Clear Secure, Inc.

Good morning and welcome to Clear's Fiscal First 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 or subject to risks and uncertainties. Factors that can 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 2025. Additionally, the company will discuss both GAAP and non-GAAP financial measures. a reconciliation of GAAP to non-GAAP financial measures that provided in today's press release in the most recently filed Form 10Q. These items can be found on the Investor Relations section of CLEAR's website. With that, I'll turn the call over to Karen.

The first quarter was a definitive stress test for the global identity landscape. As the physical and digital worlds collided with unprecedented speed, CLEAR met the moment. The seeds we planted to build the world's most trusted secure identity platform are maturing at exactly the right time. We are operating in an environment of structural instability where the national travel system is strained and AI-driven fraud is escalating at an exponential rate. In this world, identity is not a feature. It is the foundational infrastructure of a functioning economy. If you get identity wrong, nothing else matters. We ended this quarter with 41 million total CLEAR members, driving bookings of $292 million and free cash flow of $185 million. These record results are the direct output of our forever obsession with frictionless experiences and a fortress approach to security. We are meeting this moment by raising identity standards with the speed and urgency this environment demands. As I often say, and we're all now seeing firsthand, travel is hard and getting harder. March underscored the immense strain on our national travel system and highlighted the importance of public-private partnerships. We entered 2026 with incredible momentum in our customer experience and innovation across our travel business, which continued in the first quarter. Our home-to-gate strategy is transforming a fragmented series of travel hurdles into a singular, seamless experience. eGates now cover over 50% of our network, and we plan to exceed 80% by the end of the second quarter. The data is irrefutable. One-step, five-second biometric entry is delighting members. Average wait time for Clear Plus members is now under one minute. NPS has reached a three-year high, and it's not surprising that travelers who use an eGate have significantly higher NPS than non-eGate users. This is contributing to strong member ads and improved retention. Our reimagined app, which recently reached number four in the travel app store, is becoming the go-to app for our travelers. By creating certainty and transparency around the day of travel, syncing calendars, travel documents, wayfinding, and partner integrations, mobile app adoption has doubled for travelers. The app is becoming the control center for the day of travel, proactively organizing trips, surfacing gate and security details, and unlocking clear services with just one tap. Demand for clear concierge continued to increase dramatically during the quarter, and the challenges of the shutdown highlighted the value proposition of our premium product. This is a high-margin, high-touch service, and we are aggressively scaling it to major cities nationwide. Concierge turns a stressful travel day into a seamless, delightful experience, with an ambassador guiding you every step of the way. I want to thank the TSA officers who worked tirelessly without pay through the shutdown, We stood with our partners, supporting them and their families, and over 3,500 CLEAR Ambassadors worked hand-in-glove with the TSA to keep travelers moving pre- and post-security. The combination of CLEAR Ambassadors, our approach to hospitality, and the benefit of our eGates served as a stabilizing force. This is the power of public-private partnerships. Private sector speed and innovation meeting public sector scale. Identity is trusted infrastructure. It is being woven into the fabric of securing physical, digital, and agentic experiences. Clear is the trusted brand building the smart network of human identities. The definition of secure has been permanently altered, and identity is becoming harder to solve. As AI accelerates, traditional credentials like driver's licenses have become obsolete vulnerabilities. When identities and credentials can be simulated, the fundamental question becomes, are you who you say you are, and what should you have access to? Clear one is our answer. We are raising the bar for identity standards through a multilayered approach using biometrics, government-issued identification, source corroboration, and device signals to confirm that you are you. This quarter, we achieved significant year-over-year growth driven by almost two times the amount of signed deals and a record number of large multi-year enterprise contracts. Organizations now realize that identity integrity is a key protective layer. We are committed to securing the nation's digital front line by establishing total identity integrity across high-stakes environments. Our FedRAMP milestone is the first step towards unlocking our GovTech verticals. It builds on our mission with CMS to eliminate the systemic fraud highlighted in the December GAO report, where as many as 125 insurance policies were connected to a single identity. Our work directly supports the White House's executive order on fighting fraud, waste, and abuse. We are aggressively replacing vulnerable legacy systems with a high integrity layer that proactively thwarts bad actors. By ensuring taxpayer dollars and sensitive records remain shielded, Clear is delivering the non-negotiable foundation for a secure, functioning digital economy. This is a transformative era. With the World Cup, America 250, and record summer travel on the horizon, our mission has never been more critical. We are starting this year from a position of immense strength in innovation, in execution, and in financial performance. We will continue to drive members, bookings, and free cash flow with relentless intensity. I want to thank our extraordinary ambassadors and the entire Clear team for their unwavering commitment to our members and our partners. With that, I'll turn it over to Jen.

Thank you, Karen. Our first quarter results reflect step change growth, continued margin expansion, and accelerating free cash flow generation. Clear Travel and Clear One growth is compounding. In Q1, we delivered over 40% bookings growth and approximately 32% adjusted EBITDA margins while also doubling our absolute free cash flow year over year to $185 million. These results build on our strong momentum entering the year, and importantly, Q1 heading into the DHS shutdown was trending to exceed the 25% bookings growth that we reported in Q4 of last year. The shutdown further enhanced a strong quarter, highlighting how well positioned Clear is to improve the travel experience, deliver greater hospitality, and drive the highest levels of security. The consistency and predictability of the Clear Plus value proposition was evident during the shutdown, boosting member acquisition in the quarter. Revenue grew 19.7% year-over-year to $253 million. Total bookings increased 40.8% to $291.7 million, and active Clear Plus members grew to 8.2 million, up 13% year-over-year. Importantly, the investments we are making in member experience are driving improvements in retention on our growing base of Clear Plus members, translating the strong customer acquisition in the quarter into a durable benefit for our business. The shutdown also accelerated awareness and adoption of our concierge offering. Starting at $99, Clear Plus members can book an ambassador to greet you at the airport and expedite you through security for an even faster, stress-free journey. We are now offering concierge service in 32 airports and remain in the early innings of scaling Concierge across our network, driving member awareness and adoption. The products we are building around our home-to-gate Clear Travel experience, whether it be our mobile app, e-gates, or services such as Concierge, position us to drive greater member growth, strong retention, and increasing levels of ARPU. Clear One is an infrastructure layer for identity, akin to how digital wallets transformed the payments industry. The growing demand for ClearOne is reflected in our results. Total Clear members grew 31.3% to 41 million, and ClearOne bookings were approximately five times those of Q1 last year, representing another record quarter. ClearOne is an enterprise business. We typically enter into multi-year contracts with partners that include minimum annual commitments, providing revenue visibility and predictability. We are prioritizing a focused set of verticals, including healthcare, workforce, consumer, and an early but significant opportunity in government and federal relationships. The platform economies of scale in our business model have become increasingly evident. We are driving meaningful operating leverage as we scale, with close to 70% adjusted EBITDA flow-through and highly attractive levels of free cash flow conversion. In Q1, we generated $62 million of operating income and $80.6 million of adjusted EBITDA representing a 31.9% adjusted EBITDA margin and 7.2 percentage points of margin expansion year-over-year. Q1 net cash provided by operating activities was $190.4 million and free cash flow was $185.5 million representing 103.2% year-over-year growth. Our strong performance and operating rigor position us positively as Secure Identity becomes increasingly complex and foundational. We are accelerating our product roadmap across Clear Travel and Clear One and are leaning into marketing to drive greater brand awareness for Clear as the leading Secure Identity company. We are doing this while delivering expected adjusted EBITDA margin expansion in 2026 relative to 2025 and simultaneously increasing our free cash flow guidance for the year. We ended the quarter with $800 million of cash and marketable securities on our balance sheet, which provides us strategic flexibility while capitalizing on macro tailwinds and operating strength. Turning to guidance, for Q2, we expect revenue of $268 to $271 million and total bookings of $280 to $285 million, representing 22.8% and 26.7% growth at the midpoint, respectively. In light of our Q1 outperformance and confidence in our ability to sustain the momentum, we are increasing our 2026 full-year free cash flow guidance from at least $440 million to at least $465 million, which would represent an increase of approximately $120 million year-over-year and at least 36% year-over-year growth. With that, we will open the call for Q&A.