Hello, ladies and gentlemen, and welcome to the DocMorris AG 2024 full-year results and Outlook 2025. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Walter Hess.
Yes, thank you very much, and good morning to everybody to today's conference call. The full-year results 2024 will be presented by Daniel Wüest, our new CFO, and myself. We will share insights and updates across all segments and provide a comprehensive overview of our business performance. We will start with a business update, followed by a financial update, and conclude with our outlook. Thereafter, we are looking forward to answering your questions. Let us start with the highlights of last year. In 2024, we achieved significant milestones again. Since the introduction of CardLink in April 2024, there has been a fivefold increase in new Rx customers. These new customers show significantly improved KPIs compared to our former PRx customers. We are very pleased to announce that in 2024, we reached profitability with our non-Rx business.
It reflects our strategic efforts and the successful execution of the break-even program over the last few years. Overall, there was a 7% increase in revenue with contributions from all business segments. Further, Teleclinic achieved a noteworthy milestone by doubling its revenues, demonstrating strong performance and attractive profitability metrics. In conclusion, and due to a really effective cash management, we reported a cash balance end of 2024 of CHF 95 million. On slide number five, we look forward to 2025 with our strategic initiatives that are centered on, first of all, further expanding Rx growth with the customers who demonstrated already that they show significantly improved KPIs and favorable unit economics. With the new marketing campaign, "Mach's dir doch einfach", our objectives are, besides further enhancing awareness, to increase consideration and drive conversion into ERX orders.
The non-Rx business is expected to further grow profitably, thereby contributing to the future expansion of our ERX business. Teleclinic is continuing to achieve significant growth while also expanding its profitability margins. Finally, as you have read this morning, we will raise capital of about CHF 200 million to support the Rx growth and safeguarding the refinancing of the convertible bond 2026. On slide number six, you see that since the introduction of ERX in Germany in Q1 2024, our Rx business is continuously growing each quarter in terms of revenue. Our CardLink innovation led to a 2.5-fold increase in ERX revenue from statutory insured people from Q1 to Q4 last year.
Meanwhile, as you see on the left side on the chart, paper scripts for the statutory insured people decreased significantly, whereas those for privately insured grew slightly, even though they still need to hand in paper scripts. To look forward for Q1 2025, we expect a further increase in Rx growth in absolute value and at the rate of about 50%. On slide number seven, we are witnessing also a consistent growth of new Rx customers, which is most important and which serves as an encouraging indicator of our effectiveness in awareness initiatives and customer acquisition efforts. The success relies on providing and continuously improving cutting-edge apps and enhancing the customer experience. The primary focus on customer acquisition is, of course, with the DocMorris brand, which has seen a threefold increase in new customers year on year and even a fivefold increase from Q4 2023 to Q4 2024.
We will also be able to further leverage the existing customer base of all brands moving forward with the ongoing deployment of the CardLink solution in the Medpex app right now and its implementation in an Apotheke in Q2 this year. On slide number eight, we would like to share with you some insights in relevant ERX KPIs. The cohorts of new ERX customers, who, by the way, have an average age of 57 years, demonstrate a marked improvement in customer loyalty and frequency when utilizing the e-script with CardLink. As you can see on this slide, the CardLink cohorts reorder at the rate that is 2.5 times higher than the ones of previous PRx customers. This confirms the high quality and attractiveness of the ERX customers and confirms that they appreciate the great experience and convenience with CardLink in our app.
Another relevant KPI is the average order value, which reached EUR 110 due to, on one hand, a higher AOV of new Rx customers than before, and on the other hand, with a growing proportion of mixed baskets of Rx and OTC products. Over 85% of these customers currently utilize our app and CardLink to redeem their e-prescriptions, with a very high rate of even more than 95% of their regular orders being delivered to their homes the next day. Now, on slide number nine, we are really proud that in 2024, our non-Rx business has reached profitability. This achievement is crucial as we continue to diversify our value streams and strengthen our overall financial health. The key value drivers to achieve this remarkable milestone include the increase of cross-margins, the strong scaling of TeleClinic, our advanced retail media business, as well as the ongoing expansion of our marketplace.
Of course, important to mention is also Teleclinic, which will become even more important as a value driver in the future. Additional significant factors include enhanced operational and marketing performance and ongoing improvements in customer experience, which contribute to higher conversion rates. Together, with substantial reductions in overhead and indirect cost, along with the closure of several locations and the integration of brands in the last two years, we finally got back to a successful, profitable non-Rx business. On slide number 10 now, we would like to introduce to you our new marketing campaign 2025. The starting ERX campaign launched last year with the GesundBergs was highly successful in enhancing brand awareness and attracting attention to the new ERX CardLink solution.
Now, the successor campaign 25, which combines the slogan "Mach's dir doch einfach," in English, "Make it easy for you," by playing with the word "doc" from DocMorris, with a song with the same title, aims to, first of all, maintain the high top-of-mind awareness of the brand and the CardLink solution from the GesundBerg campaign, but then secondly, increase consideration by strengthening the middle funnel and intensify the focus on specific customer groups that have been identified over the past 12 months using ERX, with the result to boost ERX and sales in the future. I would like to invite you to use the QR code from this slide to see the spot and hear the song of our "Mach's dir doch einfach" campaign. Enjoy it. Now, let's talk about the exciting development of Teleclinic on slide number 11.
The demand from patients, doctors, and strategic partners demonstrates evidence that telemedicine is a crucial requirement and a real benefit to all of them. Teleclinic offers a solution to address the significant and underutilized market of ambulatory care, valued at approximately EUR 55 billion, with less than 1% online penetration. The recent introduction of the electronic sick note, the e-prescription, along with the forthcoming implementation of the electronic patient record in Germany, will serve as a further catalyst for future Teleclinic growth. We are talking about the telemedicine platform with a take-rate model showing a strong upward trajectory in revenues and providing highly attractive margins with significant expansion potential. Already in 2024, Teleclinic has doubled its revenues to CHF 11 million, with a highly attractive EBITDA exceeding CHF 3 million.
In 2025 and beyond, Teleclinic expects strong revenue and even stronger EBITDA growth due to increased demand of patients, doctors, and partners again. The app of Teleclinic has already been downloaded 2.5 million times and has received an impressive rating of 4.8 out of 5. On the next slide, we see that Teleclinic has the strongest value proposition by far in Germany. The demand for telemedicine has led to a significant increase of treatments in recent years and has exceeded 3 million in total, with more than 1.3 million treatments in 2024 only. The leading position and competitive advantage of the platform is further demonstrated by the annual strong increase in doctors surpassing 4,000 in total in 2024.
Teleclinic's uniqueness and excellence are evident as it consistently attracts new doctors and renowned partners such as TK Techniker Krankenkasse, with more than 12 million members, which just started in December 2024. We can tell you with many more to come in the near and mid-term future. On slide number 13, I would like to give a brief update on our sustainability activities, which for the first time are aligned with the European Sustainability Reporting Standard, the ESRS. We have successfully reached our sustainability targets for 2024, making significant strides towards net zero emissions. Our commitment to a sustainable planet and responsible corporate practices is reflected in our initiatives, including renewable energy adoption and gender pay gap alignment. In 2025, we will further prioritize leveraging our corporate culture, which will be essential to support our agile work methodology and align with the OKRs to realize our really ambitious objectives.
Let me conclude the business update with a reconfirmation of our strategy and positioning. Our aim is to be the health companion for customers and patients. The continuous development of our digital health ecosystem is essential for our strategy of being more than a pharmacy. User behaviors are rapidly changing at the moment due to the new opportunities presented by using GenAI tools. Specifically in the health sector, this will create new chances for those who provide comprehensive offerings to customers and patients. The digitalization of healthcare in Germany, for example, with the e-prescription, the e-patient record, and the e-sick note further enables seamless digital health journeys, which will lead to a much better adherence, a far better customer experience, and convenience.
Accordingly to all of that, we want to meet all health requirements by integrating online pharmacy, telemedicine access, a marketplace for health and well-being products, health services from strategic partners, and highly valuable health information and content through our extensive health platform. With that, I would like to hand over to Daniel now for the financial update.
Thank you, Walter, and also from my side, a very warm welcome to all of you, ladies and gentlemen. It will be a great honor for me to, for the first time, present the full year 2024 figures to you. Let's start on slide number 16 with an overview on the group performance. As already mentioned, we could achieve a very solid growth of 6.7% in local currency on group level, and that is especially remarkable with all business units contributing to this positive growth.
Also taking into consideration that in the first half, our Rx business contributed was kind of double-digit negative contribution, that is therefore even more remarkable the performance which we could show over the full year. Beside this, we could continue our positive trend in increasing the growth margin by a further 50%, and that's even more remarkable of the fact that we had increased the growth margins the year before already by 350 basis points. We are currently running different initiatives to further improve the growth margins, and we will talk about this later in the presentation. The EBITDA, which came in lower than last year, reflects the additional marketing expenses for the ERX business once the CardLink business has started. We guided for an EBITDA of around CHF -50 million and finally came out with CHF 48.6 million of adjusted EBITDA.
On the contrary, I think, and Walter already touched on this, very remarkable development on our non-Rx business in Germany. The non-Rx business is basically containing all business units excluding Rx. Just for your recollection, it's OTC BPC. The services where we have different services, which we offer alongside the OTC BPC business, and last but not least, Teleclinic. The non-Rx business achieved kind of a positive EBITDA in 2024, and I think that one can really say the break-even turnaround program has finally closed. We will see further growth on the top line, but also on bottom line, and therefore very promising and also very good development in 2024. To conclude, overall, a very pleasant result on group level achieving the set targets, the revised set targets, which we have communicated in the first half 2024.
Let's move to the next slide and to the segment, to our two segments, Germany and Europe. Germany, I think there's we noticed an overgrowth of close to 7%, just 6.9% in local currency, while Rx contributing 2.1%. I mentioned this based on minus 10.2% in the first half, and the non-Rx business of an impressive 8% growth. Their services and Teleclinic both showing a growth of over 100% in 2024 and are set to further demonstrate the same magnitude of growth in this year and the coming years. Having said this, given the yet small size of the businesses, the contribution to the overall growth was significant in relative terms, but if you combine it, there was less impact of that.
I think we also, Germany, there was a huge impact on improving the gross margin, which you can see most of it, or a big step has already been taken from 2022 to 2023 with 370 basis points. This year, another 60 basis points came on top. I mentioned we will further work on this being on the pricing side, but also by in the supply, and therefore you can expect that there will be a further improvement on this topic. Adjusted EBITDA, as mentioned, that reflects the down kind of the CHF 15 million, which has been additionally invested into marketing spend for ERX. The segment EU, also very pleasant development. I think the big achievement, the growth, top line growth, we have a positive top line growth of 3.6% that compares to a top line decline of roughly 12% in the year before.
There is a clear return and sustainable return to the growth pattern. There, the turnaround on top line has been achieved, and on the bottom line on EBITDA level, also on a very good way to become EBITDA break-even or even EBITDA positive with an increase of 270 basis points in EBITDA margin. I think on the EU, especially to mention that the gross margin level, which is above 29%, which is really kind of a very attractive gross margin level and kind of a consolidation of this 29%, and there is also some further upside potential on that end. With that, I would like to go to the overview of some of our key KPIs of the group. There you see on top the active customer base, and that's kind of customers being defined as customers being active over the last 12 months.
Substantial improvement during the year from 9.1 million to 10.3 million, which is kind of a 13% increase compared to the last year or within this 12-month period. That shows kind of the attractiveness of the solutions which DocMorris is offering to its clients. The site visits over the last 12 months, and this site visit, it's not only visit on the web, but also on the app, that's web and app both together. Also an improvement of 10 million over the last 12 months. There we see a clear shift, and that's a very good shift from web-based is losing and app-based is substantially gaining.
That shows because app-based is much more attractive because then people are already on the right place to redeem their prescription, and it clearly shows kind of the increase of new ERX customers which are only using the app and not any longer web-based. Therefore, very positive development. On the, let's say, more kind of KPIs, which we usually show, basket size, order frequency, and repeat order rate. One could think slight disappointment because they remain more or less stable or even slightly decline. However, that's a good message because that only shows that we could accumulate a lot of new customers, mainly ERX customers, which are in the midterm extremely attractive customers, as Walter already has explained.
Initially, the huge magnitude of new customers is driving down these KPIs because the first and the second order usually is just kind of they are testing out the system and has a lower basket value, and that can go through to all the main KPIs. In the midterm, that will turn around and will then further increase the relevant KPIs. With that, just a short look at the detailed P&L, and I do not want to be there too long and too detailed, just a few headlines. On the P&L, I think on the cost level, you see personnel expenses have gone down in absolute and relative terms substantially.
That's mainly through the initiated and already executed, but there are many other initiatives ongoing, mainly the closure and restructuring of the group Germany in the closure of Harley, which led to kind of less people and the centralization of the warehouse. The effects, we had a negative EUR 5.5 million restructuring cost, but that will translate into annual savings of over EUR 3 million, and that's only partially reflected in these figures, but they will show its full effect this year and in the coming years. Marketing expenses increased by EUR 30 million, kind of what we already mentioned, the additional expenses for the ERX marketing following the introduction of CardLink. For usually, you use adjusted EBITDA because this one looks better than the reported EBITDA.
This time, it would be the opposite, but we decided not to turn around kind of how we presented for good reasons that one can really track our historical financial performance. Why is reported EBITDA roughly CHF 5 million better than adjusted EBITDA? That's mainly due to the profit out of the sale of the former Switzerland building, which led to a positive contribution of CHF 13 million. Against that, we had this restructuring cost, which I already mentioned for the closure of Switzerland Germany, and then additional severance payments on the higher management level when we reshaped a little bit the EB, but also other key positions in 2024. With that, I quickly want to touch on the balance sheet. The balance sheet also, I think we ended up the year with a comfortable cash cushion of CHF 95 million, which is comfortably bring us through 2025 and beyond.
I think you will come later to that, the capital increase of the CHF 200 million, that will really lead to the fact that we are basically net debt free. We have currently a net debt of CHF 228 million on a pro forma basis. Adding CHF 200 million, we would have CHF 28 million of net debt. I think this balance sheet, which is already strong, the equity ratio is over 40%, 44%, but this CHF 200 million then will secure, first of all, the forthcoming maturity of the bond 2026, the converting bond to CHF 95 million, but also allows us to fully execute and even add some additional firepower for the promising market outlook.
As I have said, growing in all business units and especially in Rx to safeguard the balance sheet and to take every discussion off the table, whether DocMorris would be able to execute on its business plan and being in a position to repay the short-term debt. With that, a focus on two topics which I have taken on personally and which is kind of a key focus and the one who has already heard me know about it. I think focus will be, has already been substantial, will be on the indirect costs. You see, we have made also in 2024 huge progress with a reduction of 110 basis points in indirect cost ratio, but also on an absolute level with higher sales of CHF eight million, which is remarkable. If you ask me, are you happy or satisfied with 7.7% of sales? No, I'm not.
That is the reason why we have this arrow, clear focus this year and the years to come in further reducing the indirect costs, especially on a relative level to kind of a sustainable level, which is definitely below the currently 7.7%. The same is true for networking capital. There, the figures are on an annualized on an annual basis, the average use of networking capital also there. We have implemented and will further implement measures to lower the networking capital also in relation to sales with kind of 4.7% achieved this year over the year.
I think there's room to further reduce that given the nature of our industry where usually you have only to pay your suppliers once you have already sold the product and get the cash from your customers, which is not exactly true for the Rx business, but there also we are working on solutions to kind of free up cash on the accounts receivable side. With that, I would like to come to the current trading and also we'll touch on some points of the targeted and pre-announced capital increase. Let me start with the current trading. As already mentioned by Walter and by myself, we see continuous growth across all business units over in the first two months of 2025, especially Teleclinic and in our service business.
As I already mentioned, this our 100% growth is continuously going to further happen, and already the two months show the very promising developments. RX also kind of we mentioned that we expect growth in Q1 of around 50% compared to the quarter of Q1 of last year. If you translate that, that would also mean that we would grow in the first quarter 2025 compared to the Q4 2024, which is in that respect remarkable that Q4 is usually the strongest quarter for ERX and RX in general. Therefore, we are very confident and also pleased that with this current development in the first two months of the year. I think you will now maybe have some disappointment that we cannot provide you with kind of a strict guidance or a clear guidance short and midterm at this point in time.
There I have to remind you, and we have been reminded by our lawyers that we are from now on in a capital raise mode, which the capital raise will not only be done in Switzerland, but it will be a global offering most likely. Therefore, we have also to obey to U.S. securities laws, and therefore all communication which we are doing must be one for one, exactly the same like laid down and written in the potential offering prospectus, which will be published later in the year following the most likely following the AGM. Therefore, we really want to align kind of the preparation of this document with our, let's say, critical communication in relation to guidance.
That is the reason why you will get a very firm and detailed guidance, but not as of today. You have to be calm for a few weeks, and then you will get not the new, but the amended and updated guidance for the forthcoming trading of DocMorris. With that, let me give you a few words to the capital increase. I think you have seen the target is around CHF 200 million. Why CHF 200 million? I think we mentioned that there are basically two reasons for that. First of all, to really secure our growth, foreseeing growth, especially mostly in Rx, but also in all other business units which have very promising growth prospects.
We want to be sure that we have only that this is the last call to our shareholders and that they really by supporting now for the last time DocMorris with equity that we can fully execute our business plan and also reach then not only EBITDA, but also free cash flow break even and having enough ammunition left until we are getting there. On a second layer, we also want to safeguard the forthcoming maturity of the 2026 convertible bond. I think that's kind of always a little bit the big elephant in the room, and I explicitly say safeguarding a potential payback of the 2026 convertible bond and the amount of the capital raise has really been tailor-made that if needed, we could pay back this 2026 convertible bond, the CHF 95 million with cash.
I think that's kind of safeguard and that investors really now have the confidence that we can fully focus on our business and executing the business plan and not that management team. The first half of the management is how do you refinance the 2026 convertible bond, but that should be now done, and we can put a tick mark to that. For the capital raise, we have mandated banks, very reputable banks. Some of you have maybe seen that some of the usual brokers have already been restricted and cannot report anymore. Therefore, it's not that difficult to guess who is on the camp. We have several weeks worked with the bank. We got that they support us in kind of preparing, but also support us that the capital increase will be successful.
Therefore, we are really together working and have got very promising feedback and kind of even, let's say, firm confirmations that the transaction will be bonded at the appropriate time, be safeguarded. As you know, such kind of transactions usually will be capital increase against the rights, tradable rights for existing shareholders, which is addressed to existing shareholders. We think that that's the right way. Also, we have alternative options, and that's also one of the reasons why we have decided to announce this transaction early, given the several inbounds we had so far from the financial or strategic investors. That's the reason why we are now fully prepared and can run a fully and coordinated process on that level. With that, I hand over to Walter again for the Q&A and to you.
Yeah, let's start with the Q&A here.
Yeah, please go ahead.
Ladies and gentlemen, if you would like to ask a question now, please press nine followed by the star key on your telephone keypad. If you wish to cancel that question, please press three followed by the star key. Please press nine and star now to state your question. The first question comes from Olivier Calvet, UBS. Please go ahead.
Yes, hi, good morning. Jumping in for Sebastian here. Thanks for taking my questions. I have three on Rx, one on the free cash flow. The first one on Rx is just on the restatements of revenues. I see in the annual report, CHF 171 million Rx revenues in 2024 versus the preliminary number of CHF 179 million you mentioned. The 2023 base is also restated to CHF 169 million versus the initial CHF 179 million we had.
I might have missed it, but what is the driver for this? Is it Rx through Medpex or Apotal or something like that? Could you maybe tell us when that was in the year so we can better understand the Rx ramp that you've shown on slide six? Maybe I take them one by one so we can address any follow-up.
I think just to start, just to restate that there has been no restatement on the Rx specific. I have read the financials several times before signing them off, but we will come back to you on this question. We just need to better understand it, but there has been no restatement on this respect. We had a restatement of CHF three million, but that was just kind of overall where we got due to a positive lot decision.
We got CHF 3 million cash back of some of our suppliers, but that was not Rx specific. We will come back.
Sure, sure, sure. Yeah. Okay. The second question was just on the total Rx growth of 50% for the first quarter. Is that on the 35 or 35 million base from Q1 last year? Just to confirm.
Yes, it is 37.
On the 37. Okay. Yeah. All right.
Doing that in euros and in local currency because otherwise due to the move of the euro,
yeah. Okay. Okay. Yeah. The euro base. Okay. Got it. I was just wanting to, I just wanted to ask about the impact of the introduction of the electronic patient record nationwide in Germany next month. Could you share some color there if you expect any disruptions to the customer journeys?
Yeah.
Thanks, Olivier, for this question. No, in contrary. We're thinking in the future this will help tremendously to have the electronic patient records also digitally. I think with our ecosystem approach, this will be a huge advantage. I think time-wise, yeah. Germany is rolling out the EPA. It might still take time. I don't think we will see in the next few months nationwide rollout. In general, we see there's a really positive development also for us.
Okay. Cool. Then just on the free cash flow, it's kind of a two-part question. First, on the networking capital, you alluded to it on the ERX business. It is a different profile than your non-Rx business.
Could you give us a sense of what the networking capital is in percentage of sales perhaps, or the cash conversion cycle, or the metric of your choice really before any of the sort of adjustment measures you mentioned? Just to get us a sense of where we are starting from in terms of networking capital to sales in the ERX part or RX part. Yeah.
No, no. Thanks for the question. Maybe I was not explicit enough on that. If you look at the presentation on page, we have it on page 21. That is the reason why I think it is more accurate to look at on an annual basis, on an average basis annually. You see we are at 4.7%, which is even a slight increase from the 4.4% the year before.
I would assume that, let's say, if not taking Rx into consideration any measures there, that that should be somewhere in the area of kind of 3.5-4%. If we can kind of do the measures on ERX, then that would then bring that also substantially further down. I think midterm ratio of 4% should be achievable with the measures we have already implemented and about to implement.
Okay. That's helpful. Then just on the CapEx bit, I see, I mean, in terms of gross CapEx and PP&E intangibles, you spent about CHF 30 million in the last two years. Is that a good proxy for what to expect this year?
Yeah.
I think the CapEx will be part of the short and midterm guidance, but let's assume that it could be slightly higher than the 30, just reflecting the huge growth initiatives which we have and the apps we are developing. Just put 30 and that and reflect the growth of all the businesses which need to use a little bit more of CapEx, and then you're in the right ballpark.
Okay. Thanks, Daniel and Arthur. Yeah. Thanks.
The next question then comes from Jan Koch, Deutsche Bank. Please go ahead. Your line is open.
Hello. Thanks for taking my questions. I have three. The first one is, have you had already firm discussions with potential investors, or what makes you confident that you can get the entire 200 million?
Secondly, in relation to that question, would you be willing to sell a stake in Teleclinic to lower the amount you needed through the CapEx raise? Finally, on ERX, if I have done the math correctly, the 50% growth in German Rx does not really imply any sequential improvement compared to Q4. While you mentioned there is some growth, could you please clarify this and also explain why we should not assume a higher growth in Q1?
Okay. I'll start with the CapEx increase. I think that the CHF 200 million, we are extremely confident, and that's really based on the banks we have mandated and their feedback and their commitment that we would be or that we are able to raise this CHF 200 million in a kind of pure rights issue.
If you look at precedents in Switzerland, that's a common way that you perform at this kind of rights issue with tradable rights, which have an inherent value then. That has been in the past, and especially if it's underwritten, kind of 100% guarantee that you achieve the proceeds. There we have very positive feedback, not from investors, but from the banks involved. Investors, of course, could join if they would like and to basically reduce the CHF 200 million depending on the stake that they would be willing to subscribe for. That's on that. You mentioned TeleClinic. I think it would be a small stake, and then we would be done with the CHF 200 million given the prospect of the business there.
I think we were always told in the past that we have basically 50 options to raise capital, and Teleclinic would be number 50 if all the other 49 would not be feasible because I think selling Teleclinic at this point in time would harm our ecosystem thinking. Additionally, I think keeping it, the value which we will generate for our shareholders will be much higher, and we would basically even run into kind of the danger that our shareholders would sue us if we would now do a fire sale of part of Teleclinic. With, I think, the third question, I hand over to Walter.
Yeah. Okay. Yeah, the third question. I can just reinforce, as you have seen, we continuously grow quarter by quarter, also in absolute values. A strong focus is on gaining new ERX customers.
There we continue to continuously grow as well. As they also have a lower average order value than existing customers, the growth of new customers is then not fully reflected also in the growth of the revenue. You can be assured we continue to grow quarter- by- quarter. I think my statement is still true. I think the exact base of Q1 2024 is EUR 37.4 million. Q4, it was EUR 56.4 million. I stick to my statement that we will show growth in Q1 compared to Q4. Even Q4 is usually the strongest quarter within a year.
Understood. Thank you.
You're welcome.
The next question comes from Jannik Züllig, Stifel. Please go ahead. Your line is open. Mr. Züllig, your line is open. Can you hear me now? Can you hear me now?
Perfect. Sorry. Okay. Thank you.
Yeah, most questions have been answered already. Two follow-ups left, basically. The first one would be on the guidance. The question is, why are you unable to provide a guidance beyond Q1 or generally for the overall group? The other one would be on OTC revenues grew 6% in 2024. Is it right to assume that probably we will not see much incremental growth beyond that rate? Also the question, what are the drivers of growth here given that we see competitors growing much faster? That would be the second one. Thank you.
On the guidance, I reiterate what I said before. We will definitely be capable and even willing to provide you with short and midterm guidance.
However, given that we are now under capital raising restrictions, and we will also reach out to the US, and there will be kind of a very detailed documentation, the offering perspective, which is currently being prepared. We just want to avoid that any communication which comes now at this point in time could only in a very small level or size deviate from what our kind of thinking and our base will be beginning mid of May. Therefore, we decided to not give no guidance, but to postpone it much closer to the capital raise so that you really have kind of, let's say, a very fresh and straight to the point guidance, and we do not have to kind of make any changes if there would be any at all.
Yeah. To the second question regarding the OTC growth.
We have just taken a strategic decision that we steer OTC growth at about the growth level in the market, and that we add any additional euro in marketing, in gaining and retaining ERX customers. As an ERX customer, it is multiple times more interesting with regard to CLV than an OTC customer. Yeah, that is how we steer the business. We could grow also with OTC, if you would like, much more, be 10% or 20%, but strategically, we feel differently.
Okay. Understood. Thank you. One follow-up, if you allow, maybe on the timeframe of the guidance that you do provide. You mentioned to increase RX revenues by around 50%. It seems low given also the undemanding comm from the prior year.
Do these 50% already include the assumption that revenues would accelerate with the new marketing campaign, or is this 50% just until now, or let's say of the first six to eight weeks of the year with no considerable tailwind from the new marketing campaign? Thank you.
The 50%, that's the only guidance we provide as of today. That's for Q1, Q1 2025, and based on the current trading for January and February. That's because we can clear that in the 10th of April when we do have our trading update. Alongside also the HM invitation were with all the agenda items which then give some further clarity on the targeted capital increase. I think the 50, that's really and as I said, this time we do not provide short or midterm guidance. It's really a short, short, short-term guidance for Q1 2025.
The other things, we will communicate then later a little closer to the capital increase. This 50% does not include any positive effect so far from the new marketing campaign because the campaign only started at the beginning of March. Therefore, so far in January and February, we do not see, of course, we have not seen any positive effects coming out of this marketing campaign. I think on the opposite, January and February, we were, let's say, on the marketing side rather not very aggressive given the new campaign ahead. That is for your information and your consideration.
All right. Great. Thank you.
You're welcome.
The next question comes from Urs Kunz, Research Partners. Please go ahead.
Yes. Thanks for taking my question. Maybe I can ask again to clarify a little bit about this guidance.
This guidance comes for short, midterm comes together with the prospectus of the capital increase. Is that after the Q1 results? Can you elaborate a little bit on that? I come on with further questions after this.
Yeah. No big guide. I think basically we don't can discuss the whole timeframe, but there are some kind of optionality in it, as I said, given the inbound calls from financial and strategic investors, which we now can start really kind of start having the right discussions given that now it's out that we do a capital increase. Back to your question, I think the new guidance will be communicated between the 10th of April and the start of the capital increase. We have to fine-tune that.
You could assume that you will then get kind of a short-term guidance, but also a midterm guidance for the forthcoming five years. I think that's then really kind of dust and done and showing all the experience out of the one year of ERX and the current trading and the development of all our other business units.
Okay. Maybe on the capital increase regarding if you get this CHF 200 million, would that imply some change in your marketing expenditures? Are you thinking of increasing that again this year, or are you feeling happy with this kind of the marketing expenditure so you don't kind of would increase that?
I think I give you first of all the CFO answer, and then which is maybe no, we are fully aligned again between CFO and CFO. No.
I think the 200 million will certainly allow us to kind of do maybe some additional very targeted marketing spends where we really see that we get kind of good value back for each euro invested into marketing. Just to clarify and to take any fears off the table, we won't now then put kind of the 200 million and put that in 2025, 2026 into marketing. As I said, I think CHF 95 million will be safeguarded for a potential conversion of the 2026 CB. The remaining funds will be very deliberately and very diligently then kind of used to kind of bringing the business, the ERX business really forward. There will be some additional marketing, but not in kind of big size which one could expect given the 200 million headline figure of the capital increase. Maybe Walter, you want to?
No, fully in line. Good.
Maybe you got me a little bit confused about networking capital. You showed that during the whole year. I am right that by the year end, the networking capital was really low. It kind of overstated a little bit the cash flow for the year 2024. That is not sustainable. Is that right?
I think two comments, maybe a little bit cynical. I think I would immediately fire every CFO who would not optimize networking capital by year end. Sometimes not the CFO, but also the operational people. I think you see it in every company. If the company is not doing that, that you are optimizing networking capital by year end, it absolutely does not make any sense to put a lot of orders, good orders into the warehouse.
That's only good for the suppliers because then they have very nice net working capital. That's kind of a good corporate governance that you try to optimize your net working capital. I think what we have done this year, that's kind of you will see that in 2025, 2026, 2027. That's the reason why I show you the annual average. That's much more an indication because if you only show year end, you always will see a very low net working capital number. I think that's definitely sustainable because it's not a one-off. It will happen from now on every year. Therefore, that's kind of a positive effect, but which will occur every year.
To your question, of course, it did not be CHF 44 million or whatever we had during the year, but it was a few million lower due to the fact that we kind of had not the warehouse full over the Christmas time and New Year's when anyhow the demand is low. We have also taken care that our accounts receivables have been paid and the accounts payable, the ones which have been possible, you delayed to pay them instead of December 31 on January 1. All of my colleagues are doing so. I think that's not a more specific thing.
Good. Just if I compare end of 2023 to end of 2024 and trades payable increasing by a substantial amount, inventories decreasing by a substantial amount. It seems to me that was even accelerated compared to the years before, but.
I think 2023 and 2023 was kind of the exception to the other side. That was really kind of a big mishap that there was much too much inventory, even more than during the year. That was the reason why it now seems a little bit extreme into both directions. I think 2023, forget about it, that there was kind of really kind of a misalignment between operations and the finance department. That was kind of a one-time unlucky event, which hopefully never ever will happen again.
Okay. The last question is on Teleclinic and just a confirmation on slide 12. On one side, you talk about 1.3 million clients in fiscal year 2024. I see the chart on the left side in Q4, 3 million. Is that annualized 3 million?
That means if it stays on Q4 level, we would have 3 million treatments in 2025. Is that correct?
You mean the left-hand chart on page 12?
Yeah. Where you see the 3 million on Q4. I guess that's an annualized figure, 3 million, because otherwise it doesn't add up if the 1.3 million is on the whole 2024.
Yeah. And it's larger than 3 million. And it's cumulative. I'm sorry, but do we have to? Let's come back on that.
Yeah. Good. Thanks. That's all my questions. Thanks a lot.
The next question comes from Gian Marco Werro, ZKB. Please go ahead. Your line will be open.
Good day, everyone. Two questions left from my side. First one on networking capital also, pointing the finger here to inventories. I mean, you're really in growing mode, ramp-up mode.
Therefore, I really wonder how you can then reduce your inventories now in the second half, 2024. Was that also due to a reduction of SKUs, or you have maybe some supply chain bottlenecks, or what is really behind this reduction of inventories, please? The second question is on your ERX revenues and also touching again on this 50% growth in the first quarter. Just from my perspective, and tell me if I'm wrong, but if I look at your repeat order rate of 76%, and I put this on the last quarter of ERX revenues, then by nature, you would easily get out of these repeat orders around EUR 40 million in revenue. The delta then is around EUR 14-15 million additional new revenues with new customers.
My question now is, is it really so difficult to gain new customers, or has that also to do with your now maybe cautious marketing spendings in the first quarter? Thank you.
Let's start with ERX. Yeah, with the second one. Yeah. It has a bit to do with what you just mentioned. With the new campaign, we decided to start in March and not in January for some reasons. Of course, this has an impact because we allocate the bigger part of the marketing budget to the new campaign then throughout the whole year. On the other hand, it's really just going forward. For us, it's really important to well manage CAC, so customer acquisition costs, in a good manner also, and not overspending, but nevertheless continue to grow.
The combination of these two leads to what we just said. Yeah, let's see in April when we comment on the real figures and give the outlook where we will stand then and where we will go in the rest of the year.
Gian Marco, on the networking capital, I think in the second half, we definitely kind of have learned from the second half of 2023, where already your colleague has rightfully mentioned that that has been kind of less than optimal. I think we have already implemented some measures because in the past, we had much longer order frequency levels than with our suppliers. We have kind of purchased goods on stock for two months, two-three months. I think given the size of us and the magnitude as a customer for our suppliers, we have now kind of shortened these order frequencies.
Therefore, it's more just kind of not yet, but that would be kind of the ultimate target, just in time, supplier delivery. We are not there, but the order frequency is in much smaller intervals. We have also kind of started to work directly with some of the suppliers instead of using wholesalers, which also has a positive impact because, I mentioned, we are not yet fully there. Consignment warehouses, where we can really pick what we need, but they do not have it on the balance sheet or in the warehouse. I think that's a win-win for both sides. Of course, we won't see a substantial decline of networking capital in absolute terms, but in relative terms, given that we are substantially growing. The networking capital, that's a big ambition and kind of realistic ambition, will be underproportionately grow compared to the top bank growth.
That will automatically then lead to a better networking capital ratio compared to net sales.
Thank you, Matteo. Clear. Thank you, Walter, and Daniel. You're welcome.
The next question comes from Michael Heider, Warburg Research. Please go ahead.
Yes. Hi. Thanks for taking my questions. I have two left. The first one is on marketing spend in 2024. If I'm not mistaken, then your latest guidance was that you wanted to double the marketing spend. That would have meant roughly CHF 100 million. You now spend CHF 79 million in 2024, so CHF 20 million less. My question is, was this because you wanted to reach your adjusted EBITDA guidance, or was it because you did not see any additional opportunities for growth in the market with this additional CHF 20 million? That would be my first question.
The second one is just like a, yeah, to understand correctly, you mentioned that on page 8 of your slide, you mentioned that the average AOV is EUR 110 for ERX. When you get on your KPIs on some slides further behind, you have the KPIs, and the basket is EUR 98 on RX and EUR 38 on OTC. I'm wondering how you can get to EUR 110 if both baskets are lower actually than EUR 110. These are my two questions. Thanks.
Maybe I start with the marketing expenses. I think that must be wrong. We did not say that we want to double marketing expenses. I think the statement was maybe that we want to double or not even double marketing expenses for RX. If you have a look at page 19, there you see, as you rightly said, roughly CHF 80 million.
That is the 80 million that comprises OTC, BPC, and RX. We mentioned that we want to increase the ERX marketing spend by 15 million. That is exactly kind of the gap which we had to close on an EBITDA level. That was absolutely in line. We fully executed what we said, basically walk the talk and invested this 15 additional million for ERX.
On the basket size, the 110, that is the mixed baskets with RX and OTC because that is also a big advantage now with CardLink. We can add and incentivize also if OTC orders are done together with the RX redemption. The 98 is purely RX. This figure includes, of course, also in the mix, many new customers. The first RX order generally is significantly lower than the following orders.
Out of this mix, and given the high number of new customers, the 98 has to be understood.
All right. Thanks. Thanks a lot.
You're welcome.
Okay. In regards to time now, the last question comes from Chris Jones, HSBC. Please go ahead. Your line is open.
Yes. Thanks for also taking my questions. Two, if I may. First, is it possible that you can give us your view on the ECJ ruling on the bonus? Just any sort of color, things that you would want to highlight. I know you sent out a comment right after the announcement, but yeah, just about how the sort of the next steps, anything basically you want to point out on that. And then second question on the state of the recurring subscription. Yeah. Is there any sort of update on that time-wise? It's obviously an important topic.
Is there any sort of indication out of Berlin that you can share with us? Thank you.
Thanks, Chris. Two very important and good questions on the ECJ. Maybe two comments. The first one is, for us, it was positive that the ruling of 2016 has been mentioned with regard to the direct bonus. With that, it has been reconfirmed by the ECJ. This was positive in our view. Regarding now the OTC-related bonus or incentive, it goes now from the ECJ back to the German court, to the highest court. Let's see what they make with it, how they decide. Our own view in general on bonus and incentives and this kind of thing is that in the mid and long term anyway, the driver will be convenience for the customer.
Bonus or incentive will become less and less an issue or be important or a priority. That is why we very much focus on improving the app, having a really state-of-the-art app. Just making the bridge to your second question, the repeat script will be really an important step towards further increasing convenience. There we have not heard something in addition, but it is the doctors and insurance companies now just to define the money, so the value of a treatment of chronic patients throughout the year. Yeah. We expect this might start beginning of next year, would be feasible. With that, again, having a repeat script together with CardLink, together with a fully seamless digital process, this will then just really so much improve convenience that, yeah, all incentive discussions will become irrelevant.
That is clear. Thanks a lot.
Welcome.
Okay.
Yes, there are no more questionnaires at the moment. I think we can close the Q&A, and I'd like to hand it back to the speakers for some closing remarks.
Yes. Thanks a lot to all of you for joining and taking time. I can just really reassure and reconfirm. We are so much confident for the future success as never before, frankly speaking, because we really have started now growing with ERX. We see really good progress in gaining ERX new customers with highly attractive KPIs. We have done the homework. We have turned the non-Rx business around. We grow profitable now, which is really a great achievement. You know where we come from three years ago. We have done a lot there. We have Teleclinic as a platform, which is really, really highly attractive.
You will see in the future, this will give us a lot of, yeah, let's call it pleasure or joy. Daniel already has touched on it before. To combine all of what we in hand in an ecosystem and also seeing the changed behavior. I am sure all of you already used ChatGPT, Perplexity, and you name them. The different way you start to handle and treat your health. For that, with our ecosystem strategy, we are really, really perfectly prepared. By combining all of that, yeah, we can say we look from our side in a really, really good future. Also, again, I can assure you, we are highly ambitious. We have done a lot also with the teams. The teams are highly ambitious. We have a lot of agile teams. The teams are completely motivated.
They see the progress that gives more wind from the back, pushes us forward. Yeah, we look really forward to. With that, let's finish the call. Thanks to all of you. See you soon again. Hear you soon again.
Thank you.
The recording has been stopped.