IPO Watch – Clear Secure (YOU)

Clear Secure, which filed its S-1 on Monday night, is a security identity company that uses biometrics to automate the identity verification process. At the end of May, the company’s network consisted of 38 airports covering 106 checkpoints, 26 sports and entertainment partners, 67 Health Pass-enabled partners, as well as a growing number of offices, restaurants, theaters, casinos, and theme parks.

“Instead of using traditional ID documents, CLEAR uses biometrics – your eyes and face – to confirm it’s really you.”

While I mentioned that the company has a network of sports/entertainment/offices, it should be understood that the company derives substantially all of its revenue from subscriptions to its consumer aviation service, CLEAR Plus.

CLEAR Plus enables access to predictable and fast experiences through dedicated entry lanes in airport security checkpoints across the nation. With CLEAR Plus, members use the company’s touchless biometric verification technology to validate their identity and travel credentials. CLEAR Plus retails for $179 per year per member and is billed upfront.
According to their S-1, the company does offer free trials in-airport and online and promotional pricing to select partners, including Delta Air Lines and United Airlines frequent fliers, as well as a family plan for up to three household members at an additional $50 per year per family member. Through their partnership with American Express, eligible cardmembers receive statement credits for all or a portion of their CLEAR Plus membership.

Back in January 2020, the company was selected by TSA as an awardee in the TSA Biometric PreCheck® Expansion Services and Vetting Program. “We will leverage our marketing expertise, operational footprint and ambassador network to handle subscription renewal processing and new enrollments for the TSA PreCheck® program, as well as offer a CLEAR/TSA PreCheck® bundled subscription for customers who are new to both CLEAR and to TSA PreCheck®. We will provide the ability to renew TSA PreCheck® memberships on our website and complete new enrollments in-airport through our ambassador network. This program is expected to launch in the second half of 2021.”

The TSA program is expected to launch in the second half of 2021 and will represent a new source of revenue and members. They believe that approximately 66% of their CLEAR Plus members are active TSA PreCheck® subscribers, and that there is a significant opportunity for them to process their TSA PreCheck® membership renewals. In addition, they believe they can add a large number of new TSA PreCheck® subscribers for TSA. After a new TSA PreCheck® customer is enrolled or renewed, they will offer the customer an opportunity to enroll in CLEAR on an opt-in basis

Performance Metrics

As you can probably guess, the company’s financial metrics were affected by the pandemic, but management was proud of their overall resilience. “While United States domestic airline passenger volumes declined 60% in 2020 as compared to 2019, our Total Cumulative Enrollments increased 12.3% year-on-year to 5.2 million and we maintained Annual CLEAR Plus Net Member Retention of 78.8% (compared to 86.2% in 2019). While our Total Bookings declined 10.6% year-on-year, from $236.0 million to $211.0 million, and we incurred net losses of $54.2 million and $9.3 million in 2019 and 2020, respectively, our total revenue increased 20% from $192.3 million in 2019 to $230.8 million in 2020.”