CLIQ Digital — Management views foundations as fixed

CLIQ Digital (SCALE: CLIQ)

Last close As at 25/02/2025

EUR3.50

0.02 (0.57%)

Market capitalisation

EUR23m

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Research: TMT

CLIQ Digital — Management views foundations as fixed

CLIQ Digital was trading in difficult markets through 2024, with the change in credit card companies’ policies on cancellations and refunds combined with generally weak consumer sentiment. The group has adapted by reducing its marketing spend and taking a robust view on costs, while expanding both its marketing channels for customer acquisition and the range within its bundled content. FY25 will likely remain challenging, but management regards the foundations of the business as having been fixed through its ‘Fit for Future’ programme and anticipates margins starting to recover. The group’s balance sheet remains cash positive.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

Media

FY24 results

26 February 2025

Price €3.50
Market cap €23m

Net cash as at end December 2024

€11.9m

Shares in issue

6.5m
Free float 81.0%
Code CLIQ
Primary exchange XETRA
Secondary exchange FRA
Price Performance
% 1m 3m 12m
Abs (36.1) (10.8) (79.3)
52-week high/low €18.9 €3.7

Business description

The CLIQ Group is a data-driven online performance marketing company that sells bundled subscription-based digital products to consumers worldwide. The Group licenses content from partners, bundles it to digital products, and sells them via performance marketing.

Next events

AGM

11 April 2025

Analyst

Fiona Orford-Williams
+44 (0)20 3077 5700

CLIQ Digital is a research client of Edison Investment Research Limited

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

Year end Revenue (€m) EBITDA (€m) EPS (€) DPS (€) P/E (x) Yield (%)
12/23 326.4 50.3 4.91 0.00 0.7 N/A
12/24 243.0 10.2 (2.59) 0.04 N/A 1.1
12/25e 190.0 11.8 0.76 0.04 4.6 1.1
12/26e 215.0 15.0 1.10 0.04 3.2 1.1

FY24 results in line with lowered guidance

CLIQ Digital’s FY24 revenues were €243m, in line with guidance. Reported EBITDA of €10.2m (€21m before special items) was at the low end of the previously guided range. This implies that the Q424 reported EBITDA margin expanded to 5.7% (Q324: 4.9%) as the cost savings programme took hold. As part of the process of the preparation of the financial statements, CLIQ took a €26.6m goodwill write-down (end FY24 goodwill: €20.9m), reflecting the continuing difficult market trading conditions and the decrease in the group’s market valuation. Management is hopeful that its broader approach to customer acquisition from a wider range of channels will be successful, that rates of churn will reduce and that CLIQ’s financial performance will now start to recover.

‘Fit for Future’ programme lays foundations

CLIQ spent an additional €2m in Q424 on restructuring, from the €3m spent in Q324, making a total of €11.2m of special items over the full year. There may be some further costs incurred in Q125, after which the programme should be complete and, in management’s view, the foundations of the business fixed in light of the new market realities. The group finished the year with €11.9m of cash on the balance sheet (lease debt only). This is despite having spent €5.5m on a share buyback across the year and paying out a dividend totalling €0.3m. FY25 guidance is for revenue in the range of €180–220m, delivering EBITDA of €10–15m. Our new forecasts sit at the lower end of this range.

Valuation reflects unstable market

CLIQ’s share price is down 82% from the start of 2024, reflecting guidance downgrades over the year. Priced at parity with peers on EV/sales multiples, CLIQ’s implied share price comes to €63, from €77 in November. However, given the circumstances, we would apply a significant size and current trading discount. Our DCF-based valuation (WACC: 10%, terminal growth rate: 2%) is at the lower level of c €9 (from €26 at the time of our November note) on reduced short-term and longer-term trading assumptions.

Investment summary

Revenue decline slows in Q424

The sales decline in Q424 of 11% over the prior quarter was a slowdown on the previous quarter’s 21% sequential drop, reflecting the gradual traction from sales growth initiatives. The change in credit card payment cancellation policies resulted in both an increase in churn and fewer customers, reducing the expected customer lifetime value from €72 to €70. The impact on an annual basis was a 26% fall in sales for FY24. With such an external headwind, management’s focus has been on lowering the cost of customer acquisition to protect operating margins. Total customer acquisition costs for the full year were down 45% at €75m, but were slightly ahead in Q424 over Q324. The resultant adjusted EBITDA margin for the fourth quarter was 10%, down from 11% in Q3, with 9% posted for the year, from 15% in FY23.

What does Fit for Future entail?

There are two key strands to the Fit for Future plan that has been implemented to put the group back on an even keel: cost efficiencies and productivity gains. As well as the reduction in customer acquisition costs, there has been a line-by-line examination of costs, with headcount reduced by 22% to 132 over the year and a reduction in the use of external service providers. With greater tech platform efficiency and general belt-tightening, the level of overhead has seen a step-change reduction.

On the productivity side of the equation, there is much focus on new sales channels, which should significantly diversify the funnel from display, as well as an expansion of the product offering, including some software products to add to the entertainment content. An advertising video-on demand (AVoD) model is being trialled in the US and projects are under way to monetise the data acquired alongside customer acquisition.

Muted expectations for FY25

CLIQ Digital should be thought of as a performance marketing company rather than as a content or streaming platform, with its core competence being in customer acquisition. The shift in the underlying market from the new credit card company policies on cancellations has had a substantial impact on customer churn and hence on the lifetime value of those customers.

In order to preserve its profitability, CLIQ has therefore heavily dialled back on its marketing spend, from €135m in FY23 to €75m in FY24. Management guidance for FY25 suggests that customer acquisition spend for the year will fall in a range of €50-75m, with the implication that if trading conditions improve, then spend would be dialled back up. We have set our assumptions in the lower part of this range. It is the spend on customer acquisition that drives the revenue line, so our revenue forecast of €190m is also at the lower end of the guided range of €180-220m. The modelled EBITDA of €12m falls within the guided range of €10–15m. The medium-term revenue guidance of €400m has been withdrawn.

Looking out to FY26 obviously comes with great uncertainty, so we hesitate to frame this as a forecast, more of a possible outcome.

Valuation

With so much uncertainty over the financial performance, the stock valuation is as much an assessment of sentiment as it is of underlying value.

There are also few quoted stocks that are genuinely comparable in terms of business model, with most content companies having a longer-term subscriber base. Looking on an EV/sales basis across FY25 and FY26, parity with these peers would suggest a share price of €63, down from our last report in November, when it stood at €77. However, this was before the lowering of FY24 guidance in December.

We also run a DCF at varying weighted average cost of capital (WACC) and terminal growth rates. We use a 10% WACC and a 2% terminal growth rate, as previously, but have taken a more cautious view on long-term revenue growth and sustainable EBITDA margin. We now derive an implied value of c €9, down from c €26 when we last carried out the exercise, which reflects the reduction in both expectations of short-term trading and the lowered longer-term assumptions.

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