Apotea AB (publ) (V30.F) Earnings Call Transcript & Summary

Hello, and welcome to Apotea's Q4 presentation. We will have a short presentation on the numbers and events in the quarter, followed by Q&A. Today's presenters are Par Svardson, CEO and Co-Founder; and myself, Johan Marild, CFO.

So hello. We have had a good 2025 with a stable growth and a good profitability. But if we look at Q4 isolated, as we mentioned before, the profitability was a little bit weak. So please, Johan, show us the figures.

Yes. We had revenues in the quarter of SEK 1.854 billion and a growth of 7%. We had a weak profitability in the quarter, an EBIT margin of 1.3%. And as we go through the numbers, we will share more details on that in the presentation.

So short quarterly update. During the quarter, we have started to shift focus from internal to external and launched a lot of growth initiatives. We have also successfully ramped up our facility in Varberg. And so now we are actually above 20,000 orders in just 1 day. And we also started to upgrade our e-commerce platform, and the reason for that is to be able to launch a lot of new sales-related initiatives like AI and so on, on our platform. So yes, I look forward to that, but Johan.

Yes, we had -- with the growth of 7% in the quarter, we now have rolling 12 months revenues of SEK 7.2 billion and an adjusted EBIT margin for '25 of 4.2%. Let's take a closer look on the growth in the fourth quarter. The growth was of 7% in the quarter and was impacted by an internal focus during '25, as mentioned, and that's related to launching the new fulfillment center in Varberg and also scaling up that. To the right, you can see our gross margin development, and we had a lower gross margin in Q4 of 24.8%, and the gross margin was impacted by factors related to the fourth quarter such as campaign sales and additional purchasing-related costs, which were partly affected by the ramp-up in Varberg. And Q4 has always been a campaign-intense period with Black Friday. It tends to increase year after year. This year, we had more campaign sales and also lower campaign-related margin. And we had additional purchasing-related costs related to Varberg. And that is related to calibrating the purchases for our new logistics centers and examples of that is that restocking products at a higher price from wholesalers and also having products in stock that is later discounted, which is the case for some of the Rx assortment specific to each month. Profitability was down in Q4 compared to a year ago. As mentioned, adjusted EBIT margin of 1.3%, and it was impacted not only by the lower gross margin, but also increased depreciation. To the right, you can see our operating cost and D&A in percentage of revenue. And as you can see, depreciation increase in percentage of sales close to 1 percentage units in Q4. However, all other operating costs were down, and that was due to our ongoing efficiency work at Apotea related to logistics and elsewhere.

And if we look at 2025, we have had like a transformative year. We started the year with all this AI initiatives that we continued through the year. We've also launched a new hub in South of Stockholm in Ostra, and launched, in the third quarter, our Varberg facility and scaled it up during the fourth quarter. So it's been a lot of work this year with, as Johan said, this internal focus.

Yes. Looking at the full year '25, we had revenues of SEK 7.203 billion and an adjusted EBIT margin of 4.2%. The adjustments in '25 was roughly SEK 6 million in Q4. And in '24, we had SEK 24 million of adjustments, and that was related to the cost associated with the IPO in December '24. We had good growth in '25. We had a growth of 10.1% in '25 and the growth of last year was driven by Rx last year as well as many of the other years in Apotea's history. We saw a strong growth in Rx. Last year, Rx grew by 13.4%. And that growth was due to a strong underlying demand to buy prescription medicines online as well as our work to increase capacity in this area. We now employ more than 200 pharmacists. To the right, you can see our gross margin development, and that was stable in '25 compared to '24. We had a good profitability in '25 and adjusted EBIT margin of 4.2%, and that was well within our financial targets. And we did manage to have this good profitability despite additional costs related to the new fulfillment center in Varberg. To the right, you see our operating cost breakdown in percentage of revenue. And also looking at the full year, you can see that we managed to improve our efficiency. We had strong operating cash flow in '25. However, in Q4 isolated, we had a weaker cash flow, and that was due to the payment of automation-related invoices related to Varberg due in Q4.

And the final payment as well.

Yes, the final payment. So Q4 cash flow related to changes in working capital. As you can see to the right, we had significant investments in '25 and the investments last year of SEK 250 million was mainly related to the new fulfillment center in Varberg. We have now completed that investments. And going forward, we expect significantly lower investments, and these investments going forward will be related to our existing warehouses and our work to continue to improve our efficiency. As mentioned, Q4 cash flow was impacted by changes in net working capital. And as you can see, account payables declined in December compared to September. There are natural variations in the working capital, and they will fluctuate from time to time. Looking at the inventory turnover, we had an inventory turnover of 8.7x, which is high and affected by -- slightly down compared to a year ago, which is also due to the buildup of inventory in Varberg. We have a solid financial position and a high return on capital employed. Return on capital employed of 29.2% in '25, somewhat down from a year ago, and that is due to the increased assets related to the new fulfillment center in Varberg. Looking on the right-hand side of this slide, you can see that we have a net cash position as of December, and that is despite the significant investments in new capacity related to Varberg. So a solid financial position and a solid balance sheet.

Yes. And if we look on our focus ahead, I mean, we will continue to build the pharmacy of tomorrow, but shift the focus, as we said before, from internal to external and start a lot of new growth initiatives. And one example of that is that we have hired Joanna Hummel as a Chief Growth Officer. And she will work with our projects to work with our customer and improve our customer journey. And she will also work to launch a new site in Norway to sell our beauty and health assortment under the brand Apotera.no, and we will deliver these orders from our new facility in Varberg. So that will be very good both for our cost profile and for the customer. And we will also continue to scale up our Varberg facility and work more hours. So we will start working weekends and evenings quite soon.

Yes. As you can see in the report, the Board of Directors proposed a dividend to be resolved at the Annual General Meeting in May. Apotea has a long track record of share dividends. And the proposed dividend is based on the solid financial position of Apotea despite significant investments. Yes. And with that, we are done with the presentation and open up for Q&A.

The next question comes from Johan Fred from SEB.

First one on the sales development throughout the quarter, more specifically. From your earlier release, I interpreted as November had a slow start and that sales in December were weak. Still, you grew sales by 7%, which we should -- or should we interpret this that you saw a large inflow of orders in later November, assuming sort of October was in line with expectations? And could you elaborate on sort of the sales development throughout the quarter, please?

Yes. And I can start to fill in. I mean, we can see from year-to-year that Black Friday is not -- now it's not Black Friday, it's Black Week, and some e-commerce shops have more like Black Month, and our customers are waiting until Black Week or something before they shop. And I mean, that makes it more hard to have a decent gross margin in November. And so people await shopping during Black Friday, Black Week, and they don't shop in the beginning of December. So it's a little bit problematic in Q4, but I mean, it's isolated to Q4.

Yes. Was that an answer, Johan, or any?

Yes, yes. So you received a disproportionate amount of orders in the middle to end of November. Is that correct?

Yes.

Yes. And as mentioned, we have had higher campaign sales share in Q4.

And sort of how much of this volume was shipped from Morgongava versus Varberg during sort of peak season in late November?

Most part was sent from Morgongava due to very large order and a smaller assortment in Varberg because of this fill up. So I mean, that made it cost a little bit higher, because we couldn't really manage to send so many orders from Varberg because of the large number of SKUs in every order.

Okay. Cool. And sort of on the competitive environment in Q4, it was clearly intense, but do you think that the higher promotional activity was specifically related to the Black Week/Christmas period? Or are you seeing a broader sort of consumer softness continuing into Q1 in 2026?

I think it's quite related to Q4.

Okay. Very clear. And finally, on the weaker gross margin. Any chance that you can elaborate on the sort of margin decline by 2.2 percentage points, I believe. How much of this is related to lower product margins from higher campaign pressure, and how much, as you mentioned, relating to a higher fulfillment cost in Morgongava? And also, of course, the additional procurement-related cost in Varberg, as you mentioned?

I would say that there are -- of course, if you have a large assortment, there are 50,000 reasons for the gross margin. But I mean, the 2 main reasons are an increased share of campaign sales and lower campaign margin, and the other is the kind of restocking and the purchasing related costs. And out of those 2, I would say that there are kind of fairly even these 2 factors. Then there are other factors as well, of course, but these are the main factors and mainly related to factors in the fourth quarter.

So those 2 are more prevalent than, say, higher fulfillment costs from you having to ship more volume from Morgongava. Is that correct?

Yes. And I don't see that, necessarily, where we ship the items has an impact on the gross margin per se. We don't have that...

It's more like tuning in. And then if you buy campaign items to one stock and get out of stock and you repurchase. So we have to like work with optimization between the warehouses. And I think we failed a little bit on that.

Yes. So for example, [indiscernible] is that, I mean, if you're out of stock, you haven't done the purchasing properly or good enough, and that's, of course, more complex to do if you have 2 centers to fulfill rather than just one. So if you were kind of low on stock or out of stock, then you kind of may be forced to buy from wholesales at a higher price. And then they also have the kind of -- yes.

And I think we can call it like a start-up cost, because -- I mean, it's not like a structural cost or something. It's more like you have to learn how to do it in a proper way.

Okay. Got it. A final one from me then. You mentioned that you're now starting to ship products to Norway from Varberg? I believe that you previously said that this wasn't possible due to regulations. What has changed there?

We are launching a beauty and health assortment, not the medicine assortment. So it's not a pharmacy, it's more health and beauty.

So our Norwegian subsidiary, Apotera, has a comprehensive pharmacy assortment in Norway. And in addition to this pharmacy assortment, they will also operate Apotera.no and sell beauty and health products shipped from Varberg via Apotera to the Norwegian customer.

Okay. Okay. Got it. So essentially, you're starting a new subsidiary that handles the beauty and the health category?

Yes.

Got it.

The next question comes from Victor Hansen from DNB Carnegie.

Par and Johan, just a bit of a follow-up on some of the previous questions here. Starting with competition, seems to have been very tough in Q4 from what we can read in the market. You mentioned that this impacted your gross margins. And Par, you also mentioned, and you spoke about it here as well, that the gross margin effects are, to a large extent, isolated to Q4, you say. But we know that several pharmacy and beauty competitors have recently built new highly automated fulfillment capacity. So why should the tough competition ease in Q1?

I think we see strong competition going forward as well. And I think it's good for us because -- I mean, we love competition, and I think we will be stronger and more profitable and grow faster with strong competition, because it helps us as a company.

And we always want to have attractive prices, but we don't feel an increased pressure to lower our prices even more or changing that dynamic.

Okay. So you expect less price pressure in Q1 than in Q4?

Yes. And then this Black Week, I mean, everyone has campaign at the same time with very high discounts. So it's more like a phenomenon rather than a competition problem.

Yes. Okay. And the second part of your gross margin weakness you mentioned, the additional procurement-related costs in Varberg. Could you elaborate a bit more on what this means more precisely? And if you could quantify it?

And then if you look at -- if you buy, fill up the warehouse, you have like -- on Rx, you have different prices in different months and they go up and down. And if you buy them in the wrong month, they are much more expensive. So that's one example. Another example, if you buy for a campaign and we ship 50% to Varberg, 50% to Morgongava and we don't deliver 50-50, we need to resupply them maybe at a higher price, or we don't have stock in Morgongava and we need to ship it from Morgongava and then we can't sell it and then we sell something else with a lower margin. So it's a lot of costs like that. And I think it's more, as I said before, a start-up problem, because we learn every day and do it better and better, and this effect goes down.

Yes. Makes sense. And that ties into my third question. So the inventory levels in Varberg, you have complained about it before in Q3 as well. So are you satisfied now with the inventory levels in Varberg, or are you still working to fill it? So can you now deliver L and XL orders from Varberg?

I mean, I think we will probably never be satisfied with the stock level, but we have absolutely done a lot of work since Q4, and we will continue to improve the assortment over time. And we are like tuning it every day a little bit. So we are absolutely working on it.

Yes. But can you deliver extra-large orders from Varberg now? Or is that something for the future still?

Yes, we deliver a lot of extra large orders from Varberg, but we want to deliver even more. And that's why we're now starting to work more hours. So quite soon, we will start working on weekends and evenings in Varberg, and that will help us to be able to deliver much more orders from Varberg, and that will help us absolutely.

And part of the scale-up, in addition to launching more shifts in Varberg, is adding shipping methods and also continue calibrating the assortment to kind of enabling higher share of the orders being fulfilled there.

Perfect. On Rx, so Rx sales growth slowed to 8%, slower than in previous quarters, despite you, during the quarter, increasing the number of pharmacies significantly. You mentioned more than 200 now employed. So what caused this growth slowdown? Were there lack of orders? Or is your Rx setup in Varberg not fully operational yet? Or what's the reason behind that?

I mean, in Varberg, they have now started to work like full-time or something. But I mean, there's still a lot of start-up like small problems. I mean, we need to be really sure that every order is correct and everything. So we need to check everything much more. So I mean, it takes some time to scale up.

Yes. And also, you had a very strong Rx growth in the previous quarter related to the changes in high cost coverage. That could also have some impact in the quarter.

But we see a strong demand on Rx absolutely.

Yes. And we'll continue to increase our capacity this year.

Okay. Could you give any timing schedule for when Rx is more operational in Varberg?

I think it's a little bit better today compared to yesterday. So we like to scale up every day a little bit. So I think it's a continuous process.

Okay. Okay. Final question for me is the easy to grab regulation. Investors are still following this quite closely. So I'm wondering if you could give us an update on the implications for you from this during Q4, and if you have any thoughts on it ahead? Are you seeing any changes in consumer behavior?

No, not really. I mean, it affects us just a little bit. And if we look at our figures, that's not the reason for the profitability in Q4. So small effect, as we mentioned before, but it's very small. So I think it's very bad for our customer, and I don't like it. But for Apotea, it's not a big problem. So it's more for people in rural areas or rural people and so on.

Yes. It's annoying as a customer.

And people really don't like it, but that's another -- but it's not a big problem for us, but it's a problem for people in these rural areas.

Yes.

The next question comes from Daniel Schmidt from Danske Bank.

Yes. Par and Johan, maybe a follow-up from me. We talked a lot about Q4 and what happened. But more from a top line perspective, Par, you already mentioned 3 months ago that you shifted your focus from internal to external, implying that top line growth would pick up. So what went wrong really in Q4? You know that it is a campaign-intensive period, and that has been sort of the trend for many years now. So what do you think went wrong?

Do you mean with the top line or with the profitability?

With the growth ambitions basically, because you also said in Q3 that now is the time to shift focus.

Yes. And this shift takes time. I mean, we have started a lot of initiatives and, I mean, like preparing for the site in Norway for Joanna Hummel for rebuilding our site, AI initiatives and so on. But I think it will take a few quarters. I mean, this year, we will see a change, but you can't really change customer behaviors and a lot of technology and so on in just a few weeks. We need some time.

Okay. Does that mean that you think that growth will be below your target for a couple of quarters?

We have no forecast for that, but I think we will see a significant change, but give us some time, because it takes some time, but we will absolutely focus on it.

Yes. Okay. And I completely understand that Q4 has become very concentrated to a couple of weeks, and that makes it more difficult, I guess, to find your place in the market maybe. But given that, that's been a trend for now a number of years and it's become more and more concentrated, is there any reason to believe that, that behavior would change in any way looking ahead?

I think, I mean, this Black Week will continue to be some kind of problematic for the retail in the coming years as well. I mean, we need to work with it to lower the problems with it. But I mean, the phenomenon is out there and will exist in '26 as well. So I think we need to just adapt it and behave...

And the growth initiatives that we are working on are focusing on improving our customer offering even further. And I mean, it takes time, but it will also have an impact not only when you sell on the normal price, but also in campaign periods. I mean, the growth engine of Apotea has always been to kind of having satisfied customers and returning customers, and they are, over time, purchasing more and more from Apotea.

And I think a lot of these initiatives we have been doing during the autumn has been very, very good for Apotea. And we have a weak profitability, but we have also scaled up the Varberg facility and solved a lot of issues with it. So we are really good prepared with that facility for the coming years. And so I think we had a weak profitability, but also a lot of good initiatives, and we will continue to work with them.

Yes. A year ago, [indiscernible] in Varberg and then launched it this summer. And in Q3, we said that we had 10,000 orders a day fulfilled in Varberg, and now we have a record of roughly 21,000 orders. So I mean, it's a very successful ramp-up.

Yes. No, but I think you're absolutely doing what you can. I just fear that Q4 has become a quarter that's overflooded with products and campaigns, and that doesn't seem to go away. So it's sort of more and more signified by very hard competition, low growth and very low profitability, and it's hard to change that. And then I guess you try to do what you can, and we'll see what happens next Q4.

Yes, you're probably correct. But I mean, if you know something, you can work with it and you can also be best-in-class. And you can have it -- I mean, it's a threat, but also a possibility. So I mean, if you work with it like that, I mean, you can earn a lot from it as well.

Yes. I'm just saying you knew that already this time, and that didn't help, but maybe you're going to be more prepared next year.

We hope so.

The next question comes from Benjamin Wahlstedt from ABG Sundal Collier.

So a bit of a follow-up to start. You mentioned a negative impact from campaigns. Obviously, you've also been very clear in all communication with the market and your customers that you are price leaders and you've also been campaign-driven throughout your history as a company. And I was wondering, is there any specific competitors that are making you push this price leading position even further in the quarter? Or what changed?

I think -- I mean, the fourth quarter last year has been very focused on Black Week. But I think it's more driven from a customer side that they wait -- I mean, they don't shop in the beginning of November and don't in the beginning of December, because they focus more and more on Black Week. So it's more like not competitor driven, more like customer driven.

All right. A bit of a detailed related question as well. Are you using Google automated discounts?

No.

No. Okay. You also talked about working evenings and weekends in Varberg. I will assume this is done in tandem with added scale? Or should we expect sort of lower scale on OpEx near term?

Sorry, I didn't really get the question.

You mentioned adding evening and weekend shifts in Varberg in this presentation. When will this happen? Should we expect any sort of near-term higher costs related to this? Or how should we think about it?

I mean, we try to balance it between Morgongava and Varberg and try to balance it. I mean, we want to deliver more orders from Varberg, because then we can handle the growth in Varberg, and we can also start delivering to Norway from Varberg and we need more hours. So I think it's more like good for our costs and bad for our costs.

All right. I might have missed this. You spoke about your inventory position previously as well. I know that your inventory level is down quarter-over-quarter. This is not seen in previous years. And this in a time where you say you're building inventories in Varberg. How should we understand this?

The inventory stock goes a little bit up and down, and it varies between different quarters. And I mean, it's like 1 day you measure it -- so it goes up and down. But over time, I think 2 warehouses will make this stock a little bit bigger. But with better AI support and so on, you can lower the stock and still be able to deliver. So I think we can have a quite stable stock level going forward. But I mean, it's 2 different -- I mean, 2 warehouses, of course, drives a little bit more stock.

Yes, absolutely. Perhaps a sort of modeling related question. What should we expect in terms of maintenance CapEx now that you're done with Varberg?

We have very little maintenance CapEx, but the CapEx that we have had historically that has not been related to building new capacity has been in the range of, say, SEK 50 million to SEK 70 million, and we expect that pattern to continue and the investments will be related to improve efficiency rather than -- more focus on efficiency rather than building new capacity.

Like filling new workstation for Rx and so on.

But if you just kind of isolate the kind of changing spare parts, it's very, very little.

All right. So SEK 50 million to SEK 70 million per annum going forward?

Yes, something like that. Okay. I think that was the final question. Thank you for taking the time and listen to us, and we wish you a good day.

Thank you very much.

Bye.