Shop Apotheke Europe N : Transcript Earnings Call FY 2022

Shop Apotheke

Full Year 2022

7th March, 2023 | 11:00 CET

Transcript

Speakers:

Stefan Feltens

Jasper Eenhorst

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Stefan Feltens	A warm welcome to all of you. Jasper and I would like to
	welcome you again to our earnings release call, right here from
	our headquarters in Sevenum. Before jumping into the content
	of our presentation, I would like to say a few words about
	yesterday's announcement regarding my retirement from Shop
	Apotheke, following the upcoming annual general meeting at the
	end of April. The last four-and-a-half years with Shop Apotheke
	have really been the highlight of my professional career. It has
	been a real privilege to serve this unique company, to work
	together with a great management team, but also to interact with
	many of you.
	It has also been a privilege to be able to witness and, within my
	means, to contribute to the tremendous growth of Shop
	Apotheke over the last few years. Looking forward, there's really
	no doubt in my mind that Shop Apotheke will continue on its
	growth trajectory and that it will deliver on its promises, as well
	as its potential. By the way, only one individual out of the team
	of five is leaving, so the other four will continue to drive the
	business, will ensure the continuity of our management team.
	And three of the remaining four members of the management
	team, Theresa, Stefan and Marc, have been with the company
	for over 20 years.
	While this is not the last day of my time at Shop Apotheke, but
	it's certainly the last earnings release call that I can do together
	with Jasper. So, it's also an opportunity for me to say thank you
	to all of you, for your support over the last four years. For all your
	questions, sometimes they were tough questions that we had to
	deal with, but also, thank you for all the personal interactions
	over the last couple of years.
	Switching to the focus and the content of this call, especially
	since this is my last call, I'm very happy to be able to present the
	results of 2022, a year that was from our vantage point, clearly
	a success for Shop Apotheke. We delivered again both
	components of our guidance. We strengthened our competitive
	position in the market place and without stealing too much,
	Jasper, of your thunder, I think you're also going to appreciate
	the guidance that at the end of our call Jasper will share with
	you, the guidance for the current year. The agenda, we're going
	to start with looking back at 2022, how did Shop Apotheke
	perform, then I will provide you with a brief update on some of
	the strategy milestones we achieved last year. And then Jasper
	is going to conclude, before we open the microphones to your
	questions, with the outlook and the guidance for 2023.
	Let's have a quick look at our numbers. We, as the management
	team of Shop Apotheke, are really proud of what we achieved
	last year and we consider 2022 a success for Shop Apotheke.
	We met our top line guidance, we met our bottom line guidance,
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we generated sales of €1.2 billion. This consists of a non-RX growth of 17% and a total growth of 14%. With the double-digit growth last year, we demonstrated, we reinforced that Shop Apotheke could and did grow double-digit before corona, we could and we did grow double-digit during corona, and we could and we did grow double-digit after corona. Of course, our ambition is that this is not the last year with double-digit growth for Shop Apotheke.

Our active customer base grew by 18% to 9.3 million active customers. The main driver behind our customer growth and also our sales growth is the high satisfaction of Shop Apotheke's customers with the services we provide. Our NPS, our net promoter score, was above 70 across 2022. Our strong top line performance was accompanied by notable, sizeable improvement of our profitability throughout 2022. For the full year we generated an adjusted EBITDA margin for the business as of March last year, to be precise, this is before the impact of the acquisition of First A. Which since then has been renamed as GoPuls because this acquisition was concluded after we had communicated the guidance, so minus 0.3% adjusted EBITDA margin across 2022. In the second half of the year we showed an adjusted EBITDA margin of plus 0.9%, after minus 1.5% in the first six months of last year.

We also achieved a couple of strategic milestones that we had set out for ourselves, but more about this in a moment. Last September we, as a company and as a management team, we reinforced Shop Apotheke's commitment to sustainable development, by joining thousands of progressive companies around the globe with our statement that we want to become net zero by 2040. I know 2040 is a long way to go, but we are right now in the process of defining our concrete and measurable milestones for the coming years.

Looking back at 2022, I hope that you join me in concluding that 2022 was indeed a successful year for Shop Apotheke and 2022 positioned us very well for the current year, 2023.

Let's have a brief look, more precisely with how we did against the guidance that Jasper had provided exactly a year ago. In the upper half of the chart, you see our sales growth and our EBITDA margin, exactly as reported in our annual report. The dark blue bars, they show our total sales growth. You see that we grew every single quarter, but I want to highlight two quarters. In Q1 you see a growth of, quote/unquote, only 7%. This has to be seen against the backdrop of Q1 2021. You've been following Shop Apotheke for quite some time, you'll remember the RX bonus ban in Germany came into effect in December 2020, but hadn't yet fully impacted our RX business in Q1 last year. There's a base effect, therefore, only 7% growth in the Q1. The

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reverse is a little bit true for Q3. Q3 2021 we were capacity constrained. Of course this had a detrimental impact on our sales levels as a result of this, together with our underlying year- over-year growth, we could show here a total sales growth of 20%.

You're also seeing on this chart the significant improvement of our profitability from the first half of the year to the second half of the year. At the bottom of the chart you see exactly the scope of the guidance that we had provided a year ago. Here the sales growth, the dark blue bar, show our non-RX sales growth. We grew at least 15% in every single quarter. Across the year we showed a sales growth of a solid 17% in our non-RX business against the guidance of 15 to 25%, so we're solidly within our guidance range. And the light blue bar shows our adjusted EBITDA margin without the bottom line effect of GoPuls. Also here you see a very significant improvement from the first half of the year to the second half of the year, across the year an adjusted EBITDA margin of minus 0.3%, so very close to the EBITDA breakeven point. Also this in line with the guidance, we had guided towards an adjusted EBITDA from between 1.5% to plus 1.5% of sales. Again, Shop Apotheke met its guidance in both of its components.

Looking at the two reporting segments, the DACH segment and the International segment. Starting with the DACH segment, we posted sales of €940 million, so with the DACH region we're approaching the €1 billion mark. Our total sales grew by 11% in the DACH region, our non-RX sales grew by 15% in the international segment, consisting of Belgium, of France, of Italy, and the Netherlands. Sales grew by 24% and totalled more than a quarter of a billion euros last year in our International segment.

Before I hand over to Jasper, three of our KPIs. I already talked about the number of our active customers grew from 7.9 million at the end of 21 to 9.3 million at the end of last year. It's only now a question of the time, when in 2023 we're going to reach and surpass the 10 million active customer mark. A reminder for you, I know most of you know this, an active customer has placed at least one order during the preceding 12 months. Our net promoter score here, to be precise, across the year, at 72. We set a new all-time high with our customer satisfaction last year. Not all e-commerce companies and not all online pharmacies publish their NPS, but I would be very surprised if we had such a ranking, if Shop Apotheke were not right among the top performers.

Our average basket value, or the AOV, came down a bit from 21, it was €61 per basket in 21, to around €58. The only driver was the faster growth of our non-RX business and our non-RX business comes along with a slightly lower average order value

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	than our RX business. Jasper, let's have a look at the numbers.
Jasper Eenhorst	Stefan, thank you very much, and I'm happy to do so. Good
	morning to everybody on the call joining us again today. This is
	the customary slide with the number of orders in thousands per
	quarter. You see that in quarter four 2020 we achieved around
	4.4 million orders in 2020, the fourth quarter. We increased that
	a year later to 5.5 million and this year we have set in the most
	recent quarter, the past quarter four, a new record of 6.3 million
	orders processed in one quarter. Looking back at 2020, which
	was the peak of the COVID year, you basically see that the
	increase of 4.4 million orders in the fourth quarter to 6.3 now is
	an increase over the peak year in corona of 43%, 43% more
	orders.
	Also on this slide you see that actually each year, there is
	customary seasonality, where we set new records in the first
	quarter. Then we have the seasonally lower second and third
	quarter, and then we set it again in quarter four, and then the
	history repeats itself at new quarters aimed for in the next
	quarter. Last year, as Stefan already showed clearly and also
	explained, in 2021 the quarter three was somewhat lower when
	we were capacity constrained, but we recovered quickly from
	that last quarter.

If you look at the last bar with the 6.3 million orders that we did, something that makes us very confident is that fact that of the

6.3 million orders, 84% of orders came from returning customers to Shop Apotheke. If you add up the four columns of 2022, then you get to in total 23 million orders that we processed the past year. So, what numbers did we achieve with that, what financial numbers?

Here you see the adjusted numbers for the ongoing business. In the fourth quarter of 2021 we achieved 288 million of sales and we had an adjusted EBIT of minus 10 million, which was an EBITDA margin of minus 3.5%. This year in the fourth quarter, we increased our sales by 13.8% to 328 million and our EBIT was a positive 3 million, or 0.8% of sales, so a year-over-year improvement from quarter four over the quarter four the year before, of 430 basis points. The main driver of it was an improvement by 320 basis points, it was profit margin, but also, there was a very significant improvement in the selling and distribution efficiency of 170 basis points. A slight offset was in admin expenses because, of course, we need the right people and the right teams to achieve those impressive results, but actually, there were also some non-recurring negatives in the 3.5% admin in Q4 2022. That's the picture year-over-year.

If we then go to the fourth column, then the improvement from the first half of the year to quarter four of 230 basis points,

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