DocMorris AG

Hello, ladies and gentlemen, and welcome to the DocMorris AG 2020 for full year results and Outlook 2025. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Walter Hess.

Yeah, thank you very much and good morning to everybody to today's conference call. The full year results 24 will be presented by Daniel Wurst, our new CFO, and myself. We will share insights and updates across all segments and provide a comprehensive overview of our business performance. So we will start with a business update, followed by a financial update, and conclude with our outlook. Thereafter, we are looking forward to answering your questions. Let us start with the highlights of last year. In 2024, we achieved significant milestones again. Since the introduction of CardLink in April 24, there has been a five-fold increase in new Rx customers. These new customers show significantly improved KPIs compared to our former PRx customers. We are very pleased to announce that in 2024, we reached profitability with our non-Rx business. It reflects our strategic efforts and the successful execution of the breakeven program over the last few years. Overall, there was a 7% increase in revenue with contributions from all business segments. And further, Teleclinic achieved a noteworthy milestone by doubling its revenues, demonstrating strong performance and attractive profitability metrics. And in conclusion, and due to a really effective cash management, we reported a cash balance end of 2024 of 95 million Swiss francs. On slide number five, We look forward to 25 with our strategic initiatives that are centered on, first of all, further expanding RX growth with the customers who demonstrated already that they show significantly improved KPIs and favorable unit economics. With the new marketing campaign, Machs dir doch einfach, our objectives are, besides further enhancing awareness, to increase consideration and drive conversion into ERX orders. The non-ERX business is expected to further grow profitably, thereby contributing to the future expansion of our ERX business. And also teleclinic is continuing to achieve significant growth while also expanding its profitability margins. And finally, as you have read this morning, we will raise capital of about 200 million Swiss francs to support the RX growth and safeguarding the refinancing of the convertible bond 2026. On slide number six, you see that since the introduction of ERX in Germany in Q124, our RX business is continuously growing. each quarter in terms of revenue. Our card link innovation led to a 2.5 fold increase in ERX revenue from statutory insured people from Q1 to Q4 last year. Meanwhile, as you see on the left side on the chart, paper scripts for the statutory insured people decreased significantly. whereas those for privately insured grew slightly, even though they still need to hand in paper scripts. And to look forward for Q1 2025, we expect a further increasing Rx growth in absolute value and at the rate of about 50%. On slide number seven, we are witnessing Also a consistent growth of new Rx customers, which is most important and which serves as an encouraging indicator of our effectiveness in awareness initiatives and customer acquisition efforts. The success relies on providing and continuously improving cutting edge apps and enhancing the customer experience. The primary focus on customer acquisition is, of course, with the DocMorris brand, which has seen a threefold increase in new customers year on year and even a fivefold increase from Q4 23 to Q4 24. And we will also be able to further leverage the existing customer base of all brands moving forward. with the ongoing deployment of the CardLink solution in the MedX app right now and its implementation in an Apertile app in Q2 this year. On slide number eight, we would like to share with you some insights in relevant ERX KPIs. The cohorts of new ERX customers, who by the way have an average age of 57 years, demonstrate a marked improvement in customer loyalty and call frequency when utilizing the eScript with CardLink. As you can see on this slide, the CardLink cohorts reorder at the rate that is 2.5 times higher than the ones of previous PRX customers. This confirms the high quality and attractiveness of the ERX customers and confirms that they appreciate the great experience and convenience with CardLink in our app. Another relevant KPI is the average order value, which reached €110 due to, on one hand, a higher AOV of new RX customers than before, and on the other hand, with a growing proportion of mixed baskets of RX and OTC products. Over 85% of these customers currently utilize our app and card link to redeem their e-prescriptions with a very high rate of even more than 95% of the regular orders being delivered to their homes the next day. Now on slide number nine, we are really proud that in 2024, our non-Rx business has reached profitability. This achievement is crucial as we continue to diversify our value streams and strengthen our overall financial health. The key value drivers to achieve this remarkable milestone include the increase of cross margins, the strong scaling of teleclinic, our advanced retail media business, as well as the ongoing expansion of our marketplace. And of course, important to mention is also teleclinic, which will become even more important as a value driver in the future. Additional significant factors include enhanced operational and marketing performance. and ongoing improvements in customer experience, which contribute to higher conversion rates. Together with substantial reductions in overhead and indirect cost, along with the closure of several locations and integration of brands in the last two years, we finally got back to a successful, profitable non-RX business. On slide number 10 now, we would like to introduce to you our new marketing campaign 2025. The starting ERX campaign launched last year with the Gesundbergs was highly successful in enhancing brand awareness and attracting attention to the new ERX card link solution. Now the successor campaign 2025 which combines the slogan, in English, make it easy for you, by playing with the word doc from Doc Morris, with a song with the same title, aims to, first of all, maintain the high top of mind awareness of the brand and the card link solution from the Gesundberg campaign. But then secondly, increase consideration by strengthening the middle funnel and intensify the focus on specific customer groups that have been identified over the past 12 months using ERX, with the result to boost ERX and sales in the future. I would like to invite you to use the QR code from this slide to see the spot and hear the song of our Master.Einfach campaign. Enjoy it. Now, let's talk about the exciting development of teleclinic on slide number 11. The demand from patients, doctors, and strategic partners demonstrate evidence that telemedicine is a crucial requirement and a real benefit to all of them. Teleclinic offers a solution to address the significant and underutilized market of ambulatory care valued at approximately 55 billion euros with less than 1% online penetration. The recent introduction of the electronic sick note, the e-script, along with the forthcoming implementation of the electronic patient record in Germany will serve as a further catalyst for future teleclinic growth. We are talking about the telemedicine platform with a take rate model showing a strong upward trajectory in revenues and providing highly attractive margins with significant expansion potential. Already in 2024, TeleKlinik has doubled its revenues to 11 million Swiss Ranks with a highly attractive EBITDA exceeding 3 million Swiss Ranks. In 2025 and beyond, teleclinic expects strong revenue and even stronger EBTA growth due to increased demand of patients, doctors, and partners again. And the app of teleclinic has already been downloaded 2.5 million times and has received an impressive rating of 4.8 out of 5. On the next slide, we see that teleclinic has the strongest value proposition. by far in Germany. The demand for telemedicine has led to a significant increase of treatments in recent years and has exceeded 3 million in total with more than 1.3 million treatments in 2024 only. The leading position and competitive advantage of the platform is further demonstrated by the annual strong increase in doctors surpassing 4,000 in total in 2024. TeleKlinik's uniqueness and excellence are evident, as it consistently attracts new doctors and renowned partners, such as TK, Technische Krankenkasse, with more than 12 million members, which just started in December 2024. we can tell you with many more to come in the near and mid-term future. On slide number 13, I would like to give a brief update on our sustainability activities, which for the first time are aligned with the European Sustainability Reporting Standard, the ESRS. We successfully reached our sustainability targets for 24 making significant strides towards net zero emissions. Our commitment to a sustainable planet and responsible corporate practices is reflected in our initiatives, including renewable energy adoption and gender pay gap alignment. In 2025, we will further prioritize leveraging our corporate culture which will be essential to support our agile work methodology and align with the OKRs to realize our really ambitious objectives. So let me conclude the business update with a reconfirmation of our strategy and positioning. Our aim is to be the health companion for customers and patients. Continuous development of our digital health ecosystem is essential for our strategy of being more than a pharmacy. User behaviors are rapidly changing at the moment due to the new opportunities presented by using Gen-AI tools, specifically in the health sector. This will create new chances for those who provide comprehensive offerings to customers and patients. The digitalization of healthcare in Germany, for example, with the e-script, the e-patient records and the e-signaled, further enables seamless digital health journeys, which will lead to a much better adherence, a far better customer experience and convenience. And accordingly to all of that, we want to meet all health requirements by integrating online pharmacy, telemedicine access, a marketplace for health and wellbeing products, services, health services from strategic partners and highly valuable health information and content through our extensive health platform. And with that, I would like to hand over to Daniel now for the financial update.

Thank you, Walter. And also from my side, a very warm welcome to all of you, ladies and gentlemen. And it will be a great honor for me to, for the first time, present the full year. Thank you for the figures to you. let's start on slide number 16 with an overview on the group performance as already mentioned the could achieve a very solid growth of 6.7 percent in local currency on group level and that's especially remarkable with all business units contributing to this positive growth and also taking into consideration that in the first half our Oryx business contributed, there was kind of double-digit negative contribution that is therefore even more remarkable, the performance which we could show over the full year. Besides this, we could continue our positive trend in increasing the growth margin by a further 50%, and that's even more remarkable after the fact that we had increased the growth margins the year before already by 350 basis points and we are currently running different initiatives to further improve the growth margins and we will talk about this later in the presentation. EBTA, which came in lower than last year, reflects the additional marketing expenses for the ERX business once the CardLink business has started. We guided for an EBTA of around minus 50 million and finally came out with 48.6 million of adjusted EBTA. On the contrary, I think, and Walter already touched on this, very remarkable development on our non-ORIX business in Germany. The non-ORIX business is basically containing all business units, excluding ORIX. But just for your recollection, it's OTC-BPC. The services, we have different services which we offer alongside the OTC-BCP business and then Last but not least, teleclinic. And the non-Rx business achieved kind of a positive EBTA in 2024. And I think that one can really say the break even turnaround program has finally closed and we will see further growth on the top line, but also on bottom line and therefore very promising and also very very good development in 24. to conclude over a very pleasant result on group level achieving the set targets and the revised targets which we have communicated in the first half 24. then let's move to the next slide into the segment to the tools to our two segments germany and europe germany I think there's, we noticed an overgrowth of close to 7%, 6.9% in local currency, while Oryx contributing 2.1%. I mentioned this based on minus 10.2% in the first half. And the non-Oryx business of an impressive 8% growth. And there, third... ...and teleclinic both showing a growth of over 100% in 24 and are set to further demonstrate the same magnitude of growth in this year and the coming years. Having said this, given the yet small size of the businesses, the contribution to the overall growth was Significant in relative terms, but if you combine it, there was less impact of that. I think we also, Germany, there was a huge impact on improving the gross margin, which you can see most of it, or a big step has already been taken from 22 to 23 with 370 basis points. But this year, another 60 basis points came on top And I mentioned that we will further work on this, being on the pricing side, but also buy in the supply. And therefore, you can expect that there will be a further improvement on this topic. Adjusted EBITDA, as mentioned, that reflects the down, kind of the $15 million, which has been additional be invested into marketing spend for ERX. The segment EU also very pleasant development. I think the big achievement, the growth, top line growth, we have a positive top line growth of 3.6% that compares to a top line decline of roughly 12% in the year before there. A clear return and sustainable return to the growth pattern. There, the turnaround on top line has been achieved, and on the bottom line, on EBTA level, also on a very good way to become EBTA breakeven or even EBTA positive, with an increase of 270 basis points in EBTA margin. I think on the EO, especially to mention the gross margin level, which is above 29%, which is really kind of a very attractive gross margin level and kind of a consolidation of this 29% and there also some further upside potential on that end. With that, I would like to go through the overview of some of our key KPIs of the group. There you see on top the active customer base and that's kind of customers being defined as being active over the last 12 months. Substantial improvement during the year from 9.1 million to 10.3 million, which is kind of a 13% increase compared to the last year or within this 12 month period. And that shows kind of the attractiveness of the solutions which DocMorris is offering to its clients. The site visits over the last 12 months, and this site visits, it's not only visit on the web, but also on the app, that's web and app both together. Also an improvement of 10 million over the last 12 months. And there we see a clear shift, and that's a very good shift, from web-based is losing and app-based is substantially gaining. And that shows because app-based is much more attractive because then people are already on the right pace to redeem their prescription. And it clearly shows kind of the increase of new ERX customers, which are only using the app and not any longer web-based. very positive development. On the, let's say, more kind of KPIs, which we usually show basket size, order frequency, and repeat order rate, one could think slight disappointment because they remain more or less stable or even slightly decline. However, that's a good message because that only shows that could uh we could accumulate a lot of new customers mainly erics customers which are in the midterm extremely attractive customers as walt already has explained but initially the huge magnitude of new customers is driving down these kpis because the the first and the second order usually is just kind of they are testing out this system and has a lower basket value and that can go through to all the main KPIs, but in the mid-term that will turn around and will then further increase the relevant KPIs. With that, just a short look at the detailed P&L and I don't want to be there too long and too detailed, just a few headlines. On the P&L, I think on the cost level, you see personal expenses have gone down in absolute and relative terms substantially. That's mainly through the initiated and already executed, but there are many other initiatives ongoing, mainly the closure and restructuring of Therese Group Germany in the closure of Halle, which led to kind of less people and the centralization of the warehouse. The effect, we have a negative 5.5 million restructuring costs, but that will translate into annual savings of over 3 million euros. And that's only partially reflected in these figures, but they will show its full effect in this year and in the coming years. Marketing expenses increased by 30 million. kind of what we already mentioned, the additional expenses for the ERX marketing following the introduction of CardLink. Usually you use adjusted EBTA because this one looks better than the reported EBTA. This time it would be the opposite, but we decided not to turn around kind of the how we present it, for good reasons, that one can really track our historical financial performance. Why is reported EBITDA roughly 5 million better than adjusted EBITDA? That's mainly due to the profit out of the sale of the former Cirol de Switzerland building, which led to a positive contribution of 13 million. And then against that, we had this restructure cost, which I already mentioned, for the closure of the roads of Germany, and then additional severance payments on the higher management level when we reshaped a little bit the EB, but also other key positions in 24. With that, I quickly want to touch on the balance sheet. The balance sheet also, I think we ended up the year with a comfortable cash caution of 95 million, which would comfortably bring us through 25 and beyond. But I think you, a little related to that, the capital increase of the 200 million, That will really lead to the fact that we are basically net debt free. We have currently a net debt of 228 million. On a performer basis, adding 200 million, we would have 28 million of net debt. I think this balance sheet, which is already strong, the equity ratio is over 40%, 44%. but it's 200 million, then we'll secure, first of all, the forthcoming maturity of the bond, 26, the converted bond, the 95 million, but also allows us to fully execute and even add some additional firepower for the promising market outlook and, as I have said, growing in all business units and especially in Oryx, too. safeguard the balance sheet and to take every discussion off the table whether DocMorris would be able to execute on its business plan and being in a position to repay the short-term debt. With that focus on two topics which I have taken on personally and which is kind of a key focus and the one who has already heard me. know about it. I think focus will be, it has already been substantial, will be on the indirect costs. You see we have made also in 2024 huge progress with reduction of 110 basis points in indirect cost ratio, but also on an absolute level with higher sales of 8 million, which is remarkable. If you ask me, are you happy or satisfied with 7.7% of sales? No, I'm not. And there, that's the reason why we have this arrow, clear focus this year and the years to come in reducing the indirect costs, especially on a relative level to kind of a sustainable level, which is definitely below the currently 7.7%. The same is true for networking capital there. The figures are annualized on an annual basis. The average use of networking capital also there. We have implemented and will further implement measures to lower the networking capital also in relation to sales with kind of 4.7% achieved this year. Over the year, I think there's room to further reduce that given the nature of our industry Usually you have only to pay your suppliers once you have already sold the product and get the cash from your customers, which is not exactly true for the Oryx business, but there also we are working on solutions to kind of free up cash on the accounts receivable side. With that, I would like to come to the current trading. And also we'll touch on some points of the targeted and pre-announced cattle increase. Let me start with the current trading. As already mentioned by Walter and by myself, we see continuous growth across all business units over in the first two months of 2025. Especially teleclinic and in our service business, as I already mentioned, this 100% growth is continuously going to further happen and already the two months show the very promising developments. Oryx also kind of we mentioned that we expect growth in Q1 of around 50% compared to the quarter of Q1 of last year. And if you translate that, that would also mean that we would grow in the first quarter 25 compared to the Q4 24, which is in that respect remarkable that Q4 is usually the strongest quarter for the ERX and Rx in general and therefore we are very confident and also pleased that with this current development in the first two months of the year. I think you will now maybe have some disappointment that we cannot provide you with kind of a strict guidance or clear guidance, short and mid-term at this point in time. There I have to remind you, and we have been reminded by our lawyers, that we are from now on in a capital raise mode, which the capital raise won't only be done in Switzerland, but it will be a global offering most likely, and therefore we have also to obey to uh u.s securities laws and therefore all communication which we are doing must be one for one exactly the same like uh laid down and written in the in the potential offering perspectives which will be uh published uh later uh in the uh later in in the year following the most likely following the agm and therefore we really want to align kind of uh the the preparation of this document with our let's say critical communication in relation to guidance and that's the reason why you will get a very firm and detailed guidance but not as of today but you have to be calm for a few weeks and then you will get not the new but the amended and updated guidance for the forthcoming trading of Doc Morris. With that, let me give you a few words to the capital increase. I think you have seen the target is around 200 million. Why 200 million? I think we mentioned that there are basically two reasons for that. First of all, to really secure our growth, foreseen growth, especially mostly in Oryx, but also in all other business units, which have very promising growth prospects. And we want to be sure that we have only, that this is the last call to our shareholders and that they really, by supporting now for the last time, Doc Morris with equity, that we can fully execute our business plan and also reach then not only EBT but also free cash flow break even and having enough ammunition left until we are getting there. On a second layer, we also want to safeguard the forthcoming maturity of the 26 convertible bombs. I think that's kind of always a little bit the big elephant in the room and I explicitly say safeguarding a potential payback of the 26 convertible and the amount of the cabin waste has really been tailor-made but if needed we could pay back this 26 convertible from the 95 million with cash and I think that's kind of a safeguard and that investors really now have the confidence that we can fully focus on our business and executing the business plan and not that management team. The first half of the management is how do you refinance the 26 convertible, but that should be now done and we can put a tick mark to that. For the cap arrays, we have mandated banks, very reputable banks. Some of you have maybe seen that some of the usual brokers have already been restricted and cannot report anymore. So therefore, it's not that difficult to guess who is on the camp. We have several weeks' work with the bank. We thought that they support us in kind of preparing, but also support us that the capital increase will be successful. uh and therefore we are really together working and have got very promising uh feedback and uh kind of even let's say firm confirmations that the transaction will be uh once it's the appropriate time be safeguarded and as you know such kind of transactions usually will be uh capital increase against the rights, trade with rights, for existing shareholders, which is addressed to existing shareholders. And we think that that's the right way. Also, we have alternative options. And that's also one of the reasons why we have decided to announce this transaction early, given that several inbounds we had so far from the financial or strategic investors. And that's the reason why we are now fully prepared and can run a fully and coordinated process on that level. And with that, I'll hand over to Botho again for the Q&A. And to you.