CLIQ Digital AG

XETRA:CLIQ

Earnings Call Transcript 2023-Q3

[Sebastian McCoskrie, executive]

Hello. Good afternoon, ladies and gentlemen. Welcome to CLIQ Digital's 2023 Third Quarter First 9 Months Results Presentation. My name is Sebastian McCoskrie, and I'm CLIQ's Head of IR. I have the pleasure of hosting today's earnings call, and later on I will be reading out the questions you have kindly sent in via email.Please note the disclaimer shown and that this call is being recorded. The visual, audio, and/or transcription of this call may be published, including any of the data arising therefrom. If you have any objection, please disconnect at this time. After the presentation, we will answer questions sent in by email.I will now hand over to Luc Voncken who will lead you through this webcast.

[Luc Voncken, executive]

Thank you, Sebastian. And good afternoon, everyone, and thank you for joining today's earnings call. I'm Luc Voncken, the CEO of CLIQ Digital Ag. Today I will present our most recent operational highlights and then Ben will walk you through our financial results. Afterwards, we will be answering all your questions.Ladies and gentlemen, the geopolitical situation as well as the current economic environment weigh heavily on consumer sentiment and spending. Especially against this difficult backdrop, I'm very pleased to present here our impressive results and the key highlights, which just go to show how attractive, resilient, and scalable our business model is. We market our numerous streaming services predominantly on 3 continents, and we were able to grow our group sales in the first 9 months of 2023 by 25% to EUR 242 million. We have never had higher sales in the first 3 quarters before, and what makes CLIQ very difficult is that those sales are highly profitable.In the first 9 months this year, we generated EUR 39 million in EBITDA at the same 25% growth rate. That resulted in a very healthy 16% margin. But we are not only profitable, we also generate a significant amount of cash. Our EUR 9 million (sic) [ 9 month ] operating free cash flow came in higher at EUR 15 million, ensuring that we could comfortably remain debt free. Bottom line, we achieved another record-breaking net profit in the first 9 months of EUR 25 million, which resulted into a 16% higher EPS of EUR 3.82. And as you can see, we are well on track to continue our multiyear growth story and are currently busy with all our initiatives to close the fourth quarter on a high note, as well as making new plans for 2024 and the years to come.Ladies and gentlemen, let's now dive into our operational highlights. Before I start, I believe it's always very valuable and often quite necessary to repeat and emphasize our group's positioning just so that we are all on the same page. Ladies and gentlemen, CLIQ is not a streaming provider in the classical sense. We are not another Netflix or Spotify or Viaplay. Very flattering, but not true. We don't navigate and focus our business on member and churn numbers. At CLIQ, we navigate and focus on customer acquisition and conversions, and doing so very profitably and very early in our customers' or members' lifecycle. We are first and foremost marketeers, global performance marketeers to be precise. We spark the interest of consumers around the world with our marketing, our ads, and the consumers' response is immediate. If it's positive, we have signed up a new member. If it's not positive, we've got to work harder. In other words, our focus is always on converting eyeballs into paid and profitable memberships.We grew up by marketing products with a typically short shelf life, like a ringtone or a joke of the day. So we are very much used to operating in a high churn environment. Also, subscribers who binge and burn or share their passwords don't discourage us in the least. On the contrary, our products cater very well to such casual consumers, their mindsets, and consumption behavior. Our marketing today is purely online, and our objective is to extend our outreach. We want to always reach more potential members in the mass market with our affordable streaming products.And what makes our products attractive? The products we market are digital, namely numerous streaming entertainment services in over 40 countries worldwide. Our USP is twofold: convenience and choice. We offer predominantly 1 membership with 1 login and 1 monthly payment for 5 different content categories, a true one-stop shop, and as you probably know, we do this very successfully and, above all, very profitably.In the first 9 months of 2023, we made further inroads marketing our numerous streaming services, our cornerstone product line, that is the cash cow and EBITDA driver of the group. The lion's share of our marketing is done via Google Display, but we have recently extended our outreach by incorporating search engine advertising, specifically keyword buying, into our online sales mix. This new way of growing opens up exciting avenues to reach potential customers who are actively searching for the content we offer or can direct them to.What is very gratifying to see is that our newly-acquired members came in with a higher lifetime value. This resulted in a higher sales contribution in the first 9 months of 2023; also on the back of higher quality and more diverse content. For example, the inclusion of karaoke in the music vertical has been a major draw, offering a great communal and immersive experience for our members. Consequently, bundled content sales grew by 37% in the first 9 months. This growth is a testament to the hard work and dedication of our team. We have just not kept pace with the ever-evolving market, but have surged ahead. Looking to the near future, we are currently expanding our reach by preparing new market entries into Asia and the Middle East, which should go live by the end of this year. This latest international expansion follows our successful Latin American market entry last Q3 and is a true testament to our vision of making bundled content accessible to a global audience. Additionally, I'm thrilled to announce that we have secured approval to promote bundled content sales in France with all major mobile carriers. All in all, this growth potential is what when I speak about CLIQ doubling down and leveling up.Allow me to give you a more detailed update on our flagship service. We have had quite a steep learning curve with cliq.de. As previously presented, we don't at all like to burn our marketing spend. We rather learn from it. We test, we optimize, and scale up in a highly-controlled manner. At cliq.de, we tested in total 10 different traffic sources. And then we paused part of our supporting brand marketing campaign over the summer and did our homework analyzing the test results. The results were eyeopeners. Our initial brand marketing campaign included TV commercials and digital out-of-home campaigns. Both turned out to be way too expensive, giving the disappointing conversion rates. Therefore, going forward, we are placing a much greater focus on conversions based upon traffic data and flow optimization. A very strong traffic source has evolved from our successful business partnerships with retailers and foodservice companies. To harness further potential, we are dedicating resources to building a strong B2B team. This team will be the catalyst for monetizing partnerships with other brands, driving mutual success and growth.Affiliation has also proven to be a very powerful strategy, and we are taking it to the next level. In Q4, we are launching an exclusive affiliate program with a German global affiliate network. Combined with our B2B partnerships, this initiative promises to create a very powerful synergy, benefiting both our outreach and our partners. And going forward, we expect to scale up the flagship service and roll it out to the U.S. and the U.K. Great stuff and a very big compliment to our team. And a further step in making one of my personal dreams come true. Here you can see some examples of our B2B partnerships. Our cooperations with the Lidl, The New Yorker, and Call-A-Pizza have delivered some really great conversion rates. It makes so much sense to partner up with other brands who share a similar target audience. And there are quite a lot of other potential partners for us out there. So watch this space.Ladies and gentlemen. At CLIQ, we follow an ambitious growth strategy that focuses first and foremost on conversions and improving those conversions. Secondly, our growth is fueled by our expansion into new countries, but also by improving our sales densities in the existing countries we operate in. Further, and also very important, growth drivers for us are offering attractive content, engaging new members across various advertising channels, and accepting different payment methods. With all these approaches, we can capture more sales and secure our ambitious growth path ahead. As I said earlier, we are a well-oiled marketing machine dedicated to delivering profitable growth and expanding our pretty unique niche business.On that note, I will now hand over to Ben, my colleague in the Management Board, for the financials.

[Ben Bos, executive]

Well, thank you, Luc. Ladies and gentlemen, allow me now to present to you our 2023 9 months financial highlights. Let's start with the sales breakdowns, and here you can see the services and regions. The group's main selling focus is, as Luc already said, on bundled content streaming services. In the first 9 months, our bundled content sales constituted 94% of our total revenue and grew by 37% year on year, thanks to increased online advertising campaigns and also a higher lifetime value. The higher lifetime value goes hand in hand with bundled content sales as these retail, per se, at an higher average membership price than single content services and their share in percent of the group's total sales is ever growing.Geographically, North American and European sales in the first 9 months grew year on year by 29% and 80%, and Latin American sales grew to over EUR 9 million. These growth rates clearly outpace the overall market growth and encourage us further to expand our business also to new territories. Quarter on quarter, Q3 saw material improvement throughout the P&L, a testament to CLIQ's ability to level up and regain former strengths after a slightly weaker second quarter. Our sales in Q3 increased sequentially by 8%, and this growth rate continued all the way down to the bottom line, which makes me very proud of our teams and their achievements.In the first 9 months of 2023, we spent EUR 100 million on marketing, which means we grew our marketing spend, or better, our customer acquisition cost, by 21% year on year. Looking at accumulated first 9 months income statement, we pursued a stricter management on other cost of sales, and we were able to maintain our EBITDA margin on prior quarter level, slightly above the 16%. Total operating expenses in the first 9 months grew by 7% due to higher personal expenses. On average, we had a 21% higher staff count in the first 9 months this year.EBITDA in the first 9 months increased in line with our sales development by 25% to EUR 39 million. Thus, the EBITDA margin remained strong at the 16% mentioned, notwithstanding higher marketing cost and higher content-related fees included in the cost of sales. Our financial results benefited from higher interest levels as we entered the reporting period debt free. So, bottom line, basic EPS in the first 9 months was up 16% against prior years, 9 months at EUR 3.82, on the back of EUR 25 million net profit.Ladies and gentlemen, here's our multiyear growth story, including the record-breaking group performance in the first 9 months 2023. It's an evergreen slide of ours, which showcase CLIQ as a true growth story and one I am always proud to present.Let's go to the cash conversion. And ladies and gentlemen, we generated a record EUR 15 million in operating free cash flow in the first 9 months of 2023. Despite higher customer acquisition cost, our cash flow from operating activities in the first 9 months amounted to EUR 24 million, against only EUR 30 million in the same reporting period previous year. This inflow was driven by the higher EBITDA. In the first 9 months of 2023, the cash outflow from investing activities totaled EUR 9 million compared to EUR 6 million in 2022 and was largely related to payments for licensed content as well as to investments for platform and technical developments. The cash flow from finance activities during the reporting period was an outflow of EUR 13 million and included the EUR 12 million of dividend paid out in April. Our total cash flow improved from slightly negative in the first 9 months of 2022 to plus EUR 2 million. Cash is and always will be king at CLIQ.So let's now take a quick look at our balance sheet. Total assets grew to EUR 151 million at the end of September and our equity ratio amounted to 63% against 60% at the end of 2022. Contract costs as at the 30 September were EUR 48 million and thus EUR 8 million higher year to date due to the hike in marketing spend to acquire new paying members. This is also reflected in the value of our customer base, which grew it in the same period by EUR 18 million. So at the end of September, our net cash position was EUR 12 million and included the EUR 12 million dividend paid.Ladies and gentlemen, the economic environment remains challenging and is deteriorating across many countries, especially in Europe. Our record financial results in the first 9 months of this year was an EPS of EUR 3.82, EUR 50 million operating free cash flow, as well as sales and earnings up 25% year on year underscores CLIQ's ability to grow also in difficult times. Our company continues its growth track as the latest quarter demonstrated a strong 8% increase compared to the previous quarter. While revenue is a crucial metric, we are equally committed to ensuring profitable growth. Our revenue outlook for 2023 may face some challenges. However, our strategies are designed to prioritize profitability over top line revenue, and we are making conscious decisions to invest in areas that drive the most value for our shareholders.We are confident that an EBITDA target of over EUR 50 million currently coming in at 16% margin is likely to be realized. We are steadfast in our commitment to achieving profitable growth. Our strong 9-month results of 25% compared to the previous year and the recent quarter increase are indicative of our ability to adapt and thrive in changing market conditions. We remain dedicated, creating value for our shareholder, and we are well on track to achieve our midterm sales guidance of EUR 0.5 billion by the end of 2025.Ladies and gentlemen, we are currently busy with all our initiatives to close the fourth quarter on a high note as well as making new plans for 2024 and the years to come. Our fourth quarter and future growth drivers are threefold: so it's more marketing, more sales, and more content. And of course, ultimately resulting in more conversions. Our marketing activities remain focused on increasing conversions by extending the outreach to our target audience with new advertising campaigns, as well as stepping into new traffic sources via new strategic business partnerships and new media channels, we aim to achieve higher conversion rates.Furthermore, we will grow our market presence. We will enlarge our global footprint and continue to expand our business across Latin America and now into select Asia Pacific countries. At the same time, we shall be increasing our sales density with improved campaigns, especially in Europe. Ladies and gentlemen, last but not least, our multiyear growth story is forging ahead, and we are confident to achieve our sales goal of EUR 0.5 billion by the end of 2025.Thank you for your kind attention, and I shall now begin our Q&A session. Sebastian, our first question, please.

[Sebastian McCoskrie, executive]

Our first question is actually for you, Ben, and regards our guidance. Ben, is the goal of revenue of EUR 345 million still a guidance for this year?

[Ben Bos, executive]

And as just mentioned in our presentation, our revenue outlook for 2023 may face some challenges. However, our strategies are designed to prioritize profitability over top line growth, as demonstrated by our 9-month growth of 25% year on year shown today, and 8% quarter over quarter profitable sales growth. And it's working. We reported EUR 39 million of EBITDA and are confident that the target of over EUR 50 million currently coming in at 16% margin is likely to be realized. We are committed to achieving profitable growth.

[Sebastian McCoskrie, executive]

The next few questions are from [ Rick Feldhaus ]. Also for you, Ben, despite the latest good figures, the stock is underperforming. I have a couple of questions. Is the underperformance due to short sellers? Could it be that the conversion to registered shares is leading to the underperformance? And what are your plans to create more shareholder value?

[Ben Bos, executive]

Short interest in a stock is quite common occurrence in the market, and yes, it is a contrarian view to ours, which foresees substantial growth in earnings and sales going forward. EUR 0.5 billion in sales by the end of 2025, which in our view is not properly reflected in CLIQ's valuation. For us, it's just a typical part of being stock listed. And to be honest, we are motivated to prove short sellers wrong by delivering the promised growth.Regarding your question on the conversion to registered shares, we do not have any indication nor reference points that such a conversion could lead to an underperformance of shares. And our plans to create more shareholder value include further IR marketing activities. Already today, our financial reporting is more comprehensive than prescribed by our listing, and we also report faster than many other microcap issuers. We continue to explain and showcase our often-misunderstood business model everywhere we can. We attend numerous national and international investment conferences, conduct frequent roadshows for both domestic as well as foreign investors, and we give salesforce briefings. And above all, we meet in person and virtually investors and analysts at every possible opportunity.

[Sebastian McCoskrie, executive]

Our next question is from Italy, [ Vincenzo ] asks, Ben, isn't there a 2023 EPS projection?

[Ben Bos, executive]

[ Vincenzo ], we have never guided on EPS. We guide the market on sales, EBITDA, and marketing spend. Our analysts currently estimate a median EPS of EUR 5.17 for the full year 2023, and EPS in the first 9 months was already EUR 3.82, up 16% year on year. By the way, our full year 2024 guidance numbers will be announced together with our full year 2023 actuals. The prelims, therefore, are expected to already be released on the 31st of January next year.

[Sebastian McCoskrie, executive]

The next questions we have are from [ Benjamin Radamacha ]. Ben, the Management Board has estimated marketing spend for the full year at over EUR 125 million. Currently, EUR 100 million have already been spent, in the third quarter alone EUR 35 million. In order to achieve this leap in revenue growth, I therefore assume spending of more than EUR 140 million in 2023 as a whole. What marketing spend does the Management Board expect for 2023 as a whole?

[Ben Bos, executive]

[ Benjamin ], our full year 2023 guidance on the marketing spend is a floor of EUR 120 million. That means we do expect to spend more than EUR 120 million. The prelims full year amount will be announced at the end of January and the exact amount at our 2023 results presentation next February.

[Sebastian McCoskrie, executive]

The next question is what are the revenue targets for the streaming portal cliq.de for 2023 or what share of total revenue?

[Ben Bos, executive]

Well, [ Benjamin ], we only guide on a group sales level and not on a product level. Cliq.de is just 1 of our over 325 different service portals that we run in over 40 countries worldwide.

[Sebastian McCoskrie, executive]

The next questions came in from [ Uwe Zebut ]. I think they're for you, Luc. How much potential do we have to drive the expected average lifetime value up with regard to restraining marketing spends for a profitable level?

[Luc Voncken, executive]

[ Uwe ], at CLIQ, we always focus on conversions and doing so profitably. So our marketing activities are always profitable and aimed to deliver a positive margin during the first 6 months of a new member's lifecycle. The average lifetime value differs per country and is always dependent on the purchasing power per country. In case the average lifetime value is relatively high, we are willing to pay relatively high customer acquisition costs. And if the average lifetime value is lower for a country or region, we also maximize the CPA in order to safeguard our margin going forward. Some of our new target markets in Asia and the Middle East have significant purchasing power, and therefore we do see upside potential regarding our average expected lifetime value going forward.

[Sebastian McCoskrie, executive]

Luc, can you please give some color on the marketing market? Do you expect that it will get tougher or easier in the next, say, 6 to 12 months regarding prices to pay for acquiring customers? And will this be in lockstep with the customer lifetime value? So the underlying question is, how are you able to protect margins over the mid and long term, say, 3 to 5 years?

[Luc Voncken, executive]

As said already, we always focus on conversions and doing so profitably, and we will keep on doing this on the short, mid, and long term. The higher marketing costs in the third quarter 2023 reflected a greater number of marketing campaigns launched to acquire more new members than in the prior year as well as the more competitive pricing environment. [indiscernible] bidding prices to acquire new members remained elevated, especially in Europe. The new marketing initiatives we have planned, such as running new advertising campaigns and tapping into new traffic sources at media exchanges, for example, via keyword searches and business partnerships with retailers. And they all are aiming to reach a higher conversion rate. At CLIQ, we are willing to pay more for acquiring member with a higher lifetime value, which is instrumental in maintaining healthy profit margins.

[Sebastian McCoskrie, executive]

The next questions come from our analyst Ralf at Quirin, and I think they're for you, Luc. What is the reason for the sales decline in Europe in the third quarter?

[Luc Voncken, executive]

Well, Ralf, we continue to observe a more competitive pricing environment where bidding prices to acquire new members remained elevated, especially in Europe. In Europe, we will be increasing our sales densities with improved campaigns. And as already mentioned, we are willing to pay more for acquiring a member with a higher lifetime value, which is instrumental in maintaining healthy profit margins. While revenue is a crucial metric, we are equally committed to ensuring profitable growth by monitoring this profitability on a daily basis.

[Sebastian McCoskrie, executive]

Luc, what are your initiatives to turn the decline in Europe into growth?

[Luc Voncken, executive]

Well, one of them is that we have recently secured approval, for example, to promote bundled content sales in France with all major mobile carriers. In addition to our Google Display marketing campaigns, we will roll out keyword buying with improved campaigns and other new initiatives to increase the conversions.

[Sebastian McCoskrie, executive]

Luc, or do we have to accept that growth will come from North America and the rest of the world in the future?

[Luc Voncken, executive]

Well, first of all, I don't accept anything, but North America remains our largest sales region and makes up to nearly 60% of the group's total revenue. However, Europe also is very important for us. Hence, we are currently focusing on this region with improved campaigns and new initiatives as just mentioned. The region rest of the world will also grow with new market entries in the Middle East and Asia, as already told.

[Sebastian McCoskrie, executive]

Luc, could you comment on rising competition in Germany, for example, [indiscernible]?

[Luc Voncken, executive]

Of course, and as you know, the Germans say, [Foreign Language], competition stimulates business. And we believe that our flagship product, cliq.de, offers some really great and affordable content. But, Ralf, as you know, our bread-and-butter business is done with our numerous streaming services, which are characterized by dynamic pricing and no name service URLs. These are the true EBITDA drivers and cash cows for the group.

[Sebastian McCoskrie, executive]

Luc, could you give us an update on the all-in-one entertainment portal in Germany, please?

[Luc Voncken, executive]

Well, as already told you in the presentation, at cliq.de, we tested in total 10 different traffic sources. And then we paused part of our supporting brand marketing campaigns over the summer and analyzed the test results. What were our key learnings? Well, our initial brand marketing campaign included TV commercials and also digital out of home campaigns, but both turned out to be far too expensive given the disappointing conversion rates. We are now placing a much greater focus on conversions based upon traffic data and flow optimizations.

[Sebastian McCoskrie, executive]

Our next questions are from [ Niels Jacobsen ]. Luc, is the revenue goal of EUR 500 million in 2025 still realistic, as this would imply, at least, 20% growth in the next 2 years and an acceleration of the actual growth rate? If yes, how can CLIQ accelerate growth to 20% without damaging the profit margin?

[Luc Voncken, executive]

Well, our sales CAGR from 2019 until 2022 was an incredible 64%, and in my view, this shows quite clearly that we are a growth company. We are convinced that we can achieve our EUR 0.5 billion midterm sales target by the end of 2025, and we have many measures in place to support this growth. In the last 4 years, our average EBITDA margin was always above 15%. For the financial year 2023, we are even slightly above this average.

[Sebastian McCoskrie, executive]

And maybe one for Ben. In Q3, CLIQ membership numbers rose from 1.1 million to 1.3 million, which is a rise of 18%. By what percentage did the lifetime value rise of all members from the 30th of June to the 31st of October? And what is the combined effect of both developments? What outstanding revenues do you expect now compared to 3 months ago if CLIQ stopped all marketing now?

[Ben Bos, executive]

Well, as included in the financial report, the average lifetime value increased from EUR 88 in the second quarter to EUR 89 in the third quarter. The combined effect of increasing member numbers and the average LTV is shown in the increase of the customer base value, which increased from EUR 141 million as by the end of last year to EUR 159 million as by the end of the third quarter. This amount represents the total sales that is expected to be generated by existing members if we decide not to acquire any new members from the 1st of October onwards.

[Sebastian McCoskrie, executive]

Our next questions are from [ Andreas Masak ]. Ben, could you imagine that a membership of CLIQ in the Prime Standard of the Deutsche Borse would lead to a better performance?

[Ben Bos, executive]

Andreas, as a listed entity with ambitious commercial goals, we are always looking into growth prospectives, including our current listing. We already today fulfill several criteria for uplifting to the Prime Standard and monitor the requirements and changes regularly. There are few issuers of our size with the same quarterly reporting scope and speed, but nevertheless, there is currently no ongoing active project to enter into the regulated market.

[Sebastian McCoskrie, executive]

Our next questions are from Milo from Edison. Luc, you mentioned that bidding prices remain stubbornly high in Q3. Are you seeing any softening in the market?

[Luc Voncken, executive]

Well, Milo, at CLIQ we don't want to burn our marketing spend. We are a company focused first and foremost on conversions and profitable conversions. Therefore, we will also search for and test new marketing activities to be able to uphold this business practice. Improved campaigns, new traffic sources, and markets will help us to follow this objective.

[Sebastian McCoskrie, executive]

Luc, could you please provide more detail on the learnings taken from the cliq.de TV campaigns?

[Luc Voncken, executive]

Well, in short, the TV commercials were too expensive for the conversion rates that they achieved. The same goes for the digital out-of-home marketing initiatives. And therefore, we have revisited our brand marketing activities and will pursue our B2B partnerships and affiliation initiatives going forward, which really is a strong combination.

[Sebastian McCoskrie, executive]

The next questions we have are from Nils from Montega. Luc, could you please give a few sentences more on the dynamic development in Latin America? For example, roadmap for the next steps, revenue target in the medium term.

[Luc Voncken, executive]

Well, in Latin America we have realized year-to-date sales of EUR 9 million. We have tested several countries and will from now on further focus on the most profitable ones. The new marketing sources will also be launched in Latin America to further boost conversions. We will only guide the market with a consolidated sales number instead of sales numbers per region.

[Sebastian McCoskrie, executive]

One for you, Ben. Cost of sales continue to increase. How do you expect the further development? Do you have a target and how do you react to the higher costs?

[Ben Bos, executive]

The cost of sales had 3 important items: the marketing cost, the third-party cost, and the other cost of sales. The marketing costs increased significantly compared to prior year due to the acquisition of more new members, the main driver of our increased sales numbers. But as said, earlier as we were willing to accept higher customer acquisition cost as long as the lifetime value is high enough to safeguard our margins going forward. The third-party costs increased in line with the sales. Lastly, the other cost of sales increased from EUR 44 million to EUR 48 million, which is an increase of 9%, while sales increased by 25% due to investments made to the platform and technical developments.

[Sebastian McCoskrie, executive]

Another one for you, Ben. The EBITDA margin remained stable as other operating expenses compensated the increase in cost of sales. Which items to which proportion exactly?

[Ben Bos, executive]

Well, in the third quarter of 2023, CLIQ's EBITDA grew in line with sales despite significantly higher marketing costs, which were compensated by relatively lower other cost of sales.

[Sebastian McCoskrie, executive]

The next question comes from [ Bart Dimiliano ]. First of all, congratulations on maintaining stable profitability and a very healthy balance sheet despite a challenging macroeconomic environment. Again, this underlines the robustness and resilience of your business model. Luc, the latest quarterly financial reports are showing an increase in marketing spend to maintain current levels of revenue. Do you see this trend continuing in the future? And will profitability prevail over growth in your business management? Does that imply potential downscaling in order to further maintain these excellent performance ratios?

[Luc Voncken, executive]

Well, first of all, thank you for the compliment. Now the answer. The marketing spend increased from EUR 32 million in the second quarter to EUR 35 million in the third quarter, and this has resulted in an increase in sales of EUR 6 million. The increase in spend has also included the increased value of the customer base, which is the expected future revenue based on the current members. As said already in the speech, our focus is always on profitability and not only on top line growth. We have shown impressive growth in the past and also expect this going forward.

[Sebastian McCoskrie, executive]

One for you, Ben. Regarding the current economic environment, would you consider a share repurchase program as an additional tool to create shareholder value in times of undervaluation? As dividends are subjected to a high withholding tax in Germany, using a portion of this budget could prove to be a rewarding alternative for long-term shareholders.

[Ben Bos, executive]

Well, management is dedicated to continuous review of all available capital allocation options with a focus on creating value for the company. Additionally, we are committed to addressing the current challenges, although we consider that the share buyback program will reduce to already low liquidity and might have adverse effect on the market cap.

[Sebastian McCoskrie, executive]

Our next questions are from Marie-Therese from Hauck Aufhauser. The EBITDA margin, Ben, came in at 16% as of 9 months. The bottom end of the guidance for the full year 2023 is roughly 14.5%. How should one look at Q4? Much higher revenues to make the revenue guidance and lower margins than in Q3, presumably because of higher marketing spend? Or rather revenues below guidance but higher margins?

[Ben Bos, executive]

Marie-Therese, the EBITDA margin is indeed above our guided number. Our focus is more on profitability than on just sales growth. We confirm our guidance of an expected EBITDA of over EUR 50 million.

[Sebastian McCoskrie, executive]

Another one for you, Ben. What would be an operating free cash flow guidance for the fourth quarter following EUR 15 million as of 9M? Can we expect at least an improvement over Q3? Or rather see Q4 as a cash consuming quarter?

[Ben Bos, executive]

At CLIQ, cash is king. We always expect to further improve our cash position towards the end of the year.

[Sebastian McCoskrie, executive]

One for you, Luc. Please explain in detail what has changed regarding search engine advertising. What impact does this have on marketing spend, thereof marketing costs going through the P&L?

[Luc Voncken, executive]

Well, Marie-Therese, currently the lion's shares of our marketing is done via Google Display, but we have recently, and I'm really proud of that extended our outreach by incorporating search engine advertising, specifically keyword buying, into our online sales mix. This new way of growing opens up exciting avenues to reach potential customers who are actively searching for the content we offer or can direct them to. This is similar to our Google Display advertising campaigns.

[Sebastian McCoskrie, executive]

Another one for you, Luc. How is the cooperation with French mobile carriers going to look like?

[Luc Voncken, executive]

Well, we recently have secured approval to promote bundled content sales in France with all the major mobile carriers. So also there our multi content success will be launched. We will launch this service where members pay their membership fees just via their mobile carrier bill, which has always been a very successful strategy in the past.

[Sebastian McCoskrie, executive]

Another one for you, Luc. Are you reverting to affiliate marketing again after having stopped because of fraud cases? What is different this time?

[Luc Voncken, executive]

Well, times are changing, of course, and we have never stopped affiliate marketing in the past. But we have decided to only work, of course, closely with a limited number of really trusted partners.

[Sebastian McCoskrie, executive]

Luc, what are the unit economics of the B2B partnerships? How much do they, on average, retain out of your monthly subscription fee in percentage?

[Luc Voncken, executive]

Well, our B2B partners like to offer our streaming services to their loyal customers. That's the starting point. And of course, we don't disclose the financial details [indiscernible].

[Sebastian McCoskrie, executive]

Luc, does the increase in B2B partnerships as a way of growing traffic and conversion mean structurally lower EBITDA margins in the future?

[Luc Voncken, executive]

Well, the involvement of B2B partnerships is not expected to result in structurally lower EBITDA margins in the future. Regardless of the traffic source, we always endeavor to achieve profitable growth. And our last questions today are from...

[Sebastian McCoskrie, executive]

[ Sasha Deitzer ]. Zasha's first question is directed to Ben. Does the marketing spend roughly correspond in percentage terms to the distribution of sales? Or does North America have a higher share because higher price subscriptions are sold there?

[Ben Bos, executive]

Well, [ Sasha ], this is exactly why we capitalize our customer acquisition costs and amortize them over the customer's average cycle. By doing so, the marketing cost is directly related to the sales. The higher share of North American sales is mainly driven by higher conversion.

[Sebastian McCoskrie, executive]

And the last one is for Luc. Are new content offers to be expected, own shows, influencer formats, et cetera?

[Luc Voncken, executive]

We have a content team looking continuously for new content like I've been recently visiting the MIPCOM in CANNES 2 weeks ago to sign great new deals for our global streaming services.Ladies and gentlemen, that was our last question this afternoon. Should you have any further questions, please feel free to get in touch with us. Thank you for joining our 9-month 2023 video webcast today. Have a great day.