Clear Secure, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; filed August 16, 2021. CLEAR operates a U.S. identity platform, with substantially all revenue from CLEAR Plus aviation subscriptions. The quarter included a June 29 reorganization ahead of the July 2 IPO, so the company’s post-reorganization financial and share structure is new.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $55.2 million | $60.0 million | $105.7 million | $121.3 million |
| Operating income (loss) | $(37.7) million | $22.3 million | $(50.8) million | $(29.6) million |
| Net income (loss) | $(38.1) million | $22.3 million | $(51.2) million | $(28.9) million |
| Adjusted EBITDA (non-GAAP) | $(18.3) million | $25.5 million | $(25.6) million | $27.7 million |
| Free cash flow (non-GAAP) | $(3.0) million | $(5.1) million | $(11.4) million | $(1.3) million |
- Q2 operating expenses rose to $92.9 million from $37.7 million. The filing reports no conventional gross-margin measure; cost of revenue-share fees was $8.3 million in Q2.
- For the first half, operating cash flow was positive $3.1 million versus cash used of $45.3 million, primarily reflecting favorable working-capital movements, including deferred revenue and accrued liabilities. Investing used $15.5 million; financing provided $64.5 million.
- At June 30, cash and cash equivalents were $168.3 million, marketable debt securities $37.8 million, and restricted cash $22.9 million. Current assets were $233.6 million and current liabilities $163.4 million. Deferred revenue was $127.8 million.
- No borrowings were outstanding under the $100 million revolving credit facility; the company reported compliance with its covenants. The July IPO subsequently generated approximately $444.7 million in net proceeds, after underwriting discounts and commissions and before estimated offering expenses.
Changes versus the prior comparable period
- Q2 revenue fell 8%, while first-half revenue fell 13%. Management attributed the declines to fewer average monthly CLEAR Plus members and lower average revenue per member, compared with the prior-year periods.
- Bookings—a company-defined leading indicator—rose 102% in Q2 to $70.0 million and 28% in the first half to $132.0 million. Management cited recovering air travel, higher enrollments and retention, and prior-year renewal discounts rolling off; recognized subscription revenue generally lags bookings.
- Q2 operating results were burdened by substantially higher direct staffing, R&D, sales and marketing, and general and administrative expenses. Q2 G&A included a $10.9 million warrant-liability fair-value expense and the company cited $11.7 million of non-recurring non-employee equity compensation costs. First-half G&A, by contrast, declined 10%, primarily because 2020 included larger equity-based compensation costs related to repurchases of vested awards.
- Total cumulative enrollments increased 26% year over year to 6.322 million; cumulative platform uses rose 19% to 65.503 million. Annual CLEAR Plus net member retention was 80.6%, down 2.9 percentage points year over year, but up from 77.2% at March 31, 2021.
Outlook, risks and unusual items
- The filing provides no quantified revenue, earnings or bookings guidance. Management expects expenses to rise as travel and demand recover, potentially significantly, including staffing, marketing, R&D, public-company costs and equity compensation. Because subscription revenue is recognized over the subscription term, management expects revenue to lag bookings and near-term net losses to increase and Adjusted EBITDA to decline.
- Management said existing cash, operating cash flow, marketable securities and available borrowing capacity should cover working-capital and capital expenditure needs for at least 12 months.
- Key risks include continued COVID-19 effects and travel volatility; attracting and retaining paying members; conversion of free trials; partner relationships and launch timing; rising customer-acquisition costs; and expense volatility from discretionary growth investments. Management cited approximately 16x lifetime value to customer-acquisition cost for CLEAR Plus members acquired in 2019, but noted unit economics depend on continued efficient acquisition and retention.
- The company entered a tax receivable agreement requiring it generally to pay pre-IPO members 85% of certain realized or deemed tax savings. No TRA liability was recorded at June 30. Legal proceedings were not considered likely to have a material adverse effect; the filing reported no off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether bookings growth converts into recognized revenue and sustained paid-member growth, given the Q2 revenue decline.
- Whether retention continues to recover from 80.6%, and how member churn, pricing and average revenue per member develop.
- Whether higher post-recovery operating costs and equity compensation can be absorbed without prolonged deterioration in losses and cash generation.
- The effects of the IPO, non-controlling ownership, high-vote share classes, potential exchanges of Alclear Units, dilution from equity awards, and future TRA payments.