Second Quarter 2026 Earnings Call

to CLEAR's Fiscal Second Quarter 2026 Conference Call. We have with us today Karen Seidman-Becker, Founder, Chair, and Chief Executive Officer, Michael Barkin, President, and Jen Hsu, Chief Financial Officer. As a reminder before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in the documents the company has filed and furnished with the SEC, including today's press release. The company disclaims any obligation to update any forward-looking statements that may be discussed during the call. During this call, unless otherwise stated, all comparisons will be against the comparable period of fiscal year 2025. Additionally, the company will discuss both GAAP and non-GAAP financial measures. A reconciliation of gap to non-gap financial measures is provided in today's press release and the most recently filed form 10-Q. These items can be found in the investor relations section of CLEAR's website. With that, I will turn the call over to Karen.

We founded CLEAR with a profound conviction that proving you are you securely, privately, and instantly, would one day sit at the center of how Americans live, work, and travel. For a long time, it was a vision. Now, it is our reality. Clear is the trusted, secure identity company. And after 16 years of building our identity platform, Clear Travel, and Clear One, we have never been stronger or better positioned. It feels like day one around Clear because it is. Today, identity is critical infrastructure. It is security, the foundation of the connected, frictionless digital world being built around us. We ended this quarter with almost 44 million total CLEAR members, driving bookings of $296 million and free cash flow of $189 million. We delivered 33% bookings growth and free cash flow is up 60% year over year. This quarter's results reflect years of disciplined execution, building the technology, expanding the network, and earning the trust of tens of millions of members and partners. We are growing rapidly, generating significant cash, and investing aggressively in the products and experiences that will define the next era of secure identity and frictionless experiences. This is the five-year anniversary of our IPO, and at that time, we targeted 35% adjusted EBITDA margins. For the first time this quarter, we surpassed that goal with a 36.4% adjusted EBITDA margin, reflecting the investments we made for the future and the power of our growth and our business model. I had high expectations five years ago for what it meant to be the trusted secure identity company, from homeland security to cyber security. But the opportunities far surpassed what I imagined, from transforming the travel experience to fighting fraud and agentic identity. Today, Today we'll talk about these opportunities and how we're executing in both Clear Travel and Clear One. In travel, it's about home to gate. The travel economy continues to boom, and travelers expect the same seamless, personalized experiences at the airport that they have everywhere else in their lives, and Clear delivers it. We have always said we're obsessed with the member experience, and this quarter that helped deliver our highest customer experience scores due to our robust product suite enabling the much-sought-after, frictionless, and predictable travel day. The mobile app unifies the travel journey. With calendar sync, personalized travel guidance, airport wayfinding, and live updates, travelers know exactly when to leave and where to go, regardless of the airport or terminal. Our mobile business is growing rapidly and is averaging 1 million monthly users. Users are engaging with the app, whether it be home to gate, concierge, or the identity vault. We see significant opportunities to simplify the rest of the journey, from your bag to concessions. In fact, we've launched our first concessions partnership at Newark, and we're building on that momentum with a new pilot with Starbucks beginning at LaGuardia. Members can order coffee in advance and have it waiting at exactly the right spot as they head to their gate. E-gates now cover more than 70% of our network and remain magical for CLEAR members. There used to be a saying in travel, if you've seen one airport, you've seen one airport, let alone one terminal. With clear, if you've experienced one eGate, you know what to expect at every eGate, a seamless verification in under five seconds. This is the modern travel experience, driving retention, gross ads, and conversion, and winning back customers who have not yet experienced the clear we have built today. The identity layer matters more today than ever, as adversaries now manufacture identity at scale. with AI making deep fakes and synthetic identities cheap and convincing. Yesterday's defenses are no match for today's threats. Getting identity right is the foundation of a secure enterprise, and Clear One is built for this moment. Clear is raising the bar, and this quarter, we didn't just elevate industry standards, we levitated them to deliver total identity integrity to our partners and our members. We launched Clear's identity framework with three proprietary products built for today's world. Vertex, APEX, and Helix. Vertex establishes a stronger foundation of identity for our partners, moving beyond the industry standard of document-only verification. APEX builds on that foundation with a multi-layer validation for higher-risk use cases such as Medicare. Helix represents our highest level of identity confidence, rooted in witness verification and designed for the most sensitive high-stakes environments. We hold ourselves to the highest standards because strengthening security, fighting fraud, and protecting privacy demands nothing else in a world where identity is security. We are building a GovTech vertical as the fraud we are fighting at CMS is endemic through other federal agencies. Getting true identity right is crucial to protect program integrity and fight fraud, waste, and abuse in our country. We have been working in government technology and federal partnerships for a long time, as reflected in our work with the Department of Homeland Security. The administration's executive order to fight fraud makes the mandate clear. Strengthen eligibility verification, put controls in place before taxpayer dollars go out the door, and stop fraud before it happens. This administration prioritizes fighting fraud while enhancing experiences. We see that commitment in the executive order and initiatives like Trump Accounts, which is a custom-centric and modern digital experience. We are well-positioned and working with leaders across agencies to deliver secure and customer-centric experiences. Identity is security. Security is now everything. And Clear is the company built to deliver it. We are moving with urgency to create seamless, secure experiences for our members and all Americans. With that, I'll turn it over to Jen.

Thank you, Karen. Since our IPO five years ago, we have built Clear into the leading secure identity platform. Over that time, our Clear travel network expanded from 38 to 62 airports, and our member base grew nearly three and a half times from approximately 2.4 million to 8.3 million active Clear Plus members, while we only increased the standard price of our membership by an average of 4% on an annualized basis. We accomplished this while investing prudently in our business and growing annual free cash flow from just slightly above breakeven to approaching half billion dollars today. Within Clear Travel, we are continuing to expand our network, grow members in ARPU by delivering a compelling customer experience through product and services innovation and ultimately driving strong member retention. On top of this, the investments we have made in our identity platform position us as a leader in security and identity infrastructure, with Clear One scaling rapidly and further strengthening our growth profile. Our second quarter results showcased the demand for our differentiated industry-leading secure identity offerings with compelling top-line growth, meaningful margin expansion, and strong free cash flow generation. We delivered 33% bookings growth, 36% adjusted EBITDA margins, and $189 million of free cash flow, up 60% year-over-year. Notably, our adjusted EBITDA margin exceeded 35% target set at the time of our IPO, and our quarterly free cash flow reached a record high. Our home-to-gate strategy enabled another quarter of strong growth. Revenue grew 26.6% year-over-year to $277.8 million, and total bookings increased 32.8% to $295.9 million. We continue to meaningfully improve our member experience through eGates, our relaunched mobile app, and our expanding Concierge offering, which is reflected in record NPS scores, strong member retention, and active ClearPlus member growth of 15.2% to 8.3 million. This momentum is carrying through into Q3. We expanded our network with Indianapolis and Bentonville representing the two newest ClearPlus airports and Concierge expanding to seven additional locations, now available in 39 airports. Concierge remains in its early innings with an opportunity to grow through footprint expansion, member awareness, and adoption. ARPU is growing, and effective July 1st, we increased standard pricing by $10 from $209 to $219, with corresponding changes across many airline pricing tiers. Family member pricing remained unchanged at $125. Our early retention rates have remained healthy following these price increases, and we believe we have a range of additional pricing opportunities that could meaningfully contribute to the long-term growth of our business. ClearOne momentum continues to build. The growing demand for our B2B offerings drove 30% year-over-year growth in total Clear members, reaching 43.5 million in the second quarter. We are seeing strength across every stage of the ClearOne lifecycle, from pipeline generation and new partner signings to expansion within our existing customer base and net revenue retention. Our pipeline reflects channel partnerships, an expanding opportunity within government, and growth in our healthcare workforce and consumer verticals. This quarter, we signed a significant number of new partners, with average deal size continuing to increase. Our focus on customer success is expanding relationships with existing partners through additional use cases, which is driving strong net revenue retention. These trends support our meaningful bookings growth and reinforce the large and significant long-term opportunity for ClearOne. We have maintained strong operational and cost discipline, and in the second quarter, we delivered approximately 70% adjusted EBITDA flow through and meaningfully expanded free cash flow year-over-year. We generated $83 million of operating income and $101.1 million of adjusted EBITDA, representing a 36.4% adjusted EBITDA margin and approximately 900 basis points of margin expansion year-over-year. Labor has been a meaningful lever in our profitability story. E-Gates have driven significant labor efficiency with Q2 direct salaries and benefits, representing 17.3% of revenue, an improvement of approximately 450 basis points year-over-year, while also strengthening security and the member experience. That efficiency has turned what was once a pure cost center into a driver of top-line growth, enabling us to redeploy our ambassadors from lane operations towards hospitality and sales-generating initiatives such as concierge. For the full year, we continue to expect meaningful year-over-year adjusted EBITDA margin expansion, reflecting the leverage in our business model coupled with our team's operating discipline. Q2 net cash provided by operating activities was $201.2 million and free cash flow was $189 million, representing 60.3% year-over-year growth. As a reminder, and consistent with prior years, we will settle the accrued partnership liability with our credit card partner in the third quarter.