Q3 sales were up 8% both yoy and sequentially, albeit somewhat below expectations at € 82.6m (eNuWays € 88m). Growth was driven by forays into Latin America and ongoing strong growth in North America especially with bundled-content, now accounting for 95% of sales, up 1 point sequentially. The quality of the membership base is continuously improving as a result with LTV at € 89.01 as of Q3, up c. 1.7% qoq and 24% yoy. Bundled content customers also tend to be more loyal and this should contribute to increasing revenues over time. Going forward the company is exploring B2B partnerships as a way of accelerating its marketing reach as well as resuming affiliate marketing with trustworthy and established players (in Germany as of Q4 already).

Q3 EBITDA came in lower than expected at € 13.3m (eNuWays € 14m), with the margin however one point better at 16.1% and flat yoy. We had expected a yoy deterioration on the back of brand marketing for cliq.de as well as higher ad prices. Marketing spend came in at € 35.3m, up 16% yoy and some 4% higher than expected. Marketing costs (expensed through the P &L) accelerated at 40% of sales in Q3, up 8 pts yoy as more brand marketing is being undertaken: this has not come to the detriment of margins and underscores strong cost consciousness otherwise. The company is guiding for marketing spend in “excess of € 120m” for FY 2023 (eNuWays € 125m), following € 100m as of 9M. Annualizing the 9M run-rate brings us to c. to € 133m. On the other hand, we believe that if CLIQ will end up spending that amount, which is largely discretionary, this should also be visible in higher EBITDA. We therefore see little risk to EBITDA and margin guidance.

Strong cash flow generation. Cash flow from operations amounted to € 24m as of 9M, FCF was € 15m. CLIQ ended Q3 with a net cash position of € 12m and no bank borrowings any more (€ 7.4m as of Q2). We now expect the company to end the year with a net cash position of c. € 17m (prev. € 9m), on better than expected cash generation.

What else? The company switched from bearer to registered shares to get more transparency into share ownership as it seeks to strengthen its institutional shareholder base. It also has the authorization to own up to 10% in treasury stock which would come in handy in countering depressed share price levels and also to use those shares potentially as M&A currency. – cont’d-  

The company is hosting an analyst teach-in on November 17^th, which should provide more insights into the business model.

FY 23 Guidance of sales > € 345m, EBITDA > € 50m and marketing spend > € 120m is maintained. With top line developing slightly below expectations, management is clearly maintaining the EBITDA guidance, while acknowledging challenges around the top line guidance. This being said, margins should remain at the levels of 9M in our view.

Remain a BUY PT € 78.3 (€ 76.6) on FCFY 23E & 24E. Unique exposure to value for money streaming.

Source: NuWays Research