DocMorris AG

Let me please start with a brief glance on the geopolitical situation with a horrible war just in front of our door which personally makes me really concerned. Humanitarian suffering and the limited especially the limitability to influence the situation are really hard to endure. For that background we do what we can, we help in all ways possible, especially with medication and other needed material, but quite significantly. Today actually is the last time that I will be opening this conference as I stand for election as chairman of the board and Walter Hess will take over by the 1st of May. Walter is really the perfect fit for this position with long-standing experience within Soros and especially excellent management skills. I'm personally fully convinced he will continue and further accelerate the success story together with a great management team. And the real story starts right now. With the opening of the 50 billion RX market in Germany via the introduction of the electronic prescription, we will speak further more on that topic. Today you will also see Marcel who will present our numbers and an outlook to you in just a minute. 2021 ended with a low light when the German government decided to postpone the mandatory introduction of the electronic prescription. This was really a political swing that caught us as fully unexpected. We invested heavily in the ERX readiness, which is reflected also in our numbers. We were by the end of last year and now still are fully ready and geared up to drive electronic prescriptions from the first day onwards. Nevertheless, we achieved great things in 2021. New record in brand awareness of DocMorris as a result of our DocMorris app with great functions and excellent user experience actually that achieved already 1.3 million downloads we are really proud of and we also entered to strategic corporations with leading pharma companies just to mention a few highlights yesterday we learned that DocMorris and Magpacks cover the first two positions in the latest evaluation of Stiftung Warum test, which we see as a proof of our strong customer centricity. In a nutshell, we remain fully, but fully convinced about electronic prescription as key growth and profitability driver for the future, given the latest developments. Extended test phase proves electronic prescriptions work and no technical problems occur with the infrastructure. Also on the regulatory side, despite all negative processes, confirmation on electronic introduction continues. Nevertheless, the delay causes a big impact on our business plan and requires action. We are taking the situation as it is, but also as an opportunity to now focus on operational leverage and execution. We already took some steps last year, integration of VITRASANA and APOROT, and then the go-live of our new distribution center in Ireland, which will take place in the next months with a high degree of automation, which will help us to improve operational performance. We have quite some work ahead of us, but Walter, the whole team, and myself in the new role are fully committed for execution and very much excited for the electronic prescription opportunity. Before I hand over to Marcel, I also want to highlight that we issued our first sustainability report in line with GRI standards this year. We will continue to improve our disclosure and stand available for any sustainability related questions. Now over to Marcel.

Thank you, Walter. And hello also from my side. I want to start by highlighting two key points concerning the financial year 2021. First, as Walter mentioned, we were fully convinced to see an ERX launch on the 1st of January 2022 and thus invested heavily in ERX readiness and marketing to achieve the best possible starting position. And second, a significant backdrop on the German non-RX online market caused us to reduce our 2021 sales targets and also had an impact on our profitability. Let's go into the 2021 performance, starting with the group sales. We achieved our revised sales targets with a growth rate of 14.8% in local currencies. In Switzerland, we realized a solid and sustainable growth rate of 5.7%. In Germany, we were able to grow 19.4% on our external revenues. This includes the continuous light decrease of the ERX of the RX business as a result of discontinued marketing and the bonus band and also includes the contribution from the acquisition which we did in summer 2020. The OTC and BPC business developed strong in a very challenging market which grew significantly lower compared to previous year. Segment Europe achieved 22.3% growth This somewhat slower growth compared to prior periods is a result of the very strong demand in the previous year driven by the COVID effects. Let's now look at the development of our underlying KPIs. The key development here is the growth of our active customer number to 12.4 million. is an increase of 1.9 million customers. For better transparency, we decided to show the basket size and order frequency now separately for RX and OTC. Our average RX basket, which consists of our Swiss and German RX business, is at €115, with slight declines in 2021 as a result of low-value basket in connection with stately reimbursed self-tests in Switzerland. The OTC basket also saw slight declines over the period, driven by smaller COVID-related baskets. Our repeat order rate remains at a high level of 74%, which shows the significant loyalty of our customers. In terms of site visits, we saw an increased 2021 was the year in which we achieved ERX readiness and grew external revenue by 14.8% despite the significant backdrop of the German non-RX market compared to previous year. The course margin came in below previous year pandemic in 2020 and the slowdown of the German non-Rx market as a result of missing flu season and tough comparison days. It is in line with pre-pandemic levels. Personal and distribution expenses both slightly reduced as a percentage of revenue. The largest difference compared to previous year is our marketing versus 4.1% in 2020. This increase has mainly two reasons. First, our TV campaign to boost awareness ahead of the ERX launch. And second, the less dynamic non-ERX market, which required higher performance marketing spend to achieve both. This led to an adjusted EBITDA of minus 128.9 million Swiss francs. I will explain the bridge from 2020 to 2021 earnings and adjustments in more detail on the following two charts. Depreciation increased as a result of higher base due to acquisitions and higher investments in tech developments. The net financial result was impacted by the negative exchange rate effect and the results of joint ventures in Switzerland. On this chart, I will explain the drivers of the result compared to Previzia in more detail and build a bridge from 2020 adjusted EBITDA of minus 31.2 million to 2021 of minus 128.9 million. The first bar shows the achievement of ERX readiness. Together with the ERX related TV marketing push worth ahead of the ERX launch. The slower market growth in the German non-RX market led to increased customer acquisition costs and lower average gross margin with an impact of 18.7 million. We invested more in tech capabilities and user experience to enable faster scaling in all parts of the company's business and continue building the leading online platform and apps. In the second half of 2021, we successfully carried out the rebranding of our French Doctifarma platform to DocMorris and also initiated our OTC business in France with a combined effect of 13.4 million. As explained at the Capital Markets Day last year, our new business, Telemedicine Platform as a Service, and partnerships built a high future margin potential, which is why we increased our spendings in these initiatives by 9.9 million Swiss francs compared to 2020. In sum, these effects led to adjusted EBITDA of minus 128.9 million. The EBITDA adjustments in 2021 reduced significantly compared to previous year. M&A related adjustments amounted to 9.6 million. Integration includes mainly the upper road integration amounted to 2.2 million and several other smaller run-offs of 1.9 million. Total adjustments amounted to 13.8 million compared to 47.2 million in 2020. Our balance sheet remains in a good shape. Our solid cash proposition is at 277 million compared to 300 at EIR in 2020 and includes obviously the proceeds from our capital increase in December 2021. We achieved a sustainable reduction of net working capital by 28 million during the period focus also for next year. Other positions of the balance sheet remained broadly in line with previous year. Equity ratio stays with 38.2% on a solid level. Now I hand over to Walter Hiss who will give you an update on our strategic priorities for 2023.

Hello and welcome also from my side. I would like to give you first strategy update and afterwards to explain our key priorities for 2022. How important and absent digitalization in the healthcare sector is, we all experienced during the pandemic over the last three years. With our digital health ecosystem, we can contribute to more integrated and more digitalized healthcare systems. For our patients and customers, we want to become the preferred digital health destination. We will achieve it by consequently understanding and fulfilling their needs and wishes. It will be enabled by a best-in-class platform with the technology as the call area for operations, services and brands and will lead us to profitable growth and will create value add for patients, customers, partners, shareholders and employees. A trick condition for great success is that we have the best people in the right place. Therefore, to attract best talents is one of the key priorities of our company. I'm very pleased and happy to announce today that Matthias Peukert will join our company on 1st of April this year. He will become head of Germany and CEO of DocMorris and therefore be my successor in these two functions. Matthias is a proven and excellent e-commerce expert 14 years of experience with Amazon and four years as CEO of windle.de. In addition to Matthias and Madhu Nuttaki, our CTO who joined the company in last August, we further strengthen our senior management team with a digital marketing expert who already started in February this year, also coming from Amazon with a data and science specialist coming from Nissan and an expert in health procurement coming from the Phoenix Group. And he will also run our transformation program, which I will just show you afterwards and in that function reporting directly to me. All of the senior managers have proven and strong track records from their previous careers. and have a core strength in execution, which is one of the key success factors for our company. The situation which has arisen due to the extension of the ERX test phase gives us the opportunity now to leverage on the synergy potentials we have and to set the base for profitable growth in the future. We manage cash immediately accelerate on our growth activities once ERX will start. And therefore we have defined three key priorities for this year. Number one is to keep the best ERX starting position. Number two is on operational leverage. And number three is on a growth focus with DocMorris. Let's start with ERX first. Since January 1st, the mandatory ERX law is in place and in force. On 20th of December, we all know, the Ministry of Health declared to extend the testing phase as the technology was not ready and not sufficiently tested. Meanwhile, the shareholders of Gematik have defined six quality criteria, which you will find on the right hand side of the screen. which have to be passed before ERX can go in the next phase and the next phase which will be the nationwide rollout of the system and therefore all these criteria have to be fulfilled. The main criteria is number one that 30,000 ERX will have to be processed without any problem. As of today we already reached 5,700 ERECs being processed without any problem. And frankly speaking, if the system already works for 5,700, it will also work for 30,000 or 100,000 for 1 million or even more. So the system, also based on our own experience and based on the opinion from industry experts, is technically already ready and we are confident, therefore, that the ERX scaling will start in the second half of this year. Let me remind you of the size of this opportunity and our position. Today, we are at roughly 1% of online market share for prescribed drugs. If it goes up to 10%, as it was in Sweden already two years ago, we talk where the OTC market in Germany already almost is, we talk about the 12 billion market. So a huge market potential. There are many studies out in the market about the ERX. One is from Sempora saying that 25% of the people indicated that they would redeem their prescriptions with an online pharmacy once ERX is in place. Another fact is that 80% of the medication is for chronic demand. And our assumption is that out of our customer base, far more than 2 million customers have the potential to be converted from OTC customers also to RX customers. And as Marcel has shown, we have invested in marketing and brand awareness to be prepared for RX. And we have reached 80% brand awareness of 71% end of last year, which is an all time high for us and also of 26% for ERX. But why is ERX so interesting and why is it the game changer? It's all about KPIs and unit economics. see the KPIs and compare them to OTC KPIs of orders and of customers. So RX orders have a higher basket size. The customers have higher order frequency, higher retention rates, and higher customer lifetime values. And if we see the unit economics and compare ERX contribution profit, contribution margin after fulfillment cost, Only with PRX, it's already double as high and compared to OTC orders, it's even five times as high. So we are with DocMorris, but all other brands as well, fully ready for all of this ERX potential. And we have invested quite a lot last year in being prepared with technology, processes and people. And as of yesterday evening, we could process already on our systems 226 ERX prescriptions and I can assure you and confirm we could process them without any problem and we could build them without any problem. Let us give you now a glimpse on how easy it is to redeem an ERX at the same time purchase an OTC product and use our services with our DocMorris digital health ecosystem app. So let's move now to our second and equally important priority of operational leverage. Our target and our commitment is to reach EPTA break even in 2024. Therefore, we have set up an extensive transformation program, including measures to increase gross margin, leverage on performance improvements, and structural synergies. With regard to gross margin, we will enhance our assortment, pricing, and procurement strategy, and we'll launch our advertising services in Germany and France this year, as we have already done in Spain two years ago. With regard to performance improvements, we will improve on marketing performance and operational performance, including DC2, which I just would like to give you an update afterwards. And on the side of structural synergies, we see significant efficiency gains through optimizing our organizational structure and consolidating and integrating our platform. All of the measures that we have planned, we will implement and execute within the next 12 months. And this will be the base and contribute to reach target of being EBITDA breakeven in 2024. Marcel will show afterwards the impact of these measures on our P&L. We will update you about the progress regularly and on the occasion of a capital market day later this year. Let me give you a brief update on our the go-live preparation of our distribution center tool in Helen. We are fully on track to go live in Q2 this year. Based on the really extensive testing which already started in November last year and the setup of the two warehouses and distribution centers where we can run them autonomously from each other we are confident that we will see a good go-live in Q2 and a smooth ramp-up in Q3. Once we have taken live this new DC2, we will reach an automation degree of 70% in this warehouse and can leverage on a productivity improvement of more than 10 million euros per year. This is again an important and significant contribution to reach the EBDA target in 2024. And this DC2 will also add 15 million of Arcel's additional capacity and more than double the capacity in Helen. So let's come to the third priority, which is the growth focus on DocMorris. But before we talk about the growth measures on DocMorris, we have to talk about 2021. The non-Rx online market last year saw a significant slowdown, coming from 17 and 15% in the years before, down to 3.6% in the last year. But we also see that part of the cohorts of the last two years related to COVID and masks have reduced retention metrics compared with other cohorts, whereas the stickiness of the existing cohorts remain at the same high level. In combination with the fact to keep and allocate wisely our cash and being ready for the moment where ERIX starts to accelerate, we will focus on double-digit growth on non-RX with our core brand of DocMorris. With new customers, we will focus on new customers with RX potential, so OTC customers, which we can convert afterwards to RX customers with high CLV, also as a base for sustainable growth going forward. As mentioned before, part of the transformation program is the reinforcement of the marketing performance. The areas where we have defined measures you see on the right hand side in the circle on the slide and it will be added by strengthening the digital marketing team also with cross-segmental competencies from within the company. With the non-core brands we focus on profitability and have an upside potential on the market recovery on OTC in addition to ERX in the second half of the year. One of the key assets of the Dr. Morris brand is the digital health ecosystem map. We offer a unique experience for our patients and customers by combining products and services for them from awareness to diagnosis to treatment and to adherence. You see the products and services shown on the right and left hand side of our screen. This app has already been downloaded more than 1.3 million times within only a few months and have a high average of 4.7 star rating. So let me conclude this part and let me summarize. We are fully convinced and committed to capture the full potential of ERX immediately after it has started. This year, we set a strong focus on execution and leveraging the potentials we have within all our company. And we set the focus on growth with our core brand DocMorris. I will now hand over back to Marcel who will give you the information regarding the impact of the transformation program and give you the outlook for 2022 and beyond.