YOU | Q3 2024

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Links

• Link to Transcript

• Link to Shareholder Letter

• Link to 10-Q

Overview

• Non-GAAP EPS of $0.25 in-line.

• Revenue of $198.4M (+23.7% Y/Y) beats by $3.78M.

Takeaways

Despite negative free cash flow for the quarter (which we’ll discuss), Clear Secure (YOU) reported strong financial performance in Q3, highlighted by a 23.7% year-over-year revenue growth amounting to $198.4 million, which beat estimates by $3.78 million.

The company achieved an operating income of $35.1 million, with adjusted EBITDA coming in at $48.6 million. Net income for the quarter was $38.0 million, resulting in EPS of $0.25, which was in-line with expectations.

Clear Secure remains extremely committed to shareholders, and proved it by raising its quarterly dividend by 25%, supported by incredibly strong free cash flows for the year.

On that note, despite positive revenue and income figures, Clear Secure reported a free cash flow of -$37.9 million for the quarter, largely due to an annual outflow of approximately $182 million to American Express, its credit card partner.

This was a planned expenditure—it happens every year and we were reminded of it last quarter—and it aligns with the company’s strategic approach of expanding its membership network through partnerships with other companies.

To reassure investors on the cash flow front, Clear noted that it expects free cash flow for the full year 2024 to be over $280 million, representing a 40% increase year-over-year, even after accounting for this quarter’s significant payment to AmEx.

Caryn Seidman-Becker, Clear Secure’s CEO, emphasized Clear’s ongoing commitment to innovation in identity verification, with a focus on streamlining travel experiences.

This quarter, the company continued to scale TSA PreCheck, which now operates in over 60 locations, including non-airport venues like Staples stores, making it more convenient for travelers to enroll in Clear’s security and convenience solutions.

On the topic of enrollments, the cumulative enrollments across Clear Secure’s platform surpassed 27 million, and the company is targeting nearly 30 million enrollments by year-end, fueled by its expanding offerings and increased accessibility.

Clear’s advancements in biometric-based identity technology, such as the EnVe (enrollment and verification) hardware, have further improved the customer experience by reducing friction and speeding up the verification process in airports. EnVe’s face-based verification is a great example of how Clear is pushing the boundaries of secure, frictionless travel.

With that, Clear Secure’s vision extends beyond airport security. The recent collaboration with Uber (which is huge) exemplifies how Clear’s identity services are expanding into more frequent—even daily—interactions beyond travel.

As Seidman-Becker highlighted, the company aims to transform its identity platform into a tool that members can rely on in multiple contexts throughout the day, including ridesharing.

This move not only expands Clear’s potential user base but also transitions its usage from occasional to habitual, reinforcing the company’s value proposition as an essential provider of fast, secure, and seamless identity verification in an increasingly digital, high-security, and high-risk world.

In summary, Clear Secure continues to grow like a weed. The company’s investments in better technology and partnerships that will drive more habitual use will help drive sustained growth, even as the free cash flow faces these periodic hits due to planned annual outflows.

With that said, let’s not forget that the company should end up with a 40% increase in free cash flow for the year. In the meantime, the resulting drop in share price is creating a fantastic buying opportunity, and I will certainly be taking advantage of it.

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