Clear Secure, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless noted. Clear operates the CLEAR identity platform, led by its CLEAR Plus airport subscription service, alongside TSA PreCheck enrollment, CLEAR Verified and its consumer app. The filing reports unaudited U.S. GAAP results.
Financial and operating results
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $179.0 million | $132.4 million | +35% |
| Operating income (loss) | $23.7 million | $(15.1) million | Improved $38.8 million |
| Net income (loss), consolidated | $32.1 million | $(8.3) million | Improved $40.4 million |
| Net income (loss) attributable to Clear Secure, Inc. | $18.8 million | $(5.2) million | Turned profitable |
| Diluted EPS, Class A and Class B | $0.20 | $(0.06) | Improved |
| Adjusted EBITDA and margin | $40.9 million; 23% | $10.6 million; 8% | Improved |
| Operating cash flow | $80.3 million | $60.8 million | +$19.5 million |
| Free cash flow, non-GAAP | $77.6 million | $51.3 million | +$26.2 million |
Revenue growth was primarily attributed to more CLEAR Plus members. Total Bookings rose 21% to $180.6 million. Operating margin was approximately 13.2%, compared with approximately negative 11.4% in Q1 2023; net margin was approximately 17.9%, versus approximately negative 6.2%. Net interest income increased 55% to $9.9 million, primarily due to higher interest rates. The effective tax rate was 5.8%, versus 1.4%; the filing attributes the change primarily to current U.S. federal and state taxes not offset by tax attributes.
At March 31, 2024, cash and cash equivalents were $64.1 million and marketable securities were $634.3 million. Current assets were $743.6 million and current liabilities $624.8 million. Deferred revenue was $377.8 million. The company had no borrowings, with $68.3 million of remaining revolver capacity net of standby letters of credit; it reported covenant compliance. Total liabilities were $747.8 million and stockholders’ equity was $269.3 million. No conventional debt was outstanding.
Material changes and capital allocation
- Active CLEAR Plus members increased 19% to 6.798 million; cumulative enrollments rose 35% to 21.941 million and cumulative platform uses increased 37% to 192.610 million.
- Annual CLEAR Plus net member retention fell to 84.0% from 91.3%, while gross dollar retention improved to 89.8% from 84.5%. Annual member usage declined 11% to 7.8x from 8.8x.
- Operating expenses included higher revenue-share fees (+24%), direct salaries and benefits (+22%), and sales and marketing (+22%); R&D declined 8% and general and administrative expense declined 9%. G&A was lower partly because Q1 2023 included asset and lease impairment charges.
- The company repurchased and retired 4.42 million Class A shares for $84.9 million, at an average $19.22 per share; $140.7 million remained authorized at quarter end. Financing cash outflow was $101.3 million, principally reflecting repurchases and dividends/distributions.
- A quarterly dividend of $0.09 per share was paid in March. A special dividend of $0.32 per share was declared for payment in April and accrued at quarter end. After quarter end, the company announced a $0.10 quarterly dividend and repurchased 1.75 million shares for $33.9 million through the filing date.
Outlook, commentary and risks
Management said existing cash, marketable securities, operating cash flow and available credit should be sufficient for working capital and capital expenditure needs for at least the next 12 months, including dividends, potential repurchases and known commitments. The filing provides no formal revenue or earnings guidance.
Management identified member acquisition and retention, conversion of trial members, partner relationships, successful launches, unit economics and discretionary spending as important performance factors. CLEAR Plus retention may be affected by airport staffing and checkpoint configuration, TSA policies or increased randomized reverification. Other risks include travel and consumer-spending conditions, execution of new products and partnerships, and potentially rising member-acquisition costs. Management reported no material change to the risk factors in the 2023 Form 10-K and no legal proceedings expected to have a material adverse effect.
Commitments include $203.9 million of future operating lease payments, $66.2 million of airport minimum fees, $7.4 million of sports-stadium marketing commitments and $1.2 million of service minimum spends. Accrued partnership liabilities were $138.5 million, including amounts related to merchant card benefits expected to be settled in the second half of 2024. A potential Tax Receivable Agreement liability of approximately $96.9 million was not recorded because management determined it was not probable. The filing also notes $104.0 million of marketable securities in a continuous unrealized loss position for at least 12 months; management attributed no such losses to credit deterioration and did not expect to sell before recovery.
Management concluded disclosure controls were effective as of quarter end; it reported no material change in internal control over financial reporting.
Investor verification points
- Assess whether strong revenue and profit growth can continue alongside lower net member retention and usage.
- Check the drivers and persistence of cash generation, especially working-capital movements and the timing of deferred subscription revenue.
- Review the returns and remaining authorization for substantial share repurchases, and the sustainability and funding of quarterly and special dividends.
- Monitor airport and partner costs, accrued merchant-benefit liabilities, lease and airport commitments, and the unrecorded potential TRA obligation.
- Evaluate interest-rate exposure in the $634.3 million securities portfolio and the implications of securities’ unrealized losses.