Clear Secure (YOU) risk factors, FY2024 10-K

Risks Related to Our Business, Brand and Operations

1. 01If we fail to add new and retain existing Members, including Active CLEAR Plus Members,or increase the utilization of our platform, our business, results of operations and financial condition would be materially and adversely affected
2. 02that are considered valuable to our CLEAR Plus Members. Failure to do so could adversely affect our business, results of operations and financial condition
3. 03If we fail to add new or retain existing partners, or profit from partner relationships, our business, results of operations and financial condition could be materially and adversely affected
4. 04existing Members, including Active CLEAR Plus Members, or increase the utilization of our platform, our business, results of operations and financial condition would be materially and adversely affected” above
5. 05If 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
6. 06We operate in a highly competitive market, and we may be unable to compete successfully against existing and future competitors
7. 07We also face competition from solutions that could be developed in-house by our existing and future partners, 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
8. 08Increased 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
9. 09Public confidence in, and acceptance of, identity platforms and biometrics generally, and our platform specifically, will be a key factor in our business’s continued growth
10. 10We might not implement successful strategies to increase adoption of our platform or expand into new verticals, which would limit our growth
11. 11Our commercial agreements and strategic alliances, as well as potential indemnification obligations, expose us to risk
12. 12Portions of our business and results of operations depend upon concessionaire agreements
13. 13Any decline or disruption in the travel industry or general economic downturn could materially adversely affect our business, results of operations and financial condition
14. 14We may require additional capital to support business growth and objectives, and this capital might not be available to us on reasonable terms, if at all, and may result in stockholder dilution
15. 15Future acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and harm our results of operations and financial condition
16. 16Our business depends on retaining and attracting high-quality personnel, including certain key personnel, and continued attrition, future attrition or unsuccessful succession planning could adversely affect our business
17. 17Our 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
18. 18or risk losing Members or partners. In the event we experience significant disruptions, we may be unable to repair our systems in an efficient and timely manner which could have a material adverse effect on our business, financial condition and operating results
19. 19Our marketing efforts to help grow our business may not be effective
20. 20Our business could be adversely impacted by changes in the Internet browsers and mobile device accessibility of Members
21. 21If we cannot maintain our corporate culture as we grow, our business may be harmed
22. 22We are subject to payment processing risk
23. 23Our business may be vulnerable to the adverse effects of climate change, which may negatively impact our operations
24. 24We 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
25. 25Our 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

Risks Related to Information Technology and Intellectual Property

1. 26There may be breaches of our information technology systems that subject us to significant reputational, financial, legal and operational consequences or materially damage Member and partner relationships
2. 27We rely on third-party technology and information systems to help complete critical business functions. If that technology is subject to a security breach or fails to adequately serve our needs, and we cannot find alternatives, it may negatively impact our business, financial condition and results of operations
3. 28Failure to adequately protect our intellectual property, technology and confidential information could harm our business, competitive position, financial condition and results of operations
4. 29If we are unable to effectively protect our intellectual property rights on a worldwide basis, we may not be successful in the international expansion of our business that we may pursue
5. 30If our future products incorporate technologies that infringe the proprietary rights of third parties, and we do not secure licenses from them, we could be liable for substantial damages

Risks Related to Regulation and Litigation

1. 31We must continue to meet the evolving standards set for our airport operations by governmental stakeholders
2. 32We may be sued by third parties for alleged infringement, misappropriation or other violations of intellectual property and other proprietary rights
3. 33The laws and regulations that we are subject to or may become subject to are constantly evolving
4. 34As our industry evolves and we continue to expand our platform offerings, Member base and partnerships, we may become subject to additional laws and regulations, which may differ or conflict from one jurisdiction to another
5. 35We may be subject to legal proceedings, regulatory disputes and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention and materially harm our business, financial condition and operating results
6. 36The coverage afforded under our insurance policies may be inadequate for the needs of our business or our third-party insurers may be unable or unwilling to meet our coverage requirements, which could materially adversely affect our business, results of operations and financial condition
7. 37Our use of “open source” software could adversely affect our ability to offer our services and subject us to possible litigation, and may increase our vulnerability to unauthorized access and cyberattacks
8. 38Liability protections provided by the SAFETY Act may be limited

Risks Related to Our Financial Results

1. 39We may not be able to achieve or sustain profitability in the future and have incurred, and expect to continue to incur, increased expenses as we continue to invest in growth
2. 40Prior to our 2023 fiscal year, we had not been profitable since our relaunch in 2010, and we recorded a net loss of approximately $115.4 million, $115.1 million and $9.3 million for the years ended December 31, 2022, 2021 and 2020, respectively
3. 41If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected
4. 42Our focus on delivering a safe, reliable, predictable and frictionless Member experience may not maximize short-term financial results, which may yield results that conflict with the market’s expectations and could result in our stock price being negatively affected

Risks Related to Our Corporate Structure

1. 43We are a holding company and our principal asset is our equity interests in Alclear, and we are accordingly dependent upon distributions from Alclear to pay dividends, if any, and taxes, make payments under any Tax Receivable Agreement and cover other expenses, including our corporate and other overhead expenses
2. 44We have in the past, and may or may not in the future, pay quarterly and special cash dividends to our stockholders, but our ability to do so may be limited by our holding company structure, contractual restrictions and other factors
3. 45Our 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
4. 46We are controlled by the Founder Post-IPO Members, whose interests in our business may be different than yours
5. 47We will be required to pay the CLEAR Post-IPO Members for certain tax benefits we may claim, and the amounts we may pay could be significant
6. 48absence of those transactions. Both the existing and anticipated tax basis adjustments are expected to reduce the amount of tax that we would otherwise be required to pay in the future
7. 49Our Credit Agreement contains restrictions that limit our flexibility
8. 50The timing and amount of any repurchases under our stock repurchase program are subject to a number of uncertainties
9. 51The U.S. federal income tax treatment of distributions on our Class A Common Stock to a stockholder will depend upon our tax attributes and the stockholder’s tax basis in our stock, which are not necessarily predictable and can change over time

Risks Related to Ownership of Our Class A Common Stock

1. 52Substantial future sales of shares of our Class A Common Stock in the public market could cause our stock price to fall
2. 53If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired
3. 54Provisions in our charter documents and certain rules imposed by regulatory authorities may delay or prevent our acquisition by a third party
4. 55Our stock price has been, and may in the future be, volatile, and your investment in our Common Stock could decline in value
5. 56We 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
6. 57We have recorded, and will continue to record, substantial stock-compensation expense for the Founder PSUs. The aggregate grant date fair value of the Founder PSUs is estimated to be approximately $66.3 million, which will be recognized as compensation expense over a number of years following the closing of our IPO
7. 58We may issue preferred securities, the terms of which could adversely affect the voting power or value of our Common Stock