Redcare Phamacy Unsp/Adr

Good morning, everybody. Jasper and I would like to welcome you to the release of Shop Apotheke Europe's full Q3 financials. To start with the end in mind, against the backdrop, as we're all witnessing this, of difficult and challenging economic times and many uncertainties everybody is facing right now, I dare to say that Shop Apotheke delivered a solid which was fully in line with the guidance we had provided earlier this year. Talking about the guidance, Shop Apothekers management continues to stand behind this guidance and the guidance at the end of our call will be reiterated by Jasper one more time. Well, you see the usual agenda. We're going to start with a deep dive into our Q3 performance and then we just have literally a couple of charts on E-Prescriptions in Germany and Shop Apotheke's commitment to sustainable development. And at the very end, rest assured, we're going to have plenty of time to answer any questions that you might have. So let's start with a deep dive into Q3. At the start of the call, I mentioned that we delivered a successful quarter in line with our guidance. But before we go through the details, let me just take a step back and let me acknowledge that we did reach an important milestone just last week with half a million redeemed e-prescriptions in Germany. Not surprisingly, of course, as Shop Apotheke, we would like to see the growth happen at a much, much faster pace. But still, I think we need to acknowledge that just a couple of months ago, we reached the target that had been set out for the ERX test phase in Germany, which was 30,000 processed e-prescriptions. And as of last week, we surpassed the 500,000 mark. Right now, literally every single day, physicians are issuing, pharmacies are filling, and health insurers are reimbursing electronic prescriptions, thousands on a daily basis. So process-wise, certainly e-prescriptions are working smoothly. Shifting gears and looking at Shop Apotheke's performance in Q3, our sales growth went up to 20%. This compares to 15% in the second quarter and 7% in the fourth quarter. Non-AREX growth continued at an even faster pace. Looking at this on a year-to-date basis for the first nine months, we showed sales growth year-over-year of 13.5% and sales of 877 million euros. Our Q3 adjusted EBITDA came in at around 1% of net sales or 3 million euros. This is an improvement by 1.8 percentage points versus a year ago versus Q3 2021 and a very notable improvement versus the first half of this year and more on that from Jasper in a few moments. Our active customer base continued to grow at a rapid pace. We are approaching 9 million active customers. This is an increase by around 1 million customers since the beginning of this year. And more importantly, and this is one driver for our customer growth, of course, is the high customer satisfaction level at the NPS for the third quarter stood at 73%. to be precise. And shifting gears one more time, sustainability, sustainable development is very important to what we do at Shop Apotheke. At the end of September, we made the commitment to become net zero by 2040. So we are fully committed to bringing carbon emissions down to zero along the entire value chain by 2040. More about this also later in this presentation. So, looking at our two reporting segments I already mentioned on the left-hand side. Over the first nine months, Shop Apotheke's business continued to grow at double digits with 13.5 percentage points. Non-ARICs grew at a faster pace of around 18% and our sales over the first nine months of the year were close to 880 million euros. In the DACH region for the first nine months we generated top line sales of around 10%, non-ARICs grew by around 15% and our RX business for the first nine months declined by around 13%. The only driver, and you've heard this before, was still the RX bonus band. If you just look at the third quarter, our RX business didn't just stabilize, but it grew actually a little bit by 4% compared to our RX business in the third quarter, 21. And our international business grew at a faster pace, continued to be a growth driver for Shop Apotheke. Growth was approaching 30% and the total sales were close to 200 million euros. So before we now switch to our KPIs, we just want to take a moment to reflect on the position that Shop Apotheke has across the seven markets in which we operate today. In Belgium, Shop Apotheke is the undisputed market leader in the online pharmacy space with a wide and a growing margin versus the number two in the Belgian market. In Austria, Shop Appetike is the undisputed market leader in the online pharmacy space with an even wider margin versus the number two in the marketplace. And in Germany, Of course, Europe's biggest pharmacy market. We continue to be the largest and the most frequently visited pharmacy website in Germany. And I can say here again with a wide and a growing margin. In the other four markets in which we operate today, our business is indeed growing. But at the same time, we need to acknowledge we have not yet reached credible mass. We have not yet reached a market leading position. But rest assured, we are working on that. So I already referenced our KPIs starting on the left hand side. 8.9 million active customers, customers who have placed at least one order over the last 12 months by the end of September. An increase by 1.6 million versus September last year by 1 million versus January this year. And in Q3 alone, we added around 1.3 million active customers. Our net promoter score remained at a high level of 73. We succeeded in maintaining very competitive order delivery times and we're also very well positioned across the whole range of delivery options and we're going to talk more about this in a moment and the last KPI that we want to share. Our average order value was pretty much stable. We saw really just a marginal drop from around 61 euros a year ago in Q3 2021 to around 60 euros this year. I already mentioned that our RX business has stabilized and as a result of this our average order value has stabilized as well. So I mentioned when I referenced our customer satisfaction level that we are very well positioned across the whole range of order delivery options. I'm starting on the left here. Of course, today, the vast majority of the orders that are placed by our customers are placed through the Shop Apotheke webshop. Phamacy Unsp & Adr If a customer has an expectation to receive the order on the same day the order was placed, of course we cannot do this for all the markets or the metro areas in which we operate from our facility here in the Netherlands. So we do this through our Shop Apotheke Now program by collaborating closely with selected local partner pharmacies. And lastly, the latest addition to the Shop Apotheke family, First A. If a customer has a need to get an order delivered even faster, we can do this through First A in the metropolitan areas and then delivery would be in one hour or less. Okay, shifting to our web traffic. You are familiar with this picture, but we have added one indicator to illustrate a little bit better the underlying trends. So you see the blue bars, you see the green line, and then you see the, and this is new, the dotted red line. I'm going to walk you through all of these indicators one by one, starting with the blue bars. The blue bars indicate the traffic growth across all of our webshops and across all of our apps compared to the exact same week a year ago. At the end of Q2, At the beginning of Q3, you almost see a prototypical peak. Of course, this has to be seen against a backdrop of very low traffic levels. At the same period last year, for those of you who have been following Shop Apotheker for quote some time, at that time, A year ago we had to drastically reduce our performance marketing activities because we had constrained logistics capacities. Of course we are recycling this time now with very low traffic and as a result of this you see the peak towards the end Q3 you see that our web traffic growth level out between at between 10 to 20 percent and that is pretty much in line or pretty close to our top line development. The green line shows the total, the absolute number of weekly visits to our websites, to our app. And what you see here is an elevated level in Q1. Not a surprise, not a surprise to you because Q1 and also Q4 are the busiest periods for any online pharmacy. And then we see a little bit of a leveling off in Q2 and Q3, but of course we have looked at this in detail. This is purely driven by seasonality. And to take out seasonality a little bit of what we are sharing with you, we have added the red dotted line. The red dotted line shows you the rolling average weekly visits over the last 52 weeks. So in other words, we added up the weekly visits over the last 52 weeks and then we divided this number simply by 52. You see a steady increase. And again, that is once again broadly in line with the top line growth that we have seen. A moment ago, I mentioned to you that shopapotheke.com was the most popular pharmacy website in Germany. Well, I have to admit, I didn't tell you the whole story because you've already come to expect from shopapotheke.com being the most frequently visited pharmacy website in Germany. But in September, according to similar web, shopapotheke.com was actually the most popular, meaning the most frequently visited health website in Germany. Ahead of websites that offer general medical advice or the Robert Koch Institute, which of course was very popular during the COVID pandemic, or websites that offer appoint services. So in September, Shop Apotheke was the most frequently visited health website in Germany. We just want to illustrate that Schopp Apotheke in Germany, not just in Germany, but here we're talking about Germany, continues to expand and to solidify its position in the German healthcare arena. And the last chart I want to share with you before I hand over to Jasper to walk you through the Q3 numbers. According to Google Analytics, shopapotheke.com was also the most searched pharmacy brand in Germany. We're saying here by far, and I know it sounds like a broken record, but shopapotheke held the spot by a wide and a growing margin versus the number two in the marketplace. And with this, Jasper, I'll hand it over to you.

Thank you very much, Stefan, and good morning to everybody who's joining the call today. On this graph, it's the number of orders per quarter for 2020, 2021, and then the three quarters of the current year, 2022. In the last quarter, quarter three, we processed in total 5.4 million orders, which is an increase of one million compared to the third quarter of last year. The third quarter was somewhat soft, but still, of course, it's a significant increase. And also, if you would compare the current third quarter to two years ago, so quarter three of 2020, which was still the first and the full corona year, the increase from four to 5.4 is an increase of 1.4 million orders that we process or an increase of 35%. are able to welcome a lot of returning customers. And actually, the number that Stefan just quoted, the 0.3 million new active customers to our base, is a number that we are internally very proud of. But despite the fact of adding those new customers, this quarter we had a total of 85% of the total sales that were from loyal customers, returning customers, to our website. Not only to our website, to place an order. To the next slide, please. What this means for our numbers. This is the table going from sales up to and including the adjusted EBDA. But before I talk about the table in the footnote, we make very clear what the adjustments are and equal to what you have seen in the past three quarters. And equally, I explained it. The adjustments increased year over year significantly. only due to the accounting of 2021 business acquisition that we do as of quarter four of 2021. Apart from that, the other two customary items in the adjustments are related to stock options and a very small amount related to external The key thing of those adjustments is that they are all for the majority, the far majority, non-cash items. So of course our P&L reflects the correct and the best representation of the financial results. But if you look at the EBITDA, EBIT and net income, actually the adjusted EBITDA Phamacy Unsp & Adr and the nine month of this year, but later I have also bridges in explaining the latter two. In quarter three 2021, we hit a total 238 million and this year that increased by 19.6% to 284 million. We achieved that with a significantly increased gross profit margin that was year over year, three percentage points higher. of last year is actually impacted by a non-repeat of some negatives related to the corona assortment last year. And apart from that, we continue to see and benefit from better sourcing conditions and more media income. So three percentage points up compared to last year, but also 0.9 percentage points better than the first six months of this year. Then to the selling and distribution as a percentage of sales. This quarter it ended at 23.8% with an increase of 1.1% this point to the same quarter last year. And that is mainly as a percent of sales and this increase compared to last year is mainly last mile and the remainder is from IT and labor. And the interesting thing is compared to last year, We see of course inflation in cost. Our operational cost as a percentage of sales were lower than last year and marketing did not increase. So there's a lot of words. So let me summarize it again. The increase compared to last year is mainly because of last mile cost that increased and actually our operational performance that we can influence was even better than last year. And then a very important number on the S&D as a percentage of sales is the 1.7 percentage point is an improvement compared to the first six months of this year. Admin is basically hovering around 3.2 to 3.3 percentage of sales. Adding up all the numbers I just mentioned, last year Q3 was a minus 0.9% margin. This year is a plus 0.9%. It's an increase of 1.8 percentage points from minus two to plus three. It's an increase of five million. And moreover, this margin of this quarter The gross profit margin. On this slide, you see the increase of the gross profit margin from 25.4% after nine months last year to 27.4% this year. Number one of the building blocks is improvements in sourcing. Number two is a small number for the impact of net pricing and product mix after nine months. Roughly half is coming from net pricing and half is coming from an increased impact of our platform business models. Then there is mix mainly DRX OTC mix and the remaining relatively large block is again mainly related to the non-repeat of negatives related to corona that we saw in last year. To the right side again After 9 months but from the end of Q2 to Q3 there was an increase of the gross profit margin of 0.9%. Next please. Then the selling and distribution cost as a percentage of sales. Before I walk you through the changes I think it's also very relevant to take a helicopter view because actually from our perspective is quite a while ago. Imagine, for example, in Q1 2021, it was still in the full corona period. There was much more paper Rx. We hadn't MetApp in the Netherlands yet. Our core business still needed to move to the new distribution center, and we hadn't even the distribution center in Italy yet that we opened in the past quarter. But still, these are the numbers of the nine months of this year compared to the nine months of last year, but many things have happened since. If we start with marketing, marketing is generally our decision how fast we want to grow, balancing sales and margins. But in this comparison, as you see here, it's also relevant to note that quarter one 2021 still had a lot of paper. Our eggs did have a lot of corona and in quarter two, as Steven also just mentioned, we reduced our marketing because of our capacity constraints back then. More substantial remarks I can make on the shipping, which is the next one, because we Phamacy Unsp and we grow international even faster than we grow in the operational labor in this comparison minus 0.2 but as I already pre announced in quarter two and luckily we were able to realize it if you look at quarter three versus quarter three Related to IT. Most important to mention here on this slide is that compared to the cost as a percentage of sales after six months, which stood at 25.5, we lowered our cost by 1.7%. We increased our focus on efficiency and we also took out cost in order to achieve these numbers. What does it mean for our cash? We ended in our balance with cash and cash to be precise. And after the nine months of this year, you see the first two blocks together is that our operating cash flow was basically a black zero. It was 0.3 million. And then we invested for 44 million, which includes acquisitions, the opening of our distribution center in Italy, but it mainly relates to the core of our business, and that is investments in IT. The financing here is half interest and half related.

As we mentioned at the beginning of the call, this time we keep the strategy or the general business update pretty brief. We are focusing on e-prescriptions and then we're going to say something about sustainable development at Shop Apotheke. So starting of course with e-prescriptions, that's top of mind not just for you but for all of us. On the left-hand side, you see the graph. We are seeing a steady growth in the number of e-prescriptions. In this case, it's e-prescriptions filled by pharmacies. In parallel, that's something you're not seeing on this chart, but we're also seeing a steady growth of doctors that are issuing e-prescriptions. Last week, I just want to re-emphasize this again because we think it's really an important milestone. We passed half a million mark of e-prescriptions. At the same time, of course, we need to acknowledge if we would love to see the graph on the left-hand side to grow at a much, much faster pace or we would like to see an even steeper curve. Exactly today, I think two weeks ago, we went to a physician office in the Westfalen-Lippe region to see firsthand how are e-prescriptions working on a day-to-day basis. And we talked to a physician. She issues on average 150 to 200 e-prescriptions every single day. She does not issue paper prescriptions anymore. According to what she showed us, what she told us, e-prescriptions for her are working very smoothly. Patients, once they get used to them, they like them, and it did not just bring disruption, it did not just not bring disruption to her office, but it actually helped her to further enhance internal workflows or processes. For example, there is no physician assistant that has to run anymore after the doctor in order to capture a signature. So for her, e-prescriptions are working very, very smoothly. We at Shop Apotheke together with many other participants of course we try to convince more and more physicians of the benefits once you have adopted e-scripts of the benefits of electronic prescriptions and we are talking to regulators We're talking to the Gammatic. We're talking to a lot of other market participants in order to address some data privacy concerns that have been raised, but also to address questions that have been raised by physicians in terms of, again, what does this mean for their practices and for their day-to-day processes. These discussions, the discussions with all different types of market participants, they are literally going on on a day-to-day basis. I personally was in Berlin for a couple of meetings last week. I will again be there the week after next week. But this is of course not just done by me. A lot of individuals at Shop Apotheke are totally focused on making e-prescriptions a success. At the same time I cannot disclose exactly what we have proposed to the various players in this discussion right now. What I can tell you is when we outline the proposals that we have made, again, in order to address some of the concerns that have been raised over the last few months. I think the proposals are very well received, but I would, quite frankly, I think I would jeopardize the success of these conversations if I disclose too many details in public right now. Well, in closing, when we look at e-prescriptions, they are working smoothly. We are confident that they will continue to penetrate the RX market in Germany, will continue to see a steady increase of e-prescriptions, and we remain confident that e-prescriptions will be a very significant catalyst for shop apothecus growth going forward. Well, without any doubt, eat prescriptions and you can talk to anybody at Shop Apotheke and I'm pretty confident you will get a very similar answer. They are the top, top, top priority for everybody at Shop Apotheke. At the same time, we have some other priorities as well and one of the other priorities is our commitment towards sustainable development. At the end of September, Shop Apotheke Europe joined the growing number of large and small companies to commit to becoming net zero by 2040. We are fully committed to decarbonizing our entire value chain and to make sure that that we can, sorry, that we succeed in decoupling our business growth from our emissions. So in 18 years, in 2040, Shop Apotheke Europe will be a very, very different company from what it is today. Will be much, much larger, but our business growth will be decoupled from emissions, which will simply be zero by 2050. Well, we're not just talking about 2040. Our Sustainable Development Initiative was started two years ago in 2020 and we have already achieved some very tangible, some very hard benefits. We had in 2020, we had set out a target for ourselves to reduce Scope 1 and Scope 2 carbon emissions by 80% by 2025. As of the end of September, we can say with a lot of confidence and a little bit pride that we have already achieved Phamacy Unsp & Adr that we continue to establish ambitious internal goals, to continue to make progress and to rigorously also monitor our progress against these goals. We have compiled, reviewed and discussed our first very, very comprehensive ecological balance sheet for the first time based on the numbers for the first six months of the year. Going forward, this ecological balance sheet or sustainable development will be part of how we operate Shop Apotheke. It will become part of our forecasting processes. It will become part of our annual planning processes. It will become part of how we do things at Shop Apotheke. So I hope I succeeded in conveying to you that sustainable development for Shop Apotheke, it's not an empty shell. It's something that's very close to our heart. and it will continue to impact, it already has, and it will continue to impact how we do things at Shop Apotheke Europe. With this, Jasper, I think you'll close.

Okay, yeah. Absolutely, so thanks again. Yeah, a nice anecdote in line with what you just said is that in 2020, with the move to the facility where we're presenting from, our main central distribution facility for ecological reasons, We decided to totally not use any gas in this facility. So there you see nicely how the business model and actually sustainability goes hand in hand, because not having any gas is actually also financially a huge benefit this year that we had a shop upper taker. The outlook and guidance, next slide please. Basically, what Stefan just said, Phamacy Unsp Phamacy Unsp&Adr Phamacy Unsp&Adr by 2040. And though that sounds very far away, Stéphane just explained how much we did already on scope one and two already in the past one and a half years. So with that, please operator, could you go to the slides to ask questions with a slightly hopefully improved procedure to ask questions?

Thank you very much. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad or you could pre-register for the Q&A either via the link you've received via the invitation or via the button on the webcast link. Thank you. We'll now take our first question from Chris of HSBC. Your line is open. Please go ahead.

Yes, thanks everyone for taking Yeah, thanks everyone for taking my questions. At first, I want to get back to a comment that Yusef made earlier with respect to the discussions you were having with the market participants. I understand that you said that you could not discuss too many details, but I'll be curious, and maybe I just didn't get that. What particular parts are you discussing? Is this in relation to the privacy concerns, the EGK in general, changes to the phased rollout? I mean, what sort of discussions are you having at the moment?

Chris, thanks for the question. So yes, the discussions focus on two topics and they're closely related. How is the e-prescription, and it's not the e-prescription, it's the token, it's the QR code. How is the token transmitted from the doctor to the patient? And secondly, how can online pharmacies

And I know, again, within the lines of what you can say, I mean, still today, a lot of paper scripts are sent via fax, right? I mean, if this is something that is being brought up, I mean, what sort of, I mean, is there, there is nothing, no pushback to be said on that, right? I mean, why now after so many years is the token, which has been, you know, The sort of fundamental, you know, foundation of the of the whole ERX setup. Why is this now all of the sudden becoming a topic of discussion? I don't know. I just don't get it. It amazes me, to be quite honest.

Chris, we're asking the question ourselves as well. When we talk to physicians, and again, Jasper and I, we went to a supporter of e-prescriptions two weeks ago, and what she said is, again, she loves it. It's so much easier for her, but there was one but that she had, and it was that she still has to print out the prescriptions. It's not an insurmountable obstacle, but it's something that she didn't like and probably many other physicians don't like. So we have sketched out a way to transmit the QR code from the doctor to the patient without having to print anything. At the same time, and I think I shared this anecdote in the past, we think for patients, to start with something that they can put their hands around, meaning a paper printout at the beginning at least, that might actually increase the trust patients have in paper prescriptions because they can still read exactly what the doctor has prescribed. And I'm going back to the start of the COVID vaccinations. When we went to restaurants, at least in Germany, you saw a lot of people with their paper certificates coming into the restaurant at the time when they had to show them. A couple of months later, you didn't see this anymore or you hardly ever saw this anymore because people got used to using the app. I think we're going to experience something very, very similar once electronic prescriptions have been introduced. And again, the doctor we talked to, she was very excited when she talked about a 75-year-old patient that successfully used the Gematik app for the first time. There are some hoops that you have to jump through in order to get there, but once the patient was there, the doctor issued the prescription and literally a fraction of a second later, it appeared in the Gematik, in the e-prescription app of the patient. And again, once people get used to it, it's working smoothly.

Okay, that's understood. And now the difficult question. I mean, first on, I mean, you gave the example of this one doctor. I mean, if she does 150 to 200 e-scripts a day, then she basically accounts for 2% of all of the e-scripts that are issued nationwide, right? And I mean, in Westphalia, there's probably 9,000 or 10,000 doctors. So that's obviously the initial adaption is poor to say the least. It seems that the doctors are not willing to take this up unless they're being forced. And so far there has been presumably no force. Do you see any chance, this is maybe also part of your discussions, of anything on the horizon that the doctors will be forced into this framework? Because the way it stands right now, I'm not even sure that we will necessarily see a nationwide rollout in the second half of next year if the numbers keep where they are.

Chris, of course, that's a political decision. Our sense is that the current health minister, the current government in Germany, they want to do this in a collaborative approach together with the physicians. They want to convince, they want to address Subtitles by the Amara.org community

And so, I mean, what is your current expectation for the nationwide rollout? I mean, we all know about the current set of terms with respect to phase one, phase two and phase three. Yeah, I'd be happy to pick your brain on that because you're probably also doing the same math that we are doing. And yeah, maybe we're missing something.

Yeah, I think the original timeline that came out of the, you know, Dematic shareholder meeting, you know, a couple of months ago, I think that is at this point of time, it's not going to happen. We're not going to see an additional six federal states or regions in Germany to officially start with e-prescriptions on the 1st of December. What we have stated before is we are confident, we remain confident Phamacy Unsp Adr Right now, the pilot region is limited to Westphalia and Lippe. In the coming months, additional regions are going to join. But Chris, it would really be speculative to say, you know, another six states are going to enter in two, three or four months. We simply don't know. But nobody, again, we've had and we're having many, many conversations. We haven't heard from anybody that we should go back to the drawing board or we should stop this. Everybody sees the benefits, but there remain a couple of obstacles that need to be addressed and that need to be overcome.

Okay, perfect. Thanks a lot for your time.

Thank you. We'll now take our next question from . Your line is open. Please go ahead.

Yeah, thank you. I would like to start with the consumer sentiment drop, which we see here in Germany and across Europe. How do you see this consumer sentiment drop impact your business in the moment? Is there any impact in any way, for example, higher price sensitivity or a higher demand for private labels? Probably the first question. And the second question would be on the adjusted EBITDA. In 2019 and 2020, you reported a positive EBITDA in the fourth quarter, which was always better than in the third quarter. So would you expect to follow this pattern, which you showed historically in the fourth quarter of this year? So being fourth quarter adjusted EBITDA better than in third quarter? as a kind of help here for calculation. And the last question would be on your cash. Where do you think to end up cash at end of the year? Just for confirmation. Thank you.

Volker, thanks for your three questions. Number one, on the impact of customer sentiment. We of course watch this very closely. But I think the summary at this moment for us is, and we are active in seven markets where we are growing in quarter three and year to date by double digits in each of the seven markets at the moment. And of course, you see sometimes some things happening there, but in some, the best conclusion is that until now in the market where we are active, which is healthcare and medicines, we don't see significant or a change in consumer behavior. So that's the best summary of what we're seeing at the moment. So no impact at the moment at shop outtake. At the same time, you also see that we increasingly focused on our cost from quarter two to quarter three, because we want to be prepared for everything. But responding to your question, we don't see significant impact. Adjusted EBDA, what's quarter four going to be? I got this question this morning a lot already, but Volker, I can only say we have full year guidance. We are very happy The only thing I can add there is that the start of October was good. Not exceptionally strong, not exceptionally bad. It was a continuation. The start seems to be good. But that's not saying a lot about the cold of war. We still have Black Friday and December. Who knows about the cold and flu season, etc. So I cannot answer that question for you, Volker. And the same goes a little bit for cash, because we have our guidance on the growth of NONRX and the adjusted EVDA, and we don't have any guidance on cash. Generally in Quala IV, that's always the case, we have a thing which is named in Germany Die Dienterbevorratung, where we generally build some inventories in order to do very good promotions Probably you will see that also this quarter again. So that's the seasonality that you might see in working capital increased requirements in quarter four, but that's then reversing to the positive in the first quarter of next year.

Yep, got the message. Thank you very much. And yep, all the best. Thanks.

Thank you, Volker.

Thank you, Wilma Wont. Our next question from Otofeber. Your line is open. Please go ahead.

Good morning, both. It's Otto speaking from Barclays. Thank you very much for taking my questions. Just a quick clarification. Stefan, you said that you remain confident in the nationwide rollout of the RX next year, but you also said that your sense is that there won't be a mandatory rollout next year. So what would actually be then different next year in that rollout? So are you saying that you're confident that there will be a rollout, but it will definitely not be mandatory? because kind of in my mind is voluntary is one stage, the second stage would be mandatory without penalties, and the third stage would be mandatory with penalties. But if it's definitely not going to be mandatory next year, it's going to be what would actually drive the eScript adoption then next year?

I mentioned that, and I know that you have your conversations there as well, our sense is that the current government does not want to go for a mandate. They don't want a force. That could change tomorrow, nobody knows, but that is what we've been picking up. I mentioned that of course we are seeing an increasing number of e-scripts. The progress is not as fast as we would like to see. We see more doctors coming on board and issuing e-prescriptions. Phamacy Unsp Adr We remain confident that more and more doctors are going to adopt e-prescriptions and are going to start issuing e-prescriptions. The benefits of e-prescriptions, and now I don't want to go back to the very beginning of the e-prescription conversation, but they're so obvious in terms of Drug Therapy Safety in terms of efficiencies that can be gained. At some point of time, these issues are becoming much, much bigger. You know that Germany is facing a huge deficit. The public health insurers are facing huge deficits. So I think all of this is coming into play and will result in an accelerating trend of e-prescriptions that are being issued. But again, at this point of time, We don't assume that there will be a mandate coupled with, because we have a mandate today, it's in the law, but coupled with sanctions, that is not the assumptions that we use when we look forward.

Got it, got it. That's very helpful. Thank you. One more question on kind of the competitive environment in the German market right now. Your key competitor is clearly advertising less aggressively right now. Have you seen any kind of changes to your customer acquisition costs so far or are you seeing any in October so far?

Also, we don't comment on these kinds of questions related directly to our competition. We try to what we do already for so many years to And that's what we continue to do. And sometimes there's a bit more, and sometimes there's less competition. And that's all. I think you will understand that I don't comment on that directly.

Oh, I understand. Thank you.

Thank you. Yeah.

We'll now move on to our next question of Oliver Calvert. Your line is open. Please go ahead.

Yes, hi.

Good morning, Oliver.

Yes, hi, good morning, Stéphanie Asper. I have mostly one question left. I was just wondering why you are not giving guidance on the group top line now that RX has stabilized year on year. Kind of related sub-question is, are you expecting any impact from ERX or from how you apply the bonus topic in Q4? And is there any update on the topic of these bonuses that you could provide?

Should I do the first? Hi Oliver again. Just because at the start of the year with the paper RX and the unpredictability of ERX that we also discussed in this call, no, there's not anything ongoing there. What's very clear is that we are seeing already Q3 last year, Q4 last year, Q1, Q2, Q3 this year, we see the paper RX fully bottomed out. So we feel very confident about the current level that we're having. So there would be no reason to not include that, but we didn't know that at the start of the year, though we included in our guidance that we expected a bottoming out. And the ERX, at this moment, predicting that. We have all our scenarios there, but I think you will fully understand that we don't give guidance on that on the quarterly or on a year-based. So that's related to the guidance. So it's not a negative, but it's a positive reason that we do it for non-ERX. and we don't see any change in paper outreach at the moment ongoing compared to the last quarter. And then something on the bonus.

Yes, you've been following us, of course, for a long time. Nothing has changed. We remain convinced that the bonus ban enacted by the German government or the German parliament is a violation of European law that will be decided by through the legal pathway. Legal proceedings are ongoing. Phamacy Unsp Adr

Thank you. We'll move on to our next question from Jan Kosh. Your line is open.

Please go ahead. Hi, this is Jan Kosh from Deutsche Bank. Thanks for taking my questions. I would like to start with some questions on your margins. Obviously, great to see that you were able to increase your cross-profit margins again. But how much of this is sustainable in your view and support the margin in future quarters? And in regard to this question, you mentioned in your press release that it is partly driven by recruitment improvements. Have you already exploited the full potential here or do you expect to achieve further improvements? And then secondly, a question on your adjusted EBDA margin. I understand that we can't just extrapolate your margin in Q3, but are there any upcoming projects in the foreseeable future which could burden your margin again, similar to what we have seen in the first half of 2022? And then finally, very briefly, given the slow uptick in e-prescription, do you plan to maybe temporarily reduce your marketing spending in this regard?

Hi Jan, good morning again. There's not anything unsustainable in what we achieved in Q3 margin-wise. saying that it will be the same in other quarters because price is a very important element in the overall proposition we have and in the same basket as marketing and all kinds of other costs also price we consider in continuously optimizing what we think is working best in the third quarter Mission, a very large increase of 0.3 million active customers, high customer satisfaction and growing everywhere and gaining market share. And we did the proposition as we had. So that's the first half of your question. There's not anything unsustainable in that, though there are many parts that we decide upon on almost a daily basis what are the right levels. So it can go up, it can go down. Sustainable, of course, we have purchasing savings, optimization of our assortment, and also increasingly media income and income from our platform models. Procurement improvements, I think I addressed, but if the question was... No, I think I addressed there. And then the last one before I hand over to you about the adjusted EBITDA margin. Can you please remind me what your question was there?

Sure, do you have any upcoming projects like you had in the first half of the year?

Not anything significant to mention, I think you refer to the fact that we have, of course, in the first half of the year, we opened our marketplaces, we opened Italy, etc. And I think it's a rather stable business that we have in quarter four compared to all the projects we successfully launched in the in the in the first half of the year. Yeah, yeah.

Great. If I made So is the margin you showed in the recent quarter, is it a good indication for future quarters?

No, I can only refer to the full year guidance. That's all we have on margin. Okay. What it is reflecting is that it is relatively easy for us to take some action and be in sustainable cash flow positive territory.

Thank you. We'll now move on to our next question.

There was one more question about the ERX, whether there's an opportunity to reduce ERX marketing spending because there is a slower uptake than we had anticipated. At this point of time, our marketing spending on ERX is minuscule. We are doing a little bit of CRM type of activities. in the regions where ERRICs are more widely available. But once ERRICs move ahead full steam, then what we're going to see is a shift of the marketing spend that focuses on non-ERRICs today to ERRICs. So you're not going to see any drastic changes from one quarter to another because ERRICs is delayed or is going ahead full steam.

Thank you. We will move on to our next question from Alexander Till. Your line is open. Please go ahead.

Hi, Stefan and Jasper. Good to see you. I hope you can hear me. A couple of questions left from my side. I would like to take them one by one. My first one is on the sentiment you're currently getting from the BMG. Do you feel that the e-script is still a high priority for the health minister? Would you actually go to court if the government does not proceed in time to introduce the e-script according to law?

I didn't get the second part, Alex, of your question, whether we would go to court.

Yeah, if you would actually sue the government for not introducing the e-script in time, according to law.

That is not something that we have considered at this point of time. And the sentiment that we're getting when we're talking to the BMG, nobody, even between the lines, even if we really try to push them, would give up on e-prescriptions. It's quite the opposite. Again, you've been following this whole story for quite some time. They, compared to the last government, they take a more collaborative approach, but also the recent public statements by the health minister, you know, they were almost like enthusiastic about the benefits that e-prescriptions are going to bring to the German healthcare system. We're not, even between the lines, we're not picking up any kind of, you know, softening of the enthusiasm around e-prescriptions, but it's a different approach.

Okay, my second one would be in the adjustment for first day and thank you for being so transparent this quarter. My question is basically on the absolute level in Q3 versus Q4 upcoming. Should we roughly assume the same amount?

Yeah, you can assume the same amount roughly. Yeah, absolutely. Yeah.

Okay, perfect. Thank you.

Thank you.

Thank you. And we'll take our last question from Aisha Noor. Your line is open. Please go ahead.

Great, thank you for taking my questions. Can you hear me?

Yes, I can hear you.

Great. So my first question was just on the new distribution center in Italy. Could you give us an update on your expectations for the ramp up and should we see this growth acceleration take place in Q4 itself or is it more of a 1H23 event and then Q4 sees another slowdown in growth? That's my first question. And on the second question was around purchasing behaviors. Not sure if it's possible for you to implicitly detect this, but have you seen any signs of down trading towards kind of lower price brands or alternatives? And perhaps in that vein, could you talk about the performance of your own branded or the red care segment and whether that's going to see any benefit in the quarter? Thank you very much.

In terms of Italy, I'll start with Italy. So Italy, you know, Italy is ready. The DC is ready to scale. Of course, now the customer demand has to scale as well. We've been growing very, very nicely. As you know, we don't disclose country-specific information, but Italy is growing at a very aggressive pace, so it's certainly above what we disclosed for the international segment in total. But this is not a game that's going to be played from one quarter to another. This is something that we're going to see developing and continuing to grow over the coming years. But again, all the capacity, the infrastructure in order to scale very, very quickly is in place. And it was a very smooth go-live from an operational point of view.

Yeah, and the second one about purchasing behavior wise. already in a prior question. Basically, in summary, we say, OK, we don't see significant impact at the Phamacy Unsp & Adr know that we in all our communication focus a lot on price on our own brand alternative on our broad assortment where you can make your own choice in what price category It's not an unlikely scenario that actually in the increasingly recession area where we are potentially be in, it doesn't seem to be a bad place to have an online pharmacy web shop that is significantly better priced than offline

Great, thanks. And if I could slip in one last one on paper, Rx, could you give some guidance on what sort of run rate you're seeing in Germany Rx sales this quarter and how you're thinking about the trajectory for 23?

Yeah, for each quarter you can take 30 million or a little bit more or around 30 million. Yeah.

Thank you very much.

Thank you. That's all the time we had for Q&A. I will now hand it back to Stefan Felton for closing remarks. Thank you.

Okay. We're a little bit over time, so thanks for your interest in shop apotheke. Phamacy Unsp & Adr Just by reiterating what you just mentioned, looking forward, the pharmacy space, the healthcare market, if we get into recessionary territory, probably is not the worst place to be in. And with this, I want to thank everybody again and wish you a great day.