Shop Apotheke Europe N : Transcript Earnings Call Q1 2023

Shop Apotheke

Q1 Earnings Release Presentation

2nd May, 2023 | 11:00 AM CEST

Transcript

Speakers:

Jasper Eenhorst

Monica Ambrosi

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Jasper Eenhorst	Good morning to everybody joining today's call. I'm very happy
	that I can present the quarter one results for Shop Apotheke
	Europe to you this morning. And I'm here today, together with
	Monica Ambrosi from Investor Relations. I will quickly grab the
	moment here, and I will keep it short, to thank all the people who
	made it possible to have today's meeting here.
	And that's the accounting department at the Finance
	Buchhaltung, it is Investor Relations, it's IT, it is communications,
	and of course, moreover, all the people across Shop Apotheke
	Europe that have been able to achieve the results that we've
	achieved, quarter after quarter, year after year, that are, really,
	according to my definition, impressive.
	And certainly, also, the result of today, of quarter one, 2023, I'm
	very happy to present to you. We do so live from our
	headquarters, here, in Sevenum, the Netherlands. As always,
	the business performance update, and then an update of our
	general business and some strategy subjects. Let's go to the first
	slide.
	Overall, we achieved a 22% total sales growth. So, it's the post-
	corona period, and we are showing that we have been growing
	double digit pre-corona, during corona, and after corona. And
	this quarter one was, in total, 22% higher than last year, so our
	company grew by one fifth in total size. And we did so with an
	adjusted EBITDA margin which was significantly up, and
	certainly, in the next slides, I will explain to you more about that
	development.
	Let's start with the first bullet. Double digit growth pre-corona,
	during corona, and after corona, in our two segments, and even
	in all our seven countries. Non-RX and RX were both almost
	growing at the same pace, double digit total 22%, as I've said
	already, and non-RX 23%. The total performance was driven by
	continuous growth of our active customer base, that means
	keeping our existing customers loyal, increasing the frequency,
	and at the same time, also welcoming a significant amount of
	new customers.
	Our total base of customers that are active, so based on
	purchases over the past 12 months, increased in just one
	quarter, this quarter one, from 9.3 to end at 9.7. We ended the
	quarter, again, with a very high customer satisfaction score. We
	carefully track this on a daily basis, and again, total Shop
	Apotheke was at the net promoter score of north of 70.
	The second bullet, purely for this quarter. Efficiency gains
	significantly, compared to the same quarter last year, and also,
	compared to the last recent quarter, quarter four last year. The
	adjusted EBITDA margin this year was positive 2.4%, which is
	380 basis points up from the same quarter last year. As a result,
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	our operating cash flow was a positive 44 million, and please,
	don't do that times four, because a large part of this is the
	seasonality of working capital of, in total, 37 million.
	And, for example, last year, Q1, the working capital inflow in
	quarter one was also 30 million. But as we'll see later, this
	operating cash flow also included an EBITDA of nine million, so
	an EBITDA cash-in of around seven to eight million. And whilst
	achieving more customers, happy customers, and significantly
	improved financial results. Bullet number four, we are also really
	happy with some external increased acknowledgments we are
	getting for our sustainability efforts.
	More on that later, but to keep it short for now, it's always
	flattering, if an external renowned institution, in this case, MSCI,
	is increasing our ESG rating from a double A to a triple A. That's
	the highest possible score, according to MSCI, and it brings us
	into the global benchmark, in the top four. There is a couple of
	things we can mention, which we also achieved in quarter one.
	I'll point out one, and that was our intention to start a strategic
	partnership with Galenica, and to create together a leading
	online pharmacy in Switzerland. Also more on that later.
	On this slide, the sales, as I said already, total growth 22%, non-
	RX, 23%. So, both well north of 20%, achieving a total of 372
	million of sales. The DACH segment increased by 23%. Our
	international visitors, consisting of the Netherlands, Belgium,
	France, and Italy, increased by 19%, and that was still 13% in
	quarter four, so the growth based in international also increased,
	as did DACH.
	And with that, Monica, I'm happy to hand it over to you.
Monica Ambrosi	Thank you, Jasper. So, let's take a look at our customer key
	performance indicators for the quarter, which either improved or
	remained at very strong levels in quarter one. Starting with the
	active customer base. As Jasper has already mentioned, we had
	an increase of 0.4 million in the active customer base from
	quarter four to quarter one, which was an increase of 1.4 million
	over the prior year's quarter.
	So, we now boast 9.7 million active customers. And this was an
	increase seen across all of our markets. And this several
	100,000 increase in active customers every quarter has been a
	feature over the past four quarters, a consistent increase. And
	this continuous increase in active customers wouldn't be
	possible, if our customers were not happy and returning
	customers, which is why we really focus very much on delivering
	strong, excellent service.
	And we see this, again, from a very high net promoter score over
	the first quarter of 71. So, happy customers. And then finally, if
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	we can just take a look at the average shopping basket value for
	the first quarter of the year, we also saw a slight increase
	compared to last year, from around €57 to around €58 in this
	quarter. So, we've been talking about customer satisfaction, it
	certainly builds customer loyalty.
	And as a result of the strong sales growth that we reported, it
	was very much driven by a higher rate of returning customers,
	which, in the first quarter, was at a high 84%, among the highest
	it has been in the past. So, these are not new customers, these
	are returning customers. Then if we speak about our number of
	orders, you can see that strong momentum, which started in
	2022, continued in the first quarter of the year.
	Our logistics facility, very efficiently and seamlessly, processed
	over seven million orders in the first quarter of the year. And
	again, if we look back over the last four years, every first quarter,
	we have seen an increase in orders of around one million. So,
	this is a very strong underlying increase. What makes the
	performance even more solid, and Jasper has already
	mentioned about Corona, this is not demand as a consequence,
	but it's a demand after corona, and even with a bit of seasonality,
	it reflects a strong structural increase. Over to you.
Jasper Eenhorst	Thank you, Monica, very clear for me. And here, then, are the
	key financials in the P&L and the customary format in the table.
	So, let's start with columns two and three, quarter one last year
	and this year. So, our sales increased from 305 to 372, an
	increase of 67 million, compared to the same quarter last year,
	22.1% up. The gross profit margin, and later, there is more on
	that, increased by 1.1 percentage points.
	And selling and distribution, so all our expenses, as a
	percentage of sales, increased by even double that amount, by
	2.5 percentage points, reflective of scale and efficiency. At the
	same time, our administrative expenses were also stable at
	2.9% of sales, compared to the same quarter last year. And as
	such, if you add up everything I've just explained, you get to an
	increase of the adjusted EBITDA of minus 1.4 to plus 2.4 is an
	increase of 3.8 percentage points. In euros from minus four to
	plus nine is an increase of 13 million.
	And just for reference sake, also, the fully loaded EBITDA, which
	was also a positive five million in the most recent quarter. The
	columns to the right that you're seeing here, though it is an apple
	and an orange, because at Shop Apotheke, as with most
	retailers, there is seasonality in the quarters, but still, quarter
	four, where we also achieved, for the second quarter in a row, a
	positive adjusted EBITDA, if you compare those numbers, you
	can see at the top that our sales were significantly higher from
	328, as Monica just explained, to a new record of more than
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seven million orders, reflective of 372 million of net sales.

Our gross profit margin, quarter-over-quarter, was roughly comparable, slightly down 0.1%. And you see that actually, half of the year-over-year increase that we'd achieved in efficiency, and scale, and effectiveness, we also achieved, from the past quarter to this quarter, in total, 1.3 percentage points. And also, you see that our overheads are significantly leveraged by the very substantial increase of sales that we've achieved this quarter, 1.2 percentage points lower as a percentage of sales.

So, compared to the past quarter, an increase of more than two percentage points. The growth profits, an increase, year-over- year, and to the right of the slide, roughly comparable to the past quarter. The year-over-year improvement of the gross profit margin is mainly in the first bucket, which is the product margin that we're having. And the product margin is really reflective of all the optimisations we continuously try to do, and having the most relevant assortment, new assortment, showing the customers the assortment that is relevant to them.

And it's also best for us, and also, having the right incentives to buy or not to buy to the right customers. So, the total mix of adding assortment is showing the rise of assortment, and other continuous optimisations in category management and in our commercial propositions, have led to a higher gross profit margin. Because actually, as you can see in the second bucket, there's not any impact in the total Shop Apotheke number from country or RX mix.

It has really improved total margins that we achieved in the products that we are selling. Marketing was a big driver, if you compare it mathematically, year-over-year improvement of the selling distribution as a percentage of sales, but also, the operating labour of something that made us really happy, as total Shop Apotheke. Let me start at the start.

So, in total, a significantly better S&D as a percentage of sales. But please keep in mind that quarter one 2022, so a year ago, was still a relatively marketing heavy quarter to us. We were still recovering from some lower points we had in 2021 in Q3 and Q4. So, also, in Q1 last year, that was still the case but you're really seeing that last year, quarter three, quarter four, this year, quarter one, we intuitively say the machine is running.

Our model is working, and we have significantly more effective marketing across all our countries, all our seven countries, and that is resulting, as Monica was saying, not only from effective marketing efforts that we are having directly, let's say, mass marketing, but also, the significant high share of existing customers that are loyal and more frequently shopping with us.

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