DocMorris : Half-Year Report 2023

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DocMorris | Half-Year Report 2023 | Letter to Shareholders

Letter to Shareholders

Dear Shareholders

DocMorris strengthened its basis for sustainable, profitable growth in the first half of the year. Following the consolidation of logistics in the new state-of-the-art distribution centre in Heerlen and the focused brand strategy, productivity and profitability as well as marketing efficiency continued to improve significantly. The gross margin increased by 5.5 percentage points to 21.6 per cent in the first half of the year compared to the same period last year. Adjusted EBITDA improved by CHF 33.9 million to minus CHF 20.8 million and is thus within the target range for the full year.

Inflection point reached: Revenue growth in the second quarter compared to the previous quarter- DocMorrisachieved a 2 per cent revenue increase in the second quarter compared to the first quarter of 2023. The company has thus reached the inflection point in the first quarter and created a new starting position for profitable growth. In group currency, external revenue 1 was CHF 252.7 million in the second quarter and CHF 501.4 million in the first half. After completing the focus on potential e-prescriptioncustomers in Germany, especially with a chronic medication need, the number of active customers 2 as of the end of June 2023 is 9.0 million.

The revenue and operating result of the Swiss business will no longer be consolidated from the date of sale to Medbase, a subsidiary of Migros. In Germany, the revenue reduction of 11.7 per cent in local currency in the second quarter and 17.4 per cent in the first half of the year reflects the optimisation of marketing expenses and the focus on more profitable revenues. In the Southern European marketplace business, revenue decreased by 14.9 per cent in local currency in the second quarter and by 16.3 per cent in the first half of the year.

Capital structure significantly strengthened and strategy secured - Thesuccessful completion of the sale of the Swiss Zur Rose business has provided DocMorris with close to CHF 300 million proceeds to date. The equity ratio increased significantly from 31.9 per cent as of 31 December 2022 to 48.9 per cent as of 30 June 2023. An earn-outcomponent of CHF 47 million due in the second quarter of 2024 and the planned sale of the Swiss land and properties will further strengthen liquidity. At the same time, the implementation of the strategy is secured.

1. External revenue consists of the consolidated revenue of DocMorris plus online revenues of pharmacies supplied by DocMorris, less the consolidated revenue from supplying them.
2. Customers supplied by DocMorris, either directly or through its partners.

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DocMorris | Half-Year Report 2023 | Letter to Shareholders

E-prescription rollout accelerates strongly - mandatory from January 2024- On1 July 2023, the new e-prescriptionredemption channel using the electronic health card 3 (eGK) was launched on time in Germany, thus starting the nationwide rollout process in the second half of 2023. This additional redemption channel - in addition to print out and app - strengthens the general acceptance of the e-prescriptionin medical practices and among patients. In July 2023 alone, more than 340,000 e-prescriptions 4 were filled, 38 per cent more than in the previous month.

For a broad use of e-prescriptions,non-discriminatory redemption channels must also be available for online pharmacies as of January 2024. This requires a digital equivalent to the physical eGK solution, which enables the e-prescription to be redeemed via an NFC-ready eGK without a PIN. A corresponding technical solution analogous to the physical eGK solution for local pharmacies is avail- able. Close interactions are taking place with the relevant regulatory bodies and stakeholders so that the digital solution can be introduced in the fourth quarter of 2023.

Significantly improved digital customer experience- Inthe second quarter of 2023, DocMorris made significant improvements to its web shop and app. As a result, the company expects an increase in customer quality and higher conversion rates. E-prescriptionmedication management was expanded to include reminders and automatic follow-upprescriptions, among other things. In addi- tion, DocMorris expanded its core pharmacy offering. In July 2023,

1. long-tailassortment, based on its in-house technology, was added to the existing marketplace on the DocMorris healthcare ecosystem.

Outlook- DocMorris continues to focus in particular on its action plan to further strengthen the sustainable basis for profitability and future revenue growth. Regardless of the ramp-up speed of electronic prescriptions, management confirms its 2023 targets communicated in March:

• Return to revenue growth in the second half of the year fol- lowing the streamlining of the customer base. For the full year, a mid-single-digit percentage decline in external revenue in local currencies.
• Improvement of adjusted EBITDA to between minus CHF 20 million and minus CHF 40 million.
• Capital expenditure of CHF 30 million to CHF 40 million.

1. The e-prescription is not stored on the eGK. The physical card only serves to authorise the pharmacy to retrieve the prescription data stored in the telematics infrastructure. E-pre- scriptions issued within the framework of video consultations can thus also be redeemed via this procedure.
2. Source:gematik

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DocMorris | Half-Year Report 2023 | Letter to Shareholders

DocMorris expects to break-even on adjusted EBITDA in 2024, excluding e-prescriptions. In the mid-term, an adjusted EBITDA margin of 8 per cent continues to be targeted.

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