Hello, ladies and gentlemen, and welcome to the DocMorris AG Q1 Results 2025. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. If you would like to ask a question later on, please press nine, followed by the star key on your telephone keypad. Let me now turn the floor over to your host, Walter Hess.
Yes, thank you very much, and welcome to everybody to today's conference call, which will be hosted by Daniel Wüest, our CFO, and myself. We are happy to share good news today about our Q1 figures and the fully underwritten capital raise of CHF 200 million. In these challenging times, we think it is important to mention that we, as a leading European digital health company with online pharmacies and telemedicine, are neither dependent on the economic environment nor on goods from the U.S. In Germany, the biggest market in Europe, we are really best positioned with our brands and with our ecosystem, and just at the starting point of an exceptional growth with prescribed medication and telemedicine services.
By the way, both for the first time are mentioned positively and are supported by the coalition agreement of the new German government, as they have released just yesterday. As you will see later, and certainly already recognized, we have chosen a strategy for sustainable and at the same time profitable growth funded by our own operating cash flow. This brings us directly to slide number four with the key messages for today's call. In the first quarter, we could accelerate our Rx growth to 52% and non-Rx growth to 7%, which brings us to an overall growth of 13% year over year. Also, TeleClinic again confirms its strong growth path with far more than 100% and continuously improving attractive margins. The outlook for 2025 and midterm underlines our strategy of sustainable, self-funded, profitable growth.
In 2025, we plan with more than 10% revenue growth and an EBITDA target of CHF -35 million to CHF -55 million, which includes CHF 15 million incremental Rx marketing, which results in an improvement to CHF -20 million to CHF -40 million without this additional investment. Midterm, we plan with a 20% revenue CAGR, with EBITDA break even in the course of 2026 and positive free cash flow in the course of 2027. Four weeks ago, we announced the plan to increase our capital base by CHF 200 million. Today, in a real rough environment, we are really pleased to inform you that this CHF 200 million has been fully underwritten by a banking syndicate, and the capital increase will be launched after the AGM in May.
Slide number five displays the accelerated Rx growth of 52% in Q1, and the continuous growth of eRx revenues is significant, with an increase of 2.5 x year-on-year and projected acceleration quarter-over-quarter throughout the whole year of 2025. Let's move to slide number six. Also, the profitable non-Rx business, which consists of revenues coming from OTC and BPC products, including private label, marketplace, and services such as the retail media and TeleClinic businesses. They together grew by 7% in Q1. Particularly pleasing is the development of our services, with a revenue growth of more, far more even than 100% at highly attractive margins. On the next slide, you see again regarding TeleClinic, we have exciting news to update you.
Beside the fact that TeleClinic is a fast-growing platform, which more than doubled its revenue in Q1, they also won the first representation of medical doctors in ambulatory care. This happened in the region of Lower Saxony. It is called KV Niedersachsen , KVN, and they won it as a strategic partner and customer on the platform. What does this mean concretely? The KV Niedersachsen will use in the future the TeleClinic platform for their medical on-call service. Specifically, any call that requires referral to a medical doctor must first be evaluated by a telemedicine physician from the TeleClinic platform. With regard to the potential, we talk about the population of more than 8 million, so more than 10% of the Germans in Lower Saxony, with more than 14,000 doctors.
This partnership stands to improve the overburdened German healthcare system and represents a significant step of TeleClinic into the German standard of care. Let me conclude the business update with a confirmation of our strategy. Our aim is to be the 24/7 health companion for our customers and patients, enabling everybody to manage their health in one click, anytime and anywhere. We are continuously developing one platform centered around customer and patient needs. We do it by combining online pharmacy, telemedicine, marketplace, health services, and content and strategic partners. A successful example of our ecosystem approach you will find on the bottom right of this slide. By partnering with providers of weight loss injections such as Eli Lilly and combining telemedicine, online pharmacy, health services, and content, we offer a seamless end-to-end customer experience with secured availability of products and health support.
This has already resulted in increased sales by almost 10 times since we have started this service on our ecosystem. We are convinced that this is the future of healthcare, and we are at the forefront of it. With that, I would like to hand over to Daniel now.
Thank you, Walter, and also a very warm welcome from my side. First of all, I would like to provide you with some further information on the forthcoming CHF 200 million cap increase, followed by the guidance for the financial year 2025, as well as the midterm guidance. Let's move to the cap increase, and allow me a first statement. We are happy, a little bit relieved, or heavily relieved, but also a little bit proud that we managed in such a, let's say, call it challenging market environment over the last days that we could secure the underwriting of the CHF 200 million cap increase. A syndicate of banks consisting of Bank of America, UBS, and Zürcher Kantonalbank has fully underwritten the volume of CHF 200 million, and therefore the cap increase is secured.
The capital raise will, as announced, happen by way of a discounted rights issue with tradable subscription rights for shareholders. Final terms will be published in the morning ahead of the AGM on 8th, which will take place on 8th May 2025. Of course, the equity raising is subject to shareholder approval at the same mentioned AGM on 8th May. Execution of the transaction is planned immediately following the AGM, which means that the transaction should be closed in May, assuming a stable market environment. The gross proceeds of around CHF 200 million will be used to fund the incremental Rx growth by adding targeted marketing spend until reaching positive free cash flow in the course of 2027. Additionally, to secure a potential repayment of the outstanding CHF 95 million convertible bond, which will become due in September 2026. Now, let's move to the outlook.
I would like to re-emphasize what Walter has just said before. Our midterm outlook is geared towards sustainable and profitable growth to achieve internal funding of the operations by our own. The milestones to reach this, you see that in the middle in the ellipse of the slide, the milestones to reach this are to become EBITDA break even in the course of 2026, followed by positive free cash flow generation in the course of 2027. For the avoidance of doubt, we have assumed a steadily increasing Rx penetration based on the current run rate. While we are all sure that there will be an inflection point in consumer adoption in the next years, that means when the resolving prescriptions via CardLink will become the usual way. That kind of we have not factored in in our midterm plan.
That's important to know when you look at the guidance. Additionally, Walter also mentioned that we have not factored in the potential positive effect of yesterday's coalition agreement. If implemented as written and published yesterday, that would result in an over 2% increase of margin contribution margin in the Rx business, given the increase of the fixed amount per Rx package of EUR 1.15. That has also not yet been reflected in neither the short nor the midterm plan. Let's move to the short-term outlook. We forecast the revenue growth on group level of over 10%, whereby Rx will contribute with over 40% to the overall growth.
Adjusted EBITDA will be in the range of CHF - 35 million to CHF -55 million. Very important, including additional incremental CHF 15 million of marketing spend for Rx, which will be part of the use of proceeds of the cap increase. Our EBITDA guidance would have improved significantly to a range of CHF - 20 million to CHF -40 million if we would not have considered and taken into consideration this additional CHF 15 million of marketing spend, which would also be the basis when we started into the year 2025. This CHF - 20 million to CHF -40 million would then compare to the CHF -49 million negative EBITDA, which we have achieved in 2024.
CapEx spend will be in the range of CHF 35 million to CHF 40 million, which is slightly higher than what we have seen in the year 2024. Midterm guidance, I think that's the short-term guidance. That's the first step to achieve to bring us to EBITDA break even and then further on to cash flow break even or positive free cash flow generation. The midterm guidance aims for a 20% compounded annual growth on group level, which is back-end loaded.
That means we do not have kind of a sequential 20% increase every year, but at the beginning that will be lower and then will substantially increase over the years the revenue growth. The reason for that is, first of all, the cohort customer logic where we are now building the cohorts, and then they will pay off over-proportionately in the years to come. Secondly, the scaling of our service business, which is for the time being developing extremely fast and promising, but there you will see a substantial scaling on the top line, but also on the bottom line. The average annual CapEx will be CHF 35 million. You could now ask, how can you achieve such a huge growth without increasing the absolute amount of CapEx?
The reason for that is that we have already a very high automatization rate in our distribution and fulfillment, which means that our two existing warehouses in Heerlen have already right now a capacity of 30 million orders on an annual basis. We are currently running at roughly 22 million orders and could easily, without adding any additional capacity, increase to 50 million orders a year, which covers comfortably the midterm plan and the volumes of our midterm plan. The reason for this is that we can, with internal optimization and further efficiency measures, we can basically almost double or triple the existing capacity which we have there. Therefore, CapEx goes mainly into tech investment and not very much in PP&E. In the midterm, we continue to target an EBITDA margin of around 8%. Now you will ask, how do we get there?
That is the reason why we have slightly adapted a slide which should look very familiar to you because we have shown that over the last years. We have slightly adapted it in that we have included services given their substantial becoming more important on a top line, but especially on a bottom line level, and to make that more transparent for you. Based on this unit economics, which you see outlined on the slide, you can then easily derive our EBITDA target margin of around 8%. We have also, to illustrate our path to positive free cash flow, provided you with a bridge showing the development of the operating cash flows and CapEx, including the resulting cash balances by starting of this year and by end of the midterm period.
The waterfall chart, which you see here, implies full repayment of the outstanding CHF 95 million convertible bond, which is expiring in September 2026. As you can see, the inflection point to positive operational and free cash flow will happen in 2022. You see in 2027, excuse me, in 2027, you will see operational cash flow basically equals CapEx. Having said this, that means that from 2028 onwards, DocMorris will generate substantial free cash flows on an ongoing basis. That is basically the delta between the green bar and the orange bar. With this substantial free cash flow generation, which will add up and pile up, you will see you can realize that we could even think of redeeming or repaying back the outstanding CHF 200 million convertible bond, which will become due in 2029 by our own cash generation.
2029, that's pretty some years to go, and we will definitely not at this point in time decide how we tackle and handle this potential repayment. With this slide showing DocMorris' path of sustainable and profitable growth in combination with cash generation, we would like to conclude the presentation and are now looking forward to getting your questions. Many thanks.
Ladies and gentlemen, as a reminder, if you would like to ask a question now, please press nine followed by the star key on your telephone keypad. In case you wish to cancel your question, please press three followed by the star key. The first question comes from Volker Bosse, Baader Bank. Please go ahead, your line is open.
Yes, good morning. Thank``s for taking my question, Volker Bosse, Baader Bank. I have a couple of ones. First, an easy one is the, could you please provide us with the number of new customers or total active customers at the end of Q1 2025? The KPI, which you released historically, but that did not show this morning. Second one is, I think it's more for clarification. You said you want to become a break even on an adjusted EBITDA in the course of 2026. Is it right to understand that does not necessarily mean that you will be EBITDA positive on a full year basis in 2026? Just to get your thoughts by calling it in the course of 2026, what does it mean? The third one would be on the growth on the top line in Rx growth, OTC growth.
Could you perhaps give us your thinking why you think that you are significantly below the growth rate of your closest peer here? Last but not least, perhaps a bit of midterm, long-term question on the potential eRx penetration going forward. Just to get an idea, what do you expect given the momentum which you see in your assumptions? Just roughly, do you think that the eRx penetration will be at 10% in five years or at 5% in five years? Just the way of the magnitude of speed which you see and what you have in your underlying calculations. Thank you very much.
Yeah, thanks a lot, Volker, for the questions. Let's just jump into it. I will start. The number of new customers by quarter we do not disclose for competitive reasons. This is the reason why we have not showed them in detail. What you can read in our press release is that we grew in total from 10.3 million to 10.5 million active customers. Of course, also, let's say a relevant part of it is for Rx customers. On the EBITDA question, I would just give the word to Daniel.
Yeah, happy to answer that. You read it rightly. In the course, that gives us some leeway that we will achieve EBITDA break even in 2026. You are right, we would not have written down in the course if we would have guided you through a full year EBITDA break even in 2026. Having said this, it does not mean that it is not the aim, but for in the midterm guidance that is, as you read it in the course, that means during the year 2026, we will become EBITDA break even.
Yeah, and the third question on the Rx growth top line. Of course, as always, I can and will not comment on competitors' performance or whatever they say and show. For us, it's important, and that's also an important message that we have chosen a strategy, which you see also in the figures, of a sustainable growth path, which brings us, as just said, in the course of 2026 to EBITDA break even, in the course of 2027 to cash positive so that we can grow self-funded. We think that's really important for us, for the company, for the investors. This is what we have here taken a space for our planning. With regard to the eRx penetration, your fourth question, you can be assured we are fully convinced that the Rx share will go to 10%.
Personally, I think it will go furthermore because there is no reason why it should stop at 10%. The question is when. The question is when will be the inflection point? Coming back to the third one, we have just for the moment taken in consideration the current dynamics that we see also in the whole market, so not only with us in the whole market, and which already gives a highly attractive plan with high value creation within the next years.
Yeah, thank you, Mr. Hess. To ask again, in long term, above 10%, I totally agree, but there are certain milestones which you have to be past up to beyond 10% or above 10%. Could you be a bit more precise given the current momentum which you see, as you said, where we stand in three years, in five years? Just roughly any figure would be helpful. Thank you.
Yeah, of course, we have, as I always also answered to this kind of questions, we have our scenarios and we have several scenarios with different online penetration shares. I think what will be a big milestone and what, in our opinion, will be a next inflection point is the repeat script. The repeat script is already now into the law. The law is in force and it's now just up to the doctors and the insurance companies to negotiate the amount of the fee that doctors get for full year treatment of chronic patients. Once this is solved, the doctors will start to issue the repeat scripts, which means for every chronic patient, which is well [Foreign language], sorry for the German word, which is well adjusted, the doctors will issue two to four quarterly prescriptions.
With the first visit in the year, the doctors will get paid. This, of course, for us will open a huge possibility then to really offer the repeat script service, which, by the way, is already live in our ecosystem, in our app. You already find it. If you have a repeat script in Germany, you already can redeem it quarter- by- quarter via our app. It is already there. We think this will change convenience and experience of the customer completely against what the experience was in the past.
Okay, thank you.
You're welcome.
The next question then comes from Christopher Johnen, HSBC . Please go ahead.
Yes, morning. Thanks for taking my questions as well. Coming back to the 2026 guide, I think the wording in the course was pretty clear. It would just still, and sorry to get back to the point, be interesting to hear your thought about how you think about quarterly progression. Because, I mean, you can signal to us now whether you would like us to assume that to be Q2, Q3, or rather a December Q4 type comment about the EBITDA, just to have a bit of an indication on where the absolute number is really going to contend, whether it's going to be significantly negative if you, in theory, it could just be the last month of the last quarter in 2026.
Yeah, just to get a bit of direction maybe. On the point about assuming a continuation of current trends, are you looking at the absolute growth in the Rx market or are you looking at your own performance? I think the one thing, and that's maybe a third question, I didn't quite get why the more than 40% growth wasn't part of the guidance comment. What should we read into that? I'll leave it at that for now. Thanks.
Let me start with your last question because that's always the one which I remember the best. No, the 40% are basically part of the guidance. It's also on the slides and also in the media release. I think it's not, let's say, in hyphen official because then we also would have to guide on non-Rx, OTC, and services which we, for good reasons, are not doing and do not want to do. Therefore, knowing that the Rx is of importance to the market, we mention it, but not as part of the official above 10% growth on group level. The question how EBITDA break even will be achieved in 2026, I think that the way to get there is clear. There are definitely the drivers there are progression on better CM1 margin in our OTC- BPC business, where we are making a big progress.
Also the revenue and the over-proportional bottom line development of TeleClinic and our other service businesses. Last but not least, I think if you would give me the confirmation that the politicians always stick to signed agreements, i.e., the coalition agreement, and that this additional benefit will come. It is always the question at what point in time it will come. I would be much more comfortable to give you an exact guidance when we will reach EBITDA break even. You see there are so many balls in the air which we all catch, but the question is just when do we catch it? That is the reason why at this point in time, if I would tell you be it the second, the third, or the fourth quarter, that would not be serious at this point in time.
I have to leave it with the in the course of 2026. As I said before, the aim is definitely to become that rather sooner than later.
Yeah, your second question on the trends, of course, we follow the market trend. I think what you already see and what we also said is it's not a winner takes it all market. What the status in the market is still, it needs awareness, it needs education. It's something that has not been seen in the German health system before that there is any digital process or anything digital in place. It just needs time that people get aware, that they try it out. Once they did it, they see how convenient it is. The conversion will be much easier and much faster. As I said before, the repeat script will be very important. I think the gain of convenience with the repeat script will have a big impact.
We just did not want, as maybe sometimes in the past, we figure in things that are not yet seen. That is why, yeah, even with what we have now figured in, just to repeat myself, it is already highly attractive and creates a high value. Yeah, I think maybe just one word, the new campaign that we have started just underlines that. We create additional awareness, we create additional education. We see the figures, the KPIs from the campaign, it creates conversion. It all goes in the right direction.
Okay, one follow-up if I may on the Rx growth. Is it possible for us to get an exit rate for March, maybe an early indication for April or any more color? That would be great. Thanks.
Of course, not in detail because we cannot give competitive information. What we definitely see, the new campaign has a relevant impact, which is great. Of course, now we are at the beginning of the quarter and we are still in the old mode of doctors being remunerated. The start of the quarter is important. What I can say is that the start of the quarter is very good.
You see that on the previous slide where we a little bit faded, but you see there's a substantial uptick on the quarterly projection. We had to fight against the lawyers that we can show this. This chart had to be kind of broadened with the shading and everything. You see that there's a substantial uptick on a quarterly basis, which, yeah, you can measure it and maybe you come to the right. You see just per eye, if you look at it, that Q4 to Q1, there was already an uptick, but low single digit because Q4 is always a very strong quarter. From Q1 to Q2, Q3, and Q4, you see an accelerating incremental sequential Rx revenue growth.
Yeah, that's clear. Perfect. Thanks a lot.
At this point in time, yeah.
The next question comes from Jan Koch, Deutsche Bank. Please go ahead.
Good morning. Thanks for taking my questions. The first two are on the German coalition agreement. Obviously, that included a lot of positive aspects. One of them was that the future government plans to improve the framework and reimbursement for telemonitoring, tele-pharmacy, and video consultations, which would obviously be positive for you. Do you have any more insights in potential changes? Secondly, it also included the phrase that they plan to standardize requirements for local and mail-order pharmacies, particularly regarding cold chain compliance and documentation. Do you believe that the government could implement new requirements there? Lastly, on the CHF 15 million incremental Rx marketing spend you're planning, have you already spent some of that in Q1 as a run rate, or do you now plan to sequentially increase that marketing spend?
Yeah, on the first one, we have just also read the coalition agreement yesterday afternoon. What we see, there is a lot of positive information inside for us, as you just also mentioned. We do not know now for more. Also, this coalition contract has finally to be signed by all the parties. They have to go through their base, mainly the socialists. We will see also who will be the new minister of the health department, and then the work can start. In general, we see it really as positive that tele-pharmacy and telemedicine for the first time ever are positively mentioned in a coalition contract under the unionists. The second one on the cooling, the cool chain, we already have high restrictions on cooled products. We already do and have to follow high-quality control standards.
It will be interesting to see how local pharmacies, if they have to also hit the same standards, how they will handle it. From that angle, we think we are already now on the safe side. On the EUR 15 million additional marketing spendings, Daniel?
I think there in 2024, the base is EUR 35 million. We intended to, before CapEx increase, increase that by another EUR 5 to EUR 7 million. Of course, before having secured the CapEx increase, we were very, let's say, we thought twice or three times before spending any euro for the marketing. That will now be added up to this EUR 15 million incremental marketing spend. Therefore, you could assume that most of the EUR 15 million has not yet been spent and will be spent in the course of the remaining year. As said, that's kind of the plan.
We are really obvious and cautious about doing high marketing spending. I think compared to what we see left and right from us, that's still on a very, let's say, sustainable level, which is kind of working towards our sustainable growth, but also profitable growth in the short to midterm.
Just one follow-up question, if I may, on your OTC business. The allergy season seems to be weaker, at least here in Germany. Do you see the same on the ground? How important is that business for your OTC business?
Yeah, these categories, they have a smaller share of our revenues. We don't see a major impact on it.
Okay, thank you.
You're welcome.
The next question comes from Urs Kunz, Research Partners. Please go ahead.
Good morning, all together. Thanks for taking my questions. First question is regarding adjustments. Can you elaborate a little bit? Are there any in 2025 that you already know that are substantial? I see this wording of adjustments falls away in 2026, 2027. Does that mean we won't have any more adjustments? Can we expect that? The next question is on your EBITDA break-even outlook or more or less break-even outlook in 2026.
Does that also imply a reduction of marketing spend of this CHF 95 million that you have in 2025 again? Or is that not part of this CHF 45 million? As I take the midpoint of your expectation of EBITDA in 2025, of this CHF 45 million improvement that you also spend less on marketing. The last question is on your midterm goal of 8% EBITDA. What does midterm exactly mean? Is midterm 2029, 2030? Can you maybe be a little bit more precise on that? Thanks a lot.
Okay, maybe I take this question. Thank you, Urs. Potential adjustments for 2025. And you have spoken that right because we know of some adjustments in 2025. Unfortunately, they run against us in hyphen because the unadjusted EBITDA would be better than the adjusted one. As we mentioned, we intend to sell two non-operational real estate. One was the warehouse in Heerlen, which we successfully did by mid-March and which results in a positive EBITDA contribution of over CHF 3 million that will be adjusted against us, i.e., that will not be shown in the adjusted EBITDA. Then we have a second real estate here in Switzerland where we are very far advanced in negotiations. That would also give an adjustment, positive adjustment on a reported basis, but a negative adjustment on an adjusted basis of a low single-digit million.
Against that, I think there will be maybe one legal case. I think at the end, as of today, and being aware that the year is only three months old or three and a half months old, there could be other adjustments, but nothing that we are aware of at this point of time. You spotted that rightly. We are not talking about adjusted EBITDA in the midterm because I once learned that you can only put in adjusted if you have adjustments or you have to put it in if you have structural adjustments in your EBITDA reporting. DocMorris has no structural adjustments on the EBITDA level. For example, kind of striping out any share-based compensation for management, that all runs into EBITDA.
Therefore, given that I do not know any adjustments which will come in the midterm, I cannot also state the 8% as adjusted. These are clean 8%. If there would be any adjustment, that would then be reported if that would be the case. You ask about marketing. I think that's a good and fair question. I think just to be clear, we have no intention at all to cut marketing. The EBITDA and free cash flow will be achieved with ongoing marketing expenses. We have factored in for 2025 additional CHF 15 million for Oryx. There will be also some additional Oryx marketing in 2026, not a double digit, but a mid single digit amount. Also, OTC will have, in absolute terms, additional marketing spends, but not in relative terms compared to sale.
Therefore, if that would be your implied question, we do not cut down or we do not have to cut down marketing expenses to achieve EBITDA break-even and then going forward, free cash flow break-even, that's all factored in. Incremental marketing expenses for Oryx and ordinary course of business marketing expenses on non-Oryx, meaning OTC and services. Have I missed? Okay, yeah, sorry, your fourth question. How many? When is the endpoint of the midterm guidance? For me, midterm is five years. And since we are in the middle of a year, that's then if you calculate that forward, that will be something between 2029 and 2030. I think that's how I can respond to your question.
Maybe just to clarify, that means in 2026, the marketing will be at least CHF 95 million and the years thereafter, and is that correct?
Yeah, I do not know exactly where you have this CHF 95 million from. It will be significantly higher already in 2025, and then will slightly add up in 2027.
Okay. Okay, thanks a lot.
You're welcome.
Okay, thank you everyone for the Q&A session. I'd now like to hand it back to you, Mr. Hess and Mr. Wüest, for some closing remarks.
Yes, thanks a lot. Thanks for joining the call, taking time for us. We know that you have many other things to do as well in these days. Just to summarize, we are really happy and with some Swiss modesty, also a bit proud that we know banks have in these days underwritten our transaction. We can just reconfirm that we have really a fantastic team, which is very motivated and very much committed to execute this plan now. With that, I wish you a good day and looking forward to meeting you in person in the next days on the roadshow. Thank you very much.