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Momentum continuing unabated

CLIQ Digital 6 May 2022 Update
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CLIQ Digital

Momentum continuing unabated

Q122 trading update

Media

6 May 2022

Price

€24.75

Market cap

€159m

Net cash (€m) at 31 March 2022

2.5

Shares in issue

6.5m

Free float

89%

Code

CLIQ

Primary exchange

XETRA

Secondary exchange

FRA

Share price performance

%

1m

3m

12m

Abs

(5.3)

8.6

(23.5)

Rel (local)

(1.7)

17.9

(16.5)

52-week high/low

€36.35

€18.20

Business description

CLIQ Digital is a global streaming provider specialising in the direct marketing of affordable entertainment products and offering its members unlimited access to music, audiobooks, sports, movies and games. It works in over 30 countries. In FY21, 42% of sales were generated in Europe, 50% in North America and 8% in other regions.

Next events

Strategic update

15 June 2022

Q222 results

2 August 2022

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Max Hayes

+44 (0)20 3077 5700

CLIQ Digital is a research client of Edison Investment Research Limited

CLIQ Digital (CLIQ) has had a positive start to the year, with Q122 results providing an early indication that it is on track to meet its guidance for strong growth and increased profitability in FY22. Its shift to direct media buying continues to drive rapid growth in the membership base in North America and Europe, with more members now choosing to pay for its multi-content offering. This reflects the success to date of investments in marketing and new content. As expected and guided, the additional spend will depress EBITDA margin in the current year, but we would expect it to start to rebuild in FY23.

Year end

Revenue (€m)

PBT*
(€m)

Adjusted EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/20

107.0

14.4

1.2

0.5

20.6

2.0

12/21

150.0

25.3

2.6

1.1

9.5

4.4

12/22e

210.4

32.0

3.3

1.3

7.5

5.3

12/23e

290.2

47.1

4.8

2.0

5.2

8.0

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Investments driving growth

Revenue in Q122 increased by 75% to €52.6m (Q122: €30.1m), with the group reporting growth in all regions (North America: +89%, Europe: +71%, RoW: +16%). Marketing spend, its main revenue driver, was up 147% y-o-y to €22.5m, benefiting also from management’s fundamental shift from media buying from affiliate partners to an in-house media buying team. Management reiterated its short- and mid-term guidance, indicating revenue growth of at least 40% to c €210m in FY22 and a 35% CAGR to €500m by end-FY25. On an annual run-rate, CLIQ’s FY22 revenue would be €210m, so management guidance, and our forecasts, look readily achievable given that the company expects to deliver another three quarters of growth.

Robust cash position despite investments

The membership base rose 13% q-o-q to 1.5m users, reflecting the successful marketing campaigns and content investment. The company recently licensed new content from Palatin Media and LEONINE Studios, adding over 600 hours of entertainment across genres. 82% of members now opt for its higher-value multi-content offering, rather than single-content (Q121: 66%). As expected (FY21 trading update), marketing and content investment depressed margins - EBITDA margin was 15.8% (Q121: 17.6%) - and resulted in lower operating free cash flow, down €4.9m y-o-y to €0.2m. However, CLIQ’s balance sheet remains robust with net cash of €2.5m. The financing facility’s maturity date has been extended to end-July 2022 and Commerzbank has signed a mandate to arrange a new 3-to-5-year facility, giving further firepower for investment in marketing, content and platforms.

Valuation: Still significant upside potential

CLIQ’s share price is roughly the same as at the start of the year, while its peers are down 32%. Across FY22e and FY23e, it still trades at a discount to peers across average EV/sales, EV/EBITDA and P/E multiples. Parity across these ratios would equate to an implied share price of €65.4.

Investments leading to improvements in customer base

As highlighted previously, investments in marketing and content across all genres were key to expanding its customer base at the quarter end to 1.5 million, up 13% q-o-q and 50% y-o-y. These investments also drove an increase in the average length of a subscription, as well as the expected lifetime value for multi- and single-content offerings, which rose from €69.81 to €71.27 q-o-q. As a result, growth in its customer base value (number of members multiplied by expected individual lifetime value) accelerated to €104m, as illustrated in Exhibit 1. Customer base value represents the total revenue that is expected to be generated by existing members, and so provides good visibility for the rest of the year.

Exhibit 1: Customer base value and number of paid memberships

Source: CLIQ Digital

Starting to leverage the CLIQ brand

To date, the marketing effort for customer recruitment has been focused on performance marketing via clips and teasers to draw people in from their particular interest categories, then sell across the wider package. With the growth of the multi-content portals, the use of an umbrella brand (a single brand name for multiple white-label products) is an additional marketing tool that CLIQ has not used extensively previously. The upcoming strategy day on 15 June 2022 will give management the opportunity to showcase its multi-content portal and provide insight into its proposed brand marketing campaign, which should increase CLIQ’s profile both with its target subscriber base and with the financial community.


Exhibit 2: Financial summary

€m

2019

2020

2021

2022e

2023e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

63.1

107.0

150.0

210.4

290.2

Cost of Sales

(44.3)

(72.0)

(98.8)

(145.1)

(197.6)

Gross Profit

18.8

34.9

51.2

65.2

92.6

EBITDA

 

 

5.8

15.9

27.2

33.4

48.7

Normalised operating profit

 

 

4.8

15.2

26.3

32.7

47.9

Reported operating profit

4.8

15.2

26.3

32.7

47.9

Net Interest

(0.9)

(0.8)

(0.9)

(0.7)

(0.8)

Profit Before Tax (norm)

 

 

3.9

14.4

25.3

32.0

47.1

Profit Before Tax (reported)

 

 

3.9

14.4

25.3

32.0

47.1

Reported tax

0.0

(4.0)

(7.1)

(10.0)

(14.7)

Profit After Tax (norm)

3.9

10.4

17.4

22.0

32.4

Profit After Tax (reported)

3.9

10.4

18.2

22.0

32.4

Minority interests

1.7

3.3

0.4

0.5

0.7

Net income (normalised)

2.2

7.2

17.0

21.5

31.7

Net income (reported)

2.2

7.2

17.8

21.5

31.7

Average number of shares outstanding (m)

6.2

6.2

6.5

6.5

7

EPS - basic (€)

 

 

0.36

1.16

2.62

3.30

4.88

EPS - normalised fully diluted (c)

 

 

0.35

1.16

2.59

3.26

4.81

Dividend (€)

0.28

0.46

1.10

1.32

1.95

Revenue growth (%)

8.5

69.4

40.2

40.3

38.0

Gross Margin (%)

29.8

32.7

34.1

31.0

31.9

EBITDA Margin (%)

9.1

14.9

18.1

15.9

16.8

Normalised Operating Margin

7.6

14.2

17.5

15.6

16.5

BALANCE SHEET

Fixed Assets

 

 

52.9

55.2

59.4

62.0

65.4

Intangible Assets

0.7

0.8

2.6

5.0

7.5

Tangible Assets

0.7

2.2

3.8

5.2

6.0

Goodwill & other

51.5

52.3

53.0

51.7

51.9

Current Assets

 

 

15.2

21.7

36.9

57.3

59.1

Receivables

8.2

9.1

12.5

17.3

17.6

Cash & cash equivalents

0.7

4.9

7.3

19.7

19.5

Other

6.3

7.7

17.1

20.3

22.0

Current Liabilities

 

 

(8.7)

(12.9)

(27.3)

(24.3)

(18.1)

Creditors

(2.0)

(2.0)

(7.9)

(10.4)

(4.2)

Tax

(1.1)

(3.2)

(1.2)

(1.2)

(1.2)

Borrowings

0.0

0.0

(5.0)

0.0

0.0

Provisions

0.0

(0.4)

(0.4)

(0.4)

(0.4)

Other

(5.6)

(7.3)

(12.8)

(12.4)

(12.4)

Long Term Liabilities

 

 

(12.7)

(8.5)

(9.4)

(20.7)

(11.1)

Long term borrowings

(9.9)

(3.8)

0.0

(11.4)

(1.9)

Other long term liabilities

(2.8)

(4.7)

(9.4)

(9.3)

(9.2)

Net Assets

 

 

46.7

55.6

59.6

74.3

95.3

Minority interests

2.0

4.8

0.0

0.5

1.2

Shareholders equity

 

 

44.7

50.8

59.5

73.7

94.1

CASH FLOW

Op Cash Flow before WC and tax

4.8

15.1

26.8

32.7

47.9

Working capital

(1.9)

1.6

(1.2)

(2.3)

(6.5)

Exceptional & other

0.9

0.9

1.3

(1.4)

0.5

Tax

(1.3)

(2.8)

(6.1)

(11.0)

(15.5)

Operating cash flow

 

 

2.5

14.8

20.8

18.0

26.3

Capex

(0.4)

(0.7)

(3.3)

(3.4)

(3.6)

Acquisitions/disposals

(3.4)

0.0

(10.3)

0.0

0.0

Net interest

0.0

0.0

0.0

0.0

0.0

Equity financing

0.0

0.0

0.0

0.0

0.0

Dividends

0.0

(2.1)

(3.3)

(8.6)

(12.7)

Other

(1.6)

(1.5)

(2.5)

(0.1)

(0.8)

Net Cash Flow

(2.9)

10.5

1.4

5.9

9.3

Opening net debt/(cash)

 

 

6.8

9.6

(0.9)

(2.3)

(8.2)

FX

0.0

(0.0)

0.0

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

9.6

(0.9)

(2.3)

(8.2)

(17.5)

Source: Edison Investment Research, CLIQ Digital


General disclaimer and copyright

This report has been commissioned by CLIQ Digital and prepared and issued by Edison, in consideration of a fee payable by CLIQ Digital. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by CLIQ Digital and prepared and issued by Edison, in consideration of a fee payable by CLIQ Digital. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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