Redcare Phamacy Unsp/Adr

Ladies and gentlemen, welcome to the RedCare Pharmacy Full Year 2024 Earnings Released Analyst and Investor Conference Call. I am Valentina, the Quotas Call Operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Olaf Heinrich, CEO. Please go ahead.

Yes, thank you very much and good morning to everybody. And a very warm welcome also from my side. So let's have a look into the agenda of today. So first of all, we would like to start with some highlights from 2024. and followed up by business performance of 2024 and leading into a update on strategy session. And then finally, the outlook and guidance. If we go to the highlights of 24, you know, I mean, this has been an exceptional year to RedCare. If you just look back, I mean, it's almost like you can't believe it. I mean, at the beginning of last year, there were the questions, is the Eastwood coming? Is it not coming? What will be the adoption rate of it? And so, but I mean, we quickly learned that ERX became the nationwide standard in Germany for all publicly insured patients. And that is actually great news. And then there was the second question. I mean, how can we access that market? How do we get discrimination free access? And, you know, then we launched our fully digital patient journey by a card link in May of last year. It seems like it is almost more than one year ago, but it happened last year in May. And at the same time, we also further developed our product. So now we have a highly valued, customer-centric product. It has all the features you need, so it does not only have the card link functionality, but also you have the product availability, you have the payments, you have the 24-7, you can order OTC, EPC, RX. So everything is in the product and this product actually has developed over the year and now we think it's a great product out there in the market. And at the same time, we also launched our marketing campaign. So it is on the one end the product, but on the other hand also our very successful marketing campaign from last year. So which really I think may also made a difference when looking back was great achievement also on that side and also the decision to step up our marketing activities in Q4 was also the right decision based on the numbers we see. You know, our growth accelerated from 7% in Q1 all the way to 142% in Q4, again confirming we have a great product out there and we had a great marketing campaign. And putting this all together, it led to market leadership position for Redcare in Germany. You know, we always have been the market leader on non-RX, but now in 2024, We also got the market leadership on our X, so we can say that has been an exceptional year looking back in terms of the ERX. But the company is not only about ERX. We have a larger value proposition in that one. So we also continued our great growth in all of our other countries. What you already saw in the numbers, I mean, really great achievements across all countries, also high customer satisfaction, so NPS, continues to be one of our key metrics and as a result of that I mean some of you are probably tracking also traffic in Italy as a result of that we are now also market leader in Italy so I mean not only in Germany Austria Belgium and Switzerland but now also in Italy clear market leader we are proud of that because again it's not only about ERX it's also about our Phamacy Unsp&Adr Phamacy Unsp&Adr Well, at the same time, you know, with this growth also, we had to produce much more parcels. So, and we are really proud of that. We managed that also in a great way. So this, especially looking here into Severnum, but also Italy, I mean, it has been a great achievement that we kept our high level of customer satisfaction and service levels. And we were really able to manage all of those parcels leaving our warehouses. And at the same time, we even increased our efficiency in logistics. But this is not the whole story of it. You know, we also had a change in the leadership team. So in April, two board members left, and then we had two successors coming in. And I think to me, I mean, that shows how strong also the organization is set up. Because, I mean, we had two internal successors, Dirk and Lode, and it almost worked out seamlessly, I have to say, yes, sir? Yes. So it shows. Organization is strong and has a strong leadership, and we build also talents on our own. So we are really happy with what we have seen throughout 2024. And thanks to Dirk and Lotte for stepping in and making this happen. And then the last thing, you know, it's the first year of reporting CSRD. So it's been a tough audit, we have to say. It's been a tough audit, but we are ahead of the legal requirements and we are proud of the product which is out there. 2024 great achievements. Let's look into the numbers. What does that mean in numbers? You have seen the numbers, so it's a growth of 32% in 2024. Even if you exclude Mediservice, I mean, you're still on the 26%. So it confirms our strong growth part here. The non-Rx growth is at 21%. And the Rx growth is at 64%. and you know it was even higher in the German segment. At the same time, we also managed a margin at 1.4% and you know that's based on the strategic investments we also the decision we took to further accelerate our marketing in October of last year. I mean strongly underlying core businesses and Jasper will talk a little bit about that later in the presentation with a strong underlying core business which of course also helps You have a positive margin here out there. Cash flow is minus 26 million. We are operating and we are generating cash from our operations, but at the same time we also took some strategic investments and also I think here we did a good job manage the working capital and Jasper will talk a little bit more about the cash flow later in the session. If we go to the next slide, you are familiar with those slides. I mean it's just One additional information, international again is growing on the non-Marex a little bit faster than the DACH region. And of course, I mean, I pointed out the market leadership in Italy. It is also driven by our success in Italy, but not only in Italy, we are growing in all of our other countries on the international segment. If we go to the next page, you can also see that the number of active customers Now we are at the level of 12.5 million active customers by the end of the year. We added 0.6 million active customers in the last quarter of 2024. So also great achievement on our customer development. And at the same time, we kept the NPS very high level of 69. Again, this is still one of our key metrics This is all about the customer and we need to continue to work hard on keeping that net promoter score up. If you look into the AOV or the basket size, I mean, of course you can see the first impact of the RX business. We have more RX orders coming in and the average basket size is increasing. It's now almost at 61 euros. If we go to the next page, You can see our very impressive development of the orders. But the overall message, I think it's still the same pattern that it has been in previous years. I mean, Q3 even has been a little bit better. Usually Q3 is a little bit lower. But if you look into 2024, we almost reached the level or we exceeded the level of the Q2. So great development. And it's the first time that we processed 10 million or more than 10 million orders in one quarter. also a milestone for this company. And as always, if you look into the share of repeat orders, still very healthy at a level of 88%. So having said that, I would like to turn this over to Jasper.

Thank you very much, Olaf. And thank you all for joining today's call. Very happy that you show your interest in the company. And we are very happy in sharing with you today our Phamacy Unsp&Adr Phamacy Unsp&Adr Phamacy Unsp&Adr Phamacy Unsp&Adr 25.6% pre-organic. So actually our growth accelerated in the fourth quarter on an organic base. So an increase of 1.799 billion last year to close to 2.4 billion this year, an increase of 572 million. If we look at the gross profit margin line, that is slightly down versus last year in quarter four, and it's more down Phamacy Unsp & Adr but we explained that also in the second part of the presentation later and in the full year that's a bit an apple and an orange because of the full year impact of the service. In selling and distribution as a percentage of sales in the fourth quarter you see an increase of the cost to above 20% impacted by our marketing and that we are really happy with the marketing that we have been spending. I hope will become clear when we show the second Part of our presentation and our overall numbers. And perhaps you are a bit surprised to see that here the full year year over year is a flat number. But there we have the big benefit of the lower significantly lower SMB as a percentage of sales of main insurance. Now a lot of mix. I will explain it in the other slides a little bit more. in expenses 2.9% and actually it improved in the fourth quarter to 2.8% of sales a year over year. That is flat. Adding all up, the adjusted EBITDA in Q4 was minus 0.7 and for the full year we generated 33 million of adjusted EBITDA, which you will see later. It's very close to our cash generation and that's why we adjust for it to get close to the cash that we generate with our businesses and it was in the range of 1.2 to 2.2 as we updated you on October 3 for the guidance for the year. If you go to the next slide please. So this is the gross profit margin. To the left the same number as we just saw already, so that is going down 0.5% because more of the profitable are X sales that we have. And on the right, you see the larger increase as we reported in the first two pillars. But actually, if you take out the full year impact of mainly service, it's a similar decline that you are seeing there in the gross profit as a percentage of sales. Apart from that, The result that you're seeing in the P&L is only because of the impact of mix. On the next one, the cost in total, the quarter four we already looked at. If you then look at the right hand of the slide and you exclude of our decision to increase the ERX marketing through the large opportunity that we have there. But it will also make clear, if you look at the total numbers, hey, how can a company achieve only such a small increase, seeing all the firepower that we showed in the ERX campaign? And that is really because, I'll give you just one example, that logistics, in our case, actually achieved a record efficiency and also across the group with automation, Phamacy Unsp and also the benefits of being the market leader we see that cost as a percentage of sales in our business is improving year over year. On the next one, this is about the DAG segment where I wanted to communicate a certain message on and then after that also international. So in DAG, so Germany, Austria, Switzerland, We are reporting the purple ones here in the segment reporting and that was last year in total 1.5 billion of sales at the margin, a fully loaded margin of 5.1%. This year we report a significant increase of the sales in part the full year impact of May reserves, in part organic growth, in part also because of the EOX addition that we have and we increased the 1.5 billion to 1.9 billion and a 2.6% margin. But if we now look at what we then define only for the purpose of this slide now here today as the established businesses, then I say, okay, in Switzerland, we had to do it together with Galenica and that's going really well, but also in Switzerland with the launch of RedCare.ch, which we did one and a half years ago, we have a strategic reset and growing there really fast. ERIX is also the growth that we have at the moment. You can see in the black graphs already that that is actually 1.1 billion in 2023, operating at a very solid 5 to 6%. And perhaps the term established businesses is suggesting that's a stable business, but that's not the case because also this business has been growing double digit before Corona, during Corona, after Corona, two years ago, last year. Phamacy Unsp & Adr because we have a continuous growing base in our core propositions of active, happy customers. We have the most comprehensive proposition and are a clear market leader in Germany and in Austria. And later, you will also talk about the proposition that elements, of course, you can order same day, you can order next day. We have the assortment of the marketplace. We have all the other things that you will discuss also later. And with that, we always have internally the expression, you need to run to stand still. So we invest in our proposition continuously to continue to aim to have the best proposition and expanding our market leadership. This segment well above 1 billion is of course, cash generating and is continuing to grow really fast. In international Actually, all the numbers on this slide are the same numbers that you can also find in our annual report and our interim reports. But I just put them on one slide to emphasize what is happening in international. And that's also because in the second part, we will dedicate a lot of attention to ERX, how great the developments are. So I took the opportunity to also show a bit of our other businesses here. So in 2020, we had 150 million of sales in the Netherlands, Belgium, France, and Italy combined. And in only four years, we've almost tripled that to last year, close to 450 million. And at the same time, you see that our fully loaded, including everything, marketing, overhead, everything that we can allocate, an adjusted EBITDA margin of minus 9.8 in 2022, Then minus six and last year we improved with 2.4 percentage points to 3.8. And as we also disclosed in the segment reporting before overhead, so it's also in the annual report, you see that last year you had at the first time a positive result before overhead for the total international segment of 1.3%. What do we have in international? We are already for many years the market leader in Belgium. One out of the four households We have an over 90% brand recognition in Belgium. And actually after the big boys like Amazon and SHEIN, et cetera, we are in the top five of leading websites in the country. And then you gave it already. Now, in addition, since 2024, also market leadership in Italy. The next slide, back to the total group. in cash balances, including what we have in fixed deposits. And at the end of the year, we had 178. From the left to the right, we got to the minus 26 million. We were generating 32 million of operating cash and had a minus 3 million in working capital. With the growth that we achieved as a company, also knowing that we had some more receivables related to ERX, it is showing that the working capital made a great improvement also in the past year Thank you very much. Thank you.

So now we would like to give a little bit an update on strategy. And we would like to focus on two topics.

First of all, talk about the overall strategic positioning of the company.

And then secondly, get into some of the great key metrics of our Rx business. And we think at the start of 2025, it's a good timing to also take some time to talk about Our overall positioning and also why we think we are set up in the right way to also have a great 2025 ahead of us. On this slide, you will find the story for, let's say, the next six slides. So we'll not spend so much time on this one. But the overall story is, I mean, we are Europe's leading one-stop pharmacy with a unique and broad customer value proposition. We'll talk about this later. We also best positioned as the leading pharmacy to accelerate market leadership in Germany. We are gaining RX market share in Germany month after month, quarter after quarter. We tripled within one year. We have now more than 1 million active RX customers in Germany in 2024. And our cohorts, our RX cohorts, already outperform our strong and really strong non-Rx cohorts in year one by a multiple. Last slide will be about the unit economics also to show how both businesses, the non-Rx business as well as the Rx business can fuel our midterm EBITDA guidance in excess of 8%. So if we start with the first one, again, we think we are Europe's leading one-stop pharmacy and we are great positioned and I would like to take some time to explain to you why we think it's like that. So if you look into the pharmacy part of it, we offer Rx, OTC and BPC products. And so we have a really huge wide range of assortment here in the OTC, BPC, Rx. But on top of that, we also have, let's say, what we call We are known in the German market for if you really want to find a product, you need to download our app and you can check on that app. So if we don't have it available, probably difficult to find that product. And on top of that, we have, you know, we always call this the marketplace. But what is really the marketplace? The marketplace is we give sellers on our platform the opportunity to sell additional product We call it health-related products. So this, for example, is medical supply, baby food, diapers, whatever you can imagine when you think about a healthcare-related product assortment. This is what we offer on our platform, and we have currently more than 140,000 SKUs being offered on our platform. So overall, we have really the widest assortment possible. At the same time, We also have great enhanced pharmacy services, how we call them. And I would like to give you at least two examples here. The one is really when it comes down to the Rx. It is the check of interactions and double medications. So, you know, we have something like an electronic health record from all patients. So we have all the orders from the past, including also the OTC and BPC orders. And we do checks on that. Phamacy Unsp ahead of the curve and most of our products are digital. If we then think about the delivery, I mean, so we have all the options. We have the next day delivery, we have the same day, but we also have the pickup. So next day and parts of same day we do via our own pharmacy here in the Netherlands, but we also have a wide network out there of brick and mortar pharmacies in Germany. So currently with our network, we are covering already more than 30 million Germans. And we are increasing this network while we speak. So if we combine this all together, it's about assortment. It's about great prices on OTC, PPC. It's about convenience. Those are the key success driver for our pharmacy platform. And then on top, we have what we call the retail media business. So No, we offer our partners. So that's the pharmaceutical industry as well as the sellers. They can use our platform and our reach in terms of customers and traffic to offer tailored solutions towards our customers. And they really like that. So that means we have, of course, the margin we make out of our own business. We also have an income stream out of the marketplace business as well out of the retail business. And from a customer perspective, it comes all together. It is a one-stop pharmacy. You have all the products and you just get, and you can pay all the things in one. So that's why we call it a one-stop pharmacy. If we now go to the next slide, we would like to talk a little bit about the positioning of our pharmacy in the German market. Because we think we are best positioned as a leading pharmacy to even accelerate our market leadership in Germany. Let's look into this wonderful metric. So you see three layers here. Three layers, how you can actually act in the German pharmacy market. And then there are also three product categories, the OTC, BPC, DRX, and then the combination, the OTC, BPC, and DRX. If we start with the layer at the bottom, which is the easiest one. It's the brick and mortar pharmacy layer. We all know that one. I mean, there's a ban on foreign ownership in Germany. Only pharmacists can own a pharmacy. And you know, they don't really have a strong brand or something like this. They have their local pharmacy. Sometimes it's called Brunnen Apotheke or Beeren Apotheke or whatever it's called. So this is just a local business. And then we get to the next level. which we call the platform level. And let's look into the platform level. On the one hand, this is the platform OTC VPC box. There we have online retailers or drugstore apps or retail apps. So different retail players who either have a store out there and then have an app on top or just an online retailer. And they can sell OTC, EPC via online pharmacy sellers on their platform. So there's a large competitor of us who has been doing this for 10 years. But you know, I mean, besides of him doing that, I mean, we have always built our business very strongly with all of the great numbers Jasper just presented. So then let's look into the next one. The next one is DRX. So on the RX platform, you can see that there are players like the apps from the Payers or the Gematik app. But I mean, on those apps as a customer, you can place an RX order, but I mean, you do not have the full advantages of our product available. So what you can do, you can place the order, but you don't get any availability information You don't get any opportunity to buy OTC on top and you also can't do a payment on that one. So it's almost like you just leave your script there and somehow you will get a delivery from the pharmacy. So we don't really see a lot of orders coming to our pharmacy via that channel. So then that's left on the right hand side, the platform business for OTC, BPC and RX. And here we saw in the last year two platforms coming up, and they are more platforms organized by the brick and mortar pharmacies. So they are more a digital entry point for the brick and mortar pharmacies. This is, from our perspective, a difficult business model because, again, it's highly regulated. So if you want to do something like this, you have to list all of the German pharmacies and the business model on an RX or on a script. So overall, this platform level is not positioned as a pharmacy, has been out there in the past with sellers of OB and it has not hindered us at all to really grow and continue to grow in the German market. And then there's this third level, which is the level of the online pharmacies. Here we see two different types of online pharmacies. On the one hand, you know, based on a ruling from the European Court of Justice of 2003. OTC and BPC online pharmacies can offer products in Germany. And then there is only a very limited number of countries from which you are allowed also to send Rx into the German market. So the Netherlands are one of those countries. And in the Netherlands, you even have the advantage that you can give discounts on our X products. So if you put this picture all together, we are positioned in the upper right box. So we can do the OTC, the BPC, and the Rx. We can position ourselves as a pharmacy as opposed to not being a pharmacy. So that means we feel really comfortable to accelerate our market leadership in the German market. If we go to the next slide. Let's get into some more of our metrics which we can measure. And let's talk about the market share in the first place. So what you can see here, we have tripled our market share within one year. Now reaching in February 0.82% market share. So steady over time, we are building this one. And please keep in mind, we are showing here our total RX numbers. and also the total Rx market. You know, there is this market of GKV, statutory insured and PKV, private insured and in some cases there's an e-script and in other cases there's still a paper script out there. So if you would just look into, let's say the GKV market where we have the e-script and then looking into our e-scripts we receive and compare Of course our share already is a little bit higher because the dynamic is with the e-script and not so much with the paper script and the privately insured because privately insured right now they don't have an e-script. Nevertheless more important to us are the number of customers and if we can go to the next page you can see here you know At the beginning of the last year, we already started our marketing campaign and then we increased it over the time. And we have a couple of objectives on our marketing campaign. First of all, I mean, we have to do some kind of education. So we have to talk about the carton solution. And of course, secondly, we want to establish Shop Apotheke as the leading brand, which worked out pretty well in 2024. And then the third objective, of course, is to generate first-time customers. First time Rx customers for AppCare. And we decided to show you the first time or to give you an insight also what that really means, what are the results of the campaign. Because there's a lot of speculation on downloads of app, monthly active users in the app, and that's all fine. And we also look into those numbers internally. But for example, I mean, an app download could also be an OTC customer who's downloading an app, or a monthly active user. would also be an OTC user. That's why we decided to show you the most relevant numbers from our perspective, and those are the active Rx customers. And what you can see, again, we doubled this one in only a couple of months, and there was an acceleration in the second half of the year, of course, also fueled by our dedicated Rx marketing campaign. So overall, we think it's important to show you Those numbers so that you see what we have in our mind, the marketing campaign. It works out pretty well. We are building the active customer base and we are currently continuing to grow our customer base. If we go to the next slide, this is actually a slide we love a lot. We love a lot, I have to say, Jasper. Because I mean, let's start with the key message here. And the key message is, you know, The average new customers of cohort of an RX cohort, which we acquired in the first quarter of 2024, has a significantly better performance than the already good non-RX cohorts we acquired in Q1 of last year. So in terms of sales, we are 4.5 times higher on the Rx cohort and on the non-Rx cohort. And on the gross profit level, the factor is still 2.7. So, I mean, we only have now one year of actuals in, but I think it is important to share those kinds of data because it's not making some kind of assumptions about a customer lifetime value, what's going to happen in five years from now or so. This is really, those are hard facts. This is what it is all about. and you can see strong non-Rx cohorts and significantly stronger Rx cohorts. Maybe, let me try to explain it in the detail if it's not completely clear based on the picture. So what we have done is, I mean, we looked into the Q1 of last year, looked into all of the new customers we received on the non-Rx side and then looked into the sales those customers generated in the first quarter. Could be that they placed one order, could also be that they placed a second order, those new customers. For example, the one from January placed an order, a second one already in March. So that means then we have the sales and the number of new customers in the non-RX cohort. And then we build just a sale per average customer of that cohort, and we index that one at 100. And it's the same exercise, of course, we did with the Rx. And what you can see immediately already in the first quarter, the RX cohort is stronger. I mean, we would have expected probably something like that because of the higher AOV, but then you can clearly see how it's developing over time. And the main driver for that is, of course, it's interesting to see, you know, when you require new customers, not all of them return, but what we can see on the RX cohort, more customers return than on the non-RX cohort. And then secondly, what really kicks in is We have a high share of Rx patients with chronic conditions. And you know, they have a significantly higher AOV, but also a significantly higher order frequency. And if you put this all together, already after one year, you can see the sales are 4.5 times higher. And of course, I mean, that is just the beginning of it. This of course will continue, so the gap is going to widen over the next quarters, Phamacy Unsp and also the next years. And the similar pattern is on the gross margin. So putting this all together, we are happy with our non-RX cohorts because that is what you showed, Jasper. It is working. We already have fully loaded an EBITDA about 5% in established markets in Germany and Austria. But we put something really great on top here. So overall, it confirms Our marketing strategy was the right one because we acquired a lot of new customers and we see based on one year actual data that the cohort model works. If we now go to the next page, we would like to show you also how this all can play out. So how can we get to the midterm EBITDA gain guidance in excess of 8%? So let's have a look into the unit economics on the non-Rx order. as well as on the RX order. So let's go line by line. If we start with the AOV, you all know that we have more, something around 50 euros on the non-RX and more than 100 on the RX side. So we are starting off with an AOV which is more than twice as high on the RX side. If we then go into the gross margin, very interesting what you can see, the absolute gross margin on RX is a third higher than on non-RX.

Yeah.

Percentage-wise, it's lower. Percentage-wise, we are on almost 30% on the non-RX and 18% to 22% on the RX. And I don't know if everybody of you is familiar how it works on the margin side on the RX. It's regulated in Germany. So what you get is you usually get, or you always get a fixed amount of money for each script you're handing in with a payer. And then on top, you get a percentage. which is then calculated based on the value of the product. So that means the higher the value of the product, the more margin absolutely you get. But of course, the higher the value of the margin, the higher the value of the product, the lower the percentage, of course, becomes because of the fixed block in it. What we currently see based on the customers we have acquired, and again, most of them they have chronic conditions, currently we see gross margin coming in the area of 18% to 22%. If we then look down all the way on the cost, let's start with the variable cost. Variable costs are all of the costs except marketing. So what we can clearly see here, the variable costs are almost comparable. I mean, the logistics costs as well as the last mile costs are comparable. On the Rx cohort, we have an additional step, which is the pharmaceutical checks. Absolutely, the variable costs are a little bit higher. But on the other hand, percentage-wise, it's lower. And on marketing, we see a similar pattern. I mean, looking now back into the cohorts we acquired on RX, we can clearly see you almost don't need marketing once you have them, because they love the service so much. So we see that the marketing cost to keep an RX customer is lower, absolutely an 8%. So that means both cohorts can very well fuel our EBITDA guidance in excess of 8%. And if you then put on top the marketplace business, which I explained earlier to you where we also have an additional revenue stream, you can clearly see both areas are playing and fueling our midterm EBITDA guidance in excess of 8%. So having said this, I would like to turn over to Jasper.

Thank you. So we're looking even further ahead now. So after the great results that we saw as we achieved the past year, this is such an important slide that we are having here because the last year we expanded our capacity because of the success in Italy. We also shared with you already that we are building distribution capacity in the Czech Republic, but this is something where we are sitting here in Zevenum. We started a major project in the infra logistics here in Zevenum. And this will not only double our capacity that we have in total at this location, but it will also significantly reduce our costs because of much fewer labor per order. So it's a highly automated solution. We selected the world's best technology firms for this. Phamacy Unsp & Adr We finance that through our existing cash balances at the moment, but very likely, because it's such a good collateral, we will be replacing that by a lease anytime soon. Fast payback, and we're planning to go live, operational parcels from the automated system very early in 2027. And if we then go to the second and last slide, which the guidance for the current year is, I'm reading out what's on for this year a total sales growth in excess of 25%. So in other words, we are not expecting any slowdown versus what we achieved in the exceptional year last year. In Germany, we expect that the RX will roughly double to above 0.5 billion. NX for the total group, let me say, in excess of 18%. and we want to do so with an adjusted EBITDA margin above 2%, namely between 2% and 2.5%. And all those four elements are full-year guidance, but in Q1, and those that know the company and the many-year seasonality because of our internal planning, but also because of the seasonality of the quarter, we don't know it for sure, but it's likely that Q1 will be somewhat lower, also meaning that other quarters will be somewhat higher, probably, Taking now a helicopter view looking at this is that I had to think back of the year 2021. We then crossed the 1 billion. It was 1 billion and 60 million. That was 2021. And if you add all the numbers that you're seeing here, it seems to be that we are approaching in the current year, the 3 billion already. So for the coming year, we expect a double name of the ERX. And as an outcome of the total, what we think is the best value creation for the company, what we are doing there, we think it will be a margin minimally at 2%. Of course, if things happen, we will act upon it, as we always do as a company. But this is at the moment our best expectation for the current year. And with that, I think we should rapidly go to the Q&A. If there are any questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press and on the touch-on telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press and . Participants are requested to use only handouts while asking a question. In the interest of time, please limit yourself to two questions. Anyone who has a question may press and at this time. The first question comes from Aizia Noor from Morgan Stanley. Please go ahead.

Hi, good morning. Thanks for taking my question. My first one is on the RX sales ambition of more than 500 million euros. What implies that you achieve about 0.9% market share for the year when you are already running at 0.82% in February? So is it fair to say you are being conservative here and do you think there could be some volatility? Just, you know, give your color on the downside risks that you're building into this figure. And my second question is on the gross margin. Thanks for this unit economics data. Very helpful. Could you describe a little bit the drivers of the 18 to 22% range for the ERX cohort between pricing mix growth? What takes it to the bottom and upper end of that? And would you expect your gross margin to gravitate towards this kind of 20% for 2025? Thank you.

I said, yes, but we want to start on the first one. OK, yeah, yeah, I said good morning. Also for myself. We didn't speak to each other yet, so thanks for your question there. No, it's not. It's our best expectation. If you give me now a document where I can sign and you will have half a billion of sales assigned immediately. You have to do a lot of hard work for that, and we're looking forward to that. We are not conservative there. But thanks for the implicit compliment that we're almost there, you say. I have to say that the step up that you're really seeing from 0.66 to 0.82 from December to February, it's fair to say that this December number, that is a seasonality lower number of our market share. So that is a huge step up. Actually, December was somewhat lower than November was, but that's just seasonality. So now we are in total, this is our best expectation. And of course, always aiming for more, but this is the realistic expectation.

Good question on the gross margin, but I think you are looking forward to answer that. Yes, yes, we'd love to answer. I like the question on the gross margin. So there are many ways how we can get to the gross margin, also a reason why we currently still give a range. I mean, so some of the things are easy. You know, this is a business now we are first starting to get in, if you compare to the larger OTC and BPC business we have. So that means In terms of supply, sometimes you go with a wholesale, sometimes you get direct supply from manufacturers. So there's also a margin gap in between that one. So that is one of the drivers, the more volume you get, of course, the better we become also on purchasing. The second one is, you know, there's a share of OTC products also in the RX basket. And of course, I mean, that share can go out of time. As you can imagine, that is part of our product where we offer also OTC and BPC products to our customers. So that is a reason why there is still also movement in this one because we only had one year of learning and we haven't reached what I would call the ideal share of a mixed basket. And then, of course, the main driver is again this reimbursement scheme in Germany. You know, I mean, you usually get a fixed amount, which is eight euros something, and then it's a little bit of a subtraction from that. And then you get 3% on the product value. And as you can imagine, if the product value goes up, of course, the absolute margin goes up, but the percentage goes down because the eight euros something, they stay where they are and the only Phamacy Unsp & Adr but it really heavily depends on which kind of products are they sending in. Is it more on the generic side and the price is lower, so the percentage margin is higher, or is it more on the higher price items and the absolute margin is higher but the percentage is lower? So this is something which is ongoing and therefore we have to give a range. We have to give a range. It's only really the first year of experience we have in this fast-growing area and then Maybe by the end of the year we will be much smarter, but in any cases it's good enough to to fuel our above 8% FTA midterm guidance.

That's very clear. Thank you very much. The next question comes from Christopher Johan from HSBC. Please go ahead.

Phamacy Unsp & Yes, thanks for taking my questions. First, is it possible to get a bit of I noticed there wasn't anything in the prepared remarks on the Agaha ruling with respect to bonus advertising. I know you send out a PR after the after the ruling a couple of weeks ago, maybe you could give us a bit more color as to you know what your what your thinking is on that. And then second question, I was curious on Belgium. I mean, you've said this a couple of times now in a couple of calls, like a quarter of the population being a customer, that would suggest that this must be a somewhat stable business with respect to being quite mature or probably still growing. Is there anything you can share on profitability for Belgium? I know you're probably not keen to talk about individual markets, Phamacy Unsp & Adr Phamacy Unsp Phamacy Unsp & Adr I don't know, in 2030. What's your thinking about it? Because obviously, this mid to long term thing has been a rolling target for Fakwa Duval. And the question is, you know, at what point should, you know, is it going to be a realistic expectation?

Yeah, that's it. Thank you.

So I will give it a try on the first question and then hand it over to Jasper. So, I mean, your question was on the ECJ ruling. And so first of all, I mean, we are really happy with the ruling. It is the second time that the European Court of Justice, after the first time has been 2016, allows a bonus on our ranks. So that is great, and that has also been our statement in our press release. And you know how this works. I mean, the European Court of Justice only receives specific cases from a German court. They get forwarded to the European Court of Justice, and from there, they find their way back to the German court, and then that is what is now going to happen. And I think we should not really speculate about what this means in detail. Again, the overall direction I think is clear. We can give a direct bonus on our X. This is what we are really happy with. And then let's see really what happens then on the German side. And then we will, of course, react accordingly to that so that we are always in line with the actual rulings. That's all we can say at this point in time. The rest would just be speculation. Again, we are happy it's a confirmation of 2016 and then let's take it from there. Jasper, do you want to go for the question number two? I will do that.

It's on Belgium. I can confirm what you are saying, but I cannot confirm the second part, because actually, though we indeed don't talk about individual countries, so we'll also not do that now, we have the segment reporting. I can disclose here that we continuously grow double-digit in Belgium. And I also can say that the penetration numbers that we are having here, despite all the growth that we are seeing here, are much lower than we have in Germany at the moment. And in Germany, even penetration is still increasing. So there is ample room to grow. Phamacy Unsp & Adr We need to scale. We need to be larger. And then in the end, we hope we will get to the 8%. If we are saying that our established businesses are doing to 5% to 6%, indeed what you are saying, there is a lot of marketing included in there. So you can estimate what the contribution margin is there. So we could be within a month, we could be close to the 8% if we would like to do that. But we are so convinced of the opportunity in total Europe and eHarex. Phamacy Unsp Adr Phamacy Unsp That's a decision that we can take when we'll achieve it. And the thing what you are seeing now is that we continue to grow very fast in combination with the margin improvement. And I think that's the fastest value creation that we can do at the moment. But I'm repeating myself a little bit, so sorry for that. But I hope that the other numbers are also showing the attractiveness of the contribution margin in our case. That's clear. Thanks a lot. Thank you.

The next question comes from Jan Koch from Deutsche Bank. Please go ahead.

Thank you. Thanks for taking my questions. My first one is on your RX business. You mentioned that you have more than a million of active RX customers by the end of 2024. Could you share with us how many of them have a chronic disease? And then a second question also on the e-prescription market. Is there any update on the e-prescription for privately insured people in Germany? I understand that the market opportunity is a bit smaller, but it should still be a tailwind for you. And then finally, on your marketing strategy and without giving your competitors too much information, what are the key learnings of your intensified marketing campaign over the last few months?

I mean, look, we do not really want to give so many insights. I love the questions and I can understand them, but we do not want to give so many insights. I mean, we try to say that there's a high share. I think that's what is on the pages, the high share of patients with chronic conditions, because I mean, Phamacy Unsp-Adr So there's always a coding of the product and if you look into this one you can pretty easy if you're a pharmacist and even if you're not a pharmacist you can differentiate it is something acute which may be a pain killer or something like this or on the other hand if it's something more chronic which is maybe blood pressure sugar diabetes whatever it is so it's easy to to see that therefore We can identify a very high share of chronic conditions, but we do not want to give any more, any more details into that one. I think the second question, if I recall it right, was on the private insurance. So a business. Yes, an interesting question. You know, overall, the market share, I mean, you know, 90% of the Germans are so statutory insured, 10% are privately insured. So therefore, The most relevant market is the PKV market where we have the e-script and where we are really happy. To my knowledge, the PKV is still lagging behind. So I haven't seen a schedule or, let's say, from a regulatory perspective, a push where you have certain deadlines when to introduce this. They are working on that. But to my knowledge, there is not such a fixed date or something like this. At one point in time, it will happen. And of course, we will also try to get into that business, which we did also in the past. But as of now, not to my knowledge, not a fixed date to have eScript on the PKV. And then the third question. Yes, I forgot the third question, but I thought it's maybe a little bit also on your side.

No, and you placed it in the context already, Jan. Indeed, that's an area where we sometimes shed some light on, but we don't want to shed too much for obvious reasons, I would say. It has been a very exciting year. What's the key learning of the marketing that we have in total? Well, in the end, you need also to count your blessings. It is working. So there is a technology change, something with an NFC and a chip and et cetera. and how are you able to explain it to your customers? Well, you see the results that we have. So what's the key learning is that we are apparently capable of educating the people or at least they place their trust into our hands to place their order with this digitization that we see here. We see that if we then also subsequently deliver on what people hope that we will do, we get very high scores, very satisfied with the additional service Stores that has also this customer journey. Your question was to disclose the learnings, but I leave it there. We continuously learning also. Thank you. That's very helpful. Thank you. Over time, but for me, it's good to take one.

The next question comes from Christian Salis from Hauk and Halfhäuser. Please go ahead.

Hey, everyone. Thanks for taking my questions. I'm giving the marketing a try again. So I understand that you're not disclosing the exact marketing amount. But could you maybe just give us an indication, for example, whether your marketing ratio has increased year over year and percent of sales in 24? Or has it remained rather stable? And then also on the quarterly run rate? So would it be fair to assume that you obviously have increased marketing quite significantly in Q4? And then during Q4, maybe it felt it was maybe a little bit too much. And now you are scaling back a little bit more to a normalized level, which would maybe be in between the Q3 and Q4 levels on an absolute basis. That would be interesting. And then also, in light of the recent ECJ ruling, how is our exponents going to play into the marketing strategy going forward? Thank you.

Well, I mean, those two questions are wonderful questions, I have to say. I mean, they're really to the point. But unfortunately, we really do not want to answer them in detail yet. So let me give it a try on the first one. So what we try to do is, I mean, and we always said that we are very agile in terms of marketing. So we are looking into different channels, different communication messages we have here. Phamacy Unsp & Adr We are working and fine-tuning on this quarter after quarter and month after month. So, if possible, we do not really want to give more insights how we steer that. I think that is one of our success factors. On the second part, the bonus, I mean, I think that's also a good question. So, you know, we have a voucher out there. It has always been out there and it has been confirmed by the ECJ. So you get for the first order, you currently get a direct bonus on your RX. So if you have a co-payment or in Germany, there's also some other things like called a Festbetragsdifferenz. So that is a very regulated, detailed information on the pricing, but nevertheless, something a customer potentially has to pay. I mean, that is in the details of our vouchers. So it's out there for new customers. So we have been using this in the past and we are currently using that. And then, of course, the question is what else do we want to do on the bonus side? And this is, again, something which we do not want to display here because that is sensitive information. You know, we are really happy on what we have today and we have established a business model currently where it's more driven by our great product as opposed to by price. But we have all the options on our hand and then you will see once we act on the market. But so far we have this voucher for new customers and it is in line with the ECJ Williams.

All right. Thanks so much. And then just a quick follow up on the paper RX business. So are there still people who are really sending in the paper scripts to you? And what's been the PRX development over the last quarter? Was it stable or is the share decreasing again or still increasing?

What was the last question? Increasing or decreasing?

No, if the paper RX share Is it stabilizing or does it continue to decrease quarter over quarter?

We will keep our pharmacy services here open until the last letter in Germany will be sent to us. So we took that principle, so everybody who wants to send in a paper can always send in a paper. All the privately insured customers, patients, they are still doing that. Also some of the socially insured, but I can say it has really, because of the customer preference, Minimum percentage that we have in the socially assured, but because of the paper file we still have and as I just said, yeah, so we have some that the majority of the people they really want to benefit from not walking to the letterbox and waiting, but placing the order immediately after improved journey where they can also order other things at the same time. See availability checks and other things so. Answering your question directly. Very small percentage is social. Perfect. Thank you so much.

The next question comes from Olivier Calvet, UBS. Please go ahead.

Yes, good morning, Olaf and Jasper. I have a few questions left. The first one just on German Rx. So 500 million is, you know, close to 0.9% market share. Just as a follow-up to the first question. Do you expect any headwinds on the German RX growth or slowdown in market share gains versus last year? Because if you assume your February market share holds, you're already at 450 million. And your 1 million active RX customers, could you quantify the share of your customers that are repeat customers maybe? So that's the first question. Second question would be on, you know, sort of, you're showing a very impressive growth in non-Rx across DACH and international and have done so historically. But obviously we've seen, you know, competitors' interest in the space. Would it be fair to assume that your, you know, non-Rx business is broadly evenly split between medicines as in OTC versus non-medicine, so vitamins, BPC, stuff like that? And then finally, on the free cash flow, I understand that you don't want to give, given the dynamic situation, a free cash flow guidance. But I was just wondering if you could help us with the building blocks in terms of working capital dynamics now that you've seen about a year of ERX customers. What is the working capital dynamics in RX specifically versus non-RX? and CapEx guidance for the year. So if you could help us a little bit with the phasing of that 95 to 105 million project that you have in 7M over 25 to 27, that would be helpful.

Thanks.

500 million.

Yeah, yes, yes. So I mean, maybe the first question is, if I recall the first question right, there's a slowdown Phamacy Unsp&Adr Phamacy Unsp&Adr Phamacy Unsp&Adr and in terms of looking into our overall guidance, I think that's also what Jasper already pointed out. I mean, look, I mean, if you are right now, we are below then the, I think you mentioned the 0.9, we think it has to be higher to reach our guidance, but nevertheless, right now we are lower and we still have to bring in The solution becomes more and more popular. Then there was a second question on competitors entering the market. So, you know, I was trying to explain that there have been online platforms out there for more than 10 years. And on those platforms, there are online pharmacies offering OTC and BPC, and that's fine. It's always been the case. So, and especially there's one Phamacy Unsp Adr but to us it's also not so relevant because I mean those are just platforms not really pharmacies and we have been growing even despite them offering OTC and BPC and so then there was I think some more questions which are probably they work better with you Jasper, is that right? Yeah I hope otherwise you add.

Hi Oliver, good morning. Yeah, the number of repeat customers in the 1.1, we will, you will understand, not disclose, but looking at the cohort information, you will see that they are better than we have seen in Nolarex. And in Nolarex, we are really happy with the frequency of our customers. So I will not disclose any additional information. Then your question about everything but RX, how is the split between OTC and BPC? Interesting thing about that, that it's very real driven. So in some countries we have Phamacy Unsp & Adr Phamacy Unsp-Adr You talk about working capital dynamics there. On one hand, you see the underlying continuous improvement that we're having as a total company. At the same time, you see that the receivables from the insurance companies might increase somewhat, but it's also not unlikely that we have a certain solution for that. But we will see that in the future in total. And as to the investment, the base scenario, as we just said, that is that we will be spending this money in the coming three years. But I also added to it that it is also quite likely Phamacy Unsp

The next question comes from . Please go ahead.

Hello, thank you. Congrats on the results and sorry to come back to this topic again, but I'm trying to understand how you're thinking on this topic regarding the European Court ruling. Is it not fair to assume that there will be some regulatory headwinds because right now, and then please correct me if I'm wrong but you are in the complete opposite position as over one year ago when the NFC card link was not available and the company yeah threatened to sue because of unfair disadvantage which you know correctly so was right yeah but now it looks like that the Netherlands based foreign pharmacies have an unfair advantage over the local pharmacies who are not allowed to offer these Rx discounts. So don't you think that there could be some regulatory headwinds and this could even reignite the whole discussion about prohibiting mail order Rx in Germany, especially with the CDU as the new government?

Yeah, thank you very much for that question. Of course, that has been a fundamental question for more than 10 or 15 years on our business model. And so let me try to give some insight into that. But on the other hand, we shouldn't start really a speculation. So as you said last year, I think, I mean, without Cardling, there would have been Phamacy Unsp & Adr Long outstanding discussion on the bonus is a different one because the key argumentation and also why the European Court of Justice has ruled twice in our favor is pretty easy. I mean there is a protection in Germany which is called the ban of foreign ownership. So countries from outside Germany are not allowed to enter that business because of the ban on foreign ownership. And so that means there is also discrimination from that perspective towards European pharmacies. And then on top, there's this fixed price regime in Germany on Rx. So it's a double protection. And that was one of the reasons, one of the reasons why the ECJ now will twice that to offset this disadvantage, yes, online pharmacies can offer a bonus on Rx. But I mean, I think, We shouldn't get too much into those discussions because, I mean, they are legal discussions. It's not helpful to have them here. But this is, I just want to show, I want to explain the difference between the discrimination on the access via NFC and the discrimination because of the ban of foreign ownership, which was ruled twice. And then, of course, there's always and has always been political discussion in Germany. It has been also part of this business model for more than 10 or 15 years. And therefore, of course, you saw what happened in the past. I mean, there have been a lot of attempts, sometimes also to put a ban on our business, but I mean, has never worked out. Right now, I strongly believe, I mean, there's a freedom of choice on pharmacy in Germany. So that means we are an established business also on Rx. It's something the customer wants. And therefore, I'm pretty confident that, of course, there will be a new government. Phamacy Unsp & Adr Phamacy, we are part of the solution. That is what we strongly believe and therefore we will always have this position when talking to regulators. But I also think we shouldn't speculate about what's going to happen with the next government. We don't have a new government right now. Overall, I can say, I mean, having been in that business, especially on that case for almost 15 years, I can say I feel really comfortable about our current setup and also forward locating I think the setup is ideal, and again, we are part of the solution and not part of the problem in German healthcare.

Okay. Thank you. Thank you for your insights on that.

The next question comes from . Please go ahead.

Yes. Hi. Thank you for taking my question. I have a couple of ones. I would like to take them one by one if I may. The first one is a quick one. You have this new slide in the presentation regarding the unit economics and you also showed the gross margin. And if you look historically, I mean, if you take the mix of the both businesses and you never disclose that exactly, but you can for sure say that you never reached, you know, these numbers like the 30% and the 18% on ERX. And I was wondering whether this has something to do with the sales tax, the Umsatzsteuer. It's a topic that we discussed a couple of times. So do you expect to reach these kinds of margins in either 18 to 22 at the 30% in non-RX after the sales tax or before the sales tax? And an associated question. Is there a sales tax actually on the ERX or not? Is it just OTC?

Yes, thanks. You want to give it a try and maybe I can help you then out on the ERX.

Thanks for your question. The numbers that we're showing here, for example, is by definition net sales, the way we report. So it's a gross margin as a percentage of net sales.

OK, thank you. Very clear. Then just to confirm, on the RX sales, is there also a sales tax, or is it just the OTC? I'm sure there is no one on the media service, right? But on the German RX, is there a sales tax?

Can you make me understand the background of the question that I can answer it better? I give you a couple of things. For example, there are sometimes floating around numbers of 65 billion to 70 billion market, etc. So everywhere we try to be as clear as possible in our market size that we in total define, we take the net sales perspective, excluding if any VAT that we have in total. And also in all the numbers that we talked about today, that is also always from that perspective. from us, the VAT is not a relevant one here. If you look at the total regulatory framework of the reimbursement of RX, in the total calculation, you need to take into account certain elements of it. So I don't understand the background of your question. Everything we show here is in line with how you, IFRS wise, accounting wise, should look at the numbers.

Yeah, the background is any I say if I put in the numbers that you state here in my model, then you know, my margin loads below because historically, the reported margins as in terms of sales, to take your gross profit has always been lower than the 30%. And also, presumably lower than the 18 to 22. In Oryx. So if I take just these blunt numbers, you know, then my margin explodes. That's just the background of my question.

Yeah, and it's probably in the past you were taking then a number which was including OTC NRX, I would assume, with a 30%. But I have to say, otherwise it's really, please also reach out to Investor Relations or me, because we can take this also offline, because it's a little bit detailed for me in this call to talk about it, if you want to clarify something. Yeah, yeah.

Okay, sure. I have two others, if I may. The first one relates a bit to Olivier's question. It's basically, he was asking whether you believe that ERX is no longer going to grow. I mean, of course, you said no, because the whole case is that ERX is going to grow. But I think his question was rather related to the 500 million of ERX. And maybe you can clarify, is this including Phamacy Unsp. Yes, but do you want to give it a try? But I think the answer is pretty clear. It includes

E-RX and PayPal Rx, it includes Gigafow and Picafow. So statutory insured and privately insured, it's all in. That is what we call our Rx number.

So for example, the 142% we had in Q4 was for E-RX, of course, much higher. Yeah, because it's adult. Yeah.

Okay. But then, I mean, then you have to be aware that if you do the math and this really implies that your new client growth in E-RX really goes down. But you also said in excess of 500 million. No, no, no, no, no, no, no, no, no, no, but it's not true.

But I think it's important to say that that is not our plan. We don't see something like this. There is no decline in new number of customers. It's the opposite. It continues. It works very well. So I don't know how you or why you want to make this up because we don't see it. We don't simply see it.

Of course, but my estimate is also 600 million, not 500. But anyway, the last question, I don't want to take too much time. Regarding adjustments, how large are the adjustments going to be this year on ABTA level according to your current assessment or estimate?

I look at the operator. This is really the last sentence we're going to say because we ran out of time, but I like to answer this one because it's very clear. Everything adjusted. totally into the details disclosed in the annual report. Super simple it is. It is only our every stock option program that you're seeing there in total. There's nothing there that we adjust to get to a certain number. It is to get to the cash generation. Last year, 33 million of adjusted EBITDA, 32 million of operating cash flow that we had there. Nothing like we adjust for this and that. It's only what I just said. And it's in the exact detail disclosed there. and it was just a couple of million last year.

Yeah.

Because we think it's a more relevant number than the fully loaded one. Yeah. So very small, but all details are described.

So what's the number? Six million or is it? It's in the annual report. Yeah.

Yeah. Yeah.

No, I mean for 2025, what's the question?

We guide them just a little bit only.

Yeah. Yeah. No, but the question was, what is going to be OK, you don't want to give your current estimate.

OK, yeah, but there's also nothing to hide, but I don't do. We don't have guidance on the on the adjusted on the on the on the on the adjustments, but there's not any reason to be think that it will be very different from this year. So I will take care. I don't know what current year number and with the growth that we achieve something like that. Yeah, yeah.

OK cool, congratulations again. Well done and thanks so much.

Yeah, thank you so much. Yeah, thank you so much.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Ola Heinrich for any closing remarks.

OLA HEINRICH Yeah, well, thank you very much. So, well, great questions. I mean, a lot of great questions. And that's why it's always fun. It's always fun, I have to say. Look, to us, I mean, 24 has been an exceptional year, but also this year is going to be a great year. So it's a lot of stuff going on at the same time. So we are really looking forward into this year. And then sharing with you next time the information, I think it's beginning of May, 7th of May or so. Yeah, we're trading a bit much earlier already.

And then 6th of May, we're here again.

So see you 6th of May when then maybe some of the questions You asked today maybe we already have an answer to that one. So thank you very much for joining and have a good day.