: What are the priorities for TSA PreCheck expansion, and what could out-of-airport expansion look like?
A: Caryn Seidman-Becker stated that PreCheck is gaining momentum, with plans to expand out-of-airport locations, including the Oculus in New York and Mall of America. The company aims to meet travelers where they are, with a goal of over 75 locations by year-end. The expansion is expected to drive incremental enrollments and market growth.
Q: How material could CLEAR Verified become to the P&L in 2025?
A: Caryn Seidman-Becker indicated that while PreCheck and CLEAR Verified are already contributing to gross profit growth, they are expected to scale materially in 2025. Channel partnerships like Okta (NASDAQ:OKTA) are facilitating faster customer onboarding, and the company anticipates significant contributions to gross profit dollar growth next year.
Q: How quickly can the new hardware and experience be rolled out across airports?
A: Caryn Seidman-Becker mentioned that the new NVs are three times faster and are being rolled out, with expectations to be significantly through the digital identity integration by year-end. The rollout will continue into next year, enhancing the member experience and aligning with TSA partnerships.
Q: Is there a plan for tiered membership offerings in the future?
A: Kenneth Cornick acknowledged that tiered membership is a consideration, with current focus on delivering value through perks and enhanced experiences. The Ambassador Assist service, currently a paid perk, could potentially be bundled into a higher tier in the future.
Q: How do pricing changes affect commercial agreements with partners like American Express?
A: Kenneth Cornick clarified that pricing changes do not impact core agreements with partners like American Express (NYSE:AXP), but the company benefits from pricing changes on family memberships.
Q: Can you rank the potential timeline of contribution from recent product and partner announcements?
A: Caryn Seidman-Becker stated that direct partnerships have contributed this year, while channel partnerships will contribute next year. The company is finding new use cases and expanding TAM with current customers, expecting significant contributions to growth in 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.