Earnings call: DocMorris AG reports solid H1 2024 performance, eyes eRx growth

In their latest earnings call, DocMorris AG presented their financial results for the first half of 2024. The company reported achieving breakeven in their non-eRx business and a solid cash position, despite challenges in the Rx sector due to the transition from paper prescriptions (pRx) to electronic prescriptions (eRx).

The launch of CardLink in April spurred significant growth in eRx, with a notable rise in new eRx customers. TeleClinic, their telemedicine service, reached breakeven in the last quarter of 2023 and doubled its sales in the first half of 2024.

DocMorris expressed confidence in the future of eRx in Germany and their digital health strategy, which includes a focus on customer acquisition and retention. The company is on track for profitable growth and anticipates a positive cash flow through strategic investments in eRx, OTC, and TeleClinic, in line with Germany’s healthcare digitalization.

Key Takeaways

• Achieved breakeven in non-eRx business with a solid balance sheet, reporting a cash position of CHF195 million.
• Strong growth in eRx customers following the CardLink launch in April.
• TeleClinic doubled sales in H1 2024 and achieved breakeven in Q4 2023.
• Processed over 500,000 eRx, capturing significant market share.
• Committed to customer acquisition and retention, especially in eRx.
• Successful marketing campaign with the Gesundbergs.
• Exceeded sustainability goals and achieved EBITDA breakeven in the base business.
• OTC business in Germany drove revenue growth, while Rx revenue decreased due to paper prescription decline in Q1.
• Expects external revenue growth of 5% to 10% in 2024, with adjusted EBITDA around -CHF50 million.
• Plans for new customer acquisition in prescription drugs, targeting chronic patients.
• Anticipates free cash flow breakeven 12 to 18 months after EBITDA breakeven.
• Marcel Ziwica’s last conference call before leaving the company.

Company Outlook

• Positive outlook on achieving profitable growth and positive cash flow by scaling eRx and leveraging OTC and TeleClinic businesses.
• Expects external revenue growth between 5% to 10% in 2024.
• Aims for an EBITDA margin of 8% in the mid to long term, with online penetration of 10% in the market.
• Free cash flow breakeven expected 12 to 18 months after EBITDA breakeven.
• Anticipates gradual improvement in Rx business over the coming years.

Bearish Highlights

• Rx business contribution reduced due to transition from pRx to eRx.
• Decline in Rx revenue due to a decrease in paper prescriptions in Q1.
• Adjusted EBITDA projected around -CHF50 million due to investments in acquiring new eRx customers.

Bullish Highlights

• Strong eRx growth and significant increase in new eRx customers.
• TeleClinic’s successful integration into the public health system and growth driven by eSick note and eRx.
• Ability (OTC:) to pass on material and logistics cost inflation to sales prices.

Misses

• Assumptions for Rx business affected by the transition from pRx to eRx.
• Additional investments in Rx business not expected to result in immediate sales contribution in H2.

Q&A highlights

• Company is technically ready for the expected approval of a law for repeat prescriptions.
• Focused on onboarding more doctors for TeleClinic.
• Confidence in acquiring new customers and investing in marketing without commenting on competitors’ performance.
• Acknowledged the presence of paper prescriptions, especially for privately insured patients.
• Expressed confidence in the positive contribution of the Rx business based on current KPIs.
• Farewell to Marcel Ziwica, recognizing his long service with the company.

DocMorris AG (ticker not provided), with its strategic focus on eRx and telemedicine, alongside its commitment to customer acquisition and sustainability goals, continues to adapt to the evolving digital healthcare landscape in Germany. The company’s progress and strategic plans underscore its resilience and adaptability in a challenging market.

Full transcript – None (ZRSEF) Q2 2024:

Operator: Hello, ladies and gentlemen, and welcome to the DocMorris AG conference call regarding the half year results 2024. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. [Operator Instructions]. Let me now turn the floor over to your host, Walter Hess (NYSE:), CEO of DocMorris.

Marcel Ziwica: Yeah. Thank you very much, and welcome, everybody, to our H1 2024 conference call. We are pleased to inform you about our half year 2024 results and give insights in the development of our Rx business. Today with me is Marcel, our Group CFO. I start the business update with an introduction of where we stand. The indicative outlook of March consisted of two components, the OTC and the Rx business. We are achieving the plans for the OTC business in terms of growth and breakeven. The assumptions for the Rx business were indicative as nobody could foresee how eRx develops this year. The first half year was coined by two completely different quarters, a challenging one before CardLink was introduced in the quarter with encouraging growth the months following the launch of CardLink. The speed of the transition from pRx to eRx went faster than anybody could expect. Consequently, a high number of our existing pRx customers were not able to redeem their prescriptions anymore with us until CardLink went live mid of April. Missing the first four months leads to a relevant reduction of contribution due to cohort dynamics of new Rx customers ordering four to five times per year. CardLink itself is a great success. With innovation coming from the DocMorris team, finally opened us and others, the door to the e-script market and was the starting point for strong eRx growth. Besides shifting OTC to eRx customers, the main driver for eRx growth is new eRx customers. Since the start of CardLink, we have strongly increased them. And for sure, this is not the endpoint. We know how to further increase them and therefore, are going to invest additionally in eRx customer acquisition. eRx is a process. We are just at the beginning of it on the base of breakeven with the non-eRx business and a strong start with eRx since CardLink is available. Let’s now move to Slide number 4 with our key messages and highlights. Accelerated by CardLink, Rx sales grew strongly since April after a drop into Q1. In July, total Rx sales grew by 6% year-over-year and compared with an average month in Q1 increase is 36%. The new customers grew 4 times compared to last year. On our path to profitability, achieving breakeven with the business excluding eRx was a crucial milestone. By further underlying improvements of CHF14 million year-over-year and more than CHF90 million in total, we now have achieved this target. TeleClinic continues to be a highlight. In Q4 last year, TeleClinic achieved breakeven for the first time. This positive development continues quarter-by-quarter with a doubling of sales and positive EBITDA contribution in H1. And finally, by end of H1, we show a solid balance sheet with a cash position of CHF195 million. After achieving and receiving the full earnout of CHF47 million from the sale of the Swiss business, we now also completed the sale of the property at the price of CHF26 million. Let’s move to Slide number 5 now. We are right at the very beginning of a long-term journey with eRx in Germany. Our focus during the last two years was on consolidating brands with DocMorris as the lead and eRx brand, integrating and closing locations, reducing complexity and cost with the result of achieving breakeven with the base business in H1. Taking in consideration the given framework conditions from the past, the start with eRx is strong and encouraging. With the launch of CardLink mid of April, we entered in a completely new phase. We started with testing and learning extensively with the aim to find out which is the most effective way to maximize the transfer of existing paper Rx and OTC customers to new eRx customers and to maximize acquisition and retention of new eRx customers. The assumptions regarding the attractiveness of the eRx unit economics are more than confirmed already now. By scaling eRx and bridging on the profitable OTC and EU as well as the accretive TeleClinic business, we are going to reach profitability — profitable growth and positive cash flow. Digitalization in Germany starts with lawmaking. The digital law and health data usage law came into force in H1 and the law to strengthen care shall come into force by end of this year. These laws have paved the path for Chronic Care, including eRx, the repeat script telemedicine and many more. The next groundbreaking innovation will be the adjustment of doctors’ remuneration. Planned from January 2025, it will motivate doctors to use the repeat script for the care of chronically ill patients. The impact of these exciting developments starts to become visible at DocMorris. We have successfully processed more than 500,000 eRx already. This leads to a significant eRx market share of 0.52% in volume and increasing market share of 0.37% in value in July. This is good news as both market shares are continuously growing month by month. Since the launch of CardLink in April, we finally were able to start promoting and offering a highly convenient way of redeeming e-scripts digitally and easily. In combination with keeping our promise of next-day delivery, for orders placed by 8 p.m. close to 100%, we get very positive customer feedback and reviews in all the portals. To use CardLink, app downloads are required. On the right-hand side, you see a good example of testing and learning before spending money. From the moment on CardLink was becoming a reality, we successfully started to accelerate our activities to push at downloads and quadrupled them in July against previous year. After the renewed Rx bonus spend in 2021, we were able to keep a relevant number of customers using paper prescription ’til end of 2023. A high share of them with public insurances called GKV. With the fast change of the system to eRx or GKV from December to January, many of our loyal customers were not able to get the paper Rx from Doctors anymore and therefore, were forced to see a local pharmacy. Only with the start of CardLink, have we been able to address these customers again. All in all, meanwhile, we regained and shifted more than 85% of them. Together with the high growth rate of new customers, we could more than double eRx sales since January and get back to year-over-year growth with Rx in July, what we will see on Slide number 9. Since the start of CardLink, we achieved the monthly growth of Rx revenues and new eRx customers. The revenue of July is 36% higher than the average month in Q1 2024 which is significant compared to the start of eRx in January. Total Rx sales grew 6% in July year-over-year. Most important and very promising is the development of new customers. Compared to previous year, in July, we gained 4 times as many new Rx customers with a very strong acceleration since April. The high attractiveness of eRx customers has been more than confirmed after a few months already. The development of the customer acquisition costs and the key KPIs of new customers with increasing profitability each year show that these customers are profitable in less than 18 months. Even more encouraging are the indications of patients using repeat scripts with up to 3 times higher revenues. Consequently, we are very confident that every euro spent in a new customer is well invested. As it is an investment in growth with a positive contribution in the second year already. An important pillar of this pleasing development is the marketing campaign with the Gesundbergs. Through the digital channels, we could realize more than 900 million ad impressions and improve all relevant KPIs such as a significant reduction of the CPI, the cost per app installed. The TV campaign has a reach of more than 1.4 billion with benchmarks showing that also the TV campaign performs very well in all main KPIs. After a first phase of telling the market, to ask the doctor for a print out of the e-script which was actually contradictory but necessary, in the second phase, we focused on extensive testing and learning. One of the test initiatives was called local bus. We tested various marketing and communication formats in three cities in Germany to find out which ones were most effective in promoting our offering and gaining new customers. Based on the findings from the last four months and the various tests, we have now started to roll out further initiatives and activities to accelerate the acquisition of new eRx customers in H2. Let’s now switch to another strategic pillar of our digital health ecosystem. The importance of Telemedicine in general and TeleClinic in particular, is continuously increasing. With the law to strengthen care, telemedicine becomes an important pillar of health care in Germany. For us, TeleClinic is a strategic element of our digital health ecosystem, offering health in one click to customers and patients. Comparable to the pharmacy market, the total market for medical consultations is worth EUR50 billion. And in this market, the current market penetration of telemedicine is less than 1%. By wining several large tenders with well-known strategic partners, TeleClinic will double its revenue exceeding EUR10 million in 2024, at highly attractive gross and strong EBITDA margins with similar growth expected in 2025 and beyond. Amongst telemedicine platforms, TeleClinic is leading by far in all respects. Even by zooming into the market of video consultations, TeleClinic is the absolute market leader with more than 30% share. Due to high entry barriers, such as the full integration into the public health care system in Germany, the very high user satisfaction and the deep network integration with more than 65 ecosystem partners, TeleClinic has established a unique and excellent market position in a market that is only just beginning to wake up. Let me conclude the first part with an update on our sustainability activities on Slide number 14. Again, we could exceed the ambitious targets by achieving most of our annual goals already in H1. Most noteworthy are the new services for HIV patients and kidney health in the area of healthier people as well as the further CO2 reduction in the segment Germany, saving 75% of Scope 1 and 2 emissions. And with this, I would like to hand over to Marcel now.

Marcel Ziwica: Thank you, Walter, and welcome also from my side. The start of electronic prescription and the promising development with CardLink in Germany has obviously a relevant impact on the financial statements for H1 2024, which I will point out in the following slides. In addition, I will outline the progress of the business towards profitability. We have been presenting the EBITDA development in this form for more than two years now. Our aim is to show the development of the business over a longer period in a consistent and comprehensible way. As you can see, we have again improved our EBITDA in the base business by CHF7 million compared to the previous half year, resulting from further efficiency improvements in logistics, streamlining of the organization and ecosystem growth, especially at TeleClinic. The negative result in H1 2024 consists of additional eRx customer acquisition of EUR30 million and other eRx costs for marketing and pharmaceutical staff development for CardLink app improvement or chronic care services. That means that our target of EBITDA breakeven in the base business has been achieved. Walter has already explained that now is the right time for targeted new customer acquisition for prescription drugs and in particular for chronic patients. This, in the short term, an investment that pays off and will have a positive contribution from next year on. I would also like to emphasize that a strong cost and result awareness is firmly anchored in the entire organization and will continue to be a key success factor in the future. External sales in local currency increased by 8.4% compared to the previous year. The growth was driven by the OTC business in Germany and the continuous focus on profitable customer base. Whereas the Rx revenue decreased by 10.6% due to the paper prescription decline in Q1. Since mid-April, the Rx business has been growing on the basis of the CardLink solution. Gross margin is stable at 21.6%. The drop in pRx revenues compensate margin improvements of the OTC business. The negative EBITDA in H1 2024 consists as explained on the previous slide of additional eRx customer acquisition expenses and other eRx costs. As usual, we also showed the breakdown into the geographical segments. The German figures I have already commented with the group figures. In Europe, both revenue growth from EUR28 million to EUR33 million and improved EBITDA were achieved in the first half of the year. The turnaround was thus successfully implemented despite the persisting competitive intensity. The highlight of our KPI chart is the continued growth of active customers to 10 million. This figure, together with the stable and sustainable development of basket size and order frequency makes us very confident that sales growth will continue. Small reduction, you can see in basket size, order frequency and in the repeat order rate in H1 ’24 is related to the higher number of new customers. Because repeat customers always have higher values, this is in line with our expectations. Finally, the site visits at 195 million in the last 12 months has also increased. In general, site visits will be less relevant as our app will be increasingly used for CardLink. In summary, a steady and positive development that supports the realization of our goals. On Slide 20, we see our P&L compared to the previous year period. We achieved an increase in revenues and with a stable gross margin of 21.6% and a 7% increase in gross profit. On the cost side, we reduced personnel expenses significantly by CHF8 million. This is mainly based on a further increase in efficiency in the logistics process and reduction of indirect costs. Other operating income and expenses also improved by CHF2 million. Distribution expenses increased because of the direct dependency on the number of parcels delivered. And marketing expenses have been deliberately increased mainly for stronger new customer acquisition. Despite this marketing increase of CHF13 million, EBITDA improved slightly compared to the previous years period. We have only minor adjustments of EBITDA in H1 ’24 and a positive impact from the financial result due to currency exchange rates. Let’s conclude the financial update with the group balance sheet. The cash position, including current financial assets increased in H1 ’24 to a comfortable level of CHF195 million. In addition, not included in these figures, we sold the nonoperational property of the former Swiss business in August with a cash inflow of CHF26 million and a book profit of CHF13 million. The debt maturity profile has been significantly improved with the issue of new convertible bond and the simultaneous repurchase of the existing one. The new duration is until 2029. Net working capital normalized with an improvement by CHF20 million versus December 2023 due to inventory reduction and increase of payables. As a result, the equity ratio remains at a solid level of 43.7%. In conclusion, DocMorris is ready for the growth in the prescription business that finally has started in the first and the second quarter of 2024. With that, I hand back to Walter for the outlook.

Walter Hess: Thank you, Marcel. Let me summarize the key takeaways before getting to the outlook. CardLink is a great success from day one. Since then, app downloads, Rx sales and new Rx customers are growing significantly. The eRx unit economics and key KPIs are even better than expected. And consequently, eRx is the proven driver of profitable growth. It is a unique strategic opportunity to invest in valuable new eRx customers with payback less than 18 months. And again, we are very confident that every euro spent in a new customer is really well invested. The window of opportunity is open right now, which is the main reason for adopting the outlook on the next slide. The external revenue in 2024 is now expected to be between 5% to 10% due to the pRx drop as a result of the limited market access and delay until CardLink in April. The adjusted EBITDA to be around minus CHF50 million due to the deliberate investment in growth with new eRx customers. We were further able to optimize cash by reducing CapEx to around CHF30 million this year. And with this, we are looking forward now to the Q&A section of today’s call.

Operator: [Operator Instructions]. And the first question comes from Urs Kunz, Research Partners. Please go ahead.

Urs Kunz: Good morning, gentlemen. I’m still a little bit puzzled about the new outlook of the minus CHF15 million EBITDA. If I get it right, I got it like that, that the minus CHF35 million that you had on the lower end of your previous guidance, was kind of the lowest that you should be able to. Does that imply that you would do more marketing in your — than you — what you projected before in full year? So to that point, what is your marketing budget for 2024, maybe also an outlook for 2025. And then my second question is on your outlook on the sales. If I implied correctly, the 5% to 10%. If I look at the OTC still in the high single-digit growth rates and your other business is also growing quite enormous. That implies an Rx compared to the year before from minus 15% to plus 15%. Am I correct in that — and don’t think especially on the lower end, your outlook for the growth — for the whole growth for DocMorris is not too low? And last question depends on your longer-term outlook, EBITDA margin of 8%. And then I guess it still implies an Rx 10% online with half of the market going to your sales. And what implies that to kind of midterm, I was in the — before I thought it was 2026 to 2028, do you want to reach this target. Is that still correct? Thanks.

Marcel Ziwica: Thank you for your questions. Maybe just starting with the last one. The 8% EBITDA margin target is for the mid to long term, meaning three to five years and has not changed, It’s still 10% online penetration is based — or is the basis for this assumption and outlook. Then the first question of the EBITDA of minus CHF50 million. Let me remind you of the logic for the indication in March this year. Basis was the breakeven in our base business. On top, we communicated that we plan to invest in incremental eRx marketing CHF20 million to CHF30 million. And we have some eRx costs, like I have mentioned for pharmaceutical marketing staff, chronic care service and so on. This was the indication in March. What we have seen now is that our KPIs have confirmed or even exceeded our expectation. And we have decided to invest CHF10 million to CHF15 million additional marketing to invest in new Rx customers. And this is, for this year, is an investment. So only the negative impact but will contribute to our EBITDA from next year on. On the sales side, our OTC growth already March and now confirmed is in the — more in the mid- to high single-digit percentage. In the second half, we have a strong comparison from the previous year. So second half growth on OTC will be lower than in the first half. On the other side, the opposite holds true for the Rx growth. We have the minus 10% in the first half. And in the second half, we will go but it’s still not easy to predict. So we have to range between 5% and 10% as the new guidance for the full year.

Urs Kunz: Maybe just to be — to know exactly, marketing budget now is more in the range of CHF80 million to CHF85 million this year?

Marcel Ziwica: For the eRx, we have the CHF20 million to CHF30 million, and there we are at the lower end, plus the CHF10 million to CHF15 million. So for eRx, it’s more towards CHF45 million to CHF50 million. And last year was CHF50 million in total.

Urs Kunz: Do you expect that the marketing budget to stay on the high level in 2025?

Marcel Ziwica: I mean we have not decided. We do not have the budget for next year, so we cannot give a guidance on that. But what is the clear assumption is that on a percentage of sales, marketing will decline next year.

Urs Kunz: And maybe the really last question. In 2025, you expect to have a total EBITDA breakeven that you reach that’s somewhere in the slide?

Marcel Ziwica: As said, we cannot give the guidance for 2025. We expect to have a positive impact from the base business of the OTC goals but also the TeleClinic business. On the other hand, it depends on the ramp-up on the eRx sales. Just remember, every additional CHF100 million of sales in the eRx business will lead to CHF14 million additional contribution. So it really depends on this ramp up. And yes, we cannot give the guidance at this point in time.

Urs Kunz: Okay. Thanks a lot.

Operator: The next question comes from Jan Koch, Deutsche Bank. Please go ahead.

Jan Koch: Good morning. Thanks for taking my questions. I also have three, please. First of all, could you help us to better understand why the additional investments in Rx in H2 are not expected to result in additional sales contribution in H2? And then secondly, when do you expect your Rx business to meaningfully pick up speed? Or do you just expect a gradual improvement over the coming years? And then finally, one question on the repeat prescriptions. Is there a time line for the expected cabinet and parliament approval? And when do you expect to be technically ready to process those prescriptions automatically?

Walter Hess: Yeah. Thank you, Jan. I will give an answer on one and three. So the additional investment translated into sales. So the cohort dynamic of new customers ordering afterwards four to five times. So the first order in general has a lower average order value. And as we are already in August this year, for most of the customers, we will just get one order with a lower average order value this year, but then the four to five orders next year. So that’s why the impact of the investment in the first year due to the cohort logic is lower on sales, yeah, than the money you invest. And third one regarding the repeat script. So the lawmaking process is even advanced for the repeat script corresponding law. And we assume that it will be went through by end of the year because the system plans to start first of January with the new remuneration for doctors. So everybody is preparing and that’s why the law is moving fast. On our side, we already now have in place a service for subscription for Rx subscription, which now we are expanding to the future repeat script process. And with that, yes, we will be fully ready the day the remuneration system will change for the doctors.

Marcel Ziwica: Jan, maybe to add on the second question about the ramp-up and the scaling of the eRx business in the future. As Walter explained, it’s always very important to acquire the new customers and the first order is normally in value below the repeat orders. So it’s all about then to repeat orders. And as you know, it’s about chronically ill patients. And there, we have very high loyalty and carryover rates. So out of the cohort perspective, we have carryover rates of roughly 100% in terms of sales. And that means in the future, every new customers will contribute and accelerate growth. And this is the logic why we are very convinced that now is the time to acquire new customers and invest more into marketing.

Jan Koch: Understood. Very helpful. One follow-up question, if I may. What are your expectations for your free cash flow in H2 and when do you expect to achieve free cash flow breakeven?

Marcel Ziwica: On free cash flow for H2. I mean you can do the metrics in terms of EBITDA. And we also gave the guidance about our CapEx. So it’s an easy calculation. In terms of guidance of free cash flow, I can confirm that we expect to achieve free cash flow about 12 to 18 months after achieving breakeven on EBITDA for the full company.

Jan Koch: Great. Thank you.

Operator: The next question comes from Christopher Johnen, HSBC. Please go ahead.

Christopher Johnen: Yes, good morning. Thanks for taking my questions. First one, coming back to the guidance. So there is some discussion around the performance and the need for investment being opportunistic versus reactive. So I get your point on the customer lifetime value and you being happy with your KPIs and unit economics and seeing really the value add from adding more customers. But there’s still a question about how much of this is defensive because your closest peer seems to be doing very well too. So I guess the question is I’m not sure to what extent you can help with that is how do you think your current performance with respect to market shares and, let’s say, the initial take-up. How do you see that compared to your closest competitor, especially with respect to stepping up marketing. As some might say at the beginning of the year when you gave the range, sort of 35% was seen as kind of the worst the highest level of marketing implied that you’d be willing to spend. So I’m just trying to understand if you have a view on that topic. And then the second question, a shorter one, just with respect to the strategy at TeleClinic, how are you thinking about that? It seems to be growing extremely well, but I think you’re not exactly following an aggressive approach with respect to promotion. Is that something that could change maybe next year? I mean, how do you balance that growth versus profitability and sort of accelerating that business?

Walter Hess: Yeah. Thank you, Christopher. Maybe the first question. Well, we do not comment on competitors’ performance, of course. What we can say is our approach was really to test and learn in order to optimize the marketing spending. And this is what we have done in the last few months. And as we have shown, since CardLink has been introduced, app downloads, Rx sales, new Rx customers are growing significantly. And it’s not that we are happy, but we are really confident that investing right now into the new customers based on the learning and based on what we see on all main KPIs beat the retention rate, as Marcel just outlined or the — the CPI, the average outer value, et cetera. It just makes us very confident to invest now additionally, in order to gain all the contributions within less than 18 months on every customer. So these chronic patients, it’s a unique kind of customer, it’s not comparable with OTC customers at all. And that’s why it makes completely sense, and that’s why we have decided to do so. On TeleClinic, yes, so TeleClinic is really developing very well. Also, as I outlined, thanks to the lawmaking in Germany, which more and more develops in the right direction and supports all the digital services and offerings. And TeleClinic is growing also because they are really, meanwhile, the only platform available. So they partner with the strategic companies, as you can see on the slide we have shown before. And with that growth by itself is already given and triggered. So the main thing there is getting more and more doctors onboarded. Because the demand from the patient side is already there and is increasing due to the behavior of everybody naturally. Does this answer your question?

Christopher Johnen: Yeah. It does, thank you.

Operator: The next question comes from Gian Marco Werro, Zurcher KB. Please go ahead. Your line is open.

Gian Marco Werro: Good morning, gentlemen. Two questions from my side. Also on TeleClinic as many questions have been already answered. So first question is you mentioned that you see also a good contribution EBITDA perspective in TeleClinic. Can you at least roughly quantify also what you expect there for the end of this year on an EBITDA level? And then second question is also the growth dynamic here in TeleClinic again. What are the key drivers at the moment of the strong growth? Is it also mostly related to the eSick note still? Or are there some other good drivers, some trends that are really playing into the cards of TeleClinic?

Marcel Ziwica: Yes. On the first one, I mean, we announced that we expect sales of TeleClinic to exceed the CHF10 million. And because it’s a take rate business, we have double-digit EBITDA margin, double-digit percentage. And so it’s a low single-digit million amount that will contribute to EBITDA this year. And as also said, we expect similar growth for the future.

Walter Hess: And on the growth dynamic, Gian Marco. Yeah, it’s the eSick note you mentioned, but mainly now is also eRx that triggers more demand for telemedicine and for TeleClinic and the fact that the platform is part of the public health system. So it’s not only for private insured people, but it’s part of the public health system. And all of that help to push this growth dynamic forward.

Gian Marco Werro: Thank you.

Operator: The next question comes from Olivier Calvet, UBS. Please go ahead.

Olivier Calvet: Good morning. Jumping in for Sebastian here. Three questions. Firstly, you wrote the volume-based market share of the prescription business, growing continuously and already stood at 0.52% in July. How is that share looking when considering sales-based market share related to the overall Rx market? So that’s the first one. Secondly, just wondering if you could share your thoughts why your paper script are again seeming to grow in July? Why are they not coming down more? Are those scripts from privately insured patients or something else? And thirdly, are you confident that you’ll be able to reach your operated EBITDA breakeven and long-term targets even if the Rx gross margin comes in lower than you would expect?

Walter Hess: Thank you, Olivier. Let me take the first two. So the volume-based market share at 0.52%. We also mentioned the value-based share for all the Rx, which is 0.37%. So we mentioned both. And the difference in between comes from average order values and product mix. That’s the reason behind. And on the pRx again, growing in July, so are reducing, you mentioned reducing in July. With CardLink, we now have the tool on hand at the service on hand to address the pRx customers again. In the first quarter, we didn’t have — we had to ask them to go to the doctor and ask doctor to print out an e-script, which is a strange anyway. And with CardLink, we have now the possibility. And so we can convince and motivate them to use CardLink and to redeem their prescriptions with electronic prescriptions. And that’s why we could stabilize the PKV — the GKV part.

Olivier Calvet: Sorry, just to clarify, maybe just to clarify the second question. because on Slide 8, we can see this as sort of — it seems like the paper Rx revenue is relatively resilient or even nudging up a little bit from June to July, is there a reason for that?

Walter Hess: Okay. You referred to that. Sorry, then I misunderstood you. Yes. So there is now also a market share or a share of privately insured people, and there will always remain a certain number of paper prescription for certain types of medication, but also some doctors still do paper prescriptions as you can see on the dashboard of Gematik. So they are at roughly 80% of all prescriptions being redeemed electronically, which means that there is still a remaining part with paper prescriptions.

Olivier Calvet: Okay, thanks.

Marcel Ziwica: And on the margin of the electronic prescription there, we are very convinced that this will be a positive contribution to the company. And this is based on our actual KPIs. And as I said, they exceed our expectation. So this business for us, it’s clear that it’s very profitable. And just to remember, we steer also our marketing investments in terms of customer acquisition costs based on payback times. And so we, of course, we’ll adjust that day by day, how we spend our marketing and calculate that it really pays off.

Olivier Calvet: Okay. Thank you very much.

Walter Hess: Thank you.

Operator: [Operator Instructions]. And the next question comes from Yannik Siering, Stifel. Please go ahead.

Yannik Siering: Thank you. Good morning. Just one question left side and that is on your revised outlook. You mentioned material and logistics cost inflation as a headwind and also Rx medication shortages. Could you elaborate a little bit on the drivers and how this has changed compared to March? And maybe also on the shortage, how significant this is and, yes, if this — to what extent it keeps you from growing more dynamically? Thank you.

Marcel Ziwica: There is no change to the previous announcement. It’s just that we show what are the headwinds, what are the tailwinds. And of course, we do have inflation on several cost topics. But on the other hand, we are also able to pass this towards our sales prices. So there are no issue or no — or only a minimal impact what we see from this chart.

Yannik Siering: Okay. Thank you.

Operator: Okay. So as there are no further questions at this point, I’d like to hand it back to the speakers for some closing remarks.

Walter Hess: Yeah. Okay. Thank you. So before coming to the end of this call, I would like to thank Marcel personally very much because this was his last conference call for analysts and media at DocMorris. We are grateful for his almost 25 years of dedicated service. Growing DocMorris from a small company through IPO until now. For me personally, Marcel was a great support and helped since I’ve taken over the CEO functions about two years ago. I wish him all the best for the future and hope that the most challenging questions in the future will not come from him as an investor in DocMorris. And with this, we come to the end. Thank you very much for your time and your attention.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.