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, TeleKlinik 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 break-even 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 at 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.

Let's start with the Q&A here. And yeah, please go ahead.

So ladies and gentlemen, if you would like to ask a question now, please press 9 followed by the star key on your telephone keypad. If you wish to cancel that question, please press 3 followed by the star key.

Please press 9 and star now to state your question. And the first question comes from Olivier Calvet, UBS.

Please go ahead.

Yes, hi. Good morning. Jumping in for Sebastien here. Thanks for taking my questions. I have three on Rx, one on the free cash flow. So the first one on Rx is just on the restatements of revenues. I see in the annual report 171 million Rx revenues in 2024. versus the preliminary number of 179 you mentioned, and 2023 base is also restated to 169 versus the initial 179 we had. I might have missed it, but, you know, what is the driver for this? Is it RX through Medpex or Apopal or something like that? And could you maybe tell us when that was in the year so we can better understand the RX ramp that you've shown on slide six? Maybe I take them one by one so we can address any follow-up.

I think just to start, just to restate that there has been no restatement on the ORIGs specific. And I've read the financials several times before signing them off. But we will come back to you on this question. need to better understand it, but there has been no restatement in this respect. We had a restatement of $3 million, but that was just kind of overall where we got, due to a positive law decision, we got the $3 million cashback of some of our suppliers, but that was not Oryx-specific.

Okay, I'm back for it. Sure, sure, sure, yeah. Okay, and then the second question was just on the total RX growth of 50% for the first quarter. Is that on the 35 or 35 million base from Q1 last year, just to confirm?

Yes, it is, 37.

On the 37, okay, yeah.

And then doing that in euros and local currency because otherwise it's due to the move of the euro.

Okay, okay, yeah. So the euro base. Okay, got it. And then I just wanted to ask about the impact of the introduction of the electronic patient record nationwide in Germany next month. Could you share some color there if you expect any disruptions to the customer journeys?

Yeah, thanks, Olivier, for this question. No, in contrary, we think in the future this will help tremendously to have the electronic patient records also digitally. And I think with our ecosystem approach, this will be a huge advantage. I think time-wise, yeah, so Germany is rolling out the EPA It might still take time. So I don't think we will see in the next few months nationwide rollout. But in general, we see there's a really positive development also for us.

Okay, cool. And then just on the free cash flow, it's kind of a two-part question. First, on the net working capital, you alluded to it on the ERX business. So it is a different profile than your non-RX business. Could you give us a sense of what the net working capital is in percentage of sales, perhaps, or the cash conversion cycle, or the metric of your choice, really, before any of the adjustment measures you mentioned? Just to get us a sense of where we are starting from in terms of networking capital to sales in the ERX part.

Thanks for the question. Maybe I was not explicit enough on that. If you look at the presentation on page 21, and that's the reason why I think it's more accurate to look up on an annual basis, on an average basis annually. And you see we are at 4.7%, which is even a slight increase from the 4.4% the year before. And I would assume that, let's say, if not taking ORIGs into consideration, any measures there, that that should be somewhere in the area of kind of 3.5% to 4%. And if we can kind of do the measures on ERIGs, that would then bring that also substantially further down. But I think in mid-term, a ratio of 4% should be should be achievable with the measures we have already implemented, about to implement.

Okay, that's helpful. And then just on the capex bit, I see, I mean, in terms of gross capex, PPNE and intangibles, you spent about 30 million Swiss francs in the last two years. Is that a good proxy for what to expect this year?

Yeah, I think the capex will be part of the short and midterm guidance, but Let's assume that it could be slightly higher than the 30, but just reflecting that the huge growth in initiatives which we have and the apps we are developing, but just put 30 and reflect the growth of all the businesses which needs to use a little bit more of CapEx and then we are in the right boat.

Okay, thanks, Daniel and Walter.

Thanks. The next question then comes from Jan Koch, Deutsche Bank. Please go ahead. Your line is open.

Hello. Thanks for taking my questions. I have three. The first one is, have you had already firm discussions with potential investors or what makes you confident that you can get the entire 200 million? And then secondly, in relation to that question, would you be willing to sell a stake in teleclinic to lower the amount you needed through the cap raise? And then finally, on ERX, if I have done the mark correctly, the 50% growth in German Rx does not really imply any sequential improvement compared to Q4. While you mentioned there is some growth, could you please clarify this and also explain why we shouldn't assume a higher growth in Q1?

Okay, I'll start with the capital increase. I think that the 200 million, we are extremely confident and that's really based on the banks we have mandated and their feedback and their commitment that we would be or that we are able to raise this 200 million in a kind of pure rights issue. And if you look at the in Switzerland, that's a common way that you perform a discounted rights issue with tradable rights, which have an inherent value then. And that has been in the past, and especially if it's underwritten kind of 100% guarantee that you achieve the proceeds. And there we have very positive feedback, not from investors, but from from the banks involved. Investors, of course, could join if they would like and to basically reduce the 200 million, depending on the stake that they would be willing to subscribe for. On that, you mentioned teleclinic. I think it would be a small stake and then we would be done with the 200 million given the prospect of the business there and we I think we always told in the past we have basically 50 options to raise capital and teleclinic would be number 50 if all the other 49 would not be would not be feasible because I think selling teleclinic at this point in time would harm our ecosystem thinking and additionally I think keeping it with the value which we generate for our shareholders will be much higher and we would basically even run into kind of The danger that our shareholders would view us is that we would now do a five-sale of the sort of teleclinic. And with, I think, the third question, I hand over to Wolfgang.

Yeah, okay. Yeah, the third question. I can just reinforce, as you have seen, we continuously grow quarter by quarter, also in absolute values. And a strong focus is on gaining new ERX customers. and there we continue to continuously grow as well and this they also have a lower average order value than existing customers it the growth of new customers is then not fully reflected also in the growth of the region but you can be assured we continue to grow quarter by quarter and i think

My statement is still true and I think the exact base of Q1 is 37.4 million euros. Q4 was 56.4 and I stick to my statement that we will show growth in Q1 compared to Q4. Even Q4 is Usually, this is the strongest quarter within a year.

Understood. Thank you. You're welcome.

The next question comes from Janik Ziering, Stiefel. Please go ahead. Your line is open.

Mr. Ziering, your line is open.

Can you hear me now? Can you hear me now? Sorry. Okay. Thank you. So yeah, most questions have been answered already. So two follow ups left. Basically, the first one would be on the guidance. And the question is like, why are you unable to provide a guidance beyond Q1 or generally for the overall group? And then the other one would be on OTC. um revenues grew six percent in 2024 is it right to assume that probably we won't see much like incremental growth beyond that rate and then also the question what are the drivers of growth here um given that we see competitors growing much faster um that would be yeah the second one thank you well on

On the guidance, I reiterate what I said before. We will definitely be capable and even willing to provide you with short and mid-term guidance. However, given that we are now under cattle raising restrictions and we will also reach out to the US and there will be kind of a very detailed and documentation the offering prospectus which is currently being prepared and we just want to avoid that any communication which comes now at this point in time could only in a very small level of size deviate from what our kind of thinking and our base will be beginning mid of May and therefore we decided to not to give no guidance but to postpone it much closer to the categories so that you really have kind of let's say a very fresh and straight to the point guidance and we do not have to kind of make any changes if there would be any at all.

And to the second question regarding the OTC growth. So we have just taken a strategic decision that we steer OTC growth at about the growth level in the market and that we add any additional euro in marketing, in gaining and retaining ERX customers uh as an erx customer is multiple times more interesting with regard to clv than an otc customer and uh yeah that's how we steal the business we could grow also with otc if you would like much more be 10 or 20 percent but strategically we do it differently okay understood thank you and then one follow-up if you allow maybe um on the

time frame of the guidance that you do provide. You mentioned to increase our revenues by around 50%. It seems low given also the undemanding comp from the prior year. Do these 50% already include the assumption that revenues would accelerate with the new marketing campaign? Or is this 50% just until now or let's say of the first six to eight weeks of the year with no considerable tailwind from the new marketing campaign. Thank you.

The 50% is the only guidance we provide as of today for Q1 2025 and based on the current trading for January and February. That's because we then can clear that on the 10th of April when we do have our trading update and alongside also the HM invitation were with all the agenda items which then give some further clarity on the targeted capital increase. And I think that the 50 that's really, and as I said, This time we do not provide short or mid-term guidance. It's really a short, short, short-term guidance for Q1-25 and the other things. We will communicate then later, a little closer to the capital increase. And this 50% do not include any positive effect so far. from the new marketing campaign because the campaign only started at the beginning of March and therefore, so far in January, February, we do not see, of course, we have not seen any positive effects coming out of this marketing campaign. I think on the opposite, January, February, we were, let's say on the marketing side, rather not very aggressive given that the new campaign ahead, but that's for your information and your consideration.

All right, great. Thank you. You're welcome.

The next question comes from Urs Kuhn's research partners. Please go ahead.

Yes, so thanks for taking my question. Maybe I can ask again to clarify a little bit about this guidance. So this guidance comes for short, mid-term, comes together with the prospectus of the capital increase. Is that after the Q1 results or can you elaborate a little bit on that? And then I come on with further questions after this.

I think basically we can discuss the whole campaign, but there are some kind of optionality in it, as I said, given the inbound calls from financial and strategic investors, which we now can start really kind of start having the discussions, given that now it's out, that they do a capital increase. But back to your question. I think the new guidance will be communicated between the 10th of April and the start of the cattle increase, and we have to fine-tune that, but you could assume that you will then get kind of a short-term guidance, but also a mid-term guidance for the forthcoming five years, and I think that's been really kind of dust and dumb and showing all the experience out of the one year of ERIK and the current trading and the development of all our other business units.

Okay, then maybe on the capital increase regarding if you get this 200 million, would that imply some change in your marketing expenditures? Are you thinking of increasing that again this year or Or are you feeling happy with kind of the marketing expenditure so you don't kind of would increase that?

I think I give you first of all the CFO answer and then which is maybe no. No, I think the 200 million will certainly allow us to kind of doing maybe some additional very targeted marketing expense where we really see that we get kind of good value back for each euro invested into marketing. But just to clarify and to take any fears off the table, we won't now then take the 200 million and put that and 25, 26 into marketing asset. I think 95 million will be safeguarded for a potential conversion of the 26 CD. And the remaining funds will be very deliberately and very diligently then kind of used to kind of bringing the business, the ERX business really forward, and that there will be some additional marketing, but not in kind of big size, which one could expect given the top 200 million headline figure of the CAT increase. Maybe, Paul, do you want to?

No, Paul is in line. Good.

then maybe you got me a little bit confused about networking capital. And you showed that during the whole year. But I'm right that by the year end, the networking capital was really low. So it kind of overstated a little bit the cash flow for the year 2024. And that is not sustainable. Is that right?

I think... two comments, maybe a little bit cynical. I think I would immediately fire every CFO who would not optimize network and capital by year end. And sometimes not the CFO, but also to the operational people. Now, I think you see it in every company, and the company is not doing that, that you are optimizing network and capital by year end. It absolutely doesn't make any sense to to put a lot of orders, as good as orders, into the warehouse. That's only good for the suppliers because then they have very nice networking capital. That's kind of a good corporate governance that you try to optimize the networking capital. I think what we have done this year, that's kind of, you will see that in 25, 26, 27. And that's the reason why I show you the annual average, that's much more an indication, because if you only show year end, then you always will see a very low net working capital number. And I think that's definitely sustainable, because it's not a one-off. It will happen from now on every year. And therefore, that's kind of a positive effect, but which will occur every year. And the aggression, of course, it would not be 44 million or whatever we had during the year, but it was a few million lower due to the fact that we kind of had not the warehouse full over the Christmas time and New Year's. Then anyhow, the demand is low. And we have also taken care that our account receivables have been paid and accounts payable, the ones which have been possible, you delay to pay them instead of 31st of December and 1st of January, but all of my colleagues are doing so and I think that's not a DocMori specific thing.

If I compare end of 23 to end of 24, and trades payable increasing by a substantial amount, inventories decreasing by a substantial amount. So it seems to me that it was even accelerated compared to the years before.

I think 2023 was kind of the exception to the other side and that was really kind of a big mishap that there was much too much inventory, even more than during the year, and that was the reason why it now seems a little bit extreme in both directions. But I think in 2023, if I forget about it, there was kind of really a misalignment between operations and the finance department, and that was kind of a one-time unlucky event and which hopefully never ever will happen again. Okay.

Then I have the last question is on teleclinic and just a confirmation on slide 12. On one side you talk about 1.3 million clients in fiscal year 24. Then I see the chart on the left side in Q4, 3 million Is that annualized 3 million? That means if it stays on Q4 level, we would have 3 million treatments in 2025. Is that correct?

You mean the left-hand chart on page 12?

Yeah, where you see the 3 million on Q4. I guess that's an annualized ticker, 3 million, because otherwise I don't Doesn't add up with the 1.3 million on the whole 24.

Yeah, and it's more, it's larger than 3 million and it's cumulative. I'm sorry, but where do we have this?

Let's come back on that. Yeah, good. Thanks. That were my questions. Thanks a lot.

The next question comes from John Marcovedo, ZKB. Please go ahead. Your line will be open.

Good day, everyone. Two questions left from my side. First one on networking capital also, pointing the finger here to inventories. I mean, you're really in growing mode, ramp up mode. Therefore, I really wonder how you can then reduce your inventories now in the second half 2024. Was that also due to a reduction of SKUs or you have maybe some supply chain bottlenecks or what is really behind this reduction of inventories, please? And then the second question is on your ERX revenues and also touching again on this 50% growth in the first quarter. So just from my perspective, and tell me if I'm wrong, but if I look at your repeat order rate of 76% and I put this on the last quarter of ERX revenues, then by nature you would easily get out of these repeat orders around 40 million in revenue. So the delta then is around 14, 15 million additional new revenues with new customers. So my question is now, is it really so difficult to gain new customers? Or has that also to do with your now maybe cautious marketing spendings in the first quarter? Thank you.

Let's start with the second one. It has a bit to do with what you just mentioned. With the new campaign, we decided to start in March and not in January for some reasons. And then, of course, this has an impact because we We allocate the bigger part of the marketing budget, of course, to the new campaign then throughout the whole year. But on the other hand, yeah, it's really just going forward. And for us, it's really important to well manage CAC, so customer acquisition costs, in a good manner also. and not overspending but nevertheless continue to grow and the combination of these two leads to what we just said but yeah let's let's see in april when we comment on the real figures and give the outlook where we will stand then and where we will go in the rest of the year

and john marco on on the networking capital i think in in the second half uh we definitely kind of have learned from the second half of 23 where already your colleague has rightfully mentioned that that has been kind of less than than optimal uh i think we have already implemented some measures because in the past we had much longer order frequency levels than with our suppliers. We have kind of purchased goods on stock for two months, two, three months, and I think given the size of us and the magnitude as a customer for our suppliers, we have now kind of shortened this order frequency so therefore it's more kind just kind of not yet but that would be kind of the ultimate target that is just in time suppliers the delivery we are not there but the order frequency is in much smaller intervals and then we have also kind of I started to work directly with some of the suppliers instead of using wholesalers, which also has a positive impact because I mentioned We are not yet fully there. Consignment warehouses, we can really pick what we need, but we do not have it on the balance sheet or in the warehouse. I think that's been the info for both sides. And, of course, we won't see a substantial decline of networking capital in absolute terms, but in relative terms, given that we are substantially growing But the net working capital, that's the big ambition and kind of very realistic ambition, will be on the proportionally grow compared to the top bank growth. And that will automatically then lead to a better net working capital ratio compared to net sales.

Thank you very much, Cleo. Thank you, Walter and Daniel. You're welcome.

The next question comes from Michael Heider, Warburg Research. Please go ahead.

Yes. Hi. Thanks for taking my questions. I have two left. The first one is on marketing spend in 2024. So if I'm not mistaken, then your latest guidance was that you wanted to double the marketing spend. So that would have meant roughly $100 million. spent 79 in 24, so 20 million less. Now, my question is, was this because you wanted to reach your adjusted WTA guidance, or was it because you didn't see any additional opportunities for growth in the market with this additional 20 million? That would be my first question, and the second one is just like a, yeah, to understand correctly, you mentioned that On page 8 of your slides, you mentioned that the average AOV is 110 for ERX. But when you give the on your KPIs on some slides further behind, you have the KPIs. And the basket is 98 on RX and 38 on OTC. And I'm wondering how you can get to 110 if both baskets are lower, actually, than 110. So these are my two questions. Thanks.

Maybe I start with the marketing expenses. I think that must be wrong. We didn't say that we want to double marketing expenses. I think the statement was maybe that we want to double or not even double marketing expenses for RX. If you have a look at page 19, there you see, as you rightly said, roughly 80 million. But that's the 80 million that comprises OTC, BPC, and ORIX. And we mentioned that we want to increase the ERIX marketing spend by 15 million. That's exactly kind of the gap which we had to close. on an EBTA level and that was absolutely in line and we fully executed our, what we said, basically walk the talk and invested this 15 additional million for ERIC.

And on the basket size, so the 110, that's the mixed baskets with RX and OTC because that's also a big advantage now with CardLink. So we can add and incentivize also if OTC orders are done together with the RX redemption. And the 98 is purely RX. and this figure includes of course also in the mix many new customers the first rx order generally is significantly lower than the following orders and so out of this mix and given the high number of new customers the 98 has to be understood all right thanks thanks a lot

Okay, so in regards to time now, the last question comes from Christianen, HSBC. Please go ahead. Your line is open.

Yes, thanks for also taking my questions. Two, if I may. First, is it possible that you could give us your view on the ECJ ruling on the bonus, just any sort of color things that you would want to highlight? I know you stand out. a comment right after the announcement, but yeah, just about how the sort of the next steps, anything basically you want to point out on that. And then second question on the state of the recurring subscription. Yeah, is there any sort of update on that time-wise? It's obviously an important topic. Is there any sort of indication out of Berlin that you can share with us? Thank you.

Thanks, Chris. Two very important and good questions. the ECJ so maybe two two comments the first one is so for us it was a positive that the ruling of 2016 has been mentioned with regard to the direct bonus and with that has been reconfirmed by the ECJ this was positive in our view and then regarding now the the otc related bonus or incentive it goes now from uh from the ecj back to the german court to the highest court and yeah let's see what they make with it how they decide our own view in general on bonus and incentives and this kind of thing is that in the in the mid and long term anyway uh the the driver will be convenience for the customer and so bonus or incentive will become less and less an issue or be important or priority and that's why we very much focus on improving the app having a real estate of the art app and then just making the bridge to your second question so the repeat script will be really an important step towards further increasing convenience and there we have not heard something in addition but it's the doctors and insurance companies now just to define the money so the value of a of the treatment of chronic patients throughout the year. Yeah, we expect this might start beginning of next year, would be feasible. And with that, again, having a repeat script together with card link, together with a fully seamless digital process, this will then just really so much improved convenience that all incentive discussions will become irrelevant.

That's clear. Thanks a lot. Welcome.

Okay. Yes, there are no more questionnaires at the moment. I think we can close the Q&A and I'd like to hand it back to the speakers. for some closing remarks.

Yes, thanks a lot to all of you for joining and taking the time. And I can just really reassure and reconfirm. So we are so much confident for the future success as never before, frankly speaking, because we really have started now growing with ERX. We see really good progress in gaining erx new customers with highly attractive KPIs we have done the homework so we have turned turned the non rx business around and so we grow profitable now which is really a great achievement you know where we come from three years ago so we have done a lot there and we have teleclinic as a platform and which is really, really highly attractive and you will see in the future. This will give us a lot of, yeah, let's call it pleasure or joy. Daniel already has touched on it before. And then to combine all of what we hand in an ecosystem and also seeing the changed behavior. And I'm sure all of you already use the chat GPT perplexity and You name them and the different way you start to handle and treat your health. So for that, with our ecosystem strategy, we are really, really perfectly prepared. And by combining all of that, yeah, we can say we look into from our side in a really, really good future. And also, again, I can assure you, so we are highly ambitious. And we have done a lot also with the teams. The teams are highly ambitious. We have a lot of agile teams. And the teams are completely motivated. They see the progress that gives more wind from the back, pushes us forward. And yeah, we look really forward to. And with that, let's finish the call. Thanks to all of you. And see you soon again. Hear you soon again. Thank you.

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