Shop Apotheke Europe N : Transkript Earnings Call Q3 2022 (Englisch)

Shop Apotheke Europe -

Q3/2022 Earnings Release

Presentation (Investors)

Wednesday, 02 November 2022

Shop Apotheke Europe - Q3/2022 Earnings Release Presentation (Investors) Wednesday, 02 November 2022

Shop Apotheke Europe - Q3/2022 Earnings Release Presentation

(Investors)

Participants

Stefan Feltens (CEO)

Jasper Eenhorst (CFO)

AT

AN

C

JK

OC

OS

Operator: Hello, and welcome to the Shop Apotheke Europe Third Quarter 2022 Earnings Release Presentation Investors Call. My name is L., and I will be a coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your questions. Participants are reminded to pre-register for the Q&A either via the link they received via the invitation or via the button on the webcast link. If you require assistance at any point, please press star zero and you will be connected to an operator. Today, we have Stefan Feltens, the CEO, and Jasper Eenhorst, the CFO, as our presenters. I will now hand you over to your host, Stefan Feltens, to begin today's conference. Thank you.

Stefan Feltens: Well, good morning, everybody. Jasper and I would like to welcome you to the release of Shop Apotheke Europe's full Q3 financials. To start with the end in mind against the backdrop of we're all witnessing this, of difficult and challenging economic times and many uncertainties everybody is facing right now, I dare to say that Shop Apotheke has delivered a solid quarter which was fully in line with the guidance we had provided earlier this year. Talking about the guidance, Shop Apotheke's management continues to stand behind this guidance and the guidance at the end of our call will be reiterated by Jasper one more time. Well, you see the usual agenda, we're going to start with a deep dive into our Q3 performance, and then we just have, literally, a couple of charts on e-prescriptions in Germany and Shop Apotheke's commitment to sustainable development. And at the very end, rest assured, we're going to have plenty of time to answer any questions that you might have.

So let's start with a deep dive into Q3. At the start of the call, I mentioned that we delivered a successful quarter in line with our guidance, but before we go for the details, let me just take a step back and let me acknowledge that we did reach an important milestone just last week with half a million redeemed e-prescriptions in Germany. Not surprisingly, of course, as Shop Apotheke, we would like to see the growth happen at a much, much faster pace. But still, I think we need to acknowledge that just a couple of months ago we reached the target that had been set up for the eRx test phase in Germany which was 30,000 processed e-prescriptions,

2

Shop Apotheke Europe - Q3/2022 Earnings Release Presentation (Investors) Wednesday, 02 November 2022

and as of last week, we surpassed the 500,000 mark. Right now, literally every single day, physicians are issuing, pharmacies are filling, and health insurers are reimbursing electronic prescriptions, thousands, on a daily basis. So process-wise certainly, e-prescriptions are working smoothly.

Shifting gears and looking at Shop Apotheke's performance in Q3, our sales growth went up to 20% as compared to 15% in the second quarter and 7% in the fourth quarter. Our non-eRx growth continued at an even faster pace. Looking at this on a year-to-date basis, for the first nine months, we showed sales growth, year over year, of 13.5% and sales of €877 million. Our Q3 adjusted EBITDA came in at around 1% of net sales or €3 million. This is an improvement by 1.8% points versus a year ago, versus Q3 2021, and a very notable improvement was the first half of this year. And more on that from Jasper in a few moments. Our active customer base continued to grow at a rapid pace. We are approaching nine million active customers. This is an increase by around one million customers since the beginning of this year. And more importantly, and this is one driver for our customer growth, of course, is the high customer satisfaction level at the NPS for the third quarter, stood at 73 to be precise.

And shifting gears one more time, sustainability - sustainable development is very important to what we do at Shop Apotheke. At the end of September, we made the commitment to become net zero by 2040. So we are fully committed to bringing carbon emissions down to zero along the entire value chain by 2040. More about this also later in this presentation. So looking at our two reporting segments, I already mentioned on the left-hand side, over the first nine months, Shop Apotheke's business continued to grow at double digits with 13.5% points. Non-Rxs grew at a faster pace of around 18% and our sales over the first nine months of the year were close to €880 million.

In the Deutsche region, for the first nine months, we generated top-line sales of around 10%, non-Rx grew by around 15%, and our eRx business for the first nine months declined by around 13%. The only driver, and you've heard this before, was still the eRx bonus spend. If you just look at the third quarter, our eRx business didn't just stabilise but it grew actually a little bit by 4% compared to our non-eRx business in the third quarter, 2021. And the international business grew at a faster pace, continued to be a growth driver for Shop Apotheke, growth was approaching 30%, and the total sales were close to €200 million.

So before we now switch to our KPIs, we just want to take a moment to reflect on the position that Shop Apotheke has across the seven markets in which we operate today. In Belgium, Shop Apotheke is the undisputed market leader in the online pharmacy space with a wide and growing margin versus the number two in the Belgian market. In Austria, Shop Apotheke is the undisputed market leader in the online pharmacy space with an even wider margin versus the number two in the marketplace. And in Germany, of course, Europe's biggest pharmacy market, we continue to be the largest and the most frequently visited pharmacy website in Germany, and I can say here again, with a wide and growing margin. In the other four markets in which we operate today, our business is indeed growing, but at the same time, we need to acknowledge we have not yet reached critical mass, we have not yet reached a market-leading position, but rest assured, we are working on that.

So I already referenced our KPIs, starting on the left-hand side, 8.9 million active customers, customers who have placed at least one order over the last 12 months by the end of September. An increase by 1.6 million versus September last year, by one million versus January this year, 3

Shop Apotheke Europe - Q3/2022 Earnings Release Presentation (Investors) Wednesday, 02 November 2022

and in Q3 alone, we added around 0.3 million active customers. Our net promoter score remains at a high level of 73. We succeeded in maintaining very competitive order delivery times and we're also very well positioned across a whole range of delivery options. And we're going to talk more about this in a moment. And the last KPI that we want to share, our average order value was pretty much stable, we saw really just a marginal drop from around €61 a year ago in Q3, 2021, to around €60 this year. I already mentioned that our eRx business has stabilised and as a result of this, our average order value has stabilised as well.

So I mentioned, when I referenced our customer satisfaction level, that we are very well positioned across the whole range of other delivery options. I'm starting on the left here, of course, today the vast majority of the orders that are placed by our customers are placed through Shop Apotheke's web shops or Shop Apotheke's apps. Through this pathway, we can offer our customers the broadest choice of products, a huge selection of products, but also competitive pricing. And our commitment is that we are going to deliver these orders within one to two days to our customer's doorsteps.

If a customer has an expectation to receive the order on the same day the order was placed, of course, we cannot do this for all the markets or the metro areas in which we operate from our facility here in the Netherlands. So we do this through our Shop Apotheke's Now programme by collaborating closely with selected local partner pharmacies. And lastly, the latest addition to the Shop Apotheke Family First A, if a customer has a need to get an order delivered even faster, we can do this through First A in the metropolitan areas and then delivery would be in one hour or less.

Okay. Shifting to our web traffic, you are familiar with this picture but we have added one indicator to show - to illustrate a little bit better the underlying trends. You see the blue box, you see the green line, and then you see that, and this is new, the dotted red line. I'm going to walk you through all of these indicators one by one, starting with the blue bars. The blue bars indicate the traffic growth across all of our Web shops and across all of our apps compared to the exact same week a year ago, at the end of Q2. At the beginning of Q3, you will see a prototypical peak; of course, this has to be seen against a backdrop of very low traffic levels, at the same period last year.

For those of you who have been following Shop Apotheke for quite some time, at that time a year ago, we had to drastically reduce our performance marketing activities because we had constrained logistics capacities. Of course, we are recycling this, this time now with very low traffic, and as a result of this, you see the peak. Towards the end of Q3, you see that our web traffic grows, levels out between - at between 10% to 20%, and that is pretty much in line or pretty close to our top-line development.

The Green Line shows the total, the absolute number of weekly visits to our websites, to our app, and what you see here is an elevated level in Q1. Not a surprise. Not a surprise to you because Q1 and also Q4 are the busiest periods for any online pharmacy. And then we see a little bit of a levelling off in Q2 and Q3. But we have, of course, we have looked at this in detail, this is purely driven by seasonality. And to take out seasonality, a little bit of what we are sharing with you, we have added the red dotted line. The red dotted line shows you the rolling average weekly visits over the last 52 weeks, so in other words, we added up the weekly visits over the last 52 weeks, and then we divided this number simply by 52. You see a steady

4

Shop Apotheke Europe - Q3/2022 Earnings Release Presentation (Investors) Wednesday, 02 November 2022

increase. And again, that is once again broadly in line with the elevate - with the top line growth that we have seen.

A moment ago, I mentioned to you that ShopApotheke.com was the most popular pharmacy website in Germany. Well, I have to admit, I didn't tell you the whole story because you've already come to expect from ShopApotheke.com being the most frequently visited pharmacy website in Germany. But in September, according to Similarweb, ShopApotheke.com was actually the most popular, meaning the most frequently visited health website in Germany, ahead of websites that offer general medical advice, or the Robert Koch Institute, which of course was very popular during the COVID pandemic, or websites that offer appointment services. So in September, Shop Apotheke was the most frequently visited health website in Germany. We just want to illustrate that Shop Apotheke in Germany, not just in Germany, but here we're talking about Germany, continues to expand and solidify its position in the German healthcare arena.

And the last chart I want to share with you before I hand it over to Jasper to walk you through the Q3 numbers, according to Google Analytics, ShopApotheke.com was also the most searched pharmacy brand in Germany, we're saying here by far. And I know it sounds like a broken record but Shop Apotheke held the spot by a wide and a growing margin versus the number two in the marketplace. And with this, Jasper, I'll hand it over to you.

Jasper Eenhorst: Yeah. Thank you very much, Stefan. And good morning to everybody who's joining the call today. On this graph, it's the number of orders per quarter for 2020, 2021, and then the three quarters of the current year, 2022. In the last quarter, Q3, we processed in total, 5.4 million orders which is an increase of one million compared to the first quarter of last year. The first quarter was somewhat soft, but still, of course, it's a significant increase. And also if you would compare the current first quarter to two years ago, so Q3, 2020, which was still the first and the full corona year, the increase from four to 5.4 is an increase of 1.4 million orders that we processed or an increase of 35% in two years.

The other thing to mention on this slide is that, again, we were able to welcome a lot of returning customers. And actually, the number that Stefan just quoted, the 0.3 million new active customers to our base is a number that we are internally very proud of. But despite the fact of adding those new customers this quarter, we have a total of 85% of the total sales that were from loyal customers, returning customers to our website, not only to our website, to place an order.

To the next slide, please. What this means for our numbers. This is the table going from sales up to and including the adjusted EBITDA. But before I talk about the table in the footnote, we make very clear what the adjustments are and equal to what you have seen in the past three quarters, and equally, I explained it, the adjustments increased year-over-year significantly only due to the booking, the accounting of 2021 business acquisition that we did as of quarter four of 2021. Apart from that, the other two customary items in the adjustments are related to stock options and a very small amount related to external project costs.

But the key thing of those adjustments is that they are all for the majority, the far majority, most cash items. So of course, our P&L reflects the correct and the best representation of the financial results but if you look at the EBITDA, EBIT, and net income, actually the adjusted EBITDA, adjusted EBIT, and the adjusted net income, as you can find in our internal report, are

5