CLIQ Digital — Increased churn weakens FY24 outlook

CLIQ Digital (SCALE: CLIQ)

Last close As at 18/06/2024

EUR6.48

−0.21 (−3.14%)

Market capitalisation

EUR43m

More on this equity

Research: TMT

CLIQ Digital — Increased churn weakens FY24 outlook

CLIQ Digital delivered a disappointing start to FY24 in Q124, as its membership base fell following a change in refund programmes from credit card providers, making it easier for subscribers to cancel. Revenues fell 12%, while marketing expenses, a key growth driver for CLIQ, dropped 9% as management sought to protect its gross margin. The adjusted EBITDA margin fell to 7%, driven by the decline in sales. Management has initiated its Fit for Future transformation strategy to drive operational efficiencies, while diversifying its marketing channels from traditional display advertising into search engine advertising (SEA), affiliation and B2B partnerships. The company has cut FY24 revenue guidance by 13–17%, while EBITDA is now expected to be 48–50% lower than previously. Consequently, we have lowered our forecasts, now anticipating revenue of €305m and EBITDA of €26m in FY24 and revenue of €329m and EBITDA of €30m in FY25.

Written by

Milo Bussell

Analyst, Consumer and TMT

TMT

Cliq Digital

Increased churn weakens FY24 outlook

Q124 results

Media

14 May 2024

Price

€8.6

Market cap

€56m

Net cash (€m) at 31 March 2024 (excluding capitalised finance expenses)

10.5

Shares in issue

6.5m

Free float

89.0%

Code

CLIQ

Primary exchange

XTRA

Secondary exchange

FRA

Share price performance

%

1m

3m

12m

Abs

(43.4)

(54.8)

(68.1)

Rel (local)

(45.9)

(59.3)

(73.0)

52-week high/low

€28.20

€8.38

Business description

CLIQ Digital is a leading online performance marketing company selling subscription-based streaming services that bundle movies & series, music, audiobooks, sports and games globally. In Q124, 24% of sales were generated in Europe, 66% in North America, 5% in Latin America and 5% in other regions.

Next events

H124 results

8 August 2024

Q324 results

7 November 2024

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 delivered a disappointing start to FY24 in Q124, as its membership base fell following a change in refund programmes from credit card providers, making it easier for subscribers to cancel. Revenues fell 12%, while marketing expenses, a key growth driver for CLIQ, dropped 9% as management sought to protect its gross margin. The adjusted EBITDA margin fell to 7%, driven by the decline in sales. Management has initiated its Fit for Future transformation strategy to drive operational efficiencies, while diversifying its marketing channels from traditional display advertising into search engine advertising (SEA), affiliation and B2B partnerships. The company has cut FY24 revenue guidance by 13–17%, while EBITDA is now expected to be 48–50% lower than previously. Consequently, we have lowered our forecasts, now anticipating revenue of €305m and EBITDA of €26m in FY24 and revenue of €329m and EBITDA of €30m in FY25.

Year end

Revenue (€m)

EBITDA
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/22

276.1

43.5

4.47

1.79

1.9

20.8

12/23

326.4

50.3

4.91

0.00

1.8

N/A

12/24e

305.1

26.1

2.10

0.04

4.1

0.5

12/25e

329.3

29.5

2.57

0.00

3.3

N/A

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

Q124 highlight impact of credit card refunds

CLIQ’s Q124 results demonstrated a weaker backdrop and a higher churn rate due to refund policy changes from credit card providers, affecting its membership base, which fell 7% q-o-q to 1.1 million. Revenue dropped 12% to €72.0m (Q123: €82.9m), while adjusted EBITDA, before €3.5m in items related to the transformation programme, more than halved to €5.3m (Q123: €12.8m). CLIQ continued its share buyback programme in the quarter, repurchasing 10% of the allotted volume for €1.1m.

Fit for Future transformation strategy

In response to the weaker backdrop affecting sales, management initiated its Fit for Future transformation programme to streamline the business. This involved several efficiency measures in Q124 to lower the cost base, including the closure of its UK office. Looking ahead to the remainder of the year, CLIQ will utilise alternative marketing channels to its traditional display advertising such as SEA, affiliation and B2B, to generate higher sales and profitability.

Valuation: Substantial discount to peers

Reflecting the cut to guidance, CLIQ’s share price has more than halved in the year to date. CLIQ trades at discount of 90% to peer average (ex-Netflix) EV/sales multiples in FY24e and FY25e. Priced at parity to peers on this basis, CLIQ’s implied share price would be €73, reflecting substantial upside to the current price. Stable trading and consistent financials could close this valuation gap.

Changes to forecasts

We have lowered our forecasts following CLIQ’s updated guidance, which now expects revenue within a range of €300–330m (previously €360–380m), marketing expenditure of €120–140m (previously €150–170m) and adjusted EBITDA of €26–30m (previously €52–58m). We have reduced our revenue forecasts by 19% in FY24 and 25% in FY25, resulting in revenue of €305m and €329m, respectively. We expect marketing costs to be brought down by 10% to €122m in FY24 as CLIQ looks to protect its gross margin. Subsequently, we anticipate reported EBITDA of €26.1m in FY24 and €29.5m in FY25, reflecting lower revenues and some wage inflation in the cost base, offset partially by the lower marketing costs. These reflect lower margins of 8.5% and 9.0% in FY24 and FY25, respectively (previously 14.9% in both years). The reduction in profitability lowers our expected cash flow, resulting in a 53% lower net cash position of €16.5m at end FY24 and 65% lower at end FY25 at €17.7m. The lower net cash position also reflects the progress made in the share buyback programme in the year to date and the small dividend of €0.04 per share paid following the AGM in April.

Exhibit 1: Summary forecast changes

€m

FY24e old

FY24e new

Change

FY25e old

FY25e new

Change

Gross revenue

375.3

305.1

-19%

439.1

329.3

-25%

Marketing spend

157.1

121.9

-22%

180.6

129.2

-28%

EBITDA

56.0

26.1

-53%

65.5

29.5

-55%

EBITDA margin

14.9%

8.5%

-6.4pp

14.9%

9.0%

-6.0pp

Adjusted EBIT

52.5

21.0

-60%

60.5

25.5

-58%

Normalised EPS (€)

5.5

2.1

-62%

6.4

2.6

-60%

Net cash

35.1

16.5

-53%

51.1

17.7

-65%

Source: Edison Investment Research

Exhibit 2: Financial summary

€m

2021

2022

2023

2024e

2025e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

150.0

276.1

326.4

305.1

329.3

Cost of Sales

(98.8)

(201.3)

(241.7)

(240.1)

(257.6)

Gross Profit

51.2

74.8

84.6

65.0

71.7

EBITDA

 

27.2

43.5

50.3

26.1

29.5

Operating profit (before amort. and excepts.)

 

26.3

42.1

45.9

21.0

25.5

Reported operating profit

26.3

42.1

45.9

21.0

25.5

Net Interest

(0.9)

(1.2)

(0.9)

(0.9)

(0.9)

Profit Before Tax (norm)

 

25.3

40.9

45.0

20.2

24.6

Profit Before Tax (reported)

 

25.3

40.9

45.0

20.2

24.6

Reported tax

(7.1)

(11.9)

(13.2)

(6.3)

(7.7)

Profit After Tax (norm)

18.2

29.0

32.0

13.9

17.0

Profit After Tax (reported)

18.2

29.0

31.8

13.9

17.0

Minority interests

0.4

(0.1)

(0.0)

0.3

0.4

Net income (normalised)

17.8

29.1

32.0

13.6

16.6

Net income (reported)

17.8

29.0

31.8

13.6

16.6

Average Number of Shares Outstanding (m)

6.5

6.5

6.5

6.5

6.4

EPS - normalised (€)

 

2.74

4.47

4.91

2.10

2.57

EPS - normalised fully diluted (€)

 

2.71

4.45

4.84

2.07

2.54

Dividend (€)

1.10

1.79

0.00

0.04

0.00

Revenue growth (%)

40.2

84.1

18.2

(-6.5)

0.0

Gross Margin (%)

34.1

27.1

25.9

21.3

21.8

EBITDA Margin (%)

18.1

15.8

15.4

8.5

9.0

Normalised Operating Margin

17.5

15.2

14.1

6.9

7.7

BALANCE SHEET

Fixed Assets

 

59.4

65.1

69.9

77.9

86.8

Intangible Assets

2.6

8.4

12.1

19.9

28.5

Tangible Assets

3.8

5.0

4.0

4.1

4.2

Goodwill & other

53.0

51.7

53.8

54.0

54.2

Current Assets

 

36.9

70.0

84.8

97.2

110.1

Receivables

12.5

13.6

20.5

29.3

40.6

Cash & cash equivalents

7.3

16.8

15.7

16.5

17.5

Other

17.1

39.6

48.5

51.5

52.0

Current Liabilities

 

(27.3)

(31.2)

(33.9)

(38.1)

(43.3)

Creditors

(7.9)

(9.5)

(13.1)

(17.8)

(23.2)

Tax

(1.2)

(2.6)

(6.9)

(6.9)

(6.9)

Borrowings

(5.0)

0.0

0.0

0.0

0.0

Provisions

(0.4)

(0.4)

(0.4)

(0.4)

(0.4)

Other

(12.8)

(18.7)

(13.5)

(13.1)

(12.8)

Long Term Liabilities

 

(9.4)

(22.6)

(17.7)

(21.4)

(21.1)

Long term borrowings

0.0

(6.6)

0.0

0.2

0.4

Other long term liabilities

(9.4)

(16.0)

(17.7)

(21.6)

(21.5)

Net Assets

 

59.6

81.3

103.1

115.6

132.5

Minority interests

0.0

(0.1)

(0.1)

0.2

0.6

Shareholders’ equity

 

59.5

81.4

103.2

115.4

131.9

CASH FLOW

Operating Cash Flow

26.8

44.9

53.2

25.2

28.6

Working capital

(1.2)

(18.1)

(19.9)

(4.0)

(5.9)

Exceptional & other

1.3

0.4

2.4

0.9

0.9

Tax

(6.1)

(3.4)

(5.3)

(7.2)

(8.6)

Operating cash flow

 

20.8

23.8

30.4

14.9

15.0

Capex

(3.3)

(9.6)

(10.7)

(11.8)

(13.0)

Acquisitions/disposals

(10.3)

1.5

(0.2)

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

(3.3)

(7.2)

(11.6)

(0.3)

0.0

Other

(2.5)

(0.9)

(2.0)

(1.0)

(0.8)

Net Cash Flow

1.4

7.7

5.8

1.9

1.3

Opening net debt/(cash)

 

(0.9)

(2.3)

(9.9)

(15.7)

(16.5)

FX

0.0

(0.1)

(0.0)

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

(2.3)

(9.9)

(15.7)

(16.5)

(17.7)

Source: CLIQ Digital, Edison Investment Research

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 2024 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 2024 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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