Q2 sales were 8% behind expectations at € 76.8m and up 19.6% yoy. This represents a slow-down in growth compared to Q1 (c 58% yoy growth): a. the base is becoming more challenging, b. the company is deliberately premiumizing the membership base by focusing on higher-LTV bundled content memberships and c. brand marketing for cliq.de was launched in Germany in April only and has been paused until presumably end of summer to optimize conversions. Bundled content accounts for 93% of sales as of Q2, up 8 pts yoy, flat vs. Q1 levels. CLIQ is boosting content quality further with access to more movie blockbusters in Italy, LatAm and Spain.

Q2 EBITDA was in line with the margin up 50 bps yoy and 70 bps ahead of expectations at 16.2%. We had expected a yoy deterioration due to brand marketing for cliq.de. In addition, in light of persistently high ad prices, the company is focusing spend on high LTV customers to defend margins.

The EBITDA margin is effectively flat at high levels as per H1 at 15.8%. We conservatively forecast a 15.1% margin on a full year basis to account for more brand marketing ahead after a mere € 1.2m out of overall € 28.9m expensed in the P&L and € 31.8m total “cash “marketing spend. The company is guiding for marketing spend in “excess of € 120m” for FY 2023 (eNuW € 125m). Annualizing the H1 run-rate brings us to c. to € 129m. Given a comfortable liquidity position, we deem it plausible for Cliq to spend even these amounts and secure more  high-quality bundled memberships if conversions are good.

Strong cash flow generation: Cash flow from operations amounted to € 17m as of 6M, FCF was € 10.5m. The company paid out € 11.6m in dividends and ended Q2 with a gross cash position of € 15.5m and a net cash position of € 8m considering bank borrowings of € 7.4m. We expect the company to end the year with a solid c. € 10m in net cash.

What else? The company is switching from bearer to registered shares to get more transparency into share ownership as it seeks to strengthen the institutional shareholder base. It also has the authorization to own up to 10% in treasury stock which could come in handy in countering depressed share price levels and also to use those shares potentially as M&A currency. It is also for the fist time ever holding a Capital Markets Day in early Q4. Remains a BUY PT € 76.60 on FCFY 23e & 24e. Unique exposure to value for money streaming – cont’d-