Good day, and welcome to the Shop Apotheke Europe Q2 2022 earnings release presentation. Today's conference is being recorded. At this time, I would like to turn the conference over to Stefan Feltens, CEO. Please go ahead.
Well, thank you. I also wanna, together with Jasper, wanna welcome you to Shop Apotheke Europe's release of our financial results for the first six months of the year. I hope you've already had a chance to take a vacation break. Or if you haven't been able to do so yet, you'll be able to do so over the coming weeks. Of course, when we look at our financial results, we need to look at them in the context of very difficult economic times over the first six months of the year and the ongoing war in Ukraine. Our thoughts remain, of course, with the victims of this war.
Well, starting with the end in mind, based on the performance of Shop Apotheke in the first half of the year and our assumptions for the remainder of the year, our management, we continue to stand behind the guidance we had provided to you earlier this year. Well, you're familiar with the agenda. Jasper and I are going to start by walking you through the financial and business performance over the last few months. Then I'm going to say a few words about a couple of, you know, strategic topics, most notably, of course, about the state of electronic prescriptions in Germany. Then Jasper is going to conclude our presentation with the outlook for the full year 2022. At the end, rest assured, there will of course be plenty of time for your questions.
Let's start with the business and financial performance of the first half year. What were some of the highlights over the first six months? Our sales over the first six months went up by 11%. After a 7% growth in Q1, we saw an acceleration of our growth to 15% in the second quarter. This is all of Shop Apotheke's business. If we just look at our non-RX business, our non-RX business over the first six months grew by 16%. Also, for non-RX, we saw an acceleration in the second quarter. In the second quarter, we posted a growth of 18%. Our adjusted EBITDA margin for ongoing operations, meaning excluding the acquisition of First A, came in at -1.5% of sales.
In a couple of minutes, Jasper is going to provide more insights into our profitability. We also generated a positive operating cash flow of around EUR 15 million in the first half of the year. This was driven by favorable working capital movements. There is some seasonality, of course, but also this is the result of some purposeful and sustainable actions that we didn't just take this year but also last year. We're seeing the results in our operating cash flow this year. Certainly one highlight of the first half of the year was a record level and all-time high customer satisfaction. You know that we use the Net Promoter Score, NPS, to measure customer satisfaction, and we saw in the second quarter an NPS of 74.
This is an improvement compared to a year ago by nine points. The main driver was a further improvement of our order delivery times, shortening of our order delivery times. We all know that order delivery times are one of the most important, if not the most important driver for customer satisfaction. In addition to shortening our order delivery times, we also implemented some other enhancements to our overall customer proposition. I can assure you that the Net Promoter Score is one of the most closely watched, monitored, and managed KPIs at Shop Apotheke. We all understand happy customers are returning customers, and this will cascade through our financial results as well. Well, what happened to our active customer base? It grew to 8.6 million.
This is an increase compared to a year ago by 21% or by 1.5 million customers. 800,000 of the 1.5 million increase happened this year. Our expansion in Italy is fully on track. We have conveyed before that Italy is an important market for Shop Apotheke today and will become an even more important market for Shop Apotheke in the future. In July, we opened our second distribution facility besides the one that Jasper and I are reporting from today here in Sevenum. That's our second facility in Settala near Milan. Since early August, since the first of August or since this week, all orders from customers in Italy are handled by and shipped from our new facility near Milan. Last but certainly not least, e-prescriptions.
Everybody knows that the eRx test phase was successfully concluded in early July by passing the 30,000 fully reimbursed electronic prescription goal. Since then, we have seen an acceleration of electronic prescriptions that have been issued and dispensed. We passed the 100,000 mark a few days ago, and we checked yesterday, we were at 118,000 e-scripts dispensed by pharmacies as of yesterday. Well, if we take a look at everything that happened in the first quarter, I dare to say with all the disturbances that we experienced in the first quarter, I think we can be proud of how we navigated Shop Apotheke through all of these challenges.
Hopefully, you know, you're seeing this in our growth of our sales, in growth of our customer base, in the increased customer satisfaction that we shared with you, and also in our financial results. Well, let's have a closer look at the sales development in our two reporting segment. On the left-hand side, let's start with another look at the overall sales development. I already mentioned sales grew by 11% to almost EUR 600 million, EUR 592 million to be precise. non-Rx growth of around 16%. In the DACH segment, our total sales grew by a bit more than 6%. You need to look at the two sub-segments.
Our non-Rx business grew double-digit at a healthy pace of around 12%, and our Rx business showed a decline of 20% compared to the first half of 2021. This is of course the result of the Rx bonus prohibition, which came into effect in December 2020, and then showed its effect in the first half last year. If we just look at the second quarter, our Rx business compared to Q2 last year was basically flat. We showed a marginal decline of 3%. Since Q3 last year, we are recording monthly sales, stable monthly sales, Rx sales of around EUR 10 million per month.
Our international segment continued to be a growth driver with an increase of 30%, and our half year sales approached EUR 140 million. International consists of Belgium or France, the Netherlands, and of course, of Italy. Just shifting gears and taking a quick look at some of our KPIs. I already talked about the growth of active customers, which is approaching 9 million, the 9 million mark. Our net promoter score 74 in the second quarter. I can assure you this is something that really everybody at Shop Apotheke is really proud of because we on a daily basis we think about or we torture ourselves with asking the question, what else could the customer expect from us?
Looking at our average shopping basket or the average order value, we saw compared to Q2 last year, we saw a decline from EUR 61.5 to around EUR 58. The main drivers were the reduction, a lower proportion of our RX business, and you remember that the RX business enjoys significantly higher AOV than a non-RX basket. Secondly, we saw an increase of our mobile orders. We saw an increase of the proportion of orders placed by younger customer cohorts, and these two, mobile orders and younger customer orders, also tend to carry slightly lower average order values. Looking at our traffic, what you see here is the traffic across all of our sites.
Not just Germany, across all of our sites. It covers both mobile visits and desktop visits. Before I jump into the details, let me emphasize again that looking at Germany, our website in Germany, Shop Apotheke, shop-apotheke.com continues to be the most frequently visited pharmacy website in Germany by quite a margin. Well, what are you seeing on this chart? The green line shows the total number of weekly visits, again, to all of our sites. In the first quarter, you saw very healthy levels. You see a little bit of a softening in the second quarter with weekly visits totaling 6.5 million-7 million.
Of course, this can be exclusively attributed to seasonality, as in the second quarter our customer, deservedly so I dare to say, spent more time in parks and on beaches and less time in front of screens. The blue bars show the growth of our web traffic compared to the exact same week a year ago. When you look at the second quarter, for most of the weeks, we see a growth of around 20%. The negative growth in the second week, it has something to do with the Easter week in comparison to when Easter fell in the year before. At the end of the month, you see a spike where the traffic growth came up to 50% or more.
This has to be seen in the context of what happened at the end of last year when, for good reasons, we purposefully reduced our performance marketing, which at the time then resulted in a reduction of our web traffic. With this, I'll hand it over to Jasper to walk you through the details of our financials.
Yeah. Thank you, Stefan, and good morning to everybody on the call. This is the customary slide we always show with the number of orders per quarter. As you can see, we continued to grow dynamically our number of orders. If you start at the right of the graph, the first two quarters of 2022, then if you add up those two quarters, then you're getting close to 12 million orders that we processed over the first six months. If you then would go to the left side of the graph, to the gray one, that's 2019, only three years ago, it took us 12 months to do 12 million orders, and now only six months.
This graph makes clear that there is the seasonality that also you referred to already, Stefan, where often quarter two and quarter three is somewhat lower than quarter one, and then we have another peak in quarter four. That's the same this year. You only see that in 2020, there was only a slight step down from quarter one to quarter two, but that quarter two was really a peak of COVID coming to Europe. Going a little bit more to the numbers that we achieved this year, so close to 12 million orders and a strong growth of close to 90% year-over-year.
The number I want to point out is that in the last quarter, despite welcoming, as Stefan said already, so many new customers, in total, 0.8 million alone in the six months, 83% of our total orders in quarter two came from repeat customers, so returning customers, an expression of the loyalty of the Shop Apotheke customers to our proposition. To the next slide, please. What did those numbers bring us? This is the customary overview of the P&L. It's the adjusted numbers for the ongoing business, so it's just the adjusted numbers, but it is excluding, in this case, First A, acquired a little bit later than when we gave guidance, this year.
The total numbers that we achieved in H1 include a couple of costs that will not repeat in the second half of the year. This weekend, we opened our new website in Italy. 1.5 weeks ago, we opened our warehouse in Italy. The preparations for those two projects are in the costs, and the sales and the efficiencies will be in the second half. Other examples are our launch of our marketplace in Austria. That also took place in this first half year. In this table, we have the sales up to and including the adjusted EBITDA margin. Sales increased over the first six months by 11%.
10.8% to be precise, for the total group, and it accelerated to 14.7% in the second quarter. Later, I will show you the variance bridges of this gross profit margin and S&D, as we always do. First, a little bit the high-level view. Again, we have been successful in expanding our gross profit margins. In the gross profit margin of 2020, in quarter two and in the first half of 2022, there are no significant positive or negative items, so the number is basically what the reported number is. The year-over-year increase, as we see later, is also impacted by the fact it's a little bit inflated year-over-year improvement because we had some negative one-offs related to the COVID assortment, like masks, last year, but that's not impacting this year's number. Later, more.
Healthy improvement of the gross profit margin, higher sales, higher gross profit margin, bringing us more income from the sales that we achieved. On the other hand, S&D increased significantly, as well, both up in the first half and in the second quarter by in total 4.3 percentage points. Also later more on that, but already now a couple of remarks. The majority of the year-over-year increase is because of our investments, our decision to invest, in marketing to bring us in the best position for the opportunities that we are seeing across Europe and also particularly in Germany. Of course, there is a little bit of apples and oranges in the year-over-year comparison because last year, particularly quarter one, 2021, was a full lockdown quarter. Later a bit more.
Admin is up as a percentage of sales, 0.2% of our total net sales. Actually, if you would exclude the business additions we did in 2021, the underlying administrative cost as a percentage of sales would have been stable year-over-year despite the fact of the many activities that took place that we executed this year, like expanding the marketplace in Germany, opening the marketplace in Austria, and a lot of attention to improving our last mile with, for example, also the success of Shop Apotheke now in Germany. If you would add up all the numbers I just quoted, then you get to a -1.5% after six months in 2022. For full transparency sake, on these adjusted numbers for the continuing operations, also at the bottom line, the fully loaded total group EBITDA numbers.
One remark there, if you look at the first column, last year, the first six months of the year, there were in total from EUR 7 million to EUR 2 million, there were EUR 5 million of adjustments. This year from -EUR 9 million to -EUR 23 million, it increased to EUR 14 million. The adjustments increased from EUR 5 million to EUR 14 million. There's no increase in employee stock option cost. Actually, it went down slightly. There's no increase in other adjustments. The only reason for the increase is the IFRS 3 business combination accounting that we started to do in quarter four of last year. That's a non-cash item, as you will see later in the cash flow bridge. Before I go to the next slide, what's the summary for me if we look at this slide?
I think, we are internally very happy with the fact that with the high customer satisfaction scores that we achieved, growing customers, repeat customers, we have been able to expand our gross profit margins. In total, we increased our gross profit and we have been spending effectively and wisely, in marketing in order to be in the best positions for all the growth opportunities that we are seeing across Europe, in particular with the eRx in Germany. We go to the next one. This is a slide I showed you, two quarters ago. I wanna repeat the messages that I explained to you then. The two blue arrows are changes compared to what we presented two quarters ago. First, the key messages.
The vertical axis is the adjusted EBITDA margin, and the horizontal one is the sales growth. Red is all the elements that are in the DACH segment and blue, what's in the international segment. If we start with the largest bubble, and the bubble being illustrative for the total sales, then we see that a large bubble of DACH non-Rx continues to grow fast, around 12% year to date we saw, and it's continuously in positive territory. Also this quarter, in quarter one, the total adjusted EBITDA of the DACH segment is a positive one. DACH continues to grow fast. International is growing even faster, close to 30%, but certain elements of international are profitable. Some elements, like for example, Italy, are not profitable, and that's why the total of international is still at a negative adjusted EBITDA margin.
We see no fundamental difference in the unit economics here, and the only reason for being at a negative adjusted EBITDA is because we invest in growth, and we still don't have the same scale as we have in DACH. Those are the two largest blocks. To the upper left, that's the first change. That's the paper Rx. Paper Rx is even already having a higher margin than our non-Rx, and eRx will even have a higher margin than our paper Rx. It's nicely at a good adjusted EBITDA margin. It used to decline by 30%-20%, but it moved to a sales growth of around zero, -3% to 4% in the second quarter. It totally bottomed out.
To the right of this graph, you see our investments that we have been doing and are doing in a couple of things. The Now proposition First A, that's clearly investment in a data proposition for our customers. The MedApp is entering a new market, namely the RX market in the Netherlands. The own marketplace that's now live in Germany and in Austria, that's actually a promising new possibility for new revenue and new income and also an addition to our overall proposition. Now discussing all the bubbles, of course, all the elements I just discussed benefit from our growing share of our successful own brands.
The key message from this slide is we are investing in growth in our base, in our base that is already operating at a positive adjusted EBITDA margin, and at the same time, we are making investments in other growth opportunities for the midterm. The next one, please. Now back to the bridges for the gross profit margin and later the S&D as a percentage of sales. As I said already, we have an increase that's significant of 1.6 percentage points. But in the other block that you're seeing here, it's somewhat inflated by the fact that we are cycling negative one-offs, last year, but that's not impacting the 27.1% that we reported after six months.
Starting at the left, again, we are very happy with showing you sourcing improvements as we have been able to show you for many consecutive quarters of 0.5% compared to the same period last year, 0.5% better sourcing conditions, more direct deliveries instead of via the wholesaler. The second block is actually a relevant block because there you see that the net pricing and product mix in this period was -1%, and this is mainly reflecting that in a couple of our markets, we have passed on the underlying cost price inflation slower or not entirely to our customers. The next one to me is not so relevant with the mix of our Rx and OTC because the flip side of this is often in the S&D.
All in all, strong improvements in line with what we have shown in recent quarters, of the gross profit margin, up to a new level. On the other hand, there is a significant increase of the selling and distribution expenses as a percentage of sales. Marketing is explaining more than half of it. Of course, there is an apples and oranges in comparing this number to last year because last year, particularly the first quarter of the year, was a full lockdown COVID quarter, and this year, everything was luckily open again. This marketing is, of course, our decision to be in the best position for both the eRx opportunity and the great opportunities we see in Europe.
Apparently, referring to all the numbers that Stefan quoted already, and also to the order growth, and Stefan was talking about the customer satisfaction, we have been spending this marketing very effectively. At the same time, this number is also impacted because of international growing faster than DACH. All these numbers, all the four blocks you're seeing here, are impacted by the fact that we have a slightly lower basket in a certain trend, and if you compare quarter two to last year, there's actually a significant lower basket. To the best of what we can analyze internally, we saw some indication in quarter one that customers tended to leave an item of non-essentials outside of the basket, but we did not really see that in quarter two.
The decline in year-over-year basket, we could not attribute to a slowdown in customer confidence. Actually, we saw from quarter one to quarter two a slight increase as a result of the actions we took to focus on the average basket. What we are seeing in the year-over-year comparison is the fact that we have more younger customers, and younger customers tend to have a smaller basket, and we also see that we are successful in getting more people to mobile, but also mobile tends to have lower average baskets than from a desktop. That average basket is impacting this, the cost performance, and then of course also we have not been immune for certain increases, because of inflation and energy costs in shipping, and particularly also in packaging.
The operational labor cost that you're seeing here, we aim for this to be a green one, a year-over-year improvement in the upcoming quarter three and quarter four. Next, please. Cash. Luckily with cash, we don't talk about adjustments, ongoing operations, and all kinds of other things. Cash is what it is. When we counted our balances, we started the year with well over EUR 280 million, and at the end of June, we still had close to EUR 260 million. We had this amount with in total EUR 31 million of investments. This included the acquisition First A, where we paid five million, and the remaining is regular CapEx, particularly IT, but also the opening of a new distribution center and regular PP&E.
The first two blocks together, that's the operating cash flow. That's our EBITDA results, and that's changes in working capital. That was after six months, a positive EUR 15 million. In this EUR 28 million of cash generated by working capital improvements, just as Stefan said already, there are real underlying improvements that we achieved, but there's also seasonality in it, where in the quarter four, we will probably need to increase our inventories as pharmacies always do because of the winter before autumn. All in all, positive operating cash flow, we have been investing, and we had a total financing that was slightly lower in total cost than last year. I think we go to you again, Stefan.
Okay.
Yeah, actually.
Thank you, Jasper.
Yeah.
Over the coming minutes, I want to give you brief updates on a couple of topics that are of strategic relevance. Of course, First And foremost, where do we stand with electronic prescriptions in Germany? Secondly, what is the status of our forays into the Italian market? Finally, what is happening with our marketplace? Starting with electronic prescriptions, I'm repeating myself there. We've successfully concluded the test phase. It's old news. More important, a couple of days ago, Susanne Ozegowski from the German Federal Ministry of Health could declare that we passed the 100,000 mark of redeemed e-prescriptions that have been issued and filled by the pharmacy.
Now looking into the future, the rollout of e-prescriptions in Germany, the start of e-prescriptions in Germany is going to start on the first of September in two regions in Westfalen-Lippe, which is part of North Rhine-Westphalia, and Schleswig-Holstein. These two regions cover around 11 million people in Germany, or 14% of the German population. Also, as of the first of September, all pharmacies in Germany, local pharmacies, but also online pharmacies, will be ready to accept and process electronic prescriptions. On the first of December, a second set of six federal states are going to go live with e-prescriptions and the remaining federal states in Germany are going to follow on the first of February next year. Not surprisingly, because you've been following Shop Apotheke, we are receiving and processing e-prescriptions on a daily basis.
Literally every single day we are receiving electronic prescriptions. Our processes, our systems continue to work flawlessly, and we can't wait to get started to move full steam ahead with the go live of e-prescriptions in Germany. Just a couple of words about the electronic health card or the eGK. The eGK will be one of the three means for patients to transmit electronic prescriptions to the pharmacy of their choice, besides the gematik app and paper printouts, and then patients taking a picture of the QR code and sending it again to the pharmacy of their choice.
We at Shop Apotheke, of course, we are supportive of all options if they are safe, if they are convenient for patients to transmit electronic prescriptions, and the eGK could play an important role in this context. As Shop Apotheke, we support our industry association, the EAEP or the European Association of E-Pharmacies, in their discussions with the German Federal Ministry of Health to ensure that all options, including the eGK option, will be non-discriminatory in nature and are not going to constrain the freedom of patients to choose their preferred pharmacies when they want to transmit an electronic prescription.
At this point of time, the EAEP is in discussions with the German Health Ministry to ensure that an option eventually is implemented that will also allow online pharmacy to fully partake in the eGK opportunity or the eGK pathway. Well, the second topic, Italy. We mentioned in the past that Italy is an important market for Shop Apotheke in terms of the sheer size of the market. Italy is the, after Germany and France, it's the third largest pharmacy market in Europe. In terms of the sheer size, Italy is important for us. Italy has a very low online penetration rate in the pharmacy space. It's still in the single digits, and the online space from a competitive perspective is still pretty fragmented.
In order to serve our customers in Italy better, we already mentioned this, we opened our new distribution facility in early July. The first package left the new facility on the fourth of July, and as of this week, all customer orders are going out from our Settala facility near Milan. This results in significantly shorter delivery times. This is something that will be appreciated by our customers in Italy, and it also significantly reduces our carbon footprint, the carbon footprint of our business in Italy. Well, the last quick update I wanted to share with you is on the marketplace. You might remember that we went live with our marketplace in Germany last December. Since then, we have been busy onboarding new merchants and onboarding new products.
As of the end of July, we were offering an additional 40,000 products to our customers in Germany through our marketplace. Just to put this into perspective, in total, before we launched the marketplace, we were offering around 100,000 products to customers in Germany. As of today, and this is growing on a daily basis, we are already offering an incremental almost 50% of our original product assortments to customers in Germany.
At the end of June, I think on the 29th of June, to be precise, we launched our marketplace in Austria, initially with 5,000 products, but similar to what we have seen and will continue to see in Germany, the product assortment, the number of products we offer through our marketplace partners is going to grow rapidly over the coming weeks and over the coming months. Of course, Austria is not the last market in which we are going to operate a marketplace.
The marketplace will, over the coming years in the future, account for a growing and significant part of Shop Apotheke's overall business and of course, coupled with very attractive unit economics because a marketplace is an asset-light business model. Well, that's what I wanted to share with you. I hope I could convey to you that we have a strategy, a detailed roadmap for implementing our strategy. We are reliably executing against this roadmap. We are ready for e-prescriptions. We make progress in markets beyond the boundaries of Germany, and we're expanding our marketplace business. There's a lot of other stuff that's going on. Medication management will become very important in the context of electronic prescriptions. We continue to improve our same-day offering via our Now program.
We continue to work on cooperations with other healthcare providers. Again, these might be subject to future updates in the context of future earnings releases. Well, I think that's what I wanted to share about, you know, some strategic topics. The outlook for the year, Jasper Eenhorst.
Very well. The last slides are for me. The guidance. If you can go to that slide, please. We know, of course, that many things have changed since we gave our guidance. Geopolitical, customer confidence, inflation. Inflation from the perspective of the end consumer and inflation from our cost base, and also interest increases. Nevertheless, based upon the results that we achieved over the first six months of the year, based upon the start of July and based upon the visibility up to the extent that we can have for the second half of the year, we can confirm our full year guidance on all elements.
To repeat what our full year guidance is, we think that this more than a billion base of non-Rx and more than a billion sales of Rx is our base of non-Rx. Non-Rx will grow by between 15% and 25% for the full year. Sorry, I was a little bit struggling with my words. I will repeat. The growth of our non-Rx between 15% and 25% on a full year base. Rx we predicted to bottom out. Well, we certainly did so. The adjusted EBITDA margin in the range of -1.5% to a positive +0.5%, we also reiterate. With that, we have done our presentation and if you can go to the next slide. Time to ask questions. Looking forward to questions.
If you go to the next one, there are the details. The same details as always to ask your questions. Thank you.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll take our first question. Christopher Jones from HSBC. Your line is open. Please go ahead.
Yes. Good morning, guys. Thanks for taking my questions. I'd like to take them one by one if possible. First on the current trading. I mean, the quarter is almost done. Just be interesting to hear your views as to you know, how the quarter has been going. You know, I'm particularly curious whether international you know, could also grow 30% or more in the current quarter. Any color you have. I think you also gave a comment with respect to 10 million a month on Rx. The line was bad on that one for me, so maybe you could repeat that comment as well.
Should I do that?
Yeah.
Hi, Christopher. Good to speak to you again. You're saying the current quarter is almost done. Probably you mean the current month? We just had July. It's a bit forward-looking what you were saying, but I can repeat what I just said. We started well in July. Of course, we can only talk around sales there. Actually, if you look into the details of quarter two, April was a bit challenging for us, but May and June were stronger. With the strength of the end of quarter two, we entered July, and up to now, we don't see any peculiar changes ongoing there in the trading environment. That's continuing in line with what we just explained. Pay for Rx, EUR 10 million per month.
It's not really worthwhile, I think, in the big scheme of things to give a lot of color there. If I bring it to a likelihood, it's a bit more likely that it will be slightly more than 10 per month than it will be slightly less than 10 per month. Yeah. That's what we currently believe. Yeah. International-
Got it.
Yeah.
Oh, yeah, international. Sorry.
International being able to grow faster. Yeah, we only give guidance on the total company perspective. In the preparations for the opening of the distribution center, there was some both in June but also in July, which is in the next quarter. We had a certain slowdown in Italy because of our preparations. We hope that's gonna accelerate again later in the year.
Got it. My second question on the electronic health ID. I mean, this is arguably super important, right? I mean, if this is established as the primary means that people will, you know, get their eScript and you're sort of quote unquote cut off from that, this could have a material impact on the total addressable market. I'm just trying to, you know, pick your brain here in maybe as much detail as you can get at this point. I understand that, you know, we had this last quarter already discussions about, you know, trying to establish the non-discrimination also by forcing legal action.
Yeah, maybe there is some incremental color you can give here because this seems to be going ahead and, you know, what I can't fully grasp is whether essentially the government could say, "Look, you know, there's two other ways, two other methods to get the eScript, you know, to you guys. You know, the paper's perfectly fine. The Das E-Rezept is working. So if we don't have a soft token on the eGK, you know, that doesn't really, yeah, prohibit anything." So, yeah, I'm just trying to pick your brain on that angle.
Yeah, Christopher, at this point of time, nobody knows. We have three pathways. We have the Das E-Rezept, we have the paper printout and the QR code, and we're going to have the eGK. At this point of time, nobody knows what patients are going to prefer in a couple of years from now. Let me try to add a little bit of color. The eAP is in discussions with the health ministry right now. It is our sense that there was some.
The health ministry was very receptive of the concerns and now in terms of the proposals that are being developed to ensure that this is non-discriminatory, that if the eGK is going to play an important role in the future, all players, online pharmacies and local pharmacies need to be able to participate equally in this. At this point of time, when you look at the timeline that the gematik has communicated, the pilot is going to go live sometime in the fourth quarter, and the eGK on a broad scale might be used sometime next year. I'm not familiar with any more precise timing at this point of time.
Again, our effort is focused on ensuring through our industry association that, if this is a safe and convenient option, that we are in a position to participate in this as well.
Okay. Got it. On the 25% number that came out last night and this morning with respect to the first phase of the trial in the first two test regions. It seems that everybody who's commenting on this so far seems to believe that 25% of the eRx as a percentage of the total scripts issued seems like a punchy number, and that could delay, you know, the sort of further rollout to the next six or seven states. I'm just yeah. I mean, I know it's another you know picking your brain question. Very difficult to answer, but maybe you do have a view.
I mean, is it possible to achieve that 25% in two months, in your view?
Well, Christopher, this is of course a moving story. I just saw, but I haven't read it yet, that there seems to be some press release from the gematik. I haven't read it yet, so I need to be a little bit more cautious. I don't know whether there's really a joint term between phase I and phase II of the rollout that, you know, phase II can only start if these criteria have been met. Quite frankly, yesterday when we heard that they're discussing about a 25% eRx share, we were actually quite excited because it's also a sign that now everybody believes in e-prescriptions. All the shareholders of gematik are now also vocal about promoting e-prescriptions, making it happen.
I think to have an aim out there that 25% should be based on electronic prescriptions. I think in half a year we're going to laugh about the 25% because I'm confident we're going to see a much faster adoption rate. Whether we're going to see in the two regions we're going to start e-prescriptions in Germany whether they're going to achieve this within two months, again, it's speculative. My understanding is it's not yet clear whether there's going to be a long time between achieving the criteria and moving to the next set of federal states in Germany.
Okay. That's fair. Last question, I promise. With respect to market shares in the eRx, I understand that you guys do not wanna disclose how many eScripts you have processed so far. I mean, I'm sure most people on the call would probably appreciate the number, but I guess we can't force you. Maybe you can still give a little bit of color. I mean, you said you won market share. Did you also win market share in eRx, in your view? I'll try it this way.
Yeah. The reason we disclosed it. That was not quarter one. Yeah, in quarter one when we were presenting the full year numbers is just because we want to be transparent. We wanted to be clear. We wanted to substantiate that we all the time said that we were ready for eRx. So we said, "Yes, we're ready. We processed. We got reimbursed from the insurance company. Everything is working on our side from the customer," and then we released the number. What subsequently happened is that number was extrapolated a lot. We also consider it actually quite sensitive information for competition also what the exact number is. We already give you a lot of information by saying actually there's almost no day, every day we receive e-prescriptions at the moment. That's what we're saying at the moment.
Why this number, if you would release it, doesn't make any sense, just two quick remarks. On one hand, we are ready, not all pharmacies are, so then our share is too high. On the other hand, we didn't do any marketing yet, so the number is too low. This is now. It was the test phase, and now the roll-out is starting, and the number of what is your share in the total market only becomes relevant when we entering the next phases.
Okay. Appreciate it. Thanks one.
Thanks, Christopher.
We'll take our next question. Alexander Thiel from Jefferies, your line is open. Please go ahead.
Hi, Stefan and Jasper. Good to see you. I hope you can hear me. A couple of questions from my side, and I would also like to take them one by one. Firstly, on your First A deal , we have seen in the cash flow statement the EUR 5 million payment. Could you talk about the deal structure in general in terms of earnouts, and the accounting timing for the cash flow? Secondly, I assume we have also seen it on the slides. First A is still a highly diluted business. Could you clarify if this is already included in the full year guidance of the -EUR 1.5 million to +EUR 1.5 million? Thank you.
Yeah, we disclose what we have to disclose in those deals. It was the half-year report after six months. We gave all the details in the interim report. Indeed, until now, we paid EUR 5 million First A. That's it. All the remainder is part of an earn-out and that depending on the results. We also have the opportunity if we want to do that with equity instead of with cash. For the current year, there's nothing else to mention on this besides that information that you correctly took out of our disclosures. Your question on the guidance.
In order to be as clear as possible, we gave guidance at the start of the year for what we could give guidance on, and by definition, we cannot include M&A there. We gave guidance for the ongoing business at the moment there. That's what we also made explicitly. Not that we suddenly do an acquisition and then we make because of the acquisition of a sales guidance or something like that. It was that guidance. That guidance relates to the excluding M&A activities that we're having. That's we reiterated the -1.5 to +1.5 adjusted EBITDA.
On top of that, there's this relatively small acquisition First A, where we also in the interim report said that will according to our best estimates, not have an impact larger than 0.5% of sales on our EBITDA in 2022. I think that's all the information you asked for, Alex. Yeah. Yeah.
Yeah. Secondly, on your current view of the market in general, how do you see competition, marketing and pricing developing in the third quarter so far?
I think everybody is dealing with the cost price increases. We're seeing, you know, that also selling prices are following the cost price increases. You know, what we have seen with Shop Apotheke, we're seeing with some of our competitors with a certain delay. Besides this, there's nothing in the third quarter that would be, you know, surprising, you know, that would lead us to question again the guidance that we just reiterated.
Okay. Lastly, on the eGK, we know from several gematik meetings that this is a clear priority for the BMG to make this discrimination free in line with the BSI requirements. The timeline seems to indicate that the project should go live end of Q1 2023. You're currently in very constructive discussions, I understand. What if you don't find a solution for the eGK in time? Would you file an objection to block this way?
All three options need to be non-discriminatory, and they cannot constrain the choice of patients to choose to send e-prescriptions to their preferred pharmacy. For the time being, Alex, I'll leave it at this. I think that's pretty explicit.
Okay, perfect. My last one would be again on the targets that we have seen coming out over the last two days actually. It's now official press release from gematik saying that in the three months of the grace period, they want to have 25%. Are you aware of any kind of incentive programs for the doctors? Is there anything planned that you know about?
Well, we know there's nothing from the health ministry or from the gematik, at least not to our knowledge. There is the initiative of the E-Rezept Enthusiasten. They try to excite to enthuse participating pharmacies and doctors to start getting used to issuing e-prescriptions. Whether there will be a new program through the E-Rezept Enthusiasten, we don't know at this point of time, but again, to our knowledge, there won't be an incentive from the government.
Okay, perfect. Thank you.
We'll take our next question. Jan Koch from Deutsche Bank. Your line is open. Please go ahead.
Hi. Thanks for taking my questions. I would also like to ask them one by one. I would like to start with your cost expectations. I understand that you expect lower costs in H2 compared to H1, given that you rolled out your marketplace to Austria and opened your new distribution center in Italy. Are you able to quantify? Let's say the tailwind you expect in H2 from sequentially lower costs?
No. It's sales and bottom line adjusted EBITDA margin that we guide on. Yeah.
Okay. Secondly.
We have some tailwind entering the second half because of the i-elements you just mentioned, but I don't quantify it any further. Yeah.
Okay. Secondly, on your margin guidance for 2022, would you be willing to trade off a few percentages of your top line growth in order to reach the midpoint of your margin guidance in 2022?
This is what Shop Apotheke has been doing for 20 years. We always balance growth and investments in our margin. Nothing changed from that. No. There needs to be a fundamental good reason to take actions. That was not in your question. We will do so when we think that the marketing is not effective or efficient, or it's not the right moment to do it. Yeah.
Mm-hmm. Okay. Understood. Then finally, on the supply chain situation. I heard from several pharmacists that it's increasingly difficult to get sufficient supplies of certain OTC medicine. Are you witnessing similar issues at the moment? If so, does that slow down your sales?
Yeah. We are also experiencing some supply chain challenges. At this point of time, when you look at the overall business of Shop Apotheke, it's not of a material nature. Again, we can't predict what's going to happen in the future. We are, through our, you know, procurement department, in very, very close contact with all of our major suppliers. Some of the shortages, you know, when you look at some of the, especially the infant or the children's cough and cold products, you know, that's well known. Even, you know, for these types of products, we are in the process of securing additional supplies. Yes, we are not immune to what's happening in the world and what's happening to our competitors, but at this point of time, it's not having a material impact on our business or our growth.
Okay, great. Thank you.
We'll take our next question. Gerhard Orgonas from Berenberg. Your line is open. Please go ahead.
Yeah. Good morning. Just one question, please, on the eGK. Could you tell us from a technical standpoint, are there any ideas already in the room to make the e-prescription on the eGK non-discriminatory? Have there been any proposals how you could technically solve that?
Gerhard, I can answer in the affirmative. Yes, there are several options, but they're being discussed with the health ministry at this point of time.
And you don't-
I don't wanna jeopardize these discussions, so we can't say more about this. Do we have another question?
Yes. We'll take our next question. Sven Sauer from Kepler. Your line is open. Please go ahead.
Yes. Hello, gentlemen. Just two questions from my side. Thanks for taking them. Also a follow-up question on the electronic health card. If there would be no solution, and it would be rolled out as announced that there were three transmission possibilities and online pharmacies would not be able to partake in the electronic health card transmission. Do you see a risk that your assumption for online penetration in eRX and also your medium-term EBITDA margin guidance would be at risk?
Sven, thank you for the question. I think I at least partially answered it already. All options need to be non-discriminatory. They cannot constrain the choice, the freedom of choice, of our patients. If that's not the case, you know, then we need to have a different discussion. At this point of time, we remain convinced as Shop Apotheke and through our industry association that all options, including the eGK, need to be non-discriminatory.
Okay. Yeah. Thanks. The second question is regarding also your margin guidance. I'm sorry if I didn't understand it clearly, but the -1.5% to +1.5%, this is excluding First A acquisition effects. So ultimately, am I understanding this wrong? You provide an guidance for an adjusted EBITDA, and then you are now defining a new adjusted EBITDA First A. So effectively, you're reducing your guidance. Am I understanding this correctly?
No, thanks for asking the question. If that was not clear to you, then it's our mistake. It wasn't clear. We should communicate very clear. But it's totally incorrect what you are saying. It was at the start of the year, we clearly said that this is the guidance of all three elements for our continuing operations. We always said that, and it makes a lot of sense because the alternative would be that with every M&A transaction that you will do, you also need to revise your guidance. The guidance is based upon what we had as a business at the moment that we provided the guidance. Luckily, we are able, after six months, despite the challenges, to reiterate that guidance on all elements.
On top of that guidance, we disclosed as much information as possible and as required, on [Swalla] acquisition that we did. We did not change the definition of our guidance.
Yeah. I mean, if you were to acquire a company and you would have a significant increase in sales, you would also adjust your guidance. I mean, to me, it's kind of a bit of a cherry picking here if you don't adjust it downwards.
Okay, I don't agree. I only agree with you that if it's significant, of course you have to do something else. I do agree. If it's a significant thing, then if your prior guidance isn't relevant anymore, then that's an item. I hear what you're saying, but to me, the intention here was the contrary. The intention was to not cherry-pick. The intention is to give a stable guidance that's not influenced by any M&A activities that could take place during the year.
Okay. Thank you very much.
Yeah. Thank you. Yeah.
Let's conclude today's question and answer session. I will turn the conference back to Mr. Stefan Feltens for any additional or closing remark.
Okay. Well, again, thanks for your time. Thanks for your interest in Shop Apotheke. The presentation that we shared with you will of course be available on our website. If you have additional questions, if you wanna have, you know, additional conversations with Jasper or with me or with both of us, you know how to reach us. Please, take advantage of this. We'd love to, continue to stay in contact with you, and we love to either gain or to retain you as, supporters and investors in Shop Apotheke. Thank you very much. Have a great day, and we'll be in touch.
Yeah. Thank you very much. Okay. Great day indeed. Yeah.