Redcare Pharmacy N.V. — Call Transcript 2020

Aug 5, 2020

Q2 2020 EARNINGS CALL. PRESENTATION.

SHOP APOTHEKE EUROPE STEFAN FELTENS, CEO JASPER EENHORST, CFO

06 AUG 2020

TODAY'S PRESENTERS.

STEFAN FELTENS CEO SHOP APOTHEKE EUROPE JASPER EENHORST CFO SHOP APOTHEKE EUROPE

PRESENTING FOR THE FIRST TIME FROM OUR NEW HEADQUARTERS.

TODAY'S AGENDA.

FINANCIAL PERFORMANCE

UPDATE ON BUSINESS AND STRATEGY Q+A

HIGHLIGHTS. Q2 2020.

Accelerated growth driven by excellent execution. Growth of 37% in H1 to EUR 465M; in Q2 growth increased to 42% – fully organic.

Record number of new customers. Active customer base up 1.3M YOY to 5.5M; in Q2 +500,000 customers.

Adj. EBITDA margin 2.7% in Q2 and 2.4% in H1. H1 adj. EBITDA EUR 11.3M YOY up EUR 20.9M; operating cash flow positive EUR 5.8M.

E-Script progressing as planned. Internal preparations on track; gematik reported to be on schedule as well.

Launch of other strategic initiatives in H2. Roll-out same-day delivery, launch of marketplace, expand own brand portfolio.

KEY FINANCIALS. IMPRESSIVE FULLY ORGANIC TOPLINE GROWTH. ACTIVE CUSTOMERS +500,000 in Q2, +1,300,000 YOY.

EXPANSION OF ACTIVE CUSTOMER BASE. PLUS 500,000 IN Q2.

KPIs. STRONG WEB TRAFFIC GROWTH ACCELERATED.

KPIs. SHARE OF REPEAT ORDERS REMAINS HIGH DESPITE RECORD NUMBER OF NEW CUSTOMERS.

KEY FINANCIALS. ADJ. EBITDA FROM EUR -10 M LAST YEAR TO EUR +11 M NOW.

(in millions of euros)	YTD Q2 Last year and this year		H1 Last year	Q3 and this	year
	Q2 2019	Q2 2020	Better/ (Worse)	H1 2019	H1 2020	Better/ (Worse)
Sales	164	233	42%	338.3	464.7	37%
Gross profit margin	21.2%	23.5%	2.3 pp	19.9%	22.5%	2.6 pp
Selling & distribution as percentage of sales	-18.7%	-18.1%	0.6 pp	-19.8%	-17.5%	2.3 pp
Administrative costs (adj.) as percentage of sales	-2.9%	-2.7%	0.2 pp	-2.9%	-2.6%	0.3 pp
Adj. EBITDA	-0.5	6.3	6.9	-9.6	11.3	20.7
Adj. EBITDA margin	-0.3%	2.7%	3.0 pp	-2.8%	2.4%	5.2 pp
EBITDA	-1.3	5.4	6.7	-11.0	9.3	20.3

(Worse)	H1 2019	H1 2020	Better/ (Worse)

Adjustments in H1 2020 of € 2 million are mainly related to the non-cash employee stock option program.

KEY FINANCIALS. GROSS MARGIN UP 2.3PP VS. LAST YEAR.

KEY FINANCIALS. S&D IMPROVED 0.6PP VS. LAST YEAR. STEP UP INVESTMENTS IN GROWTH WITH SCALE EFFECTS STILL VISIBLE.

KEY FINANCIALS. EBITDA: POSITIVE AHEAD OF SCHEDULE.

KEY FINANCIALS. SOUND BALANCE SHEET.

TODAY'S AGENDA.

FINANCIAL PERFORMANCE

UPDATE ON BUSINESS AND STRATEGY Q+A

FROM A PURE E-PHARMACY RETAILER …

… TO A CUSTOMER CENTRIC E-PHARMACY PLATFORM.

CUSTOMER-CENTRIC SERVICES. WHAT'S NEXT?

ROLLOUT IN 2020: ü SAME-DAY DELIVERY.

NEW IN 2020: MARKETPLACE.

NEW IN 2020: ü ONLINE DOCTOR SERVICE.

EXPANSION IN 2020: ü OWN BRANDS.

THE ROAD TO E-RX IN GERMANY. GEMATIK INFRASTRUCURE ON TRACK.

1Rahmenvertrag über die Arzneimittelversorgung according to §300(3) SGB V; 2Arzneimittelabrechnungsvereinbarung according to §300(3) SBG V.

LOOKING FORWARD. LOOKING AHEAD TO H2.

TODAY'S AGENDA.

FINANCIAL PERFORMANCE

UPDATE ON BUSINESS AND STRATEGY Q+A

CONSOLIDATED SEGMENT FINANCIALS.

Segment information H1 2020 – non adjusted and adjusted

DACH	INTERNATIONAL	TOTAL
EUR 1,000	EUR 1,000	EUR 1,000
		464,661
		–360,178
–305,903	–54,275	–360,178
85.211	19.272	104.484
85.211	19.272	104.484
21.8%	26.2%	22.5%
12	2	14
–61,415	–19,839	–81,254
–61,415	–19,839	–81,254
23,808	–565	23.243
23,808	–565	23.243
		–13,948
–7,175	–4,787	–11,962
		9,295
16,633	–5,352	11,281
–4,329	–2,486	–6,815
		2,480
12,304	–7,838	4,466
		–7,601
		–7,601
		–5,120
		–3,135
	391,114 –305,903 –8,859 14,949 10,620	73,547 –54,275 –5,089 –5,654 –8,140

Segment information H1 2019 – non adjusted and adjusted

30.6.2019	DACH	INTERNATIONAL	TOTAL
	EUR 1,000	EUR 1,000	EUR 1,000
Revenue	297,959	40,317	338,276
Cost of sales	–240,739	–30,176	–270,915
Gross profit	57,220	10,141	67,361
% of revenue	19.2%	25.2%	19.9%
Other income	15	2	17
Selling & distribution	–53,503	–13,570	–67,073
Adjusted S&D	–53,503	–13,570	–67,073
Segment EBITDA	3,732	–3,427	305
Adjusted Segment EBITDA	3,732	–3,427	305
Administrative expenses	–7,433	–3,921	–11,354
Adjusted AE	–6,492	–3,425	–9,917
EBITDA	–3,701	–7,348	–11,049
Adjusted EBITDA	–2,760	–6,852	–9,612
Depreciation	–4,749	–2,505	–7,254
EBIT	–8,450	–9,853	–18,303
Adjusted EBIT	–7,509	–9,357	–16,866
Net finance cost and income tax			–3,024
Net loss			–21,327
Adjusted net loss			–19,890

CONSOLIDATED STATEMENT OF PROFIT AND LOSS.

	Period ended 30.6.2020	Period ended 30.6.2019
	EUR 1,000	EUR 1,000
Revenue	464,662	338,276
Cost of sales	–360,178	–270,916
Gross profit	104,484	67,360
Other income	14	16
Selling and distribution	–87,047	–73,239
Administrative expenses	–14,970	–12,442
Result from operations	2,481	–18,304
Finance income	174	78
Finance expenses	–8,085	–3,755
Net finance costs	–7,911	–3,677
Result before tax	–5,430	–21,981
Income tax	310	653
Result after tax	–5,120	–21,328
Attributable to:
Owners of the company	–5,120	–21,328

CONSOLIDATED STATEMENT OF FINANCIAL POSITION. Investments in associates 402 402

	30.6.2020	31.12.2019
	EUR 1,000	EUR 1,000
Assets
Non-current assets
Property, plant and equipment	49,591	13,178
Intangible assets	203,207	199,850
Deferred tax assets	120	120
Other financial assets	1,682	2,500
Investments in equity-accounted joint ventures	1,105	1,105
Investments in associates	402	402
Investments in equity-instruments	10	10
	256,117	217,165
Current assets
Inventories	76,956	56,688
Trade and other receivables	58,090	40,894
Other financial assets	39,478	50,581
Cash and cash equivalents	114,236	62,653
	288,761	210,816
Total assets	544,878	427,981

Total assets	30.6.2020 544,878	31.12.2019 427,981
	EUR 1,000	EUR 1,000
Equity and liabilities Assets
Shareholders' equity Non-current assets
Issued capital and share premium Property, plant and equipment	410,225 49,591	341,192 13,178
Reserves/accumulated losses Intangible assets	–110,901 203,207	–108,429 199,850
Deferred tax assets	299,324 120	232,763 120
Non-current liabilities Other financial assets	1,682	2,500
Deferred tax liability Investments in equity-accounted joint ventures	3,578 1,105	3,905 1,105
Loans and Borrowings Investments in associates	159,457 402	131,512 402
Investments in equity-instruments	163,035 10	135,417 10
Current liabilities	256,117	217,165
Trade and other payables Current assets	55,548	32,004
Loans and Borrowings Inventories	8,911 76,956	7,522 56,688
Amounts due to banks Trade and other receivables	36 58,090	10,167 40,894
Other liabilities Other financial assets	18,023 39,478	10,108 50,581
Cash and cash equivalents	82,519 114,236	59,801 62,653
Total equity and liabilities	288,761 544,878	210,816 427,981

CONSOLIDATED STATEMENT OF CASH FLOWS.

	Period ended 30.6.2020	Period ended 30.6.2019
	EUR 1,000	EUR 1,000
Cash flow from operating activities
Result from operations	2,481	–18,304
Adjustments for: – Depreciation and amortisation of non-current assets	6,841	7,254
– Corporate income tax	236	–5
– Net foreign exchange differences		0
– Share-based payment charge for the period	1,186	1,303
Operating result adjusted for depreciation and amortisation, taxes and provisions	10,744	–9,751
Movements in working capital
– (Increase)/decrease in trade and other receivables	–5,745	–4,008
– (Increase)/decrease in inventory	–20,268	579
– (Increase)/decrease in trade and other payables	21,075	17,550
Working capital movement	–4,938	14,120
Net cash (used in)/generated by operating activities	5,805	4,369
Cash flow from investing activities
Investment for property, plant and equipment	–9,791	–1,154
Investment for intangible assets	–7,921	–7,017
Investment for other financial assets	10,626	–15,588
Investment for acquisitions	0	0
Acquisition of subsidiary, net of cash acquired	0	0
Net cash (used in)/generated by investing activities	-7,086	–23,759

Investment for acquisitions	0	0
Acquisition of subsidiary, net of cash acquired	Period ended 0	Period ended 0
	30.6.2020	30.6.2019
Net cash (used in)/generated by investing activities	-7,086 EUR 1,000	–23,759 EUR 1,000
Cash flow from operating activities Cash flow from financing activities
Result from operations Interest received	2,481 174	–18,304 78
Adjustments for: Interest paid	–5,131	–2,480
– Depreciation and amortisation of non-current assets Payment of earn-out obligations Farmaline	6,841 0	7,254 –1,100
– Corporate income tax Capital increase	236 63,381	–5 49,147
– Net foreign exchange differences Capital increase exercised ESOP	–4,340	0 0
– Share-based payment charge for the period Issue convertible bond	1,186 0	1,303 58,592
Operating result adjusted for depreciation Issue other long-term liability	–18	–18
and amortisation, taxes and provisions Cash-out lease payments	10,744 –1,203	–9,751 –1,047
Movements in working capital Net cash (used in)/generated by financing activities – (Increase)/decrease in trade and other receivables	52,863 –5,745	103,172 –4,008
– (Increase)/decrease in inventory Net increase/(decrease) in cash and cash equivalents – (Increase)/decrease in trade and other payables	–20,268 51,583 21,075	579 83,781 17,550
Working capital movement Cash and cash equivalents at the beginning of the period	–4,938 62,653	14,120 24,338
Net cash (used in)/generated by operating activities Cash and cash equivalents at the end of the period	5,805 114,236	4,369 108,119

SHOP APOTHEKE EUROPE BECAME A UN GLOBAL COMPACT SIGNATORY. STEPS TAKEN.

10 PRINCIPLES ON HUMAN RIGHTS, LABOUR, ENVIRONMENT AND ANTI-CORRUPTION.