Clear Secure, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless otherwise noted. Clear operates the CLEAR identity platform, with substantially all revenue generated by its U.S. CLEAR Plus aviation subscription service. Powered by CLEAR and other offerings remain smaller revenue sources.
Key financial results
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $132.4 million | $90.5 million | +46% |
| Operating loss | $15.1 million | $18.2 million | Loss narrowed |
| Net loss | $8.3 million | $18.8 million | Loss narrowed |
| Net loss attributable to Clear Secure, Inc. | $5.2 million | $10.3 million | Loss narrowed |
| Basic and diluted loss per Class A and B share | $0.06 | $0.13 | Improved |
| Operating cash flow | $60.8 million | $24.9 million | +$35.9 million |
| Free cash flow (non-GAAP) | $51.3 million | $19.4 million | +$31.9 million |
Operating expenses rose 34% to $147.4 million, including higher airport revenue-share costs, staffing, research and development, marketing, and general and administrative expense. Operating margin was approximately (11.4%), compared with (20.1%) in Q1 2022. The filing does not present a conventional gross margin measure. Adjusted EBITDA was $10.6 million versus a $0.7 million loss; adjusted net income was $8.8 million versus a $5.0 million adjusted loss. These are non-GAAP measures.
Interest income, net was $6.4 million, up from approximately zero, primarily reflecting returns on cash and marketable securities. The effective tax rate was 1.4%; tax benefit was $0.1 million.
Financial position and liquidity
- At March 31, 2023, cash and cash equivalents were $39.1 million, marketable securities were $708.9 million, and restricted cash was $30.9 million. Cash, cash equivalents, and restricted cash totaled $70.0 million.
- Total assets were $1.094 billion; total liabilities were $595.1 million; total stockholders’ equity was $498.5 million. Current assets were $784.6 million and current liabilities were $464.6 million.
- No revolving-credit borrowings were outstanding at March 31. As of May 4, the company reported $93.9 million of remaining borrowing capacity, net of standby letters of credit, and no debt obligations.
- Operating cash flow benefited from working-capital changes, including accrued and other liabilities and deferred revenue. Investing cash outflow was $50.6 million, including net purchases of marketable securities, a $6.0 million strategic investment, and $9.4 million of capital expenditures. Financing cash outflow was $9.1 million, principally share repurchases and taxes on net-settled stock awards.
Material changes and operating indicators
- Revenue growth was primarily driven by a 53.1% increase in average CLEAR Plus members. Total Bookings rose 39% to $149.7 million.
- Total Cumulative Enrollments increased 37% to 16.2 million; Total Cumulative Platform Uses increased 48% to 141.1 million. These are company-defined operating metrics.
- Annual CLEAR Plus Net Member Retention declined 400 basis points to 91.3% from 95.3%, which management attributed to normalization of winback activity from pandemic levels.
- Equity-based compensation expense increased to $16.6 million from $13.1 million. Non-cash asset impairment charges were $3.6 million, including $1.5 million related to a lease impairment.
Outlook, risks, contingencies, and unusual items
- No numerical revenue, earnings, or cash-flow guidance was provided. Management said it expects available cash, securities, operating cash generation, and credit-facility availability to meet working-capital and capital needs for at least the next 12 months, including the announced special dividend and known commitments.
- CLEAR said it expected to soft-launch TSA PreCheck enrollment services at select locations in mid-2023, subject to satisfying TSA requirements and completing a trial period.
- Management identifies member acquisition and retention, partner relationships, product and location launch timing, expense timing, discretionary investment, consumer travel and spending, and macroeconomic conditions as factors that could affect results. Retention was lower year over year.
- At March 31, the company reported future minimum office lease payments of $219 million, airport-related minimum payments of approximately $38.1 million, stadium marketing commitments of $11.6 million through 2027, and service-arrangement minimum spends of $4.7 million over two years. Airport minimum annual contracted fees included $35.0 million scheduled across 2023 and later years.
- The company reported ordinary-course legal proceedings and did not believe their outcomes would have a material adverse effect. It said there were no material changes to the risk factors in its 2022 Form 10-K.
- The company repurchased 281,838 Class A shares for $6.5 million at an average $22.96 per share; $88.6 million remained under the authorization. A $0.20-per-share special cash dividend was announced May 9, payable May 25, 2023. The company stated it had no regular dividend policy.
- Alclear accrued $13.9 million of tax distributions to non-controlling members during the quarter; these were paid in April. A potential Tax Receivable Agreement liability of approximately $67.4 million was not recorded because management determined it was not probable.
- The company made a $6.0 million strategic investment in a privately held company. The remaining Whyline acquisition contingent consideration was immaterial; its maximum settlement is $3.3 million and depends on specified 2023 operating metrics.
Important facts for investors to verify
- Whether CLEAR Plus member growth translates into sustained revenue and whether net retention stabilizes after its year-over-year decline.
- How much operating cash flow reflects recurring economics versus working-capital timing, especially advance subscription collections and accrued liabilities.
- The impact of rising airport, staffing, technology, marketing, and stock-based compensation costs on margins and cash generation.
- Progress and required approvals for the planned TSA PreCheck enrollment launch, and the scale of revenue contribution from Powered by CLEAR and other non-aviation uses.
- Liquidity and investment-portfolio exposure, including the filing’s estimate that a 100-basis-point rate move could change available-for-sale securities’ fair value by about $4.1 million.
- Future cash obligations from leases, airport agreements, tax distributions, and the Tax Receivable Agreement, as well as the funding and tax treatment of any future special dividends.