Shop Apotheke Europe (Event) - Q3/2021 Earnings Release, Investors

Company:

Shop Apotheke Europe (Event)

Conference Title: Q3/2021 Earnings Release, Investors

Moderator:

Stefan Feltens

Date:

Tuesday, 2nd November 2021

Conference Time: 11:00 (UTC+01:00)

Operator:

Good day, and welcome to the Shop Apotheke Earnings Release Q3 2021 Conference

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

Stefan Feltens: Well, thank you, [Inaudible] and good morning to everybody. Jasper and I, we welcome you to the Q3 earnings release of Shop Apotheke Europe. On the picture behind Jasper and me, you see of course our new facility which by now is fully operational. Actually, you can see literally hundreds of solar panels on top of our roof.

Later, we're going to share with you additional insights into our new facility. And I am -- actually, I mean this quite literally. But before we go there, we have some really exciting news to share with you. Last Thursday, on October the 28th, we received, we processed, and we filled the first electronic prescriptions from the Gematik e-Rx pilot in the Berlin Brandenburg region.

These were prescriptions from actual, from real customers. It wasn't a surprise to us, but it was still quite comforting to witness that these electronic prescriptions went smoothly through our end- to-end processes as we had anticipated. Let me go down for a moment, let me go down history lane for a moment.

And some of you might remember -- might already know this little story. When Shop Apotheke Europe was set up, was founded 20 years ago, exactly 20 years ago, one of the drivers for setting up Shop Apotheke was the presumed imminent introduction of electronic prescriptions in Germany.

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Shop Apotheke Europe (Event) - Q3/2021 Earnings Release, Investors

Well admittedly, as it's taking a little bit longer than anticipated at the time, but finally electronic prescriptions are a reality. Electronic prescriptions have actually happened. We are very well prepared. And we are excited about the rollout of electronic prescriptions across Germany next year.

Well, let me give you a quick update on electronic prescriptions, at least how we see it. The e-Rx pilot has been extended by the Gematik until the end of November to gain some additional experience to ensure that the systems, the processes will be ready for prime time when electronic prescriptions are rolled out nationwide early next year.

In parallel, the e-Rx pilot has been scaling up. Finally, some might say with based on what we have learned from the Gematik and from others with 40 to 50 pharmacies participating and 20 to 30 physicians participating in the e-Rx pilot right now. Furthermore, and I think that is also important to know more and more pharmacies, and more and more physicians are meeting today or will meet by yearend the technical requirements needed to issue electronic prescriptions, and this includes the e-Rx readiness of the most commonly-used physician software systems.

For 2022, we -- and this is now -- I'm speaking for Shop Apotheke. We are not assuming a Big Bang on the 1st of January, but we are projecting now internally a gradual, but fast adoption of electronic prescriptions over the coming months.

And our assumption is that by midyear, the vast majority of prescriptions for publicly-insured patients in Germany will indeed be issued electronically. Quite frankly, we have waited for many years for this to happen. Whether it now happens a couple of months earlier or later doesn't make a big difference for us.

For us, for our customers, and I assume also for our long-term investors, it is key that electronic prescriptions have finally arrived. And as we said before, this really marks an important milestone

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Shop Apotheke Europe (Event) - Q3/2021 Earnings Release, Investors

for the digitalization of the healthcare system in Germany. As we mentioned, Shop Apotheke Europe is certainly ready to partake in this opportunity.

Well not just our front and backend process are ready for electronic prescriptions. With our new facility, we also have the needed capacity to turn our growth ambitions in Germany, but also in all the other markets into reality, and to secure our share of the e-prescription opportunity.

You've heard before that in our new facility, with our new facility, we will be able to handle more than 100,000 customer orders per day. But to get a better feel for the new facility, let's have a closer look. I hope that you have enjoyed this movie as much as Jasper and I have, even though we have seen it already a couple of times.

But for us, it's still exciting, as I mentioned before it's now fully operational. Actually, over the last two to three months, some of you on the phone have actually taken a firsthand look at our new facility. Well, I guess to see that it really exists. And it's probably fair to assume that we're going to host more visits by some of our investors, and have some of the analysts over the coming months.

The move from the old to the new facility was completed in early September. Actually, we were pretty much done by the end of September. The new facility is fully functional. Equally important is that we succeeded in bringing up our staffing levels. And as a result, since September, we are no longer capacity constrained, which allows us of course to continue the Shop Apotheke Europe's growth story.

Okay, let's shift gears. And let's have a closer look at the business and financial performance over the first nine months of the year. By the end of September, our Shop Apotheke Europe, our sales have grown by around 10%. And our sales had reached €772 million. DACH sales were up by 4.5 percentage points, of course hampered by the absence of an Rx bonus.

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Shop Apotheke Europe (Event) - Q3/2021 Earnings Release, Investors

And our international business went up by 38%. When you look at our everything but Rx growth rate over the first nine months of the year across all of our markets, it stood at close to 22%. Our adjusted EBITDA for the first nine months stood at around €5 million. This translates into an adjusted EBITDA margin of 0.6%.

The number of our active customers increased by almost a quarter over 1.4 million, from 5.9 million at the end of September last year to 7.3 million this year. Since January alone, we have added around one million active customers despite a reduction of our marketing spending in June and in early July.

Very encouraging for us is the quick recovery of our customer satisfaction with Shop Apotheke Europe. You'll see in a moment that our Net Promoter Score recovered nicely after the dip midyear in May, June, and early July. And since August, it had stayed at the targeted level of around 70.

Over the first nine months, we generated an operating cash flow of around €28 million. And Jasper is going to share more in a couple of minutes about the driver behind our cash flow development. And more important as of September the 30th, our cash balance was in excess of €300 million.

Well last, not least and again, we'd love to talk about it after the end of the quarter in October, on October the 28th, electronic prescriptions had finally arrived at Shop Apotheke Europe. Let's have a closer look at our two reporting segments. As we mentioned before, DACH region up by around five percentage points.

The growth rate was of course pulled down by a 31% reduction of our Rx business triggered by the absence of the Rx bonus. Our non-Rx business in the DACH region went up by 17%. Just as a reference point, the OTC market in Germany covering both the offline and the online segments over the first nine months of the year actually declined slightly versus a year ago.

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Shop Apotheke Europe (Event) - Q3/2021 Earnings Release, Investors

Our international business grew by almost 40% and sales were in excess of a €150 million. Shifting to some of our KPIs on the next chart the number of active customers, our Net Promoter Score, and our Average Order Value. As we mentioned already, active customer count went up by 24% to 7.3 million.

Our Net Promoter Score over the first nine months stood at 68, of course pulled down by the lower NPS around midyear. And our Average Order Value over the first nine months was €62 compared to €66 a year ago. This decrease can be exclusively attributed to the lower share of Rx orders which as you know carry a higher AOV.

For the first nine months of 2020 when you look at our non-Rx basket across all of our markets or no, I have to be precise, not across all of our markets. In every single market, the non-Rx basket value went up compared to a year ago, which of course is a good development. Well, I don't have to say too much about our NPS chart.

I think, it speaks for itself. You see the dip in the second half of the second quarter when we were capacity constrained. And as a result of this, we experienced extended delivery times. But again, encouraging is the quick recovery of our NPS in the month of July. And since then, it has pretty much held steady of around 70.

As mentioned before, since December, we are no longer capacity constrained. The cutoff of this chart is the end of September. But I can confirm that the NPS has held steady in the month of October as well. Well, how has our web traffic developed over the last few months? You see here the bold yellow -- not yellow, the green line, which shows the total number of web visits across all of our websites.

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Shop Apotheke Europe NV published this content on 03 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 November 2021 13:24:05 UTC.