Clear Secure (YOU) Reports A Surprise Profit As It Benefits From The Rebound In Travel
2:56 pm Monday, August 15th, 2022
Clear Secure (YOU) reported a surprise Q2 profit this morning. Its service, which allows travelers to pay a subscription to use dedicated airport security lanes that rely on biometrics (eyes, face) rather than traditional ID docs, has really been catching on with consumers. And with travel rebounding this summer, Clear Secure is seeing a noticeable pickup in its business. And it is not just airports, YOU has also been expanding at hotels, stadiums, and offices.
Granted, it was not a large profit with adjusted net income of just $0.5 mln, but for a company with a history of losses, it was an important milestone. This was YOU’s first profitable quarter since its IPO in July 2021. Revenue jumped 86.1% yr/yr to $102.7 mln, which also was better than expected. But probably the best metric was Q3 revenue guidance at $111-113 mln, which was well above analyst expectations.
Its service launched in two new airports in Q2 (Greer, SC and Milwaukee, WI) bringing total CLEAR Plus airports to 45. As the company adds more and more airports, it keeps increasing the value for travelers and boosts subscriber retention, which YOU describes as the lifeblood of a subscription business. Annual CLEAR Plus Net Member Retention in Q2 was 94.3% up 1,370 bp yr/yr, although down slightly (100bp) sequentially.
Looking ahead, YOU sounds pretty excited about the upcoming launch of its TSA PreCheck service, which it expects to roll out in Q4. It is currently gearing up marketing and operations to support that.
Overall, it is clear that YOU is benefitting from a high level of pent-up demand for travel. We are about to get earnings reports from retailers this week, and based on recent guide downs, it could be a rough ride for many. However, that is consistent with the notion that travel is gaining with consumers’ share of wallet. People are focusing more on experiences, rather than buying stuff at this point.
Finally, there was a lot of excitement when YOU made its IPO debut just over a year ago. It priced at $31, which was above range and opened at $38.55 and was above $60 by early August. However, some lackluster earnings reports and concerns about when travelers would return have weighed on the stock. Despite the trading action today, we think this report was pretty solid and should get investors to take another look.
