you-20240630

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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 June 30, 2024


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.)
85 10th Avenue, 9th Floor, New York, NY									10011
(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 every Interactive Data File required to be submitted 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 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”

“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

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 August 1, 2024:


Class A Common Stock par value $0.00001 per share (the “Class A Common Stock”)			92,249,918
Class B Common Stock par value $0.00001 per share (the “Class B Common Stock”)			907,234
Class C Common Stock par value $0.00001 per share (the “Class C Common Stock”)			20,292,253
Class D Common Stock par value $0.00001 per share (the “Class D Common Stock”)			25,796,690

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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 Income (Loss)	3
	Condensed Consolidated Statements of Changes in Stockholders' Equity	4
	Condensed Consolidated Statements of Changes in Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	41
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
Signatures		45

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CLEAR SECURE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(dollars in thousands, except share and per share data)


	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	39,108	$	57,900
Marketable securities	630,510		665,197
Accounts receivable	1,124		526
Prepaid revenue share fee	22,591		24,402
Prepaid expenses and other current assets	20,433		22,009
Total current assets	713,766		770,034
Property and equipment, net	59,290		62,611
Right of use asset, net	112,655		115,874
Intangible assets, net	18,226		20,825
Goodwill	62,757		62,757
Restricted cash	3,597		4,501
Other assets	12,091		8,407
Total assets	$	982,382	$	1,045,009
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	8,857	$	11,781
Accrued liabilities	236,422		164,015
Deferred revenue	388,021		376,253
Total current liabilities	633,300		552,049
Other long term liabilities	120,818		123,736
Total liabilities	754,118		675,785
Commitments and contingencies (Note 17)
Class A Common Stock, $0.00001 par value - 1,000,000,000 shares authorized; 92,216,698 shares issued and outstanding as of June 30, 2024 and 91,786,941 shares issued and outstanding as of December 31, 2023	1		1
Class B Common Stock, $0.00001 par value - 100,000,000 shares authorized; 907,234 shares issued and outstanding as of June 30, 2024 and December 31, 2023	—		—
Class C Common Stock, $0.00001 par value - 200,000,000 shares authorized; 24,292,253 shares issued and outstanding as of June 30, 2024 and 32,234,914 shares issued and outstanding as of December 31, 2023	—		—
Class D Common Stock, $0.00001 par value - 100,000,000 shares authorized; 25,796,690 shares issued and outstanding as of June 30, 2024 and December 31, 2023	—		—
Accumulated other comprehensive loss	(561)		2,050
Treasury stock at cost, 0 shares as of June 30, 2024 and December 31, 2023	—		—
Accumulated deficit	(30,789)		(73,714)
Additional paid-in capital	184,885		304,992
Total stockholders’ equity attributable to Clear Secure, Inc.	153,536		233,329
Non-controlling interest	74,728		135,895
Total stockholders’ equity	228,264		369,224
Total liabilities and stockholders’ equity	$	982,382	$	1,045,009

See notes to condensed consolidated financial statements

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CLEAR SECURE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(dollars in thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	186,745	$	149,871	$	365,794	$	282,227

Operating expenses:
Cost of revenue share fee	26,093		21,219		50,457		40,789
Cost of direct salaries and benefits	40,085		34,204		80,373		67,350
Research and development	17,411		22,310		37,515		44,254
Sales and marketing	11,007		10,788		22,629		20,297
General and administrative	55,371		56,144		108,261		114,222
Depreciation and amortization	6,441		4,989		12,533		10,156
Operating income (loss)	30,337		217		54,026		(14,841)

Other income (expense):
Interest income, net	8,247		7,394		18,172		13,786
Other income, net	416		634		855		908
Income (loss) before tax	39,000		8,245		73,053		(147)
Income tax expense	(409)		(211)		(2,374)		(92)
Net income (loss)	38,591		8,034		70,679		(239)
Less: net income attributable to non-controlling interests	14,472		4,023		27,754		974
Net income (loss) attributable to Clear Secure, Inc.	$	24,119	$	4,011	$	42,925	$	(1,213)

Net income (loss) per share of Class A Common Stock and Class B Common Stock (Note 15)
Net income (loss) per common share basic, Class A	$	0.26	$	0.04	$	0.46	$	(0.01)
Net income (loss) per common share basic, Class B	$	0.26	$	0.04	$	0.46	$	(0.01)
Net income (loss) per common share diluted, Class A	$	0.26	$	0.04	$	0.46	$	(0.01)
Net income (loss) per common share diluted, Class B	$	0.26	$	0.04	$	0.46	$	(0.01)
Weighted-average shares of Class A Common Stock outstanding, basic	91,984,045		89,569,933		91,907,842		89,318,481
Weighted-average shares of Class B Common Stock outstanding, basic	907,234		907,234		907,234		907,234
Weighted-average shares of Class A Common Stock outstanding, diluted	92,605,019		90,372,444		92,645,417		89,318,481
Weighted-average shares of Class B Common Stock outstanding, diluted	907,234		907,234		907,234		907,234

See notes to condensed consolidated financial statements

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CLEAR SECURE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(dollars in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income (loss)	$	38,591	$	8,034	$	70,679	$	(239)
Other comprehensive income (loss)
Currency translation	—		—		—		8
Unrealized gain (loss) on fair value of marketable securities	(1,227)		(1,240)		(4,210)		348
Total other comprehensive income (loss)	(1,227)		(1,240)		(4,210)		356
Comprehensive income (loss)	37,364		6,794		66,469		117
Less: comprehensive income attributable to non-controlling interests	14,021		3,519		26,155		1,128
Comprehensive income (loss) attributable to Clear Secure, Inc.	$	23,343	$	3,275	$	40,314	$	(1,011)

See notes to condensed consolidated financial statements

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CLEAR SECURE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(dollars in thousands, except share data)


	Class A			Class B			Class C			Class D			Additional paid in capital		Accumulated other comprehensive loss		Treasury Stock			Accumulated deficit		Total stockholders’ equity attributable to Clear Secure, Inc.		Non-controlling interest		Total stockholders’ equity
	Number of shares	Amount		Number of shares	Amount		Number of shares	Amount		Number of shares	Amount						Number of shares	Amount
Balance, January 1, 2024	91,786,941	$	1	907,234	$	—	32,234,914	$	—	25,796,690	$	—	$	304,992	$	2,050	—	$	—	$	(73,714)	$	233,329	$	135,895	$	369,224
Net income	—	—		—	—		—	—		—	—		—		—		—	—		18,806		18,806		13,282		32,088
Other comprehensive income	—	—		—	—		—	—		—	—		—		(1,835)		—	—		—		(1,835)		(1,148)		(2,983)
Equity-based compensation expense, net of forfeitures	—	—		—	—		—	—		—	—		6,684		—		—	—		—		6,684		4,185		10,869
Net share settlements of stock-based awards	183,167	—		—	—		—	—		—	—		(1,298)		—		—	—		—		(1,298)		(812)		(2,110)
Distribution to members	—	—		—	—		—	—		—	—		—		—		—	—		—		—		(10,564)		(10,564)
Tax distribution to members	—	—		—	—		—	—		—	—		—		—		—	—		—		—		(4,558)		(4,558)
Exchange of shares	1,625,803	—		—	—		(1,625,803)	—		—	—		3		—		—	—		—		3		(3)		—
Dividends	—	—		—	—		—	—		—	—		(8,481)		—		—	—		—		(8,481)		—		(8,481)
Special dividend	—	—		—	—		—	—		—	—		(28,828)		—		—	—		—		(28,828)				(28,828)
Repurchase and retirement of Class A Common Stock	(4,416,759)	—		—	—		—	—		—	—		(52,514)		—		—	—		—		(52,514)		(32,868)		(85,382)
Balance, March 31, 2024	89,179,152	$	1	907,234	$	—	30,609,111	$	—	25,796,690	$	—	$	220,558	$	215	—	$	—	$	(54,908)	$	165,866	$	103,409	$	269,275
Net income	—	—		—	—		—	—		—	—		—		—		—	—		24,119		24,119		14,472		38,591
Other comprehensive income	—	—		—	—		—	—		—	—		—		(776)		—	—		—		(776)		(451)		(1,227)
Equity-based compensation expense, net of forfeitures	—	—		—	—		—	—		—	—		6,624		—		—	—		—		6,624		3,847		10,471
Net share settlements of stock-based awards	287,541	—		—	—		—	—		—	—		(685)		—		—	—		—		(685)		(1,819)		(2,504)
Distribution to members	—	—		—	—		—	—		—	—		—		—		—	—		—		—		(5,018)		(5,018)
Tax distribution to members	—	—		—	—		—	—		—	—		—		—		—	—		—		—		(7,367)		(7,367)
Exchange of shares	6,316,858	—		—	—		(6,316,858)	—		—	—		19,763		—		—	—		—		19,763		(19,763)		—
Dividends	—	—		—	—		—	—		—	—		(9,339)		—		—	—		—		(9,339)		—		(9,339)
Repurchase and retirement of Class A Common Stock	(3,566,853)	—		—	—			—		—	—		(52,036)		—		—	—		—		(52,036)		(12,582)		(64,618)
Balance, June 30, 2024	92,216,698	$	1	907,234	$	—	24,292,253	$	—	25,796,690	$	—	$	184,885	$	(561)	—	$	—	$	(30,789)	$	153,536	$	74,728	$	228,264

See notes to condensed consolidated financial statements

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	Class A			Class B			Class C			Class D			Additional paid in capital		Accumulated other comprehensive loss		Treasury Stock			Accumulated deficit		Total stockholders’ equity attributable to Clear Secure, Inc.		Non-controlling Interest		Total stockholders’ equity
	Number of shares	Amount		Number of shares	Amount		Number of shares	Amount		Number of shares	Amount						Number of shares	Amount
Balance, January 1, 2023	87,760,831	$	1	907,234	$	—	38,290,964	$	—	25,796,690	$	—	$	394,390	$	(1,529)	80,505	$	—	$	(101,797)	$	291,065	$	219,856	$	510,921
Net loss	—	—		—	—		—	—		—	—		—		—		—	—		(5,224)		(5,224)		(3,049)		(8,273)
Other comprehensive income	—	—		—	—		—	—		—	—		—		938		—	—		—		938		658		1,596
Equity-based compensation expense, net of forfeitures	(3,079)	—		—	—		—	—		—	—		10,151		—		3,079	—		—		10,151		6,257		16,408
Net share settlements of stock-based awards	155,049	—		—	—		—	—		—	—		(946)		—		(83,584)	—		—		(946)		(1,462)		(2,408)
Warrant expense	—	—		—	—		—	—		—	—		366		—		—	—		—		366		257		623
Exercise of warrants	534,655	—		—	—		—	—		—	—		1,615		—		—	—		—		1,615		(1,615)		—
Tax distribution to members	—	—		—	—		—	—		—	—		—		—		—	—		—		—		(13,886)		(13,886)
Exchange of shares	2,048,773	—		—	—		(2,048,773)	—		—	—		6,189		—		—	—		—		6,189		(6,189)		—
Repurchase and retirement of Class A Common Stock	(281,838)	—		—	—		—	—		—	—		(7,380)		—		—	—		—		(7,380)		911		(6,469)
Balance, March 31, 2023	90,214,391	$	1	907,234	$	—	36,242,191	$	—	25,796,690	$	—	$	404,385	$	(591)	—	$	—	$	(107,021)	$	296,774	$	201,738	$	498,512
Net income	—	—		—	—		—	—		—	—		—		—		—	—		4,011		4,011		4,023		8,034
Other comprehensive loss	—	—		—	—		—	—		—	—		—		(736)		—	—		—		(736)		(504)		(1,240)
Equity-based compensation expense, net of forfeitures	—	—		—	—		—	—		—	—		8,415		—		—	—		—		8,415		6,244		14,659
Net share settlements of stock-based awards	144,341	—		—	—		—	—		—	—		(655)		—		—	—		—		(655)		(740)		(1,395)
Tax distribution to members	—	—		—	—		—	—		—	—		—		—		—	—		(26)		(26)		(17)		(43)
Exchange of shares	150,000	—		—	—		(150,000)	—		—	—		165		—		—	—		—		165		(165)		—
Special dividend	—	—		—	—		—	—		—	—		(18,089)		—		—	—		—		(18,089)		—		(18,089)
Repurchase and retirement of Class A Common Stock	(1,533,357)	—		—	—			—		—	—		(22,928)		—		—	—		—		(22,928)		(15,700)		(38,628)
Balance, June 30, 2023	88,975,375	$	1	907,234	$	—	36,092,191	$	—	25,796,690	$	—	$	371,293	$	(1,327)	—	$	—	$	(103,036)	$	266,931	$	194,879	$	461,810

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)


	Six Months Ended June 30,
	2024		2023
Cash flows provided by (used in) operating activities:
Net income (loss)	$	70,679	$	(239)
Adjustments to reconcile net loss to net cash provided from operating activities:
Depreciation of property and equipment	10,728		8,516
Amortization of intangible assets	1,805		1,640
Noncash lease expense	3,180		3,315
Impairment of assets	—		3,707
Equity-based compensation	20,895		30,937
Deferred income tax	28		12
Amortization of revolver loan costs	136		164
Premium amortization and (discount accretion), net on marketable securities	(4,489)		(7,489)
Changes in operating assets and liabilities:
Accounts receivable	(598)		240
Prepaid expenses and other assets	(656)		(1,849)
Prepaid revenue share fee	1,811		(1,848)
Accounts payable	(2,624)		(2,663)
Accrued and other long term liabilities	85,030		64,196
Deferred revenue	11,768		37,177
Operating lease liabilities	(2,760)		(54)
Net cash provided by operating activities	$	194,933	$	135,762

Cash flows provided by (used in) investing activities:
Purchases of marketable securities	(356,079)		(411,650)
Sales of marketable securities	391,044		377,528
Purchase of strategic investment	(1,000)		(6,000)
Purchases of property and equipment	(7,216)		(17,790)
Purchases of intangible assets	(318)		(89)
Net cash provided by (used in) investing activities	$	26,431	$	(58,001)

Cash flows used in financing activities:
Repurchase of Class A Common Stock	(150,000)		(45,097)
Payment of dividend	(17,820)		—
Payment of special dividend	(28,828)		(18,129)
Distributions to members	(15,582)		—
Tax distribution to members	(24,100)		(13,929)
Debt issuance costs	—		(396)
Payment of taxes on net settled stock-based awards	(4,614)		(3,803)
Other financing activities	(153)		—
Net cash used in financing activities	$	(241,097)	$	(81,354)

Net (decrease) increase in cash, cash equivalents, and restricted cash	(19,733)		(3,593)
Cash, cash equivalents, and restricted cash, beginning of period	62,401		68,884
Exchange rate effect on cash and cash equivalents, and restricted cash	37		51
Cash, cash equivalents, and restricted cash, end of period	$	42,705	$	65,342

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	June 30, 2024		June 30, 2023
Cash and cash equivalents	$	39,108	$	57,248
Restricted cash	3,597		8,094
Total cash, cash equivalents, and restricted cash	$	42,705	$	65,342

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 share and 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”). In connection with the Company’s reorganization (the “Reorganization”) completed prior to the completion of its initial public offering (“IPO”), Alclear was formed as a Delaware limited liability company on January 21, 2010 and operates under the terms of the Second Amended and Restated Operating Agreement dated June 7, 2023 (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 within our nationwide network of 58 airports (as of the date of this filing); TSA PreCheck® Enrollment Provided by CLEAR at 46 airports (as of the date of this filing), which offers consumers increased choice in how and where to sign up for this popular trusted traveler program; CLEAR Verified, our B2B offering, which enables our partners to leverage our digital identity technology and reusable member network to facilitate secure and frictionless experiences digitally and physically via our software development kits and application programming interfaces; and our free flagship CLEAR app, which offers consumer products like Home-to-Gate and includes RESERVE Powered by CLEAR, our virtual queuing technology that enables customers to prebook a spot in airport security line so they don’t have to wait.

2. Basis of Presentation and Summary of Significant Accounting Policies

These condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair presentation have been reflected in these condensed consolidated financial statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the condensed consolidated financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates.

These condensed consolidated financial statements and notes thereto 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 for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”).

The condensed consolidated financial statements are presented in US Dollars, which is the Company’s reporting currency.

Recently Adopted Accounting Pronouncements

The Company adopted all applicable standards effective as of December 31, 2023, within these condensed consolidated financial statements. There was no material impact as a result. There are no newly issued standards since December 31, 2023 that are applicable to the Company.

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

3. Revenue

The Company derives substantially all of its revenue from subscriptions to its consumer aviation service, CLEAR Plus. For the three and six months ended June 30, 2024 and 2023, no individual airport accounted for more than 10% of membership revenue.

Revenue by Geography

For the three and six months ended June 30, 2024 and 2023, 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 for the six months ended June 30, 2024.


	2024
Balance as of January 1	$	376,253
Deferral of revenue	373,923
Recognition of deferred revenue	(362,155)
Balance as of June 30	$	388,021

The Company has obligations for refunds and other similar items of $3,214 as of June 30, 2024 recorded within accrued liabilities.

During the six months ended June 30, 2024 and 2023, the Company recognized $273,062 and $199,740, respectively, of revenue which was included in the opening deferred revenue balances.

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets as of June 30, 2024 and December 31, 2023 consist of the following:


	June 30, 2024		December 31, 2023
Prepaid software licenses	$	9,464	$	10,306
Coronavirus aid, relief, and economic security act retention credit	—		1,002
Prepaid insurance costs	203		1,946
Other current assets	10,766		8,755
Total	$	20,433	$	22,009

The Coronavirus Aid, Relief, and Economic Security Act is intended to provide economic relief resulting from the COVID-19 pandemic which includes, but is not limited to, employment related costs. As of March 31, 2024, the Company no longer expects to receive the remainder of the balance in the next twelve months. As such, the Company recorded a reclass of this balance to Other assets. Refer to Note 10 for the reclassed balance.

5. 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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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 certain assets and liabilities measured at fair value, which are not considered Level 1 items.

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.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

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


	June 30, 2024		December 31, 2023
Due within 1 year	$	452,260	$	439,155
Due after 1 year through 2 years	178,250		226,042
Total marketable securities	$	630,510	$	665,197

The following table represents the amortized cost, gross unrealized gains and losses, and fair market value of the Company’s marketable securities by significant investment category in addition to their fair value level at June 30, 2024 and December 31, 2023.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	As of June 30, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Level
Commercial paper	$	18,273	$	—	$	(27)	$	18,246	2
U.S. Treasuries	247,766		12		(439)		247,339		1
Corporate bonds	280,383		104		(824)		279,663		2
Money market funds measured at NAV (a)	85,262		—		—		85,262		N/A
Total marketable securities	$	631,684	$	116	$	(1,290)	$	630,510


	As of December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Level
Commercial paper	$	42,903	$	16	$	(24)	$	42,895	2
U.S. Treasuries	324,274		2,896		(257)		326,913		1
Corporate bonds	294,540		969		(564)		294,945		2
Money market funds measured at NAV (a)	444		—		—		444		N/A
Total marketable securities	$	662,161	$	3,881	$	(845)	$	665,197

(a)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.

Of the total marketable securities held at fair value as of June 30, 2024, $139,444 was in a continuous unrealized loss position for 12 months or longer. The Company had no continuous unrealized loss positions in relation to marketable securities as of June 30, 2024 or December 31, 2023 that were as a result of credit deterioration. For the periods presented the Company does not intend to nor will it be required to sell any securities before recovery of their amortized cost bases.

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.

6. Property and Equipment, net

Property and equipment as of June 30, 2024 and December 31, 2023 consist of the following:


	Depreciation Period in Years	June 30, 2024		December 31, 2023
Internally developed software	3 - 5	$	65,888	$	62,306
Acquired software	3	6,441		6,539
Equipment	5	35,247		33,624
Leasehold improvements	1 - 15	9,069		9,113
Furniture and fixtures	5	13,680		12,709
Construction in progress		9,825		8,672
Total property and equipment, cost		140,150		132,963
Less: accumulated depreciation		(80,860)		(70,352)
Total property and equipment, net		$	59,290	$	62,611

Depreciation and amortization expense related to property and equipment for the three months ended June 30, 2024 and 2023 was $5,560 and $4,171, respectively, and $10,728 and $8,516 for the six months ended June 30, 2024 and 2023, respectively.

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

During the three and six months ended June 30, 2024, $1,756 and $3,583, respectively, were capitalized in connection with internally developed software inclusive of $241 and $445 of equity-based compensation, respectively. Amortization expense on internally developed software was $3,254 and $2,401 for the three months ended June 30, 2024 and 2023, respectively, and $6,416 and $4,152 for the six months ended June 30, 2024 and 2023, respectively.

During the three months ended June 30, 2024 and 2023, the Company recognized impairment charges of none and $74, respectively. During the six months ended June 30, 2024 and 2023, the Company recognized impairment charges of none and $2,201, respectively.

Purchases of property and equipment with unpaid costs in accounts payable and accrued liabilities as of June 30, 2024 were $450 and $115, respectively, and $147 and $120 as of June 30, 2023, respectively.

7. Leases

Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended June 30, 2024 and 2023 was $3,740 and $3,758, respectively, and $7,472 and $4,840 for the six months ended June 30, 2024 and June 30, 2023, respectively.

During the six months ended June 30, 2023, the Company entered into a sublease agreement whereby the Company continues to be a lessee under the original operating lease but will act as a sublessor. As a result, during the six months ended June 30, 2023, the Company recorded $1,506 of impairment to its right of use asset within general and administrative in the condensed consolidated statements of operations. Sublease income is recorded within other income (expense), net within the condensed consolidated statements of operations. The Company had $444 and $444 for the three months ended June 30, 2024 and 2023, respectively, and $888 and $679 sublease income for the six months ended June 30, 2024 and 2023, respectively.

8. Intangible Assets, net

See below for Intangible assets, net as of June 30, 2024 and December 31, 2023:


	Weighted Average Useful Life in Years	June 30, 2024		December 31, 2023
Patents	20.0	$	2,518	$	3,312
Acquired intangibles - technology	3.0	5,130		5,130
Acquired intangibles - customer relationships	10.8	18,370		18,370
Acquired intangibles - brand names	5.0	500		500
Indefinite lived intangible assets		310		310
Total intangible assets, cost		26,828		27,622
Less: accumulated amortization		(8,602)		(6,797)
Intangible assets, net		$	18,226	$	20,825

Amortization expense on intangible assets for the three months ended June 30, 2024 and 2023 was $881 and $819, respectively and $1,805 and $1,640 for the six months ended June 30, 2024 and 2023, respectively. The Company did not recognize any impairment charges on intangible assets, net for any periods presented.

9. Restricted Cash

As of June 30, 2024 and December 31, 2023, the Company maintained bank deposits of $3,597 and $4,501, respectively, which were primarily pledged as collateral for long-term letters of credit issued in favor of airports, in connection with the Company’s obligations under revenue share agreements.

10. Other Assets

Other assets consist of the following as of June 30, 2024 and December 31, 2023:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	June 30, 2024		December 31, 2023
Security deposits	$	280	$	273
Loan fees	132		198
Certificates of deposit	459		459
Coronavirus aid, relief, and economic security act retention credit	1,002		—
Strategic investment	7,000		6,000
Other long-term assets	3,218		1,477
Total	$	12,091	$	8,407

During the three months ended March 31, 2024, the Company made an incremental strategic investment in equity securities of a privately held company, which the Company previously invested in during three months ended March 31, 2023. As the investment does not have a readily determinable fair value, the Company elected the measurement alternative to record the investment at initial cost less impairments, if any, adjusted for observable changes in fair value for identical or similar investments of the same issuer. Adjustments resulting from these fluctuations are recorded within other income (expense) on the Company’s condensed consolidated statements of operations.

During the three and six months ended June 30, 2024, there were no fair value adjustments recorded by the Company in relation to its strategic investment.

11. Accrued Liabilities and Other Long Term Liabilities

Accrued liabilities consist of the following as of June 30, 2024 and December 31, 2023:


	June 30, 2024		December 31, 2023
Accrued compensation and benefits	$	13,362	$	18,690

Accrued partnership liabilities	186,947		96,284
Lease liability	5,913		5,727
Other accrued liabilities	30,200		43,314
Total	$	236,422	$	164,015

The Company has estimated accrued partnership liabilities related to a portion of merchant credit card benefits that it expects to settle in the second half of the current year.

Other long term liabilities consist of the following as of June 30, 2024 and December 31, 2023:


	June 30, 2024		December 31, 2023
Deferred tax liability	$	1,739	$	1,711
Lease liability	118,709		121,655
Other long term liabilities	370		370
Total	$	120,818	$	123,736

12. Warrants

In January 2023, the Company recognized $1,038 of the remaining expense related to the 534,655 fully vested United Airlines warrants. These warrants were exercised for Class A Common Stock in a cashless exercise with an intrinsic value of $16,136. The existing warrant agreement with United Airlines expired in the first quarter of 2023.

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The following warrants remained outstanding as of June 30, 2024:


	Number of Warrants	Weighted-Average Exercise Price		Weighted average Remaining Contractual Term (years)
Exercisable for Alclear Units	773,934	$	0.01	0.21

All outstanding warrants are subject to certain performance-based vesting criteria which the Company evaluates at each reporting period to determine the likelihood of achievement.

Based on the probability of vesting, the Company recorded none for both the three months ended June 30, 2024 and 2023, respectively, and none and $623 for the six months ended June 30, 2024 and 2023, respectively within general and administrative expense in the condensed consolidated statements of operations.

13. Stockholders’ Equity

Common Stock

The Company has and will issue shares of its common stock as a result of transactions in relation to warrant exercises, exchanges, and vesting of restricted stock units (“RSUs”).

Treasury Stock

Historically, the Company's treasury stock consisted of forfeited Restricted Stock Awards (“RSAs”) that were legally issued shares held by the Company, and recorded at par value, as well as any shares repurchased under the Company’s share repurchase program that are not retired by the Company’s board of directors (the “Board”). As of June 30, 2024, all RSAs have been either vested or forfeited. The Company’s treasury stock can be utilized to settle equity-based compensation awards issued by the Company and is excluded from the calculation of the non-controlling interest ownership percentage.

Share Repurchases

During the six months ended June 30, 2024, the Company repurchased and retired 7,983,612 shares of its Class A Common Stock for $150,000 at an average price of $18.79. As of June 30, 2024, $75,424 remained available under the repurchase authorization.

The Inflation Reduction Act created an excise tax of 1% on the fair market value of net stock repurchases made after December 31, 2022. During the six months ended June 30, 2024, the Company recorded an accrual of none related to this tax within its condensed consolidated financial statements. Refer to Note 1 6 for further information regarding the Inflation Reduction Act.

Special and Quarterly Dividends

On August 2, 2023, the Company announced that its Board adopted a dividend policy (the "Dividend Policy") of paying a quarterly cash dividend to holders of Class A Common Stock and Class B Common Stock. The amount of such quarterly dividends is subject to approval of the actual amount by the Board at the time of such dividend declaration. It is expected that the dividends will be funded by proportionate cash distributions by Alclear to all of its members as of the applicable record date, including holders of non-controlling interests in Alclear and the Company. The declaration of cash dividends in the future is subject to final determination each quarter by the Board based on a number of factors, including the Company’s results of operations, cash flows, financial position and capital requirements, as well as general business conditions, legal, tax and regulatory restrictions and other factors the Board deems relevant at the time it determines to declare such dividends.

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

On February 15, 2024, the Company announced that its Board declared a quarterly dividend of $0.09 per share, payable on March 5, 2024 to holders of record of Class A Common Stock and Class B Common Stock as of the close of business on February 26, 2024. The Company funded the dividend from proportionate cash distributions by Alclear to all of its members as of February 26, 2024, including holders of non-controlling interests in Alclear and the Company.

On March 21, 2024, the Company announced the declaration of a special cash dividend in the amount of $0.32 per share payable on April 8, 2024 to holders of record of the Class A Common Stock and Class B Common Stock as of the close of business on April 1, 2024. The Company funded the payment of the special cash dividend with cash held by the Company following its receipt of a pro rata cash distribution made by Alclear to all of its members, including the Company, together with cash held by the Company following its receipt of tax distributions made by Alclear.

On May 7, 2024, the Company announced that its Board declared a quarterly dividend of $0.10 per share, payable on June 18, 2024 to holders of record of Class A Common Stock and Class B Common Stock as of the close of business on June 10, 2024. The Company funded the dividend from proportionate cash distributions by Alclear to all of its members as of June 10, 2024, including holders of non-controlling interests in Alclear and the Company.

To the extent the quarterly or special dividends exceed the Company's current and accumulated earnings and profits, a portion of such dividends may be deemed a return of capital gain to the holders of our Class A Common Stock or Class B Common Stock, as applicable.

Non-Controlling Interest

The non-controlling interest balance represents the economic interest in Alclear held by our co-founders, Caryn Seidman Becker and Kenneth Cornick (the “Co-Founders”), and members of Alclear. The following table summarizes the ownership of non-voting common units of Alclear (“Alclear Units”) as of June 30, 2024:


	Alclear Units	Ownership Percentage
Alclear Units held by Alclear post-reorganization members (other than the Co-Founders and Clear Secure, Inc.)	24,292,253	16.96	%
Alclear Units held by the Co-Founders	25,796,690	18.01	%
Total	50,088,943	34.97	%

The non-controlling interest holders have the right to exchange Alclear Units, together with a corresponding number of shares of Class C Common Stock for Class A Common Stock or Class D Common Stock for Class B Common Stock. As such, exchanges by non-controlling interest holders will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase Class A Common Stock or B Common Stock and additional paid-in-capital for the Company. Upon the issuance of shares Class A Common Stock or B Common Stock, the Company issues a proportionate number of Alclear Units in conjunction with the terms of the Reorganization.

During the six months ended June 30, 2024, certain non-controlling interest holders exchanged their Alclear Units and corresponding shares of Class C Common Stock for shares of the Company's Class A Common Stock. As a result, the Company issued 7,942,661 shares of Class A Common Stock.

The non-controlling interest ownership percentage declined from 38.51% as of December 31, 2023 to 34.97% as of June 30, 2024. This decrease was primarily attributable to the issuance of shares of Class A Common Stock, primarily due to exchanges noted above.

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

14. Incentive Plans

2021 Omnibus Incentive Plan

The Clear Secure, Inc 2021 Omnibus Incentive Plan (“2021 Omnibus Incentive Plan”) became effective on June 29, 2021 to provide grants of equity-based awards to the employees, consultants, and directors of the Company and its affiliates.

The 2021 Omnibus Incentive Plan authorized the issuance of up to 20,000,000 shares of Class A Common Stock as of the date of the Reorganization. The 2021 Omnibus Incentive Plan authorized the issuance of shares pursuant to the grant, settlement or exercise of RSUs, RSAs, stock options and other share-based awards. Beginning with the first business day of each calendar year beginning in 2022 through 2031, the number of shares available will increase in an amount up to 5% of the total number of common shares outstanding (assuming exchange and/or conversion of all classes of common shares into Class A Common Stock) as of the last day of the immediately preceding year or a lesser amount approved by the Board or its compensation committee, so long as the total share reserve available for future awards at the time is not more than 12% of common shares outstanding (assuming exchange and/or conversion of all classes of common shares into Class A Common Stock). For fiscal year 2023, the Compensation Committee of the Board approved no increase in the 2021 Omnibus Incentive Plan, which such increase would have been effective on the first business day of 2023.

Restricted Stock Units

RSUs are subject to both service-based and, in some cases, performance-based vesting conditions. RSUs will vest on a specified date, provided the applicable service (generally three years) and, if applicable, when certain performance conditions are probable of satisfaction. The RSUs with performance-based vesting conditions are subject to long-term revenue and cash-basis earnings performance hurdles. The Company determines the fair value of each RSU based on the grant date and records the expense over the vesting period or requisite service period on a straight-line basis and for performance-based vesting awards, whether they are probable or not.

The following is a summary of activity related to the RSUs associated with compensation arrangements during the six months ended June 30, 2024:


	RSU’s	Weighted- Average Grant-Date Fair Value
Unvested balance as of January 1, 2024	3,897,957	$	24.85
Granted	1,590,725	18.19
Vested	(702,938)	30.23
Forfeited	(806,350)	23.24
Unvested balance as of June 30, 2024	3,979,394	$	21.79

The following is a vesting schedule of the expected vesting period related to the unvested RSUs as of June 30, 2024:


			Unvested RSU’s
Expected to vest within 1 year			1,391,812
Expected to vest between 1 to 2 years			1,500,612
Expected to vest between 2 to 3 years			1,086,970
Unvested balance as of June 30, 2024			3,979,394

Below is the compensation expense recognized related to the RSUs within the condensed consolidated statements of operations:

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Cost of direct salaries and benefits	$	154	$	143	$	280	$	216
Research and development	2,411		5,443		5,964		10,393
Sales and marketing	255		132		488		31
General and administrative	4,375		2,010		8,139		6,622
Total	$	7,195	$	7,728	$	14,871	$	17,262

As of June 30, 2024, estimated unrecognized expense for RSUs that are probable of vesting was $60,123 with such expense to be recognized over a weighted-average period of approximately 2.19 years.

Founder PSUs

During June 2021, the Company established a long-term incentive compensation plan for the Co-Founders, which consists of performance restricted stock-unit awards (the “Founder PSUs”), that will be settled in shares of Class A Common Stock pursuant to the 2021 Omnibus Incentive Plan, subject to the satisfaction of both service and market based vesting conditions.

The grant date fair value for the Founder PSUs was determined by a Monte Carlo simulation and discounted by the risk-free rate on the grant date and an expected volatility of 45%. The Founder PSUs are estimated to vest over a five year period, based on the achievement of specified price hurdles of the Company’s Class A Common Stock. The specified price hurdles of the Company’s Class A Common Stock will be measured on the volume-weighted average price per share for the trailing days during any 180 day period that ends within the applicable measurement period. In June 2021, the Company granted 4,208,617 Founder PSUs at a weighted average grant date fair value of $16.54. The Company records the expense related to these awards within general and administrative in the condensed consolidated statements of operations.

As of June 30, 2024, estimated unrecognized expense for Founder PSUs was $4,076 with such expense to be recognized over a weighted-average period of approximately 0.54 years.

Below is a summary of total compensation expense recorded in relation to the Company’s incentive plans within the condensed consolidated statements of operations:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
RSAs	$	—	$	3	$	—	$	10
RSUs	7,195		7,728		14,871		17,262
Founder PSUs	3,035		6,557		6,024		13,042
Total	$	10,230	$	14,288	$	20,895	$	30,314


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Cost of direct salaries and benefits	$	154	$	143	$	280	$	216
Research and development	2,411		5,445		5,964		10,397
Sales and marketing	256		132		488		31
General and administrative	7,409		8,568		14,163		19,670
Total	$	10,230	$	14,288	$	20,895	$	30,314

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CLEAR SECURE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

15. Net Income (Loss) per Common Share

Below is the calculation of basic and diluted net income (loss) per common share:


	Three Months Ended June 30, 2024				Three Months Ended June 30, 2023
	Class A		Class B		Class A		Class B
Basic:
Net income attributable to Clear Secure, Inc.	$	23,884	$	236	$	3,971	$	40
Weighted-average number of shares outstanding, basic	91,984,045		907,234		89,569,933		907,234
Net income per common share, basic:	$