Clear Secure, Inc.

Good morning, and welcome to CLEAR's fiscal fourth quarter and full year 2025 conference call. We have with us today Karen Seidman-Becker, founder, chair, and chief executive officer, Michael Barkin, president, and Jen Su, 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 risk 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 this call. During this call, unless otherwise stated, all comparisons will be against the comparable period of fiscal year 2024. Additionally, the company will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in today's press release and the most recently filed annual report on Form 10-K. These items can be found on the investor relations section of Clear's website. With that, I'll turn the call over to Carolyn.

2025 was a defining year for Clear. Becoming the trusted secure identity company is no longer a goal. It is our reality. Clear is incredibly well-positioned sitting at the intersection of security and the experience economy. In an era where identity has never been more critical, Clear is the trusted standard. We are an essential layer connecting and securing the physical and digital world. Over the past 15 years, Clear has built deep expertise as a secure identity company. We operate in both physical identity and digital identity across regulated consumer and enterprise environments. and have built a trusted brand that stands for high fidelity, secure identity, privacy, and a frictionless member experience for our nearly 40 million CLEAR members. We are operating with greater urgency than ever because identity is at an important inflection point. Identity is under constant siege, and it is the tip of the spear for getting security right, as threat actors create greater risk. As agentic identity evolves and identities are multiplying exponentially, Knowing that you are you and connecting you to all the things that make you you is crucial to manage and secure access. CLEAR has become the trusted standard and operating system for identity across both the physical and digital world. This is creating significant opportunities in both our B2C CLEAR travel business and our B2B CLEAR One enterprise business. I wanted to share two of CLEAR's core pillars this year. enabling identity to transform and secure physical experiences from home to gate in travel, and aggressively scaling ClearOne to secure the enterprise for both the workforce and their consumers or patients in healthcare. In ClearTravel, helping travelers win the day of travel with a frictionless home to gate experience is our North Star. Consumers don't want process, they want outcomes. They want to leave their front door and be at their gate with as little hassle as possible. To achieve this, we've doubled down on innovation with our relaunched mobile app, scaling the Clear Concierge program, and our eGate rollout with more to come. Our new mobile app reflects our obsession with the frictionless member experience. Just one tap and you are in. Seamlessly connecting traffic, the speedy Clear Lane, and the walk to your gate, you can know exactly when to leave to get to your gate perfectly on time. You can also personalize it, as we all know people who like to arrive at their gate as the doors are closing. Or my mom, who prefers to arrive two hours early no matter what I tell her. You can now easily add a concierge at almost 30 airports. A beloved clear ambassador can meet you at the curb and take you straight through security to your lounge or your gate. Live activities will help guide you step by step through your journey. This is a total reimagining of how an app can transform and connect your travel experience to help win the day of travel from home to gate and back again. The rapid expansion of our home-to-gate experience reflects our focus on the member experience and future-facing innovative culture. This drives higher NPS, strengthens our brand, and increases long-term retention. When you provide a premium magical experience, customers don't just stay, they become evangelists. Strategic partners also appreciate the importance of a member-obsessed frictionless travel experience. I am pleased that we are lengthening and strengthening our partnership with American Express. This has been a great partnership for the past five years, and we look forward to continuing to build it from here. Accelerating progress building robust public-private partnerships at the federal, state, and local level is also creating more opportunities. We continue to work with the administration and TSA to modernize travel at no cost to taxpayers. When you align private sector speed with public sector scale, the results for the American traveler are powerful. I love to talk about the AND. Clear is a travel powerhouse, and we are becoming a force in enterprise. Clear One delivered a record-breaking quarter. This is validation that our principled, multilayered approach to identity is winning. Working to reduce fraud, waste, and abuse in Medicare by building an identity interoperability layer is a testament to our opportunity and our strategy. As the largest healthcare payer in the U.S., CMS is integrating Clear One to modernize account creation and fraud prevention for millions of beneficiaries. We are helping CMS move toward a patient-centered future by providing a secure, one-and-done identity layer in one of the world's most regulated environments. Beyond healthcare, we are also seeing a pull from the Fortune 100 to secure their workforce, critical infrastructure, and their assets. Many have experienced breaches, data exfiltration, and insider risk. This is a here-and-now problem that is multiplying. From telecom giants to critical banking infrastructure, The world's most sophisticated companies are choosing ClearOne to secure their workforce lifecycle. The beauty of ClearOne is its network depth and seamless integration into existing workflows. We don't ask companies to change how they work. We plug into the systems they already use. We verify the human behind the device. We are delivering total identity integrity. In a world of deep fakes and AI-driven fraud, knowing who is who and you are you is the only thing that matters. As we said five years ago in our S-1, at Clear, we believe in the end. We can deliver both growth and profitability. We have done that. The flow through of the business from revenue to free cash flow speaks to the power of the Clear model. I am proud of our discipline to accelerate growth and be highly profitable. We have created the foundation and leverage for significant growth ahead. At Clear, we are building the infrastructure for a world where you are always you. We entered 2026 from a position of strength. Our fourth quarter acceleration is a direct result of the investments we have made over the past few years and the seeds that we planted that are now growing into forests. We have the cash, the talent, and the momentum to continue scaling. With that, I will turn it over to Michael.

Thanks, Karen. A key focus for us over the past year has been improving the member experience, and we have made significant progress. Our strengthening member experience is a rising tide that improves member acquisition, conversion, retention, and our brand for ClearOne and our travel partners. Additionally, we have network expansion opportunities both domestically and internationally, and our strong partnership with the TSA allows us to work together to improve the travel experience in the U.S. TSA PreCheck, Concierge, and Clear One are businesses that remain in their early innings and are increasingly important contributors to our overall growth. Partnerships remain a strategic part of our business and an attractive member acquisition channel. We're pleased that we have renewed our partnership with American Express, offering Clear Plus as an embedded benefit on the American Express Consumer, Corporate, and Small Business Platinum cards and select other American Express card products. This multi-year renewal reflects the value of Clear Plus for American Express cardholders and the strong partnership that Clear and American Express have established over the last six years. We look forward to continuing to provide great experiences for our American Express members. The need for secure, multi-layered identity infrastructure has been amplified, and we are entering this chapter from a position of strength. Our balance sheet is robust and growing, providing us meaningful flexibility. In a rapidly evolving identity landscape, we believe we have attractive opportunities to develop more partnerships and make disciplined investments that will deepen our home-to-gate Clear Travel membership experience, increase penetration of Clear One, and shape the future of the identity industry. I'll now turn it over to Jen.

Thank you, Michael. 2025 was a year of disciplined execution and structural improvement. In Q4, bookings accelerated to north of 25% year-over-year growth, the highest level since Q4 2023, and adjusted EBITDA margins reached well over 30%. In 2025, we generated over $340 million of free cash flow and returned over $240 million of capital to shareholders, all while investing to position us favorably as a leader in secure identity. Our Q4 results reflected our 2025 initiatives, and we ended the year in a significantly stronger position than we began. We improved the member experience, completed a billing system migration, and made meaningful progress against our product and technology roadmaps. Our fourth quarter performance gives us confidence in the step change growth that we expect in 2026 as we continue to expand margins and generate materially higher levels of free cash flow. In the fourth quarter, revenue grew 16.7% year over year to $240.8 million. Total bookings increased 25.4% to $287.1 million. For fiscal year 2025, revenue was $900.8 million, up 16.9%, and total bookings were $977.2 million, up 17.2% year over year. There are multiple structural drivers that will underpin durable and increasingly profitable growth in 2026 and beyond, including the growing size of our member base, improvements in member experience and policy resulting in strong retention trends, attractive partnership economics, a disciplined approach to pricing, ARPU growth through product expansion and new businesses, as well as the continued scaling of ClearOne. Following a comprehensive review to simplify our reporting, I'd like to provide an update on our KPIs. Beginning in the first quarter of 2026, we will discontinue three metrics, total cumulative platform uses, annual Clear Plus gross dollar retention, and annual Clear Plus member usage. Effective as of Q4 2025, we are renaming total cumulative enrollments to total Clear members, with no changes to the calculation of this metric. Starting in Q1 2026, the KPIs we will report are total bookings, total clear members, and active clear plus members. Q4 active clear plus members grew to 7.6 million, up 6% year over year, and reflect a one-time cleanup of lapsed accounts as part of a billing system transformation project undertaken during 2025. This had no impact on revenue, cash flow, or any other financial measures. Q4 total clear members grew to 38 million, up 31.5%, demonstrating the sustained momentum in clear one. We had our largest bookings quarter for ClearOne, more than doubling year for year. Q4 also marked another record quarter for the largest number of enterprise customers signed. Q4 and full year 2025 represented record profitability for Clear. Our results reflect our ability to drive growth and deliver strong flow through to the bottom line. The structural improvements we put in place throughout 2025 delivered over 33% adjusted EBITDA margins in Q4, an increase of 870 basis points from Q4 2024, and position us to continue expanding profitability. In Q4, cost of direct salaries and benefits represented 19.3% of revenue, an improvement of approximately 390 basis points year for year. We delivered sequential expense leverage in every quarter of 2025, and we expect to realize additional efficiency benefits over time. Our G&A trajectory illustrates the operating leverage we contrive while also investing in strategic priorities. Full-year G&A grew at less than half the pace of revenue, and over the last two years, G&A as a percentage of revenue has improved by more than 10 percentage points. In Q4, we generated $53.9 million of operating income and $79.9 million of adjusted EBITDA. representing a 33.2% adjusted EBITDA margin and 8.7 percentage points of margin expansion year over year. For the full year 2025, we generated $186.5 million of operating income and $262.2 million of adjusted EBITDA, representing a 29.1% adjusted EBITDA margin, 4.8 percentage points of margin expansion year over year, and over 50% flow through. We continue to deliver strong free cash flow. For the full year 2025, we generated $372.5 million of net cash provided by operating activities and prudently invested $29.3 million of capital expenditures, resulting in free cash flow of $343.1 million, significantly ahead of guidance. We have managed dilution consistently and rigorously with stock-based compensation expense as a percentage of revenue decreasing meaningfully since our IPO to 4.3% in 2025. Coupled with our capital return strategy, our total shares outstanding have decreased over time by 14 million shares or 9% since our IPO in 2021. We ended 2025 with $703 million of cash and marketable securities, and we expect to exit 2026 with over $1 billion in cash in our balance sheet and no debt prior to any capital return to shareholders. Our board of directors approved a 20% increase to our regular quarterly dividend from 12.5 cents to 15 cents per share. In 2025, we repurchased 5.3 million shares for $126.3 million at an average price of $23.86, reducing total shares outstanding by 3% to 133.2 million shares. Our board has also authorized a $125 million increase to our share repurchase program, bringing the total capacity under the repurchase authorization to approximately $250 million. We will continue to take a disciplined approach to reinvesting in the business while returning capital to shareholders. In 2026, we expect accelerating top line growth and margin expansion, which will translate to significant free cash flow growth. we expect 2026 full-year free cash flow of at least $440 million, which would represent an increase of approximately $100 million and at least 28% year-over-year growth. Based on prevailing tax rates and our corporate structure, we expect full-year 2026 GAAP P&L taxes to range between 18% and 20%. For Q1, we expect revenue of $242 to $245 million, and total bookings of $248 to $253 million, representing 15.2 and 20.9% growth at the midpoint, respectively. We will now open the call for Q&A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that analysts limit themselves to one question and a follow up so that others will have the opportunity to do so as well. One moment please while we poll for questions. Our first question comes from Eric Sheridan with Goldman Sachs. Please proceed with your question.

Thanks so much for taking the question and thanks for all the details and the prepared remarks. Keller, I wanted to put a finer point on some of your messaging this morning and better understand how you see your strategic priorities laying out over the next 12 to 18 months that can either maintain or build on the momentum you have on the member side and the subscription side in terms of building both investments in the business on the tech side, as well as further connectivity around brand and go-to-market strategy. Thanks so much.

All right. That was like eight questions in one. I respect that, Eric. So we'll talk about the two core pillars that I talked about because those really are key drivers for the business this year. When you think about our B2C clear travel business, building this home-to-gate experience, People don't just want to get through the security lane, which we're certainly doing that better than ever with higher NPS scores than we've had because of the e-gates. But driving a predictable, consistent, nationwide network and member-centric experience drives retention, and you're seeing that come through the fourth quarter numbers. That's a financial driver to 2026. It drives gross ads, it drives conversion, and with evangelism comes family attach rate and other ways to sell and to partner. And so the innovation that we've put forth with the app, with the e-gates, and more to come are a key driver to financial returns, to member growth, and also to operating leverage and the flow through that you see because of the automation when you can enroll on your phone with your passport, when we expand our TAM to now 42 visa waiver countries. And by the way, we only cover 75% of the U.S., so network growth as well. Those are big growth drivers on the travel side. And certainly what we talked about on identity and being the tip of the spear for security, and the opportunities that AI is presenting for Clear, both to drive our own productivity, but certainly to drive our Clear One business. We've invested in that business, so you are seeing the results of that investment, both from a top-line growth, contract signed, really focused on workforce, healthcare, and GovTech, and we are uniquely positioned for that. And so signing more contracts net revenue retention in that business, so going in with a bigger book of business this year and being able to cross-sell, up-sell, grow that business, have those customers turn into evangelists, and sign more new customers at larger sizes, because quite frankly, the crisis in identity is growing, are major drivers this year. Some of that are certainly the seeds we've planted for the past few years, and then we're planting new seeds this year. And you're seeing that incorporated in our free cash flow guidance, right, which is why I love talking about the and, because we have been investing, we are investing, and we are generating stronger free cash flow.

Great. Thank you.

Our next question comes from Corey Carpenter with J.P. Morgan. Please proceed with your question.

Hey, good morning. I wanted to ask about the government shutdowns, maybe, Karen, just how did that impact you guys during the last shutdown? And, you know, I think there's a lot of concern that the TSA may shut down any day now. So if that were to happen, could you just discuss how that would, you know, would or would not impact your service? And then I have a follow-up for Jen after. Thank you.

Yeah. I think the power of a public-private partnership, and we were very clear in our communications this weekend, which is clear is open. And we're here to serve our airport partners, our travelers, and certainly our airline and government partners. With a winter full of weather, so that not only is there the government shutdown disruption, but certainly with a winter full of weather and other travel disruptions, I think what you're seeing is a renewed appreciation for the consistency and the reliability of CLEAR by our members and our partners. Travel continues to be strong. You've certainly heard that from the travel industry with a continued focus on premiumization. And so, quite frankly, I think the power of the public-private partnership and our ability to serve members, our ability to staff up, and our ability to serve our partners is more appreciated and more important today than ever before.

Thank you. And, Jen, the Free Cash Flow Guide, it implies a pretty significant acceleration this year Could you just maybe unpack some of the drivers of that? And then in your prepared remarks you'd mentioned, I think top line accelerating, is that specific to you expect bookings to accelerate this year? Thank you.

Sure. Hi, Corey. Maybe I'll start with top line. I think I come back to the member experience, and I think the improvements we've made there is really a propellant to really all our key metrics. That includes higher retention, better member acquisition, stronger MPS, All of that ultimately just drives a more durable top line growth profile for our Clear Travel business. And as you heard Karen just say, Clear One is really, we think, reaching escape velocity. We had another record bookings quarter. We again signed our largest number of new Clear One partners. So we feel incredibly well positioned to capitalize during a time when identity security is top of mind across enterprises. On the free cash flow side, as you said, our guidance implies continued leverage on a business model that is already demonstrating highly strong profitability. I think importantly the bigger picture is that we are operating subscription-based businesses with strong recurring revenue in both our B2C clear travel business as well as our B2B clear one enterprise business. So when our member experience is improving, that is driving higher levels of retention, again, both for our members in clear travel as well as the net revenue retention for our from our enterprise partners. So all of that is really a reinforcing flywheel and we believe will drive better and better economics in our business and ultimately higher levels of profitability and flow through.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Dana Telsley with the Telsley Advisory Group. Please proceed with your question.

Hi, good morning, everyone, and nice to see the solid results. Can you talk a little bit about, you mentioned the American Express partnership was extended. What's different now about the partnership than before? How long is it extended for? And then on the B2B enterprise side of the business, it was good to see the Mount Sinai affiliation yesterday. What else are you looking for as we look through this year? Is it more expansion into healthcare than anything else? And how do the margins compare on those businesses? Thank you.

Thanks, Dana. Yeah, the agreement with American Express extends into a multi-year agreement. We're not disclosing specific terms, but we are really excited to continue to provide our American Express card members with the Clear Plus embedded benefit, which we really think aligns the American Express experience with our travel experience. And we also think the structure of the renewed agreement reflects the value that we each bring to the partnership, which of course has been an incredibly valuable one for us over the last six years, and we expect that to continue over the coming years. So we're really excited to be able to announce that today, and again, not disclosing any specific terms of that, but moving forward with that in a great way.

And in terms of Clear One, Dana, You know, Mount Sinai is certainly an exciting partner, and I think it really does talk to ecosystems that we're building. We have a strong network here in New York in terms of the travel business, in terms of the sports capabilities, and now adding healthcare networks on it are a natural growth for Clear. And again, as we turn into a daily habit for members, it's a really powerful use case. When we think about healthcare, I think it's important to talk about CMS, which is an anchor healthcare contract. It's multi-year in nature. And as we talked about last quarter, that contract connects to the pledge. I think last time we talked about 60 companies that have signed the pledge. I believe that number is like up tenfold, closer to 600. And so that's creating a network which is driving a pipeline for us in healthcare. So being part of Epic in the identity toolbox, being part of CMS at the identity interoperability layer, makes it easier to sign healthcare partners like Mount Sinai because it's much easier to connect. You're already embedded in it. So we are signing more healthcare partners across the country. And then the other thing is for the healthcare partners that we have, perhaps we started with workforce but then add patient, or perhaps we started with patient and then are adding workforce. So it really is this very exciting flywheel. And obviously killing the clipboard is something we've been passionate about for many years. If you come to our offices, we actually have a sculpture made of old clipboards that we made many years ago. But now having the administration also aggressively lean into that means that there's a lot of motivation at the federal level, moving on to the state level where there's a whole rural health care initiative that is mirroring what's happening at the federal level. So it is a very exciting moment. for Clear in Healthcare, and quite frankly, for patients and for doctors and nurses who work in it.

Thank you. Our next question comes from Michael Turin with Wells Fargo. Please proceed with your question.

Hey, this is Ronit on for Michael. I just wanted to pick apart the kind of drivers of bookings. Maybe if you could talk through Clear One versus the kind of core Clear Plus and how it impacted bookings and then how your bookings pipeline looks for 26. Hi.

Yeah, I would say for Q4, our performance was really strong across the board. We said, you know, we had the highest year on your bookings growth for Clear Plus since 2023. And again, Clear One had its strongest bookings quarter by quite a distance. And so the performance you saw on the beat relative to guidance was really strength across all our businesses.

Got it. And just to follow up, I just had a question on like the recent kind of TSA impacts. Has that shown in your business and do you expect it to be a forward tailwind, especially on like the value prop of Clear?

I think as I talked about a little bit earlier, you're seeing a renewed appreciation of the predictability and the consistency that Clear brings. I think that's been improved by the e-gates, and I certainly think, and you've seen this throughout the 15 years, that there's moments of enormous instability in the travel sector, and people have come to rely on Clear, and it's moments like that when, you know, I think the appreciation grows, but it's our job to continue to grow the customer experience in a consistent way. I think that is the greatest driver of our long-term sustainable growth.

And I think I'd just add that, you know, one of the benefits that we have from the member experience improvements that we've had over the last year in implementing the E-8s is that our ambassadors, right, 3,500 strong across our 60 airports, can increasingly focus on hospitality and the customer experience in the airports. And so, while there's disruptions in travel, whether that's weather or otherwise, You know, we really believe that part of our member experience is that ambassador hospitality, and with the innovations and technology and improvements that we've made, our ambassadors are increasingly able to focus on that, which becomes really important in building out this home-to-gate experience and membership.

We've always believed that it's technology and hospitality, and so when we talk about sitting at the intersection of security and the experience economy, That is massively important in the travel experience, which is highly fragmented, very challenged. And as we head into the World Cup in America 250, it is hard and getting harder. The volumes keep growing. And so you need innovation to drive this experience. That is what we're known for.

Great. Thanks.

Our next question comes from Wyatt Swanson with DA Davidson. Please proceed with your question.

Thanks for the question. Could you talk about how Clear Plus member ads and 4Q looked at airports that have e-gates versus airports that don't yet have e-gates and whether you expect those trends to continue?

Yeah, I think we're seeing strong ads across the network. What I can comment on is that we're seeing really, really strong experience scores where the e-gates have been implemented and And obviously, we just started putting e-gates in in the second half of last year. So the impact of the e-gates is still actually relatively new. And many of the airports that got e-gates came actually in the later half of the fourth quarter. And so as we continue to season those, have more people experience that, what we're seeing is an immediate impact on our NPS and lane experience scores. And we think what will happen because of that is as those experience pieces tie into retention, that we're starting to see the early benefits of that. And so in the guidance that Jen shared, we certainly are expecting improvements in retention, which we're already seeing. And we do see that as part of the holistic member experience. And so we're really encouraged by the early results that we're seeing from the e-gates. And we think that will only continue to grow as more and more of our members experience those. and as we get the coverage across our network in the coming quarters.

If I can just add to that, e-gates are an unlock to the home-to-gate experience. And so we think holistically as we look at both the numbers in the fourth quarter, which I think showed early signs of impact on the good work that we've been doing, But when you look at the mobile app, when you look at concierge, when you look at eGates, when you look at the hospitality, and then you look at our ability to grow our partnerships because of a differentiated premium member experience, the whole thing drives retention, drives growth ads, drives conversion, drives a willingness to take on new products from Clear. So it's just a really powerful flywheel.

Got it. That's really helpful. And then on the CMS partnership, can you talk about why Clear is suited particularly well to serve CMS relative to other companies out there? And then perhaps some details as to what the contract structure looks like. I believe you mentioned multi-year, but anything else would be helpful.

Right. So multi-year is what I can say. It is an important contract for Clear. And I love that question of why we're uniquely positioned. We started in a regulated industry. So understanding the importance of privacy, of security, of compliance, of working in a regulated industry with a trusted consumer brand With an embedded base, as we talked about today, of almost 40 million consumers or patients, those people are both patients as well as employees in the healthcare sector, it makes it a natural fit. I don't want to say that going into an airport feels a lot like going into a hospital, but I would say that they're both challenged experiences with multiple stakeholders, and so putting patients or travelers at the center wrapped in compliance and regulation and privacy is what we are known for. And so I really think that this was a natural fit and one that also allows us to continue to drive innovation with other partners as we continue to drive this interoperability layer. And so I just think it was hand in glove and it's a really exciting and aligned moment. We led a big conference from Pledge to Progress in December, bringing together over 100 healthcare leaders around the country, as well as government. And, you know, we are a convener to drive secure, frictionless experiences, which is exactly what this initiative is.

Okay. Thank you very much.

We have reached the end of our question and answer session. I would now like to turn the floor back over to Karen for closing comments.

Thank you for joining our fourth quarter earnings call. As always, I am deeply grateful for our CLEAR team and the CLEAR ambassadors that are delivering our home to gate experience every day. We have built the foundation and we are well positioned to execute against meaningful opportunities in the evolving and emerging identity landscape. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.