CLIQ Digital — Focus remains on profitability and cash

CLIQ Digital (SCALE: CLIQ)

Last close As at 12/11/2024

EUR4.60

−0.02 (−0.33%)

Market capitalisation

EUR30m

More on this equity

Research: TMT

CLIQ Digital — Focus remains on profitability and cash

CLIQ’s Q3 results show the continuing revenue impact of the shift in credit card providers’ policies on transaction cancellations. Revenues in the quarter were down 35% y-o-y and 21% q-o-q. Given the external factors, management is firmly focused on driving profitability and free cash flow under its ‘Fit for Future’ initiative, which has enabled a small uplift in adjusted EBITDA over the previous quarter. Management’s guidance for full year revenues is unchanged at €260–280m, increasing to €325m for FY25, which would require momentum to build behind new strategic initiatives. CLIQ’s cash positive balance sheet remains sufficiently strong to support this. Our forecasts are broadly unchanged.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

CLIQ Digital

Focus remains on profitability and cash

Q3 results

Media

13 November 2024

Price

€4.82

Market cap

€31m

Net cash at 30 September 2024

€8.7m

Shares in issue

6.5m

Free float

84%

Code

CLIQ

Primary exchange

XTRA

Secondary exchange

FRA

Share price performance

%

1m

3m

12m

Abs

(35.5)

(27.8)

(70.1)

Rel (local)

(34.3)

(32.7)

(76.1)

52-week high/low

€22.4

€4.6

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 9M24, 22% of sales were generated in Europe, 68% in North America, 5% in Latin America and 5% in other regions.

Next events

Preliminary FY24 results

30 January 2025

Q125

8 May 2025

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

CLIQ Digital is a research client of Edison Investment Research Limited

CLIQ’s Q3 results show the continuing revenue impact of the shift in credit card providers’ policies on transaction cancellations. Revenues in the quarter were down 35% y-o-y and 21% q-o-q. Given the external factors, management is firmly focused on driving profitability and free cash flow under its ‘Fit for Future’ initiative, which has enabled a small uplift in adjusted EBITDA over the previous quarter. Management’s guidance for full year revenues is unchanged at €260–280m, increasing to €325m for FY25, which would require momentum to build behind new strategic initiatives. CLIQ’s cash positive balance sheet remains sufficiently strong to support this. Our forecasts are broadly unchanged.

Year end

Revenue (€m)

EBITDA*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/22

276.1

43.5

4.47

1.79

1.1

37.1

12/23

326.4

50.3

4.91

0.00

1.0

N/A

12/24e

261.5

11.1

0.61

0.04

7.9

0.8

12/25e

282.5

19.8

1.61

0.04

3.0

0.8

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

Lowered cost per customer acquisition

CLIQ’s expected lifetime value per customer has been negatively affected by credit card providers making it far easier to cancel transactions, increasing churn. Across the group, the lifetime value of the customer base decreased to €97m at end-September, from €128m the previous quarter-end, reflecting the sharp drop in paying customers. In response, CLIQ has acted to reduce its customer acquisition costs substantially to protect margins and cash, with spend down 60% on the prior quarter. The EBITDA margin for Q3 before the additional costs of the transformation was 10.5%, from 8.2% in Q224. Those additional costs amounted to €3m in the quarter, after a spend of €2.6m in Q224. Our revenue and EBITDA forecasts are unchanged, with a small uplift at the earnings level from higher assumed interest.

Initiatives to return to growth

Management is unsurprisingly circumspect on the timing of the return to a growth track but has maintained its guidance for this year and the next. The wider range of customer acquisition channels will undoubtedly help, as will the better use of data for retargeting and monetisation. Additional digital products are also in the pipeline, as are new sales channels and further monetisation opportunities. Reaching the targets could also be supported by the initiative to launch an advertising-funded video on demand channel in North America, due shortly.

Valuation: Reflecting the difficult trading backdrop

CLIQ’s share price is down 76% year-to-date, reflecting guidance downgrades in May and July. Priced at parity with peers across EV/sales multiples, CLIQ’s implied share price comes to €77, from €70 in August, after strong performances from some peers. However, we would apply a size and current trading discount to this relative to peers. Our DCF-based valuation (WACC: 10%, terminal growth rate: 2%) is at the lower level of c €26 (unchanged from our August analysis).

Exhibit 1: Financial summary

€m

2021

2022

2023

2024e

2025e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

150.0

276.1

326.4

261.5

282.5

Cost of Sales

(98.8)

(201.3)

(241.7)

(212.5)

(219.9)

Gross Profit

51.2

74.8

84.6

49.0

62.6

EBITDA

 

 

27.2

43.5

50.3

11.1

19.8

Operating profit (before amort. and excepts.)

 

 

26.3

42.1

45.9

6.0

14.7

Reported operating profit

26.3

42.1

45.9

6.0

14.7

Net Interest

(0.9)

(1.2)

(0.9)

(0.4)

(0.9)

Profit Before Tax (norm)

 

 

25.3

40.9

45.0

5.7

13.9

Profit Before Tax (reported)

 

 

25.3

40.9

45.0

5.7

13.9

Reported tax

(7.1)

(11.9)

(13.2)

(1.8)

(4.3)

Profit After Tax (norm)

18.2

29.0

32.0

3.9

9.5

Profit After Tax (reported)

18.2

29.0

31.8

3.9

9.5

Minority interests

0.4

(0.1)

(0.0)

0.1

0.0

Net income (normalised)

17.8

29.1

32.0

3.8

9.5

Net income (reported)

17.8

29.0

31.8

3.8

9.5

Average Number of Shares Outstanding (m)

6.5

6.5

6.5

6.2

5.9

EPS - normalised (€)

 

 

2.74

4.47

4.91

0.61

1.61

EPS - normalised fully diluted (c)

 

 

271.36

445.38

483.96

60.36

158.26

Dividend (€)

1.10

1.79

0.00

0.04

0.04

Revenue growth (%)

40.2

84.1

18.2

(19.9)

8.0

Gross margin (%)

34.1

27.1

25.9

18.7

22.2

EBITDA margin (%)

18.1

15.8

15.4

4.2

7.0

Normalised operating margin (%)

17.5

15.2

14.1

2.3

5.2

BALANCE SHEET

Fixed Assets

 

 

59.4

65.1

69.9

66.2

68.6

Intangible Assets

2.6

8.4

12.1

9.8

12.5

Tangible Assets

3.8

5.0

4.0

3.0

2.5

Goodwill & other

53.0

51.7

53.8

53.4

53.6

Current Assets

 

 

36.9

70.0

84.8

56.6

45.5

Receivables

12.5

13.6

20.5

20.8

27.1

Cash & cash equivalents

7.3

16.8

15.7

8.7

11.2

Other

17.1

39.6

48.5

27.1

7.1

Current Liabilities

 

 

(27.3)

(31.2)

(33.9)

(29.6)

(29.3)

Creditors

(7.9)

(9.5)

(13.1)

(9.2)

(9.5)

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)

(12.6)

Long-term liabilities

 

 

(9.4)

(22.6)

(17.7)

(12.9)

(12.8)

Long-term borrowings

0.0

(6.6)

0.0

0.0

0.0

Other long-term liabilities

(9.4)

(16.0)

(17.7)

(12.9)

(12.8)

Net assets

 

 

59.6

81.3

103.1

80.4

71.9

Minority interests

0.0

(0.1)

(0.1)

(0.1)

(0.1)

Shareholders’ equity

 

 

59.5

81.4

103.2

80.5

72.0

CASH FLOW

Operating Cash Flow

26.8

44.9

53.2

10.7

18.9

Working capital

(1.2)

(18.1)

(19.9)

(4.2)

(6.0)

Exceptional & other

1.3

0.4

2.4

0.6

0.9

Tax & interest

(6.1)

(3.4)

(5.3)

(2.4)

(5.2)

Operating cash flow

 

 

20.8

23.8

30.4

4.8

8.6

Capex

(3.3)

(9.6)

(10.7)

(5.7)

(5.2)

Acquisitions/disposals

(10.3)

1.5

(0.2)

0.0

0.0

Equity financing

0.0

0.0

0.0

(5.0)

0.0

Dividends

(3.3)

(7.2)

(11.6)

(0.3)

(0.2)

Other

(2.5)

(0.9)

(2.0)

(0.8)

(0.7)

Net Cash Flow

1.4

7.7

5.8

(7.0)

2.5

Opening net debt/(cash)

 

 

(0.9)

(2.3)

(9.9)

(15.7)

(8.7)

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)

(8.7)

(11.2)

Source: Company accounts, 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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