Avory 的 Sean Emory 谈 Clear Security $YOU

Today I've got one of the companies I will say I've torn my hair out the most as a consumer and a potential investor thinking about. It is Clear Secure, the ticker there is YOU, with Sean Emory from Avory Capital. The reason—and you'll hear this throughout the podcast—the reason I tear myself apart is because it is such a unique potential business with such a unique and deep potential moat. But on the other side, with Clear Secure, you can go through the CLEAR line, which costs you $200-plus per year to be a member of, or you can go through the TSA line for free. The TSA line sucks, but it's free.

Anytime you've got something where there's a premium offering and a free offering that's just given to everyone, with all these potential moats, risks, and rewards, I just find it absolutely fascinating. We record this on March 26, deep in the throes of the TSA shutdown, which has caused TSA lines to go crazy and has caused a huge spike in Clear stock because people are going through that TSA PreCheck line and saying, “Oh, it's 4 hours here. If I pay $200, I get through the CLEAR line in 5 minutes. Yeah, I'm going to pay that.” But that makes it even more interesting because what better advertisement is there for their service? It's a subscription service. If all of a sudden you have 600,000 new people who sign up because the TSA lines are awful, some of them are going to stick. How many are going to stick? All this sort of stuff.

With me today, I'm happy to have on, for the first time, from Avory Capital, Sean Emory. Sean, how's it going?

What's going on, man? Thanks for having me on today.

It is super exciting, and you are talking about a company that I have followed for a while, so I'm really excited to talk about them. We'll get there in 1 second. First, disclaimer: Nothing on this podcast is investing advice. Please see the disclaimer at the end of the episode or in the legal disclaimers. With that, I'll turn it over to you, Sean.

The company we're going to talk about is kind of tangential to the news quite a lot today because you and I are talking on March 26, and the TSA shutdown has been going on for almost a month now. I'll just toss it over to you and get it out of the way. It's Clear Secure, the ticker there is YOU. What is Clear, and why are they so interesting?

Yeah, straight to it. Clear Secure is a biometric identity platform. I think most of us know it and have seen it when we go into airports, right? You have the TSA lines, you have the security lines, and then you see this thing on the right side or left side that is CLEAR. Usually, they have these ambassadors trying to get you to go through these CLEAR lanes, and most of the time you look past it. But there's that one time where you're in a rush, TSA is potentially backed up, and that's kind of what you're seeing today.

Ultimately, what happens there is you're moving into that line, and all it really does is bypass the guests in front of you who are all going through the airport through TSA to the security attendant that's sitting there at the front. You get to the front of the line, right? Ultimately, that's what it is. Think of the toll roads, the express lane. You need it when you need it; you don't need it when you don't. But you'll pay for it, or you'll pay for it through third parties as well.

Their core business has historically been a subscription business with roughly 7.2 to 7.7 million members that are actively subscribed. Those come through different ways, such as Amex, which sponsors it and will pay on your behalf and refund you, or other partners that exist in the ecosystem. That's step 1.

They're in 60-plus airports across the country. They've moved and migrated into using their expertise in identity, which is becoming a big topic, in enterprises, and we can get more into that specifically. But that's it. I mean, it's that simple. It's an airport business that works with TSA, one of the few, if any, companies that are approved to work inside airports, and they're moving outside the airports into enterprises.

Perfect. No, that's a great overview. I'm sure most of my listeners have taken a flight and had that experience. You're walking through, and you look over and say, “What's that thing that everybody's scanning their face in and doing?” So, a lot of questions here.

I have always wanted to like this company. I'll reveal my biases: It is just a super-unique moat, right? You go into the airport and there's a TSA line and there's this, and you can imagine how white-glove the service is. All this sort of stuff means that you've got a super-unique moat with this thing. But there have been a lot of questions in my mind, and we can just go through them to start.

The first question I've always had was, I remember—I think they used to have a Chase partnership. My wife had an Amex and we got CLEAR through her, right? I remember we went through it once, and the CLEAR line was 5 minutes while the TSA PreCheck line was 2 minutes. I was looking at it and I was like, “Damn, this sucks. I've got TSA PreCheck. I could be through it faster with TSA PreCheck.”

That's just one anecdote, but it kind of speaks to the fact that they do have this issue where, if too many people sign up for CLEAR, I lose the value of the service, right? If all 365 million people in the U.S. were CLEAR members and wanted that every time, the TSA lines would be empty and CLEAR would be backed up.

I was saying, “Is there a restriction here where there's kind of a cap on their growth?” We're all familiar with businesses where, as more people get there, a club is really nice when there are 50 people in it, but if there are 250 people, it's just too crowded. How do you think about that limiting factor on the growth and that push and pull?

Yeah, it makes sense. When we were thinking about it, CLEAR's growth algorithm is as follows: You have more airports, more lines within airports—meaning more terminals—and more ways to get in. As of right now, they're not in all airports, and they're also not in every terminal in those airports, right? So, there's some expansion opportunity there from that standpoint. They can carve out new lines within an airport they're already in, say, in a terminal they're already in.

But our base case isn't really any of that, right? It's actually honing in on the premiumization, this being a premium product, and working through price. Like you said, you may show up, and the last thing you want is to get into a line that you're paying for that's longer than the line you're not paying for.

What they're doing in different ways is working with TSA. As of right now, they're one of 3 participants that are allowed to offer TSA PreCheck, where you can get verified for TSA PreCheck. So, it's them, IDEMIA, and one other. If you're getting TSA PreCheck, you can go online, go to the website for TSA PreCheck, and it'll show 1 of the 3 providers that you go and verify with.

When I did this a long time ago for TSA PreCheck, I went to some back alley, random spot for them to verify me. I brought my ID, walked through the entire thing, and ultimately, it was a situation where a tenant or a person there was verifying me individually.

From there, IDEMIA and some others have stayed in that kind of capacity, but what CLEAR offers really well is that you can verify yourself at the airport. Number 1, you can also go to one of their 350 locations across the country now. They partner with Simon Property Group, so you can verify yourself in shopping malls.

They've made it easier. So, back to your question, which is really around the idea that they would eat into their business by adding more people into it, meaning not throttling it: Ultimately, having more lines helps, number 1. Raising the price so you have less throughput per line, and then, number 3, working and having more people go in and approving them in the TSA PreCheck line by being one of those providers.

That is seeing a lot of traction today. Those are the 3 areas in which they can ultimately grow their offering without impacting throughput and wait times.

Just on TSA PreCheck, they are one of the 3 TSA PreCheck providers, and I think they get something like $15 or $20 if they're the person who verifies the TSA applicant. But is that just a fee-for-service? It's not applying to their core business. That's just a nice add-on, right?

It's a nice add-on. On 1 side, kind of like what you were saying before, it's adding more people to TSA PreCheck. The best thing to do with CLEAR is actually have TSA PreCheck and CLEAR.

CLEAR gets you to the TSA representative, right? CLEAR gets you to the front. TSA is in a line, so PreCheck will have a line. You're in that line and you get to the guard.

With CLEAR, typically, you go there, scan your face or your finger, and a representative will take you to the front of the line. Oftentimes, when you're in CLEAR, there are people waiting in TSA PreCheck, and you will be the next person if you're in the front of the line, no matter how long anyone else has been waiting. They take you to the guard.

Having that combination is the combination. What they're doing, again, is offering TSA PreCheck, as you said. If it's a new application, they make roughly $20; if it's a renewal, it's roughly $15. All of that is flow-through margin, so it's 100% margin to them.

That allows, again, 2 things. It puts more people in the TSA PreCheck line, so it makes the CLEAR line a little bit more advantageous if they're not CLEAR members. In some ways, you're using CLEAR as a way to get your TSA PreCheck even if you're not a CLEAR member. It's the fastest way to do it. You go on your phone, at the airport, or in shopping malls, as opposed to the other options.

There's an advantage there. The best thing you want to do is—when they first announced it, we thought about it and said, “Well, there may be people who think CLEAR and TSA PreCheck are kind of one and the same.” If they can offer a bundled solution, you're likely not going to give up your TSA PreCheck, thinking it's kind of your CLEAR product as well. Ultimately, you're keeping both of those just in case.

I'm a business traveler. I have my CLEAR through Amex, but it's one of those things where, if I'm in a rush and I need to go, I'm getting in that CLEAR line, whether it's $50 or free. I need to get to the other side. If it's a family trip, same thing.

That's ultimately the margin structure and how there's flow-through for TSA PreCheck for them. At the same time, I think it adds value to their line relative to the other line, so they're benefiting on both sides.

Okay. Let me go to something else. You mentioned premiumization. This is the other area where, again, I loved the idea of CLEAR when I first started looking at it because I thought, “It's a unique business. There's no one else who's offering it. It's a unique moat, multi-airport across the country.”

I never really bought into the idea that, at MSG, they're talking about doing stadiums and stuff. I never really bought into that side of it. But a multi-airport network across the country—I just loved the idea of that unique moat. As you're saying, travel is growing and there's premiumization.

On the premiumization side, aside from my anecdote of TSA lines being shorter than CLEAR lines, the other thing that caught me was that you started seeing—I guess they don't control, even though they have the lines, a lot of the things around them. I started worrying about other premiumization offerings.

For example, TSA starts offering facial or touchless ID, where you can scan your identity. I know Delta rolled out its premium offering where, if you've got Delta, you can go through security and they'll kind of face-match you for it.

I started worrying because they're operating in the TSA environment, which they don't control. What happens if the airlines start cutting them out? What happens if the airlines start premiumizing their offerings or if TSA improves its offerings?

I just worried that, even though TSA is tech-forward, there's only so much they can do when they don't control the environment. There are all these things outside of their control that could come with the competition.

If I brought that into today, I'd point you to the Delta touchless offering. I think TSA started doing a biometric-scan offering that you can use. How do you think about the CLEAR line and the CLEAR offering when they've got these other competitors out there that can respond in an almost asymmetric way?

Obviously, that's something we think about. Specific to the airlines, many of those offerings are only for those airlines, right? If you're thinking of an agnostic player that can exist across airlines, across airports, and across terminals, CLEAR is the one.

If you're Delta and you're only serving Delta customers, you're somewhat isolated. Most people travel on multiple airlines, and therefore I think that risk is more off the table.

The TSA walk-through digitalization—digital ID—that they continue to work on, I think, is great. It speaks to the technology side of this equation. At the same time, we all know that TSA and governmental agencies, for the most part, are fairly slow to react.

CLEAR is working on different things. They have eGates. I don't know if you saw that, but eGates are something where it's a gate and you kind of bypass some of these TSA agents, let's say, in certain environments.

If you fast-forward 10 years, we're going to have more and more of that and less of guards sitting in front of you, waiting in line. It's going to be this kind of speed-through process. As long as they're continuing to evolve their technology, I think the combination of TSA PreCheck, CLEAR, and maybe some of these other solutions can all coexist together.

Also, remember, these airports and terminals all benefit from CLEAR, given the fact that CLEAR is paying money to be there.

Let's go to that in 1 second. You hit on something really interesting, and I just want to pull on that. The eGate thing you mentioned that CLEAR is doing—can you describe it more fully again?

That is an example of an innovation that seems awesome. You're going to get people through security faster. They're not going to have to wait in line for a person to scan them, pat them, or whatever it is. That sounds awesome.

But at the same time, you're thinking, “If this is really successful and speeds people through, if TSA starts rolling this out, isn't CLEAR dead?”

How do you think about it? Almost every innovation they do is great for their customers, but the moment TSA—whose agents are on the ground, 5 feet away, staring at the innovations—rolls this out, you can say, “You roll it out to 7 million CLEAR members. That's different from 60 million Americans flying.” But the moment TSA copies that innovation, it really kind of destroys the core CLEAR business.

Number 1, obviously, TSA would require everyone to be verified on their digital identity, right? You'd have to require that. Right now, CLEAR has 31 million members associated with that, so there is an advantage there.

There are 30 million travelers in a given year. You could argue that CLEAR is well penetrated from a verification standpoint.

Now, TSA can choose to build or partner. If you go through a TSA line—any of those lines—the only thing that is actually TSA is the guard itself. Everything else is IDEMIA. There's also Leidos, the big technology provider, where all of your luggage and stuff go through, where you walk through.

They're definitely a technology buyer, not necessarily a technology operator. If that's in mind, and they like eGates or some of these other technologies that I think CLEAR is bringing to the table, I think they ultimately become buyers of the technology as opposed to anything else.

And I could see a world where everything in TSA starts functioning and running through things like Leidos, IDEMIA, and CLEAR as the main solution providers for that. So, again, they would become a solution provider, and the monetization equation could change in that environment. But as of right now, I think the status quo is more likely.

When you are offering a service, it's working, they see the data, and they can see how fast people are walking through something like an eGate. I think TSA is likely more inclined to partner than build on their own. That's what they've done in the past. They've never really built anything on their own.

Let me go to something that I kind of switched you off of, but I'd love to discuss. The other really interesting thing about the CLEAR model, right, is the way they rolled it out: they did revenue shares with the airports. I think Denver was the first airport, if I remember correctly. They say, "Hey, every person who signs up—or, I think you can correct me if I'm wrong—at this point, it's every head who goes through the airport, the airport gets a share."

Airports actually really love this because TSA is a fixed cost. At best, it's neutral—it's a huge piece of the airport that's revenue-neutral at best. All of a sudden, you turn this huge piece of the airport that's revenue-neutral into a revenue generator. That's what every person wants, right? Every airport wants that. It also maybe alleviates the traffic and everything.

But let's talk about their partnerships with airports, because the other worry you had was that there were some airports, if I remember, that kind of didn't want to do this. I know a lot of people worried, "Hey, LaGuardia—critical airport. Denver—critical airport. CLEAR needs them more than the airport needs CLEAR." Now, hopefully, it's a beneficial partnership where there's revenue sharing and everything.

But if Denver says, "Hey, CLEAR, if 5 million people came through our gates last year, and we think we're 5% of your revenue, so we think we're—I don't know, let's just say—$50 million, right? We got $25 million of that $50 million last year. We're going to need to be at $30 million, or else we just cut you out." People have to go through Denver airport no matter what, but you'll just lose that. I kind of always worried about the asymmetry of that relationship. So how is the partnership structured with airports, and how do you think about that asymmetry?

It's something they don't provide a lot of detail on because every single airport has very different structures. I've obviously dug into these things to try to figure out whether there's any sort of blanket risk across airports and how fragmented it is. That's the benefit: all these airports, for the most part, are fragmented. Some of them are privately owned, some are publicly owned, and some have terminals that are owned and operated by the airlines. Everything is different, so none of those come in the same flavors at all.

A lot of it has to do, again, as you said, with throughput. If more people are going through, there are different types of equations that happen there. Some are throughput-based, meaning how much capacity comes through the airports and how many people walk through. Then there are ones where there are just blanket, standardized, more flat fees for service in that environment, and then they just pay out based on that.

Now, again, the fragmentation speaks to the question of the risks. Yes, you could lose an airport. They've lost airports, gained airports, and won them back. Ultimately, I think it all comes back to what they're trying to provide here: what service, whether it's making financial sense for the airport itself, number one, and whether it's making a better experience for the customers who are ultimately walking through this airport. I think for the most part, it's a yes and a yes.

As they continue to enhance their technologies, CLEAR used to have you walk up to these things, and it took a little bit longer to get through. Now they have the handheld, and they're moving toward eGates. All of that is to speed up the line and get people through the gates at the end of the day. That's ultimately what an airport wants.

Fragmentation is key here. We haven't spoken about valuation, but you're talking about something that's valued in the low-double-digit, low-teens multiple on a free-cash-flow basis. I think a lot of the stuff we're bringing up here is in the company's valuation from a free-cash-flow basis. But fragmentation is a big deal here, along with these network effects and the 31 million members across the board.

Okay, I'm going to return to valuation in a second, but let's go to something different. Again, I'm really interested in—and you've done a great job discussing it—the potential for a truly unique moat, right? Because once you're up, as you said, if you're up at 50 airports, it's really tough. If you and I are like, "Hey, CLEAR is not in the Baton Rouge airport. Let's go launch a screening service," nobody's going to want to sign up for Andrew and Sean's Baton Rouge-only CLEAR identity service.

Nobody's going to want that. The airport's not going to want it, and it's just not valuable to us. Then we go and try to take one. It's just got this really unique moat that I'm so interested in because it could either be a super-strong moat or a very weak one.

Let me pause on the moat stuff. I'll come back to some other risks. We haven't even talked about the TSA stuff that's going on. Everybody knows we're talking at the end of March, and that's helped. But I'm going to pause there and just ask you: the market is a really competitive place. The market has responded. It sees these long lines. It sees all the CNN articles that say, "Hey, the TSA wait is 4 hours unless you've got CLEAR, in which case you can get through in 10 minutes."

It sees all that. The stock's up quite a bit over the past few weeks. What do you think you're seeing that the market is missing that makes this a risk-adjusted opportunity?

Yeah, I don't think most people, if you ask anyone what CLEAR does, are talking about their enterprise business. They have roughly 7.5 million paid members, and a lot of people see that. They also see some of the things you articulated: airport risks, along that side, and the idea that their relationships with something like Amex, for example, could hinder them. Again, I can totally answer that question, so we'll go there in a second.

They haven't done the work to see what the enterprise business is doing. The enterprise business—again, I was trying to articulate this—they have 7.5 million paid members, but 31 million members overall. Their total membership is growing 30-plus percent, and their paid membership is growing 6%. So what's the delta there? What is the delta between total members and that? It's this enterprise business as they continue to enroll people into CLEAR.

What do I mean by enterprise business? If Mount Sinai, Epic—which is the EHR platform—or Baptist Hospital here in Miami, Florida, are using CLEAR—

New Orleans. When I was looking 2 days ago, they had rolled it out at Ochsner Hospital in New Orleans. I was like, "Oh, I'm from New Orleans."

Yeah, yeah, it's a big deal. It's a big deal. This is kind of what—even though we're about a year old in this investment thing—a lot of our idea around this was simple. It actually didn't stem necessarily from their airport business. I think the airport business is credibility, paid members, usage, and advertising for them. People know CLEAR.

So if you're walking into an enterprise organization, Baptist Hospital, and you're saying, "Hey, how do you let people into your hospital? How do your employees reset their passwords? Do they reach out to the help desk? How do they verify it? How do you know who's on the other side so that when they log into your health records, it's the right person?" everybody on the other side knows who CLEAR is. They're like, "Hey, look, we're TSA-approved, we have all the credentials, we're HIPAA-compliant, and we have many of the things that you look for in an identity platform."

Now, in a world of AI, obviously everyone's talking about it, the need for identity solutions is massive. That's ultimately what got us to this place. Then we're like, "Man, this airport business is actually a pretty good business." But they have this enterprise business that's starting to grow.

So, again, some of the use cases I was talking about are hospital systems and password resets. Very simple, but something where you can verify yourself, and they're using CLEAR's identity biometric solution on the back end for this. If you're checking into the hospital system, they send you an email, you verify yourself at home, you walk into the hospital, and you show a QR code. You're not waiting in line at the front desk for 30 minutes.

Uber drivers can verify themselves. On LinkedIn, you can verify yourself, which is important in the world of AI and recruiters searching for real humans, not for identity-AI fakes. Also, Home Depot rentals: You can rent equipment, which is a big deal, and you can go in there and rent equipment.

They're going from this airport business, which is a great business monetarily, into other parts, and it's showing up in the numbers. So when you see that bookings inflection this past quarter, going from 16% revenue growth to a bookings target of 24% to 26%, there's a real inflection happening here. And that's outside of the airport business.

From our view, again, the delta between total members and paid members is that delta, right? There's no free CLEAR membership at the airport, really, and nobody signs up for that unless you're actually going to go through these things. So ultimately, I think that's what the market's missing—or hasn't even—I don't even think they're missing it. I just don't think they're looking.

Let me pause you on that. I hear you. When I've looked at this, it is cool, right? Again, I see they roll out Ochsner, and you say identity, so you're basically getting into security. You can look at anything in security and slap pretty big multiples onto these things.

But then, when I look at the numbers—and you've spent more time on this—I don't believe they've broken out how much of bookings are from non-CLEAR Plus, where CLEAR Plus is the airport business, versus just normal CLEAR. I don't think that. When I do the simple math, when I look at, "Hey, 7.2 million CLEAR Plus members growing to 7.6 million throughout 2025, revenue goes from $770 million to $900 million," it doesn't seem to me like there's a lot of revenue from the non-CLEAR Plus members coming in.

So this business that they keep talking about—it just seems like, I know hospitals. Yes, I'm sure you're getting a little bit for being the person who verifies the QR code and all this sort of stuff, but there is an alternative, right? Somebody just hands you their driver's license, and the nurse looks. There's an alternative that's free, so it's going to be very difficult to price that. It doesn't appear like there are a lot of numbers.

Then, the last thing I'll say is the airport business is so valuable, even if I'm wrong on both of those things. If it's not visible in the numbers to me, it's just so far away from mattering versus the whole scheme and value of the airport thing. It just seems to me like it's a growth case and it's a nice story, but it pales in comparison to the airport business to me.

It does. It does. So, again, you have this beautiful foundation of the airport business. They're innovating there, and they're doing a wonderful job. You have this margin of safety from our standpoint, which is a good business at a good price, outside of the fact that, again, here in the last 1.5 to 2 years, they've been accelerating—or really instituting—the TSA PreCheck business, which, again, is $15 to $20 per.

That's building membership—or not membership—building total members, but not paid members, into the CLEAR plan. That's number 1. Number 2, again, is this brand-new business, as I would call it. They started talking about it 2 years ago. They got approval specifically in different areas about a year ago, and about 2 quarters ago is really when they started to articulate that they were starting to see bookings momentum and starting to name real deals.

These things tend to start off as pilots, and then they move into full production. What you're seeing is these announcements, for the most part, going from pilots about 12 months ago to full production. So we're starting to see those use cases there.

On one side, you have this high-quality business—a quality business—that is a cash machine, trading at what we consider to be a cheap multiple. It's done well, and we think it's fragmented and somewhat insulated from some of these risks that we articulate. On the other side, right down the middle, you have TSA PreCheck, which is obviously somewhat connected to their airport business. I mean, it is, but in a different way.

It's also some sort of risk hedge to them getting thrown out of the airports, let's say, because ultimately they're the ones that would just be the onboarding tool for all of these members that sign up and adopt TSA PreCheck. And then, lastly, you have this enterprise business that is very interesting, and you're seeing real traction with it.

Again, it doesn't show up in the numbers, or they don't break it out, let's say. But we are seeing, again, an inflection in bookings. So you see bookings going from—or revenue starting out at—the quarter-end rate of 16% and accelerating to 26%. That either comes from a couple of things.

Maybe their airport business is the rhyme and reason behind this, or it's some of these paid pilots turning into real, usable opportunities for them in long-term contracts. Ultimately, that is starting to show up in revenue or bookings, which will show up in revenue in the future. So I think that is the delta there.

Again, when you see total members relative to paid members, there's a big difference there, and it's not the active memberships from the paid plan that are showing up in that growth rate. Total members are growing 31%, and paid members are growing 60%.

I know I'm a little wonky, throwing numbers out, but they just did 16% revenue growth, while bookings guidance had an 8-point delta of acceleration. That's showing up, in our view, in combination with what's obviously happening with TSA today in terms of backups at airports and likely more people joining.

More importantly, I think you're starting to see an inflection, and you're hearing that. You're hearing the bookings commentary around it, and then we're obviously tracking a bunch of stuff relative to it to figure out: Are you seeing more use cases and more partners announced?

I think the quarter before last they announced 20 new partners. Then, this quarter, they said they had the biggest bookings quarter ever for their enterprise business outside of the airport. Ultimately, those are the small incremental points we want to see to continue to build on that thesis outside of just the airport.

I hear you. It reminds me of times I've gotten really excited about companies that launch small growth efforts, and then 2 years later I come back and think, "Oh, well, that growth effort actually went great, but the core business didn't do as I planned." When I go back in hindsight, I'm like, "Oh, cool. The best case for the growth effort was it was worth 2% of the core business."

It just seems to me like the story here is so much the airport business. Everything else is a cherry on top, but all that matters is getting the airport business right.

Speaking of the airport business, I know what happens. Somebody hears an idea they like, and the first thing they're going to do is pull up the stock chart and say, "Hey, let's look at the stock chart," right? If you pull up the stock chart, you're going to see 2 jumps.

One of them is at the end of February, when they report numbers. As you said, I don't think the Q4 numbers beat by too much, but their bookings, their guidance—everything beats like crazy. The stock goes from, let's just call it, $33 to $45.

Then it stays around there for 2 weeks, and this TSA shutdown that we're in happens. The stock goes from $45 to $55 as it becomes obvious, real quick, that people are waiting in 3-hour TSA lines, seeing open CLEAR lines, and saying, "Hey, why don't I just go join CLEAR and get through this effing security line?"

The most frequent question I got when I posted this on Twitter or talked to people about CLEAR, aside from all the moat questions I've been hitting, is, "Hey, if the government ever gets its stuff together and this TSA shutdown ends, aren't you just kind of riding a wave? If this lasts for 6 months, it's going to be awesome and people are going to sign up like crazy, but if this ends tomorrow, the stock just crashes. Everyone's like, 'Hey, there are short-term side effects.'"

So how do you think about that dynamic when it comes to this stock?

Yeah, definitely. Look, obviously, there are short-term and long-term ideas and thought processes here. As a firm, we're not short-term-oriented. All the stuff I've been mentioning is really around the bigger thesis at hand, and is that tracking?

I think ultimately, at the end of the day, all this stuff that we're talking about just proves the point that CLEAR is somewhat important to the travel ecosystem. Some of the demand and booking data that we're tracking, which they highlighted in the quarter, speaks to that.

I think we're a long way from being convinced that TSA is going to be this technology foundation that's going to build its own stuff in-house and be able to handle stuff without public-private partnerships, for the most part.

The reason the stock jumped, for the most part, was that bookings number. They basically articulated that they're going to grow bookings by the mid-20s percent this year, and that's their guidance. They've proved to be fairly conservative most of the time.

That 26% guidance number was announced between last quarter and this quarter, before some of the developments with TSA. I don't think that's the biggest point there. We're tracking web traffic to the TSA web portal, and that is now in second place behind IDEMIA, which is number 1. So, they're now in the number 2 position in terms of web traffic coming to TSA PreCheck.

I think more people want TSA PreCheck to get to the line and get through it. Then you also have what's a better solution than CLEAR. I think it just shows—honestly, it just highlights—that they're in an advantageous position today.

If you take that and think through the thesis around CLEAR being more than airports, meaning an identity platform, I think, again, even with the run-up—we've owned it through the run-up, and we're not patting ourselves on the back. At the end of the day, as you said, tomorrow it can fall. As long as that thesis is tracking, we think it's interesting.

I don't think, even at this point, it commands a very high multiple because there are continuing concerns around the idea that TSA, in theory, or Delta or some of these airlines could, in theory, remove them quickly. But again, as time goes on, the more members they get, the more airports they're in, and the more international travel they have—for the World Cup and things like e-gates and technology—the more embedded and entrenched they are. So, I think it's one of those things where the longer this lasts, the more entrenched they are. That's how it works.

No, it's funny you mentioned at the start TSA becoming its own inventor of technology. As you said, I was like, “Dude, Andrew, one of the risks you're quantifying—and we're clearly worried about here—is TSA having its own tech stack.” I mean, TSA can't even pay its own people, and you really think there's going to be a budget for TSA to modernize and do all this sort of stuff?

It is funny that it doesn't seem like it would be crazy hard to replicate, but the inefficiencies of government seem to play squarely into their hands. Go ahead.

Yeah, that stored identity is important, though. When you walk there, they're not verifying you at that point in time, right? You're already verified: you've given the documentation, and you went and visited somebody. You did it easily on CLEAR. It's the easiest way to get TSA PreCheck; it's the easiest way to get verified.

Therefore, your identity is stored there, and that identity can then take you places. When I went on LinkedIn and verified myself, it was the same portal, and now I'm verified on LinkedIn, whether that matters for me personally or not. For some people, it does. If I'm then going to the hospitals, which I used at Baptist at one point, it's just an ease of use, and then you're starting to get these micro-networks locally. Then you start to get the scale of that network nationally.

I don't think the average person is thinking in that way: “Hey, I'm part of this network.” It's more that, “Hey, if there was another provider right next to CLEAR, I'm not sure I would enter that line, even if it was, I don't know, 30% off. I still probably wouldn't care. I would just walk through CLEAR and mind my own business and get through the line.”

When people go in the airport, they're just trying to get to the other side. So, I think that's important: that stored identity, where TSA doesn't actually have all that today.

You mentioned valuation a few times. They provide 2026 guidance. I think their free cash flow guidance is $440 million. I would have to imagine they're going to beat that, both because I think they've been historically conservative and because the TSA stuff happens after the guidance. You just have to imagine Q1's gangbusters.

I think there's some debate around the free cash flow number. This is a consumer subscription business, so its free cash flow is going to be higher than EBITDA as long as it's growing. But float is moat, so I don't know. We can just use free cash flow.

The market cap is $7.2 billion, with an EV of $6.6 billion. So, you're paying about 15 times-plus on free cash flow numbers. How do you think about fair valuation? What would a fair value, in your opinion, be?

Yeah, obviously, it tends to be at the higher range of what we would say is a steady-state multiple. Anytime we underwrite something, we're at 10 to 15 times. That's kind of our multiple, but we're not at steady state. They just guided 26% growth.

So, the question is: what's the duration of this growth cycle, and how long is that going to stick? What numbers do we get to on the top line? Margin structure—I'm not concerned about margin structure. I think they've handled that well over time.

Depending on which metric you're looking at—operating income, net income for them, operating cash flow, and free cash flow—you can range from 20% to 40% on those. But if we stick with somewhere between operating cash flow and free cash flow, you're somewhere in your mid-30s of margin structure there.

Ultimately, the way we looked at it was we built out a path to roughly 8 million members. We actually do not think this is going to be a 10- or 20-million-member CLEAR Secure, at least as of today, the way it sits today. We don't want to get over our skis and anticipate that.

We believe they add incrementally another 600,000 to 800,000 new net members over the next several years. At the same time, the biggest lever for them is pricing—pricing on the wholesale side, which is their partner channels, and pricing directly both for individuals and for bundled family plans. We think that's ultimately where you're going to get the lift.

Last quarter, they articulated that even further. Again, back to the early part of this conversation, how do you throttle the lines? The best way to throttle the lines is, 1, add new features and capabilities in the line. What is that? Concierge. That's curb-to-gate capability, which is $20 or $30 for older people or people who are traveling with family. You can go in there, and they'll literally walk to your car and walk you to TSA for $50 or $20, but you have to be a member first in that environment.

Adding more capabilities and value, and then incrementally increasing that price, is ultimately the bigger lever for this business. When you put that all together, we think they can double the size of their revenue footprint, both from increasing the number of users and members they have on the platform and from pricing. We think they can increase pricing by incrementally more—like 30% to 40%—even from these numbers. They've been price takers here for the last year and a half.

That's a super interesting thought. Let me pull on that for a second. They do have something interesting where this can be the hallmark of a great business, or this can be tough, but they're charging and you have a free alternative, right? Right now, that free alternative, as we talked about with TSA, sucks.

But you can always not pay for the CLEAR membership—not even pay for TSA PreCheck, though TSA PreCheck is like $100 for 5 years. I don't know why you wouldn't get it if you're traveling—and you can just go through the TSA line, right?

I think the average CLEAR member is traveling—I'm just looking at their Q4—7 times per year. Is that right, or is that 7 times per quarter? It must be 7 times per quarter if you're a CLEAR user. I'm not 100% sure.

Yeah, the 7 times—that's an annualized number, actually.

So, it's only 7 times per year. Okay. So, you're paying $200 plus using it 7 times per year, right? You're paying $30 to $40 per use of CLEAR if you're a CLEAR member. How much pricing power do they have? At what point, if you're charging $200 for a CLEAR membership and someone uses it 7 times, does $30 per use start pricing people out?

Are there some people who are going to pay $100—who would pay $1,000 for 7 times through? Sure, but it's probably a small percentage. So, you've got that push and pull. How much pricing power do you think they actually have when there is that free alternative?

Yeah, we've actually seen them raise prices quite considerably.

The biggest thing they can do is bundle, too. Ultimately, if your kids are on it, and if your kids are 18 years old and travel a little bit, the family plan is the ultimate plan in consumer because you're beholden to all the pillars of the family. No one's going to want to give it up. Or, if one doesn't want to give it up, no one wants to give it up. Also, a lot of this is wrapped behind these credit card partnerships.

That was going to be my last question, actually.

You could argue the CLEAR member typically has a much higher household income, and so it's a very high-quality member to have. Credit card companies, from what I've heard speaking to different people, would line up and take it on, assuming someone like Amex stepped out. We would probably have some confusion in that moment, but you would probably have about a year cycle before you lose any of these people. Then you're building the new base or additional base thereafter.

The wholesale pricing historically has been very low, so that's one avenue. We estimate roughly 30% to 50% of their revenue comes from these partnership channels, and therefore those are easy incremental increases. You're passing that on to the partners, who then can mix and match their own card plans.

If you have these travel-heavy users who are using it more frequently than 7 times, because that's the average—someone who's actually using this twice a month, 24 times a year, roughly, for your avid business traveler—I think those people are going to want to keep these memberships, with or without these plans, once you start to get used to it. So, on pricing, I do think they continue to have levers, and there are proof points over the last year, year and a half, where they've raised prices pretty dramatically. Anytime you increase price, you have to increase value, and vice versa. I think they're doing so.

Again, it goes back to the throughput part as well: Does this help throughput of their overall business? And I think they continue to have levers there.

Have you seen any survey work on how far they could push pricing?

Yeah, we did have one survey done, but this was a year and a half ago, 2 years ago. I believe at the time they could push price 20% to 25%. At the time, I think they can push higher than that, as a user and as someone who's seeing it. We're also 2 years away from that pricing survey, so I would assume that prices have risen since.

I do think, again, they're more embedded. At the time, they were in 40 airports or something. They're in 60 airports now—65-plus—continuing to grow. I think there's more networks internationally as well, and some of the other value-added services that come with it.

I updated my passport the other day. In CLEAR, they have a partnership with a passport company, whatever the company is. It saved me, I don't know, $60 or $70 on my passport renewal. Once you start to use it more, you start to see extra value that isn't directly implicit to just walking through the line. It's one of these more partner-in-app offerings, where you can get luggage or this or that—Ship Sticks if you're sending golf clubs. You save 20% here, 20% there, and you start to utilize it more. For me, my perceived value increases every time I use that.

I'm a one of one, but at the same time, we've seen it in their strategy: raising price with limited impacts on any sort of membership. We know they raised their wholesale pricing, and Amex just signed a new deal for multiple years. Again, these are little proof points and signals to us that they've raised price and it hasn't really impacted them.

The question again, like you said, is, can they raise price more? I think they can. The opposite of that is you get a churned user, but then you have a better line, and now you have stickier users, potentially, because the value of the line becomes a little bit more clear.

At the same time, what we've been talking about is TSA PreCheck. Let's put more people—let's make it easier to sign up for PreCheck. More people are in the PreCheck line, and it makes the CLEAR line a little bit more valuable in that scenario. You could just raise prices on a smaller subscription membership size.

Lastly, there's the enterprise business, which, again, I think fast-forward 2 years from now, will be a decent part of their business.

Last question. This used to be the big bear case, and I think there's still some questions around it, but the Amex partnership. I don't know if they've disclosed recently how much of their member base is coming from the Amex partnership, but they have this Amex partnership. If I remember correctly, you pay for the CLEAR membership, you get a statement credit on your Amex card, and obviously Amex is paying CLEAR a wholesale price for the membership.

A lot of their members come from Amex, and for a long time the bear case was that Amex was going to cancel this partnership. Until this year, they had been renewing yearly. It's not lost on me that they were putting out PRs when they renewed yearly. Then this year, at their Q4 earnings, they just said, “Hey, we had a multiyear renewal with Amex.” When asked on the call, if I remember correctly, they didn't really have that much to say about it.

I guess my question is, how much of the Amex risk is in the past because they do have this multiyear renewal? I think there are questions about what the economics of this look like going forward and who needs whom in this relationship. Again, this is a big piece of their business, so I think it's the last risk and it's worth addressing. I'll just toss that over to you.

Yeah, it's funny because Amex just raised their pricing and renewed the contract with CLEAR for Business Platinum and also for some of the others, the Personal Platinum as well. They're raising prices, and I took that as a signal that CLEAR's holding its own as one of the benefits inside of that ecosystem in terms of perks for Amex.

Amex, for a long time, was top of mind for investors, prospective investors, buyers, whatever. I would always ask about it every time I spoke with management. Net-net, the story was, “Look, we're working with Amex. There are plenty of others out there that would willingly love to do business with us and be part of their plan. We like Amex because of the brand. We like Amex because they have high-premium customers.” So, there are clearly a lot of benefits to it.

At the same time, I do think there are more card plans than ever out there. We're watching the Robinhoods of the world and some others come out with all these different plans that are trying to mimic the Platinum cards. I think you fast-forward to a multiyear cycle here for their contract renewal. A year ago, we anticipated that this relationship would potentially fizzle out with a decent degree of probability, but with the anticipation that they would land someone else, just through discussions that we had—that there was potentially somebody there.

My guess is, again, Amex raised their pricing, and that allows them to afford continuing the price increases in the ecosystem and some of the perks in there. I'm actually not that worried about it. Obviously, we just got the renewal commentary around it. They're pretty zipped up on those types of deals, obviously, for competitive purposes and also for monetary purposes and many other reasons.

It's obviously top of mind, but I don't think it's any sort of existential threat. If they did lose a card provider, they would not be materially impacted—not because of the size of it, but because of the ability to pretty seamlessly migrate to other providers and have those perks paid for pretty easily.

No, I hear you. It is interesting because if you lost Amex, again, you pay and get a statement credit, so it is on auto-renew. I do wonder how many of those people who are, hopefully, using Amex would actually go and cancel their subscription, right? So, that's one question.

But the other side of it is, you mentioned other partners. To me, there's only Amex. You have Chase Sapphire. Those are the 2 that are always competing. Capital One launched the Venture X card and has really been trying to blow that out. But outside of that, I'm sure you could go get a Wells Fargo or a Bank of America to partner with you, but their user base is so much smaller. It's just not going to be a natural fit.

If you told me they went to Chase Sapphire and Chase Sapphire gave them better terms, then you're in nirvana mode, right? But I don't know.

For the 2025 renewal, they put out a PR that says 1-year extension and, I think, the same economic terms. They did not comment on the economic terms of the Amex partnership when they extended this time. Maybe they're being coy; maybe it doesn't matter. It probably doesn't matter because the stock is going to be gangbusters because of the TSA, but I was wondering if Amex clawed back some wholesale pricing power from them and whether that had impacts in the medium term.

I don't think so, right? Because they gave free cash flow guidance, which proved out again. In the 3rd quarter of every year, they do their payouts to their Amex partnerships, and you can see the net effect of the cash outlays from that. You get these big lump cash outflows from the cash flow statement in the 3rd quarter of each year, so that's a good tell of the increase, or tick-up, in usage of their partnerships. That has continued to rise steadily up and to the right.

Free cash flow again for the full year is what they guided to. They held their own. If you extrapolate their bookings into revenue over the course of the next 12 months, and then you apply their historical conservative nature of free cash flow, you get to margin structures that are very similar to prior periods. Ultimately, what that does is signal to us that the contract they just signed—the renewal—is on decent enough terms to hold their margin structure in line. So, I'm not too worried about that.

The worry is, again, in that little shuffle. But, to your point—and this is me just thinking out loud here—if you have these avid travelers traveling 20 times a year, if not more, and using this, but your average is 7, you probably have a huge cohort that's not using it all that much. It's very similar to Planet Fitness, where people go to the gym and use it, but continue to pay for it.

You could see it where, ultimately, they're not covered by Amex, but they keep 30–40% of those users and migrate them over. I've articulated them. Is there a spray-and-pray strategy where you're at Wells Fargo, Goldman Sachs, or whatever, and all the different card providers out there, including Bank of America, and all of a sudden you're embedded in all of them, with no advantage to each? Or do you isolate yourself to Sapphire or Venture and do one of those more exclusive deals? Or do you try to go more widespread?

Ultimately, I think those are the different scenarios, like you mentioned. And then there's this kind of group of neobanks that are all trying to deliver perks at different price points, which I think continue to prosper. You're seeing more and more of that, whether it's SoFi or Robinhood. These are big, big audiences, and in 5 years from now, those users, assuming they all stick on those platforms, are going to be 25, 30, 35 years old—right in their peak travel mode. I keep calling out Robinhood because they continue to do so many things that...

Robinhood, if I remember—I have a Robinhood card, and I really like it—and they are leaning into travel. So, I certainly could see that, and they do have the membership component.

All right, 2 last questions, actually. They've got $700 million in cash on the balance sheet, really no debt, and no liabilities. It's a very clean balance sheet. They're going to generate $440 million-plus in cash this year. What do you think capital allocation looks like here going forward?

Historically, they've done a lot of special dividends. They have a dividend, actually. This was run by 2 private equity people who understand investments and investor bases more than anybody. This is basically how CLEAR got created. Karen and they essentially bought it out of bankruptcy.

Absolutely. It's crazy.

Yeah, they bought this out of bankruptcy. Just for the story, for everyone listening, they bought it out of bankruptcy, basically became the owners and founders for the most part, and took this thing from very few to very many and to where it is today.

So, they're very astute from an investor lens. And then, again, on capital allocation, they've historically done some tuck-ins. They bought a company in the finance space for KYC. When you speak of an enterprise, I think being a financial institution or financial firm, KYC onboarding clients is rough. A single onboarding where you scan your face and maybe tap your finger, and all of a sudden you're onboarded onto a financial platform with everything they need, resonates with me. And so, they're trying to do that with that little tuck-in.

I expect a little bit more tuck-ins. Could they do anything much more material? Possibly. They've hinted at that, but I think special dividends and buybacks are essentially the main thing. There have been moments where it's like, "Hey, there's so much cash. Do you take this thing private?" This was when it was at single-digit multiples, and you could just build it in private.

I think dividends and growing their dividends—which sounds counterintuitive for a growth company—but they have enough capital, like you mentioned, to kind of do all these things at the same time. I think that's it: a dividend, a little bit more in dividends, a special dividend from time to time. I think they've done that 4 times, each in the realm of a couple percent. And then, lastly, capital allocation in the form of small tuck-ins, with potentially something larger. But I guess we'll see on that.

All right, last thing, and it is interesting. I mean, you've basically hit it with the enterprise business, but it is interesting to get galaxy-brained and think about, hey, you've got a company that has identity. They've got which airports you're going into and stuff. They've got a really unique breadth of data and customer travel preferences. And if they're checking in to LinkedIn and everything, they've just got a unique data set. It's kind of interesting to think about the monetization potential of that in the longer term. Though, again, that's probably too galaxy-brained, but it is interesting.

Yeah, yeah. I mean, look, I think anyone who is focused on security, identity, and privacy, I'm not sure they're going to sell identity in any sort of way, even if it's white-labeled or classified as sensitive.

More importantly, there are going to be so many facets of our lives that are going to require some sort of identity layer. Again, this is a play just because of the 2nd- and 3rd-order effects of AI. In about 2 years from now, you and I can get on Zoom or this video or whatever, and you're not going to know if it's me. It's going to have the same motion, the same voice, and all these other things.

There are avatars in Zoom, and they use them on Zoom's earnings calls. I don't know if you saw them. Eric Yuan does it in his AI avatar, and it looks and sounds pretty much like him. I think there's going to be more of that.

I always think of things like picking up your kid from school and making sure it's not somebody calling in and pretending to be them and saying, "Hey, I'm outside in the red truck," and it sounds just like me, and the front desk doesn't know. Or inside the hospital, and you're like, "Hey, pick up. We're sending the patient to the 3rd floor," and it's some fake something. Or getting on these calls, because more things are happening digitally. So, there's more sensitivity to that.

My thing there is less about the data they have and more about the various layers outside in the world that are going to require identity layers for humans, for agents, and for all these things. I'm not saying CLEAR is going to win that, but I do think the opportunity is vast for them. They're positioned with their reusable identity solution to do that, and I think they have the brand to do it. There's no better ability to sell than saying, "We sell to TSA and the government," and blah, blah.

Good point. I mean, I do like that it is branding. It's the TSA line: you go through it, and yes, it's branding. People can go through it, but it's also branding when you go to your enterprise customer and you're like, "Hey, we are the only people who can do this for TSA. Why wouldn't you use us for this? Mr. Hospital, you've got HIPAA compliance. We can be trusted. The government will trust them."

Cool. Another thing too—I gotta hop.

Go ahead.

Last thing.

Yeah, yeah. Last thing, too, is, if you're following the eVTOL space—electric vertical takeoff and landing—it's really like distributing the fabric of travel.

And so, I can imagine a world—and again, some of this is pie-in-the-sky stuff—where we're all taking more and more of these eVTOLs around the country. What you want in that environment is—

Better air traffic control is what I would want in that environment.

Yeah, yeah, for sure. There you go. But you would have smaller facilities; TSA isn't going to put their representatives there. Therefore, you're going to need these e-gates and these technologies that allow us to get through them, identify us, and get us through to the other side without requiring more TSA human agents to be there. Ultimately, I think we're going to see an explosion of distributed travel, whether it's autonomous vehicles on the ground or eVTOL takeoffs and landings, which are all happening. They're all happening at their own pace, and again, I'm looking at 3 years, 5 years, 10 years, and 15 years.

Do you need TSA to get into a helicopter right now? I don't think so, no. So, I would contend that if eVTOLs really took off, and they were really frequent and all over, it's just going to be like getting into a helicopter, getting into a car, and you're not going to have TSA for that. Now, that does not invalidate your thesis, because an eVTOL is going to be able to go 30 miles, 45 miles. It's not going to be able to go 1,000 miles at 250 miles per hour. But I would just contend there would be no TSA.

Yeah, there'd be no TSA. I mean, CLEAR isn't TSA, right?

Oh, I would contend that it's going to be like a helicopter. Anyone can just hop into it. That would be kind of where I think it would go.

Sure.

Yeah, yeah. But I'm saying just the technology could be placed everywhere so that those environments, those new networks that are forming, instead of using human labor, let's say, you can have less of them and more technology embedded to identify the people on the way in. Just like a hospital, right? You're getting someone into the hospital system. You're still going to have the front desk, but you're going to have people identify themselves through these e-gates and stuff to get onto the eVTOLs, to get onto the helicopters.

Unless you're trying to, again, create these very, very premium experiences, like some of the helicopter routes or small jumper jets do.

Yeah, but that's it. I was just trying to highlight a little bit of forward thinking 10 years out. If we have distributed travel—even more distributed travel—does that open the architecture for them to be in more places, not less? Cool, cool. This is great. Sean, Avery and Co., this is awesome. I really enjoyed learning a lot more about your moat, especially. We'll have to have you on again. Talk to you soon.

Awesome, man.