Clear Secure (YOU), Stock analysis (i dont own any shares of clear)
Is a biometric security company which means it produces eye and fingerprint scanners but clear secure markets them skillfully. At airports there are extra clear booths where you can confirm your identity via scanner if you have a clear plus membership and thus skip the line for normal government identity confirmation at the airport.
Clear secure benefits:
Clear secure benefits from unorganized airports by offering a short queue with which you can get identified by eye scan and thus do not have to wait the normal often long waiting time.
Identity checks at airports are already overloaded with queues sometimes hours long and every year more people will travel and fly so it may be worthwhile for people who travel often to buy a Clear plus membership.
So far, clear scanners are only available at 60 airports in the US, so they have a long way to go to expand
Even though their offer is very expensive (199 dollars per year) and only worth it for people who fly 5 times or more per year, you can get it cheaper with credit cards or other offers, for example with tsa precheck in the offer.
clear secure is also partnering with tsa precheck so in the future they can also take over the check-in of tsa precheck subscribers on behalf of tsa precheck which can be a good way to market clear plus and also shows a good cooperation between clear secure and the government.
For the airports, clear secure is also a win because it brings in a lot of money and with decreasing parking revenue, the airports can replace other revenue streams that are getting lower.
Their scan technology can also be used in various locations such as stadiums, offices, stands, etc. they have created a kind of ecosystem with the aim that in the future you can identify yourself everywhere with your face via clear secure and confirm your data such as age identity and vaccination status. other possible locations would be healthcare, clubs casinos etc. so far clear is already active in several stadiums and interesting partnerships are perhaps those with LinkedIn at LinkedIn you can log into your account via clear secure scan for a year now. You can also register at home depot locations using clear secure. what is interesting here is the way in which the manegment is introducing clear secure in different areas, which shows how many places you can use clear scan technology
clear's ceo has been ceo since 2010 and she initiated all the things that make clear the company it is today
Another interesting point is that clear secure has no direct competitors in this type of business other companies that also sell biometric security services such as facial iris and fingerprint scans serve the us government for example IDEMIA and Thales Group also help with their scans at border control or help with tsa checks at the airport they sell to the government but only the technology.
while clear secure pioneered a commercialized customer-facing system with purchasable premium memberships and stand-alone queues at the airport.
As for the clear plus membership retention rate, last year in Q2 it was 90% and has dropped to 80% this year due to a price increase. of course i hope that this trend will not continue but i assume that in the future the retention rate will remain between 80-90%.
Price increases are nothing unusual for Clear but since 2010 the price of the clear plus membership has only been increased twice while the product has grown from two extra lines to 60 extra lines. this year clear has also added a perk to the celar plus membership. there are some discounts for third party services through the membership and there is also a free search service that you can call if you realize you have forgotten or lost something at the airport and they will look it up on their own or help you find it. These perks are nothing earth-shattering, but they at least increase the value of your membership
Balance sheet or income statement related:
Since 2019 they have tripled the revenue from 192 million to 697 million even if I don't expect such a rapid growth Clear can still grow for many years with an annual growth rate of 10-20% as they still have many easy expansion opportunities and their market cap is only 3 billion
Clear has no debt on the balance sheet
Clear has a fcf margin of 38% and even though they have issued 2.5% shares this year, 11.5% last year and 7.27% the year before last, now that they are so profitable they want to go other ways and buy back shares. in the earnings call the cfo also said that they are doing this because they want to be shareholder friendly in the long term.
Even if they have done so much equity funding in the last few years, at least their cash flow has grown faster, which is why their fcf per share has grown by an average of 30 percent in the last three years.
Clear secure disadvantages:
One disadvantage that Clear secure definitely has is pricing their premium membership costs 199 dollars per year, if you look at platforms like reddit or trustpilot one reason for the one star rating is that it is expensive and not worth the price.
or normal consumers this is true even if you assume that the average family flies maybe twice a year it is not worth it for them because that 199 dollars is also a larger percentage of their annual income. This definitely limits clear secures customer base to wealthier people who would just do anything at the airport to make it go faster or maybe people who have to fly very often due to their job so their cost per use is so low that it's worth it
Another concern started with a case in 2022 in which a man who wanted to smuggle ammunition despite a false identity tricked such a clear secure scanner, which of course caused the share price to fall sharply and also with a reason: if the machines are not 100% secure, you don't need them. Clear Secure responded quickly with a new system that scans not only the eyes and fingerprints but also the face, assuring clear secure that they are 100% secure even though no major case has happened since then and face scanning is also relatively secure, clear secure is of course now subject to stricter controls and if such a case happens again, clear secure could be punished more severely.
Another threat is that airports could become more efficient so that a costly overhaul line like clear is no longer needed as mentioned earlier many biometric security companies sell their technology to the government and with enough of these scanners equipped the queues should not be that long. Firstly, of course we don't know what the future holds, but airports have always been completely overcrowded during the peak travel times and I don't see that changing
The last and I think also one of the strongest contra points against investing in clear secure is:
in the end, clear secure at airports (their main buisness) is an overtaking rod for those who want to afford it and that is of course a thorn in the side of every people-oriented politician.
airports are financed by tax money and so instead of offering clear secure for the money, they should make the airport more efficient in general. but if an airport earns millions a year from its clear secure line, why should it do that? For the population that can't afford clear secure, that's obviously bad.
In addition, according to some, the state should not hand over its security processes to private companies, but as far as that is concerned, I don't believe that clear secure lines will be abolished by airports in the future either. clear secure works closely with the state programs tsa and tsa precheck, as I said, in the future clear staff will be able to check in tsa precheck members and there are already lines in cooperation with tsa precheck that combine the two advantages so that there is a clear plus + tsa precheck line at several airports.
Voluation:
Clear secure PE ratio is 42 and the P/FCF ratio is 11, this big difference is due to the fact that clear secure has become profitable very quickly in the last few years in terms of free cash flow and the net income margin is not quite there yet while the FCF margin is just at 38% the net income margin is still at 10% stock based compensation is also not really meaningful that it would make such a difference.
In the future, the FCF margin should in any case remain between 40% and 30% and the net income margin should also move up to 30%.
Conclusion
I am actually interested in the company and could also imagine opening a clear secur position in the future, as I expect a long period of sales growth and the risk factors outweigh the positive aspects.
At the moment I have not yet bought any shares
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