CLEAR – A Biometrics Stock With Big Ambitions

Oftentimes when we write about certain topics, we can predict the responses we’ll get. Our piece on RFID chips in humans resulted in so many schizophrenics emailing us that we published a piece on it – How To Go About Treating Schizophrenia. They still email us to this day, and many are highly intelligent individuals that truly believe their experiences. There are also many people who don’t suffer from mental health that believe in things most people don’t. Society calls them “conspiracy theorists,” and they’re often chastised by the same people who constantly drone on about the importance of tolerance.

Today, we’re going to talk about something that’s likely to raise some eyebrows outside of the investment thesis. Biometrics and Authentication is one of the tech themes we follow, so we’re going to write about the IPO of a biometrics company called Clear Secure (hereafter referred to as CLEAR) that started out in travel and is doing the pandemic pivot.

Biometrics and the Pandemic

Before we dive into the CLEAR S-1 filing we’re going to address the elephant in the room – the vast spectrum of beliefs surrounding The Rona. There’s a clear bull case here for a biometric tracking platform that can handle people’s health information, like whether or not they’ve been vaccinated. Unfortunately, jabs are something the Americans have turned into yet another political talking point. Politics aside, there are many people from all walks of life and political persuasions who have concerns about emergency use authorized vaccines. That’s understandable. They shouldn’t be labeled anti-vax anti-science quacks and shipped off to an island for rehabilitation.

Plenty of Facebook-certified disease specialists out there have great ideas about how to move forward, but we happen to live in societies controlled by bureaucracies, because that’s how you manage the welfare of billions. So, let’s keep the comments section free from political bickering and focus on the company and value proposition. (Nanalyze is a no-politics zone if you’re a new reader.) Thank you.

We believe your identity should enable a frictionless and safe journey—both physically and digitally.

Credit: CLEAR

About Clear Secure Stock

Click for company website

Founded in 2010, New Yawk’s own Clear Secure (hereafter referred to as CLEAR) has taken in $135 million in disclosed funding from T. Rowe Price, Delta Airlines, United Airlines, and the goat of goats – Mr. Michael Jordan. The lion’s share of that money came in the form of a $100 million private equity round raised just months ago as the pandemic has shined the light on a much bigger picture of what CLEAR could become.

CLEAR believes “your identity should enable a frictionless and safe journey—both physically and digitally.” To prove that concept, they started out developing kiosks in airports that are like TSA PreCheck, but not – same same, but different (more on this in a bit).

Credit: CLEAR

CLEAR Plus is a consumer aviation subscription service, found in 38 American airports covering 106 checkpoints, which lets you rapidly pass identification checkpoints using your biometric profile – for $15 a month. Once you’re past that queue, you can then use TSA PreCheck to help expedite the security screening process. It’s no surprise that 66% of CLEAR Plus members are also TSA PreCheck subscribers. Let’s review:

  • CLEAR Plus – identity check using biometrics
  • TSA PreCheck – bypass security screening

Unsurprisingly, CLEAR’s most successful member acquisition channel is in airports where 72% of member acquisitions took place in 2020. As one would expect, revenue growth stalled the same year and renewal rates dropped as people stopped traveling.

Credit: CLEAR S-1 Filing

CLEAR recently got into bed with the TSA to “handle subscription renewal processing and new enrollments for the TSA PreCheck® program.” That’s expected to launch in the second half of 2021 and will represent a new source of revenue and members for CLEAR. That should make it easy for the company to expand their reach throughout the more than 5,000 public airports in the United States, the country with the most airports in the world. (One wonders which governing bodies CLEAR would need to align themselves with in order to expand internationally.)

Now that travel is set to resume, and CLEAR is in the right place, their sights are now set on a much grander scheme.

A secure identity merged with health insights and vaccination data is the solution for the future.

Credit: CLEAR

CLEAR Health Pass

It’s their foray into use cases outside of travel that caught our eye, particularly in healthcare. CLEAR’s “Health Pass” is a free feature in the CLEAR mobile app that now includes validation of COVID testing results and digitization of vaccine status. And it’s already being deployed.

CLEAR now has 26 sports and entertainment partners, including 67 “Health Pass-enabled partners and events” covering 110 unique locations – offices, restaurants, theatres, casinos, and theme parks. Key strategic partners include Walmart, Major League Baseball, and the NBA. (A third of all 30 NBA teams have now deployed Health Pass.) The end result is a surge in CLEAR app downloads.

Credit: Reuters

Optional kiosks can be put in place to capture additional healthcare data such as temperature checks. Once people’s healthcare data is being successfully authenticated in a frictionless manner, the additional use cases sell themselves.

The Bull Thesis for Biometrics

To try and wrap our heads around the biometric and authentication thesis, we can imagine a frictionless society in the future where you never need to pay for anything. Your face is your credit card. Why carry identification when any camera can recognize who you are? If your smartphone can recognize your face, any device can. There isn’t a need for passwords anymore. It’s the end game of authentication, an endpoint that probably won’t be reached, at least in America. The reasons why people would object to such a society are apparent.

Outside of America, facial recognition is moving forward whether people like it or not. We met with Russia’s own NtechLab, one of the top-ranked facial recognition algorithms in the world, and were surprised to learn how pervasive facial recognition is in Moscow. In one example, a football trophy was stolen, and the NtechLab platform scanned two million faces worth of foot traffic in a stadium to quickly identify the culprits. Cameras are now being placed at the entrances of all Moscow dwellings to see who comes and goes. If you think that’s bad, one-fifth of the world’s population is now being constantly monitored by well-funded facial recognition algorithms. Chinese police are now able to identify someone on a sidewalk while traveling 60 miles per hour. In addition to all the big brother scenarios one might dream up, the ability to recognize someone by their facial features has plenty of viable use cases – healthcare, travel, and entertainment to name a few.

The question is, how far will people go to allow for a frictionless society? It’s the uncertainty surrounding that question that makes CLEAR’s ambitions a bit too uncertain for our risk-averse tastes.

Conclusion

CLEAR stands as good a chance as any in making biometrics pervasive. Whenever a brand is visible, controversial, and publicly traded, it starts to arouse the interest of investors. That’s why we decided to write this piece, even though we wouldn’t consider investing in the stock. It’s a one-trick travel pony at the moment with ambitions to do something much bigger. If anything, being a publicly traded company means we now have visibility into their progress.

If the CLEAR IPO goes through as planned, shares will trade under the ticker YOU.

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2 thoughts on “CLEAR – A Biometrics Stock With Big Ambitions
  1. Dear fellow MBA colleagues,

    I highlight the following terrifying link about DM.

    What do you think?

    Thanks
    best

    1. Hello fellow MBA.

      What’s most terrifying is a comment that doesn’t related to the article 😉

      We’re only teasing you. Always feel free to comment anywhere, anytime.

      We had to remove the link you posted (no links in comments) but that sure raised some eyebrows. We need to be careful here. Indeed, they are WAY overvalued, something we only realized recently: https://www.nanalyze.com/2021/06/simple-valuation-ratio-tech-stocks/ That’s a concern, and one we’ll explore in a coming article.

      As for former employees saying the order book isn’t real, we cannot take into account hearsay, but we never like hearing that. Where there’s smoke, sometimes there is fire. Claiming the CEO has affiliations with promotional companies and deceptive practices would need to be investigated thoroughly.

      The point regarding their decision to go public via SPAC is a concern we raised. Out of more than 40 SPACs we covered, this was only one of three we invested is. We also covered half our cost basis already on DM. We’ll be looking into this stuff in a future piece. Thank you very much for raising Fabio!

      Your fellow MBAs

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