CLIQ released appalling preliminary Q1’24 results, especially on the margin side, and significantly adjusted its FY’24 guidance that had been issued only two months earlier. On the back of the implied limited visibility on the operational developments we put the rating Under Review.

In detail, Q1 sales decreased by 12% yoy to € 73m (eNuW: € 85.8m), driven by a lower number of paying members of 1.1m (Q4’23: 1.2m) and a lower LTV per member of € 81 (Q4’23: € 87). The company cited a higher-than-expected churn rate as a result of an expanded refund program by credit card companies as the main reason for the decline. Mind you, more than 90% of payments are processed via credit cards.

EBITDA dropped by 86% yoy and came in at € 1.86m or 2.5% margin (eNuW: € 13.7m or 15.9% margin) as a lower revenue base was met by significantly higher cost of sales (+8ppts to 82%) as well as personnel (+2.6ppts to 10.6%) and other operating expenses (+2.2ppts to 4.8%). The higher cost of sales was driven to a large degree by continued elevated customer acquisition costs as well as a higher amortization rate of contract costs as more members churned along with meaningful investments in CLIQ's tech and IT landscape and cost optimization projects (EBITDA excl. on-offs came in at € 5.4m).

While the company still has a net cash position of € 10.5m as of March 31, 2024, we regard the operating cash burn (excl. share buybacks) of € 4m in Q1 as a concerning development. The company’s negative FCF adds to our unease as the net cash position was an important aspect of the BUY recommendation until now. Although our preliminary calculations based on the data disclosed suggest that the company could end the year with € 5.5m net cash, our new estimates for FY'24e are subject to a high degree of uncertainty.

All of this led management to considerably slash the FY’24 guidance it had given at the end of February: Sales estimates are cut by 17% and seen to arrive at € 300-330m (old: € 360-380m), whereas the EBITDA guidance was reduced by 50% to € 26-30m (old: € 52-58m). As the guidance cut happened only two months after its issuance, the correction clearly underpins the severity of the customer churn and magnitude of the changed credit card policies.

- continued -

In our view, this also implies impaired visibility on the development of operational indicators such as LTV per member, needed to issue a reliable guidance. Going forward, if members churn as easily as in Q1 and the revenue base continues to erode, it is currently unclear whether CLIQ will be able to deliver not only on their midterm target of achieving a revenue run rate with c. € 500m FY sales potential by Q4'25 but also whether it will be able to achieve its now revised 2024 guidance, in our view. We adjust our estimates accordingly and see FY’24 sales at € 294m (old: € 375m) with EBITDA amounting to € 20.4m (old: € 55m) mainly due to (1) a lower estimated LTV per member as well as a lower member count compared to the prior year, (2) increased cost of sales as the company has to spend more on marketing along with higher amortization of contract costs as customers churn, and (3) increased personnel and other operating costs as CLIQ invests in its IT and tech landscape to enhance integration and optimization.

While the company issued several cost saving measures such as closing down the UK office, adjusting corporate structures and tax optimisation, it is currently unclear whether the resulting savings are sufficient to compensate the potentially negative operating leverage if the number of members continues to decline.

In light of the limited visibility and the resulting weak reliability, we withdraw our recommendation (old: BUY PT € 65.00 based on FCFY 24e). Our estimates are cut based on known Q1 results. To resume a rating of this security, management needs to demonstrate sufficient visibility alongside stability with regards to operations and increase transparency towards the investing community.