you-20220331

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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 March 31, 2022


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 May 12, 2022:


Class A Common Stock par value $0.00001 per share			78,579,207
Class B Common Stock par value $0.00001 per share			1,042,234
Class C Common Stock par value $0.00001 per share			43,527,355
Class D Common Stock par value $0.00001 per share			26,705,315

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		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Loss	3
	Condensed Consolidated Statements of Changes in Redeemable Capital Units and Stockholders' Equity	4
	Condensed Consolidated Statements of Changes in Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
Signatures		47

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CLEAR SECURE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(dollars in thousands, except per share data)


	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	299,134	$	280,107
Accounts receivable	7,525		5,331
Marketable securities	334,353		335,228
Prepaid revenue share fee	11,573		10,272
Prepaid expenses and other current assets	15,760		22,140
Total current assets	668,345		653,078

Property and equipment, net	46,123		44,522
Right of use asset, net	24,625		—
Intangible assets, net	24,238		22,933
Goodwill	58,381		59,792
Restricted cash	29,241		29,019
Other assets	3,102		3,406
Total assets	$	854,055	$	812,750

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	6,701	$	8,808
Accrued liabilities	77,909		67,220
Deferred revenue	205,795		188,563
Total current liabilities	290,405		264,591
Other long term liabilities	31,234		8,691
Total liabilities	321,639		273,282

Commitments and contingencies (Note 19)

Class A common stock, $0.00001 par value- 1,000,000,000 shares authorized; 78,849,574 shares issued and 78,566,156 shares outstanding as of March 31, 2022	1		1
Class B common stock, $0.00001 par value—100,000,000 shares authorized; 1,042,234 shares issued and outstanding as of March 31, 2022	—		—
Class C common stock, $0.00001 par value—200,000,000 shares authorized; 43,577,355 shares issued and outstanding as of March 31, 2022	—		—
Class D common stock, $0.00001 par value—100,000,000 shares authorized; 26,705,315 shares issued and outstanding as of March 31, 2022	—		—
Accumulated other comprehensive loss	(673)		(103)
Treasury stock at cost, 283,418 shares as of March 31, 2022	—		—
Accumulated deficit	(46,457)		(36,130)
Additional paid-in capital	326,767		313,845
Total stockholders’ equity attributable to Clear Secure, Inc.	279,638		277,613
Non-controlling interest	252,778		261,855
Total stockholders’ equity	532,416		539,468
Total liabilities and stockholders’ equity	$	854,055	$	812,750

See notes to condensed consolidated financial statements

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CLEAR SECURE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(dollars in thousands, except per share data)



	Three Months Ended
	March 31, 2022		March 31, 2021

Revenue	$	90,539	$	50,558

Operating expenses:
Cost of revenue share fee	12,142		7,769
Cost of direct salaries and benefits	22,980		12,149
Research and development	15,512		9,005
Sales and marketing	7,826		4,956
General and administrative	45,926		27,192
Depreciation and amortization	4,384		2,538
Operating loss	(18,231)		(13,051)

Other income (expense)
Interest income (expense), net	7		(71)
Other income (expense), net	(268)		—
Loss before tax	(18,492)		(13,122)
Income tax expense	(302)		(6)
Net loss	(18,794)		(13,128)
Less: net loss attributable to non-controlling interests	(8,467)
Net loss attributable to Clear Secure, Inc.	$	(10,327)

Net loss per share of Class A Common Stock and Class B Common Stock (Note 17)
Basic and Diluted	$	(0.13)
Weighted-average shares of Class A Common Stock outstanding	76,672,530
Weighted-average shares of Class B Common Stock outstanding	1,042,234

See notes to condensed consolidated financial statements

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CLEAR SECURE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(dollars in thousands)


	Three Months Ended
	March 31, 2022		March 31, 2021
Net loss	$	(18,794)	$	(13,128)
Other comprehensive loss
Foreign currency translation	(50)		—
Unrealized loss on fair value of marketable securities	(1,041)		25
Total other comprehensive loss	(1,091)		25
Comprehensive loss	(19,885)		(13,103)
Less: comprehensive loss attributable to non-controlling interests	(8,988)
Comprehensive loss attributable to Clear Secure, Inc.	$	(10,897)

See notes to condensed consolidated financial statements

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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						Number of Shares	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)
Balance, January 1, 2022	—		76,393,256	$	1	1,042,234	$	—	44,598,167	$	—	26,709,821	$	—	$	313,845	—	$	—		$	(103)		223,069	$	—	$	(36,130)	$	277,613	$	261,855	$	539,468
Net loss	—		—	—		—	—		—	—		—	—		—		—	—			—			—	—		(10,327)		(10,327)		(8,467)		(18,794)
Other comprehensive loss	—		—	—		—	—		—	—		—	—		—		—	—			(570)			—	—		—		(570)		(521)		(1,091)
Equity-based compensation expense, net of forfeitures	—		(60,349)	—		—	—		—	—		—	—		7,365		—	—			—			60,349	—		—		7,365		5,694		13,059
Warrant expense	—		—	—		—	—		—	—		—	—		37		—	—			—			—	—		—		37		34		70
Redemption of Alclear units	—		1,025,318	—		—	—		(1,020,812)	—		(4,506)	—		2,606		—	—		—	—		—	—	—		—		2,606		(2,606)		—
Exercise of warrants	—		1,207,931	—		—	—		—	—		—	—		3,070		—	—			—			—	—		—		3,070		(3,070)		—
IPO expenses	—		—	—		—	—		—	—		—	—		(156)		—	—			—			—	—		—		(156)		(141)		(297)
Balance, March 31, 2022	—		78,566,156	$	1	1,042,234	$	—	43,577,355	$	—	26,705,315	$	—	$	326,767	—	$	—		$	(673)		283,418	$	—	$	(46,457)	$	279,638	$	252,778	$	532,416

See notes to condensed consolidated financial statements

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CLEAR SECURE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS

(UNAUDITED)

(dollars in thousands)


	Three Months Ended
	March 31, 2022		March 31, 2021
Cash flows provided by (used in) operating activities:
Net loss	$	(18,794)	$	(13,128)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation on property and equipment	3,489		2,534
Amortization on intangible assets	895		4
Noncash lease expense	721		—
Impairment of long-lived assets	313		—
Equity-based compensation	13,129		608
Warrant liabilities	—		1,893
Deferred income tax expense	206		—
Amortization of revolver loan costs	198		—
Amortization, net on marketable securities	287		—
Changes in operating assets and liabilities:
Accounts receivable	(2,194)		(165)
Prepaid expenses and other assets	6,472		(2,885)
Prepaid revenue share fee	(1,300)		(798)
Accounts payable	(2,137)		(1,150)
Accrued liabilities	7,261		1,366
Deferred revenue	17,232		11,528
Operating lease liabilities	(846)		—
Deferred rent	—		(142)
Net cash used provided by (used in) operating activities	24,932		(335)

Cash flows used in investing activities:
Purchases of marketable securities	(149,066)		(47,002)
Sales of marketable securities	149,066		47,090
Purchases of property and equipment	(5,533)		(8,794)
Capitalized intangible assets	(100)		(204)
Net cash used in investing activities	(5,633)		(8,910)

Cash flows provided by financing activities:
Repurchase of members’ equity	—		(11,744)
Proceeds from issuance of members’ equity, net of cost	—		80,277
Issuance of warrants	—		289
Net cash provided by financing activities	—		68,822

Net increase in cash, cash equivalents, and restricted cash	19,299		59,577
Cash, cash equivalents, and restricted cash, beginning of period	309,126		139,082
Exchange rate effect on cash and cash equivalents, and restricted cash	(50)		—
Cash, cash equivalents, and restricted cash, end of period	$	328,375	$	198,659


	March 31, 2022		March 31, 2021
Cash and cash equivalents	$	299,134	$	175,730
Restricted cash	29,241		22,929
Total cash, cash equivalents, and restricted cash	$	328,375	$	198,659

See notes to condensed consolidated financial statements

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

1. Description of Business and Recent Accounting Developments

Description and Organization

Clear Secure, Inc. (the “Company” and together with its consolidated subsidiaries, “CLEAR,” “we,” “us,” “our”) is a holding company and its principal asset is the controlling equity interest in Alclear Holdings, LLC (“Alclear”). Alclear was formed as a Delaware limited liability company on January 21, 2010 and operates under the terms of the Amended and Restated Operating Agreement dated June 29, 2021 (the “Operating Agreement”). As the sole managing member of Alclear, the Company operates and controls all of the business and affairs of Alclear, and through Alclear and its subsidiaries, conducts the Company’s business.

The Company operates a secure identity platform under the brand name CLEAR primarily in the United States. CLEAR's current offerings include: CLEAR Plus, a consumer aviation subscription service, which enables access to predictable and fast experiences through dedicated entry lanes in airport security checkpoints nationwide; the flagship CLEAR App including Home to Gate and Health Pass; and Reserve powered by CLEAR, our virtual queuing technology that enables customers to manage lines.

Reorganization and Initial Public Offering

On June 29, 2021, prior to the completion of the initial public offering (“IPO”) of the Company’s shares of Class A common stock, $0.00001 par value per share (the “Class A Common Stock”), the Company, Alclear and its subsidiaries consummated an internal reorganization (the “Reorganization”) which resulted in the following:

•Clear Secure, Inc. became the sole managing member of Alclear.

•The certificate of incorporation of Clear Secure, Inc. was amended and restated to authorize the Company to issue four classes of Common Stock: Class A Common Stock, Class B common stock, $0.00001 par value per share (the “Class B Common Stock”), Class C common stock, $0.00001 par value per share (the “Class C Common Stock”) and Class D common stock, $0.00001 par value per share (the “Class D Common Stock” and, together with the Class A Common Stock, Class B Common Stock and Class C Common Stock, collectively, “Common Stock”). The Class A Common Stock and Class C Common Stock provide holders with one vote per share on all matters submitted to a vote of stockholders, and the Class B Common Stock and Class D Common Stock provide holders with twenty votes per share on all matters submitted to a vote of stockholders. The holders of Class C Common Stock and Class D Common Stock do not have any of the economic rights (including rights to dividends and distributions upon liquidation) provided to holders of Class A Common Stock and Class B Common Stock.

•All Alclear’s outstanding equity interests (including Class A units, Class B units and profit units) were reclassified into Alclear non-voting common units (“Alclear Units”). The number of Alclear Units issued to each member of Alclear was determined based on a hypothetical liquidation of Alclear and the initial public offering price per share of the Company’s Class A Common Stock in the IPO. Certain members exchanged their Alclear Units for an equal number of Class A Common Stock.

•Alclear Investments, LLC, an entity controlled by Caryn Seidman-Becker, the Chair of our Board, our Co-Founder and our Chief Executive Officer, and Alclear Investments II, LLC, an entity controlled by Kenneth Cornick, our Co-Founder, President and Chief Financial Officer, contributed a portion of their Alclear Units to us in exchange for Class B Common Stock.

•The remaining members of Alclear, including Alclear Investments, LLC and Alclear Investments II, LLC (“Alclear members”) subscribed for and purchased shares of the Company’s Class C Common Stock and Class D Common Stock at a purchase price of $0.00001 per share and in an amount equal to the number of Alclear Units held by such members.

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except for per share data, unless otherwise noted)

• The Company entered into a Tax Receivable Agreement (“TRA”) which generally provides for payment by the Company to the remaining members of Alclear, the “TRA Holders,” of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that the Company actually realizes or is deemed to realize in certain circumstances. The Company will retain the benefit of the remaining 15% of these net cash savings.

•Alclear is treated as a partnership for U.S. federal income tax purposes and, as such, is itself generally not subject to U.S. federal income tax under current U.S. tax laws. Clear Secure, Inc, as a member of Alclear, will be required to take into account for U.S. federal income tax purposes its distributive share of the items of income, gain, loss and deduction of Alclear.

As the Reorganization is considered a transaction between entities under common control, the condensed consolidated financial statements for periods prior to the IPO and Reorganization have been adjusted to combine the previously separate entities for presentation purposes. Prior to the Reorganization, Clear Secure, Inc. had not engaged in any business or other activities, except in connection with its formation.

On July 2, 2021, the Company completed the IPO of its Class A Common Stock. In the IPO, the Company sold an aggregate of 15,180,000 shares of Class A Common Stock, $0.00001 par value per share, at an offering price of $31 per share including as a result of the underwriters exercising their option to purchase up to 1,980,000 shares of Class A Common Stock. As a result, Clear Secure, Inc. received net proceeds from the IPO of approximately $445,875 after deducting underwriting discounts and commissions. As a result of the IPO, the Company contributed the net IPO Proceeds to Alclear in exchange for 15,180,000 Alclear Units. For the three months ended March 31, 2022, and the year ended December 31, 2021, the Company incurred $297 and $9,038 of issuance related costs as a result of the IPO, respectively, that were recorded within additional paid in capital within the condensed consolidated balance sheets.

Recently Adopted Accounting Pronouncements

Emerging Growth Company Status

The Company is an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies, until the earlier of the date that it (i) is no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Leases

As of January 1, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02) on a modified retrospective basis with respect to all lease arrangements that existed as of the adoption date. Refer to Note 8 for further details.

Current Expected Credit Losses

As of January 1, 2022, the Company adopted, ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). There was no significant impact within the condensed consolidated financial statements as a result of adoption.

Business Combinations

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 addresses inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination. ASU

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except for per share data, unless otherwise noted)

2021-08 requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination as if it had originated the contracts, in accordance with Topic 606, Revenue from Contracts with Customers. The guidance is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption of the amendments is permitted and an entity that early adopts should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company continues to evaluate the impact of this standard on its consolidated financial statements.

Other Recent Accounting Pronouncements Adopted and New Standards and Interpretations Not Yet Effective

Other than the items discussed above, there are no standards issued by the FASB and adopted by the Company effective as of January 1, 2022 that had a material impact on the Company’s condensed consolidated financial statements. Additionally, there are no standards that are not yet effective that are expected to have a material impact on the Company’s condensed consolidated financial statements.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K (the “Form 10-K).

Preparing financial statements requires management to make estimates and assumptions that affect the amounts that are reported in the financial statements and the accompanying disclosures, including the vesting of share-based and other deferred compensation plan awards. Although these estimates are based on management’s knowledge of current events and actions that the Company may undertake in the future, actual results may differ materially from the estimates.

Intercompany transactions and balances are eliminated upon consolidation.

The Company has one operating and reportable segment, which includes the operations of the businesses acquired during the year ended December 31, 2021.

Items included in the financial statements of each of the Company’s consolidated entities are measured using the currency of the primary economic environment in which the entity operates. The condensed consolidated financial statements are presented in US Dollars, which is the Company’s reporting currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at period-end exchange rates are recognized in other income (expense), net within the condensed consolidated statement of operations.

The results and financial position of all the Company entities that have a functional currency different from the Company's reporting currency are translated into US Dollars as follows:

•Assets and liabilities are translated at the closing rate at the reporting date;

•Income and expenses for each statement of operation are translated at average exchange rates; and

•All resulting exchange differences are recognized in other comprehensive loss.

3. Business Combinations

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except for per share data, unless otherwise noted)

During the year ended December 31, 2021, the Company completed two acquisitions, which are described further below. Both acquisitions were accounted for as business combinations. The goodwill for both acquisitions represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including expected future synergies and technical expertise of the acquired workforce

For both acquisitions, the intangible assets acquired primarily relate to existing technology, customer relationships and brand names. The useful life of these intangible assets range from 3-11 years. The Company valued the intangible assets using the relief from royalty method and the multi-period excess earnings method, both under the income approach.

For both acquisitions, the Company’s allocation of purchase price was based upon valuations performed to determine the fair value of the net assets as of the acquisition date and is therefore subject to adjustments for up to one year after the closing date of the acquisition to reflect final valuations.

As a result of the acquisitions, the Company recognized $1,391 of acquisition-related costs during the year ended December 31, 2021, which are recorded in general and administrative within the condensed consolidated statement of operations. Revenues and operating loss related to these acquisitions for the three months ended March 31, 2022 were not material to the condensed consolidated financial statements. Refer below for additional details on the acquisitions.

Whyline, Inc.

On December 29, 2021, Alclear acquired 100% of Whyline, Inc., a provider of virtual queuing and appointment technology that the Company operates under the product name, Reserve powered by CLEAR.

The cash consideration of $67,500 was transferred upon closing, and there was an estimated contingent consideration of $100. The acquisition was accounted for as a business combination. In the Company’s preliminary allocation of the purchase consideration, $54,792 was initially recorded as goodwill, $16,601 as acquired intangible assets, $3,792 as net deferred tax liabilities and $99 as net operating assets on the condensed consolidated balance sheets. None of the goodwill recognized is expected to be deductible for tax purposes. During the three months ended March 31, 2022, and in accordance with the election described above, the Company recorded a $1,411 decrease to goodwill, a $2,100 increase to acquired intangible assets and a $689 increase to deferred tax liabilities. The accounting for the acquisition is not complete as the valuation for certain acquired assets and liabilities have not been finalized. These final valuations of the assets and liabilities could have a material impact on the preliminary purchase price allocation disclosed above.

In conjunction with the acquisition, the Company entered into an agreement to issue shares of Class A Common Stock upon satisfaction of terms related to the contingent consideration and remuneration for post-combination services (collectively referred to as the “Earn-Out”). The first tranche will be settled upon the achievement of specified operating metrics during the twelve month period ended December 31, 2022. The second tranche will be settled upon the achievement of specified operating metrics during the twelve month period ended December 31, 2023.

The maximum settlement of the contingent consideration is $6,666, which is not subject to the satisfaction of service based criteria. For remuneration for post-combination services, there is a maximum settlement of $13,334 that is based on performance and service based criteria being met; portions of these amounts will automatically be forfeited if the employment of specified individuals terminates prior to the end of the Earn-Out period. To the extent probable, the post-combination remuneration amount is allocated evenly to the 2022 operating metrics and 2023 operating metrics targets. The Company has not recorded any compensation expense for three months ended March 31, 2022 as the performance criteria is not probable.

The estimated fair value of the contingent consideration is determined using an option pricing model and is based upon available information and certain assumptions, known as of the reporting date, which management believes are reasonable. Any differences in the actual contingent consideration liability compared to the fair value as of the previous reporting date will be recorded within general and administrative within the condensed consolidated statements of operations. The Company has not recorded any fair value adjustments on its contingent consideration for three months ended March 31, 2022 as there was no change in assumptions.

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except for per share data, unless otherwise noted)

The final number of shares to be issued upon satisfaction of the Earn-Out will be based on the average of the volume-weighted average trading price on the New York Stock Exchange for one share of Class A Common Stock for each of the 30 full trading days ending on and including the full trading day immediately prior to the applicable Earn-Out payment date.

Atlas Certified, LLC.

On December 30, 2021, Alclear acquired certain assets of Atlas Certified, LLC, which provides an automated solution to verify professional licenses and certification data across industries by communicating with certifying organizations for on demand, current and trusted data.

The fair value of the purchase consideration was $9,000. The acquisition was accounted for as a business combination. In the Company’s preliminary allocation of the purchase consideration $5,000 was recorded as goodwill and $4,000 as acquired intangible assets on the condensed consolidated balance sheets. The goodwill recognized is expected to be deductible for tax purposes. During the three months ended March 31, 2022, there were no adjustments to the preliminary allocation. The accounting for the acquisition is not complete as the valuation for certain acquired assets and liabilities have not been finalized. These final valuations of the assets and liabilities could have a material impact on the preliminary purchase price allocation disclosed above.

4. Revenue

The Company derives substantially all of its revenue from subscriptions to its consumer aviation service, CLEAR Plus. For the three months ended March 31, 2022 and 2021, no individual airport accounted for more than 10% of membership revenue.

Revenue by Geography

For the three months ended March 31, 2022 and 2021, substantially all of the Company’s revenue was generated in the United States.

Contract liabilities and assets

The Company’s deferred revenue balance primarily relates to amounts received from customers for subscriptions paid in advance of the services being provided that will be earned within the next twelve months. The following table presents changes in the deferred revenue balance as of March 31:


	2022		2021
Balance as of January 1	$	188,563	$	101,542
Deferral of revenue	105,824		62,057
Recognition of deferred revenue	(88,592)		(50,529)
Balance as of March 31	$	205,795	$	113,070

The Company has obligations for refunds and other similar items of $2,633 as of March 31, 2022. The Company does not have any material variable consideration.

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets as of March 31, 2022 and December 31, 2021 consist of the following:

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except for per share data, unless otherwise noted)


	March 31, 2022		December 31, 2021
Prepaid software licenses	$	6,799	$	4,347
Coronavirus aid, relief, and economic security act retention credit	2,036		2,036
Prepaid insurance costs	1,514		2,845
Other current assets	5,411		12,912
Total	$	15,760	$	22,140

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) is intended to provide economic relief resulting from the COVID-19 pandemic which includes, but is not limited to, employment related costs. For the year ended December 31, 2020, the Company recorded a receivable of $2,036 related to submissions made under the CARES Act. The Company expects to receive payment within twelve months.

6. Fair Value Measurements

The Company values its available-for-sale securities and certain liabilities based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair value hierarchy that prioritizes observable and unobservable inputs is used to measure fair value into three broad levels, which are described below:

Level 1 – Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in inactive markets or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data.

Level 3 – Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs to the extent possible. In addition, the Company considers counterparty credit risk in its assessment of fair value.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value.

Corporate bonds – Valued at the closing price reported on the active market on which the individual securities, all of which have counterparts with high credit ratings, are traded.

Commercial paper – Value is based on yields currently available on comparable securities of issuers with similar credit ratings.

Money market funds – Valued at the net asset value (“NAV”) of units of a collective fund. The NAV is used as a practical expedient to estimate fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV.

Contingent consideration – Valued at fair value using a simulation of targeted outcomes.

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except for per share data, unless otherwise noted)

Warrant liabilities – The Company had certain outstanding warrant liabilities prior to the Reorganization. These were valued based on significant inputs not observed in the market and, thus, represented a Level 3 measurement. The Company estimated the fair value of the liability using the Black-Scholes option pricing model and the change in fair value was recognized in general and administrative expenses. Refer to Note 13 for further information.

The contractual maturities of investments classified as marketable securities are as follows:


	March 31, 2022		December 31, 2021
Due within 1 year	$	301,021	$	288,036
Total marketable securities	$	301,021	$	288,036


	Fair Value as of March 31, 2022
	Level 1		Level 2		Level 3		Total
Commercial paper	$	—	$	117,501	$	—	$	117,501
U.S. Treasuries	89,952		—		—		89,952
Corporate bonds	—		124,092		—		124,092
Total assets in the fair value hierarchy	89,952		241,593		—		331,545
Money market funds measured at NAV(a)	—		—		—		2,808
Total assets at fair value	$	89,952	$	241,593	$	—	$	334,353

Contingent consideration	—		—		(100)		(100)
Total liabilities at fair value	$	—	$	—	$	(100)	$	(100)


	Fair Value as of December 31, 2021
	Level 1		Level 2		Level 3		Total
Commercial paper	$	—	$	128,867	$	—	$	128,867
U.S. Treasuries	82,472		—		—		82,472
Corporate bonds	—		114,965		—		114,965
Total assets in the fair value hierarchy	82,472		243,832		—		326,304
Money market funds measured at NAV(a)	—		—		—		8,924
Total assets at fair value	$	82,472	$	243,832	$	—	$	335,228

Contingent consideration	—		—		$	(100)	(100)
Total liabilities at fair value	$	—	$	—	$	(100)	$	(100)

____________________________

(a)Certain money market funds that were measured at NAV per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the condensed consolidated balance sheets.

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except for per share data, unless otherwise noted)

The Company had no continuous unrealized loss position from marketable securities as of March 31, 2022 that was a result of a credit deterioration.

The following table provides a summary of changes in fair value of the Company’s Level 3 warrant liabilities prior to the Reorganization. The Company has no outstanding warrant liabilities as of March 31, 2022.


Balance as of January 1, 2021	$	(17,740)
Warrants issued	(289)
Issuance of equity upon exercise of certain warrants	30,206
Reclassification of certain warrant liabilities to equity	619
Fair value adjustments	(12,796)
Balance prior to Reorganization	$	—

See Note 13 for further information regarding warrants.

Contingent consideration

The following table provides a summary of changes in fair value of the Company’s Level 3 contingent consideration, issued in conjunction with the acquisition of Whyline, Inc.


Balance as of January 1, 2022	$	(100)
Fair value adjustments	—
Balance as of March 31, 2022	$	(100)

For certain other financial instruments, including accounts receivable, accounts payable, accrued liabilities, as well as other current liabilities, the carrying amounts approximate the fair value of such instruments due to the short maturity of these balances.

7. Property and Equipment, net

Property and equipment as of March 31, 2022 and December 31, 2021 consist of the following:


	Depreciation period in years	March 31, 2022		December 31, 2021
Internally developed software	3 - 5	$	44,338	$	40,788
Acquired software	3	6,396		6,396
Equipment	5	26,715		26,322
Leasehold improvements	1-10	7,706		7,671
Furniture and fixtures	5	2,292		2,281
Construction in progress		3,340		2,239
Total property and equipment, cost		90,787		85,697
Less: accumulated depreciation		(44,664)		(41,175)
Total property and equipment, net		$	46,123	$	44,522

Depreciation and amortization expense related to property and equipment for three months ended March 31, 2022 and 2021 was $3,489 and $2,534, respectively.

During the three months ended March 31, 2022, $3,552 was capitalized in connection with internally developed software. Amortization expense was $1,737 and $1,131 for the three months ended March 31, 2022 and 2021, respectively.

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except for per share data, unless otherwise noted)

During the three months ended March 31, 2022 and 2021, the Company recognized impairment charges of $313 and $0, respectively, on certain long-lived assets within other income (expense), net in the condensed consolidated statements of operations.

Purchases of property and equipment with unpaid costs in accounts payable and accrued liabilities as of March 31, 2022 were $1,261 and $427, respectively, and $134 and $1,438 as of March 31, 2021, respectively.

8. Leases

As discussed in Note 2, on January 1, 2022, the Company adopted the new accounting standard ASC 842, Leases, using the modified retrospective method. As a result, and as permitted by the standard, the Company has not updated financial information or related disclosures under ASC 842 for, periods prior to January 1, 2022. Upon adoption, the Company recognized $25,346 of right of use (“ROU”) assets, $29,139 of lease liabilities and derecognized $3,793 of deferred rent on the condensed consolidated balance sheets. The short term portion of the operating lease liabilities is included within accrued liabilities and the long term portion is included within other long term liabilities on the condensed consolidated balance sheets.

The Company has entered into agreements to lease certain office spaces. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include renewal options at the election of the Company to renew or extend the lease for an additional three years. Additionally, certain of these leases contain termination options. These optional periods have not been considered in the determination of the ROU assets or lease liabilities as the Company did not consider it reasonably certain it would exercise the options. The Company performed evaluations of its contracts and determined it only has operating leases. The lease terms are between 1 and 12 years.

Most of the Company’s lease agreements require payment of certain operating expenses in addition to base rent, such as taxes, insurance and maintenance costs. As allowed under ASC 842, the Company considers these as non-lease components and has elected to exclude these components from the measurement of its lease liabilities. The Company has also elected to apply the recognition requirement of ASC 842 to leases with a term of 12 months or less for all classes of assets.

The Company has elected to utilize the following practical expedients available under the transition guidance in ASC 842:

•The Company did not reassess whether any expired or existing contracts are or contain leases;

•The Company did not reassess the lease classification for any expired or existing leases; and

•The Company did not reassess initial direct costs for any existing leases.

The Company did not elect the practical expedient available under the transition guidance in ASC 842 to use hindsight in determining the lease term and in assessing impairment of the Company’s ROU assets

The Company determines if an arrangement is a lease at inception and recognizes ROU assets and lease liabilities upon commencement. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. The classification of the Company's leases as operating or finance leases along with the initial measurement and recognition of the associated ROU assets and lease liabilities is performed at the lease commencement date. The measurement of lease liabilities is based on the present value of future lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. The ROU asset is based on the measurement of the lease liability and also includes any lease payments made prior to or on lease commencement and excludes lease incentives and initial direct costs incurred, as applicable. Rent expense for the Company's operating leases is recognized on a straight-line basis over the lease term.

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except for per share data, unless otherwise noted)

The Company has an additional operating lease for real estate space to house the Company’s corporate headquarters. The lease agreement provides for a commencement on the later of October 1, 2022 or the date on which the landlord delivers possession of the premises with certain agreed upon completed improvements to be made by the landlord. The term of the lease is fifteen years after the date the rent obligations begin, with an option to renew for one 5-year period or 10-year period at Fair Market Value (as defined in the lease agreement) by providing the Landlord with eighteen months’ notice and meeting certain other requirements. The aggregate undiscounted future minimum lease payments are approximately $177,400 beginning on April 1, 2023 and ending on April 1, 2038. The lease has not been recognized on the Company's condensed consolidated balance sheets. This operating lease is expected to commence in 2022.

Below is a reconciliation of the amounts reported on the condensed consolidated balance sheets with respect to the Company’s operating leases:


	March 31, 2022
2022	$	3,453
2023	3,729
2024	4,402
2025	4,478
2026	4,478
Thereafter	12,868
Total future operating lease payments	33,408
Less: imputed interest	(5,115)
Lease liabilities, current	3,338
Lease liabilities, non-current	24,955
Total lease liabilities	$	28,293

As of March 31, 2022, the weighted-average incremental borrowing rate applied to lease liabilities at the date of adoption was 4.3%. Additionally, the weighted-average remaining lease term was 7.7 years.

Total operating lease expense recognized on the condensed consolidated statements of operations for the three months ended March 31, 2022 was $1,035. Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended March 31, 2022 was $1,155.

9. Intangible Assets, net and Goodwill

See below for Intangible assets, net and Goodwill as of March 31, 2022 and December 31, 2021:


	Amortization Period in Years	March 31, 2022		December 31, 2021
Patents	20	$	2,216	$	2,115
Acquired intangibles	1-10	22,700		20,601
Other indefinite lived intangible assets		310		310
Total intangible assets, cost		25,226		23,026
Less: accumulated amortization		(988)		(93)
Intangible assets, net		$	24,238	$	22,933
Goodwill		$	58,381	$	59,792

Acquired intangibles, net as of March 31, 2022 and December 31, 2021 is comprised of the following:

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except for per share data, unless otherwise noted)


	Amortization Period in Years	March 31, 2022		December 31, 2021
Technology	3	$	4,300	$	5,600
Customer relationships	11	$	17,900	$	14,501
Brand names	5	$	500	$	500
Total intangible assets, cost		$	22,700	$	20,601
Less: accumulated amortization		$	(869)	$	—
Total acquired intangibles		$	21,831	$	20,601