Yesterday, CLIQ Digital reported a strong set of Q1 numbers. Here are the key takeaways:

Q1 sales were a good 32% ahead of expectations (eNuw € 62m) and up roughly 58% yoy. While we had expected a more pronounced sequential ramp-up in revenues over the course of the year, the company's strong start into the year could now even hint at a higher 2023 revenue guidance for FY23. This will partly depend on management’s decision regarding marketing spend, which is currently guided at over € 120m. Growth was carried by intensified online marketing of bundled content streaming, accounting for a good 93% of total sales, up from 82% in Q1 22. What is more, the company is simply doing away with the possibility to sign up for two single content services for credit card payers, which by now accounts for 93% of sales (vs. 82% in Q1 22). While having a minor impact on revenues, this initiative significantly enhances customer experience while at the same time reducing complexity and costs.

Q1 EBITDA was significantly ahead of expectations (eNuW € 7.2m) and up 54.2% yoy. The margin was only marginally down yoy at 15.4% while we had expected a more significant deterioration of 4.4 pts yoy, due to significantly higher marketing spend including brand marketing backing the Cliq.de portal launch. This was clearly made up by better revenue development, in times where “value for money” resonates well with cost-conscious consumers and better cost control. The brand marketing campaign for Cliq.de is essentially launching in Q2. Q1 marketing costs accelerated by 3 pts yoy to 36% of sales as pricing remains high and with some online advertising platforms changing their key account set-up which led to extra costs. For FY 2023, we expect a marketing cost ratio closer to 33%.

Cash flow from operations was 2.5x of prior year level, and 2x estimates while FCF was 1.5x better, despite the company spending more on licensed content and to set up cliq.de.

Strong FY23 guidance. Management expects sales of > € 345m and EBITDA of > € 50m and marketing spend > € 120m is maintained, while we see upside potential should management decide to spend more on marketing.

Remains a BUY with an unchanged PT of € 76.60 based on FCFY 23e & 24e. Unique exposure to value for money streaming. – continued-