Cegedim SA

PAR:CGM

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, good day and welcome to the Cegedim First Quarter 2020 Revenue Call. Today's conference is being recorded and will be available on the company's website. This presentation will be followed by a Q&A session. At this time, I would like to turn the conference over to Mr. Jan Eryk Umiastowski, Cegedim Chief Executive Officer and Head of Investor Relations. Sir, please go ahead.

[Jan Eryk Umiastowski]

Good morning and good evening, everyone. Thank you for joining us to discuss Cegedim first quarter 2020 revenue. Before we begin, I'd like to remind you that this presentation and conference call may constitute forward-looking statements. These forward-looking statements may include comments about our guidance, our expectation and prospects and are based on our view as of today, April 27, 2020. For additional information concerning important factors that may cause our results to differ materially from expectations and underlying assumption, please refer to our universal registration document, specifically the Chapter 7, Risk Management. I would like to say that in this extremely challenging times, I share our support and solidarity with you and your family. At Cegedim, the health and safety of our colleagues, customer, investors, partners and the communities in which we operate is our #1 priority. This is what we're doing on the conference call and webcast at this time. Having this in mind, I will turn on Page 3 of this presentation and give you a big picture about the first quarter 2020. So revenue came to EUR 121.5 million. This is an increase of 1.9% on a reported growth rate and 3.3% increase on a like-for-like basis. And of course, we have the COVID-19 pandemic that are affecting us as other company. So when we turn on finance, we came to EUR 121.5 million of revenues, an increase of 1.9%. That came from a 3.3% on an organic. Then we have the negative impact of the disposal of those activities in August 2019. And this is partially offset by the acquisition of Cosytec and NetEDI. So the total impact of disposal of those and the 2 acquisition is a negative impact of 1.5%, and we roughly have no impact from currency. This is why revenue came to 1.9%. In terms of breakdown of revenue, 88% is done in the U.S.-only, 10% on GBP and roughly nothing from the other part in the world. In terms of the BPO, so the BPO continue to increase. BPO activities are for the Health Insurance segment and for the HR department. Revenue came up by 6% to EUR 12.3 million in the first quarter of 2020. And we have the headcount trend that also came up to 2.4%. And we are now more than 5,000 employees as of end of March 2020. On Slide 8, you see the breakdown of revenue by division. So 68% is coming from the first division, Health Insurance, HR and e-services and 31% is coming from the Healthcare professionals division. The first division increased by 3% on a like-for-like basis and the second division increased by 4.1%. It's quite significant increase in the division. And so at the end, we are on 3.3% increase. If we come to Slide #9, you see the breakdown for Health Insurance, HR and e-services division. So this 3% roughly no impact from currency, and we get a boost of 1.3% from the acquisition of NetEDI and Cosytec. The 2 companies are being acquired last year and are dedicated for the Cegedim e-business activity. So the biggest positive impact and increase in revenue came from the BPO activity for Health Insurance. We also get the boost from Cegedim e-business. This is a document and processing for invoicing and Cegedim SRH, our HR management solution. So those -- the 3 main factor for explaining the increase of revenue, our BPO activity, Cegedim e-business and Cegedim SRH. One important point is that Cegedim e-media that's making digital communication at pharmacies have been flat during the quarter. When I say flat during the quarter, this means a significant increase in January and February and a significant decrease in March, as you may understand, that most of the advertisers that our pharmaceutical company have stopped doing advertisement campaign in March. But during the first quarter, we're flat on this segment. And at the end, we have an increase of 3% on this division. If we move now on Slide #10 for the Healthcare Professionals division, then we get an overview. So on a like-for-like basis, revenue increased by 4.1%, a very small impact from the GBP, and of course, we have the negative impact of the disposal of Pulse. So we have sold the Pulse activity, software for doctors in the U.S., in August 2019. So this is a sharp decrease by 7.2%. But at the end, if you look, this explained why revenue came down by 2.9% on a reported basis. The most important part is that we are up by 4.1% in the first quarter of 2020. So it's quite significant. Of course, we get the boost from software for doctors and nurses, the activity from nurses in France. We also get a boost from our teleconsultation appointment website that's now called Maiia. This is formerly known as Docavenue. And we have the boost from our medication database Resip. Now roughly 7 pharmacists over 10 are using our medication database. And an important fact is also that our U.K. business, so for doctors and pharmacy are flat during this quarter after being down in the past years. So it's now flat. If we move on Slide 11, this is a small overview of the COVID-19 pandemic. So first on financial structure and liquidity. So a very solid business model with most of our activity is in the health care sector. So we are less affected than other industry by this pandemic. Second, we have a robust financial situation with quite reasonable leverage of less than 2x. We have no debt maturing before October 2024. We have EUR 45 million of undrawn revolver facility, and we have EUR 24 million of overdraft facility that is in use at end of April. This is for financial. So no problem of liquidity, and we are in the more resilient segment, that is the Healthcare segment. Then what we have done specifically more to COVID is at CLM, so software for doctors in France, we have equipped 4 COVID-19 emergency center in 24 -- 28 hours with our web-based solution that gives the possibility for doctor to follow patients coming in, to make prescription diagnosis and prescription and to do this on teleconsultation or by physically meeting the patient. The second, on Maiia, we have added a prescription writing module on the teleconsultation. So the patient may receive prescription directly in the application and deliver it to the pharmacy and receive drugs. So it's very powerful tool. And this is combined with our medication database, so the doctor just have to type, "I would like a painkiller," for example, and this gives a list of painkillers with pathology, the side effect, et cetera. So this can be combined and very powerful to do teleconsultation. Then on Cegedim e-business, we have offered a simplified version of the invoicing system that can be deployed in 24 hours at the client website. So then the clients that are using paper for the invoice can switch to electronic invoicing in 24 hours with a very simplified solution that gives to some companies the possibility to send and receive invoices very easily. Then on GERS and THIN, this is our data business division. We are supplying health authorities, including Health Ministry in France, with the health care consumption data. So we explain what kind of drugs have been sold, how much they are in hospitals, in pharmacy, et cetera. And we deliver a lot of different data to the health authorities in France. And the last one, Cegedim SRH, we are assisting different companies that are clients with the partial unemployment system in France to make payroll, to make payslip, to deal with all of this changing landscape that are happening. In terms of outlook for 2020, at the stage of the pandemic, it's too early to gauge the full impact, positive and negative. We get some positive impact from Maiia, from software for doctors, from the database -- data business. We also get some negative impact like advertisement business at pharmacy, or we may expect in the future maybe some decrease in number of employees in France. So maybe the payroll activity can be affected or the electronic invoicing activity may be affected in the future if we see some company decreasing or going bankrupt, et cetera. So these businesses may be affected in the future or not depending if we win or not different clients. So this is why if we take all the positive and negative impact, it's difficult to assess exactly the impact on Cegedim. However, we still expect to see some growth for 2020 in terms of revenue. And it will be -- we'll be in better position to give you more details on it when we release the second quarter revenue at end of July. So the financial agenda, just the first -- the second, now we'll see it's in July 28 with the second quarter revenue. Then we postponed the release of half year earnings by 1 week to provide you with more in-depth understanding of the market. So September 24 and September 25 for results and October 28 for third quarter revenue, and our Investor Day has been postponed from June to November. The main reason for that is that people are affected by travel restriction, et cetera. So we think it's better to move it to November. And we'll be able to give you more details of what happened during the year, et cetera. So this concludes my presentation, and I now would like to ask our operator to open the line for the Q&A session.

[Operator]

[Operator Instructions] We already have a question from Patrick Jousseaume, Societe Generale.

[Patrick Jousseaume, Head of Mid and Small caps Europe Research]

My question is about the trend experienced from 1st of January to 15th of March and the trends for the last days of March for the whole group, please? And what do you see in April?

[Jan Eryk Umiastowski]

Thank you, Patrick. So in most of the division, we have not seen a real change in trend of activity between March 16 and end of April or in April. As I mentioned, software for doctors, for pharmacists, for nurses continue to move as expected. The only restriction on this is, it's more difficult to get new clients. During this time, we may understand that doctors, pharmacists, nurses do not want to switch to a new software. So of course, gaining new client will be postponed probably in the second half of the year. So roughly, we are more stable on this division. So software for doctors, pharmacists, nurses. However, we see some boost from the NHS in the U.K. related to the pandemic and to the COVID. They are asking us to develop more solutions, more software, tools, et cetera. So we'll probably get in the second quarter of 2020 some boost from the NHS. In the first division, the data business is developing quite significantly because more people would like to understand what's happening on the market. On the insurance side, we see the same trend, it's been quite flat because it's more complicated to gain new clients from -- on this division. So it's flat. Just gaining new clients more complicated. In terms of SRH, we've been up and we'll continue to be up, but probably would be a little bit down if we see a decrease of number -- if we see unemployment going up in France. So depending on how the market will be, but will be more affected in the second half if the unemployment market go up in the second half. Maybe some slowdown in invoices. However, at this stage, we have not noticed any slowdown in invoices, but maybe in the future, we'll see some slowdown on it. And of course, the advertisement business at pharmacies, we've been up in the beginning -- in January and February. We've been down in the second part of March. We've been roughly at 0 revenue in April. But this is not a cancellation of campaign, advertisement campaign, this is more postponing of campaign from April to July and August. We'll see that more on the pharmaceutical company would like to do strong campaign, advertising campaign in July, August and September. So at this stage, we have seen a postponement of pharmacies campaign from March, April to July, August. So probably at the end of the year, for the advertisement business, we'll be flat compared to last year. We'll be able to recover what we have not done in April, in July and August. I hope this answers your questions.

[Operator]

We have another question from Charles Bordes from Kepler Cheuvreux.

[Charles Bordes, Equity Research Analyst]

First, you talked during the presentation about potential bankruptcies affecting electronic invoicing, for example. Is it something you already observed among your customers some bankruptcies? And second question, regarding BPO. So we've got growth normalizing. Of course, the basic comparison is maybe a bit challenging. But what can we expect for the year? Have some deals being postponed due to the current crisis? Or on the other hand, did you have some positive surprises, i.e., done some business, while you expected some kind of slowdown?

[Jan Eryk Umiastowski]

Yes. So bankruptcy, we have not experienced at this stage any company going bankrupt. We have a strong support from the government in France on companies. So if something may happen, this will be more in the second half of the year. But at this stage, we have not experienced -- no negative impact from this. On the BPO side, of course, we are up by 6%. The main reason for this is that we have a challenging base of that. Already Q1 was quite high in terms of revenue for BPO. Now for the full year, we may expect 6% on a full year basis. However, we're seeing strong interest from insurance companies for the BPO business is always the same. When you see difficult time, you're thinking about outsourcing this kind of activity. So we may see an acceleration of outsourcing on our activities once the pandemic is closed -- over. So maybe in the BPO, we may see some increase on revenue because we'll be able to win new contracts in the future due to this crisis. However, if we exclude winning any new contract, the increase would be around 6% on the full year.

[Operator]

[Operator Instructions] We have a question from Sébastien Bourget from Quaero Capital.

[Sébastien Bourget]

Could you please give us an update about Maiia in terms of number of teleconsultation and things like that? Just to understand the dynamic of who -- which impacts this division.

[Jan Eryk Umiastowski]

Thank you, Sebastien. Yes, for Maiia, the trend is very, very strong. In terms of teleconsultation, we have made 100,000 teleconsultation in March and at end of April. So yesterday, we've been at 450,000 teleconsultation in April. So between March and April, we have multiplied by 4.5x the number of teleconsultation done at by the Maiia system. So again, in April, 450,000 teleconsultation. This is more than 18,000 GPs connected to our platform. And on average, if you have no appointment, you may have a teleconsultation in less than 3 minutes now on our network due to the fact that we have these 18,000 GPs connected on it. So very strong growth. However, in terms of revenue, this translates to roughly nothing at this stage. As you know that in April, we offered the services for free to GPs. And we start bidding in May. So in May and July, we'll offer a discount of 50% of the price of the solution. And then the GPs have to pay the full price starting in July. So this is free of charge in April; May and June at a discount of 50%; and the full pricing in July. So the [indiscernible] revenue will be in the [indiscernible] impact of it. [indiscernible]

[Sébastien Bourget]

And could you [indiscernible] us on the [indiscernible] price for GP as the amount of [ barrier ]?

[Jan Eryk Umiastowski]

There is different pricing. We try to combine it with our agenda. So if the GP takes the agenda through the teleconsultation, this is EUR 100 per month.

[Operator]

[Operator Instructions] Well, it seems that we have no further questions. Sir, I give the floor back to you for the conclusion.

[Jan Eryk Umiastowski]

Thank you. If you have no further questions, you may find the presentation and the press release on our website. And of course, I'm available for any call following this presentation or any video call, if you would like, so do not hesitate to contact me in order to get more information or more explanation from this first quarter revenue. Thank you. Have a happy day, and good evening. Bye. Thank you.

[Operator]

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.