Redcare Pharmacy NV
XETRA:RDC
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Redcare Pharmacy NV
Earnings Call Analysis
Q1-2024 Analysis
Redcare Pharmacy NV
In the first quarter of 2024, the company demonstrated robust growth, achieving total sales of EUR 560 million, a remarkable 50.6% increase compared to EUR 370 million in Q1 2023. This growth is attributed to heightened consumer demand and the consolidation of MediService, which significantly boosted the company's performance. When excluding MediService, the organic growth remained strong at 19%, driven by the transition to e-prescriptions (e-Rx) in Germany, which saw a 75% adoption rate under new regulations. This adaptation marks a significant milestone as e-Rx becomes the standard for prescriptions.
The adjusted EBITDA margin for the quarter ended at 2.1%, reflecting a slight decrease of 0.3 percentage points year-over-year, primarily due to increased marketing efforts to support the e-Rx transition. Despite this, the company's absolute adjusted EBITDA increased by EUR 3 million to EUR 12 million for the quarter. The gross profit margin showed an apple-to-apple increase of 0.3% in the core business, indicating effective management of operational costs despite inflation pressures.
The company's customer base continued to expand, now reaching 11.2 million active customers, with a satisfaction measure reflected in a Net Promoter Score (NPS) consistently at 70. The repeat rate among existing customers improved to 87%, showcasing strong retention capabilities. The average basket size also increased when comparing year-over-year data. The company is aggressively working to convert existing over-the-counter (OTC) customers to e-Rx customers while retaining loyalty during the transition period.
Looking forward, the company has reiterated its full-year guidance, expecting total sales to fall between EUR 2.3 billion and EUR 2.5 billion for 2024. The non-prescription segment is projected to grow at a midpoint of 20%, with a range between 15% and 25%. MediService is expected to experience mid-single-digit growth. The adjusted EBITDA margin is forecasted to remain between 2% and 4%. This guidance indicates a confidence in the company's strategic positioning and operational efficiencies moving into the subsequent quarters.
The recent approval of the NFC solution for e-Rx is pivotal. Scheduled to go live in early May 2024, it aims to enhance the digital prescription process further. While the company is poised to leverage this new capability, it acknowledges competitive pressures as peers have gained earlier access to similar technologies. Nonetheless, management remains optimistic about navigating these challenges and capitalizing on emerging opportunities in the digital pharmacy space.
Despite seasonal fluctuations, particularly noted during the Easter period, the company emphasized that sales growth remained strong. The challenges presented by increased regulatory scrutiny in the RX space have been acknowledged, but management believes their operational efficiency allows them to offset inflation impacts effectively. The company plans to maintain a close watch on spending, particularly in marketing, in anticipation of potential catch-up campaigns post-launch of new services.
In conclusion, the earnings call reflects a company well-positioned for growth in a rapidly evolving marketplace. With a solid customer base, effective retention strategies, and a robust technology upgrade on the horizon, investors can take a cautiously optimistic stance regarding future performance. The management’s continued emphasis on improving margins while expanding sales serves as a strong value proposition going forward.
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Thank you very much, and good morning, everybody, and a very warm welcome from my side. Let's have a look into today's agenda. So we would like to first start with financial performance, then an update on business and strategy, and then by the end, outlook and guidance.
Let's start with the financial performance first. So Q1 2024 highlights. We continue really strong, very strong sales growth, including MediService, we have 51%, but also organic growth excluding MediService shows a strong 19% growth. If you look into the non-Rx growth, we have 20%. And you know for [indiscernible] and also online pharmacy, it's always important to make the jump at the beginning of the year. And that is always a result of the customer file which we have been built over the past. That's our capabilities to bring a new customer at the beginning of the year, and we are really happy that we achieved that jump to 20%.
As you all know, the e-Rx became mandatory beginning of 2024 in Germany. And we saw a great adoption rate of above 75% all of the scripts being e-scripts. And because of that, we already increased our marketing activities in Q1, and we did this to make sure that in the transition from paper to e-scripts, we keep our existing customers, and at the same time, of course, we also want to learn how to acquire new customers and convert also existing OTC and BPC customers. As a result of that, we ended up on the 2.1% adjusted EBITDA margin, being up 33% compared to last year.
If we go to the next slide. You can see that our strong growth continues in both of our reporting segments. I mean, for sure, we can see in DACH that's driven by MediService because we -- a huge increase because we only consolidated MediService last year in May.
But even if we look into the non-Rx, we can see strong growth in both areas. And again, international being a little bit stronger than the DACH region. And please keep in mind, we achieved this great growth despite the fact that this year, we had an early Easter effect, yes. So we saw slowdown on the sales development in the last week [indiscernible] unless, we achieve those strong growth numbers.
If we go to the next slide, please. And this is also reflected in the number of active customers. You can see here, we had an 0.4 million active customers in Q1, and now adding up on 11.2 million active customers. And also, if we look into the Net Promoter Score, I mean, we are able to keep this at 70. And to us, this is not just a number, this is to us, this is the most relevant KPI we have in our company. And so therefore, we are proud of that we can continue to be high on that NPS. Also, very good news on the average basket side, it's up compared to the first quarter of last year. And of course, this will also help our P&L.
If we go to the next slide, you see that jump up I described earlier in sales, I mean we also see it in orders here. Right now, we are processing almost 100,000 orders a day from our warehouses on average. And still, we keep that very high NPS of 70. And also, again, the repeat rate is at 87%, so confirming our healthy customer file.
I would like now to hand over to Jasper.
Yes. Olaf, thanks very much, and good morning to everybody also from my side, and I'm happy to present the numbers of the first quarter of 2024. As Olaf already shared with you on the prior slides, we achieved new records as to the number of orders in quarter 1. So quarter 1 was even up from the strong quarter 4 that we had, and that's what we also see in quarter 2, 3 and 4 of this table, because that's the quarter-over-quarter comparison.
The good thing is, in both quarters, MediService was included, but of course, comparing the first 2 to 4 quarter, each of our quarters is having its own seasonality. So it remains a bit of an apple and an orange, for example, the first quarter of the year is having fewer base than the last quarter of the year. But still having set all our sales in Q1 were up 5.4% compared to the prior quarter, a continuation of the growth of our active customer base and our total number of orders and even very helpful despite the increased basket.
So it's a bit of an apple and orange because of seasonality, but still looking through it from a helicopter view, actually our gross profit margin was slightly higher than it was in the fourth quarter. Our total SG&A as a percentage of sales was slightly up seasonality, but also impact of what Olaf referred to already some additional communication after we saw the very rapid increase of e-Rx in Germany. So we took that momentum. All in all, EUR 12 million adjusted EBITDA in the past quarter.
If we then go to column 4, 5 and 6, so the year-over-year comparison. Q1 last year compared to this year, from seasonality perspective, critically comparable, there's a slight shift in Easter, but, okay, that's going towards only rounding. But of course, last year MediService was not included in that. But the total growth of the company, including everything from EUR 370 million last year, it was up to EUR 560 million this year, an unrounded increase of 50.6%.
If we then look at the adjusted EBITDA margin, that was growing strong also this quarter despite the fact that we did some additional marketing and communication campaigns and ended at 2.1% which was 0.3 percentage points lower than the prior year. But with the fast sales growth and this margin, we generated a couple of million more adjusted EBITDA in absolute terms.
So EUR 3 million up in adjusted EBITDA. And for clarity's sake, as always, the fully loaded EBITDA also there, and that did increase even by EUR 6 million, reflective of the fact that our adjustments went down from EUR 4 million to just slightly above EUR 1 million this quarter. The gross margin year-over-year minus 4.3%. The cost performance plus 4.1% simply says it's only mix because of MediService.
And for that reason, on the next slide, we give this clarity. And here you see the gross profit margin. And on the left side, you first see the 27.7% going down. But if you take the apple-to-apple comparison that actually -- and we are very happy with that, our core business actually improved by 0.3% compared to last year. So the gross profit margin increased in combination with a very fast increase of our sales. So very good, much more gross profit in absolute euros.
If we go to the next slide, so here it's the same representation. The first 2 columns are made apple-to-apple, so that is excluding MediService off of this year. And you see there a slight increase only of around 0.3% to 0.4%, totally explained by a slight increase delivered because of the opportunity we saw in Germany, and actually underlying something that we are very happy with because we as you see with many companies in the entire world are also faced with inflation, for example, in minimum wage rates in Germany and in the Netherlands.
But we, as a company, have been able to fully offset those cost inflations with structural efficiency both in operations and in marketing. So the year-over-year cost performance was slightly stable was more or less stable despite that situation.
Of course, there was also, and then I go to the cash flow slide, which you can see the slide health, health in the overall P&L was not only efficiency, but also the slightly increased basket is very good to our unit economics. Cash flow here, very nice an increase of EUR 15 million to already tell you. The conclusion it's mainly because of seasonality that we were benefiting from an increased payable balance as we generally see each quarter. And last year, even more than we were seeing this quarter just because of timing differences.
So I'll walk through the bridge. It's a total of cash, as you defined in the balance and other short-term financial assets, so our fixed deposits, which we also consider cash. So it's slightly above EUR 200 million when we started the year. We had a positive adjusted EBITDA of here from a cash perspective, EUR 11 million, we had working capital improvements of EUR 17 million. We have investments of around EUR 9 million, and we had financing, which also is included according to IFRS, the lease payments that we're doing and adding all up is leaned to a positive EUR 15 million, ending at EUR 219 million.
And with that, Olaf, I'm giving it back to you.
Thank you very much. So let's look into the -- into an update on business and strategy. And for this quarter, we decided to focus only on e-Rx because we think right now that -- right now, that is a dominant topic. As already communicated [indiscernible] we got approval for our solution from gematik. So we are really happy about that one. And as we all know, CardLink is the best way to redeem e-scripts fully digital.
And I think you are probably aware that in Germany right now, the eGK card has become the dominant way to redeem scripts. And therefore, we are really happy to present this CardLink solution to our patients and customers because they now can also use the eGK card without them to redeem their scripts in an online pharmacy. This way, we are back to a level playing field compared to brick-and-mortar when we look into the redemption rate of e-scripts. But of course, also the two other ways still will be available, that's the gematik app and the print-out of the QR code.
If we go to the next slide, we will see that there's actually not a lot of new information because we all gave that information 2 days ago. I think important to point out is that this solution will be live for our customers early May 2024. And maybe just a couple of words to that, why it's early May 2024. Our intention is, of course, to bring a robust and scalable solution up and running. And to do this, of course, as quickly as possible. But since we have never done it before, and since partners are involved like gematik, we cannot give you concrete date. But again, it's about bringing a robust and scalable solution up as quickly as possible.
If we go to the next page, we can see what it looks like once our solution is up, and we are not presenting here the entire flow in our app. Just to give you an idea, I mean, how this is supposed to work. So once we have an e-script which has been issued by your doctor, you can not only use the QR code, but now from now on, you can also use your eGK card.
You simply then open our app, and we then will ask you to present your eGK card, just attach it to the phone, the reader the phone will read the, let's say, the key, which is picture on the card and then we'll retrieve all of the script data from the e-scripts server. And all of the scripts, which are still open will then be presented in our app. And then as a customer, you can simply continue to do the journey as you are doing this with OTC and Rx. And of course, you can also add then OTC products to your basket. So that is pretty much the journey, very convenient, fully digital and will be live in early May.
Having said that, I would again like to turn this over to Jasper.
Yes. Again, thank you. It was only March 5 that we shared the full-year guidance. So there will be no surprise that we reiterate the guidance today. And I can't really, of course, and I'm happy to talk to you today, I really cannot overestimates the magnitude of the impacts of having received approval only 2 days ago. That is really a milestone for us as a total company having achieved the approval for our NFC solution for e-Rx in Germany. And at the same time, actually, our core business across the 7 countries has continued, as we shared with you today, has continued to perform really very strongly.
So being in that situation, we still cannot give e-Rx guidance for the months to come. Nobody knows, that we're looking forward to it. We can't wait. But where we can give guidance to you, and that's on this slide. So for the total company, we think it's very likely that we are going to end up at sales between the EUR 2.3 billion and EUR 2.5 billion as a total company. And that is, in this case, mainly driven by the non-Rx continued strong growth with a midpoint of 20% and a range of 15% to 25%. So growing another time, more than 20%, around 20% on top of the 20% over the last year on top of the 20% of the year before.
MediService, we expect to continue to grow at mid-single digits. So MediService is more, let's say, a normal company with a normal growth rate and not the exceptional fast growth rate we have in some of the core elements as a company. And the adjusted EBITDA margin, we reiterate our expectation that it's going to be between 2% and 4%.
As always, at least each time we have the possibility, we reiterate the magnitude that we see in total in Europe, and also specifically in Germany for being -- for having a lot of growth in online, and we see there a mid- to longer-term margin in excess of 8%, and that is unchanged compared to all the statements that we have made over the past quarters and last years.
So that's our guidance for the full year. We're looking forward to start really to the new phase of e-Rx. And of course, we keep you posted on all the developments there.
And that was our presentation of today, and we're looking forward if there are any questions from the audience.
[Operator Instructions] Our first question comes from Chris Johnen from HSBC.
First one, given the slightly weaker margin in the first quarter at least versus what the Street expected, is it maybe possible to get a bit of color on the running quarter. I understand last quarter, marketing was a significant component. Is there any sort of color or indication, whatever you can give on the size of the market being spent in the current quarter, especially given the importance of the CardLink launch within your app in the coming weeks, anything that helps us understand where within the range we could expect the EBITDA margin in Q2 to 4?
And then I know commentary around Rx is very premature and a lot of things can happen. I'd still be curious to hear if there is any -- any sort of color you can give following the Q1 performance of Rx, which actually growing, was actually quite strong, whether there's anything you can give on that front?
Christopher, good talking to you again. Yes, weaker margin of Q1. It is when we were seeing that there was such a successful fast penetration of Rx -- of e-Rx in Germany then we were able to anticipate on that to extend that immediately. So thanks for the complement you were giving. Of course, the 7% growth is not in the [indiscernible] that we are looking for it in a whole context. We were happy, very happy that we were able to achieve actually with the challenges, a positive growth in the first quarter. And we did so. And of course, a part of the marketing of our is particular because many chronically ill patients only order once every quarter, for example. So it's not like immediately conversion-driven that's reflected in the first quarter. So that is actually -- I just reiterate about our expectations for the full year are and they are not changed by this first quarter. So it's the reiteration of the 2% to 4%.
Maybe I will try to answer the second question, if I understood it right, it's about to give some color based on what we learned in Q1. And to me, Q1 has been exceptional because I mean it has been a switch from, let's say, paper to e-Rx. So we are really happy that we were able to keep our existing customers. That has been the main target because as you know, it's new to the customers. And in some cases, the doctor is hanging out a QR code, in some cases, not.
So we had to make sure that our existing customers stay within our system, and I think that worked off pretty well. And of course, we also saw some additional, let's put it this way, informational learnings, because we had out some marketing activities and there we already saw that also new customers are responding as well as we will be able to convert customers out of our existing customer files.
So OTC, BPC customers into Rx. But I think it's by far too early to take any readings, learnings out of that. So therefore, please, we need more time to really be able to substantiate any kind of, let's say, comments on learnings. And as you know, also the CardLink solution will only be life at the beginning of May. So therefore, it will take some time until we can give some more color into the entire e-Rx topic.
The next question comes from Jan Koch from Deutsche Bank.
I also have two. The first one, given that the NFC launch comes slightly later than the market had expected. Do you see any pressure on your 2024 guidance? I understand that you don't guide specifically on e-Rx, but any color there would be helpful.
And then secondly, could you elaborate a bit on the margin improvement drivers in your international business? Is that purely volume leverage? Or are there any other factors? And when do you expect this segment to achieve adjusted EBITDA breakeven.
I think Jasper, will you go ahead on that one.
Yes. It's [indiscernible] yes. So the first one, actually, the answer is no. No, some expected earlier, some later, and not having any impact. It's not having any impact on our guidance where we stand major thing is this week, yes, we have today the Q1 results, but the major event is, of course, that we got the approval of our solution. That's the major thing where some people expected it a couple of days earlier, not any impact on the future, not any impact on the current year guidance.
Maybe if I can add one thing to that because I think that the question refers to also why a little bit too late. I mean, if we look into the entire process, the entire process of establishing a new product within the magic environment that happened within a couple of months as opposed to usually that takes years.
So therefore, overall, overall, this has been a very fast process, and very successful. And therefore, I think this is -- you cannot really say it's too late or later than expected. I actually see it the other way around, quite successful. And it's a major step, not only for online pharmacies, but also for brick-and-mortar pharmacies and for millions of patients in Germany. And I think because of that, also the market has really accelerated this process. So we are really very happy with what we have achieved so far in terms of the NFC solution. Sorry, I don't know if that's helpful.
And second one, thanks, Jan, for catching actually, that development to it also almost forget about it, but we don't. It's a solid piece of our business, huge opportunity across total Europe, not only in Germany. We were growing this year almost by 1/3 compared to quarter 1 last year and indeed at a significantly higher margin. And to us, very clear exactly what our strategy is there because we don't see a lot of differences compared to what we already see in countries like Germany or for example, in Austria.
We are in those countries where we think we can achieve the same and then you've got efficiencies, then you got scale and then you improve your margins. And in our case, it is always that we can balance, how fast do you want to grow. What is your margin [indiscernible] and it is well-balanced approach.
Indeed, you see a structural increase not only compared to last year that we were going relatively fast, I would say, towards, let's say, [ Net-Zero ] also in international was continue to grow very fast. It will never be a straight line, it will always happen things compared to the opportunity because of the opportunities we see competition or other things. But actually, in a year-over-year, it is an apple and apple, it's a comparison, it's in solid, and in a solid comparison. We increased by 1/3, and we improved our margins. That's correct.
The next question comes from Volker Bosse from Badder Bank.
Yes. Congratulations on the CardLink approval, and the great results. I would have two questions. And it's also on marketing spend in the short term given that you have the CardLink solution now on hand and given that the main competitor received approval a bit faster, do you see pressure to do incremental marketing expenses here in Q2 to catch up. So some indication in regards to volatility of margins throughout the year would be helpful.
The second question. Any idea why the main competitor, some days earlier than [indiscernible] it does not move the needle at all that's partially clear. But just your thinking and you're looking on the situation, did you play later than the others or news or any speculation.
Volker, I will try to answer the question. To be honest, I did not really completely understand the questions because of poor quality. I think the first question was a marketing investments going forward. Now having the CardLink solution [indiscernible] if there's any kind of catch-up needs or something like this.
Well, to me, going forward, now once we have the solution like, of course, we have plans also marketing plans, we would like not to really give any insights into the marketing plans we have going forward. And I don't also don't think that we need to do some kind of catch-up because, I mean, we are talking about a huge market and it's just the beginning of it.
So that means it's a huge opportunity and it really comes down to developing a great product, convincing the customers. And of course, marketing is part of that. But I think that is something now we need to learn over the next couple of months, and then we will have a better view on that.
And the second question, if I understood this right, is about the why a competitor had the, let's say, the CardLink solution approved a little bit earlier than us. So, I mean, we cannot really talk about our competitor. What we know for sure is that we applied one day after these [ specs ] have been released. And then we got a feedback from gematik that it will take us for certain time, and we have been in that time frame.
And actually, we are really happy about our approval because, I mean, if you look into comparable products from gematik and you compare those process and lead times, I think that's a great achievement. So from our perspective, we are really happy with that we have already now and approval for the CardLink solution. Hopefully, we got the questions right. Yes, hopefully and the answer as well. Yes.
The next question comes from Sven Sauer from Kepler Cheuvreux.
My first one would be regarding what you mentioned about the slowdown at the end of March. I was wondering if this is just a onetime effect or if it improved in the first weeks of April.
And the second question was, is there is any expected impact? And if yes, if you could quantify this from the German Federal Supreme Court prohibiting the cash discount on Rx. So I'm not talking about the Rx bonus, I'm talking about the [ discount ] because some market views suggest that the larger pharmacies will have more problems than the smaller ones. And obviously, you are the largest one. So yes.
[indiscernible] first one [indiscernible] second one.
Sven, we shouldn't make it too big. I think if you had said the Easter impact, it's clear the total market, not only us, not to any extent more -- if you look at total market numbers, it was clear the last 4 days of March were very soft and it was just the cost, there was Easter. So that means that the benefit of that will be in the next April. So that's also answering your question.
So yes, that's [ probably Easter ]. But I think that if you are a Deutsche company and you have a normal growth of 2%, and this shift could make it 1% or 3%. That's relevant in our case, it's having a slightly negative impact both on sales and on the margin. That's the case. But not really something to take into account.
But actually, without the shift, our sales growth would have been slightly better and our margins would have been slightly better. But to me, it's not relative to the total picture and what's happening in -- happened in March versus to the positive in April.
So I would try to give an end to the second question, just for clarification purposes. We are not talking about, let's say, the typical Rx bonus which we -- the bonus, which then is to the advent of customers and consumers. I understand your question. It's really about the Federal Court, the ruling on [ Disconto ], meaning the purchasing conditions. And here, of course, we saw the ruling. And as you know, if you look into the market, currently, the wholesale industry is trying to find an answer to that problem. And right now, there is not really an answer to that one. So we are in discussions, of course, with our wholesale partners to see any potential impact out of that. But right now, it's by far too early to give any impact or results out of that.
The next question comes from Yannik Siering from Stifel.
Can you hear me?
Very clear, yes.
Okay. Perfect. Just two left. The first one would be on the customer base that has developed quite well in Q1 and maybe some color, can you see a continuation or maybe even an acceleration of that in the last weeks now with also an increasing awareness of the e-script in Germany.
And the second one would be on MediService, the EUR 119 million of sales, that's slightly below what I would have expected. Could you share your thoughts on the business now almost 1 year and after the acquisition.
Maybe I'll try to answer the first one Jasper, and you will do the MediService customer base, if I understand the question right. So I mean have more than 11 million active customers, and we are adding quarter-by-quarter, let's say, almost 0.3 million, 0.4 million active customers. So it's out of [indiscernible] out of 7 countries.
So, so far, it is too early to see any kind of impact on Rx from this customer file because it's just the beginning of it. Again, as we said, as we presented earlier, in the first quarter, our main activities were really about securing that our existing customers, get the support and switching from paper to the e-script. And we got some first initial new customers coming in on Rx, but compared to the overall customer file, that is a very, very, very low number. But of course, this will develop over time. And once we have a better insight into the development on Rx, you will probably also see this on the customer side. But again, right now, too early to call.
And on MediService, the important the general statement is we very happy with the strategic partnership that we have there and great people to work with. A lot of expertise and dedication, and we're very happy with what we're doing now in Switzerland.
MediService is having a direct impact and an indirect impact. And the direct impact is the consolidation of their business into our numbers. And the indirect impact, the best example there is actually that we -- if you will now go to redcare.ch, our website there, you see, for example, much more Swiss assortment than we used to have before. So part of our [indiscernible] growth is also because of the assortment extension that we're seeing their asset benefit from our strategic partnerships. So overall, very happy with where we stand just after less than 1 year.
The sales being somewhat soft, yes, it depends on what exactly your expectations were, but there is in Switzerland. And that's also something that our partner, Galenica also released to the market. There is some impact there that there is a shift towards generic actually, and that's having a slightly lower average price. And with that, with the same orders having slightly lower sales, but that's leading to that I can confirm that perhaps the sales are somewhat soft, but that's not according to our expectations. The sales development of MediService are going according to our expectations.
The next question comes from Miro Zuzak JMS Invest.
Can you hear me?
Yes.
I have a couple of questions. I would like to take them one by one, if possible. The first one is regarding your Rx sales growth. I think like-for-like in Germany, 7%, we have seen the figure of your main competitor at minus 17, or 6% and minus 17. So there is a difference of 23 percentage points in this first quarter in terms of Rx growth.
Now I don't -- I know that you don't want to talk about your competitor, but maybe you can talk about yourself and explain what makes your offering so much better? Or what is your main capability of turning paper-based clients into e-script clients. And what is your unique selling proposition there?
Well, let me try to answer that one. And so as you said and pointed out, I mean, we really do not want to comment on the DocMorris numbers. So it's really only about us. And I think the answer is there's not really a lot of magic. It's just that we have or let's put this way, a stable customer base on Rx. And you know until the end of last year.
Most of them were paper customers and the [indiscernible] communication and education tools to really help them also to, for example, talk to the doctor how to get a print out of a QR code and then send it into the pharmacy. So it was more a help and education of our existing customers, of course. And so therefore, I think here, we did a good job at least looking into the numbers because we were not shaking, we were continuing to grow.
And you know there was this challenge out there in the first quarter that a lot of doctors did not really want to issue the QR code because they said, "Hey, the e-script has to be digital and not a print out." And therefore, we had to educate and will allow customers to ensure that they get the QR code and that worked out pretty well, at least you can see it in the numbers.
So therefore, I think that's the main story about it. And then of course, on top, there's also a growth. So we're convinced some, let's say, some customers, some new customers and also existing OTC and BPC customers to first time try out e-Rx with the QR code.
And again, not all of them had a QR available for most of those customers, the script was on the eGK card, and therefore, so it was difficult. But nevertheless, we achieved also success here. So I would say without looking into the competitor, but from our perspective, we did a pretty good job on Rx in the first quarter, and we're happy about that. We have already some initial learnings, how it works with new customers, and then that is something we can apply now going forward.
Very clear. Then the next question would be about your adjustments, which have just been EUR 1.1 million in the first quarter, which I liked, basically, low number. Will 2024 be a year with a much lower adjustment compared to the last 2 years.
No, I'd also like that. I totally agree. I mean the clean sheet is the best possible. And generally, I don't like adjustments and companies that talk about investments. The reason that we adjust is actually because we want our adjusted EBITDA to be very close to what the cash generation is. So we correct for noncash items because then EBITDA -- adjusted EBITDA is very close in the past quarter. It was EUR 12 million adjusted EBITDA and EUR 11 million of cash that we saw in the cash flow rich which those are some elements also in it.
We basically have only three categories of adjustments. And number one is the fact that we have employee stock option program. And that is to us, non-cash, but in IFRS, you account for that in the costs. So it's in the cost, but you're correct for that, that's the stock option program.
Number two, it's a very limited category generally with us, who knows what can happen in the future. But it's a very strict definition of external spends on specific projects.
And #3 was a category that we have had since quarter 4 2021, and then 2022, and 2023, and that's related to a booking related to our 2021 acquisitions. And that's because a earn-out related to those acquisitions, we had to account for as labor cost value that's actually have earn-out and also Olaf has agreed there. So we adjusted for that. But that's finalized now. So there's a clean sheet now.
So in the interim report, you see that number three, that category was zero in this quarter. So everything else remaining the same. Indeed, we think the number of adjustments is going to be significantly lower this year compared to the past 2 years.
Then the next line is the depreciation figure, which was EUR 16 million, much higher than previous year, EUR 12 million. Is this the new flight level or the new cruising speed now with e-Rx life?
I'm very happy that the depreciation number is higher because actually it's mainly reflecting of the fact that we did a lot of IT investments over the past years and also capacity investments that we did over the past years. So we have been able to prepare for executing our strategy and specifically e-Rx.
So depreciation in absolute terms is up, of course, as a percentage of sales, we would always like to achieve scale. While we don't have full scale this year, it's with some pre-investments we did in the past 2 years, but also there are some depreciation included related to the acquisition of MediService that we did. And that's perhaps the missing piece, if you add those two together. Having said all this, this absolute term at this moment is also what you could basically expect for the quarters to come in this year.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Olaf Heinrich for any closing remarks.
Yes. Thank you very much. And thank you very much for all of your questions. It's always great to hear you, and we love to have the conversation with you. And that's actually pretty much it from a Q1 perspective, an interesting and exciting times ahead of us. So we are looking forward. We are ready, and we will be happy to update you next quarter. Thank you very much for joining.
Thank you.