Good Quarter For Clear Secure (YOU)

Clear Secure (YOU) just reported their Q4 and fiscal 2023 results. Let's see how this consumer identity platform provider is holding up.

Results looked pretty darn good. For the quarter, revenue grew 59%, for the year it was up 72%. Total bookings, a leading indicator, grew 37%. Enrollments (i.e., paid users) was up 48% to 15.4 million, and total platform users (including free tier users) was up 54% to nearly 130 million. All of these are quite healthy growth numbers. Clear Secure is succeeding in selling the utility of its platform to increasingly crowded airport travelers.

The financial side was equally impressive. Clear Secure delivered a 35% free cash flow margin for the year, well above my model of 25% and impressive for such a rapidly growing firm. Compare that to the litany of hyped growth stocks that burn wads of cash quarter after quarter! The balance sheet remains debt free and has over $700 million in cash. Cash returns on invested capital were magnificent at 52% for the year. All around excellent metrics here.

The near-term continues to look good. Management is guiding for 44% revenue growth in Q1 at the midpoint. 3 new airports will be added in 2023, bringing the total to 51. Additionally, the company is piloting a new healthcare vertical with University of Miami and Wellstar to use the Clear Secure platform as a check-in portal for both patients and employees. Finally, the TSA PreCheck Enrollment program will kick off this year, representing another nice auxiliary revenue stream. I think the firm could easily eclipse our model of 28% revenue growth in 2023.

To be clear, investors should realize that Clear Secure is likely to deliver somewhat volatile operating results. Travel is at an all-time high right now, but is a cyclical industry. If travel falls, and it will eventually, Clear Secure will suffer. That said, I continue to really like the extensibility of this platform and the operating results management is delivering. After updating the model, the fair value gets a bump to $41 from $38, making the current stock price look pretty attractive.