Redcare Pharmacy NV (RDC) Earnings Call Transcript & Summary

Well, thank you, and a warm welcome to all of you. Jasper and I would like to welcome you again to our earnings release call right here from our headquarters in Sevenum. But before jumping into the content of our presentation, I'd like to say a few words about yesterday's announcement regarding my retirement from SHOP APOTHEKE following the upcoming Annual General Meeting at the end of April. The last 4.5 years with SHOP APOTHEKE have really been the highlight of my professional career. It has been a real privilege to serve this unique company, to work together with a great management team, but also to interact with many of you. It has also been a privilege to be able to witness and within my means to contribute to the tremendous growth of SHOP APOTHEKE over the last few years. Looking forward, there's really no doubt in my mind that SHOP APOTHEKE will continue on its growth trajectory and that it will deliver on its promises as well as its potential. By the way, only 1 individual out of the team of 5 is leaving. So the other 4 will continue to drive the business, will ensure the continuity of our management team and 3 of the remaining 4 members of the management team; Theresa, Stefan and Marc has been with the company for over 20 years. Well, this is not the last day of my time at SHOP APOTHEKE, but it's certainly the last earnings release call that I can do together with Jasper. So it's also an opportunity for me to say thank you to all of you for your support over the last 4 years, for all your questions. Sometimes there were tough questions that we had to deal with, but also thank you for all the personal interactions over the last couple of years. Well, switching to the purpose and the content of this call, especially since this is my last call, I'm very happy to live -- I'm very happy to be able to present the results of 2022, a year that was from our vantage point, clearly a success for SHOP APOTHEKE. We delivered against both components of our guidance. We strengthened our competitive position in the marketplace and without stealing too much, Jasper, of your thunder, I think you're also going to appreciate the guidance that at the end of our call, Jasper is going to share with you the guidance, of course, for the current year. So the agenda, we're going to start with looking back at 2022, how did SHOP APOTHEKE perform. Then I will provide you with a brief update on some of the strategy milestones we achieved last year, and then Jasper is going to conclude before we, of course, open the microphones to your question with the outlook and the guidance for 2023. So let's have a quick look at our numbers. We, as the management team of SHOP APOTHEKE, we are really proud of what we achieved last year, and we consider 2022 a success for SHOP APOTHEKE. We met our top line guidance. We met our bottom line guidance. We generated sales of EUR 1.2 billion. This consists of a non-Rx growth of 17% and a total growth of 14%. And with the double-digit growth last year, we demonstrated, we reinforced that SHOP APOTHEKE could and did grow double digits before corona. We could and we did grow double digit during corona, and we could and we did grow double digit after corona. And of course, our ambition is that this is not the last year with double-digit growth for SHOP APOTHEKE. Our active customer base grew by 18% to 9.3 million active customers. The main driver, of course, behind our customer growth and also our sales growth is the high satisfaction of SHOP APOTHEKE's customers with the services we provide. Our NPS, our Net Promoter Score, was above 70 across 2022. Our strong top line performance was accompanied by notable sizable improvement of our profitability throughout 2022. For the full year, we generated an adjusted EBITDA margin for the business as of March last year. To be precise, this is before the impact of the acquisition of First A, which since then has been renamed as GoPuls because this acquisition was concluded after we had communicated the guidance. So 0.9% minus 0.3% adjusted EBITDA margin across 2022. In the second half of the year, we showed an adjusted EBITDA margin of plus 0.9% after minus 1.5% in the first 6 months of last year. We also achieved a couple of strategic milestones that we have set out for ourselves, but more about this in a moment. Last September, we, as a company and as a management team, we reinforced SHOP APOTHEKE's commitment to sustainable development by joining thousands of progressive companies around the globe with our statement that we want to become net zero by 2040. I know 2040 is a long way to go, but we are right now in the process of defining our concrete and measurable milestones for the coming years. Well, looking back at 2022, I hope that you join me in concluding that 2022 was indeed a successful year for SHOP APOTHEKE and 2022 positioned us very well for the current year, 2023. Well, let's have a brief look more precisely on how we did against the guidance that Jasper had provided exactly a year ago. In the upper half of the chart, you see our sales growth and our EBITDA margin exactly as it's reported in our annual report. So the dark blue bars, they show our total sales growth. You saw that -- you see that we grew every single quarter, but I want to highlight 2 quarters. In Q1, you see a growth of "Only 7%". This has to be seen against the backdrop of Q1 2021 and you've been following SHOP APOTHEKE for quite some time. You remember the Rx bonus ban in Germany came into effect in December 2020, but hadn't yet fully impacted our Rx business in Q1 last year. So there is a base effect. Therefore only 7% growth in Q1. The reverse is a little bit true for Q3. Q3 2021, we were capacity constrained. Of course, this had a detrimental impact on our sales levels. As a result of this, together with our underlying year-over-year growth, we could show here a total sales growth of 20%. You're also seeing on this chart the significant improvement of our profitability from the first half of the year to the second half of the year. At the bottom of the chart, you see exactly the scope of the guidance that we have provided a year ago. So here, the sales growth, the dark blue bars show our non-Rx sales growth. We grew at least 15% across in every single quarter. Across the year, we showed a sales growth of a solid 17% in our non-Rx business against the guidance of 15% to 25%. So we're solidly within our guidance range. And the light blue bars show our adjusted EBITDA margin without the bottom line effect of GoPuls. You also here, you see a very significant improvement from the first half of the year to the second half of the year across the year, an adjusted EBITDA margin of minus 0.3%. So very close to the EBITDA breakeven point also this in line with the guidance we had guided towards an adjusted EBITDA margin from between 1.5% to plus 1.5% of sales. So again, SHOP APOTHEKE met its guidance in both of its components. So looking at the 2 reporting segments, the DACH region or the DACH segment and the International segment, starting with the DACH segment, we posted sales of EUR 940 million. So we are -- with the DACH region, we are approaching the EUR 1 billion mark. Our total sales grew by 11%. In the DACH region, our non-Rx sales grew by 15%. In the international segment, consisting of Belgium, of France, of Italy and the Netherlands, sales grew up by 24% and totaled more than EUR 0.25 billion last year in our international segment. So before I hand over to Jasper, 3 of our KPIs. I already talked about the number of our active customers grew from 7.9 million at the end of '21 to 9.3 million at the end of last year. So it's only now a question of the time when in 2023 we're going to reach and surpass the 10 million active customer mark. A reminder for you, I know most of you know this, an active customer has placed at least 1 order during the preceding 12 months. Our Net Promoter Score here to be precise across the year at 72. So we set a new all-time high with our customer satisfaction last year. Not all e-commerce companies and not all online pharmacies published their NPS. But I would be very surprised if we had such a ranking if SHOP APOTHEKE were not right among the top performers. Our average basket value or the average or the AOV that came down a bit from '21. It was EUR 61 per basket in '21 to around EUR 58. Almost the only driver was the faster growth of our non-Rx business and our non-Rx business comes along with a slightly lower average order values than our Rx business. Jasper, let's have a look at the numbers.

Stefan, thank you very much, and I'm happy to do so and good morning to everybody on the call joining us again today. This is a customary slide with the number of orders in thousands per quarter. So you see that in quarter 4 2020, we achieved around 4.4 million orders in '22 -- sorry, in 2020, the fourth quarter, we increased that a year later to 5.5 million. And this year, we have set in the most recent quarter, the past quarter for a new record of 6.3 million orders processed in 1 quarter. Looking back at 2020, which was really the peak of the COVID year, you basically see that the increase of 4.4 million orders in the fourth quarter to 6.3 million now is an increase over the peak during corona of 43% more quarters. Also on this slide, you see that there is actually each year this customary seasonality where we set new records in the first quarter, and we have the seasonally lower second and third quarter, and then we set again new quarters in quarter 4 and then the history repeats itself at new quarters [indiscernible] in the next quarter. Last year, as Stefan already showed clearly and also explained, in 2021, the quarter 3 was somewhat lower when we were capacity constrained, but we recovered quickly from that last quarter. If you look at the last bar, with the 6.3 million orders that we did, something that makes us very important is the fact that of the 6.3 million orders, 84 or 84 rounded percent of orders came from returning customers to SHOP APOTHEKE. If you add up the 4 columns of 2022, then you get to, in total, 23 million orders that we processed the past years -- in the past year. So what numbers did we achieve with the financial numbers? Here you see the adjusted numbers for the ongoing business. In the fourth quarter of 2021, we achieved EUR 288 million of sales, and we had an EBIT of -- adjusted EBIT of minus EUR 10 million, which was an EBITDA margin of minus 3.5%. This year, in the fourth quarter, we increased our sales by 13.8% to EUR 328 million, and our EBIT was a positive EUR 3 million or 0.8% of sales. So a year-over-year improvement from quarter 4 over the quarter 4, the year before of 430 basis points. The main driver of it was an improvement by 320 basis points of gross profit margin, but also there was a very significant improvement in the selling and distribution efficiency of 170 basis points. A slight offset was an admin expenses because, of course, we need the right people and the right teams to achieve those impressive results. But actually there were also some largely nonrecurring negatives in the 3.5% admin in Q4 2022. So that's the picture year-over-year. If we then go to the fourth column, then the improvement from the first half of the year to quarter 4 of 230 basis points actually was in part coming from the gross profit margin, but the main driver was increased efficiency and scale in selling and distribution costs as a percentage of sales. The last 2 columns before I go to the next slide. In 2021, we achieved [ EUR 1.60 billion ] of sales, and we had an EBIT of -- EBITDA and adjusted EBITDA margin of minus 0.5%. There seems to be a slight improvement to 2022, going from minus 0.5% to minus 0.3% of sales. But I think Stefan, as you already showed very clearly in your graph, this is a very different picture from the first 6 months of 2022 to the big improvement over 200 basis points, driven by efficiency to the second half of 2022. And if we then go to the next slide, the -- on the gross profit margin, the improvement from 25.2% year-over-year to 27.5% drivers of the gross profit margin. And I think it's the 12th consecutive quarter that we are able to report this where improved sourcing conditions. The number 2, it's the net of pricing, promotions and assortment. Number 3 is also mix. And then other is some structural improvement, mainly the first positive impact from our marketplace sales, but the major impact of the 1.1 improvement actually is a non-repeat of some negatives we had in 2021 related to the corona assortment. So all in all, a solid 27.5%. You also see that there is some improvement from the first half of the year to quarter 4, mainly 0.7%. But as we will see on the next slide, the major improvement from the first 6 months to the second 6 months of 2022 is an improvement, a decrease, as you see at the right-hand, of 210 basis points from the efficiency of our selling and distribution and marketing expenses as a percentage of sales. In this case, the bridge from the cost, which is a deterioration of 22.6% to 24.5% is a little bit of an apple and an orange because the marketing was actually also including the fact that we reduced our marketing last year summer when we were somewhat capacity constrained. Also there was a bit more tailwind of corona in the year 2021. So that's about marketing, but that's the full year picture in quarter 4. This looks much better. Shipping and packaging, minus 0.6%. This is all mix -- this is mix for the fact that we deliver higher services to our customers at the moment, more last mile options with now, for example, and also some mix between the countries on an underlying basis, also here, we were able to actually offset the inflation that we have been seeing by better terms and more efficiency. A necessary content is actually the operating labor where we were flat or a 0.1% improvement where we were absorbing some underlying wage inflation, and we were absorbing the opening of a new distribution center in Italy and year-over-year, achieving a slightly improved cost as a percentage of sales and other is actually not something interesting to mention. If we go to the next one. So we ended the year 2022 and started the year 2023 with a very solid cash base of EUR 180 million. If you look on the balance sheet, you will see that there is around between EUR 80 million and EUR 100 million of this is in the other financial assets because that's money that we put for a better return on fixed deposits. But if you add or rename cash and cash equivalents, it's EUR 180 million. So we have the operating result negative last year, mainly because of the first 6 months, then there were some variances in working capital. We had a high level of investments in 2022, like we had in 2021. We peaked in executing our strategy in our CapEx in 2021 and 2022 because we successfully added the capacity that we wanted to our strategy, and we have put live a couple of very important IT projects, it's the marketplace. It's the now, it is structural robustness to be ready for earnings and for our volume ambitions in the IT landscape. So we have done that. And with that, we ended the year with EUR 180 million of cash. Stefan, that's a good moment. I hand it back. Thank you.

Jasper, I think we should keep in mind on the previous chart, the free cash flow last year was minus EUR 89 million.

Yes, minus EUR 89 million. Thanks for mentioning.

More on that later. Yes. Okay. So over the next couple of minutes before then Jasper walks you through the guidance for the year. Just I want to briskly walk you through a couple of our strategy milestones that we achieved last year. We saw another increase of our customer satisfaction level, meaning another increase of our NPS versus prior year. We went live with our first distribution facility outside of the Netherlands, of course, I'm referring to the facility near Milan. And we increased -- we saw a significant improvement of operational productivity here at our main site in Sevenum. We successfully launched our marketplaces in Germany as well as in Austria. We are --on a continuous basis, we're adding partner merchants, but also and more importantly, products with the aim to offer eventually a very broad range of health care and beauty related products to our growing customer base and we delivered against our sustainability commitment. And as we mentioned before, we reinforced this commitment by joining the net zero community. Lastly, Germany is continuing to make progress towards the nationwide introduction of electronic prescriptions, but more about this in a moment. I already highlighted that our NPS last year was 72. This compares to 68 a year before. The single most important driver of our customer satisfaction is the time that it takes us from a customer placing an order until this order arrives at the customer's home. Especially last year, it was a focus for us to work with our logistics service providers to analyze the whole journey and to identify opportunities to shorten delivery times. We succeeded in shortening delivery times. Rest assured, we are monitoring this closely and rigorously. In addition, we offered additional delivery options through our partner pharmacies through the SHOP APOTHEKE NOW program in Germany, but also in Austria. And then, of course, we added the 30-minute delivery option through the acquisition of GoPuls in the metropolitan areas of Germany. Needless to say, with the opening of our facility in Italy, delivery times to our customers in Italy came down significantly. And that said, this really from one day to another almost have a significant favorable impact on our NPS. The share of our orders that is placed by returning by existing customers is around 4/5, but that also means that still around 20% of our orders, and this is exactly within our target range are placed by new customers. So SHOP APOTHEKE is continuing to gain new customers, of course, that is critical for growing the business. And lastly, just looking at our website or in this case, particularly at shopapotheke.com, our website in Germany, shopapotheke.com was the #1 health care website in Germany, not just the #1 online pharmacy website in Germany, that's something, quite frankly, you have come to expect from us, but the #1 health care-related website in Germany in 2022. Capacity-wise, we are very well positioned for the growth this year and for the growth in the next 2 years. Our main facility here in Sevenum systems and processes are really running smoothly. Our KPIs are all moving in the right direction. And we are -- really, we are moving from one all-time high in terms of the orders. We process customer orders. We processed in a single day. We are moving from one record to another record. It's now happening with a certain regularity that we process more than 100,000 customer orders a day. And as mentioned before, we opened our new facility in Milan. Of course, the facility in Milan has, with very limited additional investment, has the capacity to handle a multitude of our current business in Italy. And we mentioned to you in the past that going forward, Italy is likely to be a growth driver for SHOP APOTHEKE. Well, when we started our sustainable development program at SHOP APOTHEKE a few years ago, at the end of 2019 and the beginning of 2020, we set the goal for ourselves to reduce our Scope 1 and Scope 2 carbon emissions by the end of 2025 by 80%. Well, I think we conveyed this before to you, you've heard this, we actually achieved this already by the end of September 2022, so more than 3 years ahead of schedule. At the same time, we want to be transparent. The vast majority of our carbon emissions are not Scope 1 and Scope 2. They are Scope 3. And there is still a lot of work that we need to do. At this point of time, we have started a couple of pilot programs with some large manufacturers to along the whole value chain end-to-end to assess the current level of carbon emissions to fully understand what drives the carbon emissions and eventually, of course, to reduce the carbon emissions. We are committed to decarbonizing our business and just to reinforce this to underline this, we joined the community of thousands of progressive companies really around the globe with our net zero commitment. We're aiming for this by 2040. I know that's a long way. Some of us are not going to be with SHOP APOTHEKE anymore at this point of time. But we are right now in the process of really specifying what does this mean in '23, in '24, in 2025. A couple of weeks ago, MSCI informed us that we maintained our AA ESG rating in a couple of subcategories we actually made some progress. At the same time, we know that there's still a little bit of -- there's some more work that needs to be done on our side to be considered for a AAA rating. Well, where do we stand with e-prescriptions in Germany? Let me first -- let me start by saying e-prescriptions in Germany simply work. As of today, more than 1.3 million e-prescriptions have been issued by physicians, dispensed by pharmacies and reimbursed by statutory health insurance in Germany. We at SHOP APOTHEKE, we are literally receiving e-prescriptions every single day. We've mentioned this to you before, our systems, our processes are working, and that's not a surprise to you. We cannot wait to get started with e-prescriptions nationwide in Germany in [ eRX ]. We are assuming a significant increase in the number of e-prescriptions in the second half of this year, together with the launch of the option to redeem electronic prescriptions through the electronic health care or as it's known in Germany, the eGK. Of course, we as SHOP APOTHEKE we are fully aware that the eGK option doesn't necessarily work for online pharmacies. But at the same time, the other 2 options to submit the e-prescription QR code to the pharmacy of your choice, hopefully, SHOP APOTHEKE via the [ E-Rezept ] the e-prescription Gematik app or via the paper print out are also available, will be available. And of course, through these 2 options, we, as an online pharmacy as an e-pharmacy will be able to partake in the e-prescription opportunity. It is still our assumption that certainly after the introduction -- nationwide introduction launch of e-prescriptions, especially the paper printout is going to play a very, very big role and it's very convenient. You take the paper, the paper contains the QR, you take a picture with your smartphone and again, you send it to the pharmacy of your choice. At this point of time, looking at the nationwide adoption of e-prescriptions across Germany, it is our assumption also with the most recent statements in the German press that we're going to see a nationwide mandate for e-prescriptions in 2024. Well, enough said about last year and about our strategy milestones, let's look at the guidance.

Yes. Thank you. Let's look forward indeed. So let me start with the first of the 2 guidance slide, which is a reiteration of our mid to long-term guidance of the adjusted EBITDA margin. This is unchanged. We still expect an adjusted EBITDA margin in excess of 8%. And actually, you see that we consistently report positive adjusted EBITDA margins each quarter in our DACH segment already, but also still there, we see ample room to improve. And let me quickly address the drivers on the gross profit margin, whether it is the sourcing or the optimization of promotions, new assortment or on rents, we see a room for improvement there. We are working on that consistently and gradually you will see the impact there. Media income, it's, of course, reflective of the strong positions we have in most of our countries with high traffic of the leading websites in a very valuable market with valuable customers. Marketing as a percentage of sales will certainly come down on a structural base over the coming years, just already alone for the fact of achieving scale, operational and overhead efficiencies and then particularly in the international segment going to a next level of scale. In the international segment, which is in our case the Netherlands, Belgium, France, and Italy. You actually see that we are doing exactly what we have done successfully in DACH already. And the only thing we need to get also there positive and continue to grow fast is the scale in order to leverage our total business model there. On top of that, we have e-prescriptions foremost in Germany, but also in the mid to longer term, we wouldn't be surprised if developments on Rx will take place in one of our other countries, though there is nothing on the short-term agenda there. And then while we have a guidance of not an adjusted EBITDA of 8%, but in excess of 8% is the fact that if our marketplace and platform continue to increase as fast and good as they are doing at the moment, they could be a substantial contributor to our bottom line adjusted EBITDA margin. Okay. Let's go more to the near future, the coming months to full year 2023. Before I talk about the details, though they are relatively clear, I would say, let me first take the big picture. The big picture is that we expect to continue on our many years track record of organically driven double-digit growth of our business. But in addition to that, in 2023, we want to do this at a positive adjusted EBITDA margin level. And in addition to that, with a [ black zero ] on the free cash flow level. So that's the big picture. We will continue to grow fast, but we will achieve positive margins. And we give this guidance, excluding the impact of a potential search, so a very fast increase of eRx. The regular eRx that we receive each day is included here, but not unlikely scenario that perhaps there will be more of an increase in the second half of the year 2023 that will come on top of the guidance that we are providing to you here today. And to start with the first bullet -- so we expect to continue to grow everything that are. So our non-Rx business, which is, at the moment, more than 90% of our total business and last year was 1.2, 1.1 billion. We expect to continue to grow that between 10% and 20%. And this is, of course, reflective of the -- in each of our 7 countries, ongoing shift of customer preference from off to online and our successful propositions in those countries. So a continuation of our double-digit growth. But for the year, and you mentioned the number already say from in 2022, we had a free cash flow of minus EUR 89 million. For next year, we aim for 0 with a range of minus EUR 20 million to plus EUR 20 million. And the range is there, just reflective, just the same with the EBITDA margin range, whether we will have some headwinds for some tailwinds during the year on some flexibility to maneuver, but our in is, of course, the midpoint. The driver of achieving free cash flow next year. There are, of course, 3 elements. It's the EBITDA, it's working capital, it's investments. But the year over year major contributor is the adjusted EBITDA margin, which is our third guidance there. It's the total SHOP APOTHEKE and not going concern, ongoing operations, it's total SHOP APOTHEKE adjusted EBITDA margin in the range of a positive 0.5% to 2.5%. And we will achieve -- we aim for those EBITDA margin improvements as a continuation of what we achieved already in the second half of 2022, driven by not only a better sales performance and better gross margin, but also by significant efficiencies and scale in our selling and distribution expenses as a percentage of sales. So this is it for the year 2023. And it's now time to go to the questions. Operator?

[Operator Instructions] First question is from the line of Alexander Thiel with Jefferies.

Good to see you again with strong results and sadly for the last time in this combination. I have 2 quick questions, and I would like to take them one by one. The first one is on your free cash flow breakeven guidance. Could you give us some like import on some moving parts, like first, on your gross margin profile level, which improved heavily over the last 3 years. Do you see this level of around 28% as of achievable also in '23? And on the operating cash flow seasonality, is it fair to assume that we see the same cadence last year, year strong Q1 followed by weaker Q2. And lastly, on the swing factor, so maintenance CapEx guidance for '23 and also on the adjustment on the EBITDA level, if you could give us a total number of the guidance, that would be great.

Yes. Those financial questions, I will take, Alexander. Yes, so the main driver of the getting from 2022 free cash flow to the black zero in 2023 is the EBITDA improvement. The improvement will not only be in the gross profit margin, but also in the gross profit margin, we aim for, but we want to keep some flexibility in which elements, but we internally basically say, we want to achieve scale and efficiencies in each of our P&L lines, but you will most certainly also see them in selling and distribution as a percentage of sales. And to your CapEx, indeed, we don't give guidance to that. The reason for that is that we say we want to have several ways to roam in this case to the positive or black zero free cash flow and we want to have some flexibility there. But as I've also mentioned during the presentation, the level of investments you have seen in '21 and '22, a part of those investments, we successfully completed. So the level will be significantly lower, and let me give some more concreteness there. We really think that the CapEx as a percentage of sales is going to be 3% or below 3% in 2023 of our total sales. So that's our CapEx, not really guidance, but that's our expectation for the CapEx. So below 3% of net sales in 2023 is a likely scenario. The adjustments to the EBITDA you asked for the adjustments, the absolute amount of adjustments came significantly down, so improved a lot from '21 to 2022. It was EUR 33 million negative in 2021 and by heart 21.6%, so EUR 22 million in 2022. It's very likely because of the reduced impact of IFRS 3 business combinations or the applicability of that, that it will come down further. Just to be clear, again, taking this opportunity, we adjust for this EBIT because the elements that are in the adjustments, 95% and noncash accounting entries. So the adjusted EBITDA is very close to the cash EBITDA, and that's the reason why we adjust for that. And we are very conservative on that. It's only the employee stock options. It's IFRS free non applicability and it's a little bit of external costs related to projects.

Lastly, on the eGK topic. We have seen some news for regarding the new standing function directly from the doctor terminal and the potential online eGK solution with double authentication and [ ERV ]. Could you comment on this further general that seem to be very convenient for patients and then when we are added. Could you also comment on the current competitive environment that you see in Germany and cross-border because the current trading supporting the weather net traffic that we see look quite positive from our side.

Yes. Alexander, on the eGK or then especially on the scan solution, that is something that's driven by the eRX into the [indiscernible], which is an association of people that believe in the digitalization of the health care system in Germany. We know that there are tests ongoing at this point of time. There was in the press recently some statement also from the health ministry about this. But it's too early to say if and when this is going to come. If there is an opportunity for us to support this and to help, of course, we'll do this. And the way we understand it, it would be a fully digital solution to transmit your e-prescription QR code to the pharmacy of your choice. We need to keep in mind the eGK option is not the ideal option because it requires the physical presence of the eGK of the electronic health card in a local pharmacy. So if the product, for example, is not available in the pharmacy, the patient has to come again. So everybody acknowledges is an important option, but it cannot be the only option. But in terms of the scanning solution, all we know is in multiple physician practices, the tests are ongoing.

And on your current trading.

Say it again, please?

On the current trading.

Well, I can say this much, 2 months and a few days have passed since the beginning of the year. And the management team and Jasper and I we're fully standing behind the guidance, Jasper just communicated a minute ago. There is no reason for us to doubt that this is a very reasonable sales projection and sales guidance.

Next question is from the line of Chris Johnen with HSBC.

I would also like to do them one by one. First, on your international business. I was a little bit surprised by how much it decelerated, actually weaker than the OTC business in Germany despite the ramp-up in Italy. I also think -- I mean, I would also like to pick your brain on consensus expectations for EBITDA. There is quite a significant improvement from minus 25-ish to minus 4 in consensus. So I was just curious whether you could give us a bit of an idea of where you think or how much the business could grow and how much margins can improve realistically in the international segment?

Yes. International, I basically can say international sounds very exotic care for us. It's in the Netherlands, Belgium, France and Italy, nice adjacent countries. Our strategy is the same. Our belief in it is the same. The numbers are still relatively smaller. So sometimes you have a faster increase, sometimes a lower increase. There's nothing that you should see behind it. We didn't change that you should see behind the fact that quarter 4 growth was lower than it was in quarter 1 last year. It is what it is. We are aiming for to accelerate that again. Our strategy remains the same there, and sometimes customer behavior in the country is very different from one country to the other. That's why we like to have the portfolio approach, and we have seen that a little bit in Q4 that some of the tough regions had a bit more positive momentum than some of the other regions. But that will likely be different in another quarter. So actually, there's not anything to comment on besides that I acknowledge that the growth in Q4 was somewhat lower, but it is what it is. Your second question on the -- I didn't really understate that consensus...

EBITDA consensus assumes a significant improvement in profitability in 2023. I'm just curious how confident or how comfortable better set you are with the minus 4% that consensus expect for absolute EBITDA in international?

For international you mean, okay, that I understand. Yes, we only give guidance a total company level. Yes. So I don't even know what the consensus for international is on total company, we think it's going to be a positive number and a clearly positive between 0.5% and 2.5% of total sales.

Okay. And then another one, pivoting back to the eRx. I mean, the thing is a lot of our comments with respect to being mandatory sometime in 2024, maybe even at the end of 2024, together with the EPA. I always find them to be very strange because it's -- you know this, it's effectively mandatory already today and has been for more than a year. So do you -- what do you actually expect to change? Do you think that there are going to be repercussions introduced to doctors who don't use it? I mean what's going to change? I understand eGK or what the eGK solution would do is probably increase the adoption. You also seem very confident that this will drive up the number of tokens printed on paper. But that's another thing that could already be done today. Like what do you think this does that will increase the adoption by doctors? Do you think the Ministry of Health will start being a bit more let's say, rigorous in ensuring compliance with the law?

Chris, I think there is a wide recognition [indiscernible] that the mandates didn't work because it came without teeth. And it is our sense that the political realm that are assessing, what does it mean to have a successful mandate? What would be required? There are several options that are being discussed right now. It's too early to say what the outcome of these discussions will be. But what we heard is the next mandate will be a success. But again, this is now purely speculative on my side to say, is it going to be an incentive. It's going to be a sanction if doctors don't issue electronic prescriptions, I don't know. But again, there is a recognition that the last mandate, and you're right, according to the law, since the beginning of '22, doctors have to -- are supposed to issue electronic prescriptions in Germany, that they can work out. But again, there is a recognition they have only one more trial.

Okay. Let's hope laws are starting to be come in force in German again. Good luck.

Next question is from the line of Volker Bosse with Baader Bank.