CLIQ Digital — Focusing on more profitable subscribers

CLIQ Digital (SCALE: CLIQ)

Currency in EUR

Last close As at 26/09/2023

EUR19.34

−0.46 (−2.32%)

Market capitalisation

EUR126m

Research: TMT

CLIQ Digital — Focusing on more profitable subscribers

CLIQ Digital delivered robust growth in H123, with 37% year-on-year growth in both revenue and EBITDA at a maintained margin of 15.8%. Growth continues to be driven by growing marketing spend and investment into evolving the bundled content offering. Given a more competitive bidding market, management is focusing on acquiring customers with a higher lifetime value to create a more profitable subscriber base. Management has reiterated both its FY23 and mid-term FY25 guidance and our headline forecasts remain unchanged. Despite CLIQ’s share price performance faring better than the peer average valuation, it remains at a significant discount to peers on both EV/sales and EV/EBITDA multiples. In our view there continues to be significant upside to the current share price on our current estimates.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

Hello - cliq

TMT

CLIQ Digital

Focusing on more profitable subscribers

H123 results

Media

8 August 2023

Price

€22.45

Market cap

€146m

Net cash (€m) at 30 June 2023

8.0

Shares in issue

6.5m

Free float

89%

Code

CLIQ

Primary exchange

XTRA

Secondary exchange

FRA

Share price performance

%

1m

3m

12m

Abs

(1.1)

(8.0)

(27.9)

Rel (local)

(3.2)

(8.0)

(38.6)

52-week high/low

€32.85

€16.62

Business description

CLIQ Digital sells subscription-based streaming services that bundle movies and series, music, audiobooks, sports and games to consumers globally. In H123, 37% of sales were generated in Europe, 56% in North America, 4% in Latin America and 3% in other regions.

Next events

Q323 results

2 November 2023

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5700

Milo Bussell

+44 (0)20 3077 5700

CLIQ Digital is a research client of Edison Investment Research Limited

CLIQ Digital delivered robust growth in H123, with 37% year-on-year growth in both revenue and EBITDA at a maintained margin of 15.8%. Growth continues to be driven by growing marketing spend and investment into evolving the bundled content offering. Given a more competitive bidding market, management is focusing on acquiring customers with a higher lifetime value to create a more profitable subscriber base. Management has reiterated both its FY23 and mid-term FY25 guidance and our headline forecasts remain unchanged. Despite CLIQ’s share price performance faring better than the peer average valuation, it remains at a significant discount to peers on both EV/sales and EV/EBITDA multiples. In our view there continues to be significant upside to the current share price on our current estimates.

Year end

Revenue (€m)

EBITDA*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/21

150.0

27.2

2.71

1.10

8.3

4.9

12/22

276.1

43.5

4.45

1.79

5.0

8.0

12/23e

345.0

51.0

4.86

1.97

4.6

8.8

12/24e

400.2

59.4

5.75

2.33

3.9

10.4

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

Bundled content delivering results

CLIQ’s revenue and profit growth in H123 reflects the success of the shift towards its bundled content streaming platform, as the company builds a more profitable and long-term subscriber base. EBITDA grew in line with sales to €25m despite greater marketing costs given the more competitive customer acquisition market, particularly in Europe. CLIQ generated robust positive operating free cash flow of €11m, offset by the €12m dividend payment, resulting in a small decline in the net cash position to €8.0m (FY22: €9.9m) at 30 June 2023. Management has paused its brand marketing campaigns relating to cliq.de and will look to resume after the summer to maximise customer conversion. Early results from Latin America indicate good progress is being made.

Headline estimates maintained

We maintain our headline revenue and EBITDA estimates but have tweaked our depreciation and amortisation charges for both FY23 and FY24, as well as our working capital expectations to reflect the H123 results. Given the greater working capital outflow, we now forecast a lower net cash position of €16m in FY23 and €25m in FY24, previously €20m in FY23 and €30m in FY24.

Valuation: Continued discount to peers

CLIQ’s share price has dipped 3% year-to-date, faring better than the peer median decline of 12%. CLIQ continues to trade at a significant discount to peers across median FY23 EV/sales and EV/EBITDA multiples of 55% and 74%, respectively. Parity to the median EV/sales multiples across FY23 and FY24 would equate to an implied share price of €55, reflecting significant upside, in our view.

H123 summary

In Exhibit 1 we summarise the good year-on-year progress CLIQ has made in H123 given the shift towards bundled content over single content.

Exhibit 1: H123 results summary

€m

H123

H122

Y-o-y change (%)

Revenue

159.6

116.8

37%

North America

89.9

66.2

36%

Europe

59.4

44.6

33%

Latin America

6.0

0.1

4907%

ROW

4.4

5.9

(25%)

Marketing spend

64.7

52.1

24%

EBITDA

25.2

18.4

37%

EBITDA margin

16%

16%

0%

EBIT

23.5

17.7

32%

Profit after tax

16.2

12.8

27%

Diluted EPS (€)

2.5

2.0

26%

Net debt/(cash)

(8.0)

5.8

N/A

Source: CLIQ Digital

Group revenue growth continues to be driven by growth in marketing expenditure focused on online campaigns, which are promoting the multi-content bundled offer, which now accounts for 93% of group sales (H122: 85%). The remaining 7% of sales come from single-content subscriptions. On a quarter-on-quarter basis, sales declined 7% due to the 3% slowdown in marketing spend in Q223 versus Q123, reflecting the more competitive advertising bidding environment. EBITDA also edged downwards 3% to €12.4m in Q223, but with an improved margin of 16.2% versus Q123 in which the margin was 15.4%. Looking to H223, management is focused on diversifying its marketing spend and building media relationships to grow sales at an efficient cost, and is confident in achieving its full year sales and profit guidance. Historically CLIQ has had a H2 weighting with regards to sales and as such we remain confident in our current forecasts.

Management has continued to invest in enhancing the platform’s content across North America, Europe and Latin America. Year-to-date CLIQ has introduced, among others, multiple new movies and series from partners, including the addition of 150 Spanish language feature films for the Spanish and Latin American markets, as well as the integration of DAZN RISE and DAZN FAST, which further extend cliq.de’s sports offering.

Management notes the growth in marketing costs reflects a more competitive customer acquisition environment and consequently greater costs per acquired customer. In response to elevated marketing costs, management has focused on those customers with a higher forecasted average lifetime value, which is instrumental in maintaining healthy profit margins. The customer base value reflects CLIQ’s expected sales from its current subscriber base, which was €150m at 30 June 2023. EBITDA grew in line with sales in the six months and despite the more competitive advertising environment, CLIQ was able to mitigate some of this cost with greater cost of sales management.

Exhibit 2: Marketing spend driving growth in CLIQ’s customer base value

Source: CLIQ Digital

The benefits from the shift to bundled content and the focus on those customers with a greater lifetime value are starting to come through and can be seen in the progress in CLIQ’s key performance indicators: expected average lifetime value of a customer (LTV) and the lifetime value of the customer base (LTVCB). Growth in the LTV to €87.53 at H123end (H122: €72.41) and in the LTVCB to €150m (H122: €121m) was despite a year-on-year dip in the number of unique paying members to 1.1m (H122: 1.2m), highlighting the benefits of premiumisation of CLIQ’s membership base. CLIQ is focused on acquiring new subscribers with a higher average lifetime value (+15% yo-y) which translate to stronger overall margins.

Management remains focused on growing its presence in North American and European markets and driving forward the bundled content subscription service offering through the acquisition of customers with a greater lifetime value. The growth of revenues in Latin America indicates management’s ability to deliver on growth opportunities in new potential markets.

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 3). It should be noted that these groups are of greatly differing scale and have widely differing business models, with correspondingly disparate growth characteristics.

CLIQ’s share price has fared better than its peers in the year-to-date, dipping just 3% against the peer median decline of 12%. CLIQ’s bundled offering provides subscribers with a more diverse platform than many of its peers at a lower average monthly price. Despite this and a higher sales growth rate expected in both FY23 and FY24, CLIQ continues to trade at a significant discount to the peer median EV/sales, EV/EBITDA and P/E multiples for both FY23 and FY24, as shown in Exhibit 3. CLIQ is also one of only two companies in the peer group that pays a dividend.

WE believe the most suitable valuation metric to use is EV/sales given that some of CLIQ’s peers are EBITDA loss-making. If priced at parity to its peers, taking an average across FY23 and FY24 EV/sales multiples of 0.98x, CLIQ’s implied share price would be €55. At 115% above the current share price of €24.55, in our view this represents significant potential upside. We continue to expect the valuation gap to narrow given CLIQ’s growth prospects.

Exhibit 3: 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

Cinedigm

$18

(80)

36

1

0.2

0.2

N/A

5.8

N/A

13.2

N/A

Stingray

C$262

4

10

6

2.0

1.9

5.8

5.3

6.7

5.5

5.8

Spotify

$28,522

86

14

17

1.8

1.6

N/A

N/A

N/A

308.5

N/A

Netflix

$190,420

46

7

14

5.9

5.2

26.6

21.0

36.1

28.0

N/A

Alchimie

€9

(28)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

0.0

Pantaflix

€17

(1)

63

4

1.0

1.0

1.8

1.8

N/A

N/A

0.0

Nordic Entertainment

SEK3,752

(76)

20

4

0.3

0.3

N/A

21.3

N/A

20.7

0.0

Storytel

SEK2,949

(13)

5

10

1.0

0.9

16.5

11.4

N/A

N/A

0.0

Peer median

 

(7)

14

6

1.0

1.0

11.1

8.6

21.4

20.7

0.0

CLIQ Digital

€160

(3)

25

16

0.4

0.5

2.9

2.9

5.0

4.2

7.3

Premium/(discount)

 

-57%

-48%

-74%

-66%

-77%

-80%

Source: Edison Investment Research, Refinitiv. Note: Priced at 4 August 2023.

Exhibit 4: Financial summary

€m

2020

2021

2022

2023e

2024e

Year end 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.

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.

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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.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

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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.

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.

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Research: TMT

Vantiva — FY23 guidance maintained post difficult H1

Vantiva has been operating in difficult markets for both its segments in its first half. At Connected Home (78% group H123 revenue), the customer base is holding high inventory levels against caution in their own underlying end markets, suppressing demand. At Supply Chain Services (SCS), DVD demand has been poorer than expected, dropping away before the benefits of the diversification programme have fully kicked in. Prospects, particularly at Connected Home where broadband equipment is the key driver, are better for H2 and management has maintained full year guidance. Our modelling has been reined in to match.

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