CLIQ Digital — Diversifying marketing channels

CLIQ Digital (SCALE: CLIQ)

Last close As at 12/07/2024

EUR5.55

−2.26 (−28.94%)

Market capitalisation

EUR37m

More on this equity

Research: TMT

CLIQ Digital — Diversifying marketing channels

CLIQ Digital continues to deliver good progress as it focuses on conversions through its customer base through its bundled content offering. In 9M23, revenue and EBITDA grew by 25% year-on-year to €242m and €39m respectively, at a maintained margin of 15.9%. CLIQ’s focus on acquiring more profitable customers with a higher lifetime value is delivering progress against key performance indicators, including growth of 21% in the customer base value. Our estimates remain unchanged, while management has reiterated its FY23 and mid-term FY25 guidance. CLIQ continues to trade at a significant discount to our peer group across EV/sales and EV/EBITDA multiples. Our implied share price comes to €62, reflecting continuing upside to the current price on our estimates.

Written by

Milo Bussell

Analyst, Consumer and TMT

CLIQ-Digital_resized

TMT

CLIQ Digital

Diversifying marketing channels

Q323 results

Media

3 November 2023

Price

€17.32

Market cap

€113m

Net cash (€m) at 30 September 2023

11.9

Shares in issue

6.5m

Free float

89%

Code

CLIQ

Primary exchange

XTRA

Secondary exchange

FRA

Share price performance

%

1m

3m

12m

Abs

(1.8)

(28.1)

(17.3)

Rel (local)

(1.1)

(24.0)

(27.6)

52-week high/low

€30.85

€16.50

Business description

CLIQ Digital sells subscription-based streaming services that bundle movies and series, music, audiobooks, sports and games to consumers globally. In 9M23, 35% of sales were generated in Europe, 59% in North America, 4% in Latin America and 4% in other regions.

Next events

Deutsches Eigenkapitalforum

27–29 November 2023

Analysts

Milo Bussell

+44 (0)20 3077 5700

Fiona Orford-Williams

+44 (0)20 3077 5700

CLIQ Digital is a research client of Edison Investment Research Limited

CLIQ Digital continues to deliver good progress as it focuses on conversions through its customer base through its bundled content offering. In 9M23, revenue and EBITDA grew by 25% year-on-year to €242m and €39m respectively, at a maintained margin of 15.9%. CLIQ’s focus on acquiring more profitable customers with a higher lifetime value is delivering progress against key performance indicators, including growth of 21% in the customer base value. Our estimates remain unchanged, while management has reiterated its FY23 and mid-term FY25 guidance. CLIQ continues to trade at a significant discount to our peer group across EV/sales and EV/EBITDA multiples. Our implied share price comes to €62, reflecting continuing upside to the current price on our estimates.

Year end

Revenue (€m)

EBITDA*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/21

150.0

27.2

2.71

1.10

6.4

6.3

12/22

276.1

43.5

4.45

1.79

3.9

10.3

12/23e

345.0

51.0

4.86

1.97

3.6

11.4

12/24e

400.2

59.4

5.75

2.33

3.0

13.5

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

Growth driven by multi-content offer

CLIQ’s focus on more profitable customers within its subscriber base through targeted marketing spend with its bundled-content offering continues to deliver both sales and profit growth. EBITDA grew in line with sales over both 9M23 and in Q323 to €39m and €13m, respectively. The profit growth was despite marketing bidding prices remaining stubbornly high, particularly in Europe. Management implemented several initiatives in the period to acquire new members with a higher expected average lifetime value (LTV), enhancing the quality and range of its content offering. Robust quarterly operating free cash flow of €4.2m resulted in an improved net cash position of €11.9m at the end of Q323.

Estimates left unchanged

We have left our estimates unchanged as we continue to expect CLIQ to deliver €345m of revenue and €51m of EBITDA in FY23. The historical seasonal weighting towards Q4 and initiatives to drive profitable customer acquisition, including new marketing channels, improving penetration in its geographies and further development of the content, underpin our profit assumptions.

Valuation: Delivery against guidance key

CLIQ’s share price has come down in recent months reflecting the more challenging consumer environment. On EV/sales CLIQ trades at a significant discount of 75% and 77% across FY23 and FY24 to the peer average (excluding Netflix). On our revised valuation methodology (see page 3), parity to these average multiples equates to an implied share price of €62, reflecting in our view significant upside to the current share price. We believe delivery against financial guidance could result in the valuation gap narrowing.

9M23 overview

In Exhibit 1 we highlight the strong year-on-year progress CLIQ has made in the year-to-date as it moves towards a greater proportion of revenue coming from bundled content.

Exhibit 1: 9M23 results summary

€m

9M22

9M23

Y-o-y change (%)

Revenue

193.3

242.2

25%

Europe

71.4

84.1

18%

North America

110.7

142.6

29%

Latin America

1.4

9.3

578%

RoW

9.8

6.2

-37%

Marketing spend

82.5

100.0

21%

EBITDA

30.8

38.5

25%

EBITDA margin

16%

16%

0.0ppt

EBIT

29.8

35.6

19%

Profit after tax

21.5

24.9

16%

Dilluted EPS (€)

3.28

3.80

16%

Net cash

2.1

11.9

454%

Source: CLIQ Digital

Revenue growth continues to be driven by CLIQ’s growing marketing spend promoting the group’s muti-content offer, which accounted for 94% of group sales in 9M23 (9M22: 86%). The remaining 6% of sales came through single-content streaming services. Growth in Q323 was predominantly driven by strong growth in North America, supported by a growing contribution from Latin America, which first went live in Q322. North America continued to grow its share of total sales, up to 59% of 9M23 sales, compared to 57% in 9M22. Higher sales of bundled content also helped to grow revenue in Q323 by 8% both year-on-year and quarter-on-quarter. EBITDA grew in line with sales, resulting in a stable margin of 16% despite more competitive advertising bidding prices, which management note remained stubbornly high particularly in Europe. The elevated bidding prices were reflected in the marketing costs in Q323, which grew as a proportion of total revenue to 40% (Q322: 32%). Robust cash flow resulted in an improved net cash position of €11.9m (H123: €8.0m).

The success of the group’s transition to bundled content offering away from single-content subscriptions can be seen in the progress against the group’s key performance indicators. The number of unique paying members grew to 1.3m at the end of Q323 (Q223: 1.1m) as CLIQ ramped up the number of advertising campaigns to drive customer acquisition. There was a significant jump in the LTV to €89 in Q323 (Q322: €72), which reflects the focus on higher-margin customers through the selling of the multi-bundled offering. As such, CLIQ’s customer base value rose to €159m at period-end (Q322: €131m).

Management has flagged a number of initiatives it is undertaking to diversify its marketing channels to help grow sales further. CLIQ has utilised search engine advertising, in particular keyword buying, directly advertising to consumers who are searching for content CLIQ offers. This is expected to become a successful marketing channel. Management is looking to develop new B2B partnerships, building on already existing partnerships with German retail and food services companies including Lidl, New Yorker and Call a Pizza. CLIQ will start an exclusive affiliate programme working with a German affiliate network in Q423. In France, CLIQ received approval to promote bundled-content sales with all mobile carriers, meaning payment can be taken from a customer’s existing phone bill, creating greater convenience for customers. Furthermore, management announced that it expects to be operational in new countries in Asia and the Middle East in Q423, further diversifying its sales mix. The combination of these initiatives should help to drive diversification of the group’s marketing channels and continued revenue growth.

Looking towards Q423, management expects more effective new marketing campaigns to achieve a higher conversion rate. When coupled with the B2B partnerships, new marketing channels, continued geographic penetration and the enhancement of the content offering, management expects these initiatives to support revenue growth in Q423. Given the historical weighting towards H2 (Q4 in particular) and these new initiatives, we maintain our forecasts. We note that our FY23 revenue forecasts require a strong Q4 performance. The emphasis on profitable growth underpins our confidence in CLIQ achieving its targeted FY23 EBITDA of over €50m.

Valuation

We have looked at CLIQ’s valuation in comparison with other selected entertainment and customer acquisition groups across various metrics, as shown below (Exhibit 2). It should be noted that these groups are of greatly varying scale and have widely differing business models, with correspondingly disparate growth characteristics.

CLIQ’s shares have come down in the last quarter despite little material news flow and the company’s substantial growth prospects. That said, there has been some recent short selling activity, which has weighed on the share price. Year-to-date, the shares have fallen by 31% versus the peer average rise of 5%, although this has been predominantly driven by the strong returns of Spotify, Pantaflix and Netflix. CLIQ’s bundled offering provides subscribers with wider ranging content than many of its peers at a lower monthly price point. Despite this and the higher expected sales growth rate on our estimates than the peer average in both FY23 and FY24, CLIQ continues to trade at a significant discount to EV/sales, EV/EBITDA and P/E multiples across both FY23 and FY24. Additionally, CLIQ is just one of two companies in the peer group that pays a dividend, as shown in Exhibit 2.

We have tweaked our valuation methodology slightly to provide a more consistent implied share price. Previously we took the median peer multiple; however, we are now using the average peer multiple, excluding Netflix, given the relatively small size of the peer group. We have excluded Netflix from the peer average as it is trading on multiples that are significantly higher than the peer group, which distorts the comparison. If priced at parity to peers on this basis, taking an average across FY23 and FY24 EV/sales multiples of 1.12x, CLIQ’s implied share price would be €62. At 230% above the current share price of €17.32, this represents significant upside in our view. We continue to expect that delivery against its financial guidance will narrow the valuation gap.

Exhibit 2: Peer valuation

 

Market cap

Share price perf ytd

Sales growth (%)

EV/sales (x)

EV/EBITDA (x)

P/E (x)

Hist div yield (%)

Company

(m)

(%)

FY1

FY2

FY1

FY2

FY1

FY2

FY1

FY2

Last

Cineverse

$14

(85)

36

1

0.2

0.2

N/A

6.2

N/A

N/A

N/A

Stingray

C$227

(8)

10

2

1.9

1.9

5.4

5.3

5.7

5.3

6.8

Spotify

$32,649

112

10

17

2.2

1.9

N/A

66.3

N/A

111.2

N/A

Netflix

$185,887

44

6

14

5.8

5.1

26.3

20.6

35.0

26.8

N/A

Pantaflix

€34

90

56

(2)

1.6

1.6

2.1

2.4

N/A

N/A

0.0

Nordic Entertainment

SEK1,901

(88)

14

(1)

0.2

0.2

N/A

14.9

N/A

7.0

0.0

Storytel

SEK2,479

(27)

2

12

0.8

0.8

12.7

9.2

N/A

N/A

0.0

Peer average (ex Netflix)

 

(1)

21

5

1.15

1.08

6.7

17.4

5.7

41.2

1.7

Cliq Digital

€113

(31)

25

16

0.3

0.3

2.0

1.7

3.5

3.0

10.3

Premium/(discount)

 

 

 

 

-75%

-77%

-71%

-90%

-39%

-93%

 

Source: Edison Investment Research, Refinitiv. Note: Priced at 3 November 2023.

Exhibit 3: Financial summary

€m

2020

2021

2022

2023e

2024e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

107.0

150.0

276.1

345.0

400.2

Cost of Sales

(72.0)

(98.8)

(201.3)

(256.1)

(297.1)

Gross Profit

34.9

51.2

74.8

88.9

103.1

EBITDA

 

15.9

27.2

43.5

51.0

59.4

Operating profit (before amort. and excepts.)

15.2

26.3

42.1

47.6

56.2

Reported operating profit

15.2

26.3

42.1

47.6

56.2

Net Interest

(0.8)

(0.9)

(1.2)

(0.8)

(0.8)

Profit Before Tax (norm)

 

14.4

25.3

40.9

46.8

55.4

Profit Before Tax (reported)

 

14.4

25.3

40.9

46.8

55.4

Reported tax

(4.0)

(7.1)

(11.9)

(14.1)

(16.6)

Profit After Tax (norm)

10.4

18.2

29.0

32.8

38.8

Profit After Tax (reported)

10.4

18.2

29.0

32.8

38.8

Minority interests

3.3

0.4

(0.1)

0.7

0.9

Net income (normalised)

7.2

17.8

29.1

32.1

37.9

Net income (reported)

7.2

17.8

29.0

32.1

37.9

Average Number of Shares Outstanding (m)

6.2

6.5

6.5

6.5

6.5

EPS - normalised (€)

 

1.16

2.74

4.47

4.93

5.83

EPS - normalised fully diluted (€)

1.16

2.71

4.45

4.86

5.75

Dividend (€)

0.46

1.10

1.79

1.97

2.33

Revenue growth (%)

69.4

40.2

84.1

25.0

16.0

Gross Margin (%)

32.7

34.1

27.1

25.8

25.8

EBITDA Margin (%)

14.9

18.1

15.8

14.8

14.8

Normalised Operating Margin

14.2

17.5

15.2

13.8

14.0

BALANCE SHEET

Fixed Assets

 

55.2

59.4

65.1

72.6

81.0

Intangible Assets

0.8

2.6

8.4

15.7

23.8

Tangible Assets

2.2

3.8

5.0

4.9

5.1

Goodwill & other

52.3

53.0

51.7

51.9

52.1

Current Assets

 

21.7

36.9

70.0

95.7

128.4

Receivables

9.1

12.5

13.6

24.6

38.4

Cash & cash equivalents

4.9

7.3

16.8

22.8

31.4

Other

7.7

17.1

39.6

48.4

58.6

Current Liabilities

 

(12.9)

(27.3)

(31.2)

(36.1)

(43.9)

Creditors

(2.0)

(7.9)

(9.5)

(14.0)

(21.0)

Tax

(3.2)

(1.2)

(2.6)

(3.9)

(5.0)

Borrowings

0.0

(5.0)

0.0

0.0

0.0

Provisions

(0.4)

(0.4)

(0.4)

(0.4)

(0.4)

Other

(7.3)

(12.8)

(18.7)

(17.9)

(17.5)

Long Term Liabilities

 

(8.5)

(9.4)

(22.6)

(25.3)

(29.2)

Long term borrowings

(3.8)

0.0

(6.6)

(6.4)

(6.2)

Other long-term liabilities

(4.7)

(9.4)

(16.0)

(19.0)

(23.0)

Net Assets

 

55.6

59.6

81.3

106.8

136.3

Minority interests

4.8

0.0

(0.1)

0.7

1.5

Shareholders equity

 

50.8

59.5

81.4

106.2

134.8

CASH FLOW

Operating Cash Flow

15.1

26.8

44.9

50.2

58.6

Working capital

1.6

(1.2)

(18.1)

(6.5)

(6.8)

Exceptional & other

0.9

1.3

1.6

2.8

2.8

Tax

(2.8)

(6.1)

(3.4)

(14.9)

(17.4)

Operating cash flow

 

14.8

20.8

25.0

31.7

37.2

Capex

(0.7)

(3.3)

(9.6)

(11.1)

(12.2)

Acquisitions/disposals

0.0

(10.3)

1.5

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

(2.1)

(3.3)

(7.2)

(12.8)

(15.2)

Other

(1.5)

(2.5)

(1.0)

(1.4)

(0.9)

Net Cash Flow

10.5

1.4

8.9

6.3

8.8

Opening net debt/(cash)

 

9.6

(0.9)

(2.3)

(9.9)

(16.2)

FX

(0.0)

0.0

(0.1)

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

(0.9)

(2.3)

(9.9)

(16.2)

(25.0)

Source: CLIQ Digital accounts, Edison Investment Research

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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.

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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.

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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.

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London, WC1R 4PS

United Kingdom

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Research: Healthcare

Creo Medical — FDA nod for UltraSlim

Creo Medical has received US FDA approval for its Speedboat UltraSlim device, which will enable the company to launch it in the coveted US market. Though expected, this marks a material regulatory win for Creo as UltraSlim is the company’s thinnest and most versatile device and it is now projected to be available in both Europe (via accelerated EU regulatory pathway) and the US in 2024. The UltraSlim device remains an important addition to the portfolio as it provides broader access to gastrointestinal (GI) procedures and it is a key contributor to Creo’s near- to medium-term growth. All eyes are on the upcoming 7 November capital markets day, which will likely be the next catalyst.

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