Good morning, everyone, and welcome to the Apotea's presentation of our fourth quarter report. This is also our first report as a listed company, which we are very excited about, of course. We will present today from our head office here in Stockholm, and we will start with the presentation, and then after the presentation is finished, we will move on to a Q&A with spoken questions. Today's presenters will be Pär Svärdson, our CEO and co-founder, together with Johan Mårild, our CFO, and together with myself, Sarah Ahnström, COO
So, hello. I think we had a very good quarter, and with strong growth and increased profitability. And we started also a lot of exciting projects, so I think we're well prepared for the future. But, Johan, let's guide us into the figures.
Yes, we had revenues of SEK 1.7 billion in the quarter and a growth of 15.8%. The adjusted EBIT margin was 3.9%, and we had a sustained high inventory turnover of close to 10x.
And if we look a little bit on this quarter, I mean, I think you know that we had a successful IPO in December, and we welcomed more than 90,000 new owners, and we're very proud of that. We also worked quite hard to increase our Rx capacity, and that's important because to sell Rx, and Rx, sorry, prescription medicine, to sell prescriptions, we need to have capacity because we have a lot of demand out there, but we need to have this capacity. And we focused on building this capacity, and I think when we move forward and look into the figures, we can see that the growth of the prescription is very high, and that's because of this. So, and we took actually a new record with almost 20,000 Rx orders in just one day.
Another thing is that our Varberg project. We start to install the automation in Varberg in October, and you can really see we visited Varberg just a few weeks ago, and it's fantastic to see, so it's on track.
Yes, a key event of the quarter was also our Black Week campaign, and we were very happy to see that it was successfully executed, much due to our increased capacity, hence also our increased automation. And during these intense days, we also delivered up to close to, I would say, 90,000 orders in a day. We have also focused quite a lot still in expanding our assortment, and we currently have the largest assortment of pharmacy products in the market, close to 53,000 products. We also launched several new products, or our own products during the quarter, and ended the year with 270 own private label products for sale on our site.
Yes, we had revenue growth of 15.8% in the quarter, and the growth was driven by strong Rx growth, and as Pär mentioned, the growth was driven by an increased capacity in this field, and to some extent, media reporting at the very end of the year about changes in the high cost coverage. We see a very strong underlying demand in buying prescription-based medicine online, and building up our capacity in Rx is important for us to capture that demand. As you can see on the right-hand side, we had stable gross margin in the quarter, more or less in line with the same period last year. We had adjusted EBIT margin in Q4 of 3.9%, and the adjustments here are related to the cost associated with the IPO in December. The EBIT margin in Q4 was 3%.
We have seen an increased profitability, and that is due to increasing sales in combination with increased fulfillment efficiency and lower freight cost in relation to sales. We have continuously been able to improve our efficiency in our fulfillment following the additional automation launched in Morgongåva spring of 2023. Let's take a deeper look at investments and cash flow. We had stable investment levels in Q4, and investments relate mainly to our new fulfillment center in Varberg. We had lower operating cash flow in the quarter, and that is due to an increase in account receivables to the Swedish state related to the Swedish, to the subsidy of prescription-based medicine. Net working capital, there are short-term variations and quarterly variations in net working capital.
If you take a longer view on this and look at the full year, we have a stable operating cash flow, and we have a stable operating cash flow model with a high inventory turnover.
Yes, and we will now move on to look at the full year of 2024. We had a very exciting year with a strong growth and improved profitability. And as a reminder, some highlights from the year. We started the quarter with a construction start of our new fulfillment center in Varberg, the actual building that we are renting. During the second quarter, we intensified the IPO preparations. We also welcomed new board members, including our Chairman of the Board, Cecilia Qvist. During the third quarter, we had an AI department that was launched, which we are very excited about. They also initiated their first AI products within that department. And Q4 was, of course, about the completion of our successful IPO.
And if we look at the whole year, we can also see that we have a strong demand to buy pharmacy products online and an increasing demand. So the market, the online penetration went up to 23%, the new high score. And our market share in the total market is 10%. So I think we can see a strong growth in demand online, and it's predicted to grow like 50% in the coming years. So we look forward to that. And our, I mean, we have built the new automation in our current warehouse from 60 to 100,000 orders, and we can see how that affects us, and it's very positive for our growth. And it's very good, and we look forward to Varberg.
Last year, we had growth of 20%. We had strong Rx growth, and we had solid growth in over-the-counter products and traded goods. As Pär mentioned, we increased our market share to 10%. On the right-hand side, you can see that we strengthened our gross margin, and it was accounted to 27.3% due to active procurement, category monitoring, and increased marketing compensation from our suppliers. The strengthened gross margin was one of the drivers for the improved profitability last year. We more than doubled the adjusted EBIT margin from 2.1% to 4.4%. The adjustments here relate to the cost associated with the IPO in December. The EBIT margin for 2024 was 4.1%.
The improved profitability was also supported by an increased efficiency, which is evident when looking at the right-hand side of this slide, where you can see an increased fulfillment efficiency as a result of the increased automation. Last year, we invested SEK 163 million, and the investment relates mainly to our new fulfillment center in Varberg. We were able to finance, by and large, this investment from our own operating cash flow, and the cash flow 2024 compared to a year earlier was stable, and we had a stable inventory turnover level of 9.8x . We've seen the inventory increase slightly during 2024 from a low point in December 2023. We believe the inventory is now in a better balance, enabling close to the full assortment being in stock at all times and enabling fast deliveries to our customers.
We had an increased return on capital employed last year, and it increased significantly to 34.5%, and that was driven by an increase in profitability. Finally, when looking at the right-hand side of this slide, you can see that we have a solid balance sheet, and despite large investments in our new fulfillment center in Varberg, we have a continued low net debt in relation to EBITDA.
Yeah, and if we look a little bit forward, 2025, we can see that we will continue to work with our Rx capacity. So we are opening a new hub in the south of Stockholm, in the south part of Stockholm. It's more like a small warehouse where we can hire more pharmacists so we can grow the capacity. We will open that in the second quarter. We will also continue to hire more pharmacists, and then we need this hub for that. Expand. Sarah mentioned the private label assortment. We want to build Apotea with strong brands together with private label so we can help the customer what they want, but we can also increase the gross margin with selling our own products with quite often twice the margin. So we have built and produced a lot of products, and now it's time to sell them. But we also.
A lot of products in the pipeline in design or in production, so we launched a lot of new products next year, or sorry, this year. We said that we launched the AI department 2024, and now the team is complete and started working. Now it's time to launch all these projects. Actually, we have, I think, three projects up and running, but they are like still in some kind of test phase. I can really see areas where we can improve both efficiency and sales and inventory and stuff like that with help of AI. I really look forward to that. We also have, we mentioned also the Varberg facility. I mean, we started to build the building a little bit more than one year ago, and we received the key in January this year. Now the building is up and running.
The automation, we start to install the automation in the beginning of fourth quarter, and we will start testing the automation in April and launch the facility in the summer and start sending orders from Varberg this summer. And that will help us to both increase our capacity, build Rx capacity so we can sell more prescriptions, but we can also deliver orders to the West Coast same day, and that's very important for our customers. And we will decrease our costs because the level of automation is much higher in Varberg compared to Morgongåva. So we really look forward to that. And as I mentioned before, I think we're well prepared for the future, and we're well prepared to meet our customer and together with our customer build the pharmacy of tomorrow. So thank you.
Perfect. That was also the last slide of the presentation, and we will open up for Q&A with spoken questions.
The next question comes from Fredrik Ivarsson from ABG Sundal Collier. Please go ahead.
Thank you so much. Good morning, guys. Thanks for the presentation. I have three questions. I'll take them one by one, and the first one is on the sales momentum in Q4. You stated in the report that you grew strongly during Black Week, so can you give some color to this statement? Like, what was the growth during this week? Was it significantly higher than the full quarter, or any color to this statement would be helpful.
I can start. I think we had a very good Black Week. I mean, we had a very nice Black Week 2023 as well, and I think the best thing for me, at least with Black Week, was that we could deliver the order very fast, so our automation was up and running really smooth, and in just like one day after the Black Week was finished, we were like, every order was delivered, and so it was a good Black Week for us and a new high score as well, but the most important thing was we could deliver our orders very good to our customers.
I agree. Exactly.
Okay. Fair enough. Thanks. Second one on the gross margin. Can you help me out a little bit with the bridge here? So you said obviously Black Week was strong, which I guess weighed a little bit on margin. And then the Rx share of total sales obviously grew quite hefty as well. I think it was four percentage points higher than last year. And that's obviously margin dilutive as well. Still, the margin was almost flat versus Q4 last year. So what were the positive drivers to the gross margin in Q4, please?
I mean, by and large, we had a slight, I mean, stable gross margin and a slightly higher gross margin in the OTC and traded goods. Because as we mentioned, the higher share of Rx is pulling the gross margin overall a little bit down. So.
And we tried to stabilize the gross margin, and then we watched the prices every day, every second. So we tried to stabilize them and have like a gross margin goal and try to reach that level. So I mean, if one sales go up and another go down and so on, we tried to stabilize it over time.
Okay. So the higher gross margin in OTC and traded goods were to some extent price-driven. That's what you're saying, I guess?
I mean, we also got contribution from our suppliers, and we negotiate the prices with the suppliers and negotiate campaigns and so on. So we tried to not raise the price. We tried to lower our cost instead.
Yes. But it's important to keep a close look on the margins at all times. I mean, if you have an assortment of 53,000 articles, you need to kind of calibrate up and down all the time.
That's clear. Thanks. And last question from my side on the new prescription hub you're opening in Stockholm during Q2. What is the capacity of this new hub in terms of number of pharmacists?
I think we can have like 30 pharmacists working there. But I mean, you can always work during evenings, and then you have 30 and another 30. You can work during weekends and so on. So it's not that this is the capacity. But from start, we will be like maybe 15-20 pharmacists working there from day one. But over time, we can absolutely increase that number.
And just, I think, as a comment, we are not really using the full capacity of the rest of the Rx hubs or our facilities. So this is also for the purpose of the future growth, but also for the purpose of actually recruiting more pharmacists. So we think that this is a quite attractive area also for recruitment and building capacity for the future.
Perfect. That's my questions. Thanks so much.
Thank you.
The next question comes from Johan Mårild from SEB. Please go ahead.
Hi, good morning, guys, and congratulations on your first quarter as a listed company. A first one from my side on other products. Sales growth was a bit slower than in prior quarters. Is there a specific reason for the slowdown? Was it due to, for example, tough competition from peers during Black Week, or is this an impact from your efforts to drive sales in Rx?
I think if you look at just one quarter, it's a little bit too short period to really say. I mean, what do you compare with last year and so on? And we can see a strong growth on traded goods. So I think over time, we will have a strong growth in that area. But don't just look at one quarter because it's too short.
Okay. Got it. So nothing in particular there, just the top comps. Okay. So could you provide any insights into the split between OTC and traded goods in the quarter?
I don't have that number actually in front of me. I think it's fairly stable compared to what we have stated before.
Yeah. And we handle traded goods and OTC the same, so we don't really follow it. But I would say it hasn't changed, but we don't follow it.
No, but I would assume the margin profile on the two categories are quite different, right?
No, they are very similar. So that's why we not follow it because we buy them, we purchase them the same, we sell them the same. Almost every aspect is the same, so.
Okay. Got it, and you stated that you intended to, or you intensified your efforts to recruit pharmacists during the autumn and now during Q4 as well. How many pharmacists do you have on staff currently, and what's sort of your trajectory for recruitment going into 2025?
I think I won't give an exact figure to that, but I think we've been quite active in recruiting pharmacists for the full year or for the full half year during the fall and during the winter. And I think that we have been quite successful. So we are looking quite positive on the future that we have the capacity to kind of grow the Rx even more, and we will continue to recruit in order to fulfill the targets for the Rx sales as well. But yeah, so we're quite pleased with the number of pharmacists we have today, and we will continue to recruit to make sure that we can grow as much as we want in the future as well.
How many pharmacists do you have today?
Sorry?
How many? I don't have the exact figure, but we are, I mean, if we last summer started with 120, we are at a significantly high number, and I think we will reach 200 during 2025, but I mean, we have.
Thank you so much, and a final one on.
Sorry.
Okay. Thank you so much. And a final one from my side. Could you provide any insights as to the potential costs relating to the expansion of the new Rx hub in south of Stockholm, please?
It's quite low. I mean, we have the investments, just a few shelves, and we have these shelves already in our Morgongåva facility. So it's more like a cost for the pharmacist, and that's like just the salary cost. So the investment cost is very, very low.
Exactly. I think also the cost for the rest, in comparison to the warehouse in Morgongåva and Varberg, and also in comparison to the inventory levels, they are very small in comparison. So also the ongoing costs are quite low in comparison.
Okay. Got it. Thank you. Those were all of my questions for now. Thank you so much.
Thank you.
Thank you.
The next question comes from Viktor Carnegie. Please unmute your microphone.
Hi guys. Good morning. Thank you for taking my questions. This is Viktor Hansen from Carnegie. So I was curious about Norway. You saw nice growth here. I believe it was 18%, if I recall correctly, at least for the full year. So I'm curious here, what sales levels do you believe you need in order to reach profitability? And how do you prioritize currently sales growth versus profitability? Because I know, for instance, that your five times larger, roughly five times larger competitor isn't profitable either in Norway.
I would say we have had some months of profitability have been quite or very much on the not losing money for months in Norway. So we feel quite comfortable that we are soon reaching the level of profitability. And that's also the ambition for 2025. So we're close in getting there. And I think we have really prioritized also the profitability during the last year, during 2024. And our ambition for 2025 is to, of course, grow, but being profitable during the year.
I think the Apotea way of doing it is that you are profitable and then you start growing. Because I think, as you can see, these competitors that are unprofitable and continue to grow, with the low margins, it's quite complicated to change from just growing to profitability. It doesn't help if you're big, if you lose money on every order. So I think it's much better to start with profitability and then focus on growing. We are quite close to changing from profitability to growing because we are very close to profitability.
Okay. Perfect. So despite there being less people in Norway and a more longer country geographically, as you see, and yeah, lower population density, basically, you see no problem in becoming profitable. Good. I have a second question that's on beauty sales. You have about SEK 1 billion in beauty sales, just above that. So I was curious how you view the competition in this category in the online channel.
I think it's similar to other categories. I mean, it's high competition in all the categories, and we like that. But of course, if you have these traded goods, I mean, beauty, you can find skincare in a lot of different channels, but you can also find toothpaste in a lot of different channels. So I think it's a little bit the same, or?
Yes. I think we also try to expand the assortment in a logical way for us, continuing being a pharmacy, but being perceived as a pharmacy, but also growing into new categories. And I think beauty has become a focus area going forward. We have a decent amount of sales in beauty already, but we also want to continue to focus on it.
Yeah. Okay. Sounds exciting. Then a final question here from my side. On cash flow, you built some working capital in Q4. Of course, that could be driven by higher sales. But is there something specific in Q4 causing you to build additional working capital, or should we perhaps expect it to reverse in the first half of 2025, or how do you view the working capital?
I believe long-term, we have a stable operating cash flow model. The change in Q4, I mean, there are ups and downs in the net working capital in the short term and in the quarter. Specifically, we had an increase in the accounts receivable. I wouldn't expect any major, or I expect the cash flow model to be, by and large, stable going forward in a long-term perspective.
Okay. Thank you very much. That's all from me.
Thank you.
Thank you.
Perfect. Thank you, and thank you for all your questions. That was also the last one of today, so thank you for listening to our fourth quarter report, and we wish you all a pleasant day.
Thank you very much. Bye.