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What changed in Clear Secure, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Clear Secure, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+449 added−447 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-02)

Top changes in Clear Secure, Inc.'s 2023 10-K

449 paragraphs added · 447 removed · 344 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

104 edited+33 added−37 removed42 unchanged
Biggest changeWhy Our Members Love Us We are obsessed with our members’ experience and seek to continually enhance the value we deliver to them through our platform as reflected by our strong member growth and our average 2022 NPS score of 76.We provide the following key benefits to our members: 6 Table of Contents • We seek to transform manual experiences into seamless end-to-end journeys: We are committed to making our members’ lives safer and easier.
Biggest changeFor our partners, we believe our growing Membership base and strong brand help increase adoption and our platform helps increase efficiencies, reduce fraud, and deliver a better experience to their customers and employees. 6 Tabl e of Contents Why Our Members Love Us We are obsessed with our Members’ experience and seek to continually enhance the value we deliver to them through our platform as reflected by our strong Member growth.
The ability to use CLEAR in more locations in more ways increases our utility to our members. The larger our member base becomes, the more valuable our platform becomes to our current and prospective partners who utilize our platform to better realize their business objectives.
The ability to use CLEAR in more locations and in more ways increases our utility to our Members. The larger our Member base becomes, the more valuable our platform becomes to our current and prospective partners who utilize our platform to better realize their business objectives.
Consumer Subscription Service CLEAR Plus CLEAR Plus is our consumer aviation subscription service, which enables access to predictable and fast experiences through dedicated entry lanes in airport security checkpoints across the nation as well as access to our broader network. With CLEAR Plus, members use our touchless biometric verification technology to validate their identity and travel credentials.
CLEAR Plus CLEAR Plus is our consumer aviation subscription service, which enables access to predictable and fast experiences through dedicated entry Lanes in airport security checkpoints across the nation as well as access to our broader network. With CLEAR Plus, Members use our touchless biometric verification technology to validate their identity and travel credentials.
As the likelihood that a domestic traveler would have access to a CLEAR lane increased, the value proposition of our CLEAR Plus offering increased substantially. In 2015, we embarked on a strategy to add additional local CLEAR lanes at stadiums and live entertainment venues.
As the likelihood that a domestic traveler would have access to a CLEAR Plus Lane increased, the value proposition of our CLEAR Plus offering increased substantially. In 2015, we embarked on a strategy to add additional local CLEAR Lanes at stadiums and live entertainment venues.
We own it by solving problems even if they “aren’t ours to solve” and commit to seeing them all the way through. • Great People: From our ambassadors in the field, to our corporate team members, people are at the heart of all that we do. • Obsessed with Member Experience: We are obsessed with our member experience.
We own it by solving problems even if they “aren’t ours to solve” and commit to seeing them all the way through. • Our Great People: From our Ambassadors in the field, to our corporate team members, people are at the heart of all that we do. • Obsessed with Member Experience: We are obsessed with our Member experience.
To interact with our platform, first time users go through our fast, secure, and easy enrollment process. Once a member is enrolled, each subsequent use of the platform to verify their identity is only a few simple steps. Our enroll once, verify everywhere approach benefits the entire CLEAR ecosystem by removing friction from members and increasing conversion for partners.
To interact with our platform, first time users go through our fast, secure, and easy enrollment process. Once a Member is enrolled, each subsequent use of the platform to verify their identity is only a few simple steps. Our enroll once, verify everywhere approach benefits the entire CLEAR ecosystem by removing friction for Members and increasing conversion for partners.
To ensure best-in-class member service we monitor real-time member feedback and quickly take action on information-driven insights. As we add new airport and non-airport locations (such as live sports and entertainment venues), the power of network effects makes CLEAR Plus more valuable to our members, further driving new member acquisition and higher member retention.
To ensure best-in-class Member service we monitor real-time Member feedback and quickly take action on information-driven insights. As we add new airport and non-airport locations (such as live sports and entertainment venues) and functionality, the power of network effects makes CLEAR Plus more valuable to our Members, further driving new Member acquisition and higher Member retention.
We also entered into strategic distribution partnerships with partners such as Delta Air Lines, United Airlines and American Express that promote our services to their customers on a discounted or subsidized basis which allows us to efficiently scale membership in CLEAR Plus.
We also entered into strategic distribution partnerships with partners such as Delta Air Lines, United Airlines, Alaska Airlines and American Express that promote our services to their customers on a discounted or subsidized basis which allows us to efficiently scale membership in CLEAR Plus.
As part of our agreement with TSA, we will leverage our marketing expertise, operational footprint and ambassador network to handle subscription renewal processing and new enrollments for the TSA PreCheck® program, as well as offer a CLEAR/TSA PreCheck® bundled subscription for customers who are new to both CLEAR and to TSA PreCheck®.
As part of our agreement with TSA, we will leverage our marketing expertise, operational footprint and Ambassador network to handle subscription renewal processing and new enrollments for the TSA PreCheck® program, as well as offer a CLEAR/TSA PreCheck® bundled subscription for customers who are new to both CLEAR Plus and to TSA PreCheck®.
Given the lengthy airport sales cycle and scarcity of airport real estate, it took us seven years to build a critical mass of airports to attract the first million members. Once we achieved this scale, the power of national network effects began to take hold.
Given the lengthy airport sales cycle and scarcity of airport real estate, it took us seven years to build a critical mass of airports to attract the first million Members. Once we achieved scale, the power of national network effects began to take hold.
Our passionate member base further drives viral, word of mouth marketing and high annual member retention rates. As we add partners, products and locations, our platform becomes more valuable to our members. In turn, as we grow membership, our platform is more valuable to our existing and prospective partners.
Our passionate Member base further drives word-of-mouth marketing and high annual Member retention rates. As we add partners, products and locations, our platform becomes more valuable to our Members. In turn, as we grow Membership, our platform is more valuable to our existing and prospective partners.
Our Member Acquisition and Retention Strategy We have focused our member acquisition strategy around delivering exceptional experiences to build brand trust as well as driving network effects by adding new partners, products and locations to increase our value proposition.
Our Member Acquisition and Retention Strategy We have focused our Member acquisition strategy around delivering exceptional experiences to build brand trust as well as driving network effects by adding new partners, products, uses and locations to increase our value proposition.
Platform Originated in High Security Aviation Environment We started in aviation security, a regulated environment requiring a robust physical and information security posture. By building our platform in this context, we invested in, and were held accountable for, industry leading security, scalability and reliability.
Platform Originated in High Security Aviation Environment We started in aviation security, a highly regulated environment requiring a robust physical and information security posture. By building our platform in this context, we invested in, and were held accountable for, industry leading security, scalability and reliability.
These use cases can be applied across verticals such as aviation and travel, hospitality, live sports and entertainment, healthcare, financial services and e-commerce, among others. 4 Table of Contents Our Offerings Secure Identity Platform Our secure identity platform is a multi-layered infrastructure consisting of both our front-end, including enrollment, verification and linking, and our robust, secure and scalable back-end.
These use cases can be applied across verticals such as aviation and travel, hospitality, live sports and entertainment, healthcare, financial services and e-commerce, among others. 4 Tabl e of Contents Our Offerings Secure Identity Platform Our secure identity platform is a multi-layered infrastructure consisting of both our front-end (including enrollment, verification and linking) and our robust, secure and scalable back-end.
Our information security core tenets include the application of encryption at rest and in transit, firewalls, multi-factor authentication, granular role-based access control, physical and personnel security (including training), intrusion detection and data loss prevention. We have a commitment to members being in control of their own information and never sell member data.
Our information security core tenets include the application of encryption at rest and in transit, firewalls, multi-factor authentication, specific role-based access control, physical and personnel security (including training), intrusion detection and data loss prevention. We have a commitment to Members being in control of their own information and never sell member data.
We provide flexibility for them to do so within their own branded solutions through our SDK and API integrations or directly with CLEAR. • We have a large, highly engaged and growing CLEAR member base: We have over 15 million CLEAR members, many of whom are frequent travelers and active consumers.
We provide flexibility for them to do so within their own branded solutions through our SDK and API integrations or directly with CLEAR. • We have a large, highly engaged and growing CLEAR Member base: We have over 20 million CLEAR Members, many of whom are frequent travelers and active consumers.
The DHS has certified our information security program at a FISMA High Rating (the highest designation according to the Federal Information Security Modernization Act). Our members provide us with their personal information on an opt-in basis with the understanding that their information is secure and will never be sold.
The DHS has certified our information security program under their purview at a FISMA High Rating (the highest designation according to the Federal Information Security Modernization Act). Our Members provide us with their personal information on an opt-in basis with the understanding that their information is secure and will never be sold.
Many of our members are also core customers of our partners. Other members can opt-in to a relationship with our partners. As our embedded base of members grow, our partners will benefit from our reach by accelerated adoption rates and economies of scale. • Our brand is trusted: We have built a trusted consumer brand with passionate members.
Many of our Members are also core customers of our partners. Other Members can opt-in to a relationship with our partners. As our embedded base of Members grows, our partners will benefit from our reach by accelerated adoption rates and economies of scale. • Our brand is trusted: We have built a trusted consumer brand with passionate Members.
In addition, our web site includes information concerning purchases and sales of our equity securities by our executive officers and directors, as well as disclosure relating to certain non-GAAP financial measures (as defined in Regulation G) promulgated under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that we may make public orally, telephonically, by webcast, by broadcast or by similar 14 Table of Contents means from time to time.
In addition, our web site includes information concerning purchases and sales of our equity securities by our executive officers and directors, as well as disclosure relating to certain non-GAAP financial measures (as defined in Regulation G) promulgated under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that we may make public orally, telephonically, by webcast, by broadcast or by similar means from time to time.
We operate through the Registered Traveler Program according to guidelines set forth by the federal government which in some cases are overseen directly by the federal government and in some cases are overseen indirectly through our airport or airline partners. As we have grown, our regulatory frameworks have evolved as well.
We operate through the Registered Traveler Program (“RT Program”) according to guidelines set forth by the federal government which in some cases are overseen directly by the federal government and in some cases are overseen indirectly through our airport or airline partners. As we have grown, our regulatory frameworks have evolved as well.
CLEAR is still executing on the original vision today, with Ms. Seidman-Becker and Mr. Cornick continuing to lead the business 13 years later. They are substantial owners of CLEAR and operate the business with the goal of long-term value creation. Ms. Seidman-Becker’s and Mr.
CLEAR is still executing on the original vision today, with Ms. Seidman Becker and Mr. Cornick continuing to lead the business 14 years later. They are substantial owners of CLEAR and operate the business with the goal of long-term value creation. Ms. Seidman Becker’s and Mr.
We have built an extensive physical footprint with a nationwide network of airports, stadiums and businesses to offer members frictionless, trusted experiences as they move and transact throughout the day in both physical and digital environments.
We have built an extensive physical footprint with a nationwide network of airports, stadiums and partners to offer Members frictionless, trusted experiences as they move and transact throughout the day in both physical and digital environments.
CLEAR creates job opportunities where we invest in the learning and development of our local employees and seek to develop partnerships which are mutually beneficial for us, our partners and the community. • We operate our own direct-to-consumer offering, creating strong alignment with our partners: We have over 13 years of experience operating CLEAR Plus, our owned and operated consumer subscription service.
CLEAR creates job opportunities where we invest in the learning and development of our local employees and seek to develop partnerships which are mutually beneficial for us, our partners and the community. • We operate our own direct-to-consumer offering, creating strong alignment with our aviation partners: We have over 14 years of experience operating CLEAR Plus, our owned and operated consumer subscription service.
Our Business Since 2010 we have been expanding our network, investing in our technology platform, strengthening our operations and developing our people to consistently deliver increased value to members and partners, resulting in the growth and trust of the CLEAR brand.
Our Business Since 2010 we have been expanding our network, investing in our technology platform, strengthening our operations and developing our team members to consistently deliver increased value to Members and partners, resulting in the growth and trust of the CLEAR brand.
We expect to expand CLEAR Plus through airport network expansion, increased market penetration in existing markets and new products in the aviation space. Additionally, we have a robust pipeline of new partners who increasingly recognize the need to deliver a fast, easy and secure experience to their customers—a true frictionless journey.
We expect to expand CLEAR Plus through airport network expansion, increased market penetration in existing markets, partnerships, and new products and services in the aviation space. Additionally, we have a robust pipeline of new CLEAR Verified partners who increasingly recognize the need to deliver a fast, easy and secure experience to their customers—a true frictionless journey.
Cornick’s prior 9 Table of Contents investment experience informs their efficient capital allocation strategy, and they have attracted a deeply experienced team to accelerate CLEAR’s next phase of growth. Our Growth Strategies We have a significant track record of member growth within our domestic aviation vertical, and our platform has numerous adjacencies for further expansion.
Cornick’s prior investment experience informs their efficient capital allocation strategy, and they have attracted a deeply experienced team to accelerate CLEAR’s next phase of growth. Our Growth Strategies We have a significant track record of Member growth within our domestic aviation vertical, and our platform has numerous adjacencies for further expansion.
CLEAR confirms identity on an opt-in basis using credential authentication (e.g., driver’s license, passport), best-of-breed biometric capture technology, liveness detection for anti-spoofing, biometric matching, backend identity proofing and other proprietary technologies to link an individual’s identity and their biometrics (e.g., eyes, face and fingerprints).
CLEAR confirms identity on an opt-in basis using document authentication (e.g., driver’s license, passport), best-of-breed biometric capture technology, liveness detection for anti-spoofing, biometric matching, backend identity proofing and other proprietary technologies to link an individual’s identity with their biometrics (e.g., eyes, face and fingerprints).
Lifetime Value is calculated by estimating the cumulative dollar contribution over the estimated lifetime of a CLEAR Plus member. To estimate retention rates we use CLEAR Plus Member Retention across annual cohorts in 2022.
Lifetime Value is calculated by estimating the cumulative dollar contribution over the estimated lifetime of a CLEAR Plus Member. To estimate retention rates we use CLEAR Plus Member Retention across annual cohorts in 2023.
Our passionate member base further drives viral, word of mouth marketing and high annual retention rates. Platform members include members who enrolled through our mobile app, our partners’ customers who have enrolled through our Powered by CLEAR solutions, and formerly paying CLEAR Plus members. Platform members can use CLEAR anywhere in our network outside of our CLEAR Plus service.
Our passionate Member base further drives viral, word-of-mouth marketing and high annual retention rates. Platform Members include Members who enrolled through our mobile app, our partners’ customers who have enrolled through our CLEAR Verified solutions, and formerly paying CLEAR Plus Members. Platform Members can use CLEAR anywhere in our network outside of our CLEAR Plus service.
We offer free trials in-airport and online and promotional pricing to select partners including Delta Air Lines and United Airlines frequent fliers, as well as a family plan for up to three household members at an additional $60 per year per family member.
We offer free trials in-airport and online and promotional pricing to select partners including Delta Air Lines, United Airlines and Alaska Airlines frequent fliers, as well as a family plan for up to three household members at an additional $99 per year per family member.
For example, California has passed a comprehensive data privacy law, the California Consumer Privacy Act of 2018 (“CCPA”), and other states including Virginia and Colorado have also passed 11 Table of Contents similar laws. Additionally, the California Privacy Rights Act (“CPRA”) took effect on January 1, 2023.
For example, California has passed a comprehensive data privacy law, the California Consumer Privacy Act of 2018 (“CCPA”), and other states including Virginia and Colorado have also passed similar laws. Additionally, the California Privacy Rights Act (“CPRA”) took effect on January 1, 2023.
See “Risk Factors—Risks Related to Regulation and Litigation— Any actual or perceived failure to comply with applicable laws relating to privacy and data protection may result in significant liability, negative publicity and erosion of trust, and increased regulation could materially adversely affect our business, results of operations and financial condition .” In addition, the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and their respective implementing regulations (collectively, “HIPAA”) impose specific requirements relating to the privacy, security and transmission of sensitive patient health information.
See “Risk Factors—Risks Related to Regulation and Litigation— Any actual or perceived failure to comply with applicable laws relating to privacy and data protection may result in significant liability, negative publicity and erosion of trust, and increased regulation could materially adversely affect our business, results of operations and financial condition ” and “— The laws and regulations that we are subject to or may become subject to are constantly evolving. ” In addition, the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and their respective implementing regulations (collectively, “HIPAA”) impose specific requirements relating to the privacy, security and transmission of sensitive patient health information.
Our largest CLEAR Plus member acquisition channel is in-airport (representing 66%, 58% and 69% of member acquisitions for the years ended December 31, 2022, 2021 and 2020, respectively), where our prominent branding and expansive physical footprint allow prospective members to engage with CLEAR’s brand, ambassadors and technology firsthand.
Our largest CLEAR Plus Member acquisition channel is in-airport (representing 65%, 66% and 58% of Member acquisitions for the years ended December 31, 2023, 2022 and 2021, respectively), where our prominent branding and expansive physical footprint allow prospective Members to engage with CLEAR’s brand, Ambassadors and technology firsthand.
Our ability to recruit talent benefits from our unique workplace culture and brand. None of our employees are covered by collective bargaining agreements, and we consider our employee relations to be good. Government Regulation Data and Privacy Our business is subject to U.S. federal, state and local laws and regulations.
Our ability to recruit talent benefits from our unique workplace culture and brand. None of our employees are covered by collective bargaining agreements, and we consider our employee relations to be good. 11 Tabl e of Contents Government Regulation Data and Privacy Our business is subject to U.S. federal, state and local laws and regulations.
We have a deep organizational commitment to preserving our members’ privacy and ensuring members have ultimate control of their personal information. This commitment has been core to our member pledge since our founding over 13 years ago.
We have a deep organizational commitment to preserving our Members’ privacy and ensuring Members have control of their personal information. This commitment has been core to our Member pledge since our founding over 14 years ago.
Our secure identity platform can power a wide range of use cases such as customer check-in, digital identity, account opening/know your customer, virtual queuing, licensing and professional credential verification, and age verification.
Our secure identity platform can power a wide range of use cases such as customer check-in, digital identity, account opening/KYC, virtual queuing, licensing and professional credential verification, and age verification.
While contract structure may vary by use case, these deals are typically multi-year, recurring contracts that drive revenue primarily through transaction fees charged either per use or per user over a predefined time period, which sometimes includes tiered pricing. In addition, they may also include one-time implementation fees, licensing fees or incremental transaction fees.
While contract structure may vary by use case, CLEAR Verified partnerships are typically multi-year, recurring contracts that drive revenue primarily through transaction fees charged either per use or per user over a predefined time period, which sometimes includes tiered pricing. In addition, they may also include one-time implementation fees, licensing fees or incremental transaction fees.
The SAFETY Act provides important legal liability protections for providers of qualified anti-terrorism products and services. Under the SAFETY Act, technology providers may apply to the DHS for coverage of the products and services. If granted coverage, such providers receive certain legal protections against product liability, professional liability and certain other claims that could arise following an act of terrorism.
Under the SAFETY Act, technology providers may apply to the DHS for coverage of the products and services. If granted coverage, such providers receive certain legal protections against product liability, professional liability and certain other claims that could arise following an act of terrorism.
We believe CLEAR Plus and TSA PreCheck® are highly complementary services and this channel is relevant to showcase not only the TSA PreCheck® value proposition, but also the power of the combination and the extension of a holistic Home to Gate travel journey. The partnership does not extend to performing physical security screening, which continues to be operated by TSA.
We believe CLEAR Plus and TSA PreCheck® are highly complementary services and this channel is relevant to showcase not only the TSA PreCheck® value proposition, but also the power of the combined products and the extension of a holistic travel journey. The partnership does not extend to performing physical security screening, which continues to be operated by the TSA.
We also manage a growing ambassador and field manager part-time and full-time workforce of approximately 2,800 who are deployed across our expansive network of locations to implement our platform and continue to build our brand reputation. We combine our on-the-ground operational expertise with strong customer acquisition and retention, digital marketing, software and mobile application development and cybersecurity capabilities.
We also manage a growing Ambassador and field manager part-time and full-time workforce of approximately 3,700 who are deployed across our expansive network of locations to implement our platform and continue to build our brand reputation. We combine our on-the-ground operational expertise with strong customer acquisition and retention, digital marketing, software and mobile application development and security capabilities.
We have been certified at the highest level of security by our government regulators. The Department of Homeland Security (“DHS”) has certified CLEAR’s information security program at a FISMA High Rating (the highest designation according to the Federal Information Security Modernization Act).
We have been certified at the highest level of security by our government regulators. The Department of Homeland Security (“DHS”) has certified our information security program under their purview at a FISMA High Rating (the highest designation according to the Federal Information Security Modernization Act).
CLEAR has been delivering friction-free experiences in airports for over a decade, achieving exceptional user delight and trust with CLEAR Plus, our consumer aviation subscription service. CLEAR Plus enables access to predictable and fast experiences through dedicated entry lanes in airport security checkpoints nationwide.
CLEAR has been delivering secure, friction-free experiences in airports for over 14 years, achieving exceptional user delight and trust with CLEAR Plus, our consumer aviation subscription service. CLEAR Plus enables access to predictable and fast experiences through dedicated entry lanes in airport security checkpoints nationwide.
The market in which we operate is highly fragmented and characterized by high growth, shifting user preferences, and introductions of new services and offerings. Our primary competitors are offline alternatives, including manual security checks and screening processes. These alternatives tend to be costly and involve significant manpower, time and resources.
Competition We compete for both our Members and our partners. The market in which we operate is highly fragmented and characterized by high growth, shifting user preferences, and introductions of new services and offerings. Our primary competitors are offline alternatives, including manual security checks and screening processes. These alternatives tend to be costly and involve significant manpower, time and resources.
See “Risk Factors—Risks Related to Our Business, Brand and Operations— We operate in a highly competitive market, and we may be unable to compete successfully against existing and future competitors .” Intellectual Property and Other Proprietary Rights Our intellectual property rights are valuable and important to our business.
See “Risk Factors—Risks Related to Our Business, Brand 10 Tabl e of Contents and Operations— We operate in a highly competitive market, and we may be unable to compete successfully against existing and future competitors .” Intellectual Property and Other Proprietary Rights Our intellectual property rights are valuable and important to our business.
We have confidence in our decisions and learn from our mistakes. As of December 31, 2022, we had 3,056 full-time employees with our largest workforces in New York, Los Angeles and Atlanta. We compete to attract and retain diverse and highly talented individuals, particularly people with expertise in engineering, product development and marketing.
We have confidence in our decisions and learn from our mistakes. As of December 31, 2023, we had 3,698 full-time employees with our largest workforces in New York, Los Angeles and Orlando. We compete to attract and retain diverse and highly talented individuals, particularly people with expertise in engineering, product development and marketing.
We have significant expertise implementing and seamlessly operating our platform’s combination of pod hardware, 8 Table of Contents biometric technology and physical human interactions across 64 regulated or complex environments, such as airports and live sporting events.
We have significant expertise implementing and seamlessly operating our platform’s combination of Pod hardware, biometric technology and physical human interactions across 75 regulated or complex environments, such as airports and live sporting events.
We also believe there are opportunities to continue to develop new features such as bag drop to improve the member and partner experience. • Launch TSA PreCheck® enrollment program: We believe our TSA PreCheck® enrollment award will drive significant growth for TSA’s program and a meaningful incremental revenue opportunity to CLEAR as we manage renewal processing and new enrollments for TSA PreCheck® subscriptions.
We also believe there are opportunities to continue to develop new features such as bag drop and concierge services to improve the member and partner experience. • Scale TSA PreCheck® enrollment program: We believe our TSA PreCheck® enrollment award will drive significant growth for TSA’s program and an incremental revenue opportunity to CLEAR as we manage renewal processing and new enrollments for TSA PreCheck® subscriptions.
Pursuant to 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.
Pursuant to 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.
Through our partnership with American Express, eligible cardmembers receive statement credits for all or a portion of their CLEAR Plus membership. We also offer discounted military, government and student pricing and children under 18 can use CLEAR Plus for free with an adult member.
Through our partnership with American Express, eligible cardmembers receive statement credits for all or a portion of their CLEAR Plus membership. We also offer discounted military and government pricing, and children under 18 can use CLEAR Plus for free with an adult Member. In 2023 we introduced our NextGen Identity+ standard.
We intend to accelerate our pace of innovation to add more features and use cases, to ultimately deliver greater value to our members. • Our ambassadors bring CLEAR to life for our members: Our passionate team of approximately 2,800 part-time and full-time nationwide CLEAR ambassadors and field managers enhance our members’ experience and in many instances bring our technology to life.
We intend to accelerate our pace of innovation to add more features and use cases, to ultimately deliver greater value to our Members. • Our Ambassadors bring CLEAR to life for our Members: Our passionate team of approximately 3,700 part-time and full-time nationwide CLEAR Ambassadors and field managers enhance our Members’ experience and bring our technology to life.
TSA PreCheck® Application Program In January 2020, we were selected by TSA as an awardee in the TSA Biometric PreCheck® Expansion Services and Vetting Program.
TSA PreCheck® Enrollment Provided by CLEAR In January 2020, we were selected by TSA as an awardee in the TSA Biometric PreCheck® Expansion Services and Vetting Program.
We benefit our partners in a variety of ways, including: • We are a committed partner for innovation: Partners turn to us to help them deliver safer, faster and easier experiences to their customers, who have increasingly high expectations for seamless end-to-end journeys.
We benefit our partners in a variety of ways, including: • We are a committed partner for innovation: Our easily integrated solutions help our CLEAR Verified partners deliver safer, faster and easier experiences to their customers, who have increasingly high expectations for seamless end-to-end journeys.
As we invest in our platform to enhance the CLEAR Plus member experience, our partners benefit from these enhancements. 7 Table of Contents We believe this creates natural alignment with our partners and makes us a trusted and forward-thinking partner to them.
As we invest in our platform to enhance the CLEAR Plus Member experience, our aviation partners benefit from these enhancements, such as NextGen Identity+. We believe this creates natural alignment with our aviation partners and makes us a trusted and forward-thinking partner to them.
Similarly, our partners trust CLEAR to enable them to deliver the same frictionless, fast and easy experiences to their own customers. Both our members and partners are passionate about CLEAR. Our business model is powered by network effects and characterized by efficient member acquisition and high member retention rates.
Similarly, our partners trust CLEAR to enable them to deliver the same frictionless and secure experiences to their own customers. Our business model is powered by network effects and characterized by efficient Member acquisition and high Member retention rates.
As we continue to innovate on the travel experience, we are proud to offer TSA PreCheck® Enrollment Provided by CLEAR–providing consumers with increased choice in where and how to sign up for this popular trusted traveler program–which we expect to soft launch in early 2023.
As we continue to innovate on the travel experience, we are proud to offer TSA PreCheck® Enrollment Provided by CLEAR–offering consumers increased choice in how and where to sign up for this popular trusted traveler program.
We also have registered the domain name www.clearme.com, and similar variations. We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective. Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, deemed unenforceable or otherwise challenged.
We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective. Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, deemed unenforceable or otherwise challenged.
Revenues from our partners, and the percentage of our total revenue from these partners, have historically been immaterial. Although platform members may not contribute directly to our revenues, they are valuable to our platform as they indirectly contribute to revenues and drive new partners to CLEAR.
Revenues from our partners, and the percentage of our total revenue from these partners, have historically been immaterial. Although platform Members may not contribute directly to our revenues, they are valuable to our platform as they indirectly contribute revenues and drive new partners to CLEAR. We believe there is a significant opportunity to expand our reach.
We have enabled 130 million Total Cumulative Platform Uses across our network of airport, sports and B2B partners as of December 31, 2022. Our approximately 2,800 hospitality and security focused part-time and full-time ambassadors and field managers on the ground bring our technology to life and work to deliver exceptional member experiences every day.
We have enabled approximately 181 million Total Cumulative Platform Uses across our network of airport, sports and CLEAR Verified partners as of December 31, 2023. Our approximately 3,700 hospitality and security focused part-time and full-time Ambassadors and field managers on the ground bring our technology to life in airports and work to deliver exceptional Member experiences every day.
ITEM 1. BUSINESS Overview Clear Secure, Inc. (the “Company” or “CLEAR”) is an identity company obsessed with the customer experience. We make everyday experiences frictionless by connecting your identity to the things that make you, YOU - transforming the way you live, work, and travel.
ITEM 1. BUSINESS Overview Clear Secure, Inc. (the “Company” or “CLEAR”) is an identity company making experiences safer and easier digitally and physically. We make everyday experiences frictionless by connecting your identity to all the things that make you, YOU - transforming the way you live, work, and travel.
These partnerships allow us to scale our use cases and membership, which enhances the value of our network, and earn revenue from platform members. Our expanding portfolio of use cases attracts new platform members directly to our platform and creates enhanced value for our CLEAR Plus members. As a result, we expect our platform member acquisition costs to remain low.
These partnerships allow us to scale our use cases and membership, which enhances the value of our network, and earn revenue from platform Members. Our expanding portfolio of use cases attracts new platform Members directly to our platform and creates enhanced value for our CLEAR Plus Members.
Our goal is for CLEAR to instill a feeling of being cared for, of being seen, and of feeling safe with predictable, secure and seamless experiences. • We expand how and where our members can use CLEAR: As of December 31, 2022, members can access our nationwide network of 48 airports covering 132 lanes, 16 sports and entertainment partners with priority lanes, and our growing B2B partners.
Our goal is for CLEAR to instill a feeling of being cared for, of being seen, and of feeling safe with predictable, secure and seamless experiences. • We expand how and where our Members can use CLEAR: As of December 31, 2023, Members can access our nationwide network of 56 airports covering 147 Lanes, 19 sports and entertainment partners with priority Lanes, and 20 global airports with RESERVE Powered by CLEAR virtual queuing Lanes.
Key elements of our growth strategy include: • Grow CLEAR Plus Members: We see growth opportunities in our CLEAR Plus member base. We believe we can continue to open CLEAR lanes in new airports and new CLEAR lanes in our existing airports. As of December 31, 2022, our airport coverage is approximately 60% of 2022 TSA checkpoint volume.
Key elements of our growth strategy include: • Grow CLEAR Plus Members: We see growth opportunities in our CLEAR Plus Member base. We believe we can continue to open CLEAR Lanes in new airports and new CLEAR Lanes in our existing airports.
In addition, we believe we can add a large number of new TSA PreCheck® subscribers on behalf of TSA. After a new TSA PreCheck® 5 Table of Contents customer is enrolled or renewed, we will offer the customer an opportunity to enroll in CLEAR on an opt-in basis.
We believe that there is a significant opportunity for us to process TSA PreCheck® membership renewals and that we can add a large number of new TSA PreCheck® subscribers on behalf of TSA. After a new TSA PreCheck® customer is enrolled or renewed, we offer the customer an opportunity to enroll in CLEAR Plus on an opt-in basis.
Operational Expertise at Scale Today, our owned and operated businesses such as CLEAR Plus and mobile applications are the largest users of our platform. Operating and scaling our own consumer-facing service, CLEAR Plus, over the past 13 years has given us experience and capabilities that are hard to replicate, and an environment for innovation that benefits all of our partners.
Operating and scaling our own consumer-facing service, CLEAR Plus, over the past 14 years has given us experience and capabilities that are hard to replicate, and an environment for innovation that benefits all of our partners.
Typically new platform members are driven to enroll by one of our partners who integrate with CLEAR to enable frictionless experiences for their customers. Our platform partners typically pay us based on the number of users or transaction volume.
Platform Members use CLEAR for free while our partners pay to use our technology solutions. Typically, new platform Members are driven to enroll by one of our partners who integrate with CLEAR to enable frictionless experiences for their customers.
We believe we have a proven platform business with numerous natural adjacencies and as our member base and product portfolio grows, we believe we will have the opportunity to grow into new verticals.
We believe we have a proven platform business with numerous natural adjacencies and as our Member base and product portfolio grows, we believe we will have the opportunity to grow into new verticals. • Acquisitions and corporate development opportunities: We may opportunistically pursue selective acquisitions and other corporate development opportunities to complement our existing platform capabilities and further accelerate our growth and platform adoption.
We believe our recognized and trusted brand, which is known for innovation and exceptional member experiences, gives our partners confidence that we will enhance and elevate their own customers’ experience. • Security is paramount: Security is our core competency. We have a deep organizational commitment to securing data and protecting member privacy and a robust cyber-security posture.
We believe our recognized and trusted brand, which is known for exceptional Member experiences, security, and innovation, gives our partners confidence that we will enhance and elevate their own customers’ experience. 7 Tabl e of Contents • Security is paramount: Security is our core competency.
Why Our Partners Love Us Our platform is designed to enable our partners to further their business objectives, better serve their customers’ needs and elevate their customers’ experiences. By transforming the end-to-end consumer journey, we believe CLEAR enables our partners to capture not just a greater share of their customers’ wallet, but a greater share of their overall lives.
Why Our Partners Love Us Our platform is designed to enable our partners to further their business objectives, better serve their customers’ needs and elevate their customers’ experiences. By transforming the end-to-end consumer journey, we believe CLEAR enables our partners to deliver a better experience for their customers, helps to drive adoption, and reduce operational overhead.
See the discussion contained in the “Risk Factors” section of this annual report for the fiscal year ended December 31, 2022 (“Annual Report on Form 10-K”) for information regarding how actions by governmental stakeholders and regulatory authorities or changes in legislation and regulation in the jurisdictions in which we operate may have a material adverse effect on our business. 12 Table of Contents Corporate History The Company (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”) and its wholly owned subsidiaries.
See the discussion contained in the “Risk Factors” section of this annual report for the fiscal year ended December 31, 2023 (“Annual Report on Form 10-K”) for information regarding how actions by governmental stakeholders and regulatory authorities or changes in legislation and regulation in the jurisdictions in which we operate may have a material adverse effect on our business.
The scalability of our platform is demonstrated by our ability to quickly launch new features. For example, in 2022 we built a web experience that can be embedded into a partners native ecosystem so the partner can leverage our verification and enrollment technology.
We have spent more than 14 years to create our scalable and secure back-end and our easy-to-use consumer front-end. The scalability of our platform is demonstrated by our ability to quickly launch new features. We built a web experience that can be embedded into a partner's native ecosystem so the partner can leverage our verification and enrollment technology.
In 2021, we acquired Whyline, Inc., a provider of virtual queuing and appointment technology, and Atlas Certified, an automated solution to verify professional licenses and certification data across industries. • International expansion: Our platform is highly scalable and can be rapidly deployed in new markets. We believe that there is likely to be global demand for our secure identity platform.
Over the years, we have completed various strategic acquisitions, such as Whyline, Inc., a provider of virtual queuing and appointment technology, in 2021, Atlas Certified, an automated solution to verify professional licenses and certification data across industries, in 2021, and Sora ID, a reusable KYC provider, in 2023. • International expansion: Our platform is highly scalable and can be rapidly deployed in new markets.
To establish and protect our proprietary rights, we rely on a combination of patents, trademarks, copyrights, trade secrets, know-how, confidentiality provisions, non-disclosure agreements, assignment agreements, and other legal and contractual rights with employees, contractors, and other third parties to establish and protect our proprietary technology and intellectual property rights. 10 Table of Contents As of December 31, 2022, we have 47 issued United States patents (with six additional patents allowed) and 63 patent applications pending in the United States relating to certain aspects of our technology.
To establish and protect our proprietary rights, we rely on a combination of patents, trademarks, copyrights, trade secrets, know-how, confidentiality provisions, non-disclosure agreements, assignment agreements, and other legal and contractual rights with employees, contractors, and other third parties to establish and protect our proprietary technology and intellectual property rights.
In addition, as we expand in Europe we are subject to the General Data Protection Regulation (“GDPR”). GDPR took effect in May 2018 and includes operational requirements for companies that are established in the European Economic Area (“EEA”) or process personal data of individuals located in the EEA.
GDPR took effect in May 2018 and includes operational requirements for companies that are established in the European Economic Area (“EEA”) or process personal data of individuals located in the EEA. These requirements govern the processing of personal data and include significant penalties for non-compliance.
Our Competitive Advantages Trusted and Extensible Brand with Passionate Member Base From our founding, we have been obsessed with the CLEAR member experience. We have been expanding our network, investing in our technology platform, strengthening our operations and developing our people to consistently deliver increased value to members and partners, resulting in our trusted and valued brand.
We have been expanding our network, investing in our technology platform, strengthening our operations and developing our people to consistently deliver increased value to Members and partners, resulting in our trusted and valued brand. Our passionate Member base drives viral, word-of-mouth marketing and high annual retention rates.
We continue to operate in aviation security today, and we use a single platform across all our use cases, both for our owned and operated businesses, such as CLEAR Plus, and for the experiences offered by our partners. As such, we bring our high standards of security, scalability, and reliability to every environment in which members engage with CLEAR.
We continue to operate in aviation security today, and we use the same foundational platform across all our use cases, which is then customized for our owned and operated businesses, such as CLEAR Plus, and for the CLEAR Verified experiences offered by our partners.
Customer Acquisition Cost is calculated by dividing total 2022 airport-related marketing spend, inclusive of commissions, by total new paying CLEAR Plus members who joined during 2022. On this basis, we achieved a Lifetime Value to Customer Acquisition Cost ratio of approximately 22 times for members who joined during 2022.
Customer Acquisition Cost is calculated by dividing total 2023 airport-related marketing spend, inclusive of commissions, by total new paying CLEAR Plus Members who joined during 2023.
Additional services can be easily integrated into this platform. • Credentials, which allow members access to unique experiences by verifying their identity and health attributes such as our Health Pass product which validates COVID-19 test results, vaccination status, and health screening responses. • Touchless Access to select partner services and venues, such as airport lounges and event venues.
Additional services can be easily integrated into this platform. • Credentials —Members can access unique experiences by verifying their identity and health attributes. • Touchless Access —Members enjoy touchless access to select partner services and venues, such as stadiums and arenas.
The continued expansion of our partnerships enable our partners to integrate with CLEAR and our members to use CLEAR in new places and in new ways. Today, our owned and operated businesses such as CLEAR Plus (our consumer aviation subscription service) and our mobile applications are the largest users of our platform.
The continued expansion of our capabilities enable our partners to integrate CLEAR Verified solutions and give our Members new places and new ways to use CLEAR. Today, our owned and operated business CLEAR Plus (our consumer aviation subscription service) is the largest user of our platform, followed by our CLEAR Verified partners.
As of December 31, 2022, our expansive network of partners and use cases provide our members with access to our nationwide network of 48 airports covering 132 lanes, 16 sports and entertainment partners with priority lanes, and a growing list of B2B partners.
As of December 31, 2023, our expansive network of partners and use cases provide our Members with access to 147 CLEAR Plus Lanes across 56 airports nationwide, 19 sports and entertainment partners with priority Lanes, 20 airports globally with RESERVE Powered by CLEAR virtual queuing Lanes and a growing list of B2B CLEAR Verified partners.
They provide on-location high-touch sales and marketing support which enables new members to enroll and existing members to use our platform with comfort and ease. They also educate our members about our technology, security and privacy. • Trust and privacy are the foundation of CLEAR: We have been certified at the highest level of security by our government regulators.
They also educate our Members about our technology, and our commitment to security and privacy. • Security and privacy are the foundation of CLEAR: We have been certified at the highest level of security by our government regulators.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur efforts to protect our confidential and sensitive data and the personal information we receive may also be unsuccessful due to software bugs or other technical malfunctions; employee, contractor, or service provider error or malfeasance, including defects or vulnerabilities in our suppliers’ or service providers’ information technology systems or offerings, including products and offerings that we integrate into our products and services; breaches of physical security of our facilities or technical infrastructure; or other threats that may surface or evolve. 25 Table of Contents If we were to experience a breach of our systems and were unable to protect sensitive data, we may not be able to remedy such breach, we may be required by law to notify regulators and individuals whose personal information was used or disclosed without authorization and compensate them for any damages, we may be subject to claims against us, including government enforcement actions or investigations, fines and litigation, and we may have to expend significant capital and other resources to mitigate the impact of such events, including developing and implementing protections to prevent future events of this nature from occurring.
Biggest changeIf we were to experience a breach of our systems and were unable to protect sensitive data, we may not be able to remedy such breach, we may be required by law to notify regulators and individuals whose personal information was used or disclosed without authorization and compensate them for any damages, we may be subject to claims against us, including government enforcement actions or investigations, fines and litigation, and we may have to expend significant capital and other resources to mitigate the impact of such events, including developing and implementing protections to prevent future events of this nature from occurring.
Our business and financial results depend significantly on adding new members, retaining existing members, increasing the number of CLEAR Plus members, including by converting non-paying members to paying members, and the utilization of our platform by our members. There can be no assurances that we will be successful at accomplishing any of the foregoing.
Our business and financial results depend significantly on adding new and retaining existing Members, increasing the number of CLEAR Plus Members, including by converting non-paying Members to paying Members, and the utilization of our platform by our Members. There can be no assurances that we will be successful at accomplishing any of the foregoing.
Any failure to meet and address these factors could adversely affect our business, results of operations and financial condition. Increased adoption of new technological solutions and services, including third-party identity verification solutions and credential authentication solutions, at locations where we operate or may operate in the future could impact our business.
Any failure to meet and address these factors could adversely affect our business, results of operations and financial condition. Increased adoption of new technological solutions and services, including third-party identity verification and credential authentication solutions, at locations where we operate or may operate in the future could impact our business.
Private industry and governmental agencies have increased their efforts related to developing and launching identity verification solutions and credential authentication solutions, and we expect this trend to continue.
Private industry and governmental agencies have increased their efforts related to developing and launching identity verification and credential authentication solutions, and we expect this trend to continue.
State governments are issuing driver’s licenses in digital formats. Additionally, airlines have launched their own identity and credential authentication initiatives, in some cases with other identity verification partners.
Additionally, state governments are issuing driver’s licenses in digital formats, and airlines have launched their own identity and credential authentication initiatives, in some cases with other identity verification partners.
We are dependent on CLEAR Plus memberships for a significant portion of our future revenue, and a significant reduction in CLEAR Plus memberships would reduce our future revenue and harm our anticipated operating results.
We are dependent on CLEAR Plus memberships for a significant portion of our revenue, and a significant reduction in CLEAR Plus memberships would reduce our future revenue and harm our anticipated operating results.
In addition, our business operations at airports involve coordination with the DHS, and we are subject to audits and reviews by the DHS and TSA.
In addition, our business operations at airports involve coordination with the DHS, and we are subject to audits and reviews by the DHS and the TSA.
We have incurred and will continue to incur substantial stock-based compensation expense related to the Founder PSUs, which may have an adverse effect on our financial condition and results of operations and may result in substantial dilution. We granted the founder performance-based restricted stock unit awards (“Founder PSUs”) following the pricing of our IPO.
We have incurred and will continue to incur substantial stock-based compensation expense related to the Founder PSUs, which may have an adverse effect on our financial condition and results of operations and may result in substantial dilution. We granted the founder performance-based restricted stock unit awards (the “Founder PSUs”) following the pricing of our IPO.
Our systems and operations or those of our third-party providers and partners could be exposed to damage, interruption, security breach and other risks from, among other things, computer viruses and other malicious software, denial-of-service attacks and other cyberattacks, acts of terrorism, human error, sabotage, natural disasters, telecommunications failures, financial insolvency, bankruptcy and similar events, and may be subject to financial, legal or regulatory issues, each of which may impose additional costs or requirements on us, expose us to potential liability or require us to expend significant resources on data security and in responding to any such actual or perceived breach, or prevent these third parties from providing services to us or our members on our behalf.
Our systems and operations or those of our third-party providers and partners could be exposed to damage, interruption, security breach and other risks from, among other things, computer viruses and other malicious software, denial-of-service attacks and other cyberattacks, acts of terrorism, human error, fraud, sabotage, natural disasters, telecommunications failures, financial insolvency, bankruptcy and similar events, and may be subject to financial, legal or regulatory issues, each of which may impose additional costs or requirements on us, expose us to potential liability or require us to expend significant resources on data security and in responding to any such actual or perceived breach, or prevent these third parties from providing services to us or our Members on our behalf.
Any real or perceived errors, bugs or vulnerabilities discovered in our code or systems released to production or found in third-party software that is incorporated into our code could result in poor system performance, an interruption in the availability of our platform, systems or websites (including our ability to sell our memberships online), data loss, errors in completing enrollments or verifications, negative publicity, damage to our reputation, loss of existing and potential members or partners, and loss of revenue, any of which could materially adversely affect our business, results of operations and financial condition.
Any real or perceived errors, bugs or vulnerabilities discovered in our code or systems released to production or found in third-party software that is incorporated into our code could result in poor system performance, an interruption in the availability of our platform, systems or websites (including our ability to sell our memberships online), data loss or breach, errors in completing enrollments or verifications, negative publicity, damage to our reputation, loss of existing and potential Members or partners, and loss of revenue, any of which could materially adversely affect our business, results of operations and financial condition.
We also face indirect competition from solutions that could be developed in-house by our existing and future partners, including companies in the airline and entertainment industries, and by governmental agencies, which could result in lost revenues and otherwise have a material adverse effect on our business, results of operations and financial condition.
We also face indirect competition from solutions that could be developed in-house by our existing and future partners, including companies in the airline, entertainment, healthcare and financial industries, and by governmental agencies, which could result in lost revenues and otherwise have a material adverse effect on our business, results of operations and financial condition.
These factors include, among others: • our operating and financial performance and prospects; • quarterly variations in the rate of growth (if any) of our financial or operational indicators, such as earnings per share, net income, revenues, Total Cumulative Enrollments, Total Cumulative Platform Uses, Annual CLEAR Plus Net Member Retention, Total Bookings, Free Cash Flow and Adjusted Net Income (Loss) Per Common Share; • the public reaction to our press releases, our other public announcements and our filings with the SEC; • strategic actions by our competitors or third parties; • changes in operating performance and the stock market valuations of other companies; 39 Table of Contents • announcements related to litigation; • our failure to meet revenue or earnings estimates made by research analysts or other investors; • changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts; • speculation in the press or investment community; • sales of our Common Stock by us or our stockholders, or the perception that such sales may occur; • changes in accounting principles, policies, guidance, interpretations or standards; • additions or departures of key management personnel; • actions by our stockholders; • general market conditions; • domestic and international economic, legal and regulatory factors unrelated to our performance; • material weakness in our internal control over financial reporting; and • the realization of any risks described under this “Risk Factors” section, or other risks that may materialize in the future.
These factors include, among others: • our operating and financial performance and prospects; • quarterly variations in the rate of growth (if any) of our financial or operational indicators, such as earnings per share, net income, revenues, Total Cumulative Enrollments, Total Cumulative platform Uses, Annual CLEAR Plus Net Member Retention, Total Bookings, Free Cash Flow and Adjusted Net Income (Loss) Per Common Share; • the public reaction to our press releases, our other public announcements and our filings with the SEC; • strategic actions by our competitors or third parties; • changes in operating performance and the stock market valuations of other companies; • announcements related to litigation; • our failure to meet revenue or earnings estimates made by research analysts or other investors; 39 Tabl e of Contents • changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts; • speculation in the press or investment community; • sales of our Common Stock by us or our stockholders, or the perception that such sales may occur; • changes in accounting principles, policies, guidance, interpretations or standards; • additions or departures of key management personnel; • actions by our stockholders; • general market conditions; • domestic and international economic, legal and regulatory factors unrelated to our performance; • material weakness in our internal control over financial reporting; and • the realization of any risks described under this “Risk Factors” section, or other risks that may materialize in the future.
The failure of these systems to perform as designed, the vulnerability of these systems to security breaches or the inability to enhance our information technology capabilities, and our inability to find suitable alternatives in a timely and efficient manner and on acceptable terms, or at all, could disrupt our operations and subject us to losses or costs to remediate any of these deficiencies.
The failure of these systems to perform as designed, the vulnerability of these systems to security breaches and fraud or the inability to enhance our information technology capabilities, and our inability to find suitable alternatives in a timely and efficient manner and on acceptable terms, or at all, could disrupt our operations and subject us to losses or costs to remediate any of these deficiencies.
Future exchanges by the CLEAR Post-IPO Members (or their transferees or other assignees) of Alclear Units and corresponding shares of Class C Common Stock or Class D Common Stock, as the case may be, for shares of our Class A Common Stock or Class B Common Stock, respectively, and purchases of Alclear Units and corresponding shares of Class C Common Stock or Class D Common Stock, as the case may be, from CLEAR Post-IPO Members (or their transferees or other assignees) are expected to produce favorable tax attributes.
Exchanges by the CLEAR Post-IPO Members (or their transferees or other assignees) of Alclear Units and corresponding shares of Class C Common Stock or Class D Common Stock, as the case may be, for shares of our Class A Common Stock or Class B Common Stock, respectively, and purchases of Alclear Units and corresponding shares of Class C Common Stock or Class D Common Stock, as the case may be, from CLEAR Post-IPO Members (or their transferees or other assignees) are expected to produce favorable tax attributes.
Any of the foregoing could materially and adversely affect our business, results of operations and financial condition. If we are not able to meet evolving stakeholder expectations or to maintain the value and reputation of our brand, our business and financial results may be harmed. We believe that our brand is important to attracting and retaining members and partners.
Any of the foregoing could materially and adversely affect our business, results of operations and financial condition. If we are not able to meet stakeholder expectations or to maintain the value and reputation of our brand, our business and financial results may be harmed. We believe that our brand is important to attracting and retaining Members and partners.
See “Risks Related to Regulation and Litigation— We may be sued by third parties for alleged infringement, misappropriation, or other violations of intellectual property and other proprietary rights .” Risks Related to Regulation and Litigation We must continue to meet the standards set for our airport operations by governmental stakeholders.
See “Risks Related to Regulation and Litigation— We may be sued by third parties for alleged infringement, misappropriation, or other violations of intellectual property and other proprietary rights .” Risks Related to Regulation and Litigation We must continue to meet the evolving standards set for our airport operations by governmental stakeholders.
Our business is dependent upon our ability to accurately confirm identities and provide the ability to connect attributes, such as boarding passes, tickets, health information or payment information, to these identities, with minimal system interruption. Our software may now or in the future contain undetected errors, bugs or vulnerabilities.
Our business is dependent upon our ability to accurately confirm identities and provide the ability to connect attributes, such as boarding passes, tickets, health information or payment information, to these identities, with minimal system interruption. Our software may now or in the future contain errors, bugs or vulnerabilities.
Our platform is highly complex, and any undetected errors, systems failures or our failure to successfully implement upgrades and new technology could materially adversely affect our business, results of operations and financial condition. Our platform is a complex system composed of many interoperating components and software.
Our platform is highly complex, and any errors, systems failures or our failure to successfully implement upgrades and new technology could materially adversely affect our business, results of operations and financial condition. Our platform is a complex system composed of many interoperating components and software.
Our business and prospects are dependent on our ability to build, maintain and expand trust in our brand and our platform from a variety of different stakeholders. Building and maintaining our brand depends on our ability to provide consistent, high-quality services to our members and partners.
Our business and prospects are dependent on our ability to build, maintain and expand trust in our brand and our platform from a variety of different stakeholders. Building and maintaining our brand depends on our ability to provide consistent, accurate, high-quality services to our Members and partners.
An inability to accurately understand the expectations of our stakeholders or forecast changes in such expectations, or any failure to meet the expectations of our stakeholders, could have a material adverse effect on our brand, and therefore on our business, results of operations and financial condition.
An inability to accurately understand the expectations of or forecast changes in our stakeholders, or any failure to meet the expectations of our stakeholders, could have a material adverse effect on our brand, and therefore on our business, results of operations and financial condition.
Our business depends on earning and maintaining the trust of our members and our partners and any breaches or alleged breaches of our systems could adversely affect our business, including by impacting the trust that we have gained.
Our business depends on earning and maintaining the trust of our Members and our partners and any actual or alleged breaches of our systems could adversely affect our business, including by impacting the trust that we have gained.
Other events or factors beyond our control can disrupt travel and events within the United States and globally or otherwise result in declines in travel demand and the demand to attend events.
Other events or factors beyond our control can disrupt travel and operations within the United States and globally or otherwise result in declines in travel demand and the demand to attend events.
The imposition of the excise tax on repurchases of our shares will increase the cost to us of making repurchases and may cause us to reduce the number of shares repurchased pursuant to the repurchase program.
The imposition of the excise tax on repurchases of our shares may increase the cost to us of making repurchases and may cause us to reduce the number of shares repurchased pursuant to the repurchase program.
For a more complete discussion of the material risks facing our business, please see below. • failure to add new and retain existing members, increase CLEAR Plus memberships or increase the utilization of our platform; • failure to add new partners, retain existing partners or profit from partner relationships; • our inability to maintain the value and reputation of our brand; • risks associated with our financial performance, including the risk of increased expenses and net losses in the near term and our ability to achieve profitability in the future; • failure to successfully compete against existing and future competitors, and the highly competitive market in which we operate; • risks associated with the increased adoption of new technological solutions and services, including third-party identity verification solutions and credential authentication solutions, at locations where we operate or may operate in the future; • public confidence in, and acceptance of, identity platforms and biometrics generally, and our platform specifically; • risks associated with our commercial agreements and strategic alliances, as well as potential indemnification obligations, and certain of our agreements with third parties; • risks associated with our growth and ability to develop and introduce platform features and offerings; • risks associated with any decline or disruption in the travel industry or a general economic downturn; • risks associated with breaches of our information technology systems, protection of our intellectual property, technology and confidential information and failures by third-party technology and devices on which our business relies; • our reliance on third-party technology and information systems to help complete critical business functions and our ability to find alternatives if such third-party technology and information systems fail; • limitations of the SAFETY Act’s liability protections; • our ability to meet the standards set for our airport operations by governmental stakeholders; and • failure to comply with the constantly evolving laws and regulations that we are subject to or may become subject to.
For a more complete discussion of the material risks facing our business, please see below. • failure to add new and retain existing Members, increase CLEAR Plus memberships or increase the utilization of our platform; • failure to add new or retain existing partners or profit from partner relationships; • our inability to meet stakeholder expectations or maintain the value and reputation of our brand; • risks associated with our financial performance, including the risk of increased expenses and net losses in the near term and our ability to achieve or sustain profitability in the future; 13 Tabl e of Contents • failure to successfully compete against existing and future competitors, and the highly competitive market in which we operate; • risks associated with the increased adoption of new technological solutions and services, including third-party identity verification solutions and credential authentication solutions, at locations where we operate or may operate in the future; • public confidence in, and acceptance of, identity platforms and biometrics generally, and our platform specifically; • risks associated with our commercial agreements and strategic alliances, as well as potential indemnification obligations, and certain of our agreements with third parties; • risks associated with our growth and ability to develop and introduce platform features and offerings; • risks associated with any decline or disruption in the travel industry or a general economic downturn; • risks associated with breaches of our information technology systems, protection of our intellectual property, technology and confidential information and failures by third-party technology and devices on which our business relies; • our reliance on third-party technology and information systems to help complete critical business functions and our ability to find alternatives if such third-party technology and information systems fail; • limitations of the SAFETY Act’s liability protections; • our ability to meet the standards set for our airport operations by governmental stakeholders; and • failure to comply with the constantly evolving laws and regulations that we are subject to or may become subject to.
The attractiveness of our solutions to members, partners and the venues where we operate is impacted by a number of factors, including the willingness of individuals to provide their personal information, including biometric information, to private or governmental entities, the level of confidence that such information can be stored safely and securely, and trust that such information will not be misused or breached.
The attractiveness of our solutions to Members, partners and the locations where we operate is impacted by a number of factors, including the willingness of individuals to provide their personal information, including biometric information, to private or governmental entities, the level of confidence that such information can be stored safely and securely, and trust that such information will not be misused or breached.
Under Alclear’s Operating Agreement, we expect Alclear from time to time to make pro rata distributions in cash to its unitholders, including us, the Founder Post-IPO Members and the other CLEAR Post-IPO Members, in amounts sufficient to cover taxes on our allocable share of the taxable income of Alclear and payments we are obligated to make under the Tax Receivable Agreement.
Under Alclear’s Operating Agreement, we expect Alclear from time to time to make pro rata distributions in cash to its unitholders, including us, the Founder Post-IPO Members and the other CLEAR Post-IPO Members, in amounts intended to cover taxes on our allocable share of the taxable income of Alclear and payments we are obligated to make under the Tax Receivable Agreement.
The Tax Receivable Agreement provides for the payment by us to the CLEAR Post-IPO Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize (computed using simplifying assumptions to address the impact of state and local taxes) as a result of (i) any increase in tax basis in Alclear’s assets resulting from (a) exchanges by the CLEAR Post-IPO Members (or their transferees or other assignees) of Alclear Units (along with the corresponding shares of our Class C Common Stock or Class D Common Stock, as applicable) for shares of our Class A Common Stock or Class B Common Stock, as applicable, and purchases of Alclear Units and corresponding shares of Class C Common Stock or Class D Common Stock, as the case may be, from CLEAR Post-IPO Members (or their transferees or other assignees) or (b) payments under the Tax Receivable Agreement, and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the Tax Receivable Agreement.
The Tax Receivable Agreement provides for the payment by us to the CLEAR Post-IPO Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize 35 Tabl e of Contents (computed using simplifying assumptions to address the impact of state and local taxes) as a result of (i) any increase in tax basis in Alclear’s assets resulting from (a) exchanges by the CLEAR Post-IPO Members (or their transferees or other assignees) of Alclear Units (along with the corresponding shares of our Class C Common Stock or Class D Common Stock, as applicable) for shares of our Class A Common Stock or Class B Common Stock, as applicable, and purchases of Alclear Units and corresponding shares of Class C Common Stock or Class D Common Stock, as the case may be, from CLEAR Post-IPO Members (or their transferees or other assignees) or (b) payments under the Tax Receivable Agreement, and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the Tax Receivable Agreement.
Even alleged infringement claims that lack merit may be distracting and expensive to defend and could contribute to reduced public confidence in our platform, and even if meritorious but ultimately unsuccessful, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and require use to incur significant expenditures.
Even alleged infringement claims that lack merit may be distracting and expensive to defend and could contribute to reduced public confidence in our platform, and even if meritorious but ultimately unsuccessful, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and require us to incur significant expenditures.
Cornick (the “Co-Founders”), together with the other persons in their permitted ownership groups (which include the Founder Post-IPO Members), collectively beneficially own, in aggregate, less than a majority of the combined voting power of our outstanding shares of Common Stock entitled to vote generally in the election of directors (the “Triggering Event”): • the 20 vote per share feature of our Class B Common Stock and Class D Common Stock; • after the Triggering Event, the sole ability of the Board to fill a vacancy on the board of directors; • prohibiting our stockholders from calling a special meeting of stockholders; • after the Triggering Event, no ability for our stockholders to take action by written consent; • after the Triggering Event, certain amendments to our Certificate of Incorporation or amendments to our by-laws will require the approval of 66 2/3% of the combined voting power of our outstanding shares of Common Stock; • after the Triggering Event, removal of directors will require the approval of holders of at least 662∕3% of the combined voting power of our outstanding shares of Common Stock; and • authorizing “blank check” preferred stock, the terms and issuance of which can be determined by our Board without any need for action by stockholders.
Cornick (the “Co- 38 Tabl e of Contents Founders”), together with the other persons in their permitted ownership groups (which include the Founder Post-IPO Members), collectively beneficially own, in aggregate, less than a majority of the combined voting power of our outstanding shares of Common Stock entitled to vote generally in the election of directors (the “Triggering Event”): • the 20 vote per share feature of our Class B Common Stock and Class D Common Stock; • after the Triggering Event, the sole ability of the Board to fill a vacancy on the board of directors; • prohibiting our stockholders from calling a special meeting of stockholders; • after the Triggering Event, no ability for our stockholders to take action by written consent; • after the Triggering Event, certain amendments to our Certificate of Incorporation or amendments to our by-laws will require the approval of 66 2/3% of the combined voting power of our outstanding shares of Common Stock; • after the Triggering Event, removal of directors will require the approval of holders of at least 66 2∕3% of the combined voting power of our outstanding shares of Common Stock; and • authorizing “blank check” preferred stock, the terms and issuance of which can be determined by our Board without any need for action by stockholders.
We may be required to incur significantly higher expenditures, including marketing, research and development, and compensation, than we currently anticipate to achieve the foregoing results. Such expenditures could have a greater negative impact on our results of operations if our revenues do not increase sufficiently.
We may be required to incur significantly higher expenditures, including marketing, equipment, labor, research and development, and compensation, than we currently anticipate to achieve the foregoing results. Such expenditures could have a greater negative impact on our results of operations if our revenues do not increase sufficiently.
We have derived substantially all of our historical revenue from CLEAR Plus, our consumer aviation subscription service. To grow and diversify our revenue, we will need to increase the number of paying members. Failure to do so could adversely affect our business, results of operations and financial condition.
We have derived substantially all of our historical revenue from CLEAR Plus, our consumer aviation subscription service. To grow and diversify our revenue, we will need to increase the number of paying Members and the utilization of our platform. Failure to do so could adversely affect our business, results of operations and financial condition.
We relaunched in 2010 at two U.S. airports as the only private company authorized by the DHS to automate the process for confirming traveler identity and validating travel documents for enrolled CLEAR members, and we continue to provide airport services to our members through the Registered Traveler Program.
We relaunched in 2010 at two U.S. airports as the only private company authorized by the DHS to automate the process for confirming traveler identity and validating travel documents for enrolled CLEAR Members, and we continue to provide airport services to our Members through the RT Program.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and 33 Table of Contents Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources.
This risk is enhanced considering we have little experience in acquiring other businesses. We may not be able to find and identify desirable acquisition targets or we may not be successful in entering into an agreement with any one target.
This risk is enhanced considering we have limited experience in acquiring other businesses. We may not be able to find and identify desirable acquisition targets or we may not be successful in entering into an agreement with any one target.
We have limited experience operating outside the United States and any future international expansion strategy will subject us to additional costs and risks and our plans may not be successful. We have, and in the future we may continue to, expand our presence internationally.
We have limited experience operating outside the United States and any future international expansion strategy will subject us to additional costs and risks and our plans may not be successful. We have, and in the future we may continue to, expand our operations internationally.
Further, even when the Founder Post-IPO Members cease to collectively own shares of our Common Stock representing a majority of the combined voting power of our outstanding shares of Common Stock, 35 Table of Contents for so long as the Founder Post-IPO Members continue to collectively own a significant percentage of our stock, they will still be able to significantly influence the composition of our Board and the approval of actions requiring stockholder approval through their voting power.
Further, even when the Founder Post-IPO Members cease to collectively own shares of our Common Stock representing a majority of the combined voting power of our outstanding shares of Common Stock, for so long as the Founder Post-IPO Members continue to collectively own a significant percentage of our stock, they will still be able to significantly influence the composition of our Board and the approval of actions requiring stockholder approval through their voting power.
If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing 40 Table of Contents bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us, which could have an adverse effect on our business, financial condition and results of operations.
If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing 40 Tabl e of Contents bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us, which could have an adverse effect on our business, financial condition and results of operations.
The future success of programs we operate with support or authorization from governmental stakeholders depends on our continued ability to satisfy the regulatory standards they promulgate such as those set forth above and maintain their support generally, including continuing to adhere to airport security protocols and maintaining an appropriate data security platform.
The future success of programs we operate with support or authorization from governmental stakeholders depends on our continued ability to satisfy the regulatory standards they promulgate such as those set forth above and maintain their support generally, including continuing to adhere to RT Program requirements, airport security protocols and maintaining an appropriate data security platform.
In addition, we may fail to detect bugs in software of businesses we acquire in our integration process.
In addition, we may fail to detect bugs in the software of businesses we acquire in our integration process.
We are dependent on the interoperability of our app with popular mobile operating systems that we do not control, such as Android and iOS, and Powered by CLEAR with popular internet browsers. Any changes in such systems that degrade the functionality of our digital offerings or give preferential treatment to competitors could adversely affect our platform’s usage.
We are dependent on the interoperability of our app with popular mobile operating systems that we do not control, such as Android and iOS, and CLEAR Verified with popular internet browsers. Any changes in such systems that degrade the functionality of our digital offerings or give preferential treatment to competitors could adversely affect our platform’s usage.
If we fail to comply with any of these requirements, we could be subject to 30 Table of Contents significant liability, which can adversely affect our business as well as our ability to attract and retain new members and their utilization of our platform. HIPAA imposes specified requirements relating to the privacy, security and transmission of sensitive patient health information.
If we fail to comply with any of these requirements, we could be subject to significant liability, which can adversely affect our business as well as our ability to attract and retain new Members and their utilization of our platform. HIPAA imposes specified requirements relating to the privacy, security and transmission of sensitive patient health information.
To the extent we do not distribute such excess cash as dividends on our Class A Common Stock or Class B Common Stock or otherwise take ameliorative actions 34 Table of Contents between Alclear Units and shares of Class A Common Stock or Class B Common Stock and instead, for example, hold such cash balances, or lend them to Alclear, this may result in shares of our Class A Common Stock or Class B Common Stock increasing in value relative to the value of Alclear Units.
To the extent we do not distribute such excess cash as dividends on our Class A Common Stock or Class B Common Stock or otherwise take ameliorative actions between Alclear Units and shares of Class A Common Stock or Class B Common Stock and instead, for example, hold such cash balances, or lend them to Alclear, this may result in shares of our Class A Common Stock or Class B Common Stock increasing in value relative to the value of Alclear Units.
We have derived substantially all of our historical revenue from members who enroll in CLEAR Plus, which includes our Registered Traveler Program service at U.S. airports, and one of our growth strategies is to continue expanding in our domestic aviation network. Accordingly, our performance is dependent on the strength of the travel industry.
We have derived substantially all of our historical revenue from Members who enroll in CLEAR Plus, which includes our RT Program service at U.S. airports, and one of our growth strategies is to continue expanding in our domestic aviation network. Accordingly, our performance is dependent on the strength of the travel industry.
The covenants in our Credit Agreement, dated as of March 31, 2020 (as amended by Amendment No. 1 to Credit Agreement, dated as of April 29, 2021, and as may be further amended from time to time, the “Credit Agreement”), by and among Alclear, the other loan parties thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., may negatively impact our ability to finance future operations or capital needs or to engage in other business activities.
The covenants in our Credit Agreement, dated as of March 31, 2020 (as amended by Amendment No. 1 to Credit Agreement, dated as of April 29, 2021, and Amendment No. 2 to the Credit Agreement, dated June 28, 2023, and as may be further amended from time to time, the “Credit Agreement”), by and among Alclear, the other loan parties thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., may negatively impact our ability to finance future operations or capital needs or to engage in other business activities.
In addition, 23 Table of Contents from time to time, we encounter fraudulent use of payment methods, which could impact our results of operation and if not adequately controlled and managed could create negative consumer perceptions of our service. Our business may be vulnerable to the adverse effects of climate change, which may negatively impact our operations.
In addition, from time to time, we encounter fraudulent use of payment methods, which could impact our results of operation and if not adequately controlled and managed could create negative consumer perceptions of our service. Our business may be vulnerable to the adverse effects of climate change, which may negatively impact our operations.
For example, our members expect us to protect their personal information, including their biometric information and health information, and provide them with safe, reliable, predictable and frictionless experiences where they choose to use our platform.
Our Members expect us to protect their personal information, including their biometric information and health information, and provide them with safe, reliable, predictable and frictionless experiences where they choose to use our platform.
For example, we expect to invest substantial amounts to: • drive member and partner awareness of our platform; • encourage new members to sign up for and use our platform; • encourage businesses to introduce our platform; • enhance our information security infrastructure; • enhance our infrastructure to handle seamless processing; • continue to develop state of the art technology; and • diversify our partner base.
For example, we expect to invest substantial amounts to: • drive Member and partner awareness of our platform; • encourage new Members to sign up for and use our platform; • encourage businesses to introduce our platform; • enhance our information security infrastructure; • enhance our infrastructure to handle seamless processing and maintain the effectiveness of our solutions; • continue to develop state of the art technology; and • diversify our partner base.
Regardless of any company’s efforts to comply with the requirements of BIPA, this private right of action increases the general likelihood of, and costs and risks associated with, biometrics litigation. Recent BIPA caselaw has increased liability exposure and the scope of 29 Table of Contents damages that may be collected for alleged violations.
Regardless of any company’s efforts to comply with the requirements of BIPA, this private right of action increases the general likelihood of, and costs and risks associated with, biometrics litigation. Recent BIPA caselaw has increased liability exposure and the scope of damages that may be collected for alleged violations.
We are a holding company and our principal asset is our ownership of Alclear Units. We have no independent means of generating revenue, and our ability to pay dividends, taxes and operating expenses is dependent upon the financial results and cash flows of Alclear and its subsidiaries and distributions we receive from Alclear.
We are a holding company and our principal asset is our ownership of common units of Alclear (“Alclear Units”). We have no independent means of generating revenue, and our ability to pay dividends, taxes and operating expenses is dependent upon the financial results and cash flows of Alclear and its subsidiaries and distributions we receive from Alclear.
Additionally, the passage or adoption of any legislation or regulation affecting the ability of service providers to periodically charge consumers for, among other things, recurring subscription payments may materially adversely affect our business, financial condition and results of operations. This could materially adversely affect our payment authorization rate.
Additionally, legislation or regulation affecting the ability of service providers to periodically charge consumers for, among other things, recurring subscription payments may materially adversely affect our business, financial condition and results of operations. This could materially adversely affect our payment authorization rate.
We rely on third-party technology for certain of our critical business functions, including credit card readers, scanners, third-party software, cameras and other technology to complete member enrollments and verifications, network infrastructure for hosting our website and mobile application, software libraries, development environments and tools, services to allow members to populate their accounts with personal information, and cloud storage platforms.
We rely on third-party technology for certain of our critical business functions, including credit card readers, scanners, third-party software, cameras and other technology to complete Member enrollments and verifications, as well as prevent fraud, network infrastructure for hosting our website and mobile application, software libraries, development environments and tools, services to allow Members to populate their accounts with personal information, and cloud storage platforms.
While we have invested and continue to invest significant resources to comply with privacy regulations, many of these regulations expose us to the possibility of material penalties, significant legal liability, changes in how we operate or offer our products, and interruptions or cessation of our ability to operate in key geographies, any of which could materially adversely affect our business, results of operations and financial condition.
While we have invested and continue to invest significant resources to comply with privacy regulations, many of these regulations expose us to the possibility of material penalties, significant legal liability, changes in how we operate or offer our products, and interruptions or cessation 29 Tabl e of Contents of our ability to operate in key geographies, any of which could materially adversely affect our business, results of operations and financial condition.
Any transactions that we are able to identify and complete may involve risks, including the commitment of significant capital, the incurrence of indebtedness, the payment of advances, the diversion of management’s attention and resources from our existing business to develop and successfully integrate the acquired or combined business, the inability to successfully integrate such business or assets into our operations, litigation or other claims in connection with acquisitions or against companies we invest in or acquire, our lack of control over certain companies, including joint ventures and other 21 Table of Contents minority investments, the risk of not achieving the intended results and the exposure to losses if the underlying transactions or ventures are not successful.
Any transactions that we are able to identify and complete may involve risks, including the commitment of significant capital, the incurrence of indebtedness, the payment of advances, the diversion of management’s attention and resources from our existing business to develop and successfully integrate the acquired or combined business, the inability to successfully integrate such business or assets into our operations, the failure of such business to meet our expectations, litigation or other claims in connection with acquisitions or against companies we invest in or acquire, our lack of control over certain companies, including joint ventures and other minority investments, the risk of not achieving the intended results and the exposure to losses if the underlying transactions or ventures are not successful.
As a result, payments could be made under the Tax Receivable Agreement significantly in excess of any tax savings that we 36 Table of Contents realize in respect of the tax attributes with respect to the CLEAR Post-IPO Members (or their transferees or assignees) that are the subject of the Tax Receivable Agreement.
As a result, payments could be made under the Tax Receivable Agreement significantly in excess of any tax savings that we realize in respect of the tax attributes with respect to the CLEAR Post-IPO Members (or their transferees or assignees) that are the subject of the Tax Receivable Agreement.
Seidman-Becker, Mr. Cornick or other key members of our senior management team, who remain at-will employees. As these individuals are able to terminate their employment with us at any time, such termination could materially adversely affect our business, results of operations and financial condition, as well as our future prospects.
Seidman-Becker, Mr. Cornick or other key members of our senior management team, who remain at-will employees. As these individuals are able to terminate their employment with us at any time, such termination could materially adversely affect our business, results of operations and financial condition, as 20 Tabl e of Contents well as our future prospects.
Member growth, retention and utilization of our platform is in part dependent on our ability to introduce new 15 Table of Contents services to our members, to expand our airport footprint, to promote and increase awareness of our existing and new offerings and to satisfy or exceed the expectations of our members with our platform and offerings.
Member growth, retention and utilization of our platform is in part dependent on our ability to introduce new services to our Members, expand our airport footprint, promote and increase awareness of our existing and new offerings and satisfy or exceed the expectations of our Members with our platform and offerings.
Our recent growth has been accelerated by our expansion from the aviation industry into new verticals, including travel and hospitality, live events and sports and healthcare. Our business strategies include expanding our platform and member base within these verticals and successfully identifying and expanding into new verticals.
Our growth has been accelerated by our expansion from the aviation industry into different verticals, including travel and hospitality, KYC, live events and sports and healthcare. Our business strategies include expanding our platform and Member base within these verticals and successfully identifying and expanding into new verticals.
This could in turn have an adverse impact on our ability to grow our membership base. If certain partners that subsidize new and existing memberships do not renew their agreements with us we could lose a portion of the members whose memberships are subsidized, which could impact our revenue and retention rate.
This could in turn have an adverse impact on our ability to grow our membership base. If certain partners that subsidize new and existing memberships do not renew their agreements with us we could lose a portion of the affected Members, which could impact our revenue and retention rate.
These events include prolonged extreme weather, natural disasters or man-made disasters, travel-related health concerns (including pandemics and epidemics, such as COVID-19, Monkeypox, Ebola, Zika, Middle East Respiratory Syndrome or other outbreak of contagious diseases), restrictions related to travel, stay-at-home orders, wars and military actions, terrorist attacks, sources of political uncertainty or political events, protests, foreign policy changes, regional hostilities, general economic conditions, increases in ticket prices, changes in regulations, labor unrest or travel-related accidents.
These events include prolonged extreme weather, natural disasters or man-made disasters, travel-related health concerns (including pandemics and epidemics, such as COVID-19, Monkeypox, Ebola, Zika, Middle East Respiratory Syndrome or other outbreak of contagious diseases), restrictions related to travel, stay-at-home orders, wars and military actions, terrorist attacks, sources of political uncertainty or political events, protests, foreign policy changes, regional hostilities, general economic conditions (such as a recession or inflation), changes in regulations, labor unrest or travel-related accidents.
We might not implement successful strategies to increase adoption of our platform or expand into new verticals, which would limit our growth. Our future profitability will depend, in part, on our ability to successfully implement our strategies to increase adoption of our platform, expand into new verticals and develop new offerings.
We might not implement successful strategies to increase adoption of our platform or expand into new verticals, which would limit our growth. Our future profitability depends, in part, on our ability to successfully implement our strategies to increase adoption of our platform, expand into new verticals and develop new offerings.
Downturns in worldwide or regional economic conditions, such as the downturn resulting from the COVID-19 pandemic, inflation, and the potential for a recession, have led to a general decrease in travel and travel spending, as well as discretionary spending on events, and similar downturns in the future may materially adversely impact demand for our platform and services.
Downturns in worldwide or regional economic conditions, such as the downturn resulting from the COVID-19 pandemic, inflation, and the potential for a recession, have in the past led to a general decrease in travel and travel spending, as well as discretionary spending generally, and similar downturns in the future may materially adversely impact demand for our platform and services.
Breaches and attacks on us or our third-party vendors or service providers may cause interruptions to the services we provide, degrade the member experience, cause members or partners to lose confidence and trust in our platform and decrease their use of our platform or stop using our platform entirely, impair our internal systems, or otherwise result in financial harm to us.
Breaches and attacks on us or our third-party vendors or service providers may cause interruptions to the services we provide, degrade the Member experience, cause Members or partners to lose confidence and trust in our platform and decrease or discontinue their use of our platform, impair our internal systems, or otherwise result in financial harm to us.
We operate through the Registered Traveler Program according to guidelines set forth by the federal government, which have historically been implemented through our airport and/or airline partners. As we have grown, our regulatory frameworks have evolved as well.
We operate through the RT Program according to guidelines set forth by the federal government, which have historically been implemented through our airport and/or airline partners. As we have grown, our regulatory frameworks have evolved as well.
Given our dependence on CLEAR Plus for a significant portion of our revenues, a decrease in demand for goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy source, such as air travel, could have a material negative impact on our revenues.
Given our dependence on CLEAR Plus for a significant portion of our revenues, a decrease in demand for goods or services that 22 Tabl e of Contents produce significant greenhouse gas emissions or are related to carbon-based energy source, such as air travel, could have a material negative impact on our revenues.
The repurchase program has no expiration 37 Table of Contents date and may be modified, suspended, or terminated at any time, and we have no obligation to repurchase any amount of our Class A Common Stock under the repurchase program.
The repurchase program has no expiration date and may be modified, suspended, or terminated at any time, and we have no obligation to repurchase any amount of our Class A Common Stock under the repurchase program.
In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our, or a potential acquirer’s, liquidity and could have the effect of delaying, deferring, modifying or preventing certain mergers, asset sales, other forms of business combinations or other changes of control.
In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our, or 36 Tabl e of Contents a potential acquirer’s, liquidity and could have the effect of delaying, deferring, modifying or preventing certain mergers, asset sales, other forms of business combinations or other changes of control.
If additional funds are raised through the issuance of equity or convertible debt securities, holders of our Class A Common Stock could suffer significant dilution, and any new shares we issue could have rights, preferences and privileges superior to those of our Class A Common Stock.
If additional funds are raised through the issuance of equity or convertible debt securities, holders of our Class A Common Stock could suffer significant dilution, and any new shares we issue could have rights, preferences 19 Tabl e of Contents and privileges superior to those of our Class A Common Stock.
Moreover, the ability of our members to use our platform could be diminished by a number of factors, including members’ inability to access the Internet, the failure of our network or software systems, ineffective interoperability between our platform and our partners’ technology, security incidents or variability in member traffic for our platform.
Moreover, the ability of our Members to use our platform could be diminished by a number of factors, including unstable or failed Internet access, the failure of our network or software systems, ineffective interoperability between our platform and our partners’ technology, security incidents or variability in Member traffic for our platform.
Our metrics and estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may harm our reputation and negatively affect our business. 24 Table of Contents We regularly review and may adjust our processes for calculating our metrics used to evaluate our growth, measure our performance and make strategic decisions.
Our metrics and estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may harm our reputation and negatively affect our business. We regularly review and may adjust our processes for calculating our metrics used to evaluate our growth, measure our performance and make strategic decisions.
We do this by incorporating processes aimed at 27 Table of Contents identifying and seeking appropriate protection for newly-developed intellectual property, including patents, trade secrets, copyrights and trademarks, as well as policies aimed at identifying unauthorized use of such property. We are not aware that our current products infringe the intellectual property rights of any third parties.
We do this by incorporating processes aimed at 26 Tabl e of Contents identifying and seeking appropriate protection for newly-developed intellectual property, including patents, trade secrets, copyrights and trademarks, as well as policies aimed at identifying unauthorized use of such property. We are not aware that our current products infringe the intellectual property rights of any third parties.
Our investments may not be successful and there can be no assurances that our growth strategies and plans will be achieved. Our commercial agreements and strategic alliances, as well as potential indemnification obligations, expose us to risk. 18 Table of Contents We provide our platform to our partners through commercial agreements and strategic alliances.
Our investments may not be successful and there can be no assurances that our growth strategies and plans will be achieved. Our commercial agreements and strategic alliances, as well as potential indemnification obligations, expose us to risk. We provide our platform to our partners through commercial agreements and strategic alliances.
Following our IPO, we have also incurred, and expect to continue to incur, increased amounts of compensation expense, including related to equity awards granted under the 2021 Omnibus Incentive Plan to both existing employees and newly-hired employees, and grants in connection with new hires could be significant.
Following our IPO, we have also incurred, and expect to continue to incur, increased amounts of compensation expense, including related to equity awards granted under the Clear Secure, Inc. 2021 Omnibus Incentive Plan (“2021 Omnibus Incentive Plan”) to both existing employees and newly-hired employees, and grants in connection with new hires could be significant.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.” Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the CLEAR Post-IPO Members that will not benefit holders of our Class A Common Stock to the same extent that it will benefit the CLEAR Post-IPO Members.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.” Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the CLEAR Post-IPO Members that will not benefit holders of our Class A Common Stock to the same extent that it will benefit the CLEAR Post-IPO Members. 34 Tabl e of Contents Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the CLEAR Post-IPO Members that do not benefit the holders of our Class A Common Stock to the same extent that it benefits the CLEAR Post-IPO Members.
See “— We must continue to meet the standards set for our airport operations by governmental stakeholders .” As our industry evolves and we continue to expand our platform offerings and member base, we may become subject to additional laws and regulations, which may differ or conflict from one jurisdiction to another.
See “— We must continue to meet the standards set for our airport operations by governmental stakeholders .” 30 Tabl e of Contents As our industry evolves and we continue to expand our platform offerings and Member base, we may become subject to additional laws and regulations, which may differ or conflict from one jurisdiction to another.
If our marketing efforts are not successful in promoting awareness of our offerings or attracting new members and partners, or if we are not able to cost-effectively manage our marketing expenses, our results of operations could be adversely affected.
If our 21 Tabl e of Contents marketing efforts are not successful in promoting awareness of our offerings or attracting new Members and partners, or if we are not able to cost-effectively manage our marketing expenses, our results of operations could be adversely affected.
Further, should regulatory frameworks evolve, they may increase our operating expenses, make compliance more difficult or impact our operating protocols, require us to add new staffing, and divert management’s attention from other growth initiatives.
Further, as regulatory frameworks evolve, they may increase our operating expenses, make compliance more difficult or impact our operating protocols, impact our Members’ experience, require us to add new staffing, and divert management’s attention from other growth initiatives.
As of December 31, 2022, the Founder Post-IPO Members collectively control approximately 80.9% of the combined voting power of our outstanding shares of Common Stock as a result of its ownership of our Class B Common Stock and our Class D Common Stock, each share of which is entitled to 20 votes per share on all matters submitted to a vote of our stockholders.
As of December 31, 2023, the Founder Post-IPO Members collectively control approximately 81.2% of the combined voting power of our outstanding shares of Common Stock as a result of its ownership of our Class B Common Stock and our Class D Common Stock, each share of which is entitled to 20 votes per share on all matters submitted to a vote of our stockholders.
In particular, a significant and growing portion of our members access our platform through the CLEAR mobile application (the “app”) and through our secure identity platform, Powered by CLEAR.
In particular, a significant and growing portion of our Members access our platform through the CLEAR mobile application (the “app”) and through our secure identity platform, CLEAR Verified.
The Inflation Reduction Act, enacted on August 16, 2022, imposes a 1% excise tax on net repurchases of shares by U.S. corporations whose stock is traded on an established securities market. The excise tax will be imposed on repurchases that occur after December 31, 2022.
The Inflation Reduction Act, enacted on August 16, 2022, imposes a 1% excise tax on net repurchases of shares by U.S. corporations whose stock is traded on an established securities market. The excise tax is imposed on repurchases that 37 Tabl e of Contents occur after December 31, 2022.
In addition, profitability, if 19 Table of Contents any, in our newer activities may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them.
In addition, profitability, if any, in our newer activities may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them.

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Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−1 removed1 unchanged
Biggest changeFor the space we use under these agreements, we are typically responsible for maintenance, insurance and other facility-related expenses and services under these agreements.
Biggest changeIn most of the airports, stadiums and other venues where we operate, we typically operate under a concessionaire or services agreement with the airport or other venue. For the space we use under these agreements, we are typically responsible for maintenance, insurance and other facility-related expenses and services under these agreements.
In many of these locations our arrangements include our ability to access space for certain small offices for our team members to use. 41 Table of Contents We believe that our existing facilities and offices are in good operating condition and adequately meet our current requirements.
In many of these locations our arrangements include our ability to access space for certain small offices for our team members to use. We believe that our existing facilities and offices are in good operating condition and adequately meet our current requirements.
ITEM 2. PROPERTIES As of December 31, 2022, our headquarters and principal executive offices are located at 65 East 55th Street, 17th Floor, New York, New York 10022, consisting of approximately 34,825 square feet, under a lease which expires in June 2030, unless terminated earlier under certain circumstances specified in our leases.
ITEM 2. PROPERTIES As of December 31, 2023, our headquarters and principal executive offices are located at 85 10th Avenue, 9th Floor, New York, New York 10011, consisting of approximately 120,000 square feet, under a lease which expires in April 2038, unless terminated earlier under certain circumstances specified in our leases.
Removed
On January 23, 2023, we relocated our headquarters and principal executive offices to 85 10th Avenue, New York, NY 10011, which is approximately 120,000 square feet. In most of the airports, stadiums and other venues where we operate, we typically operate under a concessionaire or services agreement with the airport or other venue.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

10 edited+2 added−10 removed7 unchanged
Biggest changeStockholders Based on information made available to us by the transfer agent, as of February 22, 2023, we have 130 holders of record of our Class A Common Stock, one of which was Cede & Co., a nominee for The Depository Trust Company, two holders of record of our Class B Common Stock, 28 holders of record of our Class C Common Stock and two holders of record of our Class D Common Stock.
Biggest changeBelow is a summary of the Company’s quarterly and special dividends declared and paid to holders of record of Class A Common Stock and Class B Common Stock during the year ended December 31, 2023: Dividend Type Dividend Declaration Date Record Date Payment Date Dividend per Share Quarterly August 2, 2023 August 11, 2023 August 18, 2023 $ 0.07 Quarterly November 8, 2023 November 16, 2023 November 22, 2023 $ 0.09 Special May 9, 2023 May 18, 2023 May 25, 2023 $ 0.20 Special November 8, 2023 November 16, 2023 November 22, 2023 $ 0.55 Stockholders Based on information made available to us by the transfer agent, as of February 23, 2024, we have 98 holders of record of our Class A Common Stock, one of which was Cede & Co., a nominee for The Depository Trust Company, two holders of record of our Class B Common Stock, 24 holders of record of our Class C Common Stock and two holders of record of our Class D Common Stock.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this Item is incorporated by reference to our proxy statement for the 2023 annual meeting of stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this Item is incorporated by reference to our proxy statement for the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023.
Stock Performance Graph The following graph compares the relative performance of our Class A Common Stock, with the total cumulative return of the S&P 500 Index, S&P Software & Services Select Industry Index and NASDAQ Composite Index. This graph covers the period from June 30, 2021 through December 31, 2022.
Stock Performance Graph The following graph compares the relative performance of our Class A Common Stock, with the total cumulative return of the S&P 500 Index, S&P Software & Services Select Industry Index and NASDAQ Composite Index. This graph covers the period from June 30, 2021 through December 31, 2023.
Stock and Alclear Units Repurchases Pursuant to the exchange agreement (the “Exchange Agreement”) entered into on June 29, 2021 by and among the Company, Alclear and each of the CLEAR Post-IPO Members, Alclear Units (along with the corresponding shares of Class C Common Stock or Class D Common Stock, as applicable) may be exchanged for (i) shares of Class A Common Stock or Class B Common Stock, as applicable, on a one-for-one basis or (ii) cash from a substantially concurrent public offering or private sale of Class A Common Stock, at the Company’s option, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications.
Unregistered Sales of Equity Securities Stock and Alclear Units Repurchases Pursuant to the exchange agreement (the “Exchange Agreement”) entered into on June 29, 2021 by and among the Company, Alclear and each of the CLEAR Post-IPO Members, Alclear Units (along with the corresponding shares of Class C Common Stock or Class D Common Stock, as applicable) may be exchanged for (i) shares of Class A Common Stock or Class B Common Stock, as applicable, on a one-for-one basis or (ii) cash from a substantially concurrent public offering or private sale of Class A Common Stock, at the Company’s option, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications.
Any future dividends will be subject to the approval of the Board. To the extent the dividend exceeds the Company’s current and accumulated earnings and profits, a portion of the dividend may be deemed a return of capital or a capital gain to the holders of our Class A Common Stock or Class B Common Stock, as applicable.
To the extent the dividend exceeds the Company’s current and accumulated earnings and profits, a portion of the dividend may be deemed a return of capital or a capital gain to the holders of our Class A Common Stock or Class B Common Stock, as applicable.
Issuer Purchases of Equity Securities Below is a summary of the repurchases during the three months ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Program October 1, 2022-October 31, 2022 — — — — November 1, 2022-November 30, 2022 — — — — December 1, 2022-December 31, 2022 — — — — Total — $ — — $ — All purchases of Class A Common Stock reported in the above table were purchased by the Company pursuant to the Company’s share repurchase program, authorized by the Board on May 13, 2022 and publicly announced by the Company on May 16, 2022.
Issuer Purchases of Equity Securities 43 Table of Contents Below is a summary of the repurchases during the three months ended December 31, 2023 (in millions, except share and per share amounts): Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Program October 1, 2023 - October 31, 2023 625,000 $ 16.77 625,000 28 November 1, 2023 - November 30, 2023 162,499 18.87 162,499 125 December 1, 2023 - December 31, 2023 — — — 125 Total 787,499 17.20 787,499 All purchases of Class A Common Stock reported in the above table were purchased by the Company pursuant to the Company’s share repurchase program, authorized by the Board on May 13, 2022 and publicly announced by the Company on May 16, 2022, and increased on November 8, 2023.
The share repurchase program provides for the purchase by the Company of up to $100 million of the Company’s Class A Common Stock on a discretionary basis from time to time through open market repurchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans.
The share repurchase program provides for the purchase by the Company of up to $200 million of the Company’s Class A Common Stock on a discretionary basis from time to time through open market repurchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. As of December 31, 2023, $125,424 remains available under the repurchase authorization.
They do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of the 44 Table of Contents stock involved and they are not intended to forecast or be indicative of possible future performance of our Common Stock.
They do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of the stock involved and they are not intended to forecast or be indicative of possible future performance of our Common Stock. 44 Table of Contents This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference into any of our filings under the Securities Act except as expressly set forth by specific reference in such filing.
The Company funded the dividend from proportionate cash distributions by Alclear to all of its members as of the Record Date, including holders of non-controlling interests in Alclear (who own approximately 43% of the interests in Alclear as of the Record Date) and the Company (which owns approximately 57% of the interests in Alclear as of the Record Date).
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.
On November 14, 2022, the Company announced that its Board declared a special cash dividend in the amount of $0.25 per share, payable on December 7, 2022 to holders of record of the Class A Common Stock and Class B Common Stock as of the close of business on November 28, 2022 (the “Record Date”).
Dividend Policy 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.
Removed
Dividend Policy The declaration of dividends is within the discretion of our Board, subject to any applicable limitations under Delaware corporate law, and therefore our Board could decide in the future whether or not to declare dividends.
Added
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.
Removed
Unregistered Sales of Equity Securities Use of IPO Proceeds On July 2, 2021, we closed our IPO, in which the Company issued 15,180,000 shares of Class A Common Stock (which included 1,980,000 shares of Class A Common Stock as a result of the exercise of the underwriters’ over-allotment option, which was exercised on June 30, 2021).
Added
In addition, the Company has in the past, and may in the future, declare special dividends.
Removed
All shares in the IPO were registered under the Securities Act pursuant to a Registration Statement on Form S-1 (File No. 333-256851), which was declared effective by the SEC on June 29, 2021. Goldman Sachs & Co. was the representative of the underwriters, which included Goldman Sachs & Co., J.P.
Removed
Morgan Securities LLC, Allen & Company LLC, Wells Fargo Securities, LLC, LionTree Advisors LLC, Stifel, Nicolaus & Company, Incorporated, Telsey Advisory Group LLC, Centerview Partners LLC, Loop Capital Markets LLC, and Roberts & Ryan Investments, Inc. The lead book-runners of our IPO were Goldman Sachs & Co. LLC, J.P.
Removed
Morgan Securities LLC, Allen & Company LLC and Wells Fargo Securities, LLC. The initial offering price to the public in the IPO was $31.00 per share. We received $29.295 per share from the underwriters after deducting underwriting discounts and commissions of $1.705 per share.
Removed
We incurred underwriting discounts and commissions of approximately $25.9 million, including the effect of the exercise of the over-allotment option. Thus, our net offering proceeds, after deducting underwriting discounts and commissions, net of the rebate on the over-allotment option, were approximately $445.9 million, which the Company contributed to Alclear in exchange for 15,180,000 Alclear Units.
Removed
The Company has caused Alclear to use such contributed amount to pay offering expenses of approximately $9.0 million, and for general corporate purposes. There has been no material change in the planned use of the IPO net proceeds from what is described in the Company’s Registration Statement on Form S-1 (File No. 333-256851).
Removed
No payments were made to our directors or officers or their associates, holders of 10% or more of any class of our equity securities or any affiliates. 43 Table of Contents Warrants As part of the reorganization transactions, certain warrants of Alclear were, in accordance with their terms, (i) exchanged for new warrants representing the right to receive Class A common stock or (ii) remained at Alclear and continue to be exercisable for Alclear Units.
Removed
See Note 13 within the consolidated financial statements included elsewhere in this document for more information on warrant exercises.
Removed
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing. ITEM 6.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

80 edited+49 added−29 removed57 unchanged
Biggest changeSummary and discussion of the years ended December 31, 2022, 2021 and 2020: (in millions) Years ended December 31, 2022 2021 2020 Revenue $ 437.4 $ 254.0 $ 230.8 Operating expenses (1): Cost of revenue share fee $ 56.3 $ 37.2 $ 33.2 Cost of direct salaries and benefits $ 104.8 $ 67.7 $ 40.5 Research and development $ 66.8 $ 47.5 $ 32.0 Sales and marketing $ 41.7 $ 35.2 $ 16.4 General and administrative $ 278.1 $ 168.9 $ 118.2 Depreciation and amortization $ 18.8 $ 12.4 $ 9.4 Operating income (loss) $ (129.1) $ (114.9) $ (18.9) Other income (expense) Interest income (expense), net $ 6.6 $ (0.3) $ 0.6 Other income (expense), net $ 5.0 $ 0.3 $ 9.0 Income (loss) before tax $ (117.5) $ (114.9) $ (9.3) Income tax benefit (expense) $ 2.1 $ (0.2) $ — Net income (loss) $ (115.4) $ (115.1) $ (9.3) 54 Table of Contents (1) Amounts related to the Company’s total equity-based compensation expense including warrants (refer to note 13 within the consolidated financial statements for a description for equity-based warrants) and excluding additional expense related to repurchases, as follows: Year Ended December 31, 2022 (in thousands) Pre-IPO employee performance awards Warrants Founder PSU Employee equity-based awards Total Cost of direct salaries and benefits $ 87 $ — $ — $ 269 $ 356 Research and development 2,567 — — 15,003 17,570 Sales and marketing 181 — — 385 566 General and administrative 3,278 77,033 26,301 13,391 120,003 Total equity-based compensation $ 6,113 $ 77,033 $ 26,301 $ 29,048 $ 138,495 Year Ended December 31, 2021 (in thousands) Pre-IPO employee performance awards Warrants Founder PSU Employee equity-based awards Total Cost of direct salaries and benefits $ — $ — $ — $ 316 $ 316 Research and development — — — 6,718 6,718 Sales and marketing — — — 204 204 General and administrative — 4,813 13,403 11,057 29,273 Total equity-based compensation $ — $ 4,813 $ 13,403 $ 18,295 $ 36,511 Revenue Years ended December 31, 2022 2021 $ Change % Change Revenue $ 437.4 $ 254.0 $ 183.4 72 % Revenue increased by $183.4 million, or 72%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Biggest changeSummary and discussion of the years ended December 31, 2023, 2022 and 2021 (in millions): 54 Table of Contents Years ended December 31, 2023 2022 2021 Revenue $ 613.6 $ 437.4 $ 254.0 Operating expenses (1) : Cost of revenue share fee $ 88.6 $ 56.3 $ 37.2 Cost of direct salaries and benefits $ 142.8 $ 104.8 $ 67.7 Research and development $ 74.4 $ 66.8 $ 47.5 Sales and marketing $ 43.5 $ 41.7 $ 35.2 General and administrative $ 222.4 $ 278.1 $ 168.9 Depreciation and amortization $ 21.6 $ 18.8 $ 12.4 Operating income (loss) $ 20.1 $ (129.1) $ (114.9) Other income (expense) Interest income (expense), net $ 29.0 $ 6.6 $ (0.3) Other income (expense), net $ 1.5 $ 5.0 $ 0.3 Income (loss) before tax $ 50.6 $ (117.5) $ (114.9) Income tax benefit (expense) $ (0.7) $ 2.1 $ (0.2) Net income (loss) $ 49.9 $ (115.4) $ (115.1) (1) Amounts related to the Company’s total equity-based compensation expense including warrants (refer to Note 13 within the consolidated financial statements for a description for equity-based warrants) and excluding additional expense related to repurchases, as follows: Year Ended December 31, 2023 (in thousands) Pre-IPO employee performance awards Warrants Founder PSU Employee equity-based awards Total Cost of direct salaries and benefits $ (281) $ — $ — $ 515 $ 234 Research and development (1) (2,662) — — 8,635 5,973 Sales and marketing (239) — — 852 613 General and administrative (2) (3,028) 623 19,815 13,063 30,473 Total equity-based compensation $ (6,210) $ 623 $ 19,815 $ 23,065 $ 37,293 (1) Includes $12.7 million employee equity-based compensation forfeitures for the year ended December 31, 2023.
Non-GAAP Financial Measures In addition to our results as determined in accordance with GAAP, we disclose Adjusted EBITDA (Loss), Free Cash Flow, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Common Share, Diluted as non-GAAP financial measures that management believes provide useful information to investors.
Non-GAAP Financial Measures In addition to our results as determined in accordance with GAAP, we disclose Adjusted EBITDA (Loss), Adjusted EBITDA Margin, Free Cash Flow, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Common Share, Diluted as non-GAAP financial measures that management believes provide useful information to investors.
Other income (expense), net Other Income (Expense), Net consists of certain non-recurring non-operating items including income recognized in relation to a minimum annual guarantee paid to us by a marketing partner and other items such as changes in the fair value of contingent consideration.
Other income (expense), net Other income (expense), net consists of certain non-recurring non-operating items including income recognized in relation to a minimum annual guarantee paid to us by a marketing partner and other items such as sublease income and changes in the fair value of contingent consideration.
Tax Receivable Agreement 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.
Tax Receivable Agreement The Company entered into a 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.
All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Annual Report on Form 10-K. The discussion in this MD&A is generally related to 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Annual Report on Form 10-K. The discussion in this MD&A is generally related to 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Membership subscription revenue is also reduced by the Company’s funded portion of credit card benefits issued to members through a partnership with a credit card company at the end of the contract period. The Company’s funded portion varies based on total number of members for the contract year. The Company also generates revenue in relation to Powered by CLEAR.
Membership subscription revenue is also reduced by the Company’s funded portion of credit card benefits issued to Members through a partnership with a credit card company at the end of the contract period. The Company’s funded portion varies based on total number of Members for the contract year. The Company also generates revenue in relation to CLEAR Verified.
The Company will retain the benefit of the remaining 15% of these net cash savings. As of December 31, 2022, the Company has not recognized the deferred tax asset for the step-up in tax basis, as the asset is not more-likely-than-not to be realized.
The Company will retain the benefit of the remaining 15% of these net cash savings. As of December 31, 2023, the Company has not recognized the deferred tax asset for the step-up in tax basis, as the asset is not more-likely-than-not to be realized.
The Credit Agreement contains customary affirmative covenants, such as financial statement reporting requirements and delivery of borrowing base certificates, as well as customary covenants that restrict our ability to, among other things, incur additional indebtedness, sell certain assets, guarantee obligations of third parties, declare dividends or make certain distributions, and undergo a merger or consolidation or certain other transactions.
The Credit Agreement contains customary affirmative covenants, such as 58 Table of Contents financial statement reporting requirements and delivery of borrowing base certificates, as well as customary covenants that restrict our ability to, among other things, incur additional indebtedness, sell certain assets, guarantee obligations of third parties, declare dividends or make certain distributions, and undergo a merger or consolidation or certain other transactions.
These statements are based upon assumptions that we have made in light of our 45 Table of Contents experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances.
These statements are based upon assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances.
Management views this metric as an important tool to analyze the level of engagement of our member base, which can be a leading indicator of future growth and revenue, as well as an indicator of customer satisfaction and long term business economics.
Management views this metric as an important tool to analyze the level of 49 Table of Contents engagement of our Member base, which can be a leading indicator of future growth and revenue, as well as an indicator of customer satisfaction and long term business economics.
Management views 49 Table of Contents this metric as an important tool to analyze the level of engagement of our member base which can be a leading indicator of future growth, retention and revenue.
Management views this metric as an important tool to analyze the level of engagement of our Member base which can be a leading indicator of future growth, retention and revenue.
Business Combinations 59 Table of Contents Accounting for business combinations requires us to make significant estimates and assumptions with respect to the the fair value of identifiable assets and liabilities acquired in a business combination, especially with respect to intangible assets.
Business Combinations Accounting for business combinations requires us to make significant estimates and assumptions with respect to the the fair value of identifiable assets and liabilities acquired in a business combination, especially with respect to intangible assets.
We believe our existing cash and cash equivalents, marketable securities, cash provided by operations and the availability of additional funds under our Credit Agreement (as defined below) will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months, including known commitments and contingencies as discussed below.
We believe our existing cash and cash equivalents, marketable securities, cash provided by operations and the availability of additional funds under our Credit Agreement (as defined below) will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months, including payment of dividends, potential stock repurchases, and known commitments and contingencies as discussed below.
Employee-related costs recorded in direct salaries and benefits consist of salaries, taxes, benefits and equity-based compensation and expenses under arrangements related to the use of certain space at airports.
Employee- 53 Table of Contents related costs recorded in direct salaries and benefits consist of salaries, taxes, benefits and equity-based compensation and expenses under arrangements related to the use of certain space at airports.
CLEAR has been delivering friction-free experiences in airports for over a decade, achieving exceptional user delight and trust with CLEAR Plus, our consumer aviation subscription service. CLEAR Plus enables access to predictable and fast experiences through dedicated entry lanes in airport security checkpoints nationwide.
CLEAR has been delivering secure, friction-free experiences in airports for over 14 years, achieving exceptional user delight and trust with CLEAR Plus, our consumer aviation subscription service. CLEAR Plus enables access to predictable and fast experiences through dedicated entry lanes in airport security checkpoints nationwide.
Refer to our risks and uncertainties discussed under the heading "Forward-Looking Statements" and in Part I. Item 1A. "Risk Factors" for further information. Credit Agreement On March 31, 2020, we entered into a credit agreement (the “Credit Agreement”) for a three-year $50 million revolving credit facility that expires on March 31, 2023.
Refer to our risks and uncertainties discussed under the heading "Forward-Looking Statements" and in Part I. Item 1A. "Risk Factors" for further information. Credit Agreement On March 31, 2020, we entered into a credit agreement (as amended, restated or otherwise modified, the “Credit Agreement”) for a three-year $50 million revolving credit facility that expires on March 31, 2023.
Although we believe that these forward-looking statements are based upon reasonable assumptions, you should be aware that many factors, including those described under the heading “Risk Factors,” in this Annual Report on Form 10-K, could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.
Although we believe that these forward-looking statements are based upon reasonable assumptions, you should be aware that many factors, including those described under the heading “Risk Factors,” in this Annual Report on Form 10-K, could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. 45 Table of Contents Our forward-looking statements made herein are made only as of the date of this Annual Report on Form 10-K.
Acquisitions During the year ended December 31, 2021, the Company made strategic acquisitions of Whyline, Inc., our virtual queuing technology that enables customers to manage lines and certain assets of Atlas Certified, LLC, our automated solution to verify professional licenses and certification data across industries.
Additionally, during the year ended December 31, 2021, the Company acquired Whyline, Inc., our virtual queuing technology that enables customers to manage lines, and also acquired certain assets of Atlas Certified, LLC, our automated solution to verify professional licenses and certification data across industries.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help readers understand our results of operations, financial condition and cash flows and should be read in conjunction with the audited consolidated financial statements and the related notes included elsewhere in this annual report for the fiscal year ended December 31, 2022 (“Annual Report on Form 10-K”).
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help readers understand our results of operations, financial condition and cash flows and should be read in conjunction with the audited consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K”).
In addition, the Credit Agreement contains certain other covenants (none of which relate to financial condition), events of default and other customary provisions, and also contains customary LIBOR replacement mechanics.
In addition, the Credit Agreement contains certain other covenants (none of which relate to financial condition), events of default and other customary provisions.
Changes to the macro environment Our business is dependent on macroeconomic and other events outside of our control, such as decreased levels of travel or attendance at events, terrorism, civil unrest, political instability, union and other transit related strikes and other general economic conditions. We are also subject to changes in discretionary consumer spending.
Changes to the macro environment Our business is dependent on macroeconomic and other events outside of our control, such as decreased levels of travel or attendance at events, terrorism, civil unrest, political instability, union and other transit related strikes and other general economic conditions.
Interest income, net Interest Income, net primarily consists of interest income from our investment holdings partially offset by amortization of discounts on our marketable securities and issuance costs on our revolving credit facility.
Interest income (expense), net Interest income (expense), net primarily consists of interest income from our investment holdings and discount accretion on our marketable securities partially offset by issuance costs on our revolving credit facility.
The Revenue Share fee is generally prepaid to the host airport in the period collected from the member. The Revenue Share fee is capitalized and subsequently amortized to operating expense over each member’s subscription period, as the payments are refundable on a pro rata basis. Such prepayments are recorded in “Prepaid Revenue Share fee” in the Company’s consolidated balance sheets.
The Revenue Share fee is generally prepaid to the host airport in the period collected from the Member. The Revenue Share fee is capitalized and subsequently amortized to operating expense over each Member’s subscription period. Such prepayments are recorded in “Prepaid revenue share fee” in the Company’s consolidated balance sheets.
Employee-related expenses consist of salaries, taxes, benefits and equity-based compensation. In addition, general and administrative expenses include non-personnel costs, such as legal, accounting and other professional fees, warrant expense, variable credit card fees, variable mobile enrollment costs, and all other supporting corporate expenses not allocated to other departments including overhead and acquisition-related costs.
In addition, general and administrative expenses include non-personnel costs, such as legal, accounting and other professional fees, warrant expense, variable credit card fees, variable mobile enrollment costs, and all other supporting corporate expenses not allocated to other departments including overhead and acquisition-related costs.
Years ended December 31, 2022 2021 $ Change % Change Other income $ 7.3 $ 5.8 $ 1.5 N/A Other expense $ (2.4) $ (5.5) $ 3.1 N/A Other income (expense), net $ 5.0 $ 0.3 $ 4.7 N/A Other income (expense), net increased by $4.7 million, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Years ended December 31, 2023 2022 $ Change % Change Other income $ 1.6 $ 7.3 $ (5.7) N/A Other expense $ (0.1) $ (2.4) $ 2.3 N/A Other income (expense), net $ 1.5 $ 5.0 $ (3.5) (71) % Other income, net decreased by $3.5 million, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
As we continue to innovate on the travel experience, we are proud to offer TSA PreCheck® Enrollment Provided by CLEAR–providing consumers with increased choice in where and how to sign up for this popular trusted traveler program–which we expect to soft launch in early 2023.
As we continue to innovate on the travel experience, we are proud to offer TSA PreCheck® Enrollment Provided by CLEAR –offering consumers increased choice in how and where to sign up for this popular trusted traveler program.
Any future dividends will be subject to the approval of the Board. To the extent the dividend exceeds the Company’s current and accumulated earnings and profits, a portion of the dividend may be deemed a return of capital or a capital gain to the holders of our Class A Common Stock or Class B Common Stock, as applicable.
To the extent the quarterly dividend exceeds the Company's current and accumulated earnings and profits, a portion of the dividend may be deemed a return of capital gain to the holders of our Class A Common Stock or Class B Common Stock, as applicable.
Taxation and Expenses After the consummation of our IPO, we became subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income of Alclear and will be taxed at the prevailing corporate tax rates.
We are also subject to changes in discretionary consumer spending. 47 Table of Contents Taxation and Expenses After the consummation of our IPO, we became subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income of Alclear and will be taxed at the prevailing corporate tax rates.
The change was primarily due to increased employee compensation costs of $36.0 million caused by increasing travel volumes leading to higher staffing needs as well as new airport openings.
The change was primarily due to increased employee compensation costs of $36.4 million caused by new airport openings and expansions and increased travel volumes leading to higher staffing needs.
Tax Receivable Agreement In connection with the IPO we entered into the TRA with the Alclear Members that provides for the payment by us to the Alclear Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize (computed using simplifying assumptions to address the impact of state and local taxes) as a result of (i) any increase in tax basis in Alclear’s assets resulting from (a) exchanges by the Alclear Members (or their transferees or other assignees) of Alclear Units (along with the corresponding shares of our Class C Common Stock or Class D Common Stock, as applicable) for shares of our Class A common stock, $0.00001 par value per share (“Class A Common Stock”) or Class B common stock, $0.00001 par value per share (“Class B Common Stock”) as applicable, and purchases of Alclear Units and corresponding shares of Class C common stock, par value $0.00001 per share (“Class C Common Stock”) or Class D common stock, $0.00001 par value per share (“Class D Common Stock” and, together with the Class A Common Stock, Class B Common Stock and Class C Common Stock, collectively, “Common Stock”), as the case may be, from Alclear Members (or their transferees or other assignees) or (b) payments under the TRA, and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the TRA. 48 Table of Contents The actual increase in tax basis, as well as the amount and timing of any payments under these agreements, varies depending upon a number of factors, including the timing of exchanges by or purchases from the Alclear Members, the price of our Class A Common Stock at the time of the exchange, the extent to which such exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable and the portion of our payments under the TRA constituting imputed interest.
Tax Receivable Agreement In connection with the IPO we entered into the TRA with the Alclear Members that provides for the payment by us to the Alclear Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize (computed using simplifying assumptions to address the impact of state and local taxes) as a result of (i) any increase in tax basis in Alclear’s assets resulting from (a) exchanges by the Alclear Members (or their transferees or other assignees) of Alclear Units (along with the corresponding shares of our Class C Common Stock or Class D Common Stock, as applicable) for shares of our Class A common stock, $0.00001 par value per share (“Class A Common Stock”) or Class B common stock, $0.00001 par value per share (“Class B Common Stock”) as applicable, and purchases of Alclear Units and corresponding shares of Class C common stock, par value $0.00001 per share (“Class C Common Stock”) or Class D common stock, $0.00001 par value per share (“Class D Common Stock” and, together with the Class A Common Stock, Class B Common Stock and Class C Common Stock, collectively, “Common Stock”), as the case may be, from Alclear Members (or their transferees or other assignees) or (b) payments under the TRA, and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the TRA.
Income tax benefit (expense) Years ended December 31, 2022 2021 $ Change % Change Income tax benefit (expense) $ 2.1 $ (0.2) $ 2.3 N/A Income tax benefit increased by $2.3 million for the year ended December 31, 2022 compared to an income tax expense of $.2 million.
Income tax benefit (expense) Years ended December 31, 2023 2022 $ Change % Change Income tax benefit (expense) $ (0.7) $ 2.1 $ (2.8) N/A Income tax expense increased by $2.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 .
The change was primarily driven by higher interest rates and higher average greater marketable securities and cash and cash equivalent balances.
This change was primarily driven by higher interest rates and higher average marketable securities and cash and cash equivalents balances.
On May 13, 2022, the Company's Board authorized a share repurchase program pursuant to which the Company may purchase up to $100,000 of its Class A Common Stock.
On May 13, 2022, the Company's Board authorized a share repurchase program pursuant to which the Company may purchase up to $100 million of its Class A Common Stock. On November 8, 2023, the Company announced that its Board authorized a $100 million increase to its existing Class A Common Stock share repurchase program.
Sales and marketing Sales and marketing expenses consist primarily of costs of general marketing and promotional activities, advertising fees used to drive subscriber acquisition, commissions, the production costs to create our advertisements, expenses related to employees who manage our sales and marketing efforts, as well as brand and allocated overhead costs. 53 Table of Contents General and administrative General and administrative expenses consist primarily of employee-related expenses for the executive, finance, accounting, legal, and human resources functions.
Sales and marketing Sales and marketing expenses consist primarily of costs of general marketing and promotional activities, advertising fees used to drive subscriber acquisition, commissions, the production costs to create our advertisements, expenses related to employees who manage our sales and marketing efforts, as well as brand and allocated overhead costs.
Overview CLEAR is an identity company obsessed with the customer experience. We make everyday experiences frictionless by connecting your identity to the things that make you, YOU - transforming the way you live, work, and travel.
Overview CLEAR is an identity company making experiences safer and easier digitally and physically. We make everyday experiences frictionless by connecting your identity to all the things that make you, YOU - transforming the way you live, work, and travel.
Borrowings under the Credit Agreement generally bear interest between 1.5% and 2.5% per year and also include interest based on the greater of the prime rate, LIBOR or New York Federal Reserve Bank (“NYFRB”) rate, plus an applicable margin for specific interest periods. In April 2021, the Company increased the size of the revolving credit facility to $100 million.
Borrowings under the Credit Agreement generally bear interest between 1.5% and 2.5% per year and also include interest based on the greater of the prime rate, London Interbank Offered Rate (“LIBOR”) or New York Federal Reserve Bank (“NYFRB”) rate, plus an applicable margin for specific interest periods.
As of December 31, 2022 December 31, 2021 Change Annual CLEAR Plus Net Member Retention 91.9% 92.3% (0.4%) Annual CLEAR Plus Net Member Retention was 91.9% as of December 31, 2022 and 92.3% as of December 31, 2021, a year-over year decrease of 40 basis points.
As of December 31, 2023 2022 Change Annual CLEAR Plus Net Member Retention 86.3% 91.9% (5.6%) Annual CLEAR Plus Net Member Retention was 86.3% as of December 31, 2023 and 91.9% as of December 31, 2022, a year-over-year decrease of 560 basis points.
Ability to retain CLEAR Plus members Our ability to execute on our growth strategy is focused, in part, on our ability to retain our existing CLEAR Plus members. Frequency and recency of usage are the leading indicators of retention, and we must continue to provide frictionless and predictable experiences that our members will use in their daily lives.
Frequency and recency of usage are the leading indicators of retention, and we must continue to provide frictionless and predictable experiences that our Members will use in their daily lives.
Sales and marketing Years ended December 31, 2022 2021 $ Change % Change Sales and marketing $ 41.7 $ 35.2 $ 6.5 18 % Sales and marketing expenses increased by $6.5 million, or 18%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Sales and marketing Years ended December 31, 2023 2022 $ Change % Change Sales and marketing $ 43.5 $ 41.7 $ 1.8 4 % Sales and marketing expenses increased by $1.8 million, or 4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Calculation of Adjusted Weighted-Average Shares Outstanding As of December 31, 2022 2021 Weighted-average number of shares outstanding, basic for Class A Common Stock 81,117,184 75,515,242 Adjustments Assumed weighted-average conversion of issued and outstanding Class B Common Stock 1,007,686 1,042,234 Assumed weighted-average conversion of issued and outstanding Class C Common Stock 41,265,522 44,407,609 Assumed weighted-average conversion of issued and outstanding Class D Common Stock 26,501,898 25,109,283 Assumed weighted-average conversion of vested and outstanding warrants 164,623 67,942 Adjusted Weighted-Average Number of Shares Outstanding, Basic 150,056,913 146,142,310 Weighted-average impact of unvested RSAs 863,904 — Weighted-average impact of unvested RSUs 631,104 — Total incremental shares 1,495,008 — Adjusted Weighted-Average Number of Shares Outstanding, Diluted 151,551,921 146,142,310 Calculation of Adjusted Net Income (Loss) Per Common Share, Basic For the year ended December 31, 2022 2021 Adjusted Net Income (Loss) in thousands $ 24,616 $ (33,002) Adjusted Weighted-Average Number of Shares Outstanding, Basic 150,056,914 146,142,310 Adjusted Net Income (Loss) per Common Share, Basic $ 0.16 $ (0.23) Calculation of Adjusted Net Income (Loss) Per Common Share, Diluted For the year ended December 31, 2022 Adjusted Net Income (Loss) in thousands $ 24,616 Adjusted Weighted-Average Number of Shares Outstanding, Diluted 151,551,921 Adjusted Net Loss per Common Share, Diluted $ 0.16 Summary of Adjusted Net Income (Loss) per Common Share: For the year ended December 31, 2022 2021 Adjusted Net Income (Loss) per Common Share, Basic $ 0.16 $ (0.23) Adjusted Net Income (Loss) per Common Share, Diluted $ 0.16 $ (0.23) 52 Table of Contents Reconciliation of Net cash provided by (used in) operating activities to Free Cash Flow For the year ended December 31, (In thousands) 2022 2021 2020 Net cash provided by (used in) operating activities $ 168,310 $ 69,707 $ (12,338) Purchases of property and equipment (31,362) $ (28,148) (16,502) Share repurchases over fair value — $ 712 50,551 Free Cash Flow $ 136,948 $ 42,271 $ 21,711 Components of Results of Operations Revenue The Company derives substantially all of its revenue from subscriptions to its consumer aviation service, CLEAR Plus.
Calculation of Adjusted Weighted-Average Shares Outstanding As of December 31, 2023 2022 Weighted-average number of shares outstanding, basic for Class A Common Stock 89,695,439 81,117,184 Adjustments Assumed weighted-average conversion of issued and outstanding Class B Common Stock 907,234 1,007,686 Assumed weighted-average conversion of issued and outstanding Class C Common Stock 35,586,829 41,265,522 Assumed weighted-average conversion of issued and outstanding Class D Common Stock 25,796,690 26,501,898 Assumed weighted-average conversion of vested and outstanding warrants — 164,623 Adjusted Weighted-Average Number of Shares Outstanding, Basic 151,986,192 150,056,913 Weighted-average impact of unvested RSAs 37,861 863,904 Weighted-average impact of unvested RSUs 955,661 631,104 Weighted-average impact of unvested performance based RSUs 20,850 — Total incremental shares 1,014,372 1,495,008 Adjusted Weighted-Average Number of Shares Outstanding, Diluted 153,000,564 151,551,921 Calculation of Adjusted Net Income per Common Share, Basic For the year ended December 31, 2023 2022 Adjusted Net Income in thousands $ 89,296 $ 24,616 Adjusted Weighted-Average Number of Shares Outstanding, Basic 151,986,192 150,056,913 Adjusted Net Income per Common Share, Basic $ 0.59 $ 0.16 52 Table of Contents Calculation of Adjusted Net Income per Common Share, Diluted For the year ended December 31, 2023 2022 Adjusted Net Income in thousands $ 89,296 $ 24,616 Adjusted Weighted-Average Number of Shares Outstanding, Diluted 153,000,564 151,551,921 Adjusted Net Income per Common Share, Diluted $ 0.58 $ 0.16 Summary of Adjusted Net Income per Common Share: For the year ended December 31, 2023 2022 Adjusted Net Income per Common Share, Basic $ 0.59 $ 0.16 Adjusted Net Income per Common Share, Diluted $ 0.58 $ 0.16 Reconciliation of Net cash provided by (used in) operating activities to Free Cash Flow For the year ended December 31, (In thousands) 2023 2022 2021 Net cash provided by (used in) operating activities $ 225,033 $ 168,310 $ 69,707 Purchases of property and equipment (25,555) (31,362) $ (28,148) Share repurchases over fair value — — $ 712 Free Cash Flow $ 199,478 $ 136,948 $ 42,271 Components of Results of Operations Revenue The Company derives substantially all of its revenue from subscriptions to its consumer aviation service, CLEAR Plus.
These key measures include Total Bookings, Total Cumulative Enrollments, Total Cumulative Platform Uses, and Annual CLEAR Plus Net Member Retention. Total Bookings Total Bookings represent our total revenue plus the change in deferred revenue during the period. Total Bookings in any particular period reflect sales to new and renewing CLEAR Plus subscribers plus any accrued billings to partners.
Total Bookings Total Bookings represent our total revenue plus the change in deferred revenue during the period. Total Bookings in any particular period reflect sales to new and renewing CLEAR Plus subscribers plus any accrued billings to partners.
We may also use our cash and cash equivalents to repurchase our Class A Common Stock and pay cash dividends (and distributions in respect thereof). We plan to finance our operations, future stock repurchases, cash dividends and distributions to the extent declared, and capital expenditures largely through cash generated from the proceeds of our IPO and operations.
We plan to finance our operations, future stock repurchases, cash dividends, and distributions (to the extent declared), and capital expenditures largely through cash generated from the proceeds of our IPO and operations.
We did not revise prior years' Adjusted EBITDA (Loss) because there was no impact of a similar nature in the prior period that affects comparability. 50 Table of Contents Adjusted Net Income (Loss) We define Adjusted Net Income (Loss) as Net income (loss) attributable to Clear Secure, Inc. adjusted for the net income (loss) attributable to non-controlling interests, equity-based compensation expense, amortization of acquired intangible assets, acquisition-related costs, changes in fair value of contingent consideration and the income tax effect of these adjustments.
Adjusted Net Income (Loss) We define Adjusted Net Income (Loss) as Net income (loss) attributable to Clear Secure, Inc. adjusted for the net income (loss) attributable to non-controlling interests, equity-based compensation expense, amortization of acquired intangible assets, acquisition-related costs, changes in fair value of contingent consideration and the income tax effect of these adjustments.
Cost of direct salaries and benefits 55 Table of Contents Years ended December 31, 2022 2021 $ Change % Change Cost of direct salaries and benefits $ 104.8 $ 67.7 $ 37.1 55 % Cost of direct salaries and benefits expenses increased by $37.1 million, or 55%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Cost of direct salaries and benefits Years ended December 31, 2023 2022 $ Change % Change Cost of direct salaries and benefits $ 142.8 $ 104.8 $ 38.0 36 % Cost of direct salaries and benefits expenses increased by $38.0 million, or 36%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Adjusted EBITDA (Loss) We define Adjusted EBITDA (Loss) as net income (loss) adjusted for income taxes, interest (income) expense net, depreciation and amortization, impairment and losses on asset disposals, equity-based compensation expense, mark to market of warrant liabilities, net other income (expense) excluding sublease rental income, acquisition-related costs and changes in fair value of contingent consideration.
We periodically reassess the components of our Non-GAAP adjustments for changes in how we evaluate our performance and changes in how we make financial and operational decisions to ensure the adjustments remain relevant and meaningful. 50 Table of Contents Adjusted EBITDA (Loss) and Adjusted EBITDA Margin We define Adjusted EBITDA (Loss) as net income (loss) adjusted for income taxes, interest (income) expense net, depreciation and amortization, impairment and losses on asset disposals, equity-based compensation expense, mark to market of warrant liabilities, net other income (expense) excluding sublease rental income, acquisition-related costs and changes in fair value of contingent consideration.
On November 14, 2022, the Company announced that its Board declared a special cash dividend in the amount of $0.25 per share, payable on December 7, 2022 to holders of record of the Class A Common Stock and Class B Common 57 Table of Contents Stock as of the close of business on November 28, 2022 (the “Record Date”).
On May 9, 2023, the Company announced that a special committee of its Board declared a special cash dividend in the amount of $0.20 per share payable on May 25, 2023 to holders of record of Class A Common Stock and Class B Common Stock as of the close of business on May 18, 2023.
Management views this metric as an important tool to analyze the efficacy of our growth and marketing initiatives as new members are potentially a current and leading indicator of revenues.
This includes CLEAR Plus Members who have completed enrollment with CLEAR and have ever activated a payment method, plus associated family accounts. Management views this metric as an important tool to analyze the efficacy of our growth and marketing initiatives as new Members are potentially a current and leading indicator of revenues.
Research and development Years ended December 31, 2022 2021 $ Change % Change Research and development $ 66.8 $ 47.5 $ 19.3 41 % Research and development expenses increased by $19.3 million, or 41%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Research and development Years ended December 31, 2023 2022 $ Change % Change Research and development $ 74.4 $ 66.8 $ 7.6 11 % Research and development expenses increased by $7.6 million, or 11%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Total Cumulative Platform Uses We define Total Cumulative Platform Uses as the number of individual engagements across CLEAR use cases, including Clear Plus, flagship app and Powered by CLEAR, since inception as of the end of the period.
The year over year increase was driven by growth in CLEAR Plus enrollments, as well as increased contributions from CLEAR Verified. Total Cumulative Platform Uses We define Total Cumulative Platform Uses as the number of individual engagements across CLEAR use cases, including CLEAR Plus, our flagship app and CLEAR Verified, since inception as of the end of the period.
Reconciliation of Net income (loss) to Adjusted EBITDA (Loss) For the year ended December 31, (In thousands) 2022 2021 2020 Net loss $ (115,436) $ (115,171) $ (9,310) Income tax expense (benefit) (2,062) 233 16 Interest expense (income), net (6,586) 349 (612) Other expense (income), net (4,850) (344) (9,023) Depreciation and amortization 18,792 12,358 9,423 Acquisition-related costs — 1,391 — Loss on asset disposal — — 238 Impairment on assets 1,851 — — Equity-based compensation expense 138,495 37,223 53,978 Warrant liabilities — 12,796 887 Adjusted EBITDA (Loss) $ 30,204 $ (51,165) $ 45,597 51 Table of Contents Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) For the year ended December 31, (In thousands) 2022 2021 2020 Net loss attributable to Clear Secure,.
Reconciliation of Net income (loss) to Adjusted EBITDA (Loss) 51 Table of Contents For the year ended December 31, (In thousands) 2023 2022 2021 Net income (loss) $ 49,888 $ (115,436) $ (115,171) Income tax expense (benefit) 724 (2,062) 233 Interest income (expense), net (29,013) (6,586) 349 Other income (expense), net 107 (4,850) (344) Depreciation and amortization 21,649 18,792 12,358 Acquisition-related costs 457 — 1,391 Impairment on assets 4,975 1,851 — Equity-based compensation expense 37,293 138,495 37,223 Warrant liabilities — — 12,796 Adjusted EBITDA (Loss) $ 86,080 $ 30,204 $ (51,165) Revenue $ 613,579 $ 437,434 $ 253,953 Net income Margin 8 % (26) % (45) % Adjusted EBITDA Margin 14 % 7 % (20) % Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) For the year ended December 31, (In thousands) 2023 2022 2021 Net income (loss) attributable to Clear Secure,.
As of December 31, 2022 December 31, 2021 Change % Change Total Cumulative Enrollments (in thousands) 15,384 10,366 5,018 48% Total Cumulative Enrollments were 15,384 as of December 31, 2022 and 10,366 as of December 31, 2021, which represented a 48% increase.
As of December 31, 2023 2022 Change % Change Total Cumulative Enrollments (in thousands) 20,194 15,384 4,810 31% Total Cumulative Enrollments were 20,194 as of December 31, 2023 and 15,384 as of December 31, 2022, which represented a 31% increase.
An Enrollment is defined as any member who has registered for the CLEAR platform since inception and has a profile (including limited time free trials regardless of conversion to paid membership) net of duplicate and/or purged accounts. This includes CLEAR Plus members who have completed enrollment with CLEAR and have never activated a payment method, plus associated family accounts.
Total Cumulative Enrollments We define Total Cumulative Enrollments as the number of enrollments since inception as of the end of the period. An Enrollment is defined as any Member who has registered for the CLEAR platform since inception and has a profile (including limited time free trials regardless of conversion to paid membership) net of duplicate and/or purged accounts.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. Revenue recognition The Company has derived substantially all of its historical revenue from subscriptions to its consumer aviation service, CLEAR Plus.
Cash Flow The following summarizes our cash flows for the years ended December 31, 2022 and December 31, 2021 (in millions): Years Ended December 31, 2022 2021 2020 $ Change 2022 vs 2021 % Change 2022 vs 2021 Net cash provided by (used in) operating activities $168.3 $69.7 ($12.3) $98.6 141 % Net cash used in investing activities (359.6) (403.2) (21.6) 43.6 (11) % Net cash provided by (used in) financing activities (48.9) 503.4 (63.1) (552.3) (110) % Net increase (decrease) in cash, cash equivalents, and restricted cash (240.2) 169.9 (97.0) (410.1) (241) % Exchange rate effect on cash and cash equivalents, and restricted cash — 0.1 — N/A N/A Cash, cash equivalents, and restricted cash, beginning of year 309.1 139.1 236.1 73.0 31 % Cash, cash equivalents, and restricted cash, end of period 68.9 309.1 139.1 (70.3) (51) % Cash flows from operating activities For the year ended December 31, 2022, net cash provided by operating activities was $168.3 million compared to $69.7 million for the year ended December 31, 2021, an increase of $98.6 million primarily due to an increase in non-cash adjustments to net loss of $91.8 million and a year over year favorable change in operating assets/liabilities of $7.0 million.
Cash Flow The following summarizes our cash flows for the years ended December 31, 2023, 2022 and 2021 (in millions): Years Ended December 31, 2023 2022 2021 $ Change 2023 vs 2022 $ Change 2023 vs 2022 Net cash provided by (used in) operating activities $ 225.0 $ 168.3 $ 69.7 $ 56.7 34 % Net cash used in investing activities (15.5) (359.6) (403.2) 344.1 (96) % Net cash provided by (used in) financing activities (216.0) (48.9) 503.4 (167.1) 342 % Net increase (decrease) in cash, cash equivalents, and restricted cash (6.5) (240.2) 169.9 233.7 (97) % Exchange rate effect on cash and cash equivalents, and restricted cash — — — N/A N/A Cash, cash equivalents, and restricted cash, beginning of year 68.9 309.1 139.1 (240.2) (78) % Cash, cash equivalents, and restricted cash, end of period $ 62.4 $ 68.9 $ 309.0 $ (6.5) (9) % Cash flows from operating activities For the year ended December 31, 2023, net cash provided by operating activities was $225.0 million compared to $168.3 million for the year ended December 31, 2022, an increase of $56.7 million.
Our future success is dependent upon maintaining and growing our partnerships as well as ensuring our platform remains compelling to members. 46 Table of Contents Although we have historically grown the number of new members over time and successfully converted some free trial members to paying members, our future success is dependent upon our ongoing ability to do so.
Although we have historically grown the number of new Members over time and successfully converted some free trial Members to paying Members, our future success is dependent upon our ongoing ability to do so. 46 Table of Contents Ability to retain CLEAR Plus Members Our ability to execute on our growth strategy is focused, in part, on our ability to retain our existing CLEAR Plus Members.
As of December 31, 2022, we had cash and cash equivalents of $39 million and marketable securities of $666 million. Historically, our principal uses of cash and cash equivalents have included funding our operations, capital expenditures, repurchases of members’ equity and business combinations that enhance our strategic positioning.
Historically, our principal uses of cash and cash equivalents have included funding our operations, capital expenditures, repurchases of members’ equity and more recently, business combinations and investments that enhance our strategic positioning.
Additionally, the Company has determined the TRA liability is not probable and therefore has not recorded a tax receivable liability.
Additionally, the Company has determined the TRA liability is not probable and therefore has not recorded a tax receivable liability except for realized tax benefit payment with respect to the 2022 tax year.
Our operating results and growth opportunities depend, in part, on our ability to attract new members, including paying members (CLEAR Plus members) as well as new platform members.
Ability to Grow Total Cumulative Enrollments We are focused on growing Total Cumulative Enrollments and the number of Members that engage with our platform. Our operating results and growth opportunities depend, in part, on our ability to attract new Members, including paying Members (CLEAR Plus Members) as well as new platform Members.
Future capital expenditure will generally relate to building enhancements to the functionality of our current platform, equipment, leasehold improvements and furniture and fixtures related to office expansion and relocation, and general corporate infrastructure. We have planned capital expenditures primarily related to the build out of our new office space of approximately $9 million in the next 12 months.
We expect that future capital expenditure will generally relate to building enhancements to the functionality of our current platform, equipment, leasehold improvements and furniture and fixtures related to office expansion, and general corporate infrastructure.
The change was primarily driven by an increase of $7.6 million, or 40%, in fixed airport fees and a net $14.4 million, or 53%, increase in per member fees. COVID-related concessions reduced cost of revenue share fee by $5.3 million for 2022 and $2.4 million in 2021.
The change was driven primarily by an increase of $8.5 million, or a 52% increase, in fixed airport fees and $23.9 million, or a 60% increase, in per Member fees. COVID-related concessions reduced Cost of revenue share fee by $2.5 million and $5.3 million in the twelve months ended December 31, 2023 and 2022, respectively.
Commitments and Contingencies We have non-cancelable operating lease arrangements for office space. As of December 31, 2022, we had future minimum payments of $220.0 million, with $12.3 million due within 12 months. See Note 8 within the consolidated financial statements for information related to our lease obligations.
As of December 31, 2023, we had future minimum payments of $207.7 million, with $15.0 million due within 12 months. See Note 8 within the consolidated financial statements for information related to our lease obligations. 59 Table of Contents We enter into agreements with airports for access to floor and office space.
General and administrative Years ended December 31, 2022 2021 $ Change % Change General and administrative $ 278.1 $ 168.9 $ 109.2 65 % General and administrative expenses increased by $109.2 million, or 65%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
General and administrative Years ended December 31, 2023 2022 $ Change % Change General and administrative $ 222.4 $ 278.1 $ (55.7) (20) % General and administrative expenses decreased by $55.7 million, or 20%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
As of December 31, 2022 December 31, 2021 Change % Change Total Cumulative Platform Uses (in thousands) 129,617 83,957 45,660 54% Total Cumulative Platform Uses was 129,617 as of December 31, 2022 and 83,957 as of December 31, 2021, which represented a 54% increase, driven by a continued increase in CLEAR Plus verifications in connection with a rebound in air travel and an increased share of checkpoint volumes.
As of December 31, 2023 2022 Change % Change Total Cumulative Platform Uses (in thousands) 180,807 129,617 51,190 39% Total Cumulative Platform Uses was 180,807 as of December 31, 2023 and 129,617 as of December 31, 2022, which represented a 39% increase, driven by the continued strength in air travel leading to increases in CLEAR Plus verifications combined with an increased contributions from CLEAR Verified uses.
The Company has commitments for future marketing expenditures to sports stadiums of $6.5 million as of December 31, 2022. As of December 31, 2022, the Company is subject to certain minimum spend commitments of approximately $5.8 million over the next two years under service arrangements.
As of December 31, 2023, the Company is subject to certain minimum spend commitments of approximately $1.9 million over the next year under service arrangements.
Our flagship CLEAR app offers free to consumer products like Home-to-Gate and Health Pass, and in the future will also include Reserve Powered by CLEAR, our virtual queuing technology that enables customers to manage lines.
Our free flagship CLEAR app offers consumer products like Home-to-Gate, which includes RESERVE Powered by CLEAR, our virtual queuing technology that enables customers to prebook a spot in the airport security line so they don’t have to wait.
During the fourth quarter of fiscal year 2022, we revised our definition of Adjusted EBITDA (Loss) to include impairment on assets as a separate component.
During the fourth quarter of fiscal year 2022, we revised our definition of Adjusted EBITDA (Loss) to include impairment on assets as a separate component. We did not revise prior years' Adjusted EBITDA (Loss) because there was no impact of a similar nature in the prior period that affects comparability. Adjusted EBITDA Margin is Adjusted EBITDA, divided by total revenues.
Inc $ (65,573) $ (36,082) $ — Reallocation of net loss attributable to non-controlling interests (49,863) (32,240) — Net loss per above (115,436) (68,322) (9,310) Equity-based compensation expense 138,495 33,929 53,978 Amortization of acquired intangibles 3,161 — — Acquisition-related costs — 1,391 — Income tax effect (1,604) — — Adjusted Net Income (Loss) $ 24,616 $ (33,002) $ 44,668 As stated above, due to the Company incurring a net loss for certain periods presented, the Company has not calculated Adjusted Weighted-Average Shares Outstanding, Dilutive for those periods.
Inc $ 28,108 $ (65,573) $ (36,082) Reallocation of net income (loss) attributable to non-controlling interests 21,780 (49,863) (32,240) Net income (loss) per above 49,888 (115,436) (68,322) Equity-based compensation expense 37,293 138,495 33,929 Amortization of acquired intangibles 3,268 3,161 — Acquisition-related costs 457 — 1,391 Income tax effect* (1,610) (1,604) — Adjusted Net Income (Loss) $ 89,296 $ 24,616 $ (33,002) * There was no income tax impact due to the fact that the Company’s effective tax rate was approximately 0% for the year ended December 31, 2021.
The Lifetime Value relative to our Customer Acquisition Cost for CLEAR Plus members who joined during 2022 has improved compared to prior periods. While we believe our unit economics will remain attractive, this is dependent on our ability to add new members efficiently and maintain our historically strong retention rates.
Maintaining strong unit economics Our business model is powered by network effects and has historically been characterized by efficient Member acquisition and high Member retention rates. While we believe our unit economics will remain attractive, this is dependent on our ability to add new Members efficiently and maintain our historically strong retention rates.
The Company funded the dividend from proportionate cash distributions by Alclear to all of its members as of the Record Date, including holders of non-controlling interests in Alclear (who own approximately 43% of the interests in Alclear as of the Record Date) and the Company (which owns approximately 57% of the interests in Alclear as of the Record Date).
The amount of such quarterly dividends are 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.
Years ended December 31, 2022 2021 $ Change % Change Total Bookings (in millions) $527.0 $341.0 $186.0 55% Total Bookings increased by $186.0 million, or 55%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Years ended December 31, 2023 2022 $ Change % Change Total Bookings (in millions) $711.8 $527.0 $184.8 35% Total Bookings increased by $184.8 million, or 35%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily driven by new Member enrollments, pricing increases, and strong retention of existing Members.
Non-operating income (expense) Years ended December 31, 2022 2021 $ Change % Change Interest income (expense), net $ 6.6 $ (0.3) $ 6.9 N/A 56 Table of Contents Interest income, net increased by $6.9 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
These decreases were partially offset by an $8.4 million increase in technology costs, $7.9 million increase of credit card fees due to higher Total Bookings, $5.4 million increase of allocated overhead costs, and $3.5 million increase of professional fees. 56 Table of Contents Non-operating income (expense) Years ended December 31, 2023 2022 $ Change % Change Interest income (expense), net $ 29.0 $ 6.6 $ 22.4 340 % Interest income, net increased by $22.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Cost of Revenue Share Fee Years ended December 31, 2022 2021 $ Change % Change Cost of Revenue Share Fee $ 56.3 $ 37.2 $ 19.1 51 % Cost of revenue share fee increased by $19.1 million, or 51%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Approximately 30% of paying CLEAR Plus Members were on a family plan as of December 31, 2023 and 2022. 55 Table of Contents Cost of revenue share fee Years ended December 31, 2023 2022 $ Change % Change Cost of revenue share fee $ 88.6 $ 56.3 $ 32.3 57 % Cost of revenue share fee increased by $32.3 million, or 57%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Revenues and operating loss related to these acquisitions for the year ended December 31, 2022 and December 31, 2021 were insignificant to the consolidated financial statements for all periods presented. Key Performance Indicators To evaluate performance of the business, we utilize a variety of other non-GAAP financial reporting and performance measures.
Revenues and operating income (loss) related to these acquisitions for the years ended December 31, 2023, 2022, and 2021 were insignificant to the consolidated financial statements for all periods presented. See Note 3 within the consolidated financial statements included in this document for more information on acquisitions.
The change was driven by increased ambassador commission expense of $10.8 million due to higher new member enrollments, partially offset by a $5.2 million decrease in discretionary marketing expense. Sales and marketing expense for the year ended December 31, 2022 included $0.2 million of non-cash equity-based compensation expense from pre-IPO employee performance awards.
The change was driven primarily by a $2.0 million increase in employee compensation costs, $1.8 million increase in discretionary marketing expense, and $0.8 million related to increased allocated overhead costs, partially offset by a $2.7 million decrease in Ambassador commission expense.
Cash flows from investing activities 58 Table of Contents For the year ended December 31, 2022, net cash used in investing activities was $359.6 million compared to $403.2 million for the year ended December 31, 2021, a decrease of $43.6 million, primarily due to a net increase in purchases of marketable securities of $29.3 million which was partially offset by a $75.8 million decrease in cash paid for business combinations Cash flows from financing activities For the year ended December 31, 2022, net cash used in financing activities was 48.9 million compared to net cash provided by financing activities of 503.4 million for the year ended December 31, 2021, a decrease of 552.3 million.
Cash flows from investing activities For the year ended December 31, 2023, net cash used in investing activities was $15.5 million compared to $359.6 million for the year ended December 31, 2022, a decrease of $344.1 million.
Key Factors Affecting Performance We believe that our current and future financial growth are dependent upon many factors, including the key factors affecting performance described below. Ability to Grow Total Cumulative Enrollments We are focused on growing Total Cumulative Enrollments and the number of members that engage with our platform.
CLEAR Verified, our B2B offering, enables our partners to leverage our digital identity technology and reusable member network to facilitate secure and frictionless experiences digitally and physically via our SDKs and APIs. Key Factors Affecting Performance We believe that our current and future financial growth are dependent upon many factors, including the key factors affecting performance described below.
General and administrative expense for the year ended December 31, 2021 includes $4.8 million of non-cash equity-based compensation from previously issued warrants to United Airlines.
(2) Includes $4.3 million employee equity-based compensation forfeitures for the year ended December 31, 2023.
The income tax benefit for the year ended December 31, 2022 was primarily due to the reduction in the blended state and federal tax rate attributable to the acquired intangible assets related to Whyline Inc. Liquidity and Capital Resources Our operations have historically been financed primarily through equity financing and cash flow from operating activities.
Liquidity and Capital Resources Our operations have historically been financed primarily through equity financing and cash flow from operating activities. As of December 31, 2023, we had cash and cash equivalents of $57.9 million and marketable securities of $665.2 million.
The change was primarily driven by a 71% increase in the number of average monthly CLEAR Plus members, and a 1% increase in average revenue per CLEAR Plus member in the year ended December 31, 2022 as compared to the year ended December 31, 2021, respectively.
The change was primarily due to an increase in the number of CLEAR Plus Members.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe effect of a hypothetical 100 basis points increase or decrease in overall interest rate would result in unrealized loss or gain to our marketable securities’ fair value of approximately $3.3 million that would be recognized in accumulated other comprehensive loss within the consolidated balance sheets.
Biggest changeThe effect of a hypothetical 100 basis points increase or decrease in overall interest rate would result in unrealized loss or gain to our “available for sale” investment fair value of approximately $4.5 million that would be recognized in accumulated other comprehensive loss within the consolidated balance sheets.
Since the majority of our business are transacted in the U.S. dollar, foreign currency translation risk was insignificant for the year ended December 31, 2022.
Since the majority of our business are transacted in the U.S. dollar, foreign currency translation risk was insignificant for the year ended December 31, 2023.
Foreign Currency Translation Risk Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenues, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into USD.
Foreign Currency Translation Risk 61 Table of Contents Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenues, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into USD.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, we are subject to a variety of risks which can affect our operations and profitability. Interest Rate Risk We had cash and cash equivalents of $68.9 million as of December 31, 2022.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, we are subject to a variety of risks which can affect our operations and profitability. Interest Rate Risk We had cash and cash equivalents of $57.9 million as of December 31, 2023.
Debt Interest payable on our revolving credit facility is variable. Borrowings generally will bear interest based on the greater of the prime rate, LIBOR or NYFRB rate, plus an applicable margin for specific interest periods. As of December 31, 2022, we had no outstanding borrowings under the revolving credit facility.
Debt Interest payable on our revolving credit facility is variable. Borrowings generally will bear interest based on the greater of the prime rate, SOFR or NYFRB rate, plus an applicable margin for specific interest periods. As of December 31, 2023, we had no outstanding borrowings under the revolving credit facility.
Investments in Marketable Securities We had marketable securities totaling $666 million as of December 31, 2022. This amount was invested primarily in government securities, money market funds, commercial paper, corporate notes and bonds. Our investments are made for capital preservation purposes and we do not enter into investments for trading or speculative purposes.
Investments in Marketable Securities We had marketable securities totaling $665.2 million as of December 31, 2023. This amount was invested primarily in government securities, money market funds, commercial paper, corporate notes and bonds. Our investments are made for capital preservation purposes and we do not enter into investments for trading or speculative purposes.

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