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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| | | | | |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended September 30, 2021 |
OR
| | | | | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission file number 001-40568
CLEAR SECURE, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | |
Delaware | | | 86-2643981 |
(State or other jurisdiction of incorporation or organization) | | | (I.R.S. Employer Identification No.) |
| | | |
65 East 55th Street, 17th Floor, New York, NY 10022 |
(Address of Principal Executive Offices); (Zip Code) |
(646) 723-1404
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A common stock, par value $0.00001 per share | YOU | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): | | | | | | | | | | | |
Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer | x | Smaller reporting company | o |
| | Emerging growth company | x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The registrant had the following outstanding shares of common stock as of November 11, 2021:
| | | | | | | | |
Class A common stock par value $0.00001 per share | | 74,268,466 | |
Class B common stock par value $0.00001 per share | | 1,042,234 | |
Class C common stock par value $0.00001 per share | | 44,598,167 | |
Class D common stock par value $0.00001 per share | | 26,709,821 | |
Table of Contents
CLEAR SECURE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(dollars in thousands, except per share data)
| | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 337,791 | | | $ | 116,226 | |
Accounts receivable | 3,921 | | | 912 | |
Marketable debt securities | 335,457 | | | 37,813 | |
Prepaid revenue share fee | 8,921 | | | 5,475 | |
Prepaid expenses and other current assets | 14,465 | | | 11,210 | |
Total current assets | 700,555 | | | 171,636 | |
| | | |
Property and equipment, net | 45,875 | | | 35,241 | |
Intangible assets, net | 2,267 | | | 1,564 | |
Restricted cash | 22,835 | | | 22,856 | |
Other assets | 1,694 | | | 971 | |
Total assets | $ | 773,226 | | | $ | 232,268 | |
| | | |
Liabilities, redeemable capital units and stockholders' equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 10,034 | | | $ | 8,518 | |
Accrued liabilities | 45,194 | | | 18,304 | |
Warrant liabilities | — | | | 17,740 | |
Deferred revenue | 159,589 | | | 101,542 | |
Total current liabilities | 214,817 | | | 146,104 | |
| | | |
Deferred rent | 3,428 | | | 3,809 | |
Total liabilities | 218,245 | | | 149,913 | |
| | | |
Commitments and contingencies (Note 17) | | | |
| | | |
Redeemable capital units | — | | | 569,251 | |
| | | |
Class A common stock, $0.00001 par value- 1,000,000,000 shares authorized; 74,420,306 shares issued and 74,347,905 shares outstanding as of September 30, 2021 | 1 | | | — | |
Class B common stock, $0.00001 par value—100,000,000 shares authorized; 1,042,234 shares issued and outstanding as of September 30, 2021 | — | | | — | |
Class C common stock, $0.00001 par value—200,000,000 shares authorized; 44,598,167 shares issued and outstanding as of September 30, 2021 | — | | | — | |
Class D common stock, $0.00001 par value—100,000,000 shares authorized; 26,709,821 shares issued and outstanding as of September 30, 2021 | — | | | — | |
Profit Units | — | | | 7,846 | |
Accumulated other comprehensive income | (48) | | | 27 | |
Treasury stock at cost, 72,401 shares as of September 30, 2021 | — | | | — | |
Accumulated deficit | (18,976) | | | (494,769) | |
Additional paid-in capital | 305,307 | | | — | |
Total stockholders’ equity attributable to Clear Secure, Inc. | 286,284 | | | — | |
Non-controlling interest | 268,697 | | | — | |
Total stockholders’ equity | 554,981 | | | (486,896) | |
Total liabilities, redeemable capital units and stockholders’ equity | $ | 773,226 | | | $ | 232,268 | |
See notes to condensed consolidated financial statements
3
CLEAR SECURE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2021 | | September 30, 2020 | | September 30, 2021 | | September 30, 2020 |
| | | | | | | |
Revenue | $ | 67,558 | | | $ | 56,375 | | | $ | 173,294 | | | $ | 177,641 | |
| | | | | | | |
Operating expenses: | | | | | | | |
Cost of revenue share fee | 9,926 | | | 8,298 | | | 25,995 | | | 25,707 | |
Cost of direct salaries and benefits | 18,128 | | | 7,751 | | | 46,113 | | | 31,504 | |
Research and development | 13,347 | | | 6,297 | | | 33,293 | | | 23,358 | |
Sales and marketing | 9,949 | | | 3,291 | | | 25,806 | | | 11,479 | |
General and administrative | 44,816 | | | 17,734 | | | 116,290 | | | 97,532 | |
Depreciation and amortization | 3,988 | | | 2,322 | | | 9,190 | | | 6,945 | |
Operating income (loss) | (32,596) | | | 10,682 | | | (83,393) | | | (18,884) | |
| | | | | | | |
Other income (expense) | | | | | | | |
Interest income (expense), net | (120) | | | (12) | | | (333) | | | 657 | |
Other income (expense), net | (11) | | | 477 | | | (11) | | | 477 | |
Income (loss) before tax | (32,727) | | | 11,147 | | | (83,737) | | | (17,750) | |
Income tax expense | (60) | | | (4) | | | (277) | | | (14) | |
Net income (loss) | (32,787) | | | 11,143 | | | (84,014) | | | (17,764) | |
Less: net income (loss) attributable to non-controlling interests | (15,872) | | | | | (65,095) | | | |
Net loss attributable to Clear Secure, Inc. | $ | (16,915) | | | | | $ | (18,919) | | | |
| | | | | | | |
Net loss per common share of Class A and B common stock (Note 15) | | | | | | | |
Basic and Diluted | $ | (0.23) | | | | | $ | (0.26) | | | |
Weighted-average shares of Common A stock outstanding | 72,285,100 | | | | | 72,124,741 | | | |
Weighted-average shares of Common B stock outstanding | 1,042,234 | | | | | 1,042,234 | | | |
See notes to condensed consolidated financial statements
4
CLEAR SECURE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(UNAUDITED)
(dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2021 | | September 30, 2020 | | September 30, 2021 | | September 30, 2020 |
Net income (loss) | $ | (32,787) | | | $ | 11,143 | | | $ | (84,014) | | | $ | (17,764) | |
Other comprehensive income | | | | | | | |
Currency translation | 15 | | | — | | | 18 | | | — | |
Unrealized gain (loss) on fair value of marketable debt securities | (108) | | | (32) | | | (80) | | | 32 | |
Total other comprehensive income | (93) | | | (32) | | | (62) | | | 32 | |
Comprehensive income (loss) | (32,880) | | | 11,111 | | | (84,076) | | | (17,732) | |
Less: comprehensive loss attributable to non-controlling interests | (15,917) | | | | | (65,109) | | | |
Comprehensive loss attributable to Clear Secure, Inc. | $ | (16,963) | | | | | $ | (18,967) | | | |
See notes to condensed consolidated financial statements
5
CLEAR SECURE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CAPITAL UNITS AND STOCKHOLDERS’ EQUITY
(UNAUDITED)
(dollars in thousands, except per share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Class A | | Class B | | Class C | Class D | | | | Profit Units | | Accumulated other comprehensive income | | Treasury Stock | | Accumulated deficit | | Total stockholders’ equity attributable to Clear Secure, Inc. | Non-Controlling Interest | Total stockholders’ equity |
| Total redeemable capital units | Number of shares | | Amount | | Number of Shares | | Amount | | Number of Shares | | Amount | | Number of Shares | | Amount | | Additional paid in capital | | Number of Units | | Amount | | | | |
Balance, January 1, 2021 | $ | 569,251 | | — | | | $ | — | | | — | | | $ | — | | | — | | | — | | | — | | | $ | — | | | — | | | 1,868,322 | | | $ | 7,846 | | | $ | 27 | | | $ | — | | | $ | (494,769) | | | $ | (486,896) | | — | | $ | (486,896) | |
Net loss | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (13,128) | | | (13,128) | | — | | (13,128) | |
Other comprehensive loss | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 25 | | | — | | | — | | | 25 | | — | | 25 | |
Issuance of member units, net of costs | 81,567 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | |
Repurchase and retirement of capital units | (439) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (3,005) | | | (3,005) | | — | | (3,005) | |
Repurchase, forfeitures and retirement of profit units | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (71,247) | | | (56) | | | — | | | — | | | (8,246) | | | (8,302) | | — | | (8,302) | |
Warrant expense | 281 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | |
Equity-based compensation expense, net of forfeitures | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 327 | | | — | | | — | | | — | | | 327 | | — | | 327 | |
Balance, March 31, 2021 | $ | 650,660 | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | $ | — | | | 1,797,075 | | | $ | 8,117 | | | $ | 52 | | | $ | — | | | $ | (519,148) | | | $ | (510,979) | | $ | — | | $ | (510,979) | |
Net loss prior to reorganization transaction | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | (33,720) | | | (33,720) | | — | | (33,720) | |
Other comprehensive income | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | 6 | | 6 | |
Equity-based compensation expense, net of forfeitures | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,786 | | | (26,925) | | | 353 | | | — | | | — | | | — | | | 2,139 | | 2,114 | | 4,253 | |
Warrant expense | 819 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | |
Exercise of warrants prior to the reorganization transaction | 34,224 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | |
Tax distribution to members | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (4,018) | | | (4,018) | | — | | (4,018) | |
Effect of reorganization transaction | (685,703) | | 59,240,306 | | | 1 | | | 1,042,234 | | | — | | | — | | | — | | | — | | | — | | | 62,858 | | | (1,770,150) | | | (8,470) | | | (52) | | | — | | | 556,886 | | | 611,223 | | 74,480 | | 685,703 | |
Issuance of common stock upon reorganization | — | | — | | | — | | | — | | | — | | | 44,598,167 | | | — | | | 26,709,821 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | |
Net loss post reorganization transaction | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,004) | | | (2,004) | | (2,375) | | (4,379) | |
Balance, June 30, 2021 | — | | 59,240,306 | | | $ | 1 | | | 1,042,234 | | | $ | — | | | 44,598,167 | | | $ | — | | | 26,709,821 | | | $ | — | | | $ | 64,644 | | | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (2,004) | | | $ | 62,641 | | $ | 74,225 | | $ | 136,866 | |
Net loss | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (16,915) | | | (16,915) | | (15,872) | | (32,787) | |
Other comprehensive loss | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (48) | | | — | | | — | | | (48) | | (45) | | (93) | |
Equity-based compensation expense, net of forfeitures | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,569 | | | — | | | — | | | — | | | | | — | | | 6,569 | | 6,060 | | 12,629 | |
Warrant expense | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 778 | | | — | | | — | | | — | | | — | | | — | | | 778 | | 731 | | 1,509 | |
Tax distribution to members | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (57) | | | (57) | | (54) | | (111) | |
Proceeds from IPO, net of costs | — | | 15,180,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 233,316 | | | — | | | — | | | — | | | — | | | — | | | 233,316 | | 203,652 | | 436,968 | |
Balance, September 30, 2021 | — | | 74,420,306 | | | $ | 1 | | | 1,042,234 | | | $ | — | | | 44,598,167 | | | $ | — | | | 26,709,821 | | | $ | — | | | $ | 305,307 | | | — | | | $ | — | | | $ | (48) | | | $ | — | | | $ | (18,976) | | | $ | 286,284 | | $ | 268,697 | | $ | 554,981 | |
See notes to condensed consolidated financial statements
6
CLEAR SECURE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CAPITAL UNITS AND MEMBERS’ DEFICIT
(UNAUDITED)
(dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redeemable Capital Units | | Members’ Deficit |
| Class A Units | | Class B Units | | Class C Units | | Profit Units | | Accumulated other comprehensive income (loss) | | Accumulated deficit | | Members' deficit total |
| Number of Units | | Amount | | Number of Units | | Amount | | Number of Units | | Amount | | Number of Profit Units | | Amount | | | |
Balance, January 1, 2020 | 316,785 | | | $ | 3,168 | | | 4,759,569 | | | $432,062 | | — | | | — | | | 2,113,008 | | | $ | 8,022 | | | $ | 3 | | | $ | (291,354) | | | $ | (283,329) | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (51,253) | | | (51,253) | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (64) | | | — | | | (64) | |
Issuance of member units, net of costs | — | | | — | | | 422,039 | | | 113,944 | | | — | | | — | | | 37,700 | | | — | | | — | | | — | | | — | |
Repurchase and retirement of capital units | (54,843) | | | (548) | | | (677,387) | | | (14,053) | | | — | | | — | | | — | | | — | | | — | | | (183,102) | | | (183,102) | |
Repurchase, forfeitures and retirement of profit units | — | | | — | | | — | | | — | | | — | | | — | | | (328,834) | | | (1,630) | | | — | | | (10,829) | | | (12,459) | |
Warrant expense | — | | | — | | | — | | | 1,441 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Equity-based compensation expense | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 351 | | | — | | | — | | | 351 | |
Balance, March 31, 2020 | 261,942 | | | $ | 2,620 | | | 4,504,221 | | | $ | 533,394 | | | — | | | $ | — | | | 1,821,874 | | | $ | 6,743 | | | $ | (61) | | | $ | (536,538) | | | (529,856) | |
Net income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 22,346 | | | 22,346 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 128 | | | — | | | 128 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Repurchase, forfeitures and retirement of profit units | — | | | — | | | — | | | — | | | — | | | — | | | (57,050) | | | (3) | | | — | | | (123) | | | (126) | |
Warrant expense | — | | | — | | | — | | | 141 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Equity-based compensation expense | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 328 | | | — | | | — | | | 328 | |
Balance, June 30, 2020 | 261,942 | | | $ | 2,620 | | | 4,504,221 | | | $ | 533,535 | | | — | | | $ | — | | | 1,764,824 | | | $ | 7,068 | | | $ | 67 | | | $ | (514,315) | | | (507,180) | |
Net income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 11,143 | | | 11,143 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (32) | | | — | | | (32) | |
Issuance of member units, net of costs | — | | | — | | | — | | | — | | | — | | | — | | | 130,628 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
Repurchase, forfeitures and retirement of profit units | — | | | — | | | — | | | — | | | — | | | — | | | (19,125) | | | — | | | — | | | (23) | | | (23) | |
Warrant expense | — | | | — | | | — | | | 143 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Equity-based compensation expense | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 385 | | | — | | | — | | | 385 | |
Balance, September 30, 2020 | 261,942 | | | $ | 2,620 | | | 4,504,221 | | | $ | 533,678 | | | — | | | $ | — | | | 1,876,327 | | | $ | 7,453 | | | $ | 35 | | | $ | (503,195) | | | (495,707) | |
See notes to condensed consolidated financial statements
7
CLEAR SECURE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS
(UNAUDITED)
(dollars in thousands)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2021 | | September 30, 2020 |
Cash flows provided by (used in) operating activities: | | | |
Net loss | $ | (84,014) | | | $ | (17,764) | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Depreciation and amortization | 9,190 | | | 6,945 | |
Loss on asset disposal | — | | | 2 | |
Equity-based compensation | 20,642 | | | 2,789 | |
Warrant liabilities | 12,796 | | | 444 | |
Amortization of revolver loan costs | 558 | | | — | |
Changes in operating assets and liabilities: | | | |
Accounts receivable | (3,009) | | | 733 | |
Prepaid expenses and other assets | (3,818) | | | 3,323 | |
Prepaid revenue share fee | (3,445) | | | 2,595 | |
Accounts payable | 2,796 | | | (1,572) | |
Accrued liabilities | 28,615 | | | (4,998) | |
Deferred revenue | 58,047 | | | (21,653) | |
Deferred rent | (381) | | | 685 | |
Net cash used provided by (used in) operating activities | 37,977 | | | (28,471) | |
| | | |
Cash flows used in investing activities: | | | |
Purchases of marketable debt securities | (689,789) | | | (104,249) | |
Sales of marketable debt securities | 392,066 | | | 99,898 | |
Issuance of loan | — | | | (250) | |
Purchases of property and equipment | (22,042) | | | (9,181) | |
Capitalized intangible assets | (713) | | | (425) | |
Net cash used in investing activities | (320,478) | | | (14,207) | |
| | | |
Cash flows provided by (used in) financing activities: | | | |
IPO proceeds, net of underwriter fees and issuance costs | 437,494 | | | — | |
Repurchase of members’ equity | (11,744) | | | (210,310) | |
Proceeds from issuance of members’ equity, net of cost | 80,277 | | | 113,944 | |
Distribution to post-reorganization members | (4,128) | | | — | |
Issuance of warrants | 289 | | | — | |
Proceeds from the exercise of warrants | 2,575 | | | — | |
Payment of revolver loan costs | (718) | | | (652) | |
Net cash provided by (used in) financing activities | 504,045 | | | (97,018) | |
| |