Cegedim SA

PAR:CGM

Earnings Call Analysis

Earnings Call Transcript 2021-Q3

[Jan Eryk Umiastowski]

Good morning, and good evening, everyone. Thank you for joining us to discuss Cegedim third quarter 2021 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 may include comments about our guidance, our expectation and our prospects and are based as of today, October 28, 2021. For additional information concerning important factors that may cause our results to differ materially from expectation and underlying assumption, please refer to our universal registration documents, specifically Chapter 7 on risk management. Having this in mind, I will turn on Slide 3 of this presentation. The presentation can be found on our website on the Webcast section. So on the back of the excellent first half revenues growth, Cegedim has achieved solid third quarter with an increase of 4% like-for-like in the third quarter that came to EUR 124.8 million. This led to an increase of 5.5% on a like-for-like basis on the 9 months based on revenue of EUR 376 million. Roughly, most of the business contributed to this growth, the data business, the Cegedim-Media, Cegedim Insurance, Cegedim e-business and Maiia contribute to this performance in the third quarter and in the first 9 months of this year. During this period, in the third quarter, we have some specific development like Cegedim Sante with an excellent momentum. You remember that Cegedim Sante combined all activities for health care professional in France. Seeing real-world data, we have opened our database for the Italian market. So this is a new development of our data base business now in Italy. And for Futuramedia, we are now deploying the digital communication solutions in the U.K. pharmacies. So if we looked on revenue for the first 9 months, we came to EUR 376 million. This is an increase, as I mentioned a second ago, of 5.5%. Then we have the positive impact from the acquisition done in May of Medimust and Kobus Tech that added 0.2% and the positive impact from the selling in U.K. that added 0.2%. So this lead to reported revenue growth of 5.9%. And as you may see on this slide, the revenue for the first 9 months of 2021 exceeded revenue for the 9 months of 2019. So we are up compared to 2020, but also up compared to 2019. If we look quarter-after-quarter, you'll see that in 2020, just ups and downs on revenue. And we've been at minus 1.1% at the end of the first 9 months of 2020. And in '21, this time, the first quarter would be a little bit down by 1%. Then we recovered strongly in the third quarter and came to 6.2% at the end of the first 6 months. And then we have the 4% increase in Q3, and then it lead to this 5.5% increase over the first 9 months period. If we look now division-by-division, Software & Services achieved a growth of 4.2% on a like-for-like basis. Then we have this -- the impact from the acquisition of Medimust and Kobus in May, and then we have some positive impact from the sterling. And this is the more international division of -- from Cegedim. So this lead to an increase on a reported basis of 4.9% over the first 9 months of this year. And when we look at numbers, so you'll see that last year, we've been a little bit down at end of the first 9 months, we're now up by 4.2%. So this is more or less in line with what we have actually at the end of June on this division. The positive development in Q3 came from the fact that all activities on project-based business, this is mostly on health insurance businesses have been quite strong in the third quarter. And we continue to implement a new project in Q4 and at the beginning of 2022 also. And you'll remember that the time of implementing, this project is longer than before because we have this [ homeworks ] and just put some delays on implementing new clients. The second fact came from Cegedim Sante France that has a strong momentum in sales; Maiia, also, for teleconsultation and appointment scheduling on website. We have doubled the revenue over the first 9 months of 2021 compared to the first 9 months of 2020. So we are doubling quarter-after-quarter revenue on this division. And on HR management talent outsourcing activity, we're still right on track, developing quite well, and this contributed also to this growth. Then we come to the Flow business with an increase of 7.1% on a like-for-like basis, roughly no structure, no currency impact. So this lead to a reported increase of 7.2%. You'll remember that last year was a little bit complicated as we get on the division Flow activities. The first one, we can call it electronic invoicing for all kinds of companies; and the second one is related to the business related to reimbursement for health care. And last year, in 2020, we have been affected by some companies having some reduction of activities for electronic invoicing, as we get paid for volume, and also reduction of the people using health care systems that lead to a decrease in our health care Flow business related to invoicing. In 2021, we have seen a strong rebound on our electronic invoicing for all kind of companies that were developing quite strongly. And on the same time, the health care Flow business related to reimbursement have been a little bit impacted by all the restriction put at the beginning of the year on the public health system. So [ essentially ], people use less health care system until late summer. So of course, this is still affected. However, even with that, we are up by 7.1%. And you'll see that in Q3, we are higher than Q1. So we recovered that company on this division, as people came back to the health system again in France. In Data & Marketing, very strong performance, 15.8% on a like-for-like basis. It was already quite strong last year. In Q3, we have an increase of 6.8%. And however, this increase of 6.8% in Q3 2020, we've been able to increase by 14.5% in Q3 2021. This performance is coming from the 2 activities of this division from the data side and from the marketing side. From the data side, we have seen since the beginning of this pandemic that we get more interest on the data business and more people buying our data activities. So we have seen a strong demand for the data business. And on the same time, our advertising business, digital communication in French pharmacies, have been affected last year in April due to the fact that everything has been closed, the lockdown. So there have been roughly 0 revenue in April 2020. And then we started to see rebound at the end of 2020 and early this year. However, due to the strong performance in Q3 on this digital communication solution, revenue at end of September 2021 are in line with revenue in the first 9 months of 2019. So we have recovered all the decrease in 2020 and we are on par on revenue at end of September '21 with September '19 on advertising business. So very strong rebound on the advertising business and very strong rebound for the data business since the beginning of this pandemic. And this lead to an increase of 15.8% on a reported and like-for-like basis at end of September for the first 9 months of this year. On the BPO business, so the same impact that on the Flow business for the reimbursement part, [ health care ] reimbursement. As we have seen that French people less -- were using less health care system. This means that we get less reimbursement, so less BPO activity as most of the activity in the BPO segment is providing services for health insurance companies and mutual insurance providers. So you'll see that the decrease of 4.3% at end of September is in line with the decrease at the end of June. The only reason why we have seen an increase in 2020 is related to the fact that end of 2019, we get a new contract. So the decrease due to the pandemic has been offset by the increase due to this new contract. And then in 2021, we see a major impact of this pandemic on revenue of this division. On the conclusion, it was very simple. This is only the Q3 revenue. We have achieved a solid third quarter growth, and this lead at end of the first 9 months we're up by 5.5% on like-for-like and revenue came to EUR 376 million. We are well-positioned to continue to grow and we get a strong momentum in our different businesses. We continue to keep focused on innovation and gaining market share. And so our outlook for the full year 2021 is unchanged, with revenue comprised between 3% and 5% on a like-for-like basis. We're already at 5.5%. We do not anticipate any decrease in the last quarter of the year. However, we would like to remain cautious. At this stage, we do not increase our guidance and we -- our target for recurring operating income is an increase of around 4%, basically in line with the increase of Flow. And remember this quickly, the Cegedim equity story. So a solid business model. As you have seen, innovation is really the key fact on savings. We have a long-standing shareholder support. And then from a [ software point ], all products on SaaS. We have a unique integrated health care ecosystem. Our group is now refocused with a strong recurring revenue base, strong market position, stable consumer. And as you may see -- you will see in the coming months, we'll continue to focus on free cash flow. We have a unique position to drive digitalization of the economy, more specifically of the health care ecosystem. Then you will find some slides showing you the bridge between sectors and division as well in the presentation of the group. So you will see all the details. Of this, you will see revenue by division and by quarter of 2021 and 2020, organic growth 2021 compared to 2020, 2020 compared to 2019. And then we come to the financial agenda for 2022, roughly the same date as last year. And this concludes my presentation of the first -- of the Q3 revenue 2021. And now we are open to take any questions from the floor.

[Jan Eryk Umiastowski]

[Operator Instructions] We get a question from Eric Blain. Eric?

[Eric Blain]

[Foreign Language]

[Jan Eryk Umiastowski]

[Foreign Language]

[Eric Blain]

[Foreign Language]

[Jan Eryk Umiastowski]

[Foreign Language]

[Eric Blain]

[Foreign Language]

[Jan Eryk Umiastowski]

[Foreign Language]

[Eric Blain]

[Foreign Language]

[Jan Eryk Umiastowski]

[Foreign Language]

[Eric Blain]

[Foreign Language]

[Jan Eryk Umiastowski]

[Foreign Language]

[Eric Blain]

[Foreign Language]

[Jan Eryk Umiastowski]

[Foreign Language] So the question asked about revenue about Maiia. So I just explained that we have doubled revenue and this will become significant at the end of the year. But at this stage, we do not deliver specific...

[Eric Blain]

[Foreign Language]

[Jan Eryk Umiastowski]

And our guidance remains at this level at this stage on margin. [ Good questions ]. Any more questions? I get a question from Sebastien Bourget.

[Sébastien Bourget]

You mentioned an excellent momentum in Cegedim Sante and also in Maiia. Could you please give more color about this excellent momentum because we can't see it in your figures? It will be great to have some additional info to have a better comprehension of it.

[Jan Eryk Umiastowski]

So on Maiia, as I mentioned, we just doubled revenue compared to last year, still small numbers. It will be significant as say, compared to the total number of the group at the end of the year. So we'll give more color about Maiia at the end of the year with the full year numbers on Maiia. On Cegedim Sante, it's [ just ] that we have different positive momentum. First, the integration of all of this company together under the same umbrella. Cegedim Sante is on track and everything, they go quite well. We have the positive -- these have been positively received on the market. So we get good feedback from our clients on this new presentation on the Cegedim Sante. And we see a strong interest for our product from health care centers, so when you see different doctors combine the activity together. So we see some really good traction from this health care center in France. And probably some of that -- some of the contractors that have been signed in the last -- in this quarter will deliver in the last quarter of this year. So again, for specific numbers on Cegedim Sante and Maiia. At this stage, we do not give specific color. What we say is developing on track. And the new brand, Cegedim Sante, is very well-accepted in the market. And on the Maiia, we have just doubled revenue and probably at the end of the year. So when we release the full year revenue on January, we'll be able to provide more colors on where we are in terms of revenue from Maiia.

[Sébastien Bourget]

Okay. Great. So if I understand what you are saying, different new health care professionals that will contribute in the next following quarters.

[Jan Eryk Umiastowski]

Yes. Exactly.

[Sébastien Bourget]

Great. And on the same topic, we've noticed that your competitor pharma just has acquired [ Prokov ] in the doctor space. If you got some comments to do about it.

[Jan Eryk Umiastowski]

I do not make comments about our competitors. The only thing I must say is that really showed that Cegedim is on the right. track. And in the past, people say, why Cegedim is everywhere, why would not focus only on software for doctors, only software for pharmacists, only software for insurance companies. What we see now is that most of our competitors are moving to the same organizational strategy, which means to say that serving all the health care ecosystem. We have seen the move from Pharmagest moving to the doctor side. We see that Doctolib is moving further not only providing appointment, but also on software for doctors. We see that CompuGroup is moving from doctors to pharmacists, but also to nurses and [ PT ] practice. So what we see on this move is that in order to address the change of the market that instead of having individual doctors or health care professionals in one office, we see a combination of doctors in a unique office where we see a small health care center, I would say that. In order to respond to this demand, you need to have an offer that cover all the need of this segment, and not only have a niche product in a niche market. But what I will only say is that justify why Cegedim has been everywhere in the health care space. The second point is that you get a lot of different -- you get a lot of small provider of software for doctors in France that have maybe between 100 and 10,000 doctors. And they need to move on SaaS and they need to meet all the regulation approval. So there is a more -- this is a more and more regulated market. You needed to have a compliance software. And in order to achieve this, you need to get a compliance-certified software. And to move on SaaS, you need to make huge investment on your existing software. So most of this, the small players, will probably move to be bought by some big players like Cegedim, Pharmagest, CompuGroup and other. So probably, we'll see some consolidation on the small players. Some of them would exit, some of them will just -- the clients will just move to a bigger player, and some of them will be bought by some big players. So I think we're just beginning to see this consolidation of the market in France.

[Sébastien Bourget]

Okay. And there exists some rationale that would explain that you acquired Medimust and not [ Prokov ] or not both.

[Jan Eryk Umiastowski]

Our goal is not to acquire all the players on this market. So we are focused on Medimust that I think a good fit with the Cegedim culture. The product is very interesting for us and some specificity on specialty that are interesting for us. Yes, Medimust, for us, is a very good acquisition than Pharmagest, and there's another one, [ Prokov ]. There will be probably other acquisition done by different players in the future.

[Sébastien Bourget]

And do you see some interest to make some acquisition not to -- because you need to do it, but maybe to avoid some new players in this market like Doctolib?

[Jan Eryk Umiastowski]

No, I don't think -- no, we do not make any different move on acquisitions just to avoid that. The only way to avoid Doctolib buy some players will be to buy all the players in France. That makes actually no sense in terms of -- from the financial point of view, from the technical point of view and from the commercial point of view as we'll get 10,000 different products and make absolutely no sense. So maybe Doctolib will buy some players, maybe not. The fact is that most of the players are not actually compliant with the request for the next generation of software, and they are not on sense. So anyway, if you buy them, yes, you're buying some clients. We will probably lost half of them during the migration to this new platform. And it's more than -- maybe sometimes you need some specific developers. You need some specific technology, you need some specific expertise and some specialties or you need a specific regional coverage that you cannot really get. And for all of this reason, it makes sense from time to time to make some acquisition. And most of the time, it makes no sense. But this move on buying Medimust was absolutely not related to the fact that Doctolib is entering to this market. [Foreign Language] or you can ask your question in English if you want. We'll get a question from [indiscernible]

[Unknown Analyst]

So first question on the real-world data. Can you expand on this? Can you explain a bit what it is? Is it linked to the health care sector or not? Because I was not aware with this [ unit ]. And maybe I'll give you all my questions and you can follow them. So then you mentioned you're gaining market shares. Can you give us some data on this, maybe, I don't know, on the pharmacy side in France or in U.K., on the doctor side? It's quite difficult for us to really track the performance of all the different players. And another element. So you said, you need to be everywhere now in the health care space. So you need to offer software for pharmacists, for doctors. I mean, is there any, I don't know, savings or any link you need to build between the platforms? Or what is exactly the product that people want? And what is the pressure from the regulation? What is the impact of the [Foreign Language]? And then a follow-up question would be then how many software providers are certified at the moment for the next generation of software? And whether the competition will be more or will be less there because it's -- because you need actually a software for pharmacists and a software for doctors and so on before you can enter the market.

[Jan Eryk Umiastowski]

Yes. So 4 questions. So the first one on the real-world data. So our data business, it's only for the health care space. That is the first answer. So we provide the data business only for the health care system. However, some clients may be outside health care, but the data that we provide is related to health. The second thing is on real-world data. This means that we provide information on real world, what really happen when the drug on the market, what really happen to the patient so we can track what happened to the patient. We can say the patients have seen a doctor on Monday, then were just kind of sent home. The doctor makes his diagnosis, make this prescription to the patient, buy this kind of drugs, do not buy some other ones. There have been some prescriptions for generics. Then the patient come back to see the doctor, have some side effect, buy other drugs, make the next way, a blood test. We can see all the side effect. We can see negative interaction between drugs. We can see the total cost of the treatment related to this patient. We can see in this treatment, it works with the specific patient or for some specific patients. We need to adapt the treatment or to do something else because this doesn't work, et cetera, depending on the specificity of the patient. So this is everything we can do with real-world data. This means that we really take the data from the real life, from the patient record. This is completely anonymous, and we respect all regulation everywhere where we are present. Of course, completely anonymous, and this is provided in a statistical way. Thus, this is what -- this is real-world data and only for the health care sector. Then the second question was...

[Unknown Analyst]

Maybe a follow-up on this one. In Italy, you are there only through your 51% ownership of Millennium, if I'm correct. Do you have some owned software in Italy where, I mean, pharmacist software or anything that actually generates the data you're reselling in the real-world data?

[Jan Eryk Umiastowski]

Yes. So on the Italian market, we have a JV with Millenium. We own 51%. But for the real-world data, what we have done, we have signed specific contract with some specific organization that provide us this data. So we're buying some data on the market where we get this data, and we're able to sell it. There is 2 interest: first, to cover the Italian market; and the second, for the pharma companies, very important to have data on the big top 5 country in Europe. So we're already providing this in U.K. and France, in Spain, now Italy, in the coming months in Germany, et cetera. So we're expanding our network, and we will be able to cover the big top 5 countries in Europe and providing the same quality with the same statistical [indiscernible] on all the data. Then on gaming market share, yes, I will only say that we're gaining market share. We'll not provide specific numbers on specific markets, et cetera. The market is moving on. There is some competition, et cetera, and new entrants. So we do not want to give too many info or colors on that. But it's just important to note is an increase of revenue on the software side. There is some recurring revenue. There is some product base. So recurring revenue, it's quite stable if we gain the same market share. Then we have the product base that added some additional revenue, one-off -- the one-off revenue. And then there is some increase due to the fact that we're gaining some market share. And the only answer would be, yes, we are gaining some market share in France. But I will not be more specific at this stage on this specific topic.

[Unknown Analyst]

Just to really understand, so you say -- so this year, you have 4.2% organic growth in the software business year-to-date. What is the contribution of market share gain? Is it 0.2%, 0.1%, just have an idea of the magnitude of the contribution of market share gain?

[Jan Eryk Umiastowski]

It's a significant contribution. It's not just to say that we're gaining market [ share ].

[Unknown Analyst]

Okay. So we could say that out of the 4.2% organic growth, maybe there's 1%, which is market share related.

[Jan Eryk Umiastowski]

1% is beginning to be significantly. Then there is a question on the China market, et cetera, and regulation. What we're seeing is that for doctors, for pharmacists, you need to be compliant with new regulation and that regulation is changing and becoming more and more specific. And you need more and more people to be involved just to get certification on the software. So it's quite a specific cost to be certified. So I think that the number of players in the market will decrease. To gain certification for this software is becoming more complicated than in the past. So probably the number of players over the long term will reduce due to the fact there needs specific team that did only with gaining certification on the software. This figure, Dr Sante, this will probably help software provider of software for doctors, maybe for pharmacists and maybe for nurses, but probably for doctors, to have some money to help them to be compliant with regulation and to develop new specific modules. At this stage, it's too early to give more color on that, but this will be positive as some software providers of Cegedim will receive some subsidies to help to improve the software and to develop specific modules that will be requested by the French government. Yes. And the last question is on the number of players. I think due to the fact that regulation is more strict, now to be compliant is more complicated. The number of players will reduce. Maybe you will see some new entrants that will be able to -- because they will have a lot of money to have their own team for compliance that other players will disappear. So I think that number will definitely decrease.

[Unknown Analyst]

But coming back on the first point, so it means -- it's likely that you have an -- and the only advantage you have, if you have a software for pharmacy and one for doctors, is that you save on the regulatory cost because you have only one regulatory team for certification. There is no need to have a software linked between the two.

[Jan Eryk Umiastowski]

Now the link for the different software is important for health care centers. But in the past, you see that the doctor have been alone in his office or one doctor one office. Now we see that in the specific office you may have -- you may see 2 doctors, 1 nurse, 1 [ PT ] practice, 1 dentist, 1 radiologist. And of course, they need a software that will communicate and to obtain information about the patient and for the billing also to have a common system for billing the patient and to follow on tracking the patient. So -- and this is built on our Maiia Gestion software. So we have developed the Maiia Gestion software for [ PT ] practice at end of November last year. And then on this framework, we'll move to develop Maiia Gestion for GPs, Maiia Gestion for specialists, Maiia Gestion for dentists, for nurses, et cetera. So there will be all of them on the same software with some specific modules, depending on specificity of the health care professional, and they will be completely integrated and work together. So -- and when this will be achieved, we think that we'll have a unique platform for all of our health care professionals on SaaS, of course, and the same framework. So there will be some cost savings on developing software as part of the function that will be common to all of these players. But at this stage, this is more that we need to invest to build on Maiia Gestion that is the next software and this will be spread across all the -- our activities on health care profession.

[Unknown Analyst]

When is the delivery of the -- of all the modules on the complete platform?

[Jan Eryk Umiastowski]

We're developing, so probably dentists will be at the end of the year or beginning of next year. GP, it's coming quite fast. It would be probably at the same time. We are developing this. Some of them are already ready, which is waiting to see how the market reacts, to see how our competitors are moving also and we'll release at the right time, the model needed on the market.

[Unknown Analyst]

So by mid-2022, you will have the full platform.

[Jan Eryk Umiastowski]

Yes. I mentioned that we are everywhere on the health care space. We are not, at this stage, on hospitals [indiscernible] for procurement. So when a hospital needs some drugs, et cetera, they use our system for delivery, et cetera, but we're not going to manage a hospital. We have some partnership with some players in the hospital at this stage. And we'll see in the future if we need or not to move to the -- to really move along in the hospital space or if we can do this with some -- continue to do this by having just partnership. You can still ask the questions in English or [Foreign Language]. If there is no more question, you may still ask questions by e-mail, direct it to my e-mail. So give me a phone call. I will respond to you or we can organize a call after that. And just to remind you that we had a strong third quarter, with an increase of 4% on a like-for-like basis that lead to a 9-month increase of 5.5% on a like-for-like basis. That exceeds our guidance provided that is between 3% and 5%. However, we do not expect to see any decrease of revenue in the last quarter of this year, which is just only because we are cautious about our guidance. Thank you very much for listening. Have a good evening or a good day. Bye. Thank you.