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Cegedim SA
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Ladies and gentlemen, welcome to Cegedim Q3 2020 Revenues Call. Today's conference is being recorded and will be available on the company website. This presentation will be followed by a Q&A session. I will now hand over to Mr. Jan Eryk Umiastowski, Chief Investment Officer and Head of Investor Relations. Sir, please go ahead.
Thank you. Good morning and good evening, depending where you are. Thank you for joining us to discuss the Cegedim third quarter 2020 revenue. Before we begin, I would like to remind you that this presentation and conference call may constitute forward-looking statements. These forward-looking statements include comments about our guidance or expectations and our prospect and are based as -- based on our view as of today, October 28, 2020. Additional information concerning important factors that may cause our results or revenue to differ materially from expectation and underlying assumptions, please refer to our investor registration document, specifically chapter seven, on risk management. With this in line plus -- please turn on Page 3 of the presentation. So a big picture about what happened during this difficult tragic and very specific Q. In the first quarter, revenue increased on a like-for-like basis by 3.3%. In the second quarter, revenue came down by 8% on a like-for-like basis. And you remember that in France, specifically, we have a lock down between mid-March and mid-May. So just a few days on the first quarter have been affected by this lockdown, but roughly [ 2/3 ] of the second quarter, revenue have been mostly affected by this lockdown. And then in the third quarter, we have been up by 1.9% increase on a like-for-like basis. So we've been down by 2.5% at the end of June for the first 6 months, and now at end of September, we are down by 1.1%. Again, on a like-for-like basis, this means excluding acquisition, disposal and currency impact. So we have recovered part of what we have lost in the second quarter. And now going the third quarter, roughly half of what we have seen in the first one. So if we just look at this moment, at end of September, we are on track to be flat in terms of revenue. However, we do not know what kind of announcement will be done this evening in the 2 hours from now from the French President. And we expect some severe tightening of public health restrictions. So probably this will have an impact in the revenue for the fourth quarter at Cegedim. However, let's first look on the third quarter. Just moving on the next slide, on Page 4. So revenue came to EUR 118.9 million. This is an increase on organic, again, excluding disposal, currency impact, an increase of 1.9%. Quite significant. You remember that we have made the disposal of our 12 asset software for doctors in the U.S. So we have a negative impact of 1.4%. So this means, on a reported basis, we were up by 0.4%. So now to translate on the 9 months figure, that revenue came to EUR 355.1 million, and organic were down by 1.1%. We have a negative impact of the disposal of the Pulse asset. But on the same time, we also have the positive impact of the acquisition of NetEDI and Cosytec. This 2 acquisition was done to expand our network of Cegedim business in the U.K., this NetEDI acquisition and Cosytec technology -- acquisition for technology for our SRH activity. And both divisions have a good revenue growth, so to partially compensate the negative impact of the Pulse disposal and roughly no impact from currency. So organic, minus 1.1%. On a reported basis, minus 2.5%. Now if you look on the breakdown of revenue by currency, on euro 88% is coming from euro, 10% from GDP. If we now look by segment and division. So Health insurance, HR and e-services division, the biggest one, 66% of revenue. You will see on the left side of the slide, quarter revenue like-for-like growth. So you'll see that we've been up by 3% in the first quarter then down by 8.1% in the second one. And in the third quarter, we've been up by 1.6%. So this means that at the end of the 6-month -- 9 months period, we've been down by 1.3%. And if you look at this in the third quarter, we are up by 1.6%. This is roughly half of what we have seen in the first quarter. And the main reason for that is that we get very positive impact from Cegedim Health Data. This is all the data and analytics that we're selling to pharmaceutical companies, to doctors, to health authorities, et cetera, et cetera; from Cegedim e-business, document and process digitalization; and Cegedim SRH, our payroll solution. So on all of these, we have seen strong growth in the third quarter. In terms of BPO business, we've been backed at the level of 2019, so we are roughly flat. So you remember that at the end of June, we've been a little bit down. So now we have recovered in the third quarter. However, all product-based businesses have been a little bit postponed to the third quarter -- to the fourth quarter. So we have seen some postponement of some projects from the second quarter to the third quarter and now from third quarter to the fourth quarter. So this is why growth is at 1.6% that compared to 3%. We are a little bit down, but it's still positive, and we are on track on this. So if we look now on what happened, you see that roughly no currency, no acquisition of disposal, so just like-for-like, it's the same as reported, an increase of 1.6% in the third quarter. Now if we look on the second division, so the same. The first quarter up by 4%. The second quarter, down by 7.9%, and the third quarter, up by 2.1%. So roughly, this is half of what we have seen in the first quarter. Also remember that the third quarter, obviously, July, August and September. So July, August [indiscernible], normally a time for vacation, so less businesses is done in the third quarter. However, we have seen a very strong growth from compensation of our [ health ] profession, nurses visiting patients at home, from keto practice, et cetera. We also have a positive boost from U.K. doctors, even if there is some specific project that NHS Digital ask us to deliver from the medication database and, of course, from teleconsultation businesses that have seen a strong growth. And you remember that we have offered the teleconsultation for free during the pandemic and the lockdown. So this mean in -- sorry, in April and May, then we start charging, but there are some delay depending when contract have been signed, et cetera. So we start really charging since August and mostly in September unless a doctor has been in vacation. So we have roughly one month of teleconsultation business, but it's a strong growth, and continue to deliver on track of what we expected with quite good retention rate. For other businesses in France, Spain, Belgium, activity are more or less on the same level as last year at the same period. So what -- and this is what is very strong on the business model from Cegedim, that we have a very recurring business. This means once a doctor buy our software or pharmacies use our software or nurses or doctors or providers whether insurance companies or payroll for the HR management of electronic invoicing, et cetera. Once you use the system, you continue to use it and to keep it. This means that we have a very recurring business. Now what is true, it's more complicated to get new clients with this quite strange ambience that we see now actually in most of the European countries related to the pandemic. So seeing new clients and converting them to come to us is more complicated. However -- but it's very strong at Cegedim that we have different businesses, so we address all of the health care segments and very recurring business. So this is why we came to this field.So at the end of the June, we've been down by 2.5% on a like-for-like basis. Revenue in the third quarter increased by 1.9%. And on the 9 months, at the end of the September, we are just down by 1.1%. However, as we'll probably have new announcement this evening regarding some tightening of public health restriction, it's complicated for us to maintain our guideline for revenue flat and recurring operating income to be flat compared to last year, as we do not know exactly what will happen in the coming months. So we prefer just to suspend our target and we'll be back to you when we'll have more visibility on what will happen and how the business will react to this new restriction. Another important point is that in October, we have taken a small minority stake in the group called Clamae Group, 34% or EUR 6 million. And this is a company specialized in innovative payment system. So this means that in state of using your credit card or to make direct debit, et cetera, we can use more innovative system, and this is based on the European Union framework, PSD2. And this really will be developed and put in all of our product in the coming months and years for health insurance, data management, digitalization, health care, telemedicine, et cetera, will be able to use more innovative payment system with lower cost and more effective and more friendly to be used than credit card or other payment. So this is something that in the coming months, you will see some development coming from this minority stake that we have taken from Clamae Group. Another important point is that on December 15, and this is for the first time this event will take place virtually, we'll have our virtual Capital Markets Day on December 15 at 2.30 p.m. Central European time. You may register now, you have the link on the slide. And we'll provide you more information in the coming days, but this will focus really on innovation. And we'll provide you more very interesting innovation, show you new products and make some presentation of our telemedicine strategy, where we are, what we want to achieve and some demonstration of the product. Just conclude my formal presentation, and now I open for any Q&A questions that you may have.
[Operator Instructions] We already have a question from Geoffroy Michalet from ODDO.
I have 2 at the moment. The first one is could you give us a bit more insight on how Maiia is evolving, notably in terms of sales growth KPIs? The second question has to do the Groupe CLAMAE's payment technology solution. Could you give us some financial aggregates because we have the valuation pre- and post-money but what kind of sales margin and growth do you expect from this company?
Sorry for you because I think I will not provide you very lot of insight on these 2 items. The first one on Maiia, we -- as I mentioned, already at the end of September that we have stopped delivering any specific KPI on this as we see that most of our competitors just took our figures and increased them by 20%, 50%, 40%. So it make no sense to give any specific KPI on that. What is interesting is that the retention rate at Maiia seems to be much higher compared to some of our competitors, so this is what we look. We're trying to measure it in a more efficient way, and we'll try to provide some KPI in December 15 during the Capital Market Day. But it's developing quite well. And this is mostly on track with what we have expected. And we'll see in the coming weeks and months just the new development on the economy how doctors continue to use the telemedicine. On Clamae Group, this is a start-up. So a start-up making losses. This is one of the specificity of this business. So they make some losses. But however, there are some revenue in terms of millions, let's say, around EUR 10 million of revenue. But they're developing quite well, and they'll probably be [ breakdown ] in the next 2 years. And however, what is very interesting is the technology that they get for this specific payment system, and this is what is really interesting for us.
Okay. And just maybe one more specific question on Clamae, what kind of growth? Because you said it will be breakeven probably in 2 years, what kind of growth can we expect from the company?
The same as any start up. So it's a double-digit -- high double-digit figures. That is really depending how fast the market will adopt in this new innovative payment system. So it's something that came 3, 4 years ago. And now it's more mature -- the market is more mature for this kind of innovation, and more and more company try to use it. So probably we'll see anyway, some acceleration in the coming months and probably next year.
Okay. And is there a reason why you didn't buy, let's say, more of the company, even though you didn't really buy it but did a capital increase? Is it because the founders were reluctant for you to give you more? Is it because you wanted to retrain your cash out in COVID time? I mean why 34%, why not 50%, why not more?
The reason is that the founder of the company, he want to take part of this -- what we expect of the market to be bigger and to grow and to profit from this increase of the development of the company. So they want to take the majority of the share. We want to be part of this story. So we take this 34% to be on the Board and to have something to say and some veto rights on the decision. So it came at the end of the day that regarding the valuation and what we are ready to put in the company that we came to 34%. The only reason why we have not buy 100% is that the founder do not want because they want to have some economic interest in the future from the development of the company.
We have another question from Patrick Jousseaume from Societe Generale.
Jan Eryk, can you hear me?
Yes, Patrick.
Very simple question, I guess. How was October?
Sorry?
How was October?
October was quite strong, until now, for October 28. In terms of all of the businesses, so if you look on the insurance business, the third-party payment patient continue to see doctors. We have some high level for reimbursement on the BPO side. Let's say we are continuing to develop in electronic and digitalization and procurement also. And the same for digital communication of pharmacy and for doctors and pharmacists. However, what is complicated, it's for the biggest clients, almost in the first division. It's more complicated to get big contracts and big deal with the company as most of the company just wait and see what happened. So it takes more time to convince them to -- so we get 2 kind of situation. We have some already signed contracts. So we have signed the contract. It's on our pipeline, it's ready, et cetera. Just that the company say, we will postpone the implementation for the next 1 or 2 months is depending on if we have the resources, if we get people ready for that and how the situation moves. So it's just a postponement of signed contracts and depending when we start implementation. And for other one, it's just that the decision for signing the contract take more longer time than before the COVID. So -- but in terms of normal business, excluding big contract, et cetera, the October month was quite well.
And the trend on Q3, it was like -- on a year-on-year basis, July is stronger, I mean, August stronger than July and September stronger than August? Or maybe October stronger than September?
I will not be so specific, you may imagine. However, what I can say is that if we have released our revenue one week before, so before we get this more complicated situation for COVID-19, we'll have maintained our guidance. So this means we are on track with our precision guidance, but depending what will be announced this evening, it's complicated to maintain something when you know that probably everything will change tomorrow morning.
Our next question comes from Eric Blain from Finance Connect.
So you answered a question I want to have. But in your communication, you said that the increase of COVID case does not allow to confirm the target of sales and operating margin. But if I understand what you say, it's not the increase of COVID case, it's what can be decided this evening.
Yes, but what will be decided this evening is related to the fact that we get more COVID case. The first aspect, if we get more COVID case, so of course, there will be some restriction announced this evening. The second impact is if we get more COVID case, this means that most of our clients can be impacted by this. This means that if we are dealing with a company and I do not know, 5% of the employees are ill and need to stay at home, et cetera, it's more complicated to sign contract. It's more complicated to get business meetings, et cetera. So the 2 cases are really related. Do you get more COVID case? This situation is more complicated. It's more complicated to have meetings, to see clients to convince them to buy something. And on the same time, we know that if the COVID case increase, of course, this means that there will be more restriction.
So if the recontainment, I don't know the English word, is very -- is not very strong this evening, you are saying that anyway, you will have some trouble to maintain a good level of business? Because it seems that it could be not so hard that the period of March, April.
It's not easy to answer to that. It's depending on a lot of parameters and how the lockdown will be, et cetera. However, most important is how the mood will be tomorrow. Depending on the announcement of the number of case, et cetera, depending on how people will react to this. And it's very complicated to assess how a doctor or pharmacist, an insurance company, any companies will decide for the payroll solution for the reprocurement for payment, et cetera, how they would react. They would like to save cash, they would -- ready to spend some money. People will come at work or not -- will not come, et cetera. The most important thing is how this will translate in the mood for business.
Okay. And on Clamae, you put quite a good developed amount. Do you think that the company will need more money in the future? Or is the cash consumption at the high level?
One of the reasons why they need this cash is to get an agreement from [indiscernible], from the -- French banking regulation system to be a payment provider. So in order to get this agreement, they need to make a capital increase of sufficient fund. And this is why -- one of the reasons why we came to EUR 6 million. The goal was really that they get this agreement. So there can be a payment. They can offer payment solution.
And there is any agreement for the future to increase your position in the company or there is no agreement like that?
Like in any contract, we have a priority first on what depending, et cetera, et cetera. So really what -- depending how the company move, what kind of revenue they get in the future, what the market move will be able or not to increase our margin, but -- nothing is automatic.
And nobody helps you and the management in the shareholding?
Yes. We are the only one.
We have another question from Antoine Lensel from Kepler Cheuvreux.
Jan Eryk, do you hear me?
Yes, very well.
Great. Maybe a word on C-Media. Did C-Media bounce back in Q3 as you expected? And do you see -- how do you see the activity evolving in Q4?
So for C-Media, we see quite a strong [ remand ] in July and August and then a little bit lower level in September as some pharmaceutical company, just want to be sure that we get some flu this winter as more people wash their hand, have mask, et cetera. There will be more -- maybe less disease in winter, so maybe making advertisement on flu, et cetera, it's less important for them. So we have some wait-and-see attitude in September on C-Media. Then we see a little bit of recovered in October, in early October. And then again, a wait-and-see attitude in the last 2 weeks, depending how the situation will move. So C-Media -- anyway, it will be complicated until the end of the year depending on the situation. Of course, if we get to look down, the activity will probably be near to 0 in November. If this is just one month and we've covered probably in December because this is a very strong month for advertisement. However, if the lockdown is stronger, this will be more affected. If we can go and be outside in -- during the week, there'd probably be some advertisement campaign running in. So really all of our advertisers are on a wait-and-see attitude. And probably tomorrow or in the coming 2 days, we'll have more visibility on C-Media, but it's true that for C-Media, this will be complicated in Q4. And this is the only business where this would be complicated.
We have one last question from Geoffroy Michalet from ODDO BHF.
It's me again. Just one last question. In case we go on, let's say, lockdown again, will you have a different approach, an internal policy approach related to staffing, to partial unemployment, for instance, that you had previously in Q2? Because I know that you didn't use much partial unemployment. Would you, in that case, be maybe more offensive or maybe conservative in the payroll? Or will you keep your strategy because of the retention rates of your [ engineers ]?
No. I think we have not been conservative. What we have done, it's partial unemployment for the C-Media business. Of course, if you get no revenue, it makes no sense to have people. So on C-Media, we kept and we put people on the partial unemployment. However, in all other businesses, we continue to make business. We continue to develop our product. We continue to do innovation and we'll not stop innovation and developing product because of the lockdown or whatever. They will be in place starting tomorrow. So we'll continue to invest on innovation. We'll continue to try to contact our clients anyway because it takes time. It makes no sense to stop any contact with client because we are on a lockdown. So we maintain what we think the correct level of activity of the group. 85% of the people who have been on teleworks in April last -- in April this year. So again, tomorrow, if needed, we can put 85% of our people on telework, and we can work from home without any problems. And we already know how this works, and there is no problem. And probably for C-Media, we can maybe do some partial unemployment, if situation require that we do this. But for all of our other businesses, it continue -- we make electronic reimbursement for drugs for seeing doctors going at hospitals. Doctors continue to use our solution. Pharmacists continue to use our solution. And insurance companies continue to use our solution. Payroll, you continue to get paid, even if you are in a partial unemployment. And you continue to issue bill. When to issue bills, so electronic business will continue. So we need people to maintain this, et cetera. So -- and this is -- that we talk at this stage, this is only for the French market. So probably we'll have roughly the same proportion of people being on teleworks and the same proportion of partial unemployment as we have seen in last April.
Okay. So what we can imagine is that if we have, let's say, one month of lockdown, we can somehow replicate the P&L of April earlier this year?
Yes, more or less, yes. Depending how the lockdown will be, I don't think this would be exactly the same. So probably, this will be more complicated with more flexibility. This means that probably we'll be able to maintain some margin and to see less impact on our margin. But we'll see. Okay. Very clear. I don't have any more questions.
[Operator Instructions] We indeed have a new question from [ Ruben Claire ] from [ IDME CAPS ].
Yes. I have a question about Maiia. And how do you see the evolution of Maiia in Q4? Now are you recruiting new users? Or is it just the turnover of the ex user that you signed in Q2 or July?
We have 2 impacts. We, of course, continue to get new users. There are doctors coming in, some doctors that never used telemedicine before. There are some doctors that use telemedicine from competitors and [ fee manager ] came to us. There are some doctors that use telemedicine from competitors that are using our software and to realize the complete package integration of telemedicine with the existing software, it's more easy when they are with Cegedim. So we continue to recruit to get new user on a doctor. And on the same time, of course, there are some doctors that when this is for free, they use the telemedicine and when you come and say you now need to pay for that, they just resign and they stop using telemedicine. Maybe they move to competitors or whatever. But -- so we get these 2 trends. We have some churn on term of doctors that once we get charging for that, say, "Oh, you charge for this, we'll stop using it." And also our new doctors. However, our churn rate on the existing doctors is quite low compared to some competitors. Of course, this is quite high in total numbers because when this is for free, I think that all doctors take this telemedicine modules and maybe some doctor use, take 3 or 4 different telemedicine modules from Cegedim and from competitors, et cetera. And after a certain period, they make the choice. So this is why the number do not really match when you make stats. But no, we are able to gain some clients. If there is no more question -- there is no more question?
There is no more question indeed.
If there is no more question, I would just like to remind you that in the third quarter revenue increased by 1.9% on a like-for-like basis. And at the end of September, we've been just down by 1.1%. However, regarding the announcement that will be done this evening, it's complicated for the group to maintain our target on revenue and recurring operating income. And in December 15, we'll have our first virtual Capital Market Day, so you can register online. This will be a virtual meeting, and we'll provide you more information on all of our innovation. Thank you for listening. If you have more questions, do not hesitate to contact me by e-mail or by phone calls. Thanks, night.
Ladies and gentlemen, this concludes today's conference. Thank you all for your participation. You may now disconnect.