Clear Secure, Inc. — Q1 2022 Form 10-Q
Business context and period. The filing covers the three months ended March 31, 2022, compared with the three months ended March 31, 2021, and the balance sheet as of March 31, 2022. CLEAR operates a secure identity platform, with revenue primarily from CLEAR Plus aviation subscriptions. The company also offers its app and virtual-queuing services. Unless noted, amounts below are in U.S. dollars.
Financial performance and position
- Revenue: $90.5 million, up 79% from $50.6 million. Management attributed growth primarily to a 73% increase in average CLEAR Plus members, 3% higher average revenue per member, and stronger retention.
- Bookings and operating indicators: Total Bookings were $107.8 million, up 74%. Cumulative enrollments grew 112% to 11.8 million; cumulative platform uses grew 57% to 95.3 million. Annual CLEAR Plus net member retention rose to 95.3% from 77.2%.
- Profitability: Operating loss was $18.2 million versus $13.1 million; consolidated net loss was $18.8 million versus $13.1 million. Operating margin was approximately (20.1)% versus (25.8)%; net margin was approximately (20.8)% versus (26.0)%. Net loss attributable to Clear Secure, Inc. was $10.3 million; basic and diluted loss per Class A and Class B share was $0.13.
- Expenses: General and administrative expense increased 69% to $45.9 million, including higher equity compensation, salaries and public-company costs. Equity-based compensation totaled $13.1 million versus $0.6 million in the cash flow reconciliation.
- Cash flow: Operating activities generated $24.9 million, compared with $0.3 million used in the prior-year quarter; management cited favorable working-capital changes, especially deferred revenue, and higher noncash adjustments. Capital expenditures were $5.5 million. Company-defined Free Cash Flow was $19.4 million versus negative $8.4 million.
- Liquidity and debt: Cash and cash equivalents were $299.1 million, marketable securities $334.4 million, and restricted cash $29.2 million. Cash, cash equivalents and restricted cash totaled $328.4 million. There were no revolver borrowings; the $100 million facility was undrawn, and the company reported covenant compliance.
- Balance sheet: Total assets were $854.1 million; total liabilities were $321.6 million. Deferred revenue was $205.8 million, up from $188.6 million at year-end 2021.
Changes, outlook, risks and notable items
- Revenue and bookings rose substantially year over year amid recovering air travel, increased enrollments, a credit-card partnership launched in July 2021, and improved retention. The 2021 comparison also reflects a different stage of business and, for some equity and financing measures, the pre-IPO structure.
- Management said existing cash, marketable securities, operating cash flow and available credit were expected to meet working-capital and capital-expenditure needs for at least the next 12 months. No specific revenue or earnings guidance was provided in the filing.
- Management expects expenses to increase as demand and operations expand, including staffing, sales and marketing, research and development, public-company and equity-compensation costs. Revenue recognition over subscription terms may lag bookings. Management cautioned that continued investment could result in net losses and negative Adjusted EBITDA.
- Risks highlighted include dependence on travel volumes and consumer spending; ability to acquire and retain members, convert trials, and sustain unit economics; partner relationships and launch timing; execution of new products and use cases; and continuing COVID-19 uncertainty.
- Operating cash flow benefited from working capital, including a $17.2 million increase in deferred revenue. It should not be viewed as equivalent to earnings or as a standalone measure of underlying cash generation.
- Other notable items: the company adopted lease accounting standard ASC 842 on January 1, 2022, recognizing lease assets and liabilities. A planned headquarters lease has approximately $177.4 million of undiscounted minimum payments, with rent expected to begin in 2023; it was not yet recognized on the balance sheet. The company also reported $39.8 million of future minimum airport fees, $13.2 million of service minimum-spend commitments, and $3.1 million of stadium marketing commitments.
- The Whyline acquisition purchase-price allocation remained preliminary. A $0.3 million long-lived-asset impairment was recorded. The tax receivable agreement provides eligible former Alclear members 85% of qualifying tax savings; no TRA liability was recorded at quarter-end.
- Subsequent to quarter-end, on May 13, 2022, the board authorized a share repurchase program of up to $100 million, with no expiration date. The filing reported no repurchase program or repurchases as of March 31. Management reported effective disclosure controls and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether member growth, renewals and the 95.3% retention rate persist, and how much growth depends on air-travel recovery and partner channels.
- Whether bookings convert into recognized revenue and sustainable operating cash flow, given advance subscription collections and deferred revenue.
- How expense growth, especially equity-based compensation and general and administrative costs, affects future losses and margins.
- The timing and total cost of the headquarters lease, airport and service commitments, and planned capital expenditures.
- Potential dilution from outstanding awards, warrants and exchangeable Alclear units, as well as the eventual cost and execution of the announced repurchase program.
- Final acquisition valuations and any future TRA payments; the filing does not record a TRA liability as of March 31, 2022.