Redcare Pharmacy NV
Interim Statement Q1 2024
25th April, 2024 | 11:00 CEST
Transcript
Speakers:
Olaf Heinrich
Jasper Eenhorst
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Olaf Heinrich | Thank you very much and good morning, everybody. A very |
warm welcome from my side. Let's have a look into today's | |
agenda. We would like to first have the financial | |
performance, then an update on business and strategy, and | |
then by the end, outlook and guidance. | |
Let's start with the financial performance first. Q1 2024 | |
highlights. We continue really strong. Very strong sales | |
growth. Including MediService, we're up 51%. But also, | |
organic growth excluding MediService shows a strong 90% | |
growth. Also, if we look onto the non-Rx growth, we're at | |
20%. | |
For an online company and also an online pharmacy, it's | |
always important to make the jump at the beginning of the | |
year. That is always the quality of the customer file which | |
has been built over the past plus our capabilities to bring in | |
new customers at the beginning of the year. We are really | |
happy that we achieved that jump up to 20%. | |
As you all know, the E Act became mandatory beginning of | |
2024 in Germany and we saw a great adoption rate of above | |
75%, all of the scripts being e-scripts. Because of that, we | |
already increased our marketing activities in Q1. | |
We did this to make sure that in the transition from paper to | |
e-scripts, we keep our existing customers and at the same | |
time, of course, we also want to learn how to acquire new | |
customers and convert also existing OTC and BPC | |
customers. As a result of that, we ended up on a 2.1% | |
adjusted EBITDA margin, being up 33% compared to last | |
year. | |
If we go to the next slide, you can see that our strong growth | |
continues in both of our reporting segments. For sure we | |
can see in DACH, that's driven by MediService, the huge | |
increase, because we only consolidated MediService last | |
year in May. But even if we look into the non-Rx, we can see | |
strong growth in both areas and, again, international being | |
a little bit stronger than the DACH region. | |
Please keep in mind, we achieved this great growth despite | |
the fact that this year we had an early Easter effect. We saw | |
a slow-down of the sales development in the last week of | |
March of this year. Nevertheless, we achieved those strong | |
growth numbers. | |
Can you go to the next slide, please? This is also reflected | |
in the number of active customers. You can see here we | |
added 0.4 million active customers in Q1 and now adding | |
up on 11.2 million active customers. | |
Also, if we look into the net promoter score, we are able to | |
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keep this at 70. To us, this is not just a number. To us, this | |
is the most relevant KPI we have in our company. Therefore, | |
we are proud of that we can continue to be high on the NPS. | |
Also very good news on the average basket size, it's up | |
compared to the first quarter of last year. Of course, this will | |
also help our P&L. | |
If we go to the next slide, you'll see there's the jump up I | |
referred to earlier. In fact, we also see it in orders here. Right | |
now we are processing almost 100,000 orders per day from | |
our warehouses on average and still we keep that very high | |
NPS of 70. Also, again, the repeat rate is at 87%, so | |
confirming our healthy customer file. | |
I would like now to hand over to Jasper. | |
Jasper Eenhorst | Olaf, thanks very much and good morning to everybody also |
from my side. I'm happy to present the numbers of the first | |
quarter of 2024. | |
As Olaf already shared with you on the prior slides, we | |
achieved new records as to the number of orders in quarter | |
one. Quarter one was even up from the strong quarter four | |
that we had and that's what we also see in column two, three | |
and four of this table because that's the quarter-over-quarter | |
comparison. | |
The good thing is in both quarters MediService was | |
included, but of course, comparing the first two and fourth | |
quarter, each of our quarters is having its own seasonality, | |
so it remains a bit of an apple and an orange. For example, | |
the first quarter of the year is having fewer days than the last | |
quarter of the year. | |
But still, having said all, our sales in Q1 were up 5.4% | |
compared the prior quarter, a continuation of the growth of | |
our active customer base and our total number of orders, | |
and even, very helpful, the slightly increased basket. | |
It's a bit of an apple and orange because of seasonality, but | |
still looking through it from a helicopter view, actually our | |
gross profit margin was slightly higher than it was in the | |
fourth quarter. | |
Our total SD&A as a percentage of sales was slightly up. | |
Seasonality, but also impact of what Olaf referred to already. | |
Some additional communication after we saw that very rapid | |
increase of e-Rx in Germany. We took that momentum. All | |
in all, a 12 million adjusted EBITDA in the past quarter. | |
If we then go to column four, five and six, the year-over-year | |
comparison, Q1 last year compared to this year, from | |
seasonality perspective, totally comparable, except for | |
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there's a slight shift in Easter, but that's going towards only rounding. But, of course, last year MediService was not included yet.
But the total growth of the company, including everything from P&L, 70 million last year, it was up to 560 million this year, an unrounded increase of 50.6%.
If we then look at the adjusted EBITDA margin, that was growing strong also this quarter despite the fact that we did some additional marketing and communication campaigns and ended at 2.1%, which was 0.3 percentage points lower than the prior year.
But with the fast sales growth and this margin, we generated a couple of million more adjusted EBITDA in absolute terms. So, 3 million up in adjusted EBITDA and for clarity's sake, as always, the fully loaded EBITDA also there and that increased even by 6 million, reflective of the fact that our adjustment went down from 4 to just slightly above 1 million this quarter.
The gross margin year-over-year, minus 4.3%. The cost performance, plus 4.1%. Simply said, it's only mixed because of MediService and for that reason, on the next slide we give this clarity.
Here you see the gross profit margin and on the left side you first see the 27.7% going down, but if you take an apple-to- apple comparison, then actually, and we're very happy with that, our core business actually improved by 0.3% compared to last year. So, the gross profit margin increased in combination with the very fast increase of our sales. So, very good. Much more gross profit in absolute euros.
You can go to the next slide. Here it's the same representation. The first two columns I made apple-to-apple, so that is excluding MediService of this year. You see there a slight increase only of around 0.3 to 0.4%. Totally explained by a slight increase in marketing because of the opportunity we saw in Germany and actually underlying something that we are very happy with.
Because we, as you see with many companies in the entire world, are also faced with inflation, for example, in minimum wage rates in Germany and in the Netherlands. But we as a company have been able to fully offset those cost inflations with structural efficiency, both in operations and in marketing. So, the year-over-year cost performance was more or less stable despite that situation.
Of course, there was also, and then I go to the cash flow slide, but you can keep the slide on, helped in the overall
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P&L was not only efficiency, but also the slightly increased | |
basket. It's very good to our unit economics. | |
Cash flow here, very nice, an increase of 50 million. To | |
already tell you the conclusion, it's mainly because of | |
seasonality that we were benefiting from an increased | |
payable balance as we generally see each quarter and last | |
year even more than we were seeing this quarter, just | |
because of timing differences. | |
I'll walk through the bridge. It's the total of cash as you can | |
find on the balance sheet and short-term financial assets, as | |
well as our fixed deposits, which we also consider cash. It's | |
slightly above 200 million. | |
When we started the year, we had a positive adjusted | |
EBITDA of, here from a cash perspective, 11 million. We | |
have working capital improvements of 17 million, we have | |
investments of around 9 million and we have financing, | |
which also is including according to IFRS the lease | |
payments that we're doing. Adding it all up, it's leading to a | |
positive 15 million, ending at 219 million. | |
With that, Olaf, it's going back to you. | |
Olaf Heinrich | Thank you very much. Let's have a look into an update on |
business and strategy. For this quarter we decided to focus | |
only on e-Rx because we think that right now that it's the | |
dominant topic. | |
As already communicated, Tuesday this week we got | |
approval for our solution from Gematik. We are really happy | |
about that one and that we all know CardLink is the best way | |
to redeem e-scripts fully digital. | |
I think you are probably aware that in Germany right now, | |
the eGK card has become the dominant way to redeem | |
scripts. Therefore, we are really happy to present this | |
CardLink solution to our patients and customers because | |
they now can also use the eGK card without a pin to redeem | |
their scripts at an online pharmacy. | |
This way, we are back to a level playing field compared to | |
brick and mortar when we look into the redemption rate of | |
e-scripts. But, of course, also the two other ways still will be | |
available, that Gematik app and the print-out of the QR | |
code. | |
If we go to the next slide, we will see that there's actually not | |
a lot of new information because we all gave that information | |
two days ago. I think important to point out is that this | |
solution will be live for our customers early May 2024 and | |
maybe there's just a couple of words to that, why early May | |
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2024. | |
Our intention is, of course, to bring a robust and scalable | |
solution up and running and to do that, of course, as quickly | |
as possible. But since we have never done it before and | |
since partners are involved, like Gematik, we cannot give | |
you a concrete date. But, again, it's about putting a robust | |
and scalable solution up as quickly as possible. | |
If we go to the next page, we can see what it looks like once | |
our solution is up. We are not presenting here the entire flow | |
in our app, just to give you an idea how this is supposed to | |
work. | |
Once you have an e-script which has been issued by your | |
doctor, you cannot only use the QR Code, but from now on | |
you can also use your eGK card. You simply then open our | |
app and the app then will ask you to present your eGK card. | |
Just attach it to the phone. | |
The rear of the phone will read let's say the key which is on | |
the card and then will retrieve all of the script data from the | |
e-script server. All of the scripts which are still open will then | |
be presented in our app and then as the customer you can | |
simply continue to do the journey as you are doing it with | |
OTC and Rx and, of course, you can also add then OTC | |
products to your basket. | |
That is pretty much the journey. Very convenient, fully digital | |
and will be live early May. Having said that, I would again | |
like to turn it over to Jasper. | |
Jasper Eenhorst | Again, thank you. It was only March 5th that we shared the |
full year guidance, so it will be no surprise that we reiterate | |
the guidance today. | |
I can't really, of course, and I'm happy to talk to you today, I | |
really cannot overestimate the magnitude of the impact of | |
having received approval only two days ago. That is really a | |
milestone for us as a total company having achieved the | |
approval for our NFC solution for e-Rx in Germany. | |
At the same time, actually, our core business across the | |
seven countries has continued, as we shared with you | |
today, has continued to perform really very strongly. | |
Being in that situation, we still cannot give e-Rx guidance for | |
the months to come. Nobody knows. We're looking forward | |
to it. We can't wait. But where we can give guidance to you, | |
that's on this slide. | |
For the total company, we think it's very likely that we're | |
going to enter sales between the 2.3 and 2.5 billion as a total | |
company. That is in this case mainly driven by the non-Rx | |
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continued strong growth with a mid-point of 20% and a | |
range of 15 to 25%. So, growing a lot of time more than 20%, | |
around 20% on top of the 20% of the last year, on top of the | |
20% of the year before. | |
MediService we expect to continue to grow at mid-single | |
digits. MediService is more let's say a normal company with | |
a normal growth rate and not the exceptional fast growth | |
rate we saw through all the elements as a company. The | |
adjusted EBITDA margin, we reiterate our expectation that | |
it's going to be between 2 and 4%. | |
As always, at least each time we have the possibility, we | |
reiterate the magnitude that we see in total Europe and also | |
specifically in Germany for having a lot of growth in online. | |
We see there a mid- to longer-term margin in excess of 8% | |
and that is unchanged compared to all the statements that | |
we have made over the past quarters and past years. | |
That's our guidance for the full year. We're looking forward | |
to start really to the new phase of e-Rx and, of course, we | |
keep you posted on all the developments there. | |
That was our presentation of today and we're looking | |
forward if there are any questions from the audience. | |
Operator | We will now begin the question-and-answer session. |
Anyone who wishes to ask a question may press star and | |
one on the touchtone 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 | |
star and two. | |
Participants are requested to use only handsets while | |
asking a question. In the interest of time, please limit | |
yourself to two questions. Anyone with a question may press | |
star and one at this time. | |
Our first question comes from CJ from HSBC. Please go | |
ahead. | |
CJ | Morning, all. Thanks for the opportunity to ask questions. |
First one, given the slightly weaker margin in the first | |
quarter, at least versus what the street expected, is it maybe | |
possible to get a bit of colour on the running quarter? | |
I understand last quarter marketing was a significant | |
component. Is there any colour indication, whatever you can | |
give on the size of the marketing spend in the current | |
quarter, especially given the importance of the CardLink | |
launch within your app in the coming weeks? Anything that | |
helps us understand where within the range we could expect | |
the EBITDA margin in Q2 to fall. | |
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Then I know commentary around Rx is very premature and | |
a lot of things can happen. I'd still be curious to hear if there | |
is any sort of colour you can give following the Q1 | |
performance of Rx, which actually growing, was actually | |
quite strong, whether there's anything you can give on that | |
front. Thank you. | |
Olaf Heinrich | Would you like to do that or...? |
Jasper Eenhorst | I'll do the first, you second then. |
Olaf Heinrich | Yes. |
Jasper Eenhorst | Okay. First off, good talking to you again. The margin of Q1, |
when we were seeing that, there was such successful fast | |
penetration of e-Rx in Germany, we were able to anticipate | |
on that, to act upon that immediately, so thanks for the | |
compliment you were giving. | |
Of course, the 7% growth is not the answer what we are | |
looking for. Within the whole context we were very happy | |
that we were able to achieve actually with the challenges a | |
positive growth in the first quarter. | |
We did so and, of course, a part of the marketing of Rx is | |
particular because many chronically ill patients only order | |
once every quarter, for example. It's not immediately | |
conversion-driven that's reflected in the first quarter. | |
I just reiterate about what our expectations for the full year | |
are and they are not changed by this first quarter. It's the | |
reiteration of the 2 to 4%. | |
Olaf Heinrich | Maybe I will try to answer the second question. If I |
understood it right, it's about to give some colour from what | |
we learned in Q1. To me, Q1 has been exceptional because | |
there has been a switch from let's say paper to e-Rx. | |
We are really happy that we were able to keep our existing | |
customers. That has been the main target. Because, as you | |
know, it's new to the customers and in some cases the | |
doctor is handing out a QR code, in some cases not. We | |
had to make sure that our existing customers stay within our | |
system and I think that worked off pretty well. | |
Of course, we also saw some additional, let's put it this way, | |
information or learning because we had some marketing | |
activities and then we already saw that also new customers | |
are responding, as well as we will be able to convert | |
customers out of our existing customer file, so OTC or BPC | |
customers into Rx. | |
But I think it's by far too early to take any readings, learnings | |
out of that. Therefore, please, we need more time to really | |
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be able to substantiate any kind of let's say comments or | |
learning. As you know, also the CardLink solution will only | |
be live at the beginning of May. Therefore, it will take some | |
time until we can give some more colour into the entire e-Rx | |
topic. | |
CJ | Understood. Thank you. |
Operator | The next question comes from JK from Deutsche Bank. |
Please go ahead. | |
JK | Good morning. Thanks for taking my questions. I also have |
two. The first one, given that the NFC launch comes slightly | |
later than the market had expected, do you see any | |
pressure on your 2024 guidance? I understand that you | |
don't guide specifically on e-Rx, but any colour here would | |
be helpful. | |
Then secondly, could you elaborate a bit on the margin | |
improvement drivers in your international business? Is that | |
purely volume leverage or are there any other factors? And | |
when do you expect this segment to achieve adjusted | |
EBITDA breakeven? | |
Olaf Heinrich | I think, Jasper, will you go ahead on that one? |
Jasper Eenhorst | Yes. The first one, actually, the answer is no. Some |
expected it earlier, some later. Not any impact. It's not | |
having any impact on our guidance, where we stand. | |
Major thing is this week, we have today the Q1 results, but | |
the major event was of course that we got the approval for | |
our solution. That's the major thing. Whether some people | |
expected it a couple of days earlier, not any impact on the | |
future, not any impact on the current year guidance. | |
Maybe if I can add one thing to that, because I think the | |
question refers to also why a little bit too late. If we look into | |
the entire process, the entire process of establishing a new | |
product within the market environment, that happened | |
within a couple of months as opposed to usually that takes | |
years. | |
Therefore, overall this has been a very fast process, very | |
successful and therefore I think you cannot really say it's too | |
late or later than expected. I actually see it the other way | |
around, quite successful. | |
And it's a major step not only for online pharmacies, but also | |
for brick-and-mortar pharmacies and for millions of patients | |
in Germany. I think because of that also Gematik has really | |
accelerated this process. We are really very happy with | |
what we have achieved so far in terms of the NFC solution. | |
Sorry. The other question... | |
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JK | That's very helpful. |
Jasper Eenhorst | The second one, thanks, JK, for catching actually that |
development. You would almost forget about it, but we don't. | |
It's a solid piece of our business, the huge opportunity | |
across total Europe, not only in Germany. We've grown this | |
year almost by one-third compared to quarter one last year | |
and, indeed, at a significantly higher margin. | |
To us, very clear what our strategy is there because we don't | |
see a lot of differences compared what we already achieved | |
in countries like Germany or, for example, in Austria. We are | |
in those countries where we think we can achieve the same | |
and then you've got efficiencies, you've got scale and then | |
you'll improve your margins. | |
In our case, it is always that we can balance how fast do you | |
want to grow your margin and it is a well-balanced | |
approach. Indeed, you see a structural increase not only | |
compared to last year that we were growing relatively fast, I | |
would say, towards let's say next year or also [00:23:27 | |
unclear?] will continue to grow very fast. | |
It will never be a straight line. There will always happen | |
things because of the opportunities we see or competition | |
or other things. But actually, year-over-year it is an apple | |
and apple. It's a comparison that is solid and in that solid | |
comparison we've increased by one-third and we improved | |
our margins. That's correct. | |
JK | Great. Thank you. |
Operator | The next question comes from VB from Baader Bank. |
Please go ahead. | |
VB | Hello, gentlemen. Congratulations on the CardLink approval |
and the great results. I would have two questions. It's also | |
on marketing expense. | |
The short term, given that you have the CardLink solution | |
now on hand and given that the main competitor received | |
approval a bit faster, do you see any pressure to do | |
incremental marketing expenditure in Q2 to catch up? Some | |
indication in regards to volatility of margins throughout the | |
year would be helpful. | |
The second question. Any idea why the main competitor | |
received the approval some date earlier than you? It does | |
not move the needle at all. That's completely clear. But just | |
your thinking and your looking on the situation. Did you | |
apply later than the others or any reason, any speculation? | |
Thanks. | |
Jasper Eenhorst | Olaf, I will try to answer the question. To be honest, I did not |
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Redcare Pharmacy NV published this content on 29 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 April 2024 09:44:34 UTC.