Redcare Pharmacy NV (RDC) Earnings Call Transcript & Summary

Hello, and a very warm welcome also to everybody from my side. Before we start with the presentation, I would like to welcome our new CFO, Hendrik, to this round. We are happy to have Hendrik with us in the management team to further scale Redcare Pharmacy. Welcome, Hendrik.

Thank you. Happy to be here.

Okay, let's look into the agenda of today. So first of all, we would like to start with the highlights of 2025, followed up by the financial performance '25, an update on strategy, and then later an update on guidance. Let's start with the highlights of 2025. The first three highlights are focused on Rx. 2025 has been a very successful year for Redcare on Rx. We almost doubled our Rx revenues in Germany, reaching EUR 503 million. If we look into the relevant competition, our share of 67% demonstrates our clear market leadership position. From a group perspective, Rx revenues are now exceeding EUR 1 billion, more than 33% of total sales. The Rx bonus for EU online pharmacies was confirmed not only at the ECJ again, but for the first time in history also at the highest German Federal Court. As a consequence, we introduced a new Rx bonus scheme in Q4, which supported the strong growth in Q4 of last year. In 2025, including the beginning of 2026, digital healthcare in Germany experienced a major step forward. The specs for a new and more comprehensive identification technology, [ CardLink ], have been released for local, but also for remote use cases. For online pharmacies, this will massively increase and improve the redemption options. Customers using eGK cards will no longer need SMS verification as an additional step in the order process, and on top, the digital health ID can be used to redeem Rx at online pharmacies. Please also keep in mind that at the beginning of 2027, the EU ID Wallet will be launched in Germany, expanding digital use cases including the digital health ID to the entire population in Germany. Let's go to the next slide. 2025 was not only very promising on Rx; we also delivered on our strategy to further increase customer satisfaction, scale, automation, and cost leadership. Our logistics capacity expansion in Pilsen went live in Q4 of last year. Pilsen adds 15 million parcels annual capacity to our overall capacity. We are mainly serving the entire Austrian market from Pilsen, but the setup also allows to serve other markets on non-Rx. For the Austrian market, we see since go-live faster delivery times, higher customer satisfaction, and a higher NPS. Since wages are lower in Pilsen compared to Sevenum, we also reduced operational cost per parcel. In Sevenum, we launched our logistics automation project in 2025. Sevenum will always remain the heart of our pharmacy, including Rx. Therefore, the automation has a clear focus on Rx including mixed baskets, but can also serve non-Rx orders only. The strategic rationale is comparable to Pilsen: double our capacity in Sevenum by early 2027. And here good news, we are clearly on track to deliver on that; reduce labor cost by 70% per order, and higher speed, faster delivery will boost customer satisfaction and increase our competitive advantage. And then we also strengthened our balance sheet in 2025. The EUR 300 million convertible bond secures the cash we need to execute on our strategy. Let's get to the next section, Monica, financial performance. Our full year revenues are up 24% to EUR 2.9 billion. There is a double-digit growth in the DACH region as well as in the International region. Non-Rx revenues up 15.5% to EUR 1.9 billion. Rx revenues are up 43% to EUR 1.1 billion, now comprising 36% of the total revenues versus 32% previously. And the Rx Germany revenue, we talked about this already, 98% up to EUR 503 million. Overall, a 72% increase on adjusted EBITDA, 0.6 percentage points year-over-year margin improvement ending up on 2.0% adjusted EBITDA. If we can go to the next slide, this is our typical breakdown into the different segments. Again, overall Rx is the growth engine or has become the growth engine of the company. If we look into the different segments, you can see DACH 24.1% growth, non-Rx 12.5%, Rx 42.6%, and on International a strong 23.7% growth on non-Rx. Looking into the orders, you can see there is a 19% increase in orders processed, lapping a very strong 2024, and of course, also reflects somehow the higher average basket we have in our business right now compared to previous years. Now I would like to give some additional insights into the non-Rx growth situation. So, what you can see is that our growth came down in 2025, mainly driven by the DACH segment. We have identified four main reasons. First of all, we did in 2025 not always find the sweet spot in the marketing mix, meaning, the right combination of marketing, pricing, vouchers, and also things like minimum order value. So, finding the right mix was not always possible -- we did not always perform in the best way. Secondly, to some extent, we saw currently softer markets. And then number three, we see an increased platform competition, especially in the area of top sellers of BPC. And number four, our overall push for more marketing efficiency, meaning at a certain threshold not to buy the next possible order. Overall, we increased the marketing budget 2025 compared to 2024, but improved the marketing ratio as percentage of sales, and especially towards the second half of the last year. In Q4 2025, we were working on top against a very strong Q4 2024, being pushed by, you remember, the Rx marketing boost campaign. The campaign of course had Rx as a target, but as a result of our one-brand strategy also fueled non-Rx growth in Q4 of 2024. Going forward, we will continue to optimize for growth and profitability using all elements of the marketing mix. By doing so, we expect to stabilize the growth rate at 8% to 10% in 2026. And of course, we are intensively working on the details of the marketing mix to return to different growth rates. Non-Rx is the core competence of Redcare. We consider also going forward non-Rx as a profitable, growing, cash-generating business. Having said this, I would like to hand this over to Hendrik.

Thank you, Olaf. Yes, warm welcome as well from my side. Let's jump right into the profitability analysis. So, you have seen we have improved our EBITDA significantly year-over-year. At the same time, we are at the lower end of our guidance. And this is mainly due to the higher share of Rx or the lower share of non-Rx, as Olaf just explained in Q4. Whilst the gross profit margin for Rx is significantly lower than for non-Rx, please keep in mind that the unit economics are similar. This is due to the higher ASP for Rx. We have reduced our marketing spend in percentage of revenues year-over-year, and this is because we consider offering a cash bonus directly to customers using Rx in some areas as more efficient than our marketing spend. As we plan to continue to offer Rx cash bonuses throughout the year '26 versus only four months in '25, we will as well continue to reduce our marketing spend in percentage of revenues whilst increasing at the same time our ROI on marketing. Moving to gross profit. So, our gross margin is mostly driven by Rx and non-Rx mix. You see here the impact of the increasing share especially via Rx Germany, but we have as well margin pressure on the non-Rx piece especially as Olaf pointed out in the Beauty and Personal Care category. We have a tailwind from country mix. This is due to the lower share of our high ASP and hence low margin specialty Rx business in Switzerland, MediService. And you see as well a positive impact of our marketplace business. Our marketplace business has still a share of less than 5% of total revenues and we are therefore not reporting in detail about this business yet, but we expect it to continue to lift our profitability going forward. If we look at scale, we see how it materializes in our selling and distribution administrative costs. We have reduced our marketing expenses significantly compared to an extra investment in Q4 '24 to boost Rx. And whilst we label this marketing Rx, it has as well a spillover effect to non-Rx. So, you see a significant drop in Q4 SD&A rate versus Q4 '24, but this is not representative of what we plan for 2026. However, we plan to continue to scale in marketing, operations, and administrative expenses. One example is our automation project in Sevenum, where we plan to reduce labor costs per unit by 70%. This will be completed at the end of '26 and so become effective in '27. You see as well 0.7 percentage points headwind from our country mix and our marketplace business. This is due to the lower share of MediService, which has a lower SD&A ratio, and the higher share of the marketplace business, which has a higher SD&A ratio versus our core business because our revenue is not the GMV of sellers, but is actually the seller fees. Now, if we look at EBITDA margin progression without mix effects, you see that it is mostly driven by selling and distribution expenses, mostly by marketing. And the improvement of about 0.5 or exactly 0.6 percentage points in '25 is similar to what you can expect going forward in '26, and we'll talk about that more in the guidance section. If we look at the different segments, so at the DACH segment, as you can see on the left hand side, we have constantly increased the share of Rx in our mix. In 2023, this was only our specialty business in Switzerland, and then in Q2 '24 we started to scale the Rx business in Germany. And now in '25, we have for the first time for the full year an Rx business in Germany and significantly increased the Rx share. Despite that, we have been able to improve our profitability. It's only a slight improvement, but this is against the headwind of 0.7 percentage points on the gross profit. So, we consider basically this as the turning point after the strong decrease '23-'24 in adjusted EBITDA margin for DACH. Going forward, we will improve our EBITDA margin continuously. Now looking at the international business, there as well we see scale clearly materializing, coming from minus 6% in '23 to minus 4% in '24 and now minus 1% in '25, and we expect to break even soon as the business continues to grow. On the cash side, we have increased our cash position by EUR 26 million with a EUR 50 million contribution from our operating result. We have actually improved some of our working capital KPIs, but our inventory was about EUR 10 million higher than normal as we buffered a little bit of stock for the ramp of the Pilsen site and as well for the introduction of a new ERP system at MediService, with cut-over January 1st, but this will normalize throughout the year. The majority of our investments are related to fulfillment capacity expansion in Pilsen and Sevenum, and we will spend another EUR 30 million on the Sevenum automation project in '26. After that, our investment in fulfillment capacity is basically done, meaning that for the next five years we'll have enough capacity to serve our projected top line in the DACH region, and we expect '27 and beyond a CapEx below 2% of revenues. With that, I'll hand it back to Olaf.

Thank you very much. Okay, now I would like to give an update on strategy. If you can go to the next slide. I would like to use the first slide in the strategy update section to briefly explain the competitive advantage of Redcare as the leading European online pharmacy. The combination of Rx, non-Rx, and marketplace offer gives us a unique value proposition towards our customers. We can use, wherever possible from a legal perspective, Rx as the anchor to build trust as a pharmacy and to generate the necessary frequency, especially in the case of chronically ill patients. This trust anchor differentiates us clearly from the more non-Rx-driven platform models, and it also shields us against generative commerce. Non-Rx and marketplace are becoming the drivers of basket, gross margin, and profitability. The combination of pharmacy trust, frequency, assortment, and higher customer satisfaction will lead to an increasing CLV over time. So the customer lifetime value will go up, and we will show initial results of this strategy later in the presentation. An increased use of automation and AI will lead to both higher customer satisfaction and efficiency gains throughout the entire P&L. If we go to the next slide, you will see that we used this slide already in last year's earnings call to explain the unique value proposition of the one-stop pharmacy in more detail. Still a very good slide. That is the reason why we are using it again. First of all, it all starts with a highly trusted and top-rated pharmacy brand. One customer ID, one login, one-stop pharmacy, one product. On our pharmacy platform, we offer the widest possible assortment. In the case of Rx, this often translates into the best possible product availability. As you might know, up to 30% of Rx product is not really available at local pharmacies on the first try. We claim to have the highest product availability in the market. Customers can check that in our app 24/7. In the case of non-Rx, it is more about the breadth and the depth of the assortment we offer. In contrast to a lot of our competitors and platform models are focusing only on top sellers in the BPC area. The marketplace allows us to offer adjacent assortment to our customers, which make our platform even more relevant and always a good reason to return. Our enhanced pharmacy services are a cornerstone of our offer, especially relevant to chronically ill patients. While complying with national pharmacy standards, we already introduced more than 20 years ago an electronic health record for our customers, including advanced pharmaceutical checks. This service is very well perceived by our Rx customers. Since the introduction of the e-script, we also launched additional services, like the repeat prescription service towards doctors. The reliable delivery is one of the key NPS drivers for our pharmacy. Therefore, investments in automation, in logistics do not only improve our cost position, but are also building trust and customer satisfaction. Let's go to the next slide, Monica, please. Looking into the development of our active customer base, we can see that this strategy is working out well in the German market. In total, we increased the number of active customers by 1.4 million. On Rx, we increased the number of active customers by 0.6 million in 2025. If we break this number down, we see that the additional active Rx customers are joining us in two ways. Converted non-Rx customers who like the Rx offer and are making use of this additional offer. Good effect of our assortment strategy. And secondly, first time completely new customers to Redcare liking the Rx value proposition, starting their journey with us on Rx. Additionally, they are buying non-Rx at an increasing rate. This slide should also look familiar to you. Let's talk about customer lifetime value. We are here comparing the Q1 '25 cohorts of non-Rx customers with the Q1 '25 cohort of Rx customers, including all follow-up orders throughout 2025. Key takeaways, like also in the past, the cumulative revenue and gross profit confirms that Rx customers have a superior customer lifetime value compared to non-Rx customers, and also including the impact of an Rx bonus in Q4 of '25. But also, non-Rx cohorts are growing and are generating customer lifetime value. What the cohort analysis of course also shows is that from a customer lifetime perspective, it is best to have the combination of both cohorts. Higher baskets, higher frequency, increased trade-off mixed orders, and higher gross profit. If we go to the next slide, you can see we would like to give you some more insights into the drivers of our Rx business. Most important to see that the average e- Rx basket is improving significantly to EUR 130 in Q4 '25. We have two main drivers for that. One is the mixed order rate, meaning additional non-Rx items in the basket. We see an improved mixed order rate, about 40% already in Q4 2025. And as part of our platform strategy, you can imagine we would like to bring this number further up. And secondly, the other main driver is the increased e-Rx NPS. Existing customers are trusting us as a pharmacy once they had an experience with us on Rx. And that means they are redeeming more expensive and more complex Rx products with us and also more scripts and Rx units at the same time, also pushing the average basket value. If we can go to the next slide, you can see as a result of the one-stop pharmacy strategy, we have an increasing gross profit per average active customer over time, currently at EUR 47, almost EUR 48. Please keep in mind that we have been only for less than two years in the e-Rx business in Germany. And the marketplace also still, as Hendrik pointed out, represents only a smaller part of our sales. Nevertheless, you can already clearly see that the CLV of our customer is improving, and this is just the beginning of it. Having said this, I think we should go to the next section, update on guidance. I will hand this over to Hendrik.

Yes. So I'm going to build on what you just said, Olaf. So if we look at the key drivers of our EBITDA margin improvement, you will see a lot of this is things that we are already doing. We're not inventing a new strategy, but we're basically continuing on the path that we're on. So going forward, we have sketched out a plan to consistently improve our profitability with the building blocks that you see here. So increasingly, we expect Rx to become the driver of organic new customer acquisition, reducing the cost of new customer acquisition. And then we will, with upselling and cross-selling, increase the customer lifetime value of all customers, Rx and non-Rx. We will continue to see automation in all areas, not just in logistics, but as well there. And some of this automation will reduce costs, some of it will as well improve the customer experience. We'll continue to see the scaling effects that we have on our overall overhead costs. We continue to drive marketing efficiency to some extent by scaling, but as well as we make our marketing more sophisticated and differentiated. And then we expect over proportional growth and profit contribution from the marketplace and the retail media business, who are structurally more profitable than our core business. So with these building blocks, we lead over to the guidance. Our '26 guidance is for total sales growth between 13% and 15%. For Rx revenues in Germany in excess of EUR 670 million. For non-Rx growth between 8% and 10% with an adjusted EBITDA margin of at least 2.5%. Beyond '26, we have slightly adjusted the articulation of our outlook, but we stay committed to the above 8% in the long term. We will achieve a margin of 5% in the midterm and above 8% in the long term. At the same time, we want to announce that we are changing our forecasting practice here. So we will, going forward, no longer provide EBITDA guidance beyond the next financial year. As we become a profitable company, we'll as well move to earnings per share. We'll focus on the next financial year and not provide any outlook beyond that, aligning with the practice of most DAX companies in Germany. So with that, we conclude the presentation, and we move to Q&A.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Jan Koch from Deutsche Bank.

Hi, Olaf. Hi, Hendrik. Thanks for taking my questions. And I would like to take them one by one. The first question is actually on your sales guidance, which implies a steep growth slowdown in OTC compared to the full year 2025. Could you try to unpack this and explain how much of the lower growth rate is driven by, A, the market weakness? B, your decision to spend less on OTC marketing, and three, on intensified competition. Yeah, any remarks on the new entrants would also be helpful.

Yes, happy to take that. We consider the Q4 drop in non-Rx growth as an anomaly, and we see to some extent that this is proven by the current year trading, where we see a rebound in non-Rx, especially in Germany. So why is it a one-off? The drop is mostly driven by, and mostly, I mean, like in the order of 60%, 70%, by the marketing spend reduced year-over-year. So as I laid out, we have spent in Q4 '24 significantly on Rx awareness. But every time we do this, there is a clear spillover effect on non-Rx. So whilst internally we label this Rx marketing, it's actually marketing for SHOP APOTHEKE. And with our understanding of our marketing efficiency, we can clearly attribute 60% to 70% of this drop to our marketing. Now overall, the market has been soft. If you look at the offline pharmacy reporting, that is true to some extent. That was true as well in Q3. Yes, so there is a soft environment, but it's a lot smaller share of the explanation. And when it comes to new market entrants, I think we discussed this before. We take DM obviously serious as a competitor, but we have not seen any significant traction. It will probably take them time to build a larger business, but at this point, we don't see any impact of DM on our non-Rx business.

Agreed.

Does that answer the question?

Yeah. Just as a follow-up. Essentially you mentioned that, Q1 was impacted by some one-offs in OTC, but you still print a 9% growth and essentially, your guidance for 2026 at midpoint is also for 9%?

I'm not sure I got you. So Q4 is impacted by one-offs.

Yes.

And then what we expect for 2026 is that this one-off is not really a change in the trend. However, we acknowledge that there's a longer term trend of decrease in non-Rx growth. I mean, we have seen this basically since Q4 '24. And as we look at our current trading and our understanding of the market, we assume that this will stabilize and balance out over the year and hence the 8% to 10% guidance that we're giving. So we see a rebound versus Q4 and stabilization overall.

Okay, understood. And then on capital allocation. Thanks for providing the comments on the planned spend for the automation project. But could you also share your assumptions for the overall CapEx and net working capital assumptions for 2026? And given the low share price and your strong balance sheet, would you be open for a share buyback program?

Yes. We're not providing a cash flow forecast. Our guidance is our guidance as articulated here. As you can see, we're well-funded. We have this EUR 30 million as kind of a one-off. Everything else is similar to the past in terms of IT capitalization, and this means that we're going to see a very much reduced CapEx in percentage of revenues to below 2%. So at this point, I think we are obviously not happy with our stock price, but we think that we will wait for any announcement on buybacks until we have reached profitability, and this is the current plan. Obviously, this is a constant discussion that we have, but we have nothing to announce in this area at this point. There's nothing planned in terms of share buybacks.

Okay understood. And then finally, could you help us with the phasing of your sales and margin guidance for 2026? Last year you provided some comments on the Q4 call for Q1, especially given that Q1 is typically the quarter with the lowest margin in the year.

Yes. We expect the same seasonality, if you wanna call it like this, in '26. But overall, we obviously think of this as a very balanced forecast. But yes, you should expect the same lower margin in Q1 as we have seen this in the past.

The next question comes from Sarah Roberts from Barclays.

I have two, if that's okay. We'll probably go through them one by one. Just firstly, on the EUR 670 million guidance for Rx, can you just walk us through beyond offering bonuses to customers that seem to be having a positive impact, what other levers do the business have in terms of driving that penetration of Rx online further? I think particularly given there seems to be an education element around consumers today and you seem to have pulled back a little bit on kind of brand advertising and television advertising. So just wanted to understand what you can do that's within your control to kind of drive that online penetration higher.

Well, I will try to give it. So first of all, we need to apologize a little bit about techniques. So sometimes you probably only see me or Hendrik, so I apologize for that and also for some of the noise in the back. So I will try to answer that question. Yes, I mean, we see that the change of behavior is not happening at the pace we would like it to be. So that is also the reason why our growth rate on Rx is coming down. And what is really in our hands is to have a great product, great delivery. We have the bonus now out there and of course, we need to continue to do the education. Additional things which could come in and might change this is the introduction of the digital Health ID and maybe also a change more on the way how often chronic ill patients have to see the doctor throughout the year. But what it comes down to in 2026 is really we have to continue to do the education and at the same time need to want to have efficient marketing spend. So that is the reason why we ended up on this growth rate rather than on higher growth rates.

Got it. Thank you. And then my second one, there's been a little bit of noise around proposed Section 35B regulations around the pharmacy supply chain and reforms there. I think some concerns around the temperature control elements of those reforms as well. Just wanted to understand how materially you think these changes could impact the business, and should we expect any meaningful cost increases kind of going forward? Any thoughts there would be helpful.

Well, that's a good question. You know, there's this pharmacy reform going on in Germany, having two parts. One is really a new law being introduced, and the other is more regulation on the pharmacy operations. And in this section, there are new proposals how to introduce, let's say, new measures on temperature control. So the current version, we think is not going to be the final one. Therefore, we are currently working on this one and with all of our partners. So therefore, it's really too early to say something to this one at this point in time.

[Operator Instructions] The next question comes from Christian Salis from Cantor Fitzgerald.

I've got a follow-up on the non-Rx growth topic. So you mentioned the increased competition in Germany. So from which channels is this really coming? Is it coming from multi-channel retailers that are entering the market or is it from other online pure plays? Could you just please provide a little bit more color on that? And the second question would be regarding the Fixum. There have been positive comments by the German health minister. So could you confirm that this will have a positive impact on your profitability? To which extent is this already reflected in your full year 2026 guidance?

Okay. I would give it a try on the competition. There has always been competition in the market. Yes, so the platforms, the big ones like Amazon, they have been out there for 10 years, and we also always had other online pharmacies competing against us. So that is not really something new. We simply have to find a good way to do it to deal with the competition. But if you to be more explicit about because of your question, we see more the platform businesses out there currently who are offering, let's say, especially in the area of BPC, top sellers via lower price. That is more the competition than some of the new entrants and new guys entering the market. So right now we don't see any impact of those brick-and-mortar drugstore chains entering our market. Of course, we are watching them closely, but so far there is no impact. It's really more about the online platforms. But again, I mean, this has been out for many, many years, and we will find a way to deal with this also going forward. The second of your question is on the Fixum. Yes, we also read that there are -- this discussion on the Fixum has been going on for quite a long time now already. It's already part of the coalition agreement. So now the question is when -- if and when there will be a Fixum increase. We don't know more than you know, so we also follow that discussion. But what is going to happen, nobody knows at this point in time. You know, the Ministry of Health also set up a special, let's say, committee to look into a reform overall on the healthcare system. So therefore, at this point in time, we cannot give you any additional information. For sure, we don't have any increase in our guidance for this year or in our long-term plan. There's no assumption of an increase on the Fixum in it.