Shop Apotheke Europe N : Transkript Earnings Release Call Q2 2022 (Englisch)

	Shop Apotheke Europe - Q2/2022 Earnings Release Presentation (Investors)
Company:	Shop Apotheke Europe
Conference Title: Q2/2022 Earnings Release Presentation (Investors)
Moderator:	Mod (call turned over to): Stefan Feltens
Date:	03 August 2022
Conference Time: 11:00 (UTC+01:00)
Operator:	Good day, and welcome to the Shop Apotheke Europe Q2 2022 Earnings Release

Presentation. Today's conference is being recorded. At this time, I would like to turn the conference over to Stefan Feltens, CEO. Please go ahead.

Stefan Feltens: Well, thank you. And also, together with Jasper Eenhorst, I want to welcome you to Shop Apotheke Europe's release of our financial results for the first six months of the year. I hope you've already had a chance to take a vacation break. If you haven't been able to do so yet, you'll be able to do so over the coming weeks.

Of course, when we look at our financial results, we need to look at them in the context of very difficult economic times over the first six months of the year and the ongoing War against Ukraine. Our thoughts remain of course with the victims of this war. Well, starting with the end in mind, based on the performance of Shop Apotheke in the first half of the year and our assumptions for the remainder of the year, our management, we continue to stand behind the guidance we had provided to you earlier this year.

Well, you're familiar with the agenda. Jasper, and I are going to start by walking you through the financial and business performance over the last few months. Then, I'm going to say a few words about a couple of strategic topics, most notably of course about the status of electronic prescriptions in Germany. And then, Jasper is going to conclude our presentation with the outlook for the full year 2022.

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Shop Apotheke Europe - Q2/2022 Earnings Release Presentation (Investors)

At the end, rest assured, there will of course be plenty of time for your questions. Well, let's start with the Business and Financial performance of the first-half year, what were some of the highlights over the first six months? Our sales over the first six months went up by 11%. After a 7% growth in Q1, we saw an acceleration of our growth to 15% in the second quarter.

This is all Shop Apotheke's business. If we just look at our non-RX business, our non-RX business over the first six months grew by 16%. Also, for non-RX, we saw an acceleration in the second quarter. In the second quarter, we posted a growth of 18%. Our adjusted EBITDA margin for the ongoing operations, meaning excluding the acquisition of First A came in at -1.5% of sales.

And in a couple of minutes, Jasper is going to provide more insights into our profitability. We also generated a positive operating cash flow of around €15 million in the first half of the year. This was driven by a favorable working capital movement. There is some seasonality of course. But also, this is the result of some purposeful and sustainable actions that we didn't just take this year, but also last year.

So, we are seeing the results in our operating cash flow this year. Certainly, one highlight of the first half of the year was a record level of all-time high customer satisfaction. That we use the Net Promoter Score, NPS to measure customer satisfaction. And we saw in the second quarter, an NPS of 74. This is an improvement compared to a year ago by nine points.

The main driver was a further improvement of our order delivery times, shortening of our order delivery times. And we all know that order delivery times are one of the most important, if not the most important driver for customer satisfaction. In addition to shortening our order delivery times, we also implemented some other enhancements to our overall customer proposition.

I can assure you that the Net Promoter Score is one of the most closely watched, monitored, and managed KPIs at Shop Apotheke. We all understand happy customers are returning customers.

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Shop Apotheke Europe - Q2/2022 Earnings Release Presentation (Investors)

And this will cascade through our financial results as well. Well, what happened to our active customer base? It grew to 8.6 million.

This is an increase compared to a year ago by 21% or by 1.5 million customers. 800,000 of the

1.5 million increase happened this year. Our expansion in Italy is fully on track. We have conveyed before that Italy is an important market for Shop Apotheke today, and will become an even more important market for Shop Apotheke in the future.

In July, we opened our second distribution facility besides the one that Jasper and I are reporting from today here in Sevenum. So, that's our second facility in Settala near Milan. Since, early August, since the 1st of August or since this week, all orders from customers in Italy are handled by and shipped from our new facility near Milan.

And last, but certainly not least, e-prescriptions, everybody knows that the eRX test phase was successfully concluded in early July by passing the 30,000 reimbursed, fully-reimbursed electronic prescription goal. Since then, we have seen an acceleration of electronic prescriptions that have been issued and dispensed.

We passed the 100,000 mark a few days ago. And we checked yesterday, we were at a 118,000 e-scripts dispensed by pharmacies as of yesterday. Well, if we take a look at everything that happened in the first quarter, I dare to say with all the disturbances that we experienced in the first quarter, I think we can be proud of how we navigated Shop Apotheke through all of these challenges.

And hopefully, you're seeing this in our sales, in growth of our customer base, in the increased customer satisfaction that we shared with you, and also in our financial results. Well, let's have a closer look at the sales development in our two reporting segments. On the left-hand side, let's start with another look at the overall sales development.

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I already mentioned, sales grew by 11% to almost €600 million, €592 million to be precise, non-RX growth of around 16%. In the DACH segment, our total sales grew by a bit more than 6%. But you need to look at the two subsegments, our non-RX business grew double digit at a healthy pace of around 12%. And our RX business showed a decline of 20% compared to the first half of 2021.

This is of course the result of the RX bonus prohibition, which came into effect in December 2020, and then showed its effect in the first half last year. If we just look at the second quarter, our RX business compared to Q2 last year was basically flat. We showed a marginal decline of 3%. And since Q3 last year, we are posting.

We are recording monthly sales, stable monthly sales, RX sales of around €10 million per month. Our International segment continue to be a growth driver with an increase of 30%. And our half- year sales approached a €140 million. International consists of Belgium, of France, the Netherlands, and of course of Italy.

So, just shifting gears and taking a quick look at some of our KPIs. I already talked about the growth of active customers, which is approaching the 9 million mark. Our Net Promoter Score is 74 in the second quarter. I can assure you, this is something that really everybody at Shop Apotheke is really proud of because on a daily basis, we think about or we torture ourselves with asking the question, what else could the customer expect from us.

Looking at our average shopping basket or the average order value, we saw compared to Q2 last year, we saw a decline from €61.5 to around €58. The main drivers were the reduction, a lower proportion of our RX business.

And you remember that the RX business enjoys significantly higher AOVs than a non-RX basket. And secondly, we saw an increase of our mobile orders. We saw an increase of the proportion of

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orders placed by younger customer cohorts. And these two mobile orders, and younger customer orders also tend to carry slightly lower average order values.

Looking at our traffic, what you see here is the traffic across all of our sites. So, not just Germany, across all of our sites. It covers both mobile visits and desktop visits. But before I jump into the details, let me emphasize again that looking at Germany, our website in Germany, Shop Apotheke, shop-apotheke.com continues to be the most-frequently visited pharmacy website in Germany by quite a margin.

Well, what are you seeing on this chart? The green line shows the total number of weekly visits again to all of our sites. In the first quarter, you saw very healthy levels. You see a little bit of a softening in the second quarter with weekly visits totaling 6.5 million to 7 million. Of course, this can be exclusively attributed to seasonality.

As in the second quarter, our customers deservedly so I dare to say spent more time in parks and on beaches and less time in front of the screens. The blue bars show the growth of our web traffic compared to the exact same week a year ago. When you look at the second quarter for most of the weeks, we see a growth of around 20%.

The negative growth in the second week has something to do with the Easter Week in comparison to when Easter fell in the year before. At the end of the month, you see a spike where the traffic growth came up to 50% or more. This has to be seen in the context of what happened at the end of last year when for good reasons, we purposefully reduced our performance marketing which at the time then resulted in a reduction of our web traffic. And with this, I'll hand it over to Jasper to walk you through the details of our financials.

Jasper Eenhorst: Yeah. Thank you, Stefan. And good morning to everybody on the call. This is the customary slide we always show with the number of orders per quarter. And as you can see, we

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