Clear Secure(YOU) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial statements and management's analysis for the reporting period Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, changes in equity, and cash flows, with detailed notes Condensed Consolidated Balance Sheets Provides a snapshot of the company's assets, liabilities, and equity at specific reporting dates | Metric | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Total assets | $894,791 | $812,750 | | Total liabilities | $364,471 | $273,282 | | Total stockholders' equity | $530,320 | $539,468 | - Total assets increased by $82,041 thousand (10.1%) from December 31, 2021, to September 30, 2022, primarily driven by increases in cash and cash equivalents, marketable securities, and property and equipment, net[8] - Total liabilities increased by $91,189 thousand (33.4%) over the same period, mainly due to a significant rise in deferred revenue and other long-term liabilities[8] Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net loss over specific interim periods | Metric | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenue | $115,919 | $67,558 | $309,181 | $173,294 | | Operating loss | $(65,700) | $(32,596) | $(97,053) | $(83,393) | | Net loss attributable to Clear Secure, Inc. | $(36,764) | $(16,915) | $(54,246) | $(18,919) | | Net loss per common share basic and diluted, Class A | $(0.44) | $(0.23) | $(0.67) | $(0.26) | - Revenue increased significantly by 71.6% for the three months ended September 30, 2022, and 78.4% for the nine months ended September 30, 2022, compared to the respective prior periods[11] - Operating loss more than doubled for the three months ended September 30, 2022, and increased by 16.4% for the nine months ended September 30, 2022, primarily due to a substantial rise in general and administrative expenses[11] Condensed Consolidated Statements of Comprehensive Loss Presents the net loss and other comprehensive income/loss components for the reporting periods | Metric | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net loss | $(65,559) | $(32,787) | $(96,676) | $(84,014) | | Total other comprehensive loss | $(1,336) | $(93) | $(3,211) | $(62) | | Comprehensive loss attributable to Clear Secure, Inc. | $(37,505) | $(16,963) | $(55,980) | $(18,967) | - Total other comprehensive loss significantly increased, primarily driven by unrealized losses on marketable securities, which grew from $(108) thousand to $(1,359) thousand for the three months ended September 30, 2022, year-over-year[15] Condensed Consolidated Statements of Changes in (Redeemable Capital Units) and Stockholders' Equity Outlines changes in equity, including net loss, comprehensive loss, and capital transactions, over the reporting periods - Total stockholders' equity decreased from $539,468 thousand as of January 1, 2022, to $530,320 thousand as of September 30, 2022, primarily due to net losses and other comprehensive losses[19] - Additional paid-in capital increased from $313,845 thousand to $383,974 thousand, reflecting equity-based compensation expenses and warrant expenses[19] - Accumulated deficit increased significantly from $(36,130) thousand to $(90,471) thousand during the nine months ended September 30, 2022[19] Condensed Consolidated Statements of Changes in Cash Flows Reports cash inflows and outflows from operating, investing, and financing activities for the reporting periods | Metric | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $89,030 | $37,977 | | Net cash used in investing activities | $(31,888) | $(320,478) | | Net cash (used in) provided by financing activities | $(7,751) | $504,045 | | Net increase in cash, cash equivalents, and restricted cash | $49,391 | $221,544 | - Net cash provided by operating activities increased by 134.4% year-over-year, reaching $89,030 thousand for the nine months ended September 30, 2022[22] - Net cash used in investing activities decreased substantially by 90.1% due to a significant reduction in net purchases of marketable securities[22] - Net cash from financing activities shifted from a large inflow of $504,045 thousand in 2021 (due to IPO proceeds) to a net outflow of $(7,751) thousand in 2022[22] Notes to Condensed Consolidated Financial Statements Provides detailed explanations of the company's business, accounting policies, and specific financial statement line items 1. Description of Business and Recent Accounting Developments Describes the company's operations, product offerings, and recent accounting standard adoptions - Clear Secure, Inc. operates a secure identity platform under the CLEAR brand, offering CLEAR Plus (consumer aviation subscription), the CLEAR App (Home to Gate, Health Pass), and Reserve powered by CLEAR (virtual queuing technology)[26] - The company completed an internal reorganization and IPO on June 29, 2021, becoming a holding company with a controlling equity interest in Alclear Holdings, LLC[27] - The company adopted new accounting standards for Leases (ASU 2016-02) and Current Expected Credit Losses (ASU 2016-13) as of January 1, 2022, with no significant impact from the latter[37][38] 2. Basis of Presentation and Summary of Significant Accounting Policies Outlines the principles used in preparing the financial statements and key accounting policies - The condensed consolidated financial statements are prepared in accordance with SEC rules for interim reporting and U.S. GAAP, requiring management estimates and assumptions[42][43] - The company operates as one operating and reportable segment and presents financial statements in US Dollars, its reporting currency[44][45] 3. Business Combinations Details the company's acquisitions, including purchase prices and recognized goodwill and intangible assets - In December 2021, the company completed two acquisitions: Whyline, Inc. (virtual queuing technology) for $67,500 thousand cash and Atlas Certified, LLC (professional license verification assets) for $9,000 thousand[53][61] - Whyline acquisition resulted in $54,792 thousand in goodwill and $16,601 thousand in acquired intangible assets initially, with subsequent adjustments[54] - Atlas Certified acquisition resulted in $5,000 thousand in goodwill and $4,000 thousand in acquired intangible assets[61] 4. Revenue Explains the sources of revenue and changes in deferred revenue balances - Substantially all revenue is derived from CLEAR Plus consumer aviation subscription service, with no single airport accounting for more than 10% of membership revenue[62] | Metric | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Balance of deferred revenue as of January 1 | $188,563 | $101,542 | | Deferral of revenue | $372,313 | $131,895 | | Recognition of deferred revenue | $(305,147) | $(105,590) | | Balance of deferred revenue as of September 30 | $255,729 | $127,847 | - Deferred revenue significantly increased from $127,847 thousand in September 2021 to $255,729 thousand in September 2022, indicating growth in advance payments for subscriptions[64] 5. Prepaid Expenses and Other Current Assets Itemizes and explains changes in various prepaid expenses and other short-term assets | Metric | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :------------------------------------------ | :--------------------------------- | :--------------------------------- | | Prepaid software licenses | $8,231 | $4,347 | | Coronavirus aid, relief, and economic security act retention credit | $1,002 | $2,036 | | Prepaid insurance costs | $3,594 | $2,845 | | Other current assets | $4,158 | $12,912 | | Total | $16,985 | $22,140 | - Total prepaid expenses and other current assets decreased from $22,140 thousand to $16,985 thousand, primarily due to a reduction in 'Other current assets' and partial payment received for the CARES Act retention credit[67] 6. Fair Value Measurements Describes the valuation methodologies and fair value hierarchy applied to financial instruments - The company values available-for-sale securities and certain liabilities using a fair value hierarchy (Level 1, 2, 3) based on observable and unobservable inputs[68][73] | Asset/Liability | Fair Value as of Sep 30, 2022 (in thousands) | Fair Value as of Dec 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total assets at fair value | $342,310 | $335,228 | | Total liabilities at fair value (Contingent consideration) | $(100) | $(100) | - Marketable securities, primarily commercial paper, U.S. Treasuries, and corporate bonds, increased slightly from $335,228 thousand to $342,310 thousand[76] 7. Property and Equipment, net Details the composition and changes in the company's property and equipment, net of depreciation | Metric | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Total property and equipment, cost | $107,757 | $85,697 | | Less: accumulated depreciation | $(51,704) | $(41,175) | | Total property and equipment, net | $56,053 | $44,522 | - Net property and equipment increased by $11,531 thousand (25.9%) from December 31, 2021, to September 30, 2022, driven by significant capitalization of internally developed software ($10,183 thousand) and construction in progress[83][84] - The company recognized impairment charges of $904 thousand and $1,217 thousand on certain long-lived assets for the three and nine months ended September 30, 2022, respectively[87] 8. Leases Discusses the adoption of new lease accounting standards and the company's lease liabilities and right-of-use assets - The company adopted ASC 842, Leases, on January 1, 2022, recognizing $25,346 thousand in ROU assets and $29,139 thousand in lease liabilities[89] - As of September 30, 2022, total lease liabilities were $21,185 thousand, with a weighted-average remaining lease term of 6.83 years and an incremental borrowing rate of 4.4%[97] - A new corporate headquarters lease, commencing November 2022, will result in approximately $195,787 thousand in undiscounted future minimum lease payments over 15 years, not yet recognized on the balance sheet as of September 30, 2022[96] 9. Intangible Assets, net Provides information on the company's intangible assets, including their composition and amortization | Metric | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :--------------------------------- | :--------------------------------- | | Total intangible assets, cost | $25,591 | $23,026 | | Less: accumulated amortization | $(2,543) | $(93) | | Intangible assets, net | $23,048 | $22,933 | - Net intangible assets remained relatively stable at $23,048 thousand as of September 30, 2022, compared to $22,933 thousand at December 31, 2021[102] - Acquired intangibles primarily consist of technology ($4,300 thousand), customer relationships ($17,900 thousand), and brand names ($500 thousand), with amortization expense significantly increasing year-over-year[102] 10. Restricted Cash Explains the nature and purpose of the company's restricted cash balances - Restricted cash increased from $29,019 thousand at December 31, 2021, to $29,333 thousand at September 30, 2022[8] - This includes $13,333 thousand pledged as collateral for letters of credit for airport revenue share agreements and a New York City corporate headquarters lease, and $16,000 thousand as a reserve for potential credit card refunds and chargebacks[104][105] 11. Other Assets Itemizes and explains changes in other long-term assets | Metric | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------- | :--------------------------------- | :--------------------------------- | | Security deposits | $257 | $242 | | Loan fees | $124 | $376 | | Certificates of deposit | $459 | $459 | | Other long-term assets | $2,220 | $2,329 | | Total | $3,060 | $3,406 | - Total other assets decreased slightly from $3,406 thousand to $3,060 thousand, primarily due to a reduction in loan fees[106] 12. Accrued Liabilities and Other Long Term Liabilities Details the composition and changes in accrued liabilities and other long-term obligations | Metric | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Accrued liabilities | $76,062 | $67,220 | | Other long term liabilities | $23,887 | $8,691 | - Accrued liabilities increased by $8,842 thousand (13.1%), mainly due to higher accrued partnership liabilities and the recognition of lease liabilities[108] - Other long-term liabilities significantly increased by $15,196 thousand (174.8%), primarily driven by the recognition of long-term lease liabilities under ASC 842[109] 13. Warrants Discusses the status of outstanding warrants, their exercise, and related compensation expenses - The company had no outstanding warrant liabilities as of September 30, 2022, following the Reorganization and exercises[79][113] - In September 2022, United Airlines exercised 534,655 vested warrants, resulting in the issuance of Class A Common Stock[115] - A $58,781 thousand charge was recorded in Q3 2022 for outstanding United Airlines warrants due to an updated probability of vesting, contributing to general and administrative expense[116] | Classification | Number of Warrants | Weighted-Average Exercise Price | Remaining Contractual Term (years) | | :------------------------------- | :----------------- | :------------------------------ | :------------------------------- | | Exercisable for Class A Common Stock (Equity awards) | 2,881,286 | $0.01 | 0.25 | | Exercisable for Alclear Units (Equity awards) | 968,043 | $0.01 | 1.96 | 14. Redeemable Capital Units Explains the classification and conversion of redeemable capital units prior to and during the reorganization - Prior to the Reorganization and IPO, Alclear's redeemable capital units (Class A and Class B) were classified as temporary equity due to redemption features[123] - Upon Reorganization, these units were converted to Alclear Units, and some were exchanged for Class A or Class B Common Stock[126] 15. Stockholders' Equity Details changes in the company's capital structure, including common stock issuances, repurchases, and non-controlling interests - Upon Reorganization, the company issued 59,240,306 shares of Class A Common Stock and 1,042,234 shares of Class B Common Stock, along with Class C and Class D Common Stock to Alclear members[131] - The non-controlling interest ownership percentage in Alclear declined from 48.33% at December 31, 2021, to 44.12% at September 30, 2022, mainly due to Class A Common Stock issuances from warrant exercises and exchanges[139] - The company repurchased and retired 213,100 shares of Class A Common Stock for $4,902 thousand during the three months ended September 30, 2022, with $95,103 thousand remaining under the repurchase authorization[134] 16. Incentive Plans Describes the company's equity incentive plans and related compensation expenses - The 2021 Omnibus Incentive Plan authorized the issuance of up to 20,000,000 shares of Class A Common Stock, with annual increases up to 5% of outstanding common shares[141] - Alclear's profit units and RSUs were substituted with RSAs or RSUs under the 2021 Omnibus Incentive Plan during the Reorganization, retaining original terms and fair value[142][146][151] | Metric | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total compensation expense | $14,234 | $12,629 | $39,547 | $17,209 | - Total compensation expense from incentive plans increased by 12.7% for the three months and 129.8% for the nine months ended September 30, 2022, driven by RSUs and Founder PSUs[156] 17. Net Income (Loss) per Share Presents the calculation of basic and diluted net income (loss) per share for Class A and Class B Common Stock - Basic and diluted net income (loss) per share are applicable only for periods after June 29, 2021, following the Reorganization[158] | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss per common share basic and diluted, Class A | $(0.44) | $(0.23) | $(0.67) | $(0.26) | | Net loss per common share basic and diluted, Class B | $(0.44) | $(0.23) | $(0.67) | $(0.26) | - Net loss per common share (basic and diluted) for Class A and Class B Common Stock increased significantly year-over-year, reflecting higher net losses[163][165] - Potential dilutive shares were excluded from diluted EPS calculations due to the net loss position, making them anti-dilutive[166] 18. Income Taxes Discusses the company's income tax provisions, effective tax rates, and the impact of recent tax legislation - The Inflation Reduction Act, effective after December 31, 2022, introduces a 15% corporate alternative minimum tax and a 1% excise tax on net stock repurchases; the company does not expect a material impact from the former[169] - The company reported a tax benefit of $536 thousand on a pretax loss of $66,095 thousand for Q3 2022, resulting in an effective tax rate of 0.81%[171] - The company did not recognize a Tax Receivable Agreement (TRA) liability as of September 30, 2022, as it is not probable that TRA payments would be made given its historical loss position[178] 19. Commitments and Contingencies Outlines the company's legal proceedings, minimum spend commitments, and other contractual obligations - The company is involved in various legal proceedings but does not believe they will have a material adverse effect on its financial statements[179] - Minimum spend commitments include $8,580 thousand over the next two years for service arrangements and $3,760 thousand for future marketing expenditures to sports stadiums through 2026[180][181] | Year | Minimum Annual Contracted Fees (in thousands) | | :--- | :-------------------------------------------- | | 2022 | $5,052 | | 2023 | $17,183 | | 2024 | $9,752 | | 2025 | $4,676 | | 2026 | $1,030 | | Thereafter | $446 | | Total | $38,139 | 20. Related-Party Transactions Details transactions and balances with related parties, including payables and revenue share fees - Total payables to related parties increased from $1,180 thousand at December 31, 2021, to $2,485 thousand at September 30, 2022[185] - Cost of revenue share fee related to certain related parties was $2,195 thousand for Q3 2022 and $5,780 thousand for the nine months ended September 30, 2022[186] 21. Employee Benefit Plan Reports the expenses associated with the company's 401(k) employee benefit plan - The company recorded 401(k) plan expenses of $161 thousand for Q3 2022 and $1,146 thousand for the nine months ended September 30, 2022[188] 22. Debt Provides information on the company's revolving credit facility and related loan fees - The company has a $100,000 thousand revolving credit facility, increased in April 2021 and maturing in April 2024, with no outstanding borrowings as of September 30, 2022[189] - Prepaid loan fees related to this facility were $124 thousand as of September 30, 2022[189] 23. Subsequent Events Discloses significant events that occurred after the reporting period, including stock issuances, warrant exercises, and dividends - Subsequent to September 30, 2022, the company issued 348,466 shares of Class A Common Stock due to exchanges by non-controlling interest holders[192] - In October 2022, United Airlines exercised 2,138,621 fully vested warrants, leading to approximately $3,517 thousand in remaining compensation expense to be recognized in Q4 2022[193] - On November 14, 2022, the Board declared a special cash dividend of $0.25 per share, payable on December 7, 2022[194] - In November 2022, the company commenced recognition of its new corporate headquarters operating lease, expecting an approximate $107,000 thousand increase to ROU Asset and Lease Liability[198] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on the company's financial condition, operational results, and cash flows, including key performance drivers and non-GAAP measures Overview Introduces the company's business model, secure identity platform, and current product offerings - Clear Secure, Inc. operates a member-centric secure identity platform, leveraging biometrics for frictionless experiences in travel, work, and daily life[204] - Current offerings include CLEAR Plus (aviation subscription), the CLEAR App (Home to Gate, Health Pass), and Reserve powered by CLEAR (virtual queuing)[204] Key Factors Affecting Performance Identifies critical drivers of growth, member retention, and future revenue streams - Growth is dependent on increasing Total Cumulative Enrollments (new members, including CLEAR Plus and platform members) and converting free trials to paying members[207][209] - Retention of existing CLEAR Plus members is crucial, driven by frequent usage and expanding use cases and partnerships[210] - Future success relies on adding new partners, retaining existing ones, and generating new revenue streams through transaction fees, platform licensing, and hardware leasing[211] - The business model is characterized by efficient member acquisition and high retention, with an approximately 18x Lifetime Value to Customer Acquisition Cost for 2021 CLEAR Plus members[215] The Reorganization Transactions Explains the company's pre-IPO reorganization into a holding company structure and its accounting treatment - Prior to its IPO, Clear Secure, Inc. underwent a reorganization, becoming a holding company with a controlling equity interest in Alclear Holdings, LLC[218] - The reorganization was accounted for as a common control transaction, consolidating Alclear's assets and liabilities at historical carrying amounts and recording a non-controlling interest[219] Taxation and Expenses Discusses the company's post-IPO tax structure and expected increases in compensation and public company expenses - Post-IPO, Clear Secure, Inc. is subject to U.S. federal, state, and local income taxes on its allocable share of Alclear's taxable income, as Alclear is treated as a flow-through entity[220] - The company expects increased compensation expenses, including equity awards, and additional public company-related expenses (e.g., insurance, SEC reporting, auditing, legal fees)[223] Tax Receivable Agreement Describes the agreement to share tax savings with Alclear Members and the current status of the TRA liability - The company entered into a Tax Receivable Agreement (TRA) to pay Alclear Members 85% of cash savings from tax basis increases due to exchanges of Alclear Units for company stock[224] - As of September 30, 2022, no TRA liability was recorded due to the uncertainty of realizing tax benefits from exchanges[225] Acquisitions Summarizes recent acquisitions and their financial impact on the consolidated statements - In 2021, the company acquired Whyline, Inc. (virtual queuing) and certain assets of Atlas Certified, LLC (professional license verification)[226] - Revenues and operating losses from these acquisitions were insignificant to the condensed consolidated financial statements[226] Key Performance Indicators Presents key metrics such as bookings, enrollments, platform uses, and member retention to assess business performance | Metric | Sep 30, 2022 | Sep 30, 2021 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :----- | :------- | | Total Bookings (in millions) | $145.7 | $99.3 | $46.4 | 47% | | Total Cumulative Enrollments (in thousands) | 14,236 | 8,076 | 6,160 | 76% | | Total Cumulative Platform Uses (in thousands) | 117,620 | 72,184 | 45,436 | 63% | | Annual CLEAR Plus Net Member Retention | 92.2% | 87.4% | 4.8% | - | - Total Bookings increased by 47% for the three months ended September 30, 2022, driven by a rebound in air travel and strong partnership channels[230] - Total Cumulative Enrollments grew 76% year-over-year to 14.2 million, and Total Cumulative Platform Uses increased 63% to 117.6 million, reflecting increased engagement[233][235] - Annual CLEAR Plus Net Member Retention improved by 4.8 percentage points to 92.2%, indicating strong gross renewals and winbacks[238] Non-GAAP Financial Measures Defines and reconciles non-GAAP financial measures used by management to evaluate operational performance - The company uses Adjusted EBITDA (Loss), Free Cash Flow, Adjusted Net Income (Loss), and Adjusted Net Income (Loss) per Common Share as non-GAAP measures to evaluate performance[239] | Metric | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Adjusted EBITDA (Loss) | $11,883 | $(14,470) | $14,678 | $(40,053) | | Adjusted Net Income (Loss) | $8,080 | $(18,649) | $3,574 | $(19,115) | | Free Cash Flow | $5,316 | $28,061 | $65,957 | $16,647 | - Adjusted EBITDA (Loss) significantly improved, turning positive for both the three and nine months ended September 30, 2022, compared to losses in the prior year[247] - Free Cash Flow for the nine months ended September 30, 2022, increased substantially to $65,957 thousand from $16,647 thousand in the prior year[253] Components of Results of Operations Breaks down the company's revenue sources and various operating expense categories - Revenue is primarily from CLEAR Plus subscriptions, with minor contributions from sports stadiums and Health Pass[254][255] - Operating expenses include cost of revenue share fees (amortized over subscription period), direct salaries and benefits (field ambassadors), research and development, sales and marketing, general and administrative (including warrant expense and contingent consideration changes), and depreciation and amortization[256][257][258][259][261][262] Comparison of the three and nine months ended September 30, 2022 and 2021 Provides a detailed analysis of the financial results, comparing revenue and expense trends across periods | Metric | Three Months Ended Sep 30, 2022 (in millions) | Three Months Ended Sep 30, 2021 (in millions) | $ Change | % Change | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------- | :------- | | Revenue | $115.9 | $67.6 | $48.3 | 71% | | Operating loss | $(65.7) | $(32.6) | $(33.1) | 101% | | Net income (loss) | $(65.5) | $(32.8) | $(32.7) | 100% | | Metric | Nine Months Ended Sep 30, 2022 (in millions) | Nine Months Ended Sep 30, 2021 (in millions) | $ Change | % Change | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :------- | :------- | | Revenue | $309.2 | $173.3 | $135.9 | 78% | | Operating loss | $(97.1) | $(83.4) | $(13.7) | 16% | | Net income (loss) | $(96.7) | $(84.0) | $(12.7) | 15% | - Revenue growth was driven by a 71.1% increase in average CLEAR Plus members and a 0.3% increase in average revenue per member for the three months ended September 30, 2022[268] - General and administrative expenses increased by $63.6 million (142%) for the three months and $86.2 million (74%) for the nine months ended September 30, 2022, primarily due to a $58.8 million charge on United Airlines warrants and increased employee-related expenses[279][280] Liquidity and Capital Resources Assesses the company's ability to meet its financial obligations and fund operations through available cash, securities, and credit facilities - As of September 30, 2022, the company had $329.1 million in cash and cash equivalents and $342.3 million in marketable securities[288] - The company believes existing cash, marketable securities, cash from operations, and the $100 million revolving credit facility are sufficient to meet working capital and capital expenditure needs for at least the next 12 months[289][295] - A share repurchase program authorized up to $100 million of Class A Common Stock, with $95.1 million remaining as of September 30, 2022, after repurchasing $4,902 thousand[290] - Net cash provided by operating activities increased by $51.1 million to $89.1 million for the nine months ended September 30, 2022[299] Critical Accounting Policies and Estimates Highlights accounting policies requiring significant management judgment and estimates, such as those for the TRA and business combinations - Critical accounting policies involve significant estimates and assumptions, particularly for the Tax Receivable Agreement (TRA) and Business Combinations[307][308][309] - Accounting for business combinations requires significant estimates for fair value of acquired assets and liabilities, subject to adjustments for up to one year[310] Recent Accounting Pronouncements Refers to detailed information on recently issued accounting standards and their expected impact - Refer to Note 2 for details on recently issued accounting pronouncements and their expected impact[311] Item 3. Quantitative and Qualitative Disclosures About Market Risk Discusses the company's exposure to interest rate and foreign currency risks and their potential financial impact - The company is exposed to interest rate risk on its cash and cash equivalents ($329.1 million) and marketable securities ($342.3 million)[313][315] - A hypothetical 100 basis points increase or decrease in interest rates would result in an unrealized loss or gain of approximately $2 million on available-for-sale investments[315] - Foreign currency transaction and translation risk was insignificant for the three and nine months ended September 30, 2022, as the majority of business is transacted in USD[316] Item 4. Controls and Procedures Evaluates the effectiveness of disclosure controls and procedures and confirms no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2022, providing reasonable assurance for timely and accurate financial reporting[319] - Control systems, by nature, provide only reasonable, not absolute, assurance and are subject to inherent limitations such as human error, collusion, or management override[320][321] - There were no material changes in internal control over financial reporting during the period covered by the report[322] PART II - OTHER INFORMATION Contains additional information not included in the financial statements, such as legal proceedings, risk factors, and equity sales Item 1. Legal Proceedings States that the company is involved in various legal proceedings but does not expect a material adverse financial effect - The company is subject to commercial litigation and administrative/regulatory reviews in the ordinary course of business[325] - Management believes the ultimate outcome of these legal matters will not have a material adverse effect on the condensed consolidated financial statements[325] Item 1A. Risk Factors Updates previously disclosed risk factors, including those related to stock repurchases, excise tax, and dividend payment limitations - The timing and amount of stock repurchases are uncertain, and the Inflation Reduction Act's 1% excise tax on net repurchases after December 31, 2022, will increase costs and may reduce repurchase volume[327][328] - The company's ability to pay future cash dividends is limited by its holding company structure, reliance on Alclear's distributions, and contractual restrictions in its Credit Agreement[329][330] - The U.S. federal income tax treatment of distributions to stockholders can vary based on the company's tax attributes and the stockholder's tax basis, potentially leading to different income tax liabilities than initially expected[332] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports on unregistered sales of Class A Common Stock and the use of proceeds from the July 2021 IPO - During Q3 2022, the company issued 1,022,801 shares of Class A Common Stock to non-controlling interest holders who exchanged their Alclear Units and corresponding Class C or Class D Common Stock[333] - Net proceeds from the July 2021 IPO were approximately $445.9 million, contributed to Alclear for offering expenses ($9.0 million) and general corporate purposes, with no material change in planned use[336] | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan or Program | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Program | | :-------------------------------- | :------------------------------- | :--------------------------- | :--------------------------------------------------------------------------- | :-------------------------------------------------------------------------------- | | August 1, 2022-August 31, 2022 | 213,100 | $22.98 | 213,100 | $95,103,000 | | Total | 213,100 | $22.98 | 213,100 | $95,103,000 | Item 3. Defaults Upon Senior Securities Confirms that no defaults upon senior securities were reported during the period - No defaults upon senior securities were reported[339] Item 4. Mine Safety Disclosures States that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[339] Item 5. Other Information Indicates that no other material information is required to be reported - No other information was reported[339] Item 6. Exhibits Lists all documents filed as exhibits to the quarterly report, including certifications and XBRL data - The report includes certifications from the CEO and CFO (Sections 302 and 906 of Sarbanes-Oxley Act of 2002)[342] - Various Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are filed as exhibits[342] Signatures Contains the official signatures of the company's authorized officers, affirming the report's submission - The report is signed by Caryn Seidman-Becker, Chairman and Chief Executive Officer, and Kenneth Cornick, President and Chief Financial Officer, on November 14, 2022[344]