Earnings call transcript: RedCare Pharmacy sees 32% sales growth in Q4 2024

RedCare Pharmacy (RDCP), currently trading at $132.76, reported a robust financial performance for the fourth quarter of 2024, highlighted by significant sales growth and strategic market expansions. According to InvestingPro data, the company’s impressive 39.58% revenue growth over the last twelve months has positioned it as slightly undervalued based on Fair Value analysis. The company saw a 32% increase in total sales for the year, with Q4 sales reaching $675 million, marking a 27.1% rise from the previous year. The earnings call detailed the company’s operational achievements and future plans, underscoring its market leadership in Europe.

Key Takeaways

• RedCare Pharmacy achieved a 32% increase in total sales for 2024.
• Q4 sales rose by 27.1% to $675 million.
• The company expanded its marketplace business across multiple European countries.
• RedCare launched a fully digital patient journey and e-prescription services in Germany.
• The company plans significant investment in logistics infrastructure to support growth.

Company Performance

RedCare Pharmacy reported strong performance in 2024, driven by both organic growth and strategic initiatives. Total sales for the year increased to $2.4 billion from $1.799 billion. InvestingPro analysis reveals a healthy financial position with a Current Ratio of 2.12 and a Gross Profit Margin of 23.2%, indicating strong operational efficiency. The company has solidified its position as a market leader in Germany and Italy, with significant growth in both Rx and non-Rx segments. This growth was supported by innovations such as the fully digital patient journey and the nationwide rollout of e-prescriptions in Germany.

Financial Highlights

• Total sales: $2.4 billion for 2024, up from $1.799 billion in 2023.
• Q4 sales: $675 million, a 27.1% year-over-year increase.
• Adjusted EBITDA: $33 million, with a margin of 1.4%.
• Cash flow: -$26 million for the year.

Outlook & Guidance

Looking ahead, RedCare Pharmacy expects total sales growth to exceed 25%. The company has set a target for German Rx sales to reach €500 million and aims for an adjusted EBITDA margin of 2-2.5%. Mid-term goals include achieving an EBITDA margin in excess of 8%. Analyst targets range from $92.12 to $218.92, reflecting diverse market expectations. For deeper insights into RedCare’s growth potential and comprehensive analysis, access the full Pro Research Report available on InvestingPro, which provides detailed financial health metrics and expert commentary on the company’s future prospects. The company plans to continue its focus on market expansion and customer acquisition, supported by major investments in logistics infrastructure.

Executive Commentary

CEO Olaf Heinrich remarked, "2024 has been an exceptional year," highlighting the company’s strong market position and unique customer value proposition. CFO Jesper emphasized the strength of RedCare’s unit economics, attributing it to the effective setup of their business model.

Risks and Challenges

• Supply Chain: Potential disruptions could affect product availability.
• Market Saturation: Intense competition in the European pharmacy market could impact growth.
• Regulatory Changes: Changes in healthcare regulations could affect operations.
• Economic Conditions: Macroeconomic pressures may influence consumer spending.
• Technological Advancements: Keeping pace with technological changes is crucial for maintaining competitive advantage.

RedCare Pharmacy’s strategic initiatives and robust sales growth reflect its strong market position and potential for continued success in the European pharmacy sector.

Full transcript - Rowan Companies PLC (RDC) Q4 2024:

Valentina, Conference Operator: Ladies and gentlemen, welcome to the RedCare Pharmacy Full Year twenty twenty four Earnings Release Analyst and Investor Conference Call. I am Valentina, the Coruscal’s operator. I would like to remind you that all participants will be in listen only mode and the The conference must not be recorded for publication or broadcast. At this time, it’s my pleasure to hand over to Olaf Heinrich, CEO. Please go ahead.

Olaf Heinrich, CEO, RedCare Pharmacy: Yes. Thank you very much, and good morning to everybody, and a very warm welcome also from my side. So, let’s have a look into the agenda of today. So first of all, we would like to start with some highlights from 2024 and followed up by the business performance of 2024 and leading into an update on strategy session and then finally the outlook and guidance. If we go to the highlights of 2024, you know, I mean, this has been an exceptional year to RedCare.

If you just look back, I mean, it’s almost like you can’t believe it. I mean, at the beginning of last year, there were questions, is the Eastwood coming? Is it not coming? What will be the adoption rate of it? And so but I mean, we we quickly learned that EIX became the nationwide standard in Germany for all public publicly insured, patients.

And that is actually great news. Then there was the second question. I mean, how can we access that market? How do we discriminate? How do we get discrimination or free access?

And, you know, then we launched our fully digital patient journey via Cartling in May of last year. It seems like it is almost more than one year ago, but it happened last year in May. And at the same time, we also further developed our product. So now we have a highly highly valued customer centric product. It has all the features you need.

So it does not only have the card link functionality, but also you have the product availability. You have the payments. You have twenty four seven. You can order OTC, BPC, RX. So everything is in the product and this product actually has developed over the year and now we think it’s a great product out there in the market.

And at the same time we also launched our marketing campaign. So it is on the one end of product but on the other hand also our very successful marketing campaign from last

: year.

Olaf Heinrich, CEO, RedCare Pharmacy: So which really I think may also made a difference when looking back was great achievement also on that side and also the decision to step up our marketing activities in Q4 was also the right decision based on the numbers we see. You know our growth accelerated from 7% in Q1 all the way to 142% in Q4, again confirming we have a great product out there and we had a great marketing campaign. And putting this all together, it led to market leadership position for Redken in Germany. We always have been the market leader on non Rx, but now in 2024 we also got the market leadership on Rx. So we can say that has been an exceptional year looking back in terms of the ERX.

But the company is not only about ERX. We have a larger value proposition in that one. So we also continued our great growth in all of our other countries. What you already saw in the numbers, I mean, we create achievements across all countries also high customer satisfaction. So NPS continues to be one of our key metrics.

And as a result of that, I mean, some of you are probably tracking also traffic in Italy. As a result of that, we are now also market leader in Italy. So I mean, not only in Germany, Austria, Belgium, Switzerland, but now also in Italy, clear market leader. We are proud of that because again, it’s not only about ERX, it’s also about our other business and it’s a major success and you know being market leader has as we learned in the other countries a lot of advantages. At the same time, we also continue to grow our marketplace business.

We have a very successful marketplace business in Germany and in Austria and we launched this into Belgium and also into Italy making use of the traffic that we have in those market and try to even improve our value proposition. Well, at the same time, you know, with this growth also we had to produce much more parcels. So and we are really proud of that. We managed that also in a great way. So this, especially looking here to seven but also, Italy, I mean, it has been a great achievement that we kept our high level of customer satisfaction and service levels.

And we’re really able to manage all of those passes leaving our warehouses. And at the same time, we even increased our efficiency in logistics. But this is not the whole story of it.

: You

Olaf Heinrich, CEO, RedCare Pharmacy: know, we also had to change in the leadership team. So in April, two board members left and then we had two successes coming in. And I think to me, I mean, that shows how strong was the organization set up. Because, I mean, we had two internal successes to look and load it and it almost worked off seamless, I have to say, Jesper. Yes.

So, so it shows organization strong and has a strong leadership and we build also talents on our own. So we’re really happy with what we have seen throughout 2024 and thanks to Luke and Noden for stepping in and making this happen. And then the last thing, you know, it’s the first year of reporting CSRD. So it’s been a tough audit. We have to say it’s been a tough audit, but we are ahead of the legal requirements and we are part of the product which is out there.

So 2024 great achievements. Let’s look into the numbers. What that mean in numbers? You have seen the numbers. So it’s a growth of 32% in 2024.

Even if you exclude midi service, I mean, you’re still on the 26% to con confirms our our strong growth part here. The non Rx growth is at 21% and the Rx growth is at 64% and you know it was even higher in the German segment. At the same time, we also mentioned margin at 1.4% and you know that’s based on the strategic investments we also the decision we took to further accelerate our marketing in October of last year. I mean, strongly underlying core businesses and Jesper will talk a little bit about that later in the presentation with a strong underlying core business, which of course also helps to have a positive margin here out there. Cash flow is minus 26,000,000.

We are operating and we are generating cash from our operations, but at the same time, we also took some strategic investments. And also, I think here we did a good job, managed to work in capital. And Jesper will talk a little bit more about the capital later in the session. If we go to the next slide, you are familiar with those slides. I mean, it’s just one additional information.

International, again, is growing on the non Rx a little bit faster than the DACH region. And of course, I mean, I pointed out the market leadership in Italy. It is also driven by our success in Italy, but not only in Italy. We are growing in all of our other countries on the international segment. If we go to the next page, you can also see that the number of active customers increased significantly.

Now we are at the level of 12,500,000 active customers by the end of the year. We added 600,000 active customers in the last quarter of twenty twenty four, so also great achievement on our customer development. And at the same time, we kept the NPS very high level of 69. Again, this is still one of our key metrics. This is all about the customer and we need to continue to work hard on keeping that net promoter score up.

If you look into the, AOV or the basket size, I mean, of course, you can see the first impact of the Rx business. We have more Rx orders coming in and, the average basket size is increasing. It’s now almost at If we go to the next page, you can see our very impressive development of the orders. But the overall message, I think it’s still the same pattern that it has been in previous years. I mean Q3 even has been a little bit better.

Usually Q3 is a little bit lower. But if you look into 2024, we almost reached the level or we exceeded the level of the Q2. So great development And it’s the first time that we processed, 10,000,000 or more than 10,000,000 orders in one quarter, also a milestone for this company. And as always, if you look into the share of repeat orders, still very healthy at a level of 88%. So having said this, I would like to turn this over to Jasper.

Jesper, CFO, RedCare Pharmacy: Yes. Thank you very much, Olaf and thank you all for joining today’s call. Very happy that you show your interest in the company and we are very happy in sharing with you today our results of the past year. And here the key financial numbers in the customary table and after that I have four instead of two slides in shedding more lines on the underlying developments. But first, the high level number here numbers here.

So in the fourth quarter, we achieved a total of $675,000,000 sales, which was an increase fully organic and also no impact of Medi Service because it was last year, there are two of 27.1%. And as Olaf just said, we have the full year growth number of 31.8% that was close to 26% to be precise, 25.6% pre organic. So actually our growth accelerated in the fourth quarter on an organic base. So an increase of 1,799,000,000 last year to close to 2,400,000,000.0 this year, an increase of $572,000,000. If we look at the gross profit margin line that is slightly down versus last year in quarter four and it’s more down year over year for the full year.

The margin of Rx is very attractive and that’s the full explanation what you’re seeing here. We are adding more of the very profitable sales of media services in Switzerland and we’re adding more of the very profitable RX sales in Germany. So in quarter four, it’s mainly the impact of the increase of the ERIX. In Germany, more euros in the gross profit, lower margin, but we explained that also in the second part of the presentation later and in the full year that’s a bit in apple and orange because of the full year impact of media service. In selling and distribution as a percentage of sales in the fourth quarter you see an increase of the cost to above 20% impacted by our marketing and that we are really happy with the marketing that we have been spending.

I hope it will become clear when we show the second part of our presentation and our overall numbers. And perhaps you are a bit surprised to see that year the full year, year over year is a flat number. But there we have to dig benefits of the lower significantly lower SMD as a percentage of sales of my insurance. Now a lot of mix, I will explain it in the other slides a little bit more clear. If you then go to the admin expenses 2.9% and actually it improved in the fourth quarter to 2.8% of sales and year over year that is flat.

Adding all up, the adjusted EBITDA in Q4 was minus 0.7% and for the full year we generated $33,000,000 of adjusted EBITDA, which you will see later. It’s very close to our cash generation and that’s why we adjust for it to get close to the cash that we generate with our businesses. And it was 1.4% positive margin for the full year in the range of 1.2% to 2.2% as we updated you on October 3 for the guidance for the year. If you go to the next slide please. So this is the gross profit margin to the last percent as we just saw already.

So that is going down 0.5% because more of the profitable Rx sales that we have. And on the right, you see the larger increase as we reported it in the first two pillars, but actually if you take out the full year impact of Medi Service, it’s a similar decline that you are seeing there in the gross profit as a percentage of sales. Apart from that, you see that we on an organic base have been growing more than 25% in the company and that did not come at the cost of our gross profit margins. Across the group, our gross profit margins are stable and the results that you’re seeing in the P and L is only because of the impact of mix. On the next one, the cost in total, the quarter four we already looked at.

If you then look at the right hand of the slide and you exclude the impact of mix, then you see the year over year increase of a bit over one percentage point. And that’s of course because of our decision to increase the Eurex marketing, assume the large opportunity that we have there. But it will also make clear if you look at the total numbers, hey, how can a company achieve only such a small increase seeing all the firepower that we showed in the ERX campaign? And that is really because, I’ll give you just one example, that logistics in our case actually achieved a record efficiency and also across the group with automation, scale and also the benefits of being the market leader. We see that cost as a percentage of sales in our core business is improving year over year.

On the next one, this is about the DACH segment where I wanted to communicate a certain message on and then after that also international. So in DACH, so Germany, Austria, Switzerland, we are reporting the purple ones here in the segment reporting and that was last year a total 1,500,000,000.0 of sales at a margin, a fully loaded margin of 5.1%. This year, we report a significant increase of the sales, in part the full year impact of mainly service, in part organic growth, in part also because of the EOEX addition that we have, we increased to SEK1.5 billion to SEK1.9 billion and a 2.6% margin. But if we now look at what we then define only for the purpose of this slide now here today as the established businesses, then I say, okay, in Switzerland, we had to do it together with Garenica and that’s going really well, but also in Switzerland with the launch of breathcare.ch which we did one point five years ago, we had a strategic reset and growing there really fast. Eurex is also the growth that we have at the moment.

So if you then only look at the established businesses, you can see in the black graphs already that that is actually 1,100,000,000.0 in 2023, operating at a very solid 5% to 6%. And perhaps the term established businesses is suggesting that’s a stable business, but that’s not the case because this also this business has been growing double digit before corona, during corona, after corona, two years ago, last year and also the past year this established businesses continues to grow fast from $1,100,000,000 double digit to $1,300,000,000. Also this year, if you take out the impact of the Eurex push, but then also the sales and also the contribution margin, we are again operating here at the 5% to 6%, meaning that our contribution margin is even much higher because this is fully loaded including all the overheads. How is this possible? Because we have a continuous growing base in our core propositions of active happy customers.

We have the most comprehensive proposition and are the clear market leader in Germany and in Austria. And later, you will also talk about the proposition with elements. Of course, you can order same day, you can order next day, we have the assortment, we have the marketplace, we have all the other things that you will discuss also later. And with that, we always have internally expression, you need to run to spend still. So we invest in our proposition continuously to continue to aim to have the best proposition and expanding our market leadership.

This segment well above 1,000,000,000 is of course cash generating and is continuing to grow really fast. In international, actually all this the numbers on this slide are are the same numbers that you can also find in our annual reports and our interim reports, but I just put them on one slide to emphasize what is happening in international. And that’s also because in the second part we will dedicate a lot of attention to are. So I took the opportunity to also show a bit of our other businesses here. So in 2020, we had 150,000,000 of sales in The Netherlands, Belgium, France and Italy combined.

And And in only four years, we’ve almost tripled that to last year close to SEK $450,000,000. And at the same time, you see that our fully loaded including everything, marketing, overheads, everything that we can allocate an adjusted EBITDA margin of minus 9.8 in 2022, then minus six and last year we improved with 2.4 percentage points to 3.8. And as we also disclosed in the segment reporting before overhead, so it’s also in the annual report, you see that last year you had at the first time a positive result before overhead for the total international segment of 1.3%. What do we have in international? We are ready for many years to market it in Belgium.

One out of the four households in Belgium is an active customer of us. We have an over 90% brand recognition in Belgium and actually after the big boys like Amazon and Shein etcetera, we are in the top five of leading websites in the country. And then you gave it already now in addition since 2024 also our leadership in Italy. The next slide. Back to the total group fuel.

This is our cash flow. We started the year 2024 with NOK $2.00 4,000,000 in cash balances, including what we have in fixed deposits. And at the end of the year, we had NOK 178. From the left to the right, we got to the minus SEK 26,000,000, we were generating SEK 32,000,000 of operating cash and had a minus SEK 3,000,000 of working capital with the growth that we achieved as a company also knowing that we had some more receivables related to ERX. It is showing that the working capital made a great improvement also the past year because it only increased with 3,000,000.

So operating cash flow in total around NOK 29,000,000 positive. We had total investments of NOK 38,000,000 and then we had the financing, which is according to IFRS. So also this overview also including the leases that we paid in total. So minus $26,000,000 continued working capital improvements. With that,

Olaf Heinrich, CEO, RedCare Pharmacy: back to you. Thank you very much. Thanks, Jesper. So now we would like to give a little bit an update on strategy. And, you know, we would like to focus on two topics.

First of all, talk about the overall strategic positioning of the company. And then secondly, get into some of the great, key metrics of our Rx business. And we think at the start of 2025, it’s a good timing to also take some time to talk about our overall positioning and also why we think we are set up in the right way towards have a great 2025 ahead of us. On this on this slide, you will find the story for, let’s say, the next six slides. So we’ll not spend so much time on this one.

But the overall story is, I mean, we are Europe’s leading one stop pharmacy with a unique and broad customer value proposition. We’ll talk about this later. We’re also best positioned as the leading pharmacy to to accelerate market leadership in Germany. We are gaining Rx market share in Germany month after month, quarter after quarter, we tripled within one year. We have now more than 1,000,000 active Rx customers in Germany in 2024.

And our cohorts, our Rx cohorts already outperformed our strong and really strong non RX cohorts in year one by a multiple. Last slide will be about the unit economics also to show how both businesses, the non RX business as well as PRX business, can fuel our mid term EBITDA guidance in excess of 8%. So if we start with the first one. Again, we think we are Europe’s leading pharmaceutical pharmacy and we are great positioned and I would like to take some time to explain to you why we think it’s like that. So if you look into the pharmacy part of it, we offer Rx, OTC and BPC products.

And so we have a really huge wide range of the software here in the OTC, BPC, Rx. But on top of that, we also have, let’s say, what we call real time availability information. So we are known in the German market for if you really want to find a product, you need to download our app and you can check on that app. So if we don’t have it available, probably difficult to find that product. And on top of that, we have, you know, we always call this the marketplace.

But what is really the marketplace? The marketplace is we will give sellers on our platform the opportunity to sell additional product. We call it health related products. So this for example is medical supply, baby food, diapers, whatever you can imagine when you think about a healthcare related product assortment, this is what we offer on our platform and we have currently more than 140,000 SKUs being offered on our platform. So overall, we agree the widest assortment out possible.

At the same time, we also have great enhanced pharmacy services, how we call them. And I would like to give you at least two examples here. The one is really when it comes down to to the Rx, is, the check of interactions and double medications. So, you know, we have on something like a electronic health record from all patients. So we have all the orders from the past including also the the MOTC and BPC orders and we do checks on that and reach out either to patient or to doctors if things are not not in the right way.

And we provide all of this information in a digital way in our app, and customers really love that. We also are developing a repeat script service. So that means especially for the chronically ill patients, they can use that service to get a refill script from the doctor and then you can use our pharmacy to get the product. So we think in that area we are really ahead of the curve and most of our products are digital. If we then think about the delivery, I mean, so we have all the options.

We have the next day delivery. We have the same day, but we also have the pickup. So next day and part of of same day we do our by our own pharmacy here in The Netherlands, but we also have a wide network out there of, brick and mortar pharmacies in Germany. So currently with our network, we are covering already more than 30,000,000 Germans and we are increasing this network while we speak. So if we combine this all together, it’s about assortment, it’s about great price on OTC, PPC, it’s about convenience.

Those are the key success driver for our pharmacy platform. And then on top, we have what we call the retail media business. So, you know, we offer our partners for that’s the pharmaceutical industry as well as the sellers. They can use our platform and our reach in terms of customers and traffic to offer tailored solution towards our customers and they really like that. So that means we have of course the margin we make out of our own business.

We also have an income stream out of the marketplace business as well out of the retail media business. And from a customer perspective it comes altogether. It is it is a one stop pharmacy. You have all the products and you just get and you can you can pay all the things in one store. That’s why we call it a one stop pharmacy.

If we now go to the next slide, we would like to talk a little bit about the positioning of our pharmacy in the German market. Because we think we are best positioned as a leading pharmacy to even accelerate our market leadership in Germany. Let’s look into this wonderful metric. So, you see three layers here. Three layers how you how you can actually act in the German pharmacy market.

And then there are also three product categories, the OTC, BPC, DRX, and then the combination, the OTC, BPC, and DRX. If we start with the layer at the bottom, which is this is the easiest one, it’s the brick and mortar pharmacy layer. We all know that one. I mean, there’s a ban on foreign ownership in Germany. Only pharmacist can own a pharmacy and, you know, they don’t really have a strong brand or something like this.

They have their local pharmacy. Sometimes it’s called or whatever it’s called. So this is a this is just a local business. And then we get to the the next level, which we call the, platform level. And let’s look into the platform level.

On the one hand, this is the platform OTC, DPC box. There we have online retailers, or drugstore apps or retail apps. So different retail players will either have a a store out there and then have an app on top or just an an online retailer. And they they can sell OTC, EPC via online pharmacy sellers on their platform. Yeah.

So there’s a there’s a large competitor of us who has been doing this for ten years. But, you know, I mean, besides of him doing that, I mean, we have always built our business very strongly with all of the great numbers Jasper just presented. So there then we let’s let’s look into the next one. The next one is PRX. So on the PRX platform, you can see and then we that there are players like the apps from from the payers, yeah, or the market app.

No. But I mean, on those apps as a customer, you can place an Rx order. But I mean, you do not have the full advantages of our product available. So what you can do, you you can place the order but you don’t get any availability information. You don’t get any opportunity to buy OTC on top and you also can’t do a payment on that one.

So it’s almost like you just leave your script there and then somehow you will get

Jesper, CFO, RedCare Pharmacy: you will

Olaf Heinrich, CEO, RedCare Pharmacy: get a delivery from the pharmacy. So we don’t really see a lot of orders coming to our pharmacy via that channel. So then let’s left on the right hand side, the platform business for OTC, PPC and RX. And here we saw in the last year two platforms coming up and they are more platforms organized by the brick and mortar pharmacies. So they have more digital entry point for the brick and mortar pharmacies.

This is from our perspective a difficult business model because, again, it’s a highly regulated. So if you want to do something like this, you have to list all of the German pharmacies and the business model is very limited. We cannot, for example, get a commission on an Rx or on a script. So overall, this platform level is not positioned as a pharmacy, has been out there in the past, with sellers of a week and it has not hindered us at all to really grow and continue to grow in in the German market. And then there’s the third level, which is the level of the online pharmacies.

Here we see two different types of online pharmacies. On the one hand, you know, based on a ruling from the European Court of Justice of 02/2003, OTC and BPC online pharmacies can offer products in Germany. And then there is only a very limited number of countries from which you are allowed also to send Rx into the German market. So The Netherlands are one of those countries. And in The Netherlands, you even have the advantage that you can just can that you can give discounts on Rx on Rx products.

So if you put this picture altogether, we are positioned in the upper right box. So we can do the OTC, the BPC, and DRX. We can position ourselves as a pharmacy as opposed to not being a pharmacy. So that means we feel really comfortable to accelerate our market leadership in the German market. If you go to the next slide, let’s get some into some more of our metrics, which we can measure and let’s talk about the market share in the first place.

So what you can see here, we have tripled all market share within one year. Now reaching in February zero point ’8 ’2 percent market share. So steady over time, we are building this one. And please keep in mind, we are showing here our total Rx numbers and also the total Rx market. You know there is this market of data files, statutory insured and data file private insured.

And in some cases there’s an e script and in other cases there’s still a paper script out there. So if you would just look into let’s say the GigaPhone market where we have the e script and then looking into our e scripts we receive and compare that to the number of e scripts out there based on what the remark is saying, of course, our share already is a little bit higher because the dynamic is with the e script and not so much with the paper script and the privately insured because privately insured right now, they they don’t have any script. Nevertheless, more important to us are the number of customers. And if we can go to the next page, you can see here, you know, at the beginning of the last year, we already started our marketing campaign and then we increased it over the time. And, we have a couple of objectives on our marketing campaign.

First of all, I mean, we have to do some kind of education. So we have to talk about the car

Jesper, CFO, RedCare Pharmacy: solution.

Olaf Heinrich, CEO, RedCare Pharmacy: And of course, secondly, we want to establish ShopUp Boutique as the leading brand which worked out pretty well in 2024. And then the third objective, of course, is to generate first time customers, first time Rx customers for RedCare. And, we decided to show you the first time or to give you an insight also what that really means, what are the results of the campaign. Because I mean, there’s a lot of speculation on downloads of app, monthly active users in the app. And that’s all fine.

And we also look into those numbers internally. But for example, I mean, an app app download could also be an OTC customer who’s downloading an app. Our monthly active user could also be an OTC user. That’s why we decided to show you the most relevant numbers from our perspective and those are the active Rx customers. And what you can see again, we doubled this one in only a couple of months and there was an acceleration in the second half of the year, of course, also fueled by our dedicated Rx marketing campaign.

So overall, we think it’s important to show you those numbers so that you see what we have in our mind. The marketing campaign works out pretty well. We are building the active customer base and we are currently continuing to grow our customer base. If we go to the next slide, this is actually a slide we love a lot. We love a lot, I have to say, Jasper, because I mean, let’s start with the key message here.

And the key message is, you know, the average new customers of cohort of an Rx cohort, which we, acquired in the first quarter of twenty twenty four has a significantly better performance than the already good non Rx cohorts we acquired in Q1 of last year. So in terms of sales, we are 4.5 times higher on the Rx cohort than on the non Rx cohort. And on the gross profit level, the factor is still 2.7. So I mean, we only have now one year of actuals in, but we I think it is important to share those kind of data because it’s not making some kind of assumptions about the customer lifetime value, what’s going to happen in five years from now or so. This is really those are facts, this is what it’s all about and you can see strong non IX cohorts and significantly stronger RX cohorts.

Maybe let me try to explain it in detail if it’s not completely clear based on the picture. So what we have done is, I mean, we looked into the Q1 of last year, looked into all of the new customers we received on the non Rx side and then looked into the sales, those customers generated in the first quarter. Could be that they placed one order, could also be that they placed the second order. Those new customers, for example, the one from January placed an order, second one already in March. So that means then we have the sales and the number of new customers, the non Rx cohort.

And then we build just a sale per average customer of that cohort and we index that one at a hundred. And it’s the same exercise, of course, we did with the Rx. And what you can see immediately already in the first quarter, the Rx cohort is stronger. I mean, we would have expected probably something like that because of the higher AOV. But then you can clearly see how it’s developing over time.

And the main driver for that is, of course, it’s interesting to see, you know, when you require new customers, not all of them return. But what we can see on the Rx cohort, more customers return than on the non Rx cohort. And then secondly, what really kicks in is we have a high share of Rx patients with chronic conditions. And you know they have a significantly higher AOV, but also a significantly higher order frequency. And if you put this all together already after one year you can see the sales of 4.5 times higher.

And of course, I mean that is just the beginning of it. This of course will continue so the gap is going to widen over the next quarters and also the next years. And the similar pattern is on the gross margin. So putting this all together, we are happy with our non Rx cohorts because that is what you showed Jesper. It is working.

We already have fully loaded an EBITDA about 5% in established markets in Germany and Austria, but we put something really great on top here. So overall it confirms our marketing strategy was the right one because we acquired a lot of new customers and we see based on one year actual data that the cohort model works. If we now go to the next page, we would like to show you also how this all can play out. So how can we get to the midterm EBITDA gain guidance in in excess of 8%? So let’s let’s have a look into, the unit economics on the non Rx order as well as on the Rx order.

So let’s go line by line. If we start with the AOV, you all know that we have more, something around €50 on the non Rx and, more than a hundred on the on the Rx side. So we are starting off with an AOV, which is more than twice as high on the on the Rx side. If we then go into the gross margin, very interesting what you can see the absolute gross margin on Rx is a third higher than on non Rx. Yeah.

Percentage wise, it’s lower. Percentage wise, we are almost 30% on the non Rx and 18 to 22% on the Rx. And I don’t know if everybody of you is familiar how it works on the on the margin side on the Rx. It’s regulated in Germany. So what you get is you usually get or you always get a fixed amount of money for each script you’re handing in with the payer.

And then on top, you get a percentage, which is then calculated based on the value of the product. So that means the higher the value of the product, the more margin absolutely you get. But of course, the higher the value of the margin the higher the value of the product the lower the percentage of course becomes because of the fixed block in it. What we currently see based on the customers we have acquired and again most of them they have chronic conditions currently we see gross margin coming in the area of 18% to 22%. If we then look down all the way on the cost, let’s start with the variable cost.

Variable cost are all of the cost except marketing. So what we can clearly see here, the variable cost are almost comparable. I mean, the logistics cost as well as the last mile cost are comparable. On the RX cohort, we have an additional step, which is the pharmaceutical check. So absolutely, the variable costs are a little bit higher.

But on the other hand, percentage wise, it’s lower. Yeah. So and on marketing, we see a similar pattern. I mean, looking now back into the courts we acquired on Rx, we can clearly see you almost don’t need marketing once you have them because they love the service so much. So we see that the marketing cost to keep an Rx customer is lower absolutely at 8%.

So that means both cohorts can very well fuel our EBITDA guidance in excess of 8%. And if you then put on top of the marketplace business, which I explained earlier to you where we also have additional revenues, revenue stream, you can clearly see both areas are playing and fueling our midterm EBITDA guidance in excess of 8%. So having said this, I would like to turn over to Jesper.

Jesper, CFO, RedCare Pharmacy: Thank you. So we’re looking deeper ahead now. So after the great results that we saw as we achieved the past year, this is such an important slide that we are having here because at the last year we expanded our capacity because of the success in Italy. We’ve also shared with you already that we are building distribution capacity in The Czech Republic. But this is something else.

This is a major project that actually right in the location where we are sitting here in Zafernam, we started a major project in the infra logistics here in Zafenham. And this will not only double our capacity that we have in total at this location, but it will also significantly reduce our cost because of much fewer labor per order. So it’s a highly automated solution. We selected the world’s best technology firms for this. It’s proven technology and of course we tailored it towards the specific of our processes.

I’m repeating what I just said, we doubled the capacity and we reduced labor by 70% plus versus the current process. The total investment is around NOK 100,000,000. We will be paying debt in NOK 25, NOK 20 6, NOK 20 7. We finance that through our existing cash balances at the moment, but very likely because it’s such a good collateral, we will be replacing that by a lease anytime soon. Fast payback and we’re planning to go live operational parcels from the automated system very early in 2027.

And if we then go to the second and last slide, which the guidance for the current year is I’m reading out what’s on the slides and add a little bit of color. We expect for this year a total sales growth in excess of 25. So in other words, we are not expecting any slowdown versus what we achieved in exceptional year last year. In Germany, we expect that the average will roughly double to above 500,000,000.0. Motor picks for the total group, let me say, in excess of 18% and we want to do so with an adjusted EBITDA margin above 2%, namely between 2% at 2.5%.

And although four elements are full year guidance, but in Q1 and those that know the company and the many year seasonality because of our internal plan and it’s also because of the seasonality of the quarter. We don’t know it for sure, but it’s likely that Q1 will be somewhat lower also meaning that all the quarters will be somewhat higher probably. Taking now a helicopter view looking at this is that I had to think back of the year 2021. We then crossed the 1,000,000,000. It was 1,000,000,000 at 60,000,000 that was 2021.

And if you add all the numbers that you’re seeing here, it seems to be that we are approaching in the current year the 3,000,000,000 already. So for the coming year, we expect undoubtedly, so uninterrupted continuation of our organic growth. We expect a delay of the ERX and as an outcome of the total, what we think is the best value creation for the company, what we are doing there, we think it will be a margin, minimally at 2%. Of course, if things happen, we will act upon it as we always do as a company, but this is at the moment our best expectation for the current year. And with that, I think we should rapidly go to the Q and A.

If there are any questions.

Valentina, Conference Operator: We will now begin the question and answer session. You. The first question comes from Aizia Noor from Morgan Stanley. Please go ahead.

Aizia Noor, Analyst, Morgan Stanley: Hi, good morning. Thanks for taking my question. My first one is on the Rx sales ambition of more than EUR 500,000,000. Would imply that you achieve about 0.9% market share for the year when you are already running at 0.82% in February. So is it fair to say you are being conservative here and do you think there could be some volatility?

Just give you color on the downside risks that you’re building into this figure. And my second question is on the gross margin. Thanks for this unit economics data. Very helpful. Could you describe a little bit the drivers of the 18% to twenty two percent range for the ERX cohort between pricing, mix, growth?

What takes it to the bottom and upper end of that? And would you expect your gross margin to gravitate towards this kind of 20% for 2025? Thank you.

Olaf Heinrich, CEO, RedCare Pharmacy: Marcelo, do you want to start on the first

Jesper, CFO, RedCare Pharmacy: one? Yes. Yes. Good morning. Also from Max, we didn’t So thanks for your question there.

No it’s not it’s our best expectation. If you give me now a document where I can sign and you will have half a billion of our Excels, I sign it immediately. We have to do a lot of hard work for that and we’re looking forward to that and we are not conservative there. But thanks for the implicit compliment that we’re almost there, Jose. I have to say that the step up that you’re really seeing from 0.66 to 0.82 from December to February, it’s fair to say that this December number had that is seasonality lower number of our market share.

So that is a huge step up. Actually December was somewhat lower than November was, but that’s just seasonality. So no, we are in total not this is our best expectation and of course always aiming for more, but this is a realistic expectation. Good question on the gross margin, but I think you are looking forward to answer that.

Olaf Heinrich, CEO, RedCare Pharmacy: Yes, yes, yes. We’d love to answer. It. I like the question on the gross margin. So there are many ways, how we can get through gross margin.

Also the reason why we currently still give a range. I mean, so some of the things are easy. You know, this is a business now we are first starting to get in, if you compare to the larger OTC and BPC business we have. So that means in terms of supply, you can sometimes you go with the wholesale, sometimes you get direct supply from manufacturers. So there’s also a margin gap in between that one.

So that is one of the drivers, the more volume you get, of course, the better we become also on purchasing. The second one is, you know, there’s, a share of OTC products also in the Rx basket. And of course, I mean, that share can go over time. As you can imagine, that is part of our product where we offer also OTC and BP BPC products to our customers. So that is a reason why it’s still also moving this one because we only had one one year of learning And it’s it’s been we we haven’t reached what I would call the ideal share of, of a mixed mixed basket.

And then, of course, the main driver is is again this this, this reimbursement scheme in Germany. You know, I mean, you usually get a fixed amount, which is euros 8 something and then it’s a little bit of a subtraction from that and then you get 3% on the product value. And as you can imagine, if the product value goes up, of course, the absolute margin goes up, but the percentage goes down because the ADU is something they say where they are and you only get the 3% related to the value of the product. And which kind of customers we will get in this year and the upcoming years, we don’t know exactly what we have seen so far, which is the good news. The customers we see today are those with chronic conditions.

So that is exactly the target group we want to have. But it really heavily depends on which kind of products are they sending in. Is it more on the generic side and the price is lower? So the percentage margin is higher or is it more on the higher price items and the absolute margin is higher but the percentage is lower. So this is something which is ongoing and therefore we have to give a range.

We have to give a range. It’s only really the first year of experience we have in this fast growing area. And then maybe by the end of the year, we will be much smarter. But in any cases, it’s good enough to fuel our above 8% EBITDA, midterm guidance.

Aizia Noor, Analyst, Morgan Stanley: That’s very clear. Thank you very much.

Valentina, Conference Operator: The next question comes from Christophe Dogen from HSBC. Please go ahead.

: Yes. Thanks also for taking my questions. First, is it possible to get a bit of I noticed there wasn’t anything in the prepared remarks on the AVR ruling with respect to bonus advertising? I know you sent out a PR after the ruling a couple of weeks ago. Maybe you could give us a bit more color as to what your thinking is on that?

And then second question, I was curious on Belgium. I mean, you’ve said this a couple of times now in a couple of calls, like a quarter of the population being a customer that would suggest that this must be somewhat a stable business with respect to being quite mature, although you’re probably still growing. Is there anything you can share on profitability for Belgium? I know you’re probably not keen to talk about individual markets, but given that international overall is still loss making, it would be interesting to hear about drivers or individual countries within that sort of profit mix. And then last question on the 8% margin target.

I understand it’s a mid to long term guidance, but in the prepared remarks earlier, you have sort of alluded to the, let’s say, established part of the business already being at 5% to 6%. I think the general assumption is that, that marketing and size also play quite a big role. I mean, is it reasonable for us to assume that at some point you’ll give us a specific target like is the 8% already theoretically possible, I don’t know, in 02/1930? What’s your thinking about it? Because obviously, this mid to long term thing has been a rolling target for Quadrado.

And the question is, at what point should is it going to be a realistic expectation? Yes, that’s it. Thank you.

Olaf Heinrich, CEO, RedCare Pharmacy: So I will give it a try on the first question and then hand it over to Jasper. So I mean, your question was on the ECJ ruling. And so first of all, I mean, we are really happy with the ruling. It is the second time that the European Court of Justice after first time has been 2016 allows a bonus on our ranks. So that that is great and that has also been our our statement and our press release.

And you know how this works? I mean, the European Court of Justice only receives specific cases from German court. They get forwarded to the European Court of Justice and from there, they find their way back to the to the to the German court and then that is what is now going to happen. And I think we should not really speculate about what this means in detail. Again, the order direction, I think, is clear.

We can we can give a a direct direct bonus on our ex. This is what we are really happy with. And and then let’s see really what happens then then on the German side. And then we will, of course, react accordingly to that so that we are always in line with, in line with the the actual rulings. I think that’s that’s all we can say at this point in time.

The rest would just be speculation. Again, we’re happy it’s a confirmation of 2016 and then let’s take it from there. Jasper, do you wanna go for the question number

Jesper, CFO, RedCare Pharmacy: two and three? I will do that. So thanks on Belgium. Jan, indeed, I can confirm what you are saying, but I cannot confirm the second part because actually, though we indeed don’t talk about individual countries, so I will also not do that now. We have the segment reporting.

I can disclose here that we continuously grow double digit in Belgium. And I also can say that the penetration numbers that we are having here despite all the growth that we are seeing here are much lower than we have in Germany at the moment. And in Germany even the penetration is still increasing. So there is ample room to grow. Olaf also just said we even added the marketplace to that now in total.

So it’s a very good base and we don’t see an end to the growth opportunities that we’re having there. And we’re also really happy with the financial results that we are achieving in that market. The third one, the midterm to 8%. I think that is super important that you asked that question because it is not that we We need to scale, we need to be larger and that in the end we hope we will get to the 8%. If we are saying that our established businesses are doing to 5% to 6%, indeed what you are saying, there is a lot of marketing included in there.

So you can estimate what the contribution margin is there. So we could be within month, we could be close to the 8% if we would like to do that. But we are so convinced of the opportunity in total Europe and Enerix that we think is much more value creating by continuing to increase our base. But underlying our unit economics are very strong because of the setup of our model, because of the focus on the efficiency that we’re having in the attractiveness of the industry. So you say, when will you achieve it?

Yeah. That’s a decision that we can take when we will achieve it. And the thing what you are seeing now is that we continue to grow very fast in combination with the margin improvement. And I think that’s the fastest value creation that we can do at the moment. But I’m repeating myself a little bit, so sorry for that.

But I hope that the other numbers are also showing the attractiveness of the contribution margin in our case.

: That’s clear. Thanks a lot.

Jesper, CFO, RedCare Pharmacy: Thank you.

Valentina, Conference Operator: The next question comes from Jan Kork from Deutsche Bank. Please go ahead.

: Thank you. Hi, Olof, Jasper. Thanks for taking my questions. My first one is on your Rx business. You mentioned that you have more than 1,000,000 of active Rx customers by the end of twenty twenty four.

Could you share with us how many of them have a chronic disease? And then a second question also on the e prescription market. Is there any update on the e prescription for privately insured people in Germany? I understand that the market opportunity is a bit smaller, but it should still be a tailwind for you. And then finally, on your marketing strategy and without giving your competitors too much information, what are the key learnings of your intensified marketing campaign over the last few months?

Jesper, CFO, RedCare Pharmacy: First question for you, Paul.

Olaf Heinrich, CEO, RedCare Pharmacy: Yes, yes.

Jesper, CFO, RedCare Pharmacy: So first, yes, on the chronic kidney.

Olaf Heinrich, CEO, RedCare Pharmacy: Yes, on the chronic kidney. Yes, I mean, look, we do not really want to give so many insights. I I love the questions, and I can understand them. And but we do not give want to give so many insight. I mean, we try to say that there’s a a high share.

I think that’s what that’s what is on the patients. The high share of, a patient with chronic conditions because I mean, the fear probably could have been, oh, it’s only one time customer or something like this. No. We see it. It’s it’s exactly the other way around.

And if we look into the frequency, so that mean the number of scripts being available to an individual active customer for sure that has to be a chronic patient. Can’t be that there there are so many scripts on on that level. And therefore, additionally, of course, we can also look into what is called the ATC code. So there’s always a coding of the product. And if you look into this one, you you you can pretty easy if you’re a pharmacist and even if you’re not a pharmacist, you can differentiate it if it is something acute, which may be a pain killer or something like this or on the other hand, if it’s something more chronic, which is maybe, blood pressure, sugar, diabetes, whatever it is.

So it’s easy to to to see that therefore, we can identify a very high share of chronic conditions, but we do not want to give any more any more details into that one. I think the second question, if I recall it right, was on the private insurance. So a pick up our business. Yes, an interesting question. Overall, the market share, I mean, 90% of the Germans are GigaPhone, so statutory insured, 10% are privately insured.

So therefore, the most relevant market is the market where we have the e script and where we are really happy. And to my knowledge, the is still lagging behind. So I haven’t seen a schedule or let’s say from a regulatory perspective, a push where you have certain deadlines when to introduce a state they are working on that. But I I to my knowledge, there’s not such a fixed date or something like this. Well, of course, at one point in time, it would happen and, of course, we will also try to get into that business which we did also in the past.

But as of now, not to my knowledge, not a fixed date to have e script on the on the, pick and follow. And then the third question yes, I forgot the third question, so but I thought it’s maybe a little bit also on your side.

Jesper, CFO, RedCare Pharmacy: No, no, no. And you placed it in the context already Jan, yeah, indeed that that’s an area where we sometimes shed some light on where we don’t want to share too much for obvious reasons, I would say. It has been a very exciting year. What’s the key learning of the marketing that we have in total? Well, in the end, you need also to count your blessings.

It is working. So, there is a technology change, something with an NFC and a chip and etcetera. And how are you able to explain it to your customers? Well, you see the results that we have. So what’s the key learning is that we are apparently capable of educating the people or at least they place their trust into our hands to place their order with this digitization that we’re seeing here.

We see that if we then also subsequently deliver on what people hope that we will do, we get very high scores, very satisfied with the additional service in the perspective of the total healthcare system having also this possibility next to all the availability of the physical stores that has also this customer journey. Your question was to disclose in yearnings, but I leave it there. Yes, it’s okay. We continuously learning also. Thank you.

: That’s very helpful. Thank you.

Valentina, Conference Operator: The next question comes from Christian Salis from Hauck and Hauckfuhlizer. Please go ahead.

Christian Salis, Analyst, Hauck and Hauckfuhlizer: Hey, everyone. Thanks a lot for taking my questions. I’m giving the marketing a try again. So I understand that you’re not disclosing the exact marketing amounts. But could you maybe just give us an indication, for example, whether your marketing ratio has increased year over year in percent of sales in 2024?

Or has it remained rather stable? And then also on the quarterly run rate, so would it be fair to assume that you obviously have increased marketing quite significantly in Q4? And then during Q4, maybe it felt it was maybe a little bit too much. And now you are scaling back a little bit more to a normalized level, which would maybe be in between the Q3 and Q4 levels on an absolute basis. That would be interesting.

And then also in light of the recent ECJ ruling, how is the RX bonus going to play into the marketing strategy going forward? Thank you.

Olaf Heinrich, CEO, RedCare Pharmacy: Well, I mean, those two questions are wonderful questions, I have to say. I mean, they’re really to the point, but unfortunately, we do not want to answer them in detail. So let me give it a try on the first one. So what what we try to do is, I mean and and we always said that we we are very agile in terms of marketing. So we are looking into different channels, different communication messages, we have here out there and we try to steer the CAC, so the cost per new customer.

So this is something we are doing and then whenever we see that we are doing too much then we reduce a little bit maybe in one channel or increase in another channel. So it is more an ongoing optimization on the CAC. So where we say this is the amount per new customers per new customer we want to spend. And we are working and fine tuning on this quarter after quarter and month after month. So if possible,

Christian Salis, Analyst, Hauck and Hauckfuhlizer: we

Olaf Heinrich, CEO, RedCare Pharmacy: want to give more insights how we think that is one of the second part the bonus. I mean I think that’s also a good question. So we have a voucher out there. It has always been out there and it has been confirmed by the ECJ. So you get, for the first order, you kindly get a direct bonus on your Rx.

So if you have a co payment or in Germany, there’s also some other things like called a fast track different lens. So that is a very regulated detailed information on the pricing, but never that’s something a customer potentially has to pay. I mean, that is in the details of our of our vouchers. So it’s out there for for for new customers. So we have been using this, in the past and we are currently using that.

And then of course the question is, what else do we want to do on the bonus side? And this is again something which we do not want to display here because that is sensitive information. You know, we are really happy on what we have today and we have established a business model currently where it’s more it’s more driven by our great product, yeah, as opposed to by price. So, but we have all the options on our end and then you will see one once we act on the market. But so far, we have this voucher for new customers and it is in line with the ECJ ruling.

Christian Salis, Analyst, Hauck and Hauckfuhlizer: All right. Thanks so much. And then just a quick follow-up on the paper RX business. So are there still people who are really sending in the paper scripts to you? And also, what’s been the PRX development over the last quarter?

Was it stable or is the share decreasing again or still increasing?

Olaf Heinrich, CEO, RedCare Pharmacy: What was the last question? Increasing or decreasing?

Christian Salis, Analyst, Hauck and Hauckfuhlizer: No, if the Paper RX share, is it stabilizing or is it or does it continue to decrease quarter over quarter?

Jesper, CFO, RedCare Pharmacy: We will keep our pharmacy services here open until the last step in Germany it will be sent to us. So, we took the principle, so everybody who wants to send in a paper can always send in a paper. All the privately insured customers, patients, they are still doing that. Also some of the social early insured, but I can say it has really, because of the customer preference, really diminished to a minimum percentage that we have in the social media shirt. That’s because of the pay profile we still have and as I just said.

Yeah. So we have solved that the majority of the people, they really want to benefit from not walking to the letterbox and waiting but placing the order immediately, have the improved journey where they can also order other things at the same time, see availability checks and other things. So answering your question directly, very small percentage in social.

Christian Salis, Analyst, Hauck and Hauckfuhlizer: Perfect. Thank you so much.

Valentina, Conference Operator: The next question comes from Olivier Calve, UBS. Please go ahead.

Olivier Calve, Analyst, UBS: Yes. Good morning, Olaf and Jasper. I have a few questions left. The first one just on German Rx. So 500,000,000 is close to 0.9% market share.

Just as a follow-up to the first question, do you expect any headwinds on the German RX growth or slowdown in market share gains versus last year? Because if you assume your February market share holds, you’re already at four fifty million. And your 1,000,000 Active Rx customers, could you quantify the share of your customers that are repeat customers maybe? So that’s the first question. Second question would be on sort of you’re showing a very impressive growth in non Rx across TAR and international and have done so historically.

But obviously, we’ve seen competitors’ interest in the space. Would it be fair to assume that your non Rx business is broadly evenly split between medicines as in OTC versus non medicines, so vitamins, BPC, stuff like that? And then finally, on the free cash flow, I understand that you don’t want to give a given the dynamic situation and free cash flow guidance. But I was just wondering if you could help us with the building blocks in terms of working capital dynamics now that you’ve seen about a year of ERX customers. What is the working capital dynamics in Rx specifically versus non Rx and CapEx guidance for the year.

So if you could help us a little bit with the phasing of that $95,000,000 to $105,000,000 project that you have in Sevinom over $25,000,000 to 27 that would be helpful? Thanks.

Jesper, CFO, RedCare Pharmacy: 500,000,000.

Olaf Heinrich, CEO, RedCare Pharmacy: Yes. So I mean maybe the first question is, if I recall the first question, right, is there a slowdown on Rx, we can see no, we don’t see a slowdown on Rx. Why why should we see this? You know, I mean, the the the way fundamentally

: works is, I mean,

Olaf Heinrich, CEO, RedCare Pharmacy: we have this freedom of choice here in Germany. And as long as the product is good and we think we have a great product, we don’t see any reason why there should be a slowdown. I mean, we have great product on the non Rx side, which has a market share is more than 20%. So why should there be a slowdown? And in terms of looking into our overall guidance, I think that’s also what Jasper already pointed out.

I mean, look, I mean, if you are right now, we are below than the I think you mentioned the 0.9. We think it has to be higher to reach our guidance. But nevertheless, right now we are lower and we still have to bring in this full year. But I think that is already what Jesper pointed out. So I don’t see any slowdown on Rx.

It’s the opposite. The solution becomes more and more popular. And there was a second question on competitors entering the market. So I was trying to explain that there has been online platforms out there for more than ten years. And on those platforms, there are online pharmacies offering OTC and BPC and that’s fine.

It’s always been the case. So and especially there’s one online retailer who’s the largest one in Germany. He has been doing this for ten years. So, we don’t see there any additional competition even if now others are trying to do the same thing because over the last couple of years, the last ten or fifteen years, we have been growing our business very well. And so we also don’t give any breakdown of OTC and VPC.

But to us, it’s also not so relevant because, I mean, those are just platforms, not really pharmacies. And we have been growing even despite them offering OTC and VPC. And so then there was I think some more questions which are probably they work better with you. Yes, better, right? Yes, I

Jesper, CFO, RedCare Pharmacy: hope and otherwise you add. Hi, Rolke. Good morning. The number of repeat customers in the 1.1, we will you will understand not disclose. But looking at the cohort information, you will see that they are better than we have seen in NOLORIX.

And in NOLORIX we are pretty happy with the frequency of our customers. So I will not disclose to any additional information. Then your question about everything but RX, how is the split between OTC and BPC, the interesting thing about that is it’s very little driven. So in some countries we have significantly higher shares of BPC and in other countries it’s mainly OTC. Also there I don’t want to add anything else.

We talk Rx and we talk all the other assortments which we always name OTC, but it is indeed OTC, BPC, healthcare related vitamins etcetera. That’s the entire business. Free cash flow I understand, but we don’t give guidance on free cash flow. So I cannot answer your question there, but also nothing to hide. You see the EBITDA as a driver of our cash generation.

You talk about working capital dynamics there. On one hand, you see the underlying continuous improvement that we’re having as a total company. At the same time, you see that the receivables from the insurance companies might increase somewhat, but it’s also not unlikely that we have a certain solution for that, that we will see that in the future in total. And as to the investments, the base scenario is as we just said, that is that we will be spending this money in the coming three years. That’s I also added to it that it is also quite likely that there will be a lease and that means there is no cash out at all in the coming years until we start harvesting the benefits when we will be starting to pay a lease.

That’s a little bit forward looking because otherwise we would have announced that now, but that’s common practice. It’s such a good collateral to do that. And adding those things up then you get to the free cash flow, but we don’t have the guidance here.

Olivier Calve, Analyst, UBS: Okay. Fair enough. Thanks, Jasper.

Jesper, CFO, RedCare Pharmacy: Yes. Okay. Have a nice day. Thank you.

Valentina, Conference Operator: The next question comes

Olaf Heinrich, CEO, RedCare Pharmacy: from Glenn

Jesper, CFO, RedCare Pharmacy: Foul from Kepler Cheuvreux.

Valentina, Conference Operator: Please go ahead.

Glenn Foul, Analyst, Kepler Cheuvreux: Hello. Thank you. Congrats on the results and sorry to come back to this topic again. But I’m trying to understand how you’re thinking on this topic regarding the European Court ruling. Is it not fair to assume that there will be some regulatory headwinds?

Because right now, and please correct me if I’m wrong, but you are in the complete opposite position as over one year ago when the NFC card link was not available and the company, yes, threatened to sue because of unfair disadvantage, which correctly so was right, yes. But now it looks like that The Netherlands based foreign pharmacies have an unfair advantage over the local pharmacies who are not allowed to offer these RX discounts. So don’t you think that there could be some regulatory headwinds and this could even reignite the whole discussion about prohibiting mail order RX in Germany, especially with the CDU as the new government?

Olaf Heinrich, CEO, RedCare Pharmacy: Yes. Thank you very much for that that question. Of course, it has been, a fundamental question for more than ten or fifteen years on our business model. And, so let me try let me try to give some insight into this. But on the other hand, we shouldn’t we shouldn’t start really a speculation.

Yeah. So I mean, as you said last year, I think I think I mean, without calling, there would have been a or there had been a discrimination on of our businesses because I mean, few customers get this printout from the doctors. So therefore, I think it was it was fair and it was a good move, also to to establish this carding solution. To me, a completely different discussion is this bonus. It’s nothing to do with the card.

And card was to make sure we don’t just get an additional discrimination because of of being introduced. The the, long outstanding discussion on the bonus is a different one because the argumentation, the key argumentation and also why the European Court of Justice has ruled twice in our favor is pretty easy. I mean, there’s a protection in Germany, which is called the ban of foreign ownership. So countries from outside Germany are not allowed to enter that business because of the ban on foreign ownership. And so that means there is also discrimination from that perspective towards, European pharmacies.

And then on top, there’s this fixed price, which in Germany on our ex. So it’s a double protection. And that was one of the reasons one of the reasons why the ECJ now went twice that to offset this disadvantage, yes, online pharmacies can offer a bonus on Rx. But I mean, I think we shouldn’t get too much into those discussions because I mean, they are legal discussions is not helpful to have them here. But this is I I just want to show I want to explain the difference between the discrimination on the excess via NFC and the discrimination because of the ownership which was ruled twice.

And then of course there’s always and has always been political discussion in Germany. It has been also part of this business model for more than ten or fifteen years and therefore of course you saw you saw what happened in the past. I mean there have been a lot of attempts sometimes also to put a ban on all business but I mean has never worked out. Right now I strongly believe I mean there’s a freedom of choice on pharmacy in Germany so that means we are an established business also on Rx. It’s, it’s something the customer wants and therefore I’m pretty confident that of course there will be a new government but let’s let’s see what then the new government comes up with.

I think personally we are part of the solution that is what we also see in the numbers. I mean we just recently also published the study saying, I mean, who are our customers and what you can see, our customers are not customers in the big cities. They are customers in the rural areas. So we as a pharmacy, we are part of the solution. That is what we strongly believe and therefore we will always have this position when talking to regulators.

So but I also think we shouldn’t speculate about what’s going to happen with the next government. We don’t have a new government right now. Overall I can say I mean having been in that business, especially on that case for almost fifteen years, I can say I feel really comfortable about our current setup and also forward looking. I think the setup is ideal and again we are part of the solution and not part of the problem in German healthcare.

Glenn Foul, Analyst, Kepler Cheuvreux: Okay. Thank you. Thank you for your insights on that.

Jesper, CFO, RedCare Pharmacy: Next up

Valentina, Conference Operator: is Sussak from G. A. Messines. Yes.

Sussak, Analyst, G.A. Messines: Hi. Thank you for taking my question. I have a couple of ones. I would like to take them one by one if I may. The first one is a quick one.

You have this new slide in the presentation regarding the unit economics and you also showed the gross margin. And if you look historically, I mean, if you take the mix of the both businesses and you never disclosed that exactly, but you can for sure say that you never reached these numbers like the 30 and the 18% on ERX. And I was wondering whether this has something to do with the sales tax, the Umtarsturje, it’s a topic that we discussed a couple of times. So do you expect to reach these kind of margins in either 2018 to 2022 at the 30% in non OREX after the sales tax or before the sales tax? And an associated question, is there a sales tax actually on the eOREX or not?

With just OTC? Yes,

Olaf Heinrich, CEO, RedCare Pharmacy: Paul. Thanks. You want to give it a try? Maybe I can ask you then out on the eRx.

Jesper, CFO, RedCare Pharmacy: Hi, Willian. Thanks for your question. The numbers that we’re showing here, for example, in the NOVARIX, that’s our numbers that we have in total. I always look at it from the internal perspective and which is by definition net sales the way we report. So it’s a gross margin as a percentage of net sales.

Sussak, Analyst, G.A. Messines: Okay. Thank you. Very clear. Then just to confirm, on the RX sale, is there also a sales tax or is it just the OTC? I’m sure there is no one on the Medi Service, right, but on the German RX, is there a sales tax?

Jesper, CFO, RedCare Pharmacy: Can you make me understand the background of the question that they can answer it that I give you a couple of things. For example, there are some floating around numbers of a 65,000,000,000 to 70,000,000,000 market etcetera. So everywhere we try to be as clear as possible in our market size that we totally define. We take the net sales perspective excluding if any VAT that we have in total. And also in all the numbers that we talked about today, that is also always from that perspective.

So from us, the VAT is not a relevant one here. If you look at the total regulatory framework of the reimbursements of AmEx, indeed in the total calculation, you need to take into account certain elements of it. But that is so I don’t understand the background of your question. Everything we show here is in line with how you IFRS wise, accounting wise should look at the numbers.

Sussak, Analyst, G.A. Messines: Yes. The background is I mean, if I put in the numbers that you state here in my model, then my margin explodes below because historically the reported margins as in terms of sales take your gross profit has always been lower than the 30% and also presumably lower than the 2018% to 22% in Oryx. So if I take just these blunt numbers, then my margin explodes. That’s just the background to my question.

Jesper, CFO, RedCare Pharmacy: Yes, yes. And it’s probably in the past you were taking that a number which was including OTC and RX, I would assume, with the 30%. But I have to say otherwise, it’s really please also reach out to Investor Relations or me because we can take this also offline because it’s a little bit detailed for me in this call to talk about it, if you want to clarify something. Yes?

Sussak, Analyst, G.A. Messines: Okay. Sure. I have two others, if I may. The first one relates a bit to Olivier’s question. It’s basically he was asking whether you believe that EORx is no longer going to grow.

I mean, of course, you said no because the whole case is that EORx is going to grow. But I think his question was rather related to the 500,000,000 of Oryx. And maybe you can clarify, is this including the according to my estimate, roughly 60,000,000 paper script sales or is it excluding those? The 500,000,000?

Olaf Heinrich, CEO, RedCare Pharmacy: Yes, but do you want to give it a try? But I think the answer is pretty clear in terms of everything. It includes eREX and paper RX, it includes speaker phone, speaker phone. So statutory insured and private insured. It’s all in.

That is what we call our RX number.

Jesper, CFO, RedCare Pharmacy: So for example, the 42% we have in Q4 was for E rates of course much higher, yes, because it’s a total,

Sussak, Analyst, G.A. Messines: yes. Okay. But then I mean then you have to be aware that if you do the math and this really implies that your new clients growth in E rates really goes down. I mean but you also said in excess of $500,000,000

Christian Salis, Analyst, Hauck and Hauckfuhlizer: with all clients over $600,000,000 right?

Olaf Heinrich, CEO, RedCare Pharmacy: No, but that’s not true. But I think it’s important to say that it’s not our plan. We don’t see something like this. There is no decline in new number of customers. It’s the opposite.

It continues. It works very well. So I don’t know how you why you want to make this up because we don’t see it. We don’t simply see it.

Sussak, Analyst, G.A. Messines: No, no. Of course. But my estimate is also SEK 600,000,000 or SEK 500,000,000. But anyway, the last question, I don’t want to take too much time. Regarding adjustments, what how large are the adjustments going to be this year on EBITDA level according to your current assessment or estimate?

Jesper, CFO, RedCare Pharmacy: I look at the operator, this is really the last sentence we’re going to say because we run out of time, but I like to answer this one because it’s very clear. Everything adjusted totally into the details discussed in the annual report, super simple it is. It is only our equity stock option program that you’re seeing there in total. But there’s nothing there that we are just to get to the certain number. It is to get to the cash generation.

Last year SEK 33,000,000 of adjusted EBITDA, SEK 32,000,000 of operating cash flow that we had there. Nothing like we are just for this and that. It’s only what I just said. And it’s in the exact detail disclosed there and it was just a couple of million last year. Yes.

Because we think it’s a more relevant number than the fully loaded one. Yes. So very small, but all details I understand.

Sussak, Analyst, G.A. Messines: So what’s the number? 6,000,000 or is

Jesper, CFO, RedCare Pharmacy: it It’s in the annual report. Yes. Yes.

Sussak, Analyst, G.A. Messines: No, I mean for 2025 was the question.

Jesper, CFO, RedCare Pharmacy: We’re targeting adjusted EBITDA only, yes, yes.

Sussak, Analyst, G.A. Messines: No, but the question was what is going to be okay, you don’t want to give your current debt. Okay.

Jesper, CFO, RedCare Pharmacy: Yes, there’s also nothing to hide. But I don’t do we don’t have guidance on the adjusted on the adjustments. So there’s not any reason to be think that it will be very different from this year. So I will take, I don’t know what, current year number and with the growth that we achieved something like that. Yeah.

Sussak, Analyst, G.A. Messines: Okay. Congratulations again. Well done. And let’s keep in touch.

Jesper, CFO, RedCare Pharmacy: Yes. Thank you so much.

Valentina, Conference Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Olaf Eirings for any closing remarks.

Olaf Heinrich, CEO, RedCare Pharmacy: Yes, thank you very much. So great questions. I mean a lot of great questions and that’s why it’s always fun. Yes, it’s always fun I have to say. Look to us it’s I mean, ’24 has has been an exceptional year, but also this year is going to be a great year.

So it’s a lot of stuff going on at the same time. So we are really looking forward into this year. And then sharing with you, next time the information, I think it’s May, seventh of May or so.

Jesper, CFO, RedCare Pharmacy: Yep. We have trading update virtually already and then the May 6, we have

Olaf Heinrich, CEO, RedCare Pharmacy: The May. So We’re

Jesper, CFO, RedCare Pharmacy: here again.

Olaf Heinrich, CEO, RedCare Pharmacy: So see you May 6, and then maybe some of the questions you asked today maybe we already have an answer to that one. So thank you very much for joining and have a good day.

Valentina, Conference Operator: Ladies and gentlemen, the conference is now over.

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