Original-Research: CLIQ Digital AG (von NuWays AG): Under Review

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Original-Research: CLIQ Digital AG - from NuWays AG

Classification of NuWays AG to CLIQ Digital AG

Company Name: CLIQ Digital AG
ISIN: DE000A35JS40

Reason for the research: Update
Recommendation: Under Review
from: 22.05.2024
Last rating change:
Analyst: Mark Schüssler

Massive FY'24 guidance cut / recommendation under review
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 EUR 73m (eNuW: EUR 85.8m), driven
by a lower number of paying members of 1.1m (Q4'23: 1.2m) and a lower LTV
per member of EUR 81 (Q4'23: EUR 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 EUR 1.86m or 2.5% margin (eNuW: EUR
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 EUR 5.4m).

While the company still has a net cash position of EUR 10.5m as of March 31,
2024, we regard the operating cash burn (excl. share buybacks) of EUR 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 EUR 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 EUR 300-330m (old: EUR 360-380m), whereas the EBITDA guidance was
reduced by 50% to EUR 26-30m (old: EUR 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.

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. EUR 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 EUR 294m (old: EUR
375m) with EBITDA amounting to EUR 20.4m (old: EUR 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 EUR 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.

You can download the research here:
http://www.more-ir.de/d/29843.pdf
For additional information visit our website
www.nuways-ag.com/research.

Contact for questions
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss bestimmter Börsengeschäfte.
Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben analysierten Unternehmen befinden sich in der vollständigen Analyse.
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The issuer is solely responsible for the content of this research.
The result of this research does not constitute investment advice
or an invitation to conclude certain stock exchange transactions.

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