Redcare Phamacy Unsp/Adr

Well, thank you and a warm welcome to all of you. Jasper and I would like to welcome you again to our earnings release call right here from our headquarters in Sevenon. But before jumping into the content of our presentation, I'd like to say a few words about yesterday's announcement regarding my retirement from Shop Apotheke following the upcoming Annual General Meeting at the end of April. The last four and a half years with Shop Apotheke have really been the highlight of my professional career. It has been a real privilege to serve this unique company, to work together with a great management team, but also to interact with many of you. It has also been a privilege to be able to Witness and you know within my means to contribute to the tremendous growth of shop apotheke over the last few years looking forward is there's really no doubt in my mind that shop apotheke will continue on its growth trajectory and that it will deliver on its promises as well as its potential by the way only one individual out of the team of five is leaving so the other four Phamacy Unsp will continue to drive the business, will ensure the continuity of our management team and three of the remaining four members of the management team, Theresa, Stefan and Mark have been with the company for over 20 years. Well, this is not the last day of my time at Shop Apotheke, but it's certainly the last earnings release call that I can do together with Jasper. So it's also an opportunity for me to say thank you to all of you for your support over the last four years for all your questions. Sometimes there were tough questions that we had to deal with. Thank you for all the personal interactions over the last couple of years. Switching to the purpose and the content of this call, especially since this is my last call, I'm very happy to be able to present the results of 2022. a year that was, from our vantage point, clearly a success for Shop Apotheke. We delivered against both components of our guidance. We strengthened our competitive position in the marketplace. And without stealing too much, Jasper, of your thunder, I think you're also going to appreciate the guidance that at the end of our call, Jasper is going to share with you the guidance, of course, for the current year. The agenda we're going to start with looking back at 2022 how the CHOP Apotheke perform. Then I will provide you with a brief update on some of the strategy milestones we achieved last year and then Jasper is going to conclude before we of course open the microphones to your question with outlook and the guidance for 2023. So let's have a Quick look at our numbers. We as the management team of Shop Apotheke, we are really proud of what we achieved last year and we consider 2022 a success for Shop Apotheke. We met our top line guidance, we met our bottom line guidance, we generated sales of 1.2 billion euros. Phamacy Unsp & Adr and we could and we did grow double digit after Corona. And of course, our ambition is that this is not the last year with double digit growth for Shopper Boutique. Our active customer base grew by 18% to 9.3 million active customers. The main driver, of course, behind our customer growth and also our sales growth is the high satisfaction of Shop Apotheke as customers with the services we provide. Our NPS, our Net Promoter Score was above 70 across 2022. Our strong top line performance was accompanied by notable sizeable improvements of our profitability throughout 2022. For the full year, we generated an adjusted EBITDA margin for the business as of March last year. To be precise, this is before the impact of the acquisition of 1stA, which since then has been renamed as GoPulse because this acquisition was concluded after we had communicated the guidance. So 0.9 minus 0.3% adjusted EBITDA In the second half of the year, we showed an adjusted EBITDA margin of plus 0.9% after minus 1.5% in the first six months of last year. We also achieved a couple of strategic milestones that we had set up for ourselves, but more about this in a moment. Last September, we as a company and as a management team, we reinforced Shop Apotheke's commitment to sustainable development by joining thousands of progressive companies around the globe with our statement that we want to become net zero by 2040. I know 2040 is a long way to go but we are right now in the process of defining our concrete and measurable milestones for the coming years. Well, looking back at 2022, I hope that you join me in concluding that 2022 was indeed a successful year for Shop Apotheke and 2022 positioned us very well for the current year 2023. Well, let's have a brief look, a more precise look on how we did against the guidance that Jasper had provided exactly a year ago. In the upper half of the chart, you see our sales growth. and our EBITDA margin exactly as it's reported in our annual report. So the dark blue bars, they show our total sales growth. You see that we grew every single quarter, but I want to highlight two quarters. In Q1, you see a growth of, quote unquote, only 7%. This has to be seen against the backdrop of Q1 2021. And you've been following Shop Apotheke for quite some time. You remember the RX bonus ban in Germany came into effect in December 2020, but hadn't yet fully impacted our RX business in Q1 last year. So there is a base effect, therefore only 7% growth in Q1. The reverse is a little bit true for Q3. Q3 2021, we were capacity constrained. Of course, this had a detrimental impact on our sales levels. As a result of this, together with our underlying year over year growth, we could show here a total sales growth of 20%. You're also seeing on this chart the significant improvement of our profitability from the first half of the year to the second half of the year. At the bottom of the chart, you see exactly the scope of the guidance that we had provided a year ago. So here, the sales growth, the dark blue bars show our non-ARIC sales growth. We grew at least 15% in every single quarter. Across the year, we showed a sales growth of a solid 17%. in our non-RX business against the guidance of 15% to 25%. So we're solidly within our guidance range. And the light blue bars show our adjusted EBITDA margin without the bottom line effect of GoPulse. You also here, you see a very significant improvement from the first half of the year to the second half of the year. Across the year, an adjusted EBITDA margin of minus 0.3%, so very close to the EBITDA break-even point. Also this in line with the guidance we had guided towards an adjusted EBITDA margin from between 1.5% to plus 1.5%. So, again, Shop Apotheke met its guidance in both of its components. So, looking at the two reporting segments, the DACH region or the DACH segment and the international segment, starting with the DACH segment, we posted sales of 940 million euros. So, with the DACH region, we are approaching the 1 billion euro mark. Our total sales grew by 11%. In the dark region, our non-ARIC sales grew by 15%. In the international segment consisting of Belgium, of France, of Italy and the Netherlands, sales grew up by 24% and totaled more than a quarter of a billion euros last year in our international segment. So before I hand over to Jasper, three of our KPIs already talked about the number of our active customers grew from 7.9 million at the end of 21 to 9.3 million at the end of last year. So it's only now a question of Phamacy Unsp Adr Our Net Promoter Score here to be precise across the year at 72. So we set a new all-time high with our customer satisfaction last year. Not all e-commerce companies and not all online pharmacies published the NPS, but I would be very surprised if we had such a ranking if Shop Apotheke were not right among the top performers. Our average basket value or the average or the AOV came down a bit from 21. It was 61 euros per basket in 21 to around 58 euros. Almost the only driver was the faster growth of our non-RX business. And our non-RX business comes along with a slightly lower average order value. Let's have a look at the numbers.

Stefan, thank you very much. And I'm happy to do so. And good morning to everybody on the call joining us again today. This is the customary slide with the number of orders in thousands per quarter. So you see that in quarter four 2020 we achieved a Phamacy Unsp in 2020 the fourth quarter, we increased that a year later to 5.5 million and this year we have set in the most recent quarter, the past quarter, for a new record of 6.3 million orders processed in one quarter. Looking back at 2020, which was really the peak of the COVID year, you basically see that the increase of 4.4 million orders in the fourth quarter to 6.5 Also on this slide you see that there is actually each year this customary seasonality where we set new records in the first quarter then we have the seasonally lower second and third quarter and then we set again new quarters in quarter four and then the history repeats itself with new quarters aimed for in the next quarter Last year, as Stefan already showed clearly and also explained, in 2021 the quarter 3 was somewhat lower when we were capacity constrained, but we recovered quickly from that last quarter. If you look at the last bar with the 6.3 million orders that we did, something that makes us very content is the fact that of the 6.3 84% of orders came from returning customers to shop apotheke. If you add up the four columns of 2022, then you get to in total 23 million orders that we processed the past year. So what numbers did we achieve with that? What financial numbers? Here you see the adjusted numbers for the ongoing business. In the fourth quarter of 2021, we achieved 288 million of sales and we had an adjusted EBIT of minus 10 million, which was an EBITDA margin of minus 3.5%. This year in the fourth quarter we increased our sales by 13.8% to 328 million and our EBIT was a positive 3 million or 0.8% of sales. So a year over year improvement from quarter four of 430 basis points. The main driver of it was an improvement by 320 basis points of the gross profit margin, but also there was a very significant improvement in the selling and distribution efficiency of 170 basis points. A slight offset was in admin expenses, because of course we need the right people and the right teams to achieve those impressive results, but actually there were also some largely non-recurring negatives in the 3.5% admin in Q4 2022. If we then go to the fourth column then the improvement from the first half of the year to quarter four of 230 basis points actually was in part coming from the gross profit margin but the main driver was increased efficiency and scale in the selling and distribution cost as a percentage of sales. In 2021, we achieved 1 billion 60 million of sales and we had an EBIT of EBITDA, an EBITDA margin of minus 0.5. That seems to be a slight improvement to 2022 going from minus 0.5 to minus 0.3% of sales. But I think, Stefan, as you already showed very clearly in your graph, this is a very different picture from the first six months of 2022 to the big improvement over 200 basis points driven by efficiency to the second half of 2022. And if you then go to the next slide, on the gross profit margin, the improvement from 25.2% year over year to 27.5%. Drivers of the gross profit margin, and I think it's the 12th consecutive quarter that we're able to report this, were improved sourcing conditions. The number two is the net of pricing, promotions, and assortment. Number three is also mixed. and then other there is some structural improvement namely the first positive impact from our marketplace sales but the major impact of the 1.1 improvement actually is a non-repeat of some negatives we had in 2021 related to the corona assortment so all in all a solid 27.5 You also see that there is some improvement from the first half of the year to quarter four, namely 0.7%. But as we will see on the next slide, the major improvement from the first six months to the second is, as you see at the right hand of 210 basis points from the efficiency of our selling and distribution and marketing expenses as a percentage of sales. 22.6% to 24.5% is a little bit of an apple and an orange because the marketing was actually also including the fact that we reduced our marketing last year summer when we were somewhat capacity constrained. Also, there was a bit more tailwind of corona in the year 2021. So that's about marketing, but that's the full year picture in quarter four. This looks much better. Shipping and packaging minus 0.6. This is all mixed. This is mixed for the fact that we deliver higher services to our customers at the moment. More last mile options with now, for example, and also some mix between the countries on an underlying base. Also here we were able to actually offset the inflation that we have been seeing by better terms and more efficiency. What makes this very content is is actually the operating labour where we were flat or a 0.1% improvement where we were and absorbing some underlying wage inflation and we were absorbing the opening of a new distribution centre in Italy and year over year achieving a slightly improved cost as a percentage of sales and other is actually not something interesting to mention. If you go to the next one, so we ended the year 2022 and started the year 2023 with a very solid cash base of 180 million. If you look in the balance sheet, you will see that there is around between 80 and 100 million of this is in the other financial assets because that's money that We put for a better return on fixed deposits. But if you add what we name cash and cash equivalents, it's 180 million. So we had the operating result negative last year, mainly because of the first six months. Then there were some variances in working capital. We had a high level of investments in 2022 like we had in 2021. We peaked in executing our strategy in our CAPEX in 2021 and 2022. because we successfully added the capacity that we wanted for our strategy and we have put live a couple of very important IT projects. It's the marketplace, it's the now, it is structural robustness to be ready for ERX and for our volume ambitions in the IT landscape. So we have done that and with that we ended the year with 180 million of cash Stéphane, that's a good moment. I hand it back to you.

Thank you. Espar, I think we should keep in mind on the previous chart, the free cash flow last year was minus 89, correct? Yeah, minus 89. Yeah, so at the first drop, minus 89. We might come back to this. More on that later. Thanks for mentioning. Okay, so over the next couple of minutes, before then Jasper walks you through the guidance for the year, I just want to briskly walk you through a couple of our strategy milestones that we achieved last year. We saw another increase of our customer satisfaction level, meaning another increase of our NPS versus prior year. We went live with our first distribution facility outside of the Netherlands. Of course, I'm referring to the facility near Milan. And we increased, we saw significant improvement of operational Productivity here at our main site in Severnum. We successfully launched our marketplaces in Germany as well as in Austria. On a continuous basis we're adding partner merchants but also and more importantly products with the aim to offer eventually a very broad range of healthcare and beauty related products to our growing customer base. and we delivered against our sustainability commitment and, as we mentioned before, we reinforced this commitment by joining the net zero community. Lastly, Germany is continuing to make progress towards the nationwide introduction of electronic prescriptions, but more about this in a moment. I already highlighted that our NPS last year was 72 this compares to 68 a year before. The single most important driver of our customer satisfaction is the time that it takes us from a customer placing an order until this order arrives at the customer's home. Especially last year it was a focus for us to to work with our logistics service providers to analyze the whole journey and to identify opportunities to shorten delivery times. We succeeded in shortening delivery times. Rest assured, we are monitoring this closely and rigorously. In addition, we offered additional delivery options through our partner pharmacies. Now program in Germany, but also in Austria. And then, of course, we added the 30-minute delivery option through the acquisition of GoPulse in the metropolitan areas of Germany. Needless to say, with the opening of our facility in Italy, delivery times to our customers in Italy came down significantly, and this really from one day to another almost had a significant favorable impact on our NPS. The share of our orders that is placed by returning by existing customers is around four-fifths. But that also means that still around 20% of our orders, and this is exactly within our target range, are placed by new customers. So Shop Apotheke is continuing to gain new customers. Of course, that is critical for growing the business. And lastly, just looking at our website, or in this case, particularly at shopapotheke.com, our website in Germany, shopapotheke.com was the number one healthcare website in Germany. Not just the number one online pharmacy website in Germany, this is something, quite frankly, you have come to expect from us, but the number one healthcare related website in Germany in 2022. Capacity-wise, we are very well positioned for the growth this year and for the growth in the next two years. Our main facility here in Severnum systems and processes are really running smoothly. Our KPIs are all moving in the right direction and we are moving from one All time high in terms of the orders we process customer orders we process We are moving from one record to another record. It's now happening with a certain regularity that we process more than 100,000 customer orders a day. And as mentioned before, we opened our new facility in Milan. Of course, the facility in Milan with very limited additional investments has the capacity to handle a multitude of our current Phamacy Unsp Well, when we started our Sustainable Development Program at Shop Apotheke a few years ago, at the end of 2019 and the beginning of 2020, we set the goal for ourselves to reduce our Scope 1 and Scope 2 carbon emissions by the end of 2025 by 80%. I think we conveyed this before to you. You've heard this. We actually achieved this already by the end of September 2022, so more than three years ahead of schedule. At the same time, we want to be transparent. The vast majority of our carbon emissions are not scope one and scope two. They are scope three. and there is still a lot of work that we need to do. At this point of time we have started a couple of pilot programs with some large manufacturers to along the whole value chain end to end to assess the current level of carbon emissions to fully understand what drives the carbon emissions and eventually of course to reduce the carbon emissions. We are committed to decarbonizing our business and just to reinforce this, to underline this, we joined the community of thousands of progressive companies really around the globe with our net zero commitment. We're aiming for this by 2040. I know that's a long way. Some of us are not going to be with Shop Apotheke anymore at this point of time. But we are right now in the process of really specifying what does this mean in 23, in 24, in 2025. A couple of weeks ago, MSCI informed us that we maintained our AA ESG rating. In a couple of subcategories, we actually made some progress. At the same time, we know that there's some more work that needs to be done on our side to be considered for a AAA rating. Well, where do we stand with e-prescriptions in Germany? Let me first, let me start by saying e-prescriptions in Germany simply work. As of today, more than 1.3 million e-prescriptions have been issued by physicians, dispensed by pharmacies and reimbursed by statutory health insurers in Germany. We as Schaub Apotheke, We are literally receiving e-prescriptions every single day. We've mentioned this to you before. Our systems, our processes are working and that's not a surprise to you. We cannot wait to get started with e-prescriptions nationwide in Germany in earnest. We are assuming a significant increase in the number of e-prescriptions in the second half of this year together with the launch of the option to redeem electronic prescriptions through the electronic health card or as it's known in Germany the EGK. Of course, we as Shop Apotheke, we are fully aware that the EGK option doesn't necessarily work for online pharmacies. But at the same time, the other two options to submit the e-prescription QR code to the pharmacy of your choice, hopefully Shop Apotheke, via the eRicep, the e-prescription gematic app, or via the paper printout, are also available, will be available, and of course, through these two options, we as an online pharmacy, as an e-pharmacy, will be able to partake in the e-prescription opportunity. It is still our assumption that certainly after the introduction, nationwide introduction launch of e-prescriptions, is going to play a very, very big role and it's very convenient. You take the paper, the paper contains the QR code, you take a picture with your smartphone and again you send it to the pharmacy of your choice. At this point of time, looking at the nationwide adoption of e-prescriptions across Germany, it is our assumption, also with the most recent statements in the German press, that we're going to see a nationwide mandate for e-prescriptions in 2024. Well, enough said about last year and about our strategy milestones. Let's look at the guidance.

We start with the first of the two guidance slides, which is a reiteration of our mid- to long-term guidance of the adjusted EBITDA margin. This is unchanged. We still expect an adjusted EBITDA margin in excess of 8%. And actually, you see that we consistently report positive adjusted EBITDA margins each quarter in our DAG segment already, but also still there we see Phamacy Unsp Adr Phamacy Unsp A media income is of course reflective of the strong positions we have in most of our countries with high traffic often leading websites in a very valuable market with valuable customers. Marketing as a percentage of sales will certainly come down on a structural base over the coming years, just already alone for the fact of achieving scale, operational and overhead efficiencies, and then particularly in the international segment, going to a next level of scale. In the international segment, which is in our case, the Netherlands, Belgium, France and Italy, you actually see that we are doing exactly what we have done successfully in DAG already, and the only thing we need to get also there positive and continue to grow fast is the scale in order to leverage our total business model there. On top of that we have e-prescriptions for most in Germany but also in the mid to longer term we wouldn't be surprised if developments on our X will take place in one of our other countries though there is nothing on the short-term agenda there. And then while we have a guidance of not an adjusted EBITDA of 8%, but in excess of 8%, is the fact that if our marketplace and platform continue to increase as fast and good as they are doing at the moment, they could be a substantial contributor to our bottom line adjusted EBITDA margin. Okay, let's go more to the near future, the coming month, the full year 2023. Before I talk about the details, though they are relatively clear, I would say, let me first take the big picture. The big picture is that we expect to continue on our many years track record of organically driven double digit growth of our business, but in addition to Phamacy Unsp So a very fast increase of ERX. The regular ERX that we receive each day is included here, but a not unlikely scenario that perhaps there will be more of an increase in the second half of the year 2023 that will come on top of the guidance that we are providing to you here today. And to start with the first bullet. So we expect to continue to grow everything but Rx. So our non-Rx business, which is at the moment more than 90% of our total business, Phamacy Unsp Adr But for the year, and you mentioned the number already, Stefan, in 2022, we had a free cash flow of minus 89 million. For next year, we aim for zero with a range of minus 20 to plus 20 million. And the range is there, just reflective, just the same with the EBITDA margin range, whether we will have some headwind or some tailwind during the year. Also flexibility to maneuver, but our aim is, of course, the midpoint. The driver of achieving free Phamacy Unsp & Adr in the range of a positive 0.5% to 2.5%. And we're going to achieve, we aim for those EBITDA margin improvements as a continuation of what we achieved already in the second half of 2022, driven by not only a better sales and also by significant efficiencies and scale in our setting and distribution expenses as a percentage of sales. So this is it for the year 2023. And it's now time to go to the questions operator.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone keypad. If you wish to remove yourself from the question queue, you may press star followed by two. In the interest of time, please limit yourself to two questions only. As a reminder, if you have a question, please press star and one at this time. One moment for the first question, please. First question is from the line of Alexander Thieu with Jefferies. Please go ahead.

Hi Stefan and Jesper. I hope you can hear me. Good to see you again. We strongly shout and sadly for the last time in this combination. Thank you very much Stefan. I have two quick questions and I would like to take them one by one. The first one is on your free cash flow break-even guidance. Could you give us some Phamacy Unsp & Adr And lastly, on the swing factor, the maintenance cap is guidance for 23. And also on the adjustment on the EBJ level, you could give us a total number of the guidance. That would be great. Thank you.

Yeah, those financial questions I will take, Alexander. Hey, good to talk to you again. Yeah, so the main driver of the getting from 2022 free cash flow to the black zero in 2023 is the EBDA improvement. The improvement will not only be in the gross profit margin, but also in the gross profit margin. We aim for but we want to keep some flexibility in which elements but we internally basically say we want to achieve scale and efficiencies in each of our P&L lines but you will most certainly also see them in selling and distribution as a percentage of sales. Then to your CAPEX, indeed we don't give guidance to that the reason for that is that we say we want to have several ways to roam in this case to the positive or black zero free cash flow and we want to have some flexibility there but as I've also mentioned during the presentation Phamacy Unsp & Adr Not really guidance, but that's our expectation for the CAPEX. So below 3% of net sales in 2023 is a likely scenario. The adjustments to the EBDA you asked for. The adjustments, the absolute amount came significantly down, so improved a lot from 2021 to 2022. It was 33 million negative in 2021 and by heart 21.6%, so 22 million in 2022. And it's very likely because of the reduced impact of IFRS free business combinations or the applicability of that, that it will come down further. Just to be clear again, taking this opportunity, We adjust for this EBIT because the elements that are in the adjustments, 95% are non-cash accounting entries. So the adjusted EBITDA is very close to the cash EBITDA. And that's the reason why we adjust for that. And we are very conservative on that. It's only employee stock options. It's IFRS-free non-applicability and has a little bit of external costs related to projects.

Okay, thank you. Very clear. Lastly, on the EGK topic, we have seen some useful regarding a new scanning function directly from the doctor's terminal. and a potential online EGK solution with double-authentification and EID. Could you comment on this further general that seems to be very convenient for patients and when we are at it? Could you also comment on the current competitive environment that you see in Germany and cross-border? Because the current trading supporting the weapon app traffic that we see look quite positive from our side. Thank you.

Yeah, Alexander, on the EGK, especially on the scam solution, that is something that's driven by the E-Rezept enthusiasts, the ERX enthusiasts, which is an association of people that believe in the digitalization of the healthcare system in Germany. We know that there are tests ongoing at this point of time. There was in the press recently some statement also from the health ministry about this, but it's too early to say if and when this is going to come. If there is an opportunity for us to support this and to help, of course, we'll do this. The way we understand it, it would be a fully digital solution to transmit your E-Prescription QR Code to the pharmacy of your choice. We need to keep in mind the EGK option is not the ideal option because it requires the physical presence of the EGK of the electronic health card in a local pharmacy. So if the product, for example, is not available in the pharmacy, the patient has to come again. So everybody acknowledges it's an important option, but it cannot be the only option. But in terms of the scanning solution, all we know is in multiple physician practices, the tests are ongoing.

Perfect. And on your current trading?

Say it again, please. On the current training. Oh, the current training.

The line is not very strong, Alexander. Okay. Well, I can say this much. Two months and a few days have passed since the beginning of the year, and the management team and Jasper and I, we're fully standing behind the guidance Jasper just communicated a minute ago. There is no reason for us to doubt that this is a very reasonable sales projection and sales guidance.

Thank you very much.

Next question is from the line of Chris Yornan with HSBC. Please go ahead.

Yes, good morning, everyone, and thanks for taking all of my questions. I would also like to do them one by one. First, on your international business, I was a little bit surprised by how much it decelerated. It's actually weaker than the OTC business in Germany, despite the ramp-up in Italy. I would also like to pick your brain on consensus expectations for EBITDA. There is quite a significant improvement from minus 25-ish to minus 4 in consensus. So I was just curious whether you could give us a bit of an idea of where you think or how much the business could grow and how much margins can improve realistically in the international segment.

Yeah, morning. Thanks for your question. International, I basically can say, international sounds very exotic here for us. It's the Netherlands, Belgium, France and Italy, nice adjacent countries. Our strategy is the same, our belief in it is the same. The numbers are still relatively smaller, so sometimes you have a faster increase, sometimes a lower increase. There's nothing that you should see behind it. We didn't change that you should see behind the fact that four to four growth was lower than it was in quarter one last year. It is what it is. We are aiming for to accelerate that again. Our strategy remains the same there and sometimes customer behavior in a country is very different from one country to the other. That's why we like to have the portfolio Phamacy Unsp Adr Phamacy Unsp

Phamacy Unsp-Adr Phamacy Unsp-Adr

Phamacy Unsp & Yeah, we only give guidance on total company level. Yeah, so, so I don't even know what the consensus for international is on total company. We think it's going to be a positive number and clearly positive between 0.5 and two and a half percent of of of total sales.

Phamacy Unsp Okay, and then another one on pivoting back to the ERX. I mean, the thing is, a lot of us comments with respect to, you know, being mandatory sometime in 2024, maybe even at the end of 2024 together with the EPA. I always find them to be very strange because it's, you know, if you know this, it's effectively mandatory already today and has been for more than a year. What do you actually expect to change? Do you think that there are going to be repercussions introduced, you know, to doctors who don't use it? I mean, what's going to change? I understand the EGK or what the EGK solution would do is probably increase the adoption. You also seem very confident that this will drive up the number of tokens printed on paper. But that's another thing that could already be done today. What do you think this does that will increase the adoption by doctors? Do you think the Ministry of Health will start being a bit more Let's say rigorous in ensuring compliance with the law.

Chris, I think there is a wide recognition in Berlin that the mandate didn't work because it came without teeth. and it is our sense that the political realm they are assessing what does it mean to have a successful mandate what would be required there are several options that are being discussed right now it's you know it's too early to say you know what the outcome of these discussions will be but what we heard is the next mandate will be a success but again this is now purely speculative on my side to say is it going to be an incentive is going to be you know Ascension if doctors don't issue electronic prescriptions. I don't know. But again, there is a recognition that the last mandate, and you're right, you know, according to the law, since the beginning of 22, doctors have to, are supposed to issue electronic prescriptions in Germany. That didn't work out. But again, there is a recognition they have only one more trial.

Okay, let's hope laws are starting to become enforced in Germany again. Good luck. Thanks, guys.

Thank you. Let's quickly go to the next one. Yeah.

Next question is from the line of Volker Bossler with Baader Bank. Please go ahead.

Yeah, good morning. Thank you for taking my question. Congratulations on the figures and all the best for you, Stefan, for your future. I have three questions. First is on the consumer trend. Consumer demand is in general subdued. How do you see consumers reacting on the overall challenging environment? Do you see them trading down or do they see them putting a lower number of items per order or how do you see consumer trends evolving on that? Phamacy Unsp&Adr Phamacy Unsp&Adr Phamacy Unsp&Adr Italy is on stream. Any expansions or new warehouses which you have already in the planning process, so to say, going forward? When is the next step to come? Any meat on the bone in that regard? Thank you.

I'll start with consumer trends and then in a national segment, Jasper, if that's okay. In terms of consumer trends, it is a little bit too early to say how this is all going to play out. Of course, we all understand money might be a little bit more tighter, but I know Jasper is always emphasizing that might be an additional reason Phamacy Unsp & Adr So at this point of time we think we are very well positioned also in terms of being able to attract new customers, to convince them to place their second, third and fourth and many more orders with Shop Apotheke. Again, that is why as of today Jasper just communicated the guidance of

We have the same hypothesis as you had in your questions, but we don't see any signs if you look at the data in our business of any trading down or lower baskets because of the reasons that you mentioned. So the hypothesis is clear, but we don't see anything there. International Business. No, I'm not commenting on the specific countries. We report in two segments. What's perhaps interesting to know is that in last year, in our seven countries, all of our countries achieved double-digit growth. That's perhaps the only thing I can say there. But about regional differences in customer behavior, there's not a lot I can comment on. We steer in two business Phamacy Unsp-Adr If we need to add capacity, we will find ways how to add capacity, which we think we are very well set up at the moment. But of course, continuously, we think in scenarios of what could happen, and then we act proactively, ideally, on what's happening there. But there's nothing big that you should assume in your model in the near-term future on any capacity, big investments, but also in 2023 and the moment that we speak, we make investments in capacity continuously. Thank you, got the message.

All the best. Thank you.

Next question is from the line of Daniela Ali Brandewa-Steefel. Please go ahead.

Yes, good morning, gentlemen. Thanks for taking my question. This is Daniel Librandi with Stifel. I just have one question on international markets and particularly on Italy, given the investment in the warehouse you made last year. Can you please provide us a little bit more color on the trends you've seen last year? And if you can, I presume not, but just give an indication on the level of turnover you reached also as a percentage of sales last year and related to these Could you please mention also what are your expectations of growth in Italy this year? I remember you once flagged that you were seeing a triple digit growth in this country and I would like to understand if you have seen a normalization over the past few months. Thank you very much.

Well, thank you for your question. As Jasper mentioned, normally we don't talk about specific countries. We are reporting in two segments, but we've talked about Italy in the past. We are very well prepared for future growth in Italy. We have stated and we fully stand behind this that Italy will be a growth driver for Shop Apotheke going forward. The capacity that we have, I think I mentioned this in the call, can handle a multitude of our current business. What makes the Italian market attractive for us is, number one, it is still a pretty fragmented market. There is no dominant player. No surprise here that Shop Apotheke has the ambition to become the market leader in Italy. And secondly, the online penetration. in Italy is still relatively low. When we look at the non-Rx business in Germany, the last data point that we have seen, it's significantly above 20%, the online share of the non-Rx business in the German pharmacy market. In Italy, it was, based on the data that we have during Corona, it went up to a solid 8%. Since, of course, the opening of local pharmacies, it has come down to 6%. So if you now juxtapose the 6% online penetration non-ARICS in Italy to 20, I think the number was 23% in Germany, the online penetration in Italy over the coming years is only going to move in one way, and we want to take a disproportionate share of this opportunity.

Okay, thank you. Maybe just a follow-up. Can you please mention what is your, according to your calculation, what is your market share currently in Italy, please? Thank you.

No, there are no official numbers. Of course, we have internal certain estimates, but that's our internal management information and not something that we can effectively publish. Yeah.

Thank you.

Next question is from the line of Aisha Noor with Morgan Stanley. Please go ahead.

Good morning and thanks for taking my questions. My first question is on the mid to long term guidance of more than 8% margin. I guess what in your view is mid to long term at this stage and can we expect that to be 2025? You know, if you get some thoughts there. My second question is on the international business. I understand you don't want to disclose segmental profit, but is it fair to assume your international segment continues to be in ramp-up mode in 2023, so more investments? And then if I could just quickly follow up on the question previously on free cash flow guidance for 2023, what exactly gets you to the lower end of this range? Do you have any sizable CapEx or M&A projects that you're kind of reviewing for the year? Thank you.

Phamacy Unsp & Adr Phamacy Unsp Adr Phamacy Unsp & Adr I think the best answer there is the same as I want to give also in the adjusted EBITDA margin which is the main driver. We have the guidance but we have a certain range also with free cash flow reflective of whether we will have some tailwind or some headwind and also to have a little bit flexibility on the on maneuvering. In all cases the midpoint is the midpoint And then we have a range reflective of the dynamics of the quite uncertain world that we're all living in. That's the main reason. That's not like we have a scenario which will bring us to one of the outer sides of the range, because then that will be our midpoint. And that's not the case. The midpoint is the midpoint.

Okay, thank you very much and all the best, Stefan.

Thank you.

Next question is from the line of Jan Koch with Deutsche Bank. Please go ahead.

Hi, Stefan. Hi, Esma. Thanks for taking my questions. My first one is on your 2023 margin guidance. You spoke about the efficiencies you want to achieve, but what have you included in your outlook in terms of inflation with cost pressure? It would be helpful if you could further break down your expectations on the impact of inflation on wages, distribution costs, and procurement costs. And then secondly, I wanted to come back to Alex's question on the current trading. Have you noticed a slowdown in your flu business? Given that many people bought cough and cold medicine in Q4, I was wondering if they now order less in Q1 compared to Q1 in 2021. And then finally, on the expected rollout of ERRICs in H2, what you mentioned earlier, does your 2023 margin guidance include a step up in marketing spending for ERRICs? And if so, could you quantify the amount?

Jan, we need to give you very short answers, seeing the time. If you have any more questions, then please don't hesitate to reach out to us. So quickly, inflation, as far as we think in scenarios, and we can estimate what the impact is, that's all included in our guidance, what we do there. And what exactly we assume there is, for me, not adding value to disclose that. But in the improved Ibera Guidance. There is of course our best estimate of what inflation will do included there.

Current trading? I don't have the details in front of me right now. There is, of course, seasonality. I wouldn't be surprised. But again, I don't have the numbers in front of me right now. If we had a slowdown in cough and cold, because also the cough and cold season is coming to an end. And you're right, there was certainly some stocking up last quarter. But then there are other segments that are benefiting from seasonality. I can only come back to in general we are encouraged by what we have seen so far this year and that's why we are still very comfortable with the guidance that Jasper just communicated.

The third one that you had is about the marketing. But I think always is a main point. It's not if ERX is coming that we suddenly say, hey, we don't do any marketing. Let's do marketing for ERX because it's such a big opportunity. We are doing a lot of marketing every day and it will be a shift also largely of the message that we have in this marketing. And actually of the past years, all the marketing that we're doing, talking about trust, customer loyalty, returning customers, That's all actually because OTC is a very attractive business, but in the back of our head also to be best prepared for ERX. And the larger our base of active happy customer is, the better we are prepared for ERX. So that could be one of the 10 scenarios we have requiring a couple of million more of marketing, of course, if that's needed, but it depends on the circumstances, et cetera. But it will also largely be most probably a shift instead of a significant increase. Phamacy Unsp and then the expectations on the second half, we don't give any guidance on ERX except that we have it included in our mid to long-term guidance, but the exact timing in the coming month, that is too uncertain to give guidance on. We need to leave it at that, I think.

Oh, one more, you say?

Okay, yeah. I see people stay tuned. Yeah, operator, there's apparently still one pending question.

Yes, the final question is from the line of Olivier Calvert with Credit Suisse. Please go ahead.

Yes, good morning. Thanks for taking my questions, and special thank you for Stéphane, and best wishes for the future. I would have a couple left, just not a guidance question, but just on eScript volumes. I know you don't disclose the number of escripts you redeem anymore, but would your expectation going into Q3 and H2 be that you over-index or under-index? As we see, perhaps first customers be more digital natives, or I don't know if I could pick your brain on that. And then the second question would be on the stake of your top shareholder and the voting pool agreement. I've seen it went down from 26-ish percent to slightly over 25. So I just wanted to know if you could give us a sense of is it a function of your regular issuance of stock for compensation or if there's anything else going on there. Phamacy Unsp&Adr Phamacy Unsp&Adr Phamacy Unsp&Adr Phamacy Unsp&Adr Phamacy Unsp&Adr

in the focus for us as a management team. In terms of stock-based compensation, we think that has worked for Shop Apotheke very well in the past and there is no intent at this point of time to do something different there or to change to replace the stock-based compensation with other compensation components. Yes, but the ERX guidance volume, I wasn't clear 100%.

I also didn't fully understand. Olivier, what was the exact question on ERX? Could you please repeat?

Sure, yeah. So the question is essentially, do you expect to essentially over-index or under-index on the volumes, the incremental volumes we see in eScript as the ramp-up goes, right? Meaning, do you expect your market share to be Phamacy Unsp&Adr

Yeah, this is, from my viewpoint, not relevant. I mean, we are best prepared for it, and that's what we do. And at the moment, it searches. It increases faster. Then everything starts. So what is happening now or in the pre-phase, it is, for me, not really relevant. Yeah.

Fair enough. Thanks.

Yeah, you're welcome. I think the next one. Yeah. No, there's one other slide. Please go to that. Now that I got you all on the call still, before most probably Stefan, you will thank everybody for participating again on the call today and all the questions. I would like to invite you actually for a short webcast on an update on our brand strategy coming Wednesday, next week Wednesday at the 15th at 15 hour. It's a short presentation that will be hosted by Monica Ambrosi from Investor Relations and myself and via the regular channels you will receive an invite the coming days and I hope you got time to join.

Okay, Jasper, thanks. So, in conclusion, I hope that you were a bit reassured by the performance that we demonstrated last year. I hope you are, you know, confident in the guidance that we provided to you. We fully stand behind the guidance again, reinforced by what we've been seeing so far this year. As I mentioned at the beginning, this is probably the last time that I'm going to talk to the broad investor or financial community of Shop Upper Ticket. Thanks again for all the interactions in the past, for the challenges that you provided to us, but also the reassurance. I'm probably going to be able to touch base with some of you over the coming weeks before I then retire. Phamacy Unsp