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Walter Hess: Good morning, everyone, and welcome to our Q1 '26 trading update. I'm Walter Hess, the CEO, and I'm joined today by our CFO, Daniel Wuest. In line with what we announced at the full year conference, we will provide transparent quarterly insights into our path to EBITDA breakeven, which is why we are hosting today's call. Just a few weeks ago, during our full year '25 results, we outlined our strategic evolution from an online pharmacy player to the leading digital and AI health platform, the engine for our profitable expansion at scale. Today, we will show you the facts that validate our successful development. Let's move straight to the Q1 highlights on the next slide to demonstrate how well this engine is now accelerating. Overall, we achieved a strong revenue growth of 10.7% year-over-year. Our Rx business showed outstanding momentum with a 30.4% growth year-over-year alongside a strong 7.6% sequential growth compared to the previous quarter. The growth was fueled by accelerating month-over-month with a remarkable uptick in March, which also continues in April. Our high-margin Digital Services business continues to scale rapidly, achieving an impressive 63.1% growth rate while consistently increasing margins. In Q1 '26, we successfully expanded our ecosystem platform, growing our active customer base by 1 million year-over-year, whereas 0.4 million in Q1 '26, to a total of 12.6 million, which is a great achievement. And most importantly, and as you know, our main priority, we improved our adjusted EBITDA by CHF 10 million year-over-year to minus CHF 6 million, proving we are on track to achieve our breakeven target in the course of 2026. Let's move to Slide #5 now. The 30.4% year-over-year Rx growth clearly proves that our strategy to capture the potential of the Rx market is highly effective. It shows that the patients are more and more familiar with our Digital Services and increasingly value the comfort of home delivery. We saw a growth in Rx orders from month-to-month with a significant uptick in March, rounding off a very successful first quarter and also continuing into April. And this acceleration comes together with a more and further optimized channel mix, which pleasingly increased RAS, return on advertising spend, and decreased our customer acquisition costs even further. Ultimately, this is a strong start into the year, and it demonstrates the growing stickiness of our health platform. Our non-Rx business remains a reliable driver of value, delivering continuous and profitable growth of 6.5% year-over-year to fuel our broader ecosystem. We managed our OTC and BPC business according to plan to a growth rate of 4.4%. Our Digital Services, including TeleClinic, Retail Media and our Marketplace grew further by an outstanding 63.1%. These digital business lines are not just growing top line, they are delivering increasing margins and therefore, a significant EBITDA contribution. And on top of it, the strong platform performance and expansion also forms an excellent basis for our Retail Media business. And now I would like to hand over to Daniel. Daniel Wüest: Thank you, Walter. And also from my side, a very warm welcome to all the participants. Let's move to Slide #7, where you see the EBITDA bridge, which we also provided to you during the full year figures in March. And I want to start this with the following comments. We closed Q1 with an adjusted EBITDA, as Walter already said, with minus CHF 6.3 million, representing a substantial improvement of almost CHF 10 million, exactly CHF 9.8 million compared to the quarter of last year. That's proving our continuous path to profitability. The adjusted EBITDA margin improved by over 360 basis points from minus 5.7% to minus 2.1% in Q1 compared to the previous year's quarter. If you look at the chart and you see since Q1 '25, we have seen an ongoing quarterly EBITDA improvement driven by basically 3 factors: Better operational performance, focus on marketing efficiency and also very important to mention, disciplined cost management. Amongst other, you remember, we have closed the Heerlen Logistics operations last year. And this year, we have announced the closing of Ludwigshafen, the warehouse and their respective logistics operations, which have already contributed substantially on the cost side, but will further contribute during '26. And I can also confirm that with the closure of Ludwigshafen, we are very well on track. We will see first positive operational effects there in the second half of '26. We continue to be very transparent, and you see with this minus CHF 6.3 million in Q1 '26 in the chart on Page 7 that we expect the quarter result almost on the same level for Q2. And then as already mentioned in March, we aim for getting close to EBITDA breakeven in Q3 and there will be definitely EBITDA breakeven in Q4. And I think that's what the management team is kind of aiming to achieve. All in all, our Q1 results demonstrate that our measures are working and will further work because it's not yet done, and bet DocMorris is very well on track to achieve EBITDA breakeven in the course of the year. We are relentlessly executing our plan with precision, knowing that our strategy, the evolution from a leading online pharmacy to a leading digital and AI health platform will pay off. With that, I would like to go to Slide #8. There, nothing new. Backed by our strong Q1 performance and our current trading, where we see an ongoing positive trend from March, we are fully confirming our short and midterm guidance as laid out on the full year presentation in March. That means we confirm our '26 adjusted EBITDA target in the range of minus CHF 10 million to minus CHF 25 million, strongly supported by the improvements we have already seen and delivered in Q1. We are confident to achieve EBITDA breakeven even if we would be at the higher end of the guided external revenue growth guidance. And just for your memory, we guided mid-single-digit to low teens percentage range. And as you have seen in Q1, we can deliver on the EBITDA target even if we are at the upper end of the overall revenue guidance. All in all, we firmly reiterate our commitment to reaching EBITDA breakeven during '26 and achieving positive free cash flow in the course of '27. And with that, I hand over to Walter. Walter Hess: Yes. Thank you, Daniel. So before we move to Q&A, I want to briefly address the upcoming Annual General Meeting and the future Board composition proposals. Our Board proposes 3 independent nominees, Thomas Bucher, Nicole Formica-Schiller and Dr. Thomas Reutter. Together with our existing Board members, this composition brings targeted expertise across the areas most critical to further execute on our strategy. Management's clear preference is for continuity and stability. We are at a pivotal point in our development. Consistent, focused execution requires a Board that is aligned, experienced and ready to act, not one in transition. All proposed new nominees are fully independent and stand for the interest of all shareholders. We believe this is the right team to take DocMorris forward, and we encourage shareholders to support these nominations at the AGM. Let me conclude the call with a clear message. Our vision of health in one click is not just a concept. It is fully operationalized through our integrated digital and AI health platform. However, a strategy is ultimately defined by its execution. Our Q1 results deliver strong proof that our measures are working and DocMorris is firmly on track. We are not just making promises for the future, we are delivering today. This is clearly demonstrated by our strong Rx growth and the 63% expansion in Digital Services and our continuous EBITDA improvements. My clear statement to you is that the transition to a profitable digital health ecosystem is fully underway and is yielding tangible financial results. We have the right strategy. We have the right management team and the operational proof is in place. We are executing with absolute focus, and we are pairing the necessary sense of urgency with a clear commitment to long-term value creation. And with that, we would like to move over to the Q&A part of this call. Operator: [Operator Instructions] And we have already some questions. The first question comes from Mr. Koch from Deutsche Bank. Jan Koch: My first one is on Rx. Encouraging to see that the growth rate has accelerated again in Q1. If I analyze your Q1 number, I'm already quite close to your full year guidance. So is there anything we should consider here? Or is your full year guidance just a bit more conservative than in recent years? Then secondly, on profitability, could you confirm that the loss in Q2 is not expected to be higher than in Q1? And if so, the upper end of the EBITDA loss range looks quite unlikely as well. Any comments here? And then lastly, are there any upcoming regulatory changes that we should keep in mind? There have been some headlines on the potential changes to the cold chain requirements. So any color here would be helpful. Walter Hess: Yes. Thank you, Jan, for your questions. Let me take the first and third question. And then the second one, I would like to hand over to Daniel. On the Rx, what I just can confirm that we continuously improve the marketing mix, the performance of the marketing. And with that, we just see a really good development. And yes, so let's meet again in August, and then I can further -- or we can further give you more details about the growth and what you can expect also in the second half year and for the full year. About profitability, maybe Daniel? Daniel Wüest: Yes. I think that's always the backside of being very transparent and you did the right math or measuring up on the scale. I think it would be -- if you already would know how Q2 would come in, especially on the bottom line, then my life would be much easier, and we would now go out and [indiscernible] join with the fun. No, but on a more serious note, definitely, we aim for EBITDA -- quarterly EBITDA in the area of Q1 and knowing that Q1 and Q2 are usually the weakest quarters and with acceleration in Q3 and Q4. However, having said this, as Walter already mentioned, we see very good traction coming from March and also has been transferred into April, even that basically, we had 2 slower weeks due to the Easter time and related vacation. And therefore, I would kind of confirm your view that you could assume that it will be roughly on the level of Q2. But of course, we have -- the management has a higher ambition to maybe improve it to the upper end of the midpoint of the shaded bar, which you see in the chart. Walter Hess: Okay. And then coming to your third question about the regulatory development, and you mentioned the cold chain. So as you all know, there is a draft of regulation, which has been issued by the Ministry of Health. And now the EU Commission intervened and basically said that it's a violation of EU law again, we have to say. For us, it's a positive signal because we see it equally. So now the ministry has to adjust this draft. And it's really just a draft, and it's only on the regulation level. So we see it as a really positive sign as I think also the market has seen. Operator: The next question is from Mr. Kunz from Research Partners. Urs Kunz: I have just one question regarding Digital Services. If I calculated correctly, you had a growth rate of 110% in Q3 and then 95% in Q4. Now you have 63% in Q1. And this is a rather steep deceleration. Is that something we have to think about that it's going further down in the coming quarters? Or is it going to stabilize? Because you have your guidance or your inofficial guidance of mid-double-digit percentage range for the whole year, which would translate to, I guess, 40% to 60%. Daniel Wüest: Thank you, Mr. Kunz, for the question. I think your calculations of the last year and the quarterly development are, let's say, more or less right. And as mentioned, we indicated when we guided for Digital Services that we are aiming for mid-double-digit growth, which we would also translate into 40% to 60%. And with the -- we are now actually at the upper end. And I think in relation to TeleClinic, there, the TeleClinic was slightly below the average, but we have kind of disclosed for Q1. But as mentioned, you have to remember that last year, TeleClinic has won the TK tender, which is by far the biggest insurer in Germany. And there you have seen a huge increase in volume starting in December, but mainly in Q1. And you can expect and assume that there will be kind of a leveling out, i.e., that the base effect will then, from Q2 onwards, play in favor of TeleClinic. And having said this, TeleClinic has several tenders outstanding where we expect to get feedback rather sooner than later and which could then also basically, if they would go into the right direction, give some additional top line growth, which was not reflected in the initial guidance, which we had put out in March. I think just to add there, I think top line growth is one, and we also explained in March that in -- with TeleClinic, we always have years where with high growth, but let's say, stable profitability, margin development, which was last year because the growth was 3 digit, but the margins more or less were stable. And this year, and that deliberately, we see already in the Q1 that the growth is a little bit lower, but the margins have substantially improved, and we expect that this will continue during the year, meaning that we are not talking kind of a 3, but rather kind of a 4 as the first number in the margin profile. Urs Kunz: Okay. But all in all, you're quite confident that the growth rate in Digital Services in the next few quarters stabilize somewhere in this double-digit percentage range, mid-double-digit percentage range and then not kind of constantly going backwards? Daniel Wüest: No, no. I think we hope it will be the other way around, but let's see. But we are very confident that this 40% to 60% is for the time being that the wide range and not any -- adjustments to the downside are definitely not a topic for this year. Operator: [Operator Instructions] And the next question comes from Guillaume Galland, I hope I pronounced your name correctly, from Barclays. Guillaume Galland: See, I have one question maybe on the non-Rx and OTC side. So yes, could you give us a bit more color on what you're currently seeing in German OTC? And -- so your peers have flagged some softness in the market, which was seen in Q4. [indiscernible] in Q1. It seemed that OTC has slowed in Q1 for DocMorris. So keen to hear a bit more on the consumer demand and if you've seen any changes on the competitive intensity. Walter Hess: Thank you, Guillaume. Happy to answer that one. So obviously, the market is going on more or less the same level and pace as also the Q4. For us, it's important. We have a plan to grow mid-single digit with OTC and BPC, and this is the level where we manage growth in that part. And yes, so as you might remember, generating OTC growth would not be really difficult. So we could grow further, but it comes with a price. And our priority is very clearly on profitability. And this is why we decided also to soft guide OTC on mid-single digit, what works well in Q1 and also in Q2, the start in April. Guillaume Galland: And then regarding -- sorry, Rossmann and dm, any change here in terms of competition? Walter Hess: Sorry, I didn't understand your question. Guillaume Galland: Have you seen any switch in competition from Rossmann and dm in the market on the OTC side? Walter Hess: No, we don't feel additional competition at all. Daniel Wüest: Guillaume, so to make it very clear, I think on the OTC, we have compared from Q1 -- Q4 to Q1 this year, we have not changed anything. We have exactly the same amount of marketing spend, marketing ratio and everything. And that's the reason -- you do not have to ask us why in Q4, we all of a sudden got to a double-digit OTC growth. But I think that was somehow exceptional. But Q1 is really according to plan and budget and to guidance, which we provided this mid-single digit and this 4.6%, we are perfectly on track to -- in this respect. Walter Hess: Okay. So as there are no further questions... Operator: Yes, one more question. It just came in. I'd like to interrupt you. So the next question is from Gian-Marco Werro. The floor is yours. Yes, we can't hear you, Mr. Werro. I'm sorry. Walter Hess: But we can answer your question off the call at any time. So we are, of course, achievable -- available. Okay. So let's end this call. Thank you very much for taking part, for spending the time. I just can confirm we are really well on track. The management, the company needs stability and consistency, and we are strongly executing and fully focused on delivering the guidance that we have promised to you and to the market. I wish you a wonderful day and looking forward to seeing you and meeting you in August latest. Thanks a lot. Daniel Wüest: Thank you.
Operator: Good day, everyone, and welcome to today's Flexible Solutions International's Full Year 2025 Financials Conference Call. [Operator Instructions] Please note, this call is being recorded, and I'll be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Dan O'Brien. Please go ahead. Daniel O’Brien: Thank you, Jen. Good morning. This is Dan O'Brien, CEO of Flexible Solutions. The safe harbor provision of the Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Certain of the statements contained herein, which are not historical facts, are forward-looking statements with respect to events, the occurrence of which involve risks and uncertainties. These forward-looking statements may be impacted, either positively or negatively by various factors. Information concerning potential factors that could affect the company is detailed from time to time in the company's reports filed with the Securities and Exchange Commission. Welcome to the full year conference call for 2025. I'd like to discuss our company condition and our product lines first, along with what we think might occur in Q1 and Q2 2026. I'll comment on our financials in the second part of the speech. NanoChem division. NCS represents the majority of FSI's revenue. In 2022, NCS started food-grade operations. And by the end of 2026, we expect that NCS will be 100% focused on food-grade products. Growth in the NCS division will be in food and nutraceuticals only. The Panama division. This division makes polyaspartic acid, called TPA for short. It's a biodegradable polymer with many valuable uses. Panama also manufactures SUN 27 and N Savr 30, which are used to reduce nitrogen fertilizer loss from soil. Panama is taking over production of all the legacy industrial and agricultural products historically made at NCS. This is a step-by-step process that is intended to be complete by the end of 2026. TPA is used in agriculture to significantly increase crop yields. TPA is also a biodegradable way of treating oilfield water for scale prevention. It's also sold as a biodegradable ingredient in cleaning products and as a water treatment chemical. Nearly all of our product for international sales will be made in Panama using materials sourced without the U.S. tariffs. There will also be shipping advantages. The new plant is 30 minutes from the Port. Inbound raw materials and outbound finished goods will not have to be shipped across the U.S. to and from Illinois for our international customers. Delivery times will be shortened by many days. Reduced shipping times and no exposure to U.S. tariffs on international sales would allow us to increase sales to existing customers and obtain new customers over the next 2 years. We're already engaging with potential new customers. NCS food products. Well, our Illinois plant is FDA and SQF certified. We have commercialized two food products. The first was our wine additive based on polyaspartates that was developed in-house. Last August, we announced our second major food grade contract of 2025 and our third overall. As noted in the news release, it's a 5-year contract with protection from tariffs and inflation. It has a minimum revenue of $6.5 million per year and a maximum if the customer requests it, of greater than $25 million per year. The August contract has reached full production. It's running 24 hours per day and is now our second food grade product after the wine product. We're reviewing methods of increasing production quickly if the customer requests it. Production utilizes equipment we've been buying and installing over the last 2 years, but did not have a customer for. Therefore, little CapEx will be needed to reach -- about $15 million per year in sales for this contract and mild CapEx in the $2 million to $3 million range to reach $25 million. In January 2025, we announced another larger food grade contract. Actual production at small volumes started this week and will be increased weekly until full production is achieved. Significant revenue from this contract may be visible in our Q2 financials. Growing these two food contracts to the estimated maximum revenues of greater than $50 million per year, it's our critical goal for the next 4 to 6 quarters. We hope to execute this to the customers' absolute satisfaction and obtain all their business before taking on additional major projects. It does not mean that we're not looking for more customers. We're already doing R&D work in certain areas. However, it does mean that several quarters are likely to elapse before other major customers are announced. We would also like to be clear regarding margins in the Food division. In order to obtain such large contracts from a very low base and in order to negotiate tariff and inflation protection clauses, we have lower margins than we prefer. We hope to be in the 22% to 25% range before tax. Future customers will be selected in order to increase our average margins now that we have a strong base in place. The ENP division. ENP represents most of our other revenue and is focused on sales into the greenhouse, turf and golf markets. ENP grew in 2025 and growth is expected again in 2026. Q1 is the weakest quarter for this division, followed by Q2. And growth is usually concentrated in the second half of the year for ENP. The Florida LLC investment, the LLC had a small profit for the 2025 year. It's focused on international agriculture sales into multiple countries. Its management has advised us that they estimate a return to growth in 2026, which should translate into increased revenue for FSI. However, the international agricultural markets like the U.S. market are stressed. So we expect the growth rate to be low. Agricultural products in the United States remain under extreme pressure. Crop prices are still not increasing at the rate of inflation and extreme uncertainty is present due to tariff changes, energy costs and fertilizer scarcity. Growers are facing a conflict between rising costs and low crop prices, aggravated by political actions and war. In some cases, sales are being lost for the whole season. As a result, we saw a weakness in agriculture throughout 2025 and expect 2026 to be another difficult year. Tariffs. The current tariff on all our imports of raw materials from China into the United States is between 15% and 58.5% depending on the material. We are very careful not to import materials unless destined for U.S. customers who are guaranteed to purchase from us and are aware that the tariffs will be added to their invoices. We did not manage our transition to Panama perfectly and have had to import some raw materials into the U.S. in the second half of 2025. Some of this tariff costs will be passed on to customers, some will qualify for the rebate program and some reduced our 2025 margins. Moving most agriculture and polymer production to Panama has freed space in the Illinois plant so that food grade production in the U.S. can be optimized and expanded substantially as more U.S. customers are found. Shipping and inventory. Shipping prices are not stable. Shipping times are longer than usual on the routes we use. These issues are caused by the Iran war and are expected to subside if the war does. Raw materials prices are unstable and increasing to account for the oil prices caused by the Iran war. We have significant inventory of most raw materials, but we estimate that we will have to raise prices to our customers in third quarter unless there's a significant -- reduction in the price of oil that also reduces our raw material costs. The highlights of the financial results. Sales for the year were unchanged compared to 2024, $38.51 million versus $38.23 million. Profits. 2025 reported a gain of $787,000 or $0.06 a share compared to a gain of $3 million or $0.24 a share in 2024. Many costs incurred to prepare for the potential new revenue from the food grade contracts announced in January and August, negatively affected 2025 profits because they were expensed as they occurred. Substantial costs for the Panama factory were also expensed quarter-by-quarter. This will continue in first half 2026 for Panama and for food products in Illinois, but at much lower levels. We anticipate some profits in Q1 and Q2 2026, followed by rapidly increasing profits in the second half of the year. We've done our best to maintain profitability as we built the new factory and repurposed the existing one for the new revenue streams in food products. For 2025, we achieved these goals. We did so while reducing net debt and avoiding any equity financing. This should be considered very significant for shareholder value. Operating cash flow, this non-GAAP number is useful to show our progress, especially with noncash items removed for clarity. For 2025, it was $5.54 million or $0.44 a share, down from $7.08 million or $0.57 a share in 2024. Cash flow has been reduced by the same cost as noted for profits, and it's expected to rebound similarly in 2026. Long-term debt. We continue to pay down our long-term debt according to the loan terms. The loan we used to buy our ENP division was paid in full in June 2025. Our 3-year note for equipment was fully paid in December 2025. This has freed up more than $2 million in cash flow per year for other purposes. Only one small term loan and the mortgage on our Illinois factory remain. Working capital is adequate for all our purposes. We have lines of credit with Stock Yards Bank for ENP and NCS subsidiaries. We're confident that we can execute our plans with our existing capital and without resorting to any equity actions. The text of this speech will be available as an 8-K filing on www.sec.gov by Monday, April 20, and e-mail copies can be requested from Jason Bloom, jason@flexiblesolutions.com. Thank you. The floor is open for questions. Jen, will you set that up for us, please? Operator: [Operator Instructions] And our first question will come from [ Ron Richards ]. Unknown Attendee: I was just wondering on that $800,000 payment due from the Florida LLC. Do you expect them to pay that this year? Daniel O’Brien: We are negotiating the payment, and we don't know which way it will go. So that one, I can't answer you explicitly other than to say that we are doing our best to obtain that cash. Unknown Attendee: Okay. And that second nutraceutical contract, when do you think it will be at full production? Daniel O’Brien: We're hoping for end of second quarter or the very earliest part of third quarter. So -- that's what appears to be feasible at this point, but without a guarantee, of course. Operator: And our next question will come from Tim Clarkson with Van Clemens. Timothy Clarkson: Dan, nice to meet you a month or so ago. Just wanted to ask what would be a reasonable after-tax net margin by -- forget about third quarter, even, let's say, by fourth quarter. I mean, are we looking at a company that can at 10% net or 5% net or 15% net? What would be a reasonable net margin once those new revenues start coming in? Daniel O’Brien: I would suggest -- and I got a calculator open because that was an unexpected question, Tim. It was good to meet you, too. I think we're looking at [ '22 ] -- yes, probably a 15% net margin after tax. Timothy Clarkson: Okay. Great. And then this is sort of a nerdy agricultural question, but it seems to me that with the price of nitrogen fertilizer exploding some of your products that add value and allows the nitrogen fertilizer to stay in the soil longer. I mean those should be really valuable products and benefit the fertilizer situation. Daniel O’Brien: Yes. In theory, you're correct. On the ground, it's not quite as clear. Remember that if the grower isn't expecting to make a profit from his land, he not only cuts back on our products, but he cuts back on his nitrogen as well. And in the farm industry, it's known as fertilizer mining. They -- in order to cut their costs, they actually -- especially with phosphates, but to a certain extent with nitrogen as well, they cut back their usage of everything and accept a lower crop yield per acre because it's one of the ways to keep their doors open. So -- my analysis of this is that it's not going to affect us this year. But if nitrogen prices continue to be high and crop prices rebound, then we will do very well. Timothy Clarkson: Right. Right. Well, great. And yes, I'm excited, and it doesn't sound like you need to be raising any additional money from stock issues or anything like that. Daniel O’Brien: No, definitely not. It's -- as everyone knows, who's been paying attention, we have a shelf registration in place, but that is not for use at today's prices. Timothy Clarkson: Okay. Okay. Well, I know one cynical observer was commenting on that, but I know that you're a large shareholder -- the largest shareholder, so you're not interested in diluting yourself. So with that, I'll pass. Operator: And our next question will come from William Gregozeski with Greenridge Global. William Gregozeski: Dan, on ENP, with the sales down in the fourth quarter relative to the third, should we be looking at ENP more as a first half against first half, second half against second half kind of thing? Daniel O’Brien: Yes, that would be fair, Bill. What's happening in the turf and ornamental market appears to be a general movement towards early buy programs. And the best value on the early buy programs typically are in third quarter because that's when the people we sell to are trying to book next year's sale. They drift into fourth quarter, and we don't really control this process. So my feeling would be lump Q4 and Q3 together and lump Q1 and Q2 together to give you a better analysis whether we're doing a good job or not. William Gregozeski: Okay. And then are you guys -- what kind of growth are you expecting from ENP this year just year-over-year for the full year? Daniel O’Brien: Very much in line with historical numbers, low double digits, 10%, 12%, certainly not greater than that. It's not a great environment in America right now. William Gregozeski: Okay. With the Florida LLC, their -- it looks like their margins were up quite a bit in the quarter. Is there anything going on there where they're somehow getting better margins from customers? Or was that more of a onetime thing? Daniel O’Brien: I would say that's a onetime thing. And in relation to earlier question from Ron, we are working with the Florida LLC to get them better organized and receive our payment tranche. I think that you should treat Q4 as an aberration. And let's look at that company going forward more than going backward. And as I get clarity on that particular topic, we'll probably be making actual news release announcements to keep the transparency going. William Gregozeski: Okay. On the January food contract, the big one that you mentioned is kind of going up slow. Should we be looking at kind of lower than the margins you disclosed what you expect for this as it ramps up just because of the low base and just starting it up? Daniel O’Brien: It's -- let me explain that further for everybody. We're carrying a substantial number of employees who are drawing nice salaries and installing equipment and testing equipment and learning how to run the equipment, that's where all the pressure on our profits and EBITDA is coming from is people and large numbers of small value purchases that don't qualify as CapEx and end up on the expenses. So this is slowing down. And as the production ramps up, the amount of employee and operational expenses that are covered by the sale of the product increases. So throughout this quarter, as we ramp up we will go from making a loss on every employee that's working on this project to breakeven and then onwards to making a profit on each of them. The margin is not going to ever exceed the 22% to 23% level because that is contractually limited. So where we are aiming for is full production in Q3 at full margin because each of the employees is properly utilized. Is that a useful explanation? William Gregozeski: Yes. Yes, absolutely. Last question was on Panama. You mentioned it's not -- the shift hasn't gone as well as you planned. I mean, are you -- are we going to see lower margins as that shift happens over the course of this year from where you initially thought? Or how should we look at that? Daniel O’Brien: It's going to be similar margins to our legacy products in the past. We're not going to increase our margins. But what is happening there is identical to the food grade plant. We are employing people and building out a factory where the volume of sales doesn't match the cost of expenses and people at this time. And as the sales increase, the employees will be properly utilized for making stuff and selling it instead of building the factory, learning their jobs and doing and putting things in place. So it's happening at the same -- roughly the same rate. We're expecting that by third quarter, most of the legacy business will be coming out of Panama. There will still be some until the end of the year coming out of Illinois. But again, margins in Panama will creep upwards as we utilize the factory properly and the employees properly. They will creep up to historical margin levels for our legacy products. Operator: [Operator Instructions] And Mr. O'Brien, it appears there are no further questions at this time. Daniel O’Brien: Well, thank you, Jen. Everybody, thanks very much. Sorry, we were delayed for audit and [Audio Gap] Operator: And Mr. O'Brien has disconnected. This will conclude today's conference call. Thank you for attending.
Walter Hess: Good morning, everyone, and welcome to our Q1 '26 trading update. I'm Walter Hess, the CEO, and I'm joined today by our CFO, Daniel Wuest. In line with what we announced at the full year conference, we will provide transparent quarterly insights into our path to EBITDA breakeven, which is why we are hosting today's call. Just a few weeks ago, during our full year '25 results, we outlined our strategic evolution from an online pharmacy player to the leading digital and AI health platform, the engine for our profitable expansion at scale. Today, we will show you the facts that validate our successful development. Let's move straight to the Q1 highlights on the next slide to demonstrate how well this engine is now accelerating. Overall, we achieved a strong revenue growth of 10.7% year-over-year. Our Rx business showed outstanding momentum with a 30.4% growth year-over-year alongside a strong 7.6% sequential growth compared to the previous quarter. The growth was fueled by accelerating month-over-month with a remarkable uptick in March, which also continues in April. Our high-margin Digital Services business continues to scale rapidly, achieving an impressive 63.1% growth rate while consistently increasing margins. In Q1 '26, we successfully expanded our ecosystem platform, growing our active customer base by 1 million year-over-year, whereas 0.4 million in Q1 '26, to a total of 12.6 million, which is a great achievement. And most importantly, and as you know, our main priority, we improved our adjusted EBITDA by CHF 10 million year-over-year to minus CHF 6 million, proving we are on track to achieve our breakeven target in the course of 2026. Let's move to Slide #5 now. The 30.4% year-over-year Rx growth clearly proves that our strategy to capture the potential of the Rx market is highly effective. It shows that the patients are more and more familiar with our Digital Services and increasingly value the comfort of home delivery. We saw a growth in Rx orders from month-to-month with a significant uptick in March, rounding off a very successful first quarter and also continuing into April. And this acceleration comes together with a more and further optimized channel mix, which pleasingly increased RAS, return on advertising spend, and decreased our customer acquisition costs even further. Ultimately, this is a strong start into the year, and it demonstrates the growing stickiness of our health platform. Our non-Rx business remains a reliable driver of value, delivering continuous and profitable growth of 6.5% year-over-year to fuel our broader ecosystem. We managed our OTC and BPC business according to plan to a growth rate of 4.4%. Our Digital Services, including TeleClinic, Retail Media and our Marketplace grew further by an outstanding 63.1%. These digital business lines are not just growing top line, they are delivering increasing margins and therefore, a significant EBITDA contribution. And on top of it, the strong platform performance and expansion also forms an excellent basis for our Retail Media business. And now I would like to hand over to Daniel. Daniel Wüest: Thank you, Walter. And also from my side, a very warm welcome to all the participants. Let's move to Slide #7, where you see the EBITDA bridge, which we also provided to you during the full year figures in March. And I want to start this with the following comments. We closed Q1 with an adjusted EBITDA, as Walter already said, with minus CHF 6.3 million, representing a substantial improvement of almost CHF 10 million, exactly CHF 9.8 million compared to the quarter of last year. That's proving our continuous path to profitability. The adjusted EBITDA margin improved by over 360 basis points from minus 5.7% to minus 2.1% in Q1 compared to the previous year's quarter. If you look at the chart and you see since Q1 '25, we have seen an ongoing quarterly EBITDA improvement driven by basically 3 factors: Better operational performance, focus on marketing efficiency and also very important to mention, disciplined cost management. Amongst other, you remember, we have closed the Heerlen Logistics operations last year. And this year, we have announced the closing of Ludwigshafen, the warehouse and their respective logistics operations, which have already contributed substantially on the cost side, but will further contribute during '26. And I can also confirm that with the closure of Ludwigshafen, we are very well on track. We will see first positive operational effects there in the second half of '26. We continue to be very transparent, and you see with this minus CHF 6.3 million in Q1 '26 in the chart on Page 7 that we expect the quarter result almost on the same level for Q2. And then as already mentioned in March, we aim for getting close to EBITDA breakeven in Q3 and there will be definitely EBITDA breakeven in Q4. And I think that's what the management team is kind of aiming to achieve. All in all, our Q1 results demonstrate that our measures are working and will further work because it's not yet done, and bet DocMorris is very well on track to achieve EBITDA breakeven in the course of the year. We are relentlessly executing our plan with precision, knowing that our strategy, the evolution from a leading online pharmacy to a leading digital and AI health platform will pay off. With that, I would like to go to Slide #8. There, nothing new. Backed by our strong Q1 performance and our current trading, where we see an ongoing positive trend from March, we are fully confirming our short and midterm guidance as laid out on the full year presentation in March. That means we confirm our '26 adjusted EBITDA target in the range of minus CHF 10 million to minus CHF 25 million, strongly supported by the improvements we have already seen and delivered in Q1. We are confident to achieve EBITDA breakeven even if we would be at the higher end of the guided external revenue growth guidance. And just for your memory, we guided mid-single-digit to low teens percentage range. And as you have seen in Q1, we can deliver on the EBITDA target even if we are at the upper end of the overall revenue guidance. All in all, we firmly reiterate our commitment to reaching EBITDA breakeven during '26 and achieving positive free cash flow in the course of '27. And with that, I hand over to Walter. Walter Hess: Yes. Thank you, Daniel. So before we move to Q&A, I want to briefly address the upcoming Annual General Meeting and the future Board composition proposals. Our Board proposes 3 independent nominees, Thomas Bucher, Nicole Formica-Schiller and Dr. Thomas Reutter. Together with our existing Board members, this composition brings targeted expertise across the areas most critical to further execute on our strategy. Management's clear preference is for continuity and stability. We are at a pivotal point in our development. Consistent, focused execution requires a Board that is aligned, experienced and ready to act, not one in transition. All proposed new nominees are fully independent and stand for the interest of all shareholders. We believe this is the right team to take DocMorris forward, and we encourage shareholders to support these nominations at the AGM. Let me conclude the call with a clear message. Our vision of health in one click is not just a concept. It is fully operationalized through our integrated digital and AI health platform. However, a strategy is ultimately defined by its execution. Our Q1 results deliver strong proof that our measures are working and DocMorris is firmly on track. We are not just making promises for the future, we are delivering today. This is clearly demonstrated by our strong Rx growth and the 63% expansion in Digital Services and our continuous EBITDA improvements. My clear statement to you is that the transition to a profitable digital health ecosystem is fully underway and is yielding tangible financial results. We have the right strategy. We have the right management team and the operational proof is in place. We are executing with absolute focus, and we are pairing the necessary sense of urgency with a clear commitment to long-term value creation. And with that, we would like to move over to the Q&A part of this call. Operator: [Operator Instructions] And we have already some questions. The first question comes from Mr. Koch from Deutsche Bank. Jan Koch: My first one is on Rx. Encouraging to see that the growth rate has accelerated again in Q1. If I analyze your Q1 number, I'm already quite close to your full year guidance. So is there anything we should consider here? Or is your full year guidance just a bit more conservative than in recent years? Then secondly, on profitability, could you confirm that the loss in Q2 is not expected to be higher than in Q1? And if so, the upper end of the EBITDA loss range looks quite unlikely as well. Any comments here? And then lastly, are there any upcoming regulatory changes that we should keep in mind? There have been some headlines on the potential changes to the cold chain requirements. So any color here would be helpful. Walter Hess: Yes. Thank you, Jan, for your questions. Let me take the first and third question. And then the second one, I would like to hand over to Daniel. On the Rx, what I just can confirm that we continuously improve the marketing mix, the performance of the marketing. And with that, we just see a really good development. And yes, so let's meet again in August, and then I can further -- or we can further give you more details about the growth and what you can expect also in the second half year and for the full year. About profitability, maybe Daniel? Daniel Wüest: Yes. I think that's always the backside of being very transparent and you did the right math or measuring up on the scale. I think it would be -- if you already would know how Q2 would come in, especially on the bottom line, then my life would be much easier, and we would now go out and [indiscernible] join with the fun. No, but on a more serious note, definitely, we aim for EBITDA -- quarterly EBITDA in the area of Q1 and knowing that Q1 and Q2 are usually the weakest quarters and with acceleration in Q3 and Q4. However, having said this, as Walter already mentioned, we see very good traction coming from March and also has been transferred into April, even that basically, we had 2 slower weeks due to the Easter time and related vacation. And therefore, I would kind of confirm your view that you could assume that it will be roughly on the level of Q2. But of course, we have -- the management has a higher ambition to maybe improve it to the upper end of the midpoint of the shaded bar, which you see in the chart. Walter Hess: Okay. And then coming to your third question about the regulatory development, and you mentioned the cold chain. So as you all know, there is a draft of regulation, which has been issued by the Ministry of Health. And now the EU Commission intervened and basically said that it's a violation of EU law again, we have to say. For us, it's a positive signal because we see it equally. So now the ministry has to adjust this draft. And it's really just a draft, and it's only on the regulation level. So we see it as a really positive sign as I think also the market has seen. Operator: The next question is from Mr. Kunz from Research Partners. Urs Kunz: I have just one question regarding Digital Services. If I calculated correctly, you had a growth rate of 110% in Q3 and then 95% in Q4. Now you have 63% in Q1. And this is a rather steep deceleration. Is that something we have to think about that it's going further down in the coming quarters? Or is it going to stabilize? Because you have your guidance or your inofficial guidance of mid-double-digit percentage range for the whole year, which would translate to, I guess, 40% to 60%. Daniel Wüest: Thank you, Mr. Kunz, for the question. I think your calculations of the last year and the quarterly development are, let's say, more or less right. And as mentioned, we indicated when we guided for Digital Services that we are aiming for mid-double-digit growth, which we would also translate into 40% to 60%. And with the -- we are now actually at the upper end. And I think in relation to TeleClinic, there, the TeleClinic was slightly below the average, but we have kind of disclosed for Q1. But as mentioned, you have to remember that last year, TeleClinic has won the TK tender, which is by far the biggest insurer in Germany. And there you have seen a huge increase in volume starting in December, but mainly in Q1. And you can expect and assume that there will be kind of a leveling out, i.e., that the base effect will then, from Q2 onwards, play in favor of TeleClinic. And having said this, TeleClinic has several tenders outstanding where we expect to get feedback rather sooner than later and which could then also basically, if they would go into the right direction, give some additional top line growth, which was not reflected in the initial guidance, which we had put out in March. I think just to add there, I think top line growth is one, and we also explained in March that in -- with TeleClinic, we always have years where with high growth, but let's say, stable profitability, margin development, which was last year because the growth was 3 digit, but the margins more or less were stable. And this year, and that deliberately, we see already in the Q1 that the growth is a little bit lower, but the margins have substantially improved, and we expect that this will continue during the year, meaning that we are not talking kind of a 3, but rather kind of a 4 as the first number in the margin profile. Urs Kunz: Okay. But all in all, you're quite confident that the growth rate in Digital Services in the next few quarters stabilize somewhere in this double-digit percentage range, mid-double-digit percentage range and then not kind of constantly going backwards? Daniel Wüest: No, no. I think we hope it will be the other way around, but let's see. But we are very confident that this 40% to 60% is for the time being that the wide range and not any -- adjustments to the downside are definitely not a topic for this year. Operator: [Operator Instructions] And the next question comes from Guillaume Galland, I hope I pronounced your name correctly, from Barclays. Guillaume Galland: See, I have one question maybe on the non-Rx and OTC side. So yes, could you give us a bit more color on what you're currently seeing in German OTC? And -- so your peers have flagged some softness in the market, which was seen in Q4. [indiscernible] in Q1. It seemed that OTC has slowed in Q1 for DocMorris. So keen to hear a bit more on the consumer demand and if you've seen any changes on the competitive intensity. Walter Hess: Thank you, Guillaume. Happy to answer that one. So obviously, the market is going on more or less the same level and pace as also the Q4. For us, it's important. We have a plan to grow mid-single digit with OTC and BPC, and this is the level where we manage growth in that part. And yes, so as you might remember, generating OTC growth would not be really difficult. So we could grow further, but it comes with a price. And our priority is very clearly on profitability. And this is why we decided also to soft guide OTC on mid-single digit, what works well in Q1 and also in Q2, the start in April. Guillaume Galland: And then regarding -- sorry, Rossmann and dm, any change here in terms of competition? Walter Hess: Sorry, I didn't understand your question. Guillaume Galland: Have you seen any switch in competition from Rossmann and dm in the market on the OTC side? Walter Hess: No, we don't feel additional competition at all. Daniel Wüest: Guillaume, so to make it very clear, I think on the OTC, we have compared from Q1 -- Q4 to Q1 this year, we have not changed anything. We have exactly the same amount of marketing spend, marketing ratio and everything. And that's the reason -- you do not have to ask us why in Q4, we all of a sudden got to a double-digit OTC growth. But I think that was somehow exceptional. But Q1 is really according to plan and budget and to guidance, which we provided this mid-single digit and this 4.6%, we are perfectly on track to -- in this respect. Walter Hess: Okay. So as there are no further questions... Operator: Yes, one more question. It just came in. I'd like to interrupt you. So the next question is from Gian-Marco Werro. The floor is yours. Yes, we can't hear you, Mr. Werro. I'm sorry. Walter Hess: But we can answer your question off the call at any time. So we are, of course, achievable -- available. Okay. So let's end this call. Thank you very much for taking part, for spending the time. I just can confirm we are really well on track. The management, the company needs stability and consistency, and we are strongly executing and fully focused on delivering the guidance that we have promised to you and to the market. I wish you a wonderful day and looking forward to seeing you and meeting you in August latest. Thanks a lot. Daniel Wüest: Thank you.
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