CLIQ Digital AG

XETRA:CLIQ

Earnings Call Transcript 2022-Q2

[Sebastian McCoskrie, executive]

Good morning, ladies and gentlemen. Welcome to the video conference call of CLIQ Digital, which is being recorded, and a replay of the call will be available later on our website. [Operator Instructions]

I will now hand over to Ben Bos, who will lead you through the conference. Over to you, Ben.

[Ben Bos, executive]

Thank you, Sebastian. Good morning, ladies and gentlemen. Welcome to CLIQ Digital's Second Quarter 2022 Results Presentation. My name is Ben Bos, and I am a member of the Management Board at CLIQ.

This morning, I shall first present the highlights from the last quarter and its financial results. Afterwards, we'll open the floor for questions.

This past second quarter has had many highlights and produced record-breaking financials. So without further ado, let's begin with the key takeaways.

Ladies and gentlemen, inflationary pressure on consumers is rising, and the growing threat of recession is putting markets on increasing stress. Against this backdrop, CLIQ had a very strong year-to-date business development. Our products, especially our multi-content portals, are selling exceptionally well. Consequently, mid-June, we raised our full year 2022 guidance for sales, paid memberships, marketing spend and earnings.

Furthermore, we presented an update to our strategy. From September on, we will be reintroducing our -- in Germany, our cliqdigital.com portal as CLIQ.de, with new content and features across numerous content categories. This new add-on to our successful and proven strategy will increase our visibility considerably and subsequently attract more members as well as improve our overall stakeholder awareness. Against current market trends, we will charge EUR 6.99 as an introductionary price. This pricing will attract many budgets of value-oriented consumers burdened by high energy and household prices. To further promote CLIQ.de, a brand marketing campaign called best of alles, in English, that's best of everything, will run in parallel to our existing performance marketing campaigns and will make CLIQ much more visible to all audiences as a real household name.

In the second quarter, we announced an exciting sports content deal with Sportdigital, and just last week, we secured a significantly larger growth financing facility with Commerzbank and Deutsche Bank. This will help support both our organic and inorganic growth plans going forward.

Our biggest highlight is, without a doubt, the blow-out Q2 results: nearly doubling our sales year-on-year, over 205,000 members added to our customer base and hitting an all-time high EBITDA. Bottom line EPS in the first 6 months was 73% higher than last half year and came in at a staggering EUR 1.97.

Ladies and gentlemen, allow me now to take a deeper dive into our second quarter highlights before we come to the financials. On June 15, we raised our full year 2022 outlook based on the very good business development year-to-date in all regions, which are pleased to confirm today as well as our midterm guidance. As you probably know, we have ambitious growth plans. We will continue to expand also into new geographies, and we will ramp up our marketing activities as well as add new and attractive content to grow our customer base and business further.

Organically, we expect to see sales and earnings to exceed EUR 250 million and EBITDA to come in at more than EUR 38 million. We also expect to spend more than EUR 90 million in marketing during 2022. In turn, this marketing spend will help increase the number of paid memberships by the end of 2022 to over 2 million, and this is the foundation of our future sales growth.

As mentioned previously, in times of inflationary pressure, lots of consumers must review their budgets and spending behavior and seek better value for money. We offer just that, great products with great value for money and provide entertainment service to our members in the mass market.

Ladies and gentlemen, to be able to effectively engage with the mass market in Germany, we are improving our visibility as well as upgrading our product proposition and -- as presented on June 15 by Luc Voncken, our CEO. From September on, CLIQ.de will replace our cliqdigital.com multi-content portal in Germany and offer an upscale content portfolio with new features for an attractive price of EUR 6.99. You may have seen it, Amazon just recently increased the monthly Prime membership price by way more than the current inflation rate. At CLIQ, our products are priced to provide great value for money. And this EUR 6.99 price point will give, especially families, the possibility to budget better and get entertained at the same time. Our best of alles brand marketing campaign will increase CLIQ's brand awareness in Germany and complement our performance marketing in promoting CLIQ.de.

Ladies and gentlemen, CLIQ's digital existing performance marketing campaigns have successfully led to 1.7 million paid membership by the end of June 2022. And our company's growth driver and DNA. Here, you can see the main elements of this very effective member acquisition strategy. In the second quarter, we continue to increase our marketing volume, and this includes also higher bidding for ad spaces and more diversified media traffic sources on demand-side platforms. Performance marketing is and always will be our bread and butter to attract members to our portals.

Brand marketing. But soon, in addition, we shall kick off a brand marketing campaign to flank the CLIQ.de launch in September. Under the slogan best of alles, we will run a brand marketing campaign that will reflect CLIQ.de's market positioning as simple and affordable, in particular, to attract value-oriented consumers currently burdened by high energy and household prices.

We are very much looking forward to advertising once again on television. We were always successful in doing, so that's not new to us. And next to the TV advertising campaigns, we also start doing so-called out-of-form campaigns and be on social media. You can expect to see a campaign, which is catchy and funny and one that should wake interest of a lot of new members.

For the CLIQ.de portal, in particular, we have beefed up our content library considerably. Here, you can see the new content additions to our category of movies and series. And in addition to our Hollywood blockbusters, we have a 2-year licensing deal with Lighthouse Home Entertainment for 360 high-quality cross-genre, German, European and international films. The catalog, including current new releases, is updated with new titles every month. There will be more children's entertainment and famous TV programs from ZDF, with over 400 hours of popular national and international drama as well as children TV series and movies. Another content partner, Autentic, offers 29 high-quality documentaries, with a total of 82 episodes, which focus on future relevant topics, machinery, nature and wildlife, history and people and places.

In the first quarter 2022, we added more than 600 hours of high-quality series and film content from over -- from our new parties, Palatin and LEONINE to strengthen our SVoD offering.

Also, our category sports and games were upgraded. We licensed the live broadcasting rights to the top Italian Serie B football matches in full length and HD for 3 seasons. In addition, more live sports content comes from Motorvision.tv, More Than Sports TV, which shows numerous sport leagues and events, including select races of NASCAR Cup Series, the European Le Mans Series and much more.

Our most recent content addition was to deal with Sportdigital in Q2, which included a 2-year license agreement for live international football matches from -- for example, from the Dutch Eredivisie, U.S. MLS, Polish Ekstraklasa, et cetera, et cetera, and even the Japanese J.LEAGUE is in there. In addition, we will have fun and action sports as well as outdoor sports, motor sports and, believe it or not, horse riding.

A major content step forward was the signing of a 5-year license agreement for Blacknut multiscreen cloud gaming service to significantly enhance our gaming category, with more than 500 premium cloud games. We believe our games category is, and forgive me the pun, a real game changer and gives CLIQ's offering a further competitive edge.

Let's go to our financing. As a further highlight, we recently announced and was securing of an increased credit facility to fund our growth paths. I'm very glad that we have enlarged our credit facility now in place. We now have the possibility to finance, by the syndicated facility of Commerzbank and Deutsche Bank, our organic and inorganic growth plans. The new facility can fund a maximum amount of EUR 57.5 million, including an optional EUR 20 million facility for the next 3 years, with 2 1-year extension options. The facilities consist next to the overdraft and borrowing base facility, also a facility to fund future acquisitions.

We are delighted to see that next to Commerzbank and also Deutsche Bank sees the great opportunities CLIQ's business model has. In the current market environment, the extension is testimony to our strong credit profile and financial performance.

Ladies and gentlemen, let's move now on to our financials. Well, here is one of our evergreen slides, where you can clearly see, over the past 14 quarters, the scalability of our business, resulting in an increase in sales from EUR 14 million to over EUR 64 million in the last reported quarter of 2022. This trend line shows effectively how every euro more spent on marketing generates higher incremental sales. And bottom line, you can see that EPS is growing and growing. In the first half of 2022, the annual growth rate was 73% and EPS was EUR 1.97.

So more marketing, more members, more revenue, we all know. And again, we raised our marketing spend and the volume of our campaigns to acquire more members and consequently generate more sales. And this paid off.

In the second quarter 2022, our marketing spend was EUR 30 million, with a 90% share of our own media buying. I mentioned earlier that we now also bid higher prices for the better ad space and pay slightly higher prices for that, which, of course, impacts our customer acquisition costs and, consequently, our profitability index. And yes, the 6 months profitability index has slightly decreased. But at the same time, the average expected member lifetime value has continued to rise and was over EUR 72 during Q2, which is up more than a year or quarter-on-quarter, as you can see from the green line. This is one of the main reasons why you accept a lower 6 months profitability index.

Let's move on. And on the right-hand side, you can see that our customer base is growing quarter-by-quarter, and we added nearly 2 members every minute in the second quarter. That's more than 205,000 so-called net adds or registers to our customer base by the end of June, which clearly underscores that our marketing strategy is paying off and we are gaining members. Also, the value of our customer base is increasing quarter-on-quarter at roughly the same pace as the paid memberships. The remaining lifetime value of our customer base at the end of Q2 2022 was EUR 121 million. That's 60% higher than 3 months ago and 112% more year-on-year. Again, I can't say it enough. More marketing generates more memberships and does more sales.

Here, we can see exactly how much more sales and where exactly those sales are coming in Q2, predominantly from membership-based services and especially from our multi-content product lines. These packaged solutions target the mass market and are geared to meet broader entertainment needs like families have. 88% of total sales were generated by our multi-content portals, which grew year-on-year at an astounding rate of 140%.

Regionally, and as we have seen also in the previous quarters, North America grew the strongest in the quarter at 138% compared to prior year's Q2 and constituted nearly 60% of total sales. European sales growth accelerated by over 10% quarter-on-quarter, also thanks to the ongoing shift in media buying. Across all material regions, sales over the course of 12 months were up on the back of higher member numbers. This trend is a fantastic team effort by all CLIQ employees, and I'd like to thank them very, very much.

Apologies for this unexpected background noise. I hope it doesn't bother that much, but let's continue. Because in total, sales in the second quarter grew considerably and purely organically by 94% to over EUR 64 million. Our gross margin of 29% remained flat quarter-on-quarter on the back of higher marketing spend and stronger investments into our content and payment infrastructure, which are reflected in the other cost of sales.

EBITDA increased by 60% to over EUR 10 million, an all-time high, and EBITDA margin remained on prior quarter's level at a strong 16% despite higher personnel and other operating expenses, which also reflect the building of our CLIQ.de platform.

Bottom line, profit for the 6 months was up by 69% to nearly EUR 13 million. Consequently, EPS was strong at EUR 1.97 and 73% higher than in prior year's first half.

Ladies and gentlemen, as previously mentioned, marketing is our primary driver of membership growth and major but also highly effective cost factors for CLIQ. The actual marketing spend went up by nearly 150% year-on-year, from EUR 12 million to EUR 30 million. This spend reflects the cash out in the quarter for new memberships, which drive both sales and our lifetime value of the customer base.

In the second quarter 2022, our total marketing costs amounted to nearly EUR 20 million, more than double the amount in prior year's quarter. In percent of total sales, our marketing cost was basically on prior year's level and around 31% and just slightly lower than in this first year's quarter.

To recap, the part of the marketing spend directly allocable to new members, memberships is capitalized and amortized as contract cost in accordance with IFRS.

Let's go to the balance sheet. And looking at our balance sheet, the total assets grew to EUR 119 million and equity ratio of -- by the end of the second quarter amounted to 55%. The investment in the CLIQ.de platform and content led to higher intangible assets seen here. The increased business activities resulted in higher trade receivables as well as trade payables and other liabilities. Nothing new. Our overall financial liquidity is shown on the next slide.

Focus our position on the cash flow. Here, you can see, at the quarter end closed, the drawdown from the former credit facility was EUR 12 million on 30th June. Therefore, net debt amounted to EUR 5.8 million and reflects the prefunding of our growth. Please remember the marketing spend is always payable immediately, whereas the sales comes in at a later date.

So looking at our cash flow in the bottom table, you can see here the cash conversion. The outflow from higher contract costs, the capitalized marketing spend significantly offset the positive change in working capital and, after deducting the outflows for taxes and the financial results, brings us to an operating cash inflow of EUR 3.5 million.

Together with the cash outflow from investing activities, our operating free cash flow totaled minus EUR 0.9 million in the first half year and was mainly impacted by the increased marketing spend. The cash outflow from investing activities in the first 6 months increased mostly due to the investment into the CLIQ.de platform and development and newly licensed content. The cash outflow from financing activities included, in comparison to prior year, significantly higher dividend distribution of EUR 7.2 million.

So ladies and gentlemen, this last quarter goes to show where CLIQ is and where we are heading. We have sustainably grow our customer base, sales and earnings, thanks to a consistent strategy and the hard work of our amazing team of CLIQers. We are confident that we shall continue our growth path and become more and more attractive to our members.

Thank you for your kind attention.

[Ben Bos, executive]

We shall now begin our live question-and-answer sessions. [Operator Instructions]

So our first question today comes from Felix Ellmann.

[Felix Ellmann, analyst]

Can you hear me?

[Ben Bos, executive]

I can hear you loud and clear, Felix.

[Felix Ellmann, analyst]

Wonderful. So with regards to your marketing spend, congratulations to the CLIQ factor, which seems to be stable despite the fact that you increased your marketing spend so much, which is really good.

First question is, if there would be a problem allocating the CLIQ factor or the marketing spend, you will probably not see it in the first place in the first weeks. Maybe you could even see it in the next month to appear. And if not, if you were able to implement the marketing spend as planned, why do you only -- the only, it's a funny word in this context, but why don't you spend more marketings or, looking at the very, very attractive CLIQ factor, you still achieve despite the fact you increased so much?

[Ben Bos, executive]

So to make it a short question, it is why don't we ramp up more marketing?

[Felix Ellmann, analyst]

Yes. And how would you see if your marketing spend, you ramp it up, don't succeed, when would you see it the first time? Maybe you already would have seen it if it didn't work, but maybe there, it could appear in the next quarters or month or -- better to say, month?

[Ben Bos, executive]

Well, first of all, on the volume, of course, we are delighted about our -- ramping up our marketing spend, so to say. And of course, it's a question of pricing, whether we can further ramp up going forward. But of course, we monitor our profitability index on a daily basis. So we will notice immediately once it won't be effective anymore. And then we take it down.

[Felix Ellmann, analyst]

And could you imagine spending even more marketing spend, maybe with regards to the recession effect on the marketing cost, on the prices of marketing? I could imagine that within recessional tendencies, the cost of online marketing may be going down in general and create an opportunity for you to spend even more on marketing.

[Ben Bos, executive]

Well, the market's space for marketing online is very, very big. And there are different ways on spending your money for online marketing. And some of those marketing lines or systems are getting more and more expensive if you have other bidders in place. As you know, we are only paying for marketing once we know that we are successful, and we are not the only one in the market who we are doing so. Also, in other business models or other products, I would say, we've seen people or companies coming in and bidding on those ad spaces. So you cannot compare and look to the complete market as such. You need to look in the individual segments of the marketing.

So let's go to Marie-Therese.

[Marie-Therese Gruebner, analyst]

Can you hear me?

[Ben Bos, executive]

Yes. Now I can hear you.

[Marie-Therese Gruebner, analyst]

Wonderful. I have a couple of questions. I think the most important one for me is really -- I mean is this year considering your multi-content portal launch brand marketing campaign in Germany, et cetera? Is this year a blueprint for the years ahead in terms of you entering similar other big European markets? And the background for this is I'd like to understand if the EBITDA margin can be expected to be better in the years '23, '24, again, maybe not on par with '21, where you had an extraordinarily high level at 18%. So yes, so if you could try to explain maybe what's coming, '23, '24 in terms of what we can expect for the EBIT margin development knowing or maybe knowing that you might be entering other markets in a similar way that you're doing for Germany this year?

[Ben Bos, executive]

Yes. Well, first of all, Marie-Therese, thank you for your questions. We are -- we see the outroll of the CLIQ.de platform as just an add-on on our current business. So there is nothing other than just putting our company name on the platform as well. So it's business as usual. And it's indeed for the first time since long that we are now also start advertising and promoting CLIQ as a brand, which we all have experienced with also in the past. For over 15 years ago, we did quite a lot and significantly high budgets on television marketing already. So nothing special here.

If I go to -- if we look to the EBITDA margin, yes, it all depends, of course, on the marketing effectiveness going forward. But as I said, I believe, in the earlier calls, we expect to be able to have an EBITDA margin around the level which we are currently seeing. So not a significantly high drop or an incremental increase going forward.

[Marie-Therese Gruebner, analyst]

Okay. So basically -- but just maybe to understand better, within your overall marketing spend that you are guiding for this year, how much is actually the brand marketing?

[Ben Bos, executive]

Well, the brand marketing as such, the television, we -- the TV marketing and out-of-home marketing, we don't release those numbers as such. But it won't be a significant part of the EUR 90 million, which we guided the market with.

[Marie-Therese Gruebner, analyst]

So is it more below double digit? Or I mean what is it?

[Ben Bos, executive]

Sorry about that, but I cannot comment on that. But as you know that we are operating our business in over 30 countries. You can imagine if we are just starting TV and out-of-home and social within the German market space that this is not a real significant number, although the amounts which we are spending are significant as such. But as part of our budget, it's not a big, big, big part of it, so to say.

[Marie-Therese Gruebner, analyst]

Okay. All right. Maybe next question regarding the German portal relaunch. You're saying EUR 6.99 is the introductory price. What is it going to be eventually after the -- and how long is the intro offer valid for? And also, can you shed some light on what are the new features and the new content? I mean you mentioned the ZDF, but I'm a bit surprised with ZDF because this is really something people already pay for, right? I mean it's free-on-air German TV. The apps are for free. So I'm not sure why they would be part of a paid-for offer. Yes, I mean I was a bit surprised to see it, honestly. So yes, maybe you can comment on the German side of things a bit more.

[Ben Bos, executive]

Well, first of all, I think that it is not necessarily the individual packages, which we are including in our multi-content offering, but it is the multi-content offering as such. So in the core, it's a family package. So for everybody within the family, they can entertain themselves for this EUR 6.99, meaning that we have very nice new products coming up from Blacknut within the cloud gaming. And as we all know, cloud gaming is expected to grow at a pace of about 50% on a yearly basis in different markets within Europe. So this is a completely new market space, I would say, not only for CLIQ but also for other players there.

If you look to the other products like the audiobooks, we added significantly more content to it. And it's, of course, also not only ZDF but also LEONINE and Palatin, kids content, which we license. So you see -- you have to see it in a broader perspective. It's a real good value for money package, which we are offering for the families.

[Marie-Therese Gruebner, analyst]

And so after EUR 6.99, what are people expected to pay?

[Ben Bos, executive]

Well, we cannot say yet. I mean it depends on once we launch and we start selling this product for EUR 6.99. We have to see what's happening and how many people we can, of course, attract for this part of our business model.

[Marie-Therese Gruebner, analyst]

Okay. And maybe last question regarding your expanded sports offer. I mean you signed up a new content provider, and you mentioned the leagues, which will be available for live broadcast, and they do sound a bit exotic. I was wondering why you do that. It's basically to test the water for more multi-content offers in those markets, as you mentioned, Japan and the Netherlands. And also from that standpoint, I'm curious to see -- to understand the Italian B league matches offer that you have in base. Has that resulted in more subscribers in Italy, also for your multi-content portals? I mean was that like a bridge into the Italian market? Or how does that work?

[Ben Bos, executive]

Please be careful on judging our content because it's also geographically blocked. So we also have to be very careful where we can broadcast some of our content. But I think it's more like a whole package. And you will be surprised to see how many people are interested also in the local leagues. So it looks like it's not attractive to get a lot of subscribers or members in. But surprisingly, we see that we get a lot of traction. And again, for the combined package. So yes, people can be entertained and not necessarily always on the Premier League or the Bundesliga. They also like to see other content. And thereby, you have a very nice package available for the mass market.

[Marie-Therese Gruebner, analyst]

So Ben, it means that the Sportdigital offer is going to be available, let's say, for example, for German viewers or -- in terms of the deduction, the Japanese leagues? Or is that how I must understand it?

[Ben Bos, executive]

That's typically one we indeed licensed from -- for the German market. So it's geo-blocked, as we say. So because if you like to broadcast like the Bundesliga in Germany itself, well, we all know it's decided by different players in the market. It's the same also in the Netherlands, like Eredivisie. If you like to license that for the Netherlands, those license fees are not interesting enough for us to make our model work at this moment.

So we go to Max Hayes.

[Max Hayes, analyst]

Congratulations on your results. So 2 of my questions were answered there, 1 on the margins and 1 on the CLIQ.de portal. But I guess one more, just maybe looking at the content types. It's clear that you've been investing across the board. I'm just wondering, going forward, is that a particular content type that you've identified as a particular growth area? Does that change between regions? Just maybe a bit more color on that?

[Ben Bos, executive]

Well, we are -- we do not release or give any guidance on particular markets where we will go in the coming period. What we do, we have talked more about continents like Latin America where we’re currently investing our marketing monies in as well as, of course, in European countries where we are not in yet. So this is coming up. And going forward, we will further increase our visibility in those markets.

Max, you are on mute. Was this your question? Can we go on? Okay. Mark -- Mark Josefson. Can you hear me?

[Mark Josefson, analyst]

Yes, I can hear you. Congratulations on the terrific results. I have 2 specific financial questions and 1 more hypothetical, but it links into your answers to the questions earlier from Felix and Marie-Therese.

In terms of the specific question, I was a little bit caught by the EUR 13.5 million investment in net working capital as per the 6 months or EUR 8 million investment in Q2. Can you explain a little behind what's driving that? And to what extent will this unwind as we progress through the year?

And the second question that I have is more specific, again, further in the -- further down in the cash flow, EUR 3.7 million spend on intangibles. I think this is a bit of program rights and the investment on the CLIQ.de platform. I'm guessing that the CLIQ.de platform is pretty much peak now. So can you give us a sort of a run rate for this line into cash flow, what is likely to be spent for the full year, for example, on intangibles?

And then if you want to deal with that, I'll come back to my more hypothetical question.

[Ben Bos, executive]

Okay. Well, thank you, Mark. Your first question on the EUR 13.5 million, this has mainly been cost [ or no ] cost, I would say. It's due to our marketing investment. So it's a contract cost which we capitalize. So as you can see, quarter-on-quarter, we are increasing significantly our marketing spend. So that automatically also means that our capitalized marketing spend goes up. And you see now with the speed which we are increasing our marketing spend at more or less an amount of the last quarter spend is being capitalized, if you look to our balance sheet. Yes.

So your second point to the cash flow, the EUR 3.7 million, yes, indeed, it is due to CLIQ.de as well as to the content which we already invested in, which will be used for the CLIQ.de content portal in September.

[Mark Josefson, analyst]

Indeed, but are we past the peak in terms of -- I think it was EUR 2.5 million or so investment in intangibles in Q2 alone. Are we past the peak of investment in intangibles? Or will it run at that sort of rate in Q3 and Q4?

[Ben Bos, executive]

Well, of course, we are further increasing our flexibility, and it depends on the further development, which we're carefully watching. Also, we're always watching, as you have seen over the last years, our cash flow situation, always. But yes, of course, if we see that we can further increase our business, we won't wait to invest again in marketing but also in content and further roll out our portal. It's hard to say if we have seen that this peaked. To be honest with you and the other side, I hope not because it would mean that if we're be further peaking that business is growing further and further.

[Mark Josefson, analyst]

Indeed, indeed. Okay. Then more hypothetical, but the CLIQ factor in Q2 was 1.5. And in Q3, there'll be more -- or there'll be the introduction of the brand marketing, which tends to support profits in the longer term rather than in the shorter term on which the CLIQ factor is actually based. So will you allow the profit index or the CLIQ factor to fall below 1.4 in any 1 quarter if it allows you to get, for example, CLIQ.de up and running?

[Ben Bos, executive]

Well, it's part, of course, of our business model that we are watching very closely, every day our profitability index. And of course, the profitability index will be influenced by our TV campaigns as mostly those campaigns you cannot capitalize on your market -- on your balance sheet. So those will be charged into our P&L directly. And we'll put maybe some pressure on our EBITDA margin but not significantly. And as always, also here, we will be watching very closely our EBITDA margin development going forward.

[Mark Josefson, analyst]

Okay. So the focus is more on the EBITDA margin rather than the CLIQ factor profitability index.

[Ben Bos, executive]

At the end, bottom line, yes, but it starts with the profitability index. And as I said in my speech as well, of course, also with the lifetime value of each new individual member. And we -- as we've seen that raising, we can allow also a lower CLIQ factor because on the long end, it means that we can make more money as we can gain more revenue with the members, which is, I think, a very positive thing. And that allows us also to lower down a bit our profitability index for the first 6 months as it's a KPI only for the first 6 months and not for the lifetime value.

[Mark Josefson, analyst]

No, I see that. And I kind of endorse it myself. I think this makes sense. I just wanted to get a better feel of steering for the short-term models in terms of quarterlies.

The final question from my side in terms of -- I mean you flagged for a little while now that you'll be looking to new geographies. Is this really a subject for 2023 rather than 2022?

[Ben Bos, executive]

We are continuously watching the markets. And -- well, let's see. Let's see in Q3 earnings call how we are progressing on the different markets. And of course, we know that we can increase our business also in other territories. So we always test the market there but very carefully not spending too much money on it initially. But once we see it's working, then of course, we further increase our business model also in those territories where we think we can be profitable.

[Mark Josefson, analyst]

Okay, Ben. Well, again, congratulations to the whole team.

[Ben Bos, executive]

Thanks, Mark. So we now go over to [ Wilhelm Schultz ].

[Unknown Analyst]

Do you hear me?

[Ben Bos, executive]

I can hear you loud and clear.

[Unknown Analyst]

Okay, brilliant. Okay. Congratulations as well. Now 2 things I see -- well, obviously, you capitalize on most of your marketing spend. And you're right that there is something a period from up to 18 months where you do the amortization of these capitalized marketing spends. But in another call, I heard that your membership duration is more around 7 to 8 months. So does this match? Or does it not match, well, membership time and amortization time of these costs?

[Ben Bos, executive]

Well, thank you so much for asking this question. Let me first zoom in on the 7 to 8 months because the 7 to 8 months is just an average. So that doesn't mean that all the customers are out after 7 to 8 months -- or our members. There are a lot of members even will stay on for many years, although we set our maximum amortization time only on 18 months. So even if they are still on board, we amortize all the marketing spend in those first 18 months.

There's another important item for you to know that it will -- it's not amortized in a linear way, so on the first 18 months after lifetime. But it goes gradually with the expected revenue, which we can derive from each individual customer, meaning that -- just to give you an extreme example, if you, as a customer, come in as a member today, and you leave in 3 weeks' time. That means that within the 3 weeks' time, we amortize the capitalized marketing cost completely, so it's all in line. So we don't blow up our capitalized marketing spend. I can secure you for that.

[Unknown Analyst]

Okay. That's important, yes. Because -- well, if you say you have some which are, well, going on for years, there must be -- to get the average of only, say, 7 to 8 months, there must be some much, much shorter memberships, which exactly have to -- what size immediately.

[Ben Bos, executive]

Sure. We have them shorter because we also have, as you know, the initial period where people can already decide whether they take on the membership and go out in the trial period, yes or no. So if they decide not to stay on, then we, of course, amortize completely the capitalized marketing spend.

[Unknown Analyst]

Okay. Final thing, you now come out with a more offer which is around, as you said, EUR 6.99 or something like that, which is quite cheap and very much even cheaper than you had before, if I realize that. Does that mean that your profitability on these new memberships will be much lower than you had it before?

[Ben Bos, executive]

Well, they, of course, will show a lower profitability index for the first 6 months. That's for sure. But on the long end, we think that they will stay on longer so that the lifetime value will further increase. But of course, the statistics will show us once we go live with the EUR 6.99.

[Unknown Analyst]

Does this cannibalize your other offers? Or is it -- or do you change everything to this new offer, which would mean that we will see some EBITDA, well, pressure -- margin pressure for a couple of quarters at least?

[Ben Bos, executive]

No, it won't cannibalize. I mean we will keep on doing what we are good at and our DNA, which is performance marketing. So we even will further boost as far as we can, of course. And you see our guidance up to the EUR 500 million by 2025. The majority of that guidance is coming from our DNA, our performance marketing. So this is just a smaller bit, the EUR 6.99 offer, which we have in place.

[Unknown Analyst]

Okay, final thing. Do we have -- for the EUR 500 million revenue target, do you have EBITDA margin target as well, more or less?

[Ben Bos, executive]

Well, not a precise target but the range, and we expect to have this range around the mark where we are currently at. Maybe a little bit lower because volume has to further increase, which mostly give a little bit pressure on our marketing spend -- cost, actually. But then we are talking about some percentage points. So maybe 1 or 2. But we expect to keep it around this number, so to say.

So let's go to Antoine Lensel.

[Antoine Lensel, analyst]

A couple of questions on my side. First, I was wondering if you have kind of a target on the paid members for the CLIQ.de platform for this year in Germany or maybe in 2023, just to have like a kind of idea of how many members it could represent going forward. And also, I wanted to ask you regarding the performance in North America, which was very good again this quarter. Could you elaborate a bit on what was the main drivers of growth in this region for the quarter?

[Ben Bos, executive]

Thank you, Antoine. Sorry to disappoint you, but we won't release any numbers specifically on each individual portal. So we -- yes, that's actually -- that's it. We see it as on top on our current performance marketing, and we see it as an add-on and just putting a brand name on such a portal because we also do performance marketing, of course, for our CLIQ.de portal. Then well, you've seen clearly where the business was coming from. We were increasing our business in the U.S. and also further in Europe in some individual countries. And we are very happy about that.

[Antoine Lensel, analyst]

Okay. If there is nothing specific about one single content product or one large driver in North America, which explains the stronger performance there for the quarter?

[Ben Bos, executive]

Well, again, it's a multi-content store, which was doing quite very well actually because it's now the biggest part of our revenue. So the multi-content offer is really the main driver of our business, and it will be going forward. We see that we can attract customers on each individual category, which we have in there. So there's not a specific item, which was what we have seen was doing a lot of sales specifically.

[Antoine Lensel, analyst]

Okay. And if I may ask you follow-up questions. We talk about a lot of inflation currently, inflation costs and inflation wages and so on. I was wondering if you can give us another view of the current pricing environment for digital marketing. Do you notice a price increase? And do you have some pricing power to pass it through your customers?

[Ben Bos, executive]

Well, to start with your last question. No, we don't pass that on, not for the time being. We don't need to. And so we are addressing, of course, the mass market and the mass market is -- itself. Those consumers have already quite a pressure on their budgets. So we try to keep their entertainment budget just good in place, so to say.

On the marketing side, we do see specific -- on a country-by-country base, we see different prices coming in. If that has to do with the inflation situation at the moment, I cannot elaborate on. It also has to do, of course, with the marketplace itself as we are bidding for the ad spaces on different platforms. So it can also come from just from the market space itself rather than driven by inflation.

Okay. So now we go out to [ Felix Schlueter ]. Well, okay, then we go to [ Matthias Schtusser ]. You have to unmute yourself, [ Matthias ], I believe.

[Unknown Analyst]

You hear me?

[Ben Bos, executive]

Yes, now I can hear you, loud and clear.

[Unknown Analyst]

Excellent, excellent. Yes, I was wondering about your new strategy to even grow by buying other companies. And I was wondering, do you have some specific targets already identified? And if yes, will you have -- or will you be able to find some real bargains in the market as the market, in general, is quite depressed?

[Ben Bos, executive]

Yes. I think that we are now positioned well while pricing is coming down from different companies, especially those who are having difficulties in raising the cash needed to grow their business any further in the streaming service, especially. So we do not have a specific target on hand yet, although we are talking to a lot of companies. But we are not in a stage where I can elaborate on and say, okay, listen, we are close to a finish line to strike a deal with one of those companies. But we are carefully watching, and we see -- as I said, we see a lot of opportunities passing by currently due to the fact that cash is an important issue for those streaming services.

[Unknown Analyst]

And I have another question. Obviously, the share of the U.S. market is still growing -- the share of sales. And I was wondering if there are any windfall profits you will enjoy because of the low euro against the U.S. dollar?

[Ben Bos, executive]

Well, of course, we've seen some effect on our exchange rate. But it's all over. It's -- I think it's quite -- it's minor because, of course, we also hedge in our -- if I'm talking about results, we hedge, of course, our revenues coming in, in dollars and our costs being paid also in dollars. Yes, we had a small windfall there for just over, I think, between 1% and 2% in generally.

Further, we see the market in the U.S. has a very profitable one. It's a good one for us as we started our business on a multi-content start some years ago, and it's one market. So it's easy to serve for us. rather than, of course, the European countries where we go one by one. But I think also, it's very promising also in Europe because the last quarter or the previous quarter, we increased our sales in Europe by 8%. And the last quarter, we increased by 10%. So also there, we see now raising revenues within the European market.

Well, thank you so much, [ Matthias ]. And then we have a question which came in by text, and I'm reading it now. I can't -- we had this question already, so answered verbally.

So thank you so much. We all -- a last question comes in now. Sorry to bother you, but hello, [ Felix Schlueter ].

[Unknown Analyst]

Perfect. Can you hear me now?

[Ben Bos, executive]

Yes. No, I can hear you great.

[Unknown Analyst]

Awesome. The first question was on the churn. In your customer lifetime calculation, what's the lifetime of a customer? How long -- what's the average that people stick with you? Is it still 7 to 8 months that you've said previously? Has it changed?

[Ben Bos, executive]

Yes, [ Felix ], that's still 7 to 8 months. That's correct.

[Unknown Analyst]

7 to 8 months. Okay.

[Ben Bos, executive]

As I said also before, it's slowly growing bit by bit. And you can see that also a bit from our lifetime value of each new member, which is now by EUR 72, which is great.

[Unknown Analyst]

Yes. Perfect. And then just to come back on the question on this capitalized marketing spend because just high volume numbers, it looks like the average amortization period would exceed that lifetime. I mean would there be any benefit in you just disclosing what your amortization period is also for the marketing cost just for us to understand better whether it matches the lifetime of your customers? Because obviously, if we look at the quarterly results, the P&L looks great, but the cash flow, given what the top line has done, is, in some ways, disappointing.

And then just the last question on capitalized marketing spend in general. Can you just explain to me why you decided to do this, given that your typical peers wouldn't capitalize the marketing spend, even those that have a longer lifetime of customers? So I'm just trying to understand why you decided to report your financials this way.

[Ben Bos, executive]

Okay. So first of all, the -- I think it's a positive thing. Yes, it costs cash in the beginning, but you have seen with our increase in marketing spend that also our lifetime -- the remaining lifetime value of our customer base is growing rapidly, and that secures future income. So of course, with the growth, which we have seen from at least EUR 22 million of marketing spend in the first quarter to EUR 30 million in the second quarter and given the fact that we have a trial also for our customers, it automatically will show, of course, the revenues going forward afterwards. So it takes a bit of time before the revenue kicks in after we spend the money, and therefore, we capitalize also our marketing spend.

And please imagine if we would -- then coming to your second question, if we would have not capitalized our marketing spend, then you have the phenomenon that with an increase of marketing spend and if you directly allocate it into your P&L, our EBITDA will be heavily under pressure while it shows, at that moment, then maybe even a loss of the company or a negative EBITDA because of the spend. And this is just hypothetical. But that also means that you don't see a regular income and a gross margin which you can follow anymore. And now you can follow the real margin, which we can make from each individual member, whereby opposite effect, if you expand everything into your P&L, you can't follow that anymore. And it doesn't give you a true view on the company because more spend means, at the end, more revenue and more profit coming in within the company.

So if you spend it with an increased spend volume, profit goes down, will be less and while it is actually positive for the company. And of course, the way around as well. If we would not spend any money and the profit goes up, it also means that we are losing customers at the end but making more profit. So it's a contradiction in that respect.

[Unknown Analyst]

That's right. I guess the problem with it is, is that your amortization period has to match exactly the lifetime of the customers. And the way it is presented, we just don't know from the outside whether that will be the case. And what, I guess, you suggest is that you do it on an individual basis, but there's just no away for us to verify that.

[Ben Bos, executive]

Okay. Well, we have to. I mean this is being audited because if we cannot allocate a marketing spend to one individual customer, we were not able to capitalize our marketing spend and so -- under their -- on their contract costs. And we do this already since, I believe, on top of that since 2014. So -- and this has been audited year-over-year. So the auditors are looking into our capitalized marketing spend every year.

Okay. Ladies and gentlemen, this was our last question. Thank you for attending our video call today. If you have any further questions, please get in touch with Sebastian or Julián. So once more, I'd like to thank you, and have a great day, and hopefully, see you soon again.