DocMorris AG (DOCM) Earnings Call Transcript & Summary

Good morning, and welcome to Zur Rose. Let me please start with a brief glance on the political situation with a horrible war just in front of our door, which adversely makes me really concerned. Humanitarian suffering and the limited -- especially the limited ability to influence the situation are really hard to endure. So with that background, we do what we can. We help in all ways possible, especially with medication and other needed material, but quite significantly. Today actually is the last time that I will be opening this conference as I stand for election as Chairman of the Board, and Walter Hess will take over by the 1st of May. Walter is really the perfect fit for this position with long-standing experience within Zur Rose and especially excellent management skills. I'm personally fully convinced he will continue and further accelerate the success story together with the great management team and the real story starts right now with the opening of the EUR 50 billion Rx market in Germany via the introduction of the electronic prescription, we will speak furthermore on that topic. Today, you will also see Marcel, who will present our numbers and an outlook to you in just a minute. 2021 ended with a low light when the German government decided to postpone the mandatory introduction of the electronic prescription. This was really a political swing that caught us fully unexpected. We invested heavily in the eRx readiness, which is reflected also in our numbers. We were by the end of last year and now still are fully ready and geared up to drive electronic prescriptions on the first day onwards. Nevertheless, we achieved great things in 2021. New record in brand awareness of DocMorris as a result of our marketing campaign, the new DocMorris app with great functions and excellent user experience. Actually, they achieved already 1.3 million downloads we are really proud of. And we also entered 2 strategic cooperations with leading farm companies, just to mention a few highlights. Yesterday, we learned that DocMorris and Medpex covered the first 2 positions in the latest evaluation of [indiscernible] test, which we see as a proof of our strong customer centricity. In a nutshell, we remain fully -- are fully convinced about electronic prescription as key growth and profitability driver for the future given the latest developments. Extended test phase proves electronic prescriptions work and no technical problems occur with the infrastructure. Also on the regulatory side, despite all negative [indiscernible] size, confirmation on electronic introduction continues. Nevertheless, the delay causes a big impact on our business plan and requires action. We are taking the situation as it is, but also as an opportunity to now focus on operational leverage and execution. We already took some steps last year, integration of Vitalsana and apo-rot and then the go-live of our new distribution center in Heerlen, which will take place in the next months, with a high degree of automation, which will help us to improve operational performance. We have quite some work ahead of us, but Walter, the whole team and myself in the new role are fully committed for execution and very much excited for the electronic prescription opportunity. Before I hand over to Marcel, I also want to highlight that we issued our first sustainability report in line with GRI standards last -- this year. We will continue to improve our disclosure and stand available for any sustainability-related questions. Now over to Marcel please.

Thank you, Walter. And hello also from my side. I want to start by highlighting 2 key points concerning the financial year 2021. First, as Walter mentioned, we were fully convinced to see an eRx launch through the 1st of January 2022 and thus invested heavily in eRx readiness and marketing to achieve the best possible starting position. And second, a significant backdrop on the German non-Rx online market caused us to reduce our 2021 sales target and also had an impact on our profitability. Let's go into the 2021 performance, starting with the group sales. We achieved our revised sales target with a growth rate of 14.8% in local currencies. In Switzerland, we realized a solid and sustainable growth rate of 5.7%. In Germany, we were able to grow 19.4% on our external revenues. This includes the continued slight decrease of the Rx business as a result of this continued marketing and the [indiscernible] spend and also includes the contribution from Apotal acquisition, which we did in summer 2020. The OTC and BTC business developed strong in a very challenging market, which grew significantly lower compared to previous year. Segment Europe achieved 22.3% growth. This somewhat slower growth compared to prior periods is a result of the very strong demand in the previous year driven by the COVID effects. Let's now look at the development of our underlying KPIs. The key development here is the growth of our active customer numbers to 12.4 million compared to last year, it is an increase of 1.9 million customers. For better transparency, we decided to show the basket size and order frequency now separately for pRx and OTC. Our average Rx basket, which consists of our Swiss and German Rx business is at EUR 115 with slight declines in 2021 as a result of low value basket and connection with safely reimbursed self-test in Switzerland. The OTC basket also saw slight declines over the period driven by smaller COVID-related baskets. Our repeat order rate remains at a high level of 74%, which shows the significant loyalty of our customers. In terms of site visits, we saw an increase of almost 10% compared to previous year and almost 15% compared to the 12-month period ending June '21. 2021 was the year in which we achieved the eRx readiness and grew external revenue by 14.8% despite the significant backdrop of the German non-Rx market compared to the previous year. The gross margin came in below previous year as a result of the very strong increase driven by the COVID pandemic in 2020 and the slowdown of the German non-Rx market as a result of [indiscernible] flu season and tough comparison base. It is in line with prepandemic levels. Personnel and distribution expenses both slightly reduced as a percentage of revenue. The largest difference is -- compared to previous year is our marketing spend, which increased to CHF 118.8 million and the percentage of 6.9% versus 4.1% in 2020. This increase has mainly 2 reasons: First, our TV campaign to boost awareness ahead of the eRx launch and second, the less dynamic non-Rx market, which required higher performance marketing spend to achieve both. This led to an adjusted EBITDA of minus CHF 128.9 million. I will explain the bridge from 2020 to 2021 earnings and adjustments in more details on the following 2 charts. Depreciation increased as a result of higher base due to acquisitions and higher investments in tech developments. The net financial result was impacted by the negative exchange rate effect and the result of joint ventures in Switzerland. On this chart, I will explain the drivers of the result compared to previous year in more detail and build a bridge from 2020 adjusted EBITDA of minus CHF 31.2 million to 2021 of minus CHF 128.9 million. The first bar shows the achievement of the eRx readiness. Together with the eRx-related TV marketing push, CHF 34.2 million in order to achieve the best possible position ahead of the eRx launch. The slower market growth in the German non-Rx market led to increased customer acquisition costs and lower average gross margin with an impact of CHF 18.7 million. We invested more in tech capabilities and user experience to enable faster scaling in all parts of the company's business and continue building the leading online platform and apps. In the second half of '21, we successfully carried out the rebranding of our French DoctiPharma platform to DocMorris and also initiated our OTC business in France with a combined effect of CHF 13.4 million. As explained at the Capital Markets Day last year, our new businesses, telemedicine platform as a Service and partnerships they offer high future margin potential, which is why we did increase our spendings in these initiatives by CHF 9.9 million compared to 2020. In sum, these effects led to adjusted EBITDA of minus CHF 128.9 million. The EBITDA adjustments in '21 reduced significantly compared to previous year. M&A adjustments amounted to CHF 9.6 million. Integration includes mainly the apo-rot integration amounted to CHF 2.2 million and several other smaller one-offs of CHF 1.9 million. Total adjustments amounted to CHF 13.8 million compared to CHF 47.2 million in 2020. Our balance sheet remains in a good shape. Our solid cash position is at CHF 277 million compared to CHF 300 million at year-end 2020 and includes, obviously, the proceeds from our capital increase in December 2021. We achieved a sustainable reduction of net working capital by CHF 28 million. During the period, the management of these positions will stay in our focus also for the next year. Other positions of the balance sheet remained broadly in line with previous year. Equity ratio stays with 38.2% on a solid level. Now I hand over to Walter Hess, who will give you an update on our strategic priorities for 2023.

Hello, and welcome also from my side. I would like to give you a first strategy update and, afterwards, to explain our key priorities for 2022. So important and absent digitalization in the health care sectors is we all experienced during the pandemic over the last 2 years. With our digital health ecosystem, we can contribute to a more integrated and more digitalized health care systems. For our patients and customers, we want to become the preferred digital health destination. We will achieve it by consequently understanding and fulfilling their needs and wishes. It will be enabled by a best-in-class platform with the technology as the core layer for operations, services and brands and will lead us to profitable growth and will create value add for patients, customers, partners, shareholders and employees. A precondition for great success is that we have the best people in the right place. Therefore, to attract best talent is one of the key priorities of our company. I'm very pleased and happy to announce today that Matthias Peuckert will join our company on 1st of April this year. He will become Head of Germany and CEO of DocMorris and, therefore, will be my successor in these 2 fronts. Matthias is a proven and excellent e-commerce expert with 14 years of experience with Amazon and 4 years as CEO of windeln.de. In addition to Matthias and Madhu Nutakki, our CTO, who joined the company in last August, we further strengthened our senior management team with a digital marketing expert who already started in February this year, also coming from Amazon with a data and science specialist coming from Nissan and expert in health procurement coming from the [indiscernible] Group. And he will also run our transformation program, which I will just show you afterwards, and in that function, reporting directly to me. All of the senior managers have proven and strong track records from their previous careers and have the core strength in execution, which is one of the key success factors for our company. The situation, which has arisen due to the extension of the eRx test phase gives us the opportunity now to leverage on the synergy potentials we have and to set the base for profitable growth in the future. We manage cash in a manner that we can immediately accelerate on our growth activities once eRx will start. And therefore, we have defined 3 key priorities for this year. Number one is to keep the best eRx starting position, number two is on operational leverage, and number three is on a growth focus with DocMorris. Let's start with eRx first. Since January 1, the mandatory eRx law is in place and in force. On 20th of December, we all know, the Ministry of Health declared to extend the testing phase as the technology was not ready and not sufficiently tested. Meanwhile, the shareholders of Gematik have defined 6 quality criteria, which you will find on the right-hand side of the screen, which have to be passed before eRx can go in the next phase and -- the next phase, which will be the nationwide rollout of the system. And therefore, all these criteria have to be fulfilled. The main criteria is, number one, that 30,000 eRx will have to be processed without any problem. As of today, we already reached 5,700 eRxs being processed without any problem. And frankly speaking, if the system already works for 5,700, it will also work for 30,000 or 100,000 or 1 million or even more. So the system also based on our own experience and on the opinion -- based on the opinion from industry experts is technically already ready, and we are confident, therefore, that the eRx scaling will start in the second half of this year. Let me remind you of the size of this opportunity and our position. Today, we are at roughly 1% of online market share for prescribed drugs. If it goes up to 10% as it was in Sweden already 2 years ago, we talk about the 5 billion market. If it goes up to 25%, where the OTC market in Germany already almost is, we talk about the 12 billion market, so a huge market potential. There are many studies out in the market about pRx. One is from Sempora saying that 25% of the people indicated that they would redeem their prescriptions with an online pharmacy once eRx is in place. Another fact is that 80% of the medication is for chronic demand. And our assumption is that out of our customer base, far more than 2 million customers have the potential to be converted from OTC customers also to Rx customers. And as Marcel has shown, we have invested in marketing and brand awareness to be prepared for eRx. And we have reached aided brand awareness of 71% end of last year, which is an all-time high for us and also of 26% for eRx. But why is eRx interesting and why is it the game changer? It's all about KPIs and unit economics. If we see the KPIs and compare them to OTC KPIs of orders and of customers. So Rx orders have a higher basket size. The customers have higher order frequency, higher retention rates and higher customer lifetime values. And if we see the unit economics and compare our eRx contribution profit, contribution margin after fulfillment costs only with eRx, it's already in double as high and compared to OTC orders even 5 times. So we are with DocMorris, but all other brands as well truly ready for all of this eRx potential. And we have invested quite a lot last year in being prepared with technology processes and people. And as of yesterday evening, we could process already on our systems, 226 eRx prescriptions. And I can assure you and confirm we could process them without any problem, and we could build them without any problem. I just give you now a glimpse on how we see it is to redeem an eRx, at the same time, purchase on an OTC product and use our services with our DocMorris digital health ecosystem app. [Presentation]

So let's move to now to our second and equally important priority of operational leverage. Our target and our commitment is to reach EBITDA breakeven in 2024. Therefore, we have set up an extensive transformation program, including measures to increase gross margin, leverage on performance improvements and structural synergies. With regard to gross margin, we will enhance our assortment, pricing and procurement strategy and we'll launch our advertising services in Germany and France this year as we have already done in Spain 2 years ago. With regard to performance improvements, we will improve on marketing performance and operational performance, including DC2, which I just would like to give you an update afterwards. Then on the side of structural synergies, we see significant efficiency gains through optimizing our organizational structure and consolidating and integrating our platform. All of the measures that we have planned, we will implement and execute within the next 12 months. And this will be the base and contribute to reach the target of being EBITDA breakeven in 2024. Marcel will show afterwards the impact of these measures on our P&L. We will update you about the progress regularly and on occasion of a Capital Market Day later this year. Let me give you a brief update on our -- on the go-live preparation of our Distribution Center 2 in Heerlen. We are fully on track to go live in Q2 this year. Based on the really extensive testing, which already started in November last year and the setup of the 2 warehouses and distribution centers where we can run them autonomously from each order, we are confident that we will see a good go-live in Q2 and a smooth ramp-up in Q3. Once we have taken live this new DC2, we will reach an automation degree of 70% in this warehouse and can leverage on productivity improvement of more than EUR 10 million per year. This is, again, an important and significant contribution to reach the EBITDA target in 2024. And this DC2 will also add 15 million of parcels additional capacity and more than double the capacity in Heerlen. So let's come to the third priority, which is the growth focus on DocMorris. But before we talk about the growth measures on DocMorris, we have to talk about 2021. The non-Rx online market last year saw a significant slowdown coming from 17% and 15% in the years before down to 3.6% in the last year. But we also see that out of the cohorts of the last 2 years related to COVID and masks have reduced retention metrics compared with protocols whereas the stickiness of the existing cohorts remain at the same high level. In combination with the fact to keep and allocate wisely, our cash and being ready for the moment where eRx starts to accelerate, we will focus on double-digit growth on non-Rx with our core brand of DocMorris. With new customers, we will focus on new customers with Rx potentials of OTC customers which we can convert afterwards to Rx customers with a high CLV, also as a base for sustainable growth going forward. As mentioned before, out of the transformation program is the reinforcement of the marketing performance. The areas where we have defined measures, you'll see on the right-hand side in the circle on the slide and it will be aided by strengthening the digital marketing team also with cross-segmental competencies from within the company. With the noncore brands, we focus on profitability and have an upside potential on the market recovery on OTC in addition to Rx in the second half of the year. One of the key assets of the DocMorris brand is the digital health ecosystem app. We offer a unique experience for our patients and customers by combining products and services for them from awareness to diagnosis, treatment and to adherence. You see the product and services shown at the right left-hand side of our screen. This app has already been downloaded more than 1.3 million times within only few months and have a high average of 4.7-star rating. So let me conclude this part, and let me summarize. We are fully convinced and committed to capture the full potential of eRx immediately after it has started. This year, we had a strong focus on execution and leveraging the potentials we've involved our company, and we set the focus on growth with our core brand DocMorris. I will now hand over back to Marcel, who will give you the information regarding the impact of the transformation program and digital outlook for 2022 and beyond.

Thank you. As Walter explained, we have defined clear measures to achieve EBITDA breakeven in 2024 independent of eRx spending. The actual EBITDA includes significant spending for eRx readiness. We are fully convinced that in the importance and strategic relevance to continue to invest this amount in order to keep the best position for eRx scaling. The explained focus on marketing spend on our main brand, DocMorris and the reduction of channels with lower customer KPIs and gross margin will have an immediate impact on 2022 EBITDA. The contribution of the new distribution center will start post go-live in Q2 2020, 2022, and have the first full year effect in 2023. After 2022, one of the 3 important levers towards breakeven is gross margin improvement. Here, we initiated to improve product mix, buying conditions and pricing to introduce and scale advertising service businesses and to extend our assortment in private label from some of the already initiated measures will start to have the main impact on our numbers post 2022. Performance improvement includes the reduction of our cost per parcels driven by the new distribution center and direct savings via realization of economies of scale in all our segments as well as via our telemedicine and Platform-as-a-Service business. Structural synergies are indirect cost reductions, which we will realize by organizational optimization and implementation of [indiscernible] services throughout the group. In sum, this will lead to breakeven in 2024 with significant potential on eRx scaling comes on top. This leads me to our financial outlook for 2022 and beyond. We are confident that the German eRx market will ramp up in 2022, and this remains our core growth and profitability driver. As the timing is not yet confirmed, we exclude any eRx impact from the outlook for 2022. We target double-digit non-Rx growth for our core brand DocMorris Group external revenues are expected to remain flat relative to previous year as we focus on operational leverage and profitability in the short term. Our current trading also is in line with this outlook. Driven by continued tech invest and maintaining eRx readiness, adjusted EBITDA in the range of minus CHF 75 million to minus CHF 95 million in 2022 is expected. As a result of the eRx delay, we now expect to reach EBITDA breakeven in 2024. Our medium-term EBITDA margin target is confirmed at around 8%. With that, I would like to open the Q&A session and look forward to your questions.

[Operator Instructions] We will take the first question from Alexander Thiel from Jefferies.

A few questions on the guidance from my side, and I would like to take them one by one. First, on your flat revenue guidance for '22, how should we understand the moving pieces there? I mean you guide for DocMorris, which is a major part of the OTC business in Germany to grow double digit. And I believe we can also assume that the Switzerland business will grow with 5% plus. So excluding Rx, how should we come up with a flat revenue performance year-over-year basically? What are the moving pieces there?

Yes. Maybe starting with Switzerland. There, we expect growth between 5% and 10%, which is very sustainable and on a good level like the years before. In Europe, we target low teens as a percentage of growth. And in Germany, it's [indiscernible] slight decline with eRx and the market covering as an upside potential and this leads our group level on a flat development on service.

Okay. Second, on your profitability guidance, I mean, you obviously don't guide on eRx for the top line. But how should we think about profitability? I mean, i.e., does that mean if eRx kicks off in the second half, we should assume a guidance change for top line and profitability because on the presentation, Page 28, you baked eRx revenue into your guidance, but 1 page earlier, you're basically saying any eRx impact is excluded from the outlook. So, yes, if you could clarify this one.

Yes, eRx is excluded from the outlook. Nevertheless, as I showed, we included in the EBITDA bridge that it will remain on our spending for eRx readiness and also to keep the -- achieve brand awareness topics. So base market is included in EBITDA. But again, we do not know the timing and so we try not include eRx impact in our guidance at the moment.

Okay. Last 1 from my side. On your scale back in marketing, I mean, we have seen a doubling to around 120 million in '21. What number is currently baked into your guidance for '22? And if you could comment also on your current trading in Q1, I mean, what market development have you seen in the OTC space so far because last year was really weak? And I mean you highlighted it also in your presentation.

This we included in our 2022 EBITDA guidance reduction of marketing spending which are shown in the bridge from 2020 to -- 2021 till 2022. Therefore, marketing spending will be below this year level. This is our main impact to achieve the EBITDA guidance for '22. On market development, we do not have yet any market numbers for the first year '22.

The next question comes from Chris Johnen from HSBC.

I'd also like to do them one by one, if possible. First, I'd like to pick your brain on working capital and CapEx for the year. I mean I would just try to understand your funding needs going forward. You closed the year with 2 -- around at CHF 280 million cash on the books. At the midpoint, the EBITDA burn will be 85 million there will be some CapEx on top this year. And with the breakeven target now postponed by year, I'm just trying to see if we get to a level where the cash on the books is maybe not comfortable enough to go without raising new equity or debt. So if you could give us some color on predominantly working capital and CapEx that would already be helpful. That would be my first question.

Yes, due to the fact that we have a flat sales development target of 2022, we do not see increase of net working capital on our [indiscernible] due to the fact that we manage on these positions, we target a slight decline and investments on CapEx, we expect to be on a similar level in 2021.

Okay. That's clear. Then coming to the current quarter, I think that was also missed previously. I mean, the quarter is almost over. Is there any color you can give on -- I mean I'll happily take any comment on any market group. Anything you can share on the current quarter?

Yes, the current trading supports our full year guidance and is in line with what we expect for the full year.

Okay. And in terms of Rx in Germany. I think this is probably, by far, the biggest driver of this adjusted decline this year. Is there any sort of color you can give as far as your expectations or concern on that?

Yes, as the pRx concerns, yes, there is a slight decline in the same range as last year. But we are sure it's going to be more than compensated in the second half of the year once the eRx starts to ramp up.

Got it. And then the last question regarding the number of e-scripts you process. So looking at, I think, yesterday was 5,700 in total. Your share is 4%. And I mean, how are you thinking in terms of your share of all of the total eRx issued so far. Do you think the sample size is still very much too small to draw any conclusions? Or how are your initial expectations on the sort of share of the eRx market in Germany so far?

Yes, it's probably not yet really representative. Nevertheless, it's only 5,700 e-prescriptions. So for us, we do not already take considerations or assumptions out of it. I think what is really more important is that it is growing day by day. The last few days, we are at the rate which should bring us latest -- even if it would remain flat, latest in 4 to 5 months to reach the quality gates. And we know that every day, there are additional doctors joining, and we see that there are additional doctors issuing e-prescripts. And therefore, we think the curve will continue to raise and we will see an earlier reach of the quality gates and the 4 or 5 months we think it would now remain flat. And I think this is the real important part of the figures that are at the table at the moment.

And should we -- I mean once we go live, is it your expectation -- or fully live, let's call it that. Is it your expectations that we will a very significant pickup? I mean the number -- the Sempora number, the 25% general interest, do you expect a more positive shift also in the later stage of the trial phase, once more people are onboarded? Or what's your expectation near-term?

Yes. Well, in the next phase, we follow very closely what the Ministry of Health says, what Gematik says. And there, they now say all that once the quality gates have been passed, so there will be the nationwide rollout of the system. So this means for a certain period of time, probably, they will talk or tell to other doctors and pharmacies to roll systems out completely before then it will start after some months, probably really then at full speed. And from there on, we have different scenarios prepared for ourselves. So let's say, the planning scenario is that within 3 to 5 years, we'll reach 10% of online share. But of course, we have scenarios which also are different to be prepared for any case. And the only thing that we see is all of the studies. So I mentioned the Sempora study, but all of the studies. I think the lowest said, it will relatively fast go to 14% of the people redeeming eRx. And there is no study I have seen, which says it will be low after certain time. So that's why we are confident that there will be the ramp-up and the speed of the ramp-up, we will see probably already after the first months, but definitely at the half of the first year.

We'll now take the next question from Volker Bosse from Baader Bank.

For the 3 starting, [indiscernible]

Volker, hang on. Can you speak up, please?

Is it better now? So I think what [indiscernible] certain strategy changed. So before you already said you are 100% top line focus with all brands capturing the maximum of the market potential. Now you move to short-term profitability focus. Would you agree on that observation? The second question would be on the group sales guidance. You said group sales to be flat. You just give us a breakdown DocMorris core to be up double digits, what does it mean for other brands, which brands will, so to say, decline in sales in order to come up to the flat on group business finally? And the third one is on your EBITDA guidance. And before you already said, if we would not invest in growth and if we have the new warehouse onstream, we would see profitable now for '22. When you grow and the warehouse is onstream, but you still guide for a high double-digit million negative EBITDA, so what is here the missing the part from the slide, your presentation?

I will take the first question and I will pass then to Marcel. So yes, that's correct. Up to now, we are focused on growth and gaining and expanding customer base, the customer base, which then is the base also to convert the customers to Rx customers. And now with that extension of the test phase. But nevertheless, with the eRx really just ahead of us, we shift now to a path where we will follow profitable growth. And as I've said before, we'll just now use the opportunity of this space to leverage on the potentials we have. And we have done M&A acquisitions. We have potential on the structure. We have potential in marketing, in operations. We will now just use this time to set the base for profitable growth. And in addition of all this transformation process, we then will have the eRx and will anyway come in a profitable growth situation in the future.

And this leads to your second question. Therefore, we have the growth focus on our main brand, DocMorris on our ecosystem brand and in order to profit, we'll focus on the other brands. And this, in combination, leads to a flat development on group level. Of course, if DocMorris is growing double digit, then some of the other brands have a slightly decline because of the focus on high quality, high loyalty customer base. On the EBITDA level, our EBITDA includes also all the investments for eRx readiness and also marketing in order to keep our starting position on the highest level because we are fully convinced that this will move the needle to interesting eRx topic, and that's why we think it's very important to have this amount of spending for e-script and also the tech focus that we still develop on user experience, customer-centric services and to developing our ecosystem. This will be the success factor for the future, and that's why we are convinced that it's really important to spend on these levels and focus on operational leverage and performance improvements and on the other topics.

The next question comes from Gerhard Orgonas from Berenberg.

A couple of questions from me as well. You said that you are focusing the noncore brands on profitability. Can you tell us which one these noncore brands are, which ones you consider noncore?

Yes. So the core brand is definitely DocMorris. And then we have Medpex, let's say, the second lead brand within our portfolio and the noncore brands are definitely [indiscernible] and Apotal.

Okay. And then I was wondering, for the flat Germany guidance, it also because your paper Rx revenues were pretty good last year, down from maybe the single digits or so. Is there any lag effect -- is there any effect from the bonus ban given last year that you see a more significant decline in the paper Rx business this year before eRx comes in?

It continues at that same scale about of the second half of last year. The first half was less in our portfolio. The second half was a bit more. And it continues at the same level about last year. It's due to that the bonus ban, yes. But I think our focus really is on the eRx. We keep the eRx customer retention as we ever can. But the focus and the future will be eRx definitely.

Can you give us an indication what the H2 decline was in paper Rx? Double-digit percentage?

We do not comment on the details yet.

Okay. And then my last question is on the gross profit improvement. You expect a significant gross profit improvement between '22 and '24 just in the OTC business, it looks like maybe, I don't know, 40 million or so where -- what is the driver for that?

Yes, here, we have a lot of initiatives -- initiated measures, starting on the improvement on procurement and pricing and reduction of the low-margin channels like price search engines or external marketplaces. And then as Walter explained, we are increasing our ad services offerings, which also increases our gross margin. And last but not least, we work on assortment and private label with higher margin and this in sum altogether leads to this margin improvement for EBITDA breakeven, 2024.

We will now take our next question from Michael Heider from Warburg Research.

Yes, I have a follow-up also on your flat sales guidance again, sorry. But you said Switzerland is going to grow 5% to 10% and then obviously, DocMorris is growing double digit. And then the sales decline in noncore brands. Is this now -- are you only talking about Germany? So what is your -- I mean, can you give an indication on your international business? Is this expected to continue to grow as we have seen in the past?

On the European business, we plan sales growth in the low teens. So we focus on the German market and we hope we will continue on a double-digit basis, but not on the levels we have seen in the last years.

Okay. Then another question on your midterm or long-term targets. You confirmed your 8% EBITDA margin. Before, you also guided on revenues. You said that you expect to reach 4 billion in revenues, and that was like a time frame you gave there. And but you expected that to be at the beginning of the period, so that was around 2024. Can you confirm this guidance?

This also is very much related to the start of the mandatory introduction of e-scripts. And so we do not give exact year for the 4 billion, but we still believe in the 10% online penetration in the midterm with the result leads to this 4 billion.

So basically, the 4 billion should be still reached in that time period, but maybe not in the first year anymore.

Yes, this could be possible, yes.

And then last -- well, 2 more questions, sorry. First one, will you be able to integrate all your external sales in the year 2022 because the logistics center is planned to be opened in 2022? And I think that was one of the key issues here that you needed to shift all the volumes to Heerlen. And so the question is, will there be a full integration and full consolidation of all external sales in this year?

No, we will not be able to fully consolidate, and we will continue on the reporting as we did in the past.

So is that then planned for 2023.

Maybe out of the transformation program, is that we also leverage on structure synergies, and the synergies also part of our M&A acquisitions. And as I've said before, we will keep you informed and regularly updated about the progress of the project. And yes, this will be targeted.

Okay. And then last question. Can you remind me of your total capacity now or once that the logistics center will be up and running, please?

Yes, total capacity will be up to 48 million parcels per year as of the go-live of the DC2 in Heerlen.

We will now take the last question from Lorenzo Margiotta from Bank of America.

Two quick ones from me. One is on the OTC market, excluding the issues you are discussing this year with it being flat. Do you confirm that you would expect that to be growing double digits again from 2023 onwards? And secondly, in the 2024 breakeven guidance, if Rx comes sooner than expected or is strongly additive in 2023, do you still think you could be profitable in 2023? Or is that no longer a realistic target at all?

Yes. Maybe on your first question, so we assume that for this year, the growth might be more or less at the same level as last year. This is our assumption. Therefore, we see an upside potential if the market growth -- comes back or grow faster. And on the EBITDA target for next year, so what -- we confirmed and are committed to be at breakeven in 2024 because the breakeven was planned, including the eRx rank -- ramp-up within 12 to 18 months. And this is now delayed, it will be in 2024, and we will make sure just to have breakeven ready in any case this time.

Okay. That's clear. And then just OTC from 2023 onwards, do you think that market will return to growth of recent past? Or do you think it's now something that your business excluding eRx will grow slower?

No. We think that the post-COVID, the markets will recover completely. And despite it's already at 23% to 25% online share, we see there is much more growth potential also in the OTC business in the future.

Okay. So the 1-year impact from shifting towards DocMorris than a structural change in the story?

Yes, we think so.

Thank you very much altogether. Thank you for attendance and for your questions. And with this, we close this conference call. Thank you so much.

Thank you.

Thank you.