Business context and reporting period
Clear Secure, Inc. (NYSE: YOU) filed its first annual report as a public company for the fiscal year ended December 31, 2021. This is a full-year 10-K, not a standalone fourth-quarter report; standalone Q4 financial results are not clearly provided in the filing text. CLEAR operates a biometric identity platform, with substantially all revenue derived from its annual CLEAR Plus airport subscription service. Other offerings include Health Pass, Home to Gate, Reserve virtual queuing, and partner integrations.
Financial and operating performance
- Revenue: $254.0 million, up 10% from $230.8 million in 2020. Growth reflected an 11.7% increase in average monthly CLEAR Plus members, partly offset by a 1.6% decline in average revenue per member.
- Profitability: Operating loss was $114.9 million, compared with $18.9 million in 2020; consolidated net loss was $115.2 million, versus $9.3 million. Net loss attributable to Clear Secure, Inc. was $36.1 million after allocation to non-controlling interests. Adjusted EBITDA (non-GAAP) was a loss of $51.2 million, versus income of $45.6 million in 2020.
- Cash flow: Operating cash flow was positive $69.7 million, compared with cash use of $12.3 million in 2020. Management attributed the improvement primarily to $134.6 million of favorable working-capital changes, including deferred revenue and accrued liabilities. Free cash flow (non-GAAP) was $42.3 million, versus $21.7 million.
- Liquidity and debt: Year-end cash and cash equivalents were $280.1 million and marketable securities were $335.2 million. The company had no revolver borrowings and had a $100 million revolving credit facility, which matures three years after its April 2021 increase. Restricted cash was $29.0 million.
- Other metrics: Total cumulative enrollments reached 10.4 million, up 97%; cumulative platform uses were 84.0 million, up 44%; and annual CLEAR Plus net member retention improved to 92.3% from 78.8%. The filing reports $341 million of 2021 bookings, but gives conflicting 2020 comparatives: the KPI table reports $211 million, while another passage reports $236 million.
- Margins: The filing text does not provide a clear reported gross-margin figure.
Material changes versus 2020
- Operating expenses rose across major categories as travel activity recovered and the company expanded: direct salaries and benefits increased 67% to $67.7 million, research and development rose 48% to $47.5 million, sales and marketing rose 115% to $35.2 million, and general and administrative expenses increased 43% to $168.9 million.
- The larger net loss reflected higher operating costs, equity and warrant-related expenses, and a $5.5 million impairment expense. 2020 also included $9.0 million of other income, compared with $0.3 million net other income in 2021.
- The July 2021 IPO generated approximately $445.9 million of net proceeds. The company also acquired virtual-queue provider Whyline and certain assets of Atlas Certified; acquisition revenue and operating loss were reported as insignificant for 2021.
Outlook, risks and unusual items
- Management expects expenses to rise faster than revenue in the near term, with increased net losses and lower Adjusted EBITDA and Free Cash Flow compared with 2020. It expects reported subscription revenue to lag bookings because subscription revenue is recognized over the membership term. No numerical earnings or revenue guidance is provided.
- Management expected the TSA PreCheck enrollment and renewal program to launch in 2022, creating a potential member-acquisition channel and revenue source.
- Key risks include continued dependence on air travel and CLEAR Plus subscriptions; COVID-19-related uncertainty; competition and adoption of alternative identity technologies; cybersecurity, biometric and health-data privacy exposure; evolving regulation; and the ability to add and monetize partners and new use cases.
- Long-term commitments include $73.8 million of future minimum payments disclosed in MD&A, plus a new headquarters lease with approximately $177.4 million of undiscounted future payments beginning in 2023. The filing also discloses minimum spend commitments under service arrangements; the amount is stated differently in MD&A and the notes ($19.5 million and $22.0 million, respectively).
- The Tax Receivable Agreement provides eligible pre-IPO members 85% of specified realized tax savings. The filing describes a hypothetical aggregate payment of approximately $610.7 million over 15 years under stated assumptions; actual payments depend on future exchanges, taxable income, tax rates, and other factors. Founders held approximately 82.1% of voting power at year-end through high-vote shares.
- The company reported no legal proceedings it believed would have a material adverse effect. It reported effective disclosure controls, but did not include management’s assessment or auditor attestation of internal control over financial reporting because of the new-public-company transition period.
Important facts for investors to verify
- Reconcile the inconsistent 2020 bookings figures ($211 million versus $236 million) and the differing service-commitment totals disclosed in the filing.
- Track paying-member growth, retention, average revenue per member, and conversion of free-trial and platform members into paid subscriptions.
- Assess whether operating expenses, especially general and administrative costs, grow more slowly than revenue and whether positive operating cash flow persists as deferred revenue and accrued liabilities change.
- Monitor execution and economics of the TSA PreCheck program, partner revenue growth, and acquisitions, which contributed insignificant revenue in 2021.
- Review privacy, cybersecurity, biometric-data compliance, long-term lease obligations, potential Tax Receivable Agreement payments, and dilution and control implications of equity awards and the dual-class structure.