CompuGroup Medical SE & Co KgaA

XETRA:COP

Earnings Call Transcript 2018-Q2

[Operator]

Dear, ladies and gentlemen, welcome to the conference call of CompuGroup Medical SE regarding the Q2 results 2018. At our customer's request, this conference will be recorded. [Operator Instructions]May I now hand you over to Mr. Christian Teig, CFO, who will lead you through this conference. Please go ahead, sir.

[Christian Bartlett Teig, CFO & Member of Management Board]

Thank you very much. A warm welcome also from my side. This is Christian Teig speaking to you out of Koblenz to report on the second quarter 2018 for CGM. We will very much follow the normal format with a prepared presentation that you can either watch through the webcast or you can download it and read it yourself and download it from our website. I will, as always, try to keep track at the slide numbers throughout the presentation so that everyone can be on the same right page.So we will then step into the first slide, Slide #2, where we see the key figures for the second quarter this year. If Q1 was slightly weak, then from -- in our opinion, Q2 is slightly strong. I think year-to-date, we are exactly where we should be. But certainly, these numbers are good. 36% organic growth, that means almost all of the growth organic, and a 29% EBITDA margin, which is a level that we haven't seen for many years. So all in all, we are very happy with how the quarter has gone through, at least at group level.We will then step through the normal housekeeping areas to make sure that all the moving parts on the numbers side are well understood. If we flip to Slide #3, we here see the sequential quarterly revenue and profitability over the last few years. A very clear step-up beginning towards the end of last year and where we really see the results of years of investments also through the P&L and now in Q2 with, again, a very, very marked step-up showing a very strong performance and pattern over the last 9 months, actually.Drilling then a little bit further down into the P&L. We're now at Slide 4. You have the cost of goods and gross margin. A lot of the growth comes from, say, nonrecurring sales, product deliveries related to the TI rollout in Germany. There, we have certain components which are either purchased or manufactured externally. This takes some of the gross margin away, about 5 percentage points compared to the same period last year. Still, it is a very, say, high gross margin business and you see this year in a consistent picture at around 80%. I guess, this quarter, 77%. And again, the driver for the change over the last 12 months is just a higher proportion of product sales and deliveries.Brings us to Slide #5, the personnel expenses, also in the sequential view. This graph shows the nature of the scalable technology business, strong growth based on essentially the same organization size. That's how it should be and that's what drives profitable growth. And most of the TI-related recruiting and the build-out of our organization actually happened last year, which means we are now in a stable organization size.Other expenses, those are all other expenses that come on top of the cost of goods and personnel expenses. That's Slide #6. Yes, we have some more marketing expenditures and external costs related to the TI rollout. We also spend more on outsourced R&D. That goes into our capitalized R&D. That's a clear decision this year to accelerate product areas to prepare for other growth horizons in coming years. And you will see that showing up not as in-house resources with personnel but actually as outsourced partially offshore development.Brings us to Slide #7. The CapEx for this quarter, EUR 13.5 million altogether. On the M&A side, it's a small tuck-in acquisition here in Germany. We'll have a separate slide on that. And again, the mentioned increased outsourced research and development is related to our Hospital Information System. We also capitalized some on the connector software, which is for the new applications that will be rolled out next year. And we bought an office building in France, which we have used since 2014, which shows up under office building and property. So hopefully, that's a clear reconciliation of CapEx done in the quarter.Slide #8, the details of the La-Well acquisition. This is essentially a telemedicine application, to some extent, an exception. Typically, we buy market presence and reach. This is more of a product-based acquisition that we plan to leverage and roll out to, hopefully, a large part of our installed base. As in many countries, Germany, France, there will be more and more focus on remote consultations, more modern ways of directing between doctors and consumers. And this is a solution that's proven. They have a certain size of installed base. It's not a big business. Revenue-wise, it's still under EUR 1 million per year. But again, the product is very strong. It has all the security features that you need to use it in Germany, in France, in Italy, in all our main markets. And certainly, in the years to come, we plan to grow this business by cross-selling it into our installed base.And just a last comment on this La-Well. So, so far it's placed in the HIS segment. I think it depends a little bit on how it will be taken up and distributed internally, whether it will stay there or go into the AIS segment. It's not a big number. But for this quarter at least, you will see it showing up in the HIS segment.Brings us to Slide #9. Here, we see again a sequential view here on the operating cash flow. Good, solid cash flow also in Q2, and we expect continued strong operating cash flows also in coming quarters. We did a lot of installations and deliveries, TI-wise, in June. But cash, essentially, comes in July. So should be good prospects for good, continued strong operating cash flow throughout the year this year.Slide #10, the balance sheet. Very, very stable picture over the last 3 months. Basically, the dividend payment was more or less paid for through the operating results during the quarter. At least the broad picture looks like that and as you will see, very, very stable and more or less unchanged statement of financial position.Those were the normal housekeeping financial items. We now step into more operating details, of course, also financial for the different segments. We step through the placeholders, software for doctors, also known as Ambulatory Information Systems. On Slide 12, we see the main developments, very, very strong growth. Obviously, 64% is exceptional. Some smaller moving parts, negative FX from the U.S. and Sweden is, in the overall picture, immaterial. The main growth driver is the continued rollout of TI in Germany. Normal positive developments in other markets. U.S. is unchanged flat year-on-year in local currency.Slide 13. Strong focus this year on the TI rollout, for obvious reasons. We've gone through another quarter where we have stayed the only source in the market. Yes, we have accumulated now 31,000 orders. At the end of Q1, we reported about 20,000. That means 11,000 new orders in the quarter. That's order intake. Interestingly, they are no longer only from existing CGM customers, and we now have about 4,000 orders from the rest of the German market.In terms of installations, accumulated, we had about 25,000 live installations by the end of the second quarter. That same number was 13,000 end of Q1. That means we did 14,000 in the quarter and took some of the backlog down, which was about 7,000 installations Q1, and we now have a backlog of about 4,000, which we will try to work down as much as we can in the current quarter. That means Q3.Other events in the quarter. The new financing agreement was signed by the parties, that means the insurers and the provider organizations, end of May, which basically gives a slower step-down. Still a step-down but slower than what it originally was and gives, I guess, financially, the doctor and dental community more time to get their TI installations done. Yes, and one of our competitors were able to get their accreditation for their connector. That also happened at the very end of June. And they will -- we expect that product to be in the market during this month, August. Last point, that's a development from our side that we also now are able to offer self-installation for the practical doctor who just wants to do the connection to the TI themselves.There are some follow-up slides on these points following. First one is Slide 14. Here, we see the complete picture based on the new financing agreement, how the reimbursements that doctors get stepped down roughly 10% per quarter. Up until the end of May, there was a sharp drop-off on this date, the 1st of July 2018. Remember that, that was linked to the original sanction deadline and there was an element of mismatch between them, the extension of that deadline, and the financing agreement. That mismatched has now been fixed so that you have this gradual 10% step-down in terms of what doctors and dentists actually get reimbursed.Then we move to Slide 15, which is our latest and greatest offer. I think we have exhausted the naming options almost completely. Well, if there was every year for a good summer offer, this would be the year. And we are currently in the so-called summer offer, which is consistent like in previous quarter, identical to the reimbursed amounts that doctors and dentists get, which means we are taking that, say, potential discussion out of the picture. And basically, we have decided to match with our offer what doctors and dentists get reimbursed so they don't have to do any co-payment themselves.And maybe a comment here because, as you will see from the form, it is in German. But you do have the option to order some extras, in particular, the extra card readers. And I think we've created more revenue in Q2 than the consensus estimate was. I think a number of installations that was probably more spot on, which means we just get a little bit more revenue than what everyone had calculated based on, actually, quite a large volume of extra components being ordered when physicians and dentists order their collection. So this also means that doctors are not completely allergic to, say, buy some extra equipment. That's daily business for them. And again, some convenience-based extra card readers also for their mobile work. So home visits is certainly something that most doctor and dental practices add on to their order.And of course, all of this, we're still on Slide 15, is under our CGM brand. If we move to Slide 16, you will now see our second brand in the market. It's red and it's called KoCo. It's even, say, visually enhanced by a bird, a Koco. How creative that is. But it leverages -- this is not as easy as it might look. Actually, it was a lot of effort and thinking and also development that went into this so that, a, we could leverage the existing secure delivery chain that we have in CGM. That's not trivial, but we have now done it also in a formal way. We have a very automated and intuitive installation wizard, which really makes most, say, modern people able to do it, if they want. And then, of course, in terms of videos and other self-tutoring material, all of that is available. And you can just buy it online through a web shop. We included the link here for those who would be curious. It's still something that have given us a few hundred orders, so it's new. And I think many doctors still want some kind of assistance and assurance through a service partner. But we think this could be an interesting option for, say, other software houses who don't necessarily want some kind of formal contractual agreement with us, CGM. Here, their customers can just order it through the web shop, and then they can get the resistance and service technician as a separate assignment to help them if they need it. And this was a positive surprise to us that we -- only with a few hundred orders, they were actually based on more than 50 different software solutions.So yes, a little bit of first sign that maybe we can use this in addition to the existing resellers that we have to reach broadly into the, say, rest of the German market outside our own existing customer base.Those were the main points on AIS and, specifically, for the TI rollout. We now move to the second largest segment, which is software for pharmacies, flipping through the placeholder, into the highlights and details. That's Slide #18. Yes, another very strong quarter. We started the year well and continued even stronger. Now 9% organic growth is more than what we have guided and also, I will say, somewhat surprising. But I think we still consider this to be within, say, normal fluctuations that may happen. This business, as it's listed here on the slide, is almost exclusively Germany and Italy. They're both developing positively. There's nothing spectacularly new. We don't have new products. We don't have new services. It's just good sales, I guess having a good position, good reputation in the market and using our well-established products and services to penetrate even deeper into our home turf.Clearly, the Spanish market is important for us in terms of a new geography. It has size and it has relevance, and I think we are inspired about what we have achieved in Germany and France over the last -- no, Germany and Italy, over the last 5 years and would like to continue to expand this segment within CGM.That brings us to the next segment, the hospital business. We flip here very fast through the placeholder and to Slide #20. I guess, here, we sobered up a little bit. The start to the year was also here good. Some of that was reversed, which means year-to-date, we're happy with the development. We should always remember that there is some year-on-year skew, which comes from this revenue -- pass-through revenue, which is now going out. So year-to-date, we're at 1% growth, which is perfectly okay and perfectly in line with our guidance. As such, Q2 wasn't spectacular but perfectly okay.Brings us now to the last segment, HCS, Slide 22. A bit like the hospital business, gets dwarfed by the positive and also size-wise performance of AIS and pharmacy software. It is what it is. It -- you know the deficit, which year-to-date is about EUR 1 million, really comes from less business volume with pharma companies, not say, on the semi-recurring part that we can accurately forecast but more on the discretionary spending within quarters, which both Q1 and Q2 have been slightly softer than what we would have liked it to be. No big warning light here but as I said, slightly behind our expectations in this quarter.But altogether, a really strong performance. On group level, how is this now going to continue? And that brings us to Slide 23. We injected this slide as a slide portion for those who like to do sequential extrapolations. And certainly, if you take the year-to-date figures, we are more or less spot on halfway to reach the midrange of our guidance, both revenue and EBITDA. Q2, much stronger than Q1. In terms of the coming 2 quarters, there will be seasonality for the reasons which you will see here on the slide. Q3 more comparable to Q1, and Q4 more comparable to Q2. So we will not have EUR 190 million of revenue in Q3. Even if it's early days, that's most likely not going to happen just because of the holiday period, which is long in Europe. And if even if we call back all holiday internally within CGM, our customers are also much less able and willing to take delivery during this period. So that's just for the detailed analyst and investor to get that right and not get expectations wrong for the coming quarter.Overall, Slide 24, outlook is unchanged. Exactly where we will end up in these ranges very much will depend on Q4, which could potentially be very strong. That will, of course, depend now on the coming months. I mean, the holiday period is more or less over now, certainly in Germany, not Italy. But in the dynamic part of our business related to the TI rollout, we now get back to normal business. And, of course, the dynamics, the order intake is going to be the deciding factor. We've said all along that deliveries, installation capacity is something that we can manage. That's -- it's not trivial, that's a very doable operational task. Sales, order intake is always the last factor, which you cannot influence 100% directly. But we will do our best to get a very strong performance also in the second half of the year. And as I said, right now, we see no reason to change the outlook and we've kept our ranges, which are still quite large. But I think for those who were nervous after Q1, hopefully, Q2 gave some added comfort that we are certainly on a good way to fulfill this outlook.Yes, Slide 25, before we go into the Q&A session. Not only we will have, of course, the Q3 presentation in November, early November. In between, we will have our normal investor and analyst conference in Koblenz, normal place, normal format. Hopefully, many of you listening will pencil that into your diaries and come preferably in person to visit and see some colleagues and some exciting future areas, business areas here. For those not able to travel or not willing or not wanting, there will also be a webcast opportunity so you can get a partial experience. But again, the date is October 18.This concludes then the prepared presentation. This brings us now into the normal Q&A session. [Operator Instructions]

[Operator]

We've already received the first question. It comes from Knut Woller of Baader Bank.

[Knut Woller, Analyst]

So a couple, actually. Christian, so we saw a nice rebound now in the second quarter and you ran us through the ideas behind it and then higher ASP. The expectation is now for a lower Q3 compared to Q2 and then all depending on the final quarter of the year. You enjoyed, basically, still a monopolistic situation in the second quarter. This will change now from Q3 on. We have to see how many competitors finally are around. A couple of questions around that. A, there are rumors also in the press that participants, or the KBV at least, asked for prolongation of the end of the rollout date by at least 2 quarters until mid-2019. We have seen now from you around about 4,000 customer wins outside of your base, which is 2% of the overall market. How do you think this would change your ability to take market share because of the rollout? My view would be it gives some more time for competitors to enter and take their own share of the pie if the rollout date would be postponed once again. Then on the seasonality in Q3, have there also been some, apart from the catch-up effect in Q2, some put-forward deals due to the holiday season that doctors just wanted to go first and getting a feeling for the kind of customers that opted now for your -- for TI? Is it fair to assume, if I can call it like that, that you address the low-hanging fruit first, so doctors with more seat that had to be equipped, which also drove the ASP a bit higher? And should ASPs come down now in the coming quarters, out of your perspective? And lastly, on the capitalization, you had some nice tailwinds here also in terms of margins. No doubt you had a clear lead compared to consensus expectations. However, the capitalization lifted the margins slightly ahead of the high end of your guidance range. Adjusted for this tailwind, we would have been roughly at the midpoint. How should we think about capitalization looking into the second half of the year?

[Christian Bartlett Teig, CFO & Member of Management Board]

Okay. So, first question first. There -- it has been in the media from many sides, especially from the doctors' side, which you can obviously understand, that they would like more time. This -- there are good reasons, I just say, for that. If you just look at the sheer numbers, that now need to happen in the coming 5 months assuming that not that much happened in July. Having said that, it's our clear opinion that there shouldn't -- and if you do that now, all you will do is to take pressure out and it will just drag out longer. That would not be smart, in our opinion. It's not the end of the world. But what we expect, because we always expect rational and intelligent behavior, is that it remains a non-topic for the time being, meaning, August, September, October and November. And then in December, preferably after Christmas, you can raise the question and you can evaluate the level of commitment and loyalty to the law from all participants, and then you can decide at that point. And now there is no reason to speculate how it would be. But I think everyone should be prepared that they will be increasing voices asking for more time. That's not forbidden, but certainly, if I personally was the Minister, I would just say that's not for now. Now we want to see commitment and loyalty to the law, and then we can always have a discussion towards the end of the year. But if it happened now, it would slow down what we would be able to do, which would be bad for German health care. It would be bad for the users of this network, which are planned already for next year. It would be bad for patients and consumers in Germany. And I guess it would, relatively speaking, reduce what we would be able to do this year and more would spill into next year, which nobody wants. And then I guess you asked -- second question was, are there customers, the 31,000 end of Q2 that we have been able to convince, are they low-hanging fruits? Not -- in some sense, I guess they are. But in another sense, we believe this is probably the more price-sensitive part of the market. So those doctors and dentists who are -- who want to see that they get fully reimbursed, for them, of course, it's been important that they use those -- that period when reimbursement is high and when they have a safe offer that can match it back-to-back. We know many doctors are less price-sensitive, and we think those certainly sit quiet. They can afford to wait, make it a hardened and proven solution. There's no rush. If they need to pay a little bit themselves, even everything maybe, there will be some that wouldn't care even that much because of that. So I think maybe not just low-hanging fruits but more those that have seen price and back-to-back reimbursement as important. And we now have a market, actually, which may be less price-sensitive where they just want to do it according to their schedule and their wish and not based on a financing mechanism. There are probably 10,000 other dynamics going on and many of them we don't even know yet. So I think we are still in an interesting period where we are learning. And of course, then, the dynamic of new offers coming into the market, so far, this hasn't really moved anything. And T-Systems, who got the accreditation in June, now are in a small test phase because they didn't do testing before. So they will only really do deliveries end of August, early September. But so far -- and, of course, July doesn't give any answers to anything. So I think, so far, it's an open question whether there would be positive dynamics, less of the stigma of a monopolist or we would have to fight harder for the non-CGM customers. We just don't know, but we will really do our best to use our experience and our track record to convince as many as possible. Capitalization, given that some of this -- the mechanics of it, which is how much do you actually do, you will see somewhat lower in Q3, call it, analog to the delivery schedules of TI. I think, for the full year, I would probably pencil in plus/minus the same number for the full year last year. So different seasonality, quite a lot came in now in Q2, but that's just a mirror of how much was done. So -- but again, for the full year, yes, just pencil in the same number as for the full year in 2017.

[Knut Woller, Analyst]

Okay. Just a quick follow-up for modeling. Would you feel fine if we model for Q3 the midpoint of Q1 and Q2 in terms of the number of installations?

[Christian Bartlett Teig, CFO & Member of Management Board]

No. I would more look -- I'm not saying that couldn't happen, but as I said, I would more use Q1 as a reference and Q2 as a reference for Q4. And then, of course, you can always adjust.

[Operator]

The next question is from Uwe Schupp of Deutsche Bank.

[Uwe Schupp, Small and Mid]

Two for me, please. Firstly, also connected to the guidance, I was wondering how you basically internally thought about the guidance heading into the quarterly results. As you said, Q1 was a bit more muted. You had a very strong Q2 now. If post Q1, the consensus was sitting towards the low end of your range, is it now -- would you now feel comfortable with the kind of mid- to high end of that range, both in terms of sales and EBITDA? Is that a fair assumption? And then secondly, on the competitive environment again in Germany, did I hear correctly, T-Systems you expect only in the market by, I mean end of August or maybe early September? And what's the latest on the one or one of the other potential contenders you are seeing for the German market?

[Christian Bartlett Teig, CFO & Member of Management Board]

So I think we have explicitly not made any statements related to the range, so the full range is open. But if the full range is open, maybe mid-range is then still the neutral assumption. But that's -- would that be unchanged since the beginning of when we gave the guidance. In terms of the competitive environment, so the statement that T-Systems will be doing deliveries end of August, early September is their own. So we just assume that they have this well in their grip and will do it that way. So what we have seen in terms of partners, which are with Arvato/Secunet, is that they now speak on late Q3, early Q4. So that's kind of indirectly but still official communication. So that would mean then September, October. And we've only seen that for the -- say, for the more standalone connector from RISE, they are now in their official communication changed necessarily from Q2 to Q3. So that's all we know.

[Uwe Schupp, Small and Mid]

And one last one for me, please. Any feedback from doctors that you have -- you must have had a fair amount of feedback from doctors so far on -- that have ordered connector because we see a few new CN there that people are not -- doctors are not that happy. There are some, I'll call it, teasing issues with the systems. Is that kind of a very punctual issues that you are seeing in the market? Or have you had kind of larger and kind of more frequent callbacks than you would have hoped for?

[Christian Bartlett Teig, CFO & Member of Management Board]

No. I would say I think we have less callbacks and less issues than what we have hoped for. When you have done almost 30,000 installations, there will be some which will have -- some may be our fault, but certainly, the components are really now hardened. And you can also go to our website. You do have to read German, but you will see many testimonials from customers who are also extremely happy about how easy it has been. So the -- it is just so that you have a big, big silent majority who just experienced absolutely no problem. And I think compared to what you might expect in maybe not so popular, generally speaking, and certainly not from the doctor side-driven initiative, that if there was any type of material volume or problems, it would be outcry. So I think these stand-alone incidences, which are very quiet given the whole context, is really the minimum as you will get regardless of what you do. So I think, overall, we are really happy with the technical side of the rollout.

[Uwe Schupp, Small and Mid]

My understanding is in many cases, also related to the old eGK cut, which some patients may still have today, right?

[Christian Bartlett Teig, CFO & Member of Management Board]

Yes, which is 100% an issue related to the gematik specification. So okay, the doctors don't know the difference, but the system does exactly what -- down to the comma, what it is meant to do. Some doctors who experience this, because it gives them some administrative or some extra work, yes, they don't like it. But that's not a technical issue. That is a pure, say, logical issue related to the specification of the solution.

[Operator]

We have the next question. It comes from Victoria Kruchevska of Commerzbank.

[Victoria Kruchevska, Analyst]

A couple of questions from my side. Returning to the -- or I was just talking about the telematics in general. The maintenance revenue, I was wondering -- I mean, now you are having 27,000 installed equipment on the sites, so to speak. Maybe you can explain how are the maintenance revenues sort of like technically works, whether you are receiving sort of like the fees upfront or at the beginning or at the end of the year. That will be my first question. The second one is regarding the installations per week. I recall that the guided [ futuristic ] run rate of installations per week is around 1,000, I guess. And if I've done the math so to speak correctly, I have for the second quarter as slightly above that number, more than 1,000 installations per week. Maybe you can verify that. And what dynamics so to speak you see in the coming quarters? Also, regarding the market share wins, if I recall it correctly in the first quarter, you had around 1,000 of non-CGM customers, so to speak. And now we are having 4,000, which implies 3,000 new non-CGM customers acquired in the second quarter. Can you see the dynamics also changing? Do we -- do you see -- do you expect in the third quarter now that we are right in the second month of the third quarter, any changes on that side? And the very last question is regarding the overall market. I mean, now you have talked about T-Systems, they are about to launch. They are -- TI put out at the end of August. What do you think by the end of the year, how many doctors' practices will be in total, in your opinion, connected to CGM? Yes, that will be it from my side.

[Christian Bartlett Teig, CFO & Member of Management Board]

So for the running costs, this is a monthly subscription that runs. So this gets charged and paid, most of it through direct debit on a monthly basis. There's no upfront cash flow-wise disturbance there. So installations per week, it varies a lot. Certainly, we are able -- I think we did many in June. And I think we had also weeks where we did more than 2,000, including the usage of, say, third parties, IT service companies who helped out. So I think capacity can -- and if you do a few weeks with more than 2,000, people are exhausted. And you have some wear and tear on daily maintenance with our customers. But all in all, the average that we've seen in Q2 is certainly not a problem. And technically speaking, if it came to -- if we got just a boat load of orders, we would be able to do a lot in the coming months. So I think -- we've always said installation capacity isn't really the bottleneck, it is orders. And in terms of the mix between own customers and external customers, yes, there was definitely -- and that's also to be expected. We always started with our own customers to get precedence. Those are the ones that we can influence directly. And we really started midyear last year, whereas the resellers and the partners who address the rest of the market really only got moving now end of Q1, beginning of Q2. So certainly, the mix, if we are successful in our overall distribution strategy, will continue to be more balanced between own customers and external customers. Because at the end of the day, we -- since 4 years and many even longer, we've always expected to practically get all our own customers convinced to use us. The larger question and more important question is how much of the rest of the market will we get? And, of course, that means gradually, more and more will come from the rest of the market as we front-loaded and started early with our own customers. The last question, overall market, yes, that is a very good question. And I think if you have the answer, Jens Spahn, the Minister, would be interested here. So I mean we kind of said we expect something like 80% of our own customers to be installed by the end of the year. And given what I said on the previous question, that number will most likely be lower for the rest of the market. But how much lower? And who am I to say? Maybe now everyone comes back from holiday and says, okay, it's time to move, and everyone gets it done and dusted by the end of the year. That's going to be more or less practically impossible. But as I said, the coming weeks and months will be very decisive when it comes to that. I think it would certainly raise a lot of issues also on a political level if there was just no -- if there was a continued resistance, we don't think there is, and you would see very limited uptake or acceleration compared to the first half because then you would get technically to a very low penetration. And again, there are already plans -- official plans for the first applications to run in the network, which basically has as a prerequisite that everyone is connected. This is the emergency data set, the medication plan and also the electronic document exchange between doctors. So -- but as I said, it is really the key question, more from health care policy than for CGM results. Nobody really knows.

[Victoria Kruchevska, Analyst]

Okay, okay. And, Christian, maybe as a follow-up, the very last one regarding the core business growth in our -- in the [ state ] AIS segment, can you maybe give us little like a hint how much -- how hot it was, so to speak? We are having 64%, including TI, on the -- excluding so to speak, TI basis, what is the...

[Christian Bartlett Teig, CFO & Member of Management Board]

Yes. I mean, if you take last year, and we've given you the dollar amount for the U.S. business, which you can then accurately model, and you take the rest of the business with anything between 4% and 6% organic growth, you will be very close. It's unchanged to the Q1 picture.

[Operator]

The next question is from Andreas Wolf of Warburg Research.

[Andreas Wolf, Research Analyst]

A couple of questions also from my side. So the capitalization regarding the application that you are developing for next year, is it right to assume that those are targeting exactly those applications that you've just mentioned like emergency data, medication and document exchange? Or are there other applications beyond that? And if yes, is there a certain trigger that you see that would support installation by doctors? And the second is on connector sales of direct sales versus indirect sales. Is there a significant portion coming from your partners already that is worth mentioning? And could you maybe also repeat the number of KoCo box installations/orders that were carried out? I guess it was a few hundreds, if I got you right. Maybe if you could repeat this, that would be helpful. And looking forward, with regard to capital allocation, what's your view on share buybacks versus M&A? You've mentioned Spain already as a potential new market. Maybe you could shed some light on this topic as well.

[Christian Bartlett Teig, CFO & Member of Management Board]

So in terms of the capitalization, they are specifically for the efforts to the gematik-specified release of connector software, which will be brought in late this year or early next year. So it is not -- so the emergency data set, the electronic documents and the medication plan. And you will also -- you can see it a little bit now, how much is then in -- so you have 3 big projects now, which get capitalized. It's the connector software. So in the new releases, which are linked to revenue stream's comps, so you have no choice. You have to capitalize that whether you like it or not. You have the G3 HIS and we continue now to expand the universe of market-ready web-based products also on the AIS side. And you will see then the segment report how the capitalization spreads across segments. So that gives you a little bit more resolution on that. In terms of direct sales versus nondirect sales, and of the 31,000, roughly 2,500 came through resellers and the rest is direct sales. Not a big secret. And yes, it's correct. The -- it's roughly 200 orders over the web shop, KoCo. So yes, there are some definite opinions also internally, whether this would be a big thing or an insignificant thing. We don't know. As we said, I think what could drive volume if it just becomes an easy way of offering for, say, service providers and software houses to offer our connection package without having a formal cooperation with us. But let's see. It's early days. But I would encourage anyone with some spare time to go into the web shop. You can watch the video, see a bit of, say, impressive simplification of a relatively complex, formal and technical procedure. But the link is in the presentation. Capital allocation, yes, we have started buybacks. So it shows that -- we think that is a good -- no, that's not meant to send any strong signal other than that we, from time to time, do that and we see that as a comparable way of accreting returns to our shareholders as dividends. That will continue. If you read the report, you will also see that we have extended and refinanced our credit facilities. So we have -- and now it's a full revolver, high, high degree of flexibility, which means we have, within 3 days, something like EUR 150 million of available firepower. We've never thought ourselves to be capital constrained in our M&A. It's all about finding the right targets. We would be happy to invest more if we had found more matching targets. It's not easy in terms of what they are, in which markets they are and what sellers and other buyers want to pay. And then we will be patient, and there's no rush for us. But definitely, we -- right now, we are not capital constrained. We are moving down on leverage. And as one way, again, to accrete to shareholders, buybacks comes in, not as a strong signal, whether related to intentions on M&A and certainly, not related to valuation. We -- people buy and sell CompuGroup shares at the prevailing market price, and so do we. It's as easy as that.

[Operator]

The next question is from Charlotte Friedrichs of Berenberg.

[Charlotte Friedrichs, Analyst]

Three questions from my side, please. Firstly, now that you've talked about higher ASPs for the TI product group, what kind of EBITDA margins are you thinking about for the full year? And also, looking at the maintenance revenues further out, what should we think of here in terms of the maintenance costs that you need to incur here as well? And then even further out, is there any new information that you have gotten on further developments that will fit within the sort of Telematics Infrastructure, the patient file, et cetera? If there was anything more concrete coming out of the government that they have been speaking to you, et cetera.

[Christian Bartlett Teig, CFO & Member of Management Board]

First question, EBITDA margin. It's easy to answer, between 25% and 26%. And in terms of maintenance, say, run rate going into next year, the price is completely unchanged. It's the EUR 69 -- or I think EUR 67 or EUR 69 per month. And our current expectation is unchanged that we would have between 50,000 and 60,000 running installations end of this year. So I think that gives you a good basis to calculate that for the purpose of next year. Second question, the personal health records. It's a focus area in Germany, so-called EPR, elektronische Patientenakten, sometimes confused with the electronic health card. Hopefully, no longer. There isn't that much new. It gets debated in the press. It has attention from the Minister. There is a lot going on within the health insurances, but nothing really new other than that it is a clear intention to -- for insured persons in Germany to have personal health records in a very standardized and, I will say, regulated way. And I think, by now, it's quite clear that they would be able to access this without an own personal connector, so there would be some kind of secure access to it. But I would encourage -- but really, nothing new, but there will be some news flow to this during the coming 5 months as the clear goal is to start to move this in the coming years. And we have our CGM LIFE offer, which we are doing our best to position as something that would be attractive through insurances, through the doctors' community, for some, even direct to consumers. But we will see. It's still early days, and yes, we are still waiting for the final draft of this eHealth 2 law, which is in the making, which would get more specific on this particular topic. But so far, we are more observing and there's nothing really tangible new.

[Charlotte Friedrichs, Analyst]

Okay. And just to get back to the question on the maintenance, I was thinking more about the cost base that you kind of have with the sort of CapEx that you incur when thinking about the maintenance revenues. Is that because I think you mentioned EUR 5 million per year at some point, right? Or is that too high?

[Christian Bartlett Teig, CFO & Member of Management Board]

So I mean the revenue [ slides should be ] clear, and I think I will go back to our general statement, is that after a decade -- at least a decade and even more of losses and investments, we've made no secret that we see the revenue streams to pay back on that investments to be high-margin business. And for us, that means 30% EBITDA margin or more. And the discussions that we typically have with investors and analysts is that, okay, if you want to be aggressive and believe in our ability to efficiently manage this maintenance and service, you could probably move to 40%. If you want to stay safe based on our promise, you would leave it at 30%. And then the cost base, you can derive from that. More resolution, we will not provide.

[Operator]

As there are no further questions, I will hand back to you, Mr. Teig.

[Christian Bartlett Teig, CFO & Member of Management Board]

Excellent. Then thank you, everyone, for the participation. We have been able to do this almost exactly at the allocated 1 hour; more precisely, 57 minutes. That -- it's been a pleasure to report this quarter, and we look forward, hopefully, to reconnect at the 18th of October on our Capital Markets Day. And if that doesn't somehow fit in your calendars, then certainly, when we come with our 3Q presentation early in November. So thank you, and have a continued nice day.

[Operator]

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.