Ascom Holding AG (ASCN) Earnings Call Transcript & Summary

Good morning, everybody. I welcome you here in these not easy time, but at least, we can do a presence meeting again. It is a bit as this crisis, never was before. But we are in the middle of it, and that's the reason why we try to keep distance and also following all the rules. There are 2 things, today, Thursday, the 13th. It's -- tomorrow, it's exactly 1 year since I stood here the first time, and we had, together, a lot of discussions and also a lot of nasty questions about how Ascom is developing. And you can be sure that by today's time, I know a lot more what is possible than it was 1 year ago, but this time was simply needed. There is a second thing today. Today is the day of the left handers, means like we are all asked that you are right handers, maybe mostly to do something that we normally do with the right-hand with the left-hand today. So that's also something I heard today, and I think like it's kind of a nice thing. The agenda, we are going through today is -- I will summarize what you already read this morning with some more background information then Dominik Maurer, our CFO will do the financial review. I will elaborate a bit very short about Ascom during the COVID-19 crisis. And then we have a representative here from Slingeland Hospitals in the Netherlands, and she is explaining us then how running project during this COVID crisis changed and how was -- how the added value was from what we did there as a project and how it was needed because when we met, let's say, in spring, the 5th of March, we were talking a bit about the offering areas that Ascom has products, et cetera. And now it's also very important to understand how exactly these products and offerings help to be successful in real youth. So and then I will do very short outlook about what is going to common question and answer, very important thing, always will be with as well. You know that today's presenters, we took -- we said that we only are Dominik and me, basically because we wanted to have space for all of you and not having mainly Ascom people participating in this session. So what we were -- what was our commitment, the 5th of March. We started this year, and it was the 5th of March. It was still before this so-called restrictive lockdown, we were discussing about, is it having an influence? Yes or no. Now everybody knows, yes, it actually had an influence also an economic one. And now we look at what we did. And the execution highlights we had next to that we also had to manage this kind of crisis as a company as well. And Ascom is in 18 different markets worldwide, and there were 18 different situations basically that we had to take care of and that was a challenge. And also, we could not travel, I thought like -- I feel like I work 24/7 in the last couple of months. So the execution highlights were that we stabilize the business a lot with a lean organization and a strong leadership team. It was very important to have the right people in place, for example, a Managing Director for our U.S. Organization, but it was also important that we took the decision to have end-to-end responsibility in our local markets that they can basically act without having people flying in from left and right all the time. So we didn't know about this lockdown in advance, but this was anyway the way we decided to act, and we implemented it at the right time, and it really works now. That's the second point, also the regions have end to -- full end-to-end profit and loss responsibility, which is very important for me because I think everybody in this company should really follow the same goals and also objectives. So -- and we had the setup of a clinical solution team. We were discussing this the 5th of March very, very important thing because overarching, we see that the trend is that projects are larger, bigger solution projects, but it's also for several years and the buildup of that and also winning these projects needs a lot of so-called consulting practice also from our side. And that's the reason why we have this clinical solution team. Yes, they were a bit hindered in doing their business because they couldn't travel around. That's also one of our low lights we have, but we are convinced that this is the right step to be basically even develop the company in a good way. And then we have our transformation program, SIFOX, we were talking about this. It's the name for simplify, focus and the execution to stabilize and transform the business and this is advancing well. The current focus that we have at the moment is the simplification and realignment of our go to market, basically doing the same thing in some of our markets as that is -- that are successful and an efficient delivery model, which is also important because delivery is the one thing you always have to adapt to the needs in the markets. So let me summarize the most important points that we have for the first half years. Its 7 points I want to mention, and Dominik Maurer is doing more a deep dive then into the figures and is telling you then what this means. We had 2.8% net revenue growth at constant currencies, and we were now exactly hit by that, that if you take actual currencies and the Swiss franc is a very strong currency that we were exactly the opposite, then it looks a bit like we shrinked, but we didn't do actually if you compare apples with apples. We have a substantial improvement of gross profit margin and EBITDA. This is also a nice thing, but it's also something we discussed already a year ago where we said that we have the feeling that the cost base was basically too high. So we had a positive development, in particular, in the U.S. and Canada, and as well in the U.K. and the Nordics. And the interesting thing is that, yes, these are the markets where we also told you. There is potential but it was also about how these markets reacted also on this crisis. And that's also a very important point, and we had a lot of passion from our employees really keep up business even growing, winning during this time. There were regions, France, for example, that was temporary, negatively impacted. The lockdown there was much harder, if I can describe it that way than done in some of the other regions. Because in France, it was not even possible to ship things. Means like if there would have been a hospital level to have needed hardware or whatever, we were not even allow to ship and that was totally different from other markets, and that's where we really noticed that lockdown measures were different and also impacted the market negatively. But our colleagues in France, they're really -- they're running hard now to catch up. So incoming orders with a slight increase, and that also despite of COVID-19, which made it not so easy for our salespeople to approach customers that was not easy, a lot over Skype, over phone. And you know as well as me that this sometimes is not the best way really to do business. But we manage basically to have a slight increase there as well. We have a solid double-digit order backlog increase. And I do not want to talk about records here or whatever because there is one positive thing because we do have quite some certain amount of larger projects that last for several years, yes, backlog is growing. This is a very positive sign because it's exactly the direction we said we want to develop in. On the other hand, backlog was also growing because some of the projects we had, actually current running projects were a bit postponed because of the crisis. There was no access to long-term care for exactly long-term care homes. They were really close, very restrictive. So there are several things that are now in the backlog that would have been done during this time. So yes, backlog grew, and there is a positive sign, but there is also a lot to catch up. Ascom also benefited from emergency activities in certain markets during this crisis and that compensated partially, but not all of it. And I know that Dominik sometimes is a bit angry about this because it could have been better. But on the other hand, you also have to see that it was important to be present in this temporary hospital installations. And you might have seen the press coverage about the temporary hospital in the McCormick Exhibition Center in Chicago or also the 10 -- that 10 hospitals they had in New York. Ascom was basically there also with their -- with our solutions, and also in Milan and London, we did emergency installations. And this is a good sign. We also felt like from our employees, a lot of passion to do all that. So -- and that the seventh point, very important Ascom with improved balance sheet and positive net cash position. That was also something very important for us also for the management team. And yes, this is behind the scenes, but having a healthy company from a financial side also gives us the opportunity then to grow, and also having solid projects with our customers. Now I hand over to Dominik Maurer, and he is going to elaborate on our figures a bit more.

Thanks, Jeannine. A warm welcome from my side too. Good morning. I'm a left hander. Therefore, it's my day today an easy part. Although, when I'm looking on my left-hand, I'm writing left hand, I'm not playing tennis and all these things with the left hand, so I do not have the benefit there. The thing what I know is, if you look numbers, it doesn't matter if you're left or right hander. And that's the reason I became CFO or not tennis player because I think with playing tennis, I would not survive, and my family will not have the food at home because I would be nobody. Let's now look a little bit deeper in the numbers. We try to work hard. We try to improve the financial figures, as we said it in March. And when you're looking the numbers, you see that it was not so bad, what we've done. That we are on the right track. But as a finance guy, first half is first half, then we have to do second half, and there is even an awful part. The New Year will start once again. And then you start this year. So therefore, we are aware that we need to work and that we need to continue the work we were doing. Looking our net revenue, as Jeannine said it. Yes, we were growing 2.8% on constant currency. And I will show you later on what happened in the markets a little bit in more detail that you can see what exactly the story. Because we were having on corona, positive and negative markets. Same story in IR, incoming order, solid growth, a good start, even with the crisis and the good half year. As Jeannine said it, higher backlog, we were winning larger projects. We are winning long-term projects, and this is boosting our backlog or backlog is due to that fact going up. And that's a good story for the future, too. Now on EBITDA and the EBITDA development, you see that it was really positive, a really good story. We said in March that we will stabilize the business, that we will implement a leaner organization and that we will work and focus on cost savings. And then you're looking now the result of 7 -- over CHF 7 million EBITDA growth, you see that the result out of the hard work in the number. We addressed the point, as I said. And even with corona, we were able to grow the EBITDA and EBITDA margin. Looking on gross profit -- group profit, not gross profit. Group profit, the development is positive, too. You may do not see that here because if you compare it, it seems that we are doing less, but it's not the case. Last year, you may remember we had the sale of Teningen, a onetime effect. And if you take that out, we were growing even in group profit by CHF 1.5 million. On the FTE part, end-to-end responsibility, as Jeannine explained it, as driving here the FTE reduction because we were reducing people in the regions as a first step. Now let's look a little bit incoming orders and show you where we increased it by 2%, if not taking into account the OEM. And if you look it on constant currency. And there, we have a mixed picture, too. You have the region Europe, where we were having a slight decrease, heavily infected or impacted by France, which Jeannine already said, where France was really bringing us down. There, we lost 27% due to the fact that the lockdown was really influencing us there. On the other side, positive, we had DACH -- the DACH region, Switzerland, Germany and Austria, where we were growing around 15%. Then in the Netherlands, when you're taking Netherlands is another big country, too. There, we lost 10% in incoming order due to the fact that we are having a lockdown there, too, especially in long-term elderly care facilities where we were not able to do business and where nobody was really looking forward to close contracts because they were focused on other problems they were having with corona. Then now looking on the Americas, one of our problem which we had last year. There, you can see we were growing. We were growing with the new management team, with the new leadership and with the task force. We implemented, you see it in the numbers in incoming orders. You can see it in revenue and you can see it on the result too. Rest of the world, mixed picture too. There, we were having countries with good results, Finland, Australia and even Italy. And there, we were having countries with problems where the lockdown and corona was hitting us. To mention here is Belgium and MEA, Middle East. OEM, the overall global channel. There, you see that corona was catching it and was influencing it 1 of our distributed channels was suffering, and we see that in IO, and we will see that in revenue later on, too. Revenue growth. Yes, as I said, 2.8%. As Jeannine mentioned it, and you can see that on this chart here, we started with CHF 137 million that we had last year and when you take the currency effect out, you see that we were growing. All the negative impact that, at the end, we were a little bit below last year is coming from currency effects. If you take out that, we were growing 2.8%. And in absolute terms, we were growing CHF 3.9 million. Sometimes, it's good that you are a Swiss-based company, and sometimes not. If you have lots of revenue outside Switzerland, the Swiss franc is in crisis normally going up is not helping at the end when you compare Swiss franc's numbers. Now let's look. We were growing 2.8% on constant currency, where exactly we were growing and which were the markets, we performed or we were less performing. Looking on DACH, more or less flat, not flat due to the market conditions, flat because we were not able to get the resources to bring home or to close the projects. There, we have to work and we are addressing that point that we have the resources to really grow in DACH too. As mentioned by Jeannine, France, COVID lock down, not able to ship. You see that directly in the revenue. And you see that we had there a 29% decrease compared to last year. Netherlands, long-term care was it, as I said. But nevertheless, when you're looking on the numbers, you see that we were more or less flat on the revenue. So we were able to compensate things and on the IO, we were not able -- the projects were shifted to H2. On the revenue, we're still able to do the things and to compensate the lockdown in long-term care. Nordics different approach in COVID, in some countries. And there, you see we were able to grow 15%. The Super Boost let's say that way in U.K., we were able to grow in U.K. with bigger contracts we closed, 22%. And U.K. is following the overall strategy, and there we can see that the strategy we are doing is right, and we are applying that to all other countries, too. Americas, as I explained it on the IO, same story, appeared on revenue, new leadership team, new focus was helping that we are able to grow there too. Rest of the world, as mentioned already, mixed picture, once again, countries up and countries down, the same like in IO. Finland, Italy and Australia, positive. MEA and Belgium, not positive. There we were losing revenue compared to last year. Same story, as mentioned already in OEM, same problem. Incoming order and revenues they're directly linked due to the fact that we have not long-term contracts there. Now let's look what is the effect on the income statement, with that revenue and the revenue split I showed you. We said in March, we will work on our cost base. As already mentioned, we need to improve the cost base, and we were working heavily on that with the SIFOX program, as mentioned by Jeannine, we addressed already the first key points. And of course, this will continue. This was the first part, but we will continue the work on the points. And then when they look on cost of sales, we had a better cost position there. We were able to improve the efficiency in the service part. We were able to improve our project implementation, skills and project implementation results, let's say. And both together, these both two, they helped that we were able to improve our margin, gross profit margin by around 1.9%. And in addition, we are having a little bit different product mix than we had last year. And the different product mix is bringing 1% around gross margin in addition too. So with all this, as already mentioned by Jeannine, we were really able to improve our gross margin to 47.8%. And if you compare that with 2018, we are almost there where we were in 2018 on the GP margin. Then a little bit in the cost base, marketing and sales. We were having lower cost due to the fact that we were doing savings, due to the fact that corona COVID, there were no fares. Part of the fares were just shifted, but there we were having less travel and things like that. And we were having -- comparing to last year. Last year, we were having a bad debt of CHF 1.1 million, which you have to add in 2019 or deduct in 2020 to compare apples-with-apples. Research and development. We've done our investments, our maintenance there. So no big changes there. That mean you see that it looks like we have CHF 1 million more admin cost. And CFO saying, we are working on cost base and cost reduction that seems to be a little bit strange. It's not. We were having last year a one-off positive item of a provision of CHF 1.2 million. If you take that, once again, out or in, we were not growing, we were decreasing the cost there too. EBITDA development, a waterfall chart showing what we had and what happened there, biggest influence, that's the item #3. You see coming out of the positive revenue we were having the productivity effects, which I already explained in the former chart. We were there CHF 3.9 million having a growth. With that, revenue and we start additional margin. We improved the COGS, and that was driving the EBITDA, of course, directly. Then the one-off item, once again, the bad debt. So this you have to deduct and take away. And then if you look, we were able to increase our cost base by CHF 2.9 million, improvement coming out of cost reductions, restructuring we've done and the COVID-19 savings, which I already explained a little bit in the former slides. So that's more or less to show you what happened on the EBITDA, which were the most important drivers, let's say. Now following story or same story coming out of cash flow. We started with a balance of CHF 18.2 million and we produced operating cash flow $28.8 million. And you may remember what I said in March, we need to work on our net working capital management. And due to the fact that the CHF 28.8 million -- is CHF 28.8 million is the reason we were working on our net working capital management. We were working on our overdue receivables, where we were able to reduce the overdue by more than CHF 10 million. Be aware, you can do that once or 2x, but that's not something we're going to do every year. But you see, if you work on net working capital, you're able to produce cash even during crisis where everybody is looking on the cash and is try to secure the cash. So we worked heavily on that with all the regions due to the fact that we had end-to-end responsibility, we were able to catch them and discuss and to work to reduce the overdue month. And you can see no dividends paid. So all the cash went in directly to the paying back of the bank loans we were having and on the bank account, which is improving our cash position and which is in helping to improve, of course, our balance sheet, where I'm coming to my last slide. Here, I have three points. Cash is king. Net cash at the end is important. We were able to increase it by CHF 23 million, the net cash position. And you can see, and we already announced it in the press release. We are net cash positive. And if you look the half years back, you'll see that last time with exactly the same amount that's ranged, but it is CHF 1.2 million cash positive we were in December 2018. So we are back where we were in 2018. But we are not back where we were in 2018 on net work capital. Net working capital. We are now at CHF 44.2 million, mentioning what I said, working hard on that, and we were able to bring it down. Then on equity, you see that our equity came a little bit down. Of course, we had a small loss. But if you look on the equity ratio, we are back to be over 30%, which is showing that we said, we had a good balance sheet. Last time I was standing here, and you see we even improved the position. So our balance sheet is healthy, and we are well prepared for the future. To finalize my part and do a summary and to bring the highlights out and to be here and to say it with proud and this pleasure. We were growing 2.8% on constant currency. In revenue part, we were having strong gross profit increase of 10%. We were able to improve our EBITDA and EBITDA margin at the end, we were having an EBITDA margin of 6.3%. But we, by the way, had 2018, too, in the first half year. And net cash is positive. Our balance sheet looks well. And when you look at that and take all the crisis and you look at other companies, I think we've done a good job. But as you know, finance guys, they always say, yes, first one done. So we need to continue to do a good job. Otherwise, all the good results will disappear. That's from my side. I thank you, and I would like to hand back to Jeannine.

Thank you, Dominik. Compared to last year, we have now the team in place, but we know exactly the work is not done, and we will continue to push hard. Ascom, during the COVID-19 crisis, it was important for us to maybe tell you a bit story what happened, and also having an introduction of one of the projects that really helps us to describe why Ascom solution is having added value. So two points in advance. This COVID crisis is still ongoing. We do not know how long it will be and how long it will last. And also, how it's going to influence the one or the other market we are in. But at the moment, we see that -- we basically jobbed quite well with what what's going on and we will keep on giving our best to do so. The second thing is, is that the presence that we have in the local markets is really helping us. And I'm convinced, I'm doing international business since a very long time that this is one of the differentiators we have, if you're not capable to basically fly around and do your business in another way. So what were our highlight and lowlight during this COVID-19 crisis, as Ascom highlights was we won several deals in both health care and enterprise sector. The second thing is Ascom revenue benefited from emergency activities, as I described already in certain markets, compensating some of the COVID-19 related project delays. And yes, the finance guy said it in advance, we could have been better. But let's say it like this, we can show this in the future as well. We have a very good staff morale and team spirit during this COVID-19 crisis. There Ascom was -- I couldn't just send everybody home at -- working at home or home office because we have installations in really critical infrastructures like hospitals and long-term care, means like we had to be very differentiated and it was pleasure to see with what passion our employees did installation in London, in Milan, and basically themselves decided that they want to do this and then went themselves in quarantine for 10 days basically to make sure that nobody is affected. We had very few employees infected by COVID-19, and they're all already back to work. So we also had low lights. The COVID-19 crisis hit, particularly the French market very hard. It was not only that business went down. It was also not easy for our Managing Director there to keep the team together, and also keeping morale up because people were not even allowed really to leave the house. And that was not an easy situation, specifically, if you have kind of like some passionate people around there. Some projects were delayed into H2. And this is not a low light if you can deliver it, but it's -- we really have to juggle with our resources that we can manage to do all these things because that's not the easiest thing to do now, and also delivering all that at the same time. But at the moment, we are managing that quite well. Then one of the low lights was international collaboration and support is impacted and still will be impacted for a longer period. There is no prognosis possible at today's date. And I mentioned in the beginning, for example, our clinical solution team, they did a lot of work remote, whatever they could do. But there is no discussion that they could have been further with their development, if they could have access to some of the larger customers. But nevertheless, we are prepared, and we will manage to do good business there. So there is a selection of substantial wins we did in H1 2020. And for me, it's already kind of like it's the past because we are already discussing new ones that we have in July and August. But as you can see, it's in the enterprise sector, but it's also in some substantial health care facilities where we were able to win deals, despite the crisis we were in. We are very proud on that, and I think we will keep on pushing and doing even more. What is important for me now, and I'm really happy that I can introduce now our showcase that we wanted to show you today from Slingeland Hospital. I'm proud that we have [ Gabby Poms from Duke ], sorry, here. And she is PHD, and she's going to explain to us how exactly this worked and what they did to really survive basically, and also act during this COVID-19 crisis. Thanks a lot, again, for coming and sharing with us this information.

Yes, I want to shortly tell you something about our smart monitoring project. We started at Slingeland Hospital. Slingeland Hospital is a small medium-sized regional hospital in the East of Holland, and we have approximately 250 clinical beds. We started the project at the neurology ward and vascular surgery ward within total 50 beds available. We have one problem in our area, and that is that we're settled in a rural environment. Because of this, we have an increase in age and the younger people are migrating so we really have a shift in age. Because of this age increase, we expect that people will get -- we will have more chronical illnesses. And because of this, we will have more hospital admissions and higher costs. That's why we were thinking in solution, how can we change it, how can we manage this. And we were thinking about using e-health. That's how we started thinking. And the idea is that we want continuous monitoring of our patients. So that we will not have to be admitted in the hospital and they can stay longer at home. So that's our quite ruple aim. We want to generate or really use the data as well as improve the communication. And then that's when we started our smart monitoring project. This is how it's thought of. Our success factor for better patient outcome. We start with continuous measurement of the vital signs. Because if we do that, we will have an early detection of a change in condition, and then we'll make a decision based on artificial intelligence and the clinical decision support system. And then we can treat before actual incidents happen. So shorter length of days -- of stay or even that people can stay at home, and we will have a better patient outcome. And even have less admission to, for example, the intensive care unit. Well, when we start thinking about this, we thought of what we wanted, and we had some requirements like free choice and sensors, data integrations, that we can use it and our already existing patient file directory and that's when we thought that Ascom is our ideal partner in this situation. Ascom already has a lot of knowledge in EL systems in our previous projects, and that's when we contacted them. The idea is that we have several sensors, which will measure heart rate, respiratory rate, blood pressure and oxygen saturation. That will go to one -- how do you say that? One, don't know, Digistat, digital communication suite, and that will integrate all the data we get. From that data, we will make scores. We call that an early warning score. With which we already work in a hospital, but now it happens manually. So the nurse has to measure it 3x or even more a day to get those data. And the idea is that with the continuous measurement, we will have it all day long. And then we can use our own hospital algorithms, and we can even have a medical device direction and regulation certification on it. The big idea is then that it will come to the caregiver through a handheld device, the micro and at the end, even a central control room where all the data will come together and will give alerts. We can even use already existing neuro school system. Yes, so we started our project on March 9. And we really included a lot of patients, but then COVID-19 came along. As you all know, a pandemic. Yes, we had stopped a complete project, Ascom had to leave for hospital because we could only get in COVID-19 positive patient really emergency patients. But then we started to get familiar with COVID-19, how it worked? What did we see? You probably know the kind of quote you see here. It was really that you -- what we normally do when you see a patient as we look at the patient and we get information on the skin color and how they do, and you make an assumption on what care they need. But what we saw in COVID-19 is that we couldn't trust our instincts. You saw a patient, you talked to the patient, you thought, okay, he's not that ill. Then we measure them when we saw oxygen levels from 70%, while it has to be 100%. And then we realized, okay, we can do really something with this. And we contacted Ascom, yes that we had the idea to use the continuous measurement and see what we can learn from COVID-19. So that's when Ascom really change and set up an algorithm really quickly and rechanged our workflow, and we could include, again, and we started the 1st of April to include our patients. In total, we had 41 patients included on which we have a lot of data, I will show one example. What you see here on the top picture is the early warning score. The early warning score is summation of all the scores below. So you can see the heart rate, respiratory rate and oxygen level, based on normal values, you should have an ES score of 0. And if it goes up, you will get alarms. What we saw in the patients that before they really get ill, there's an increase in heart rate, an increase in respiratory rates. So there getting trouble, doing everything, and there's a decrease in the oxygen level. If you then look at the top bottom, you see an increase in the early warning score. So we saw that in almost all the 41 patients we monitored. And the idea for projects is that if we see the tendency, we know we have to intervene and that we can already bring them to the intense care units and not to wait until it's too late. So we can prevent people to get on mechanical ventilation so we really think we can improve our health care system on how it's working nowadays. Our idea is to increase our project. Now we're doing only at or 2 wards, which I said like 50 beds. But we want to expand and yes, get all the beds. We have 250 beds in total in our hospital and even expand it to regional like care hotels, nursing homes, other hospitals. And at the end, it's even the patients at home can get the sensors. So maybe we don't even have to admit them at the hospital. Yes, we just want to -- that patient have to right amount of care, have to right time at the right place and that we can lower the cost in our health care system. So yes, we really think that continuous monitoring can provide us really useful information and that we even can prevent medical complications. So that's what I wanted to tell you very quickly in this presentation.

Perfect. Thanks. It's very impressive. And for me, sometimes, it's important to see if you're a very long time within this ICT area, IT and telecommunication that you see, what's the real case, what's the added value, what's really the reason why you do this kind of business. And very impressive. Thank you very much. And I think that a lot of this experience that's done now worldwide and where we really can improve health care systems a lot. So the last thing, but maybe it's also an important one. Our outlook 2020 is reiterated. As we already said in our -- in the media conference, 5th of March. Net revenue, we want to have a low single-digit growth of constant currencies, and that's important to mention. As you could see now that the currency exchange rate is moving up and down. And EBITDA MEA margin also should be a high single-digit margin at constant currency. This is based on the assumption that the COVID-19 crisis will not basically worsen again or hit off in a way that we do not know yet. But you can assume this because I'm also not a magical guy knowing about the future. So -- but we are pretty confident at the moment that we can reach this. And this gives us also a good feeling to jump with passion for the business into the H2 now. Thanks a lot for everybody that you were here. We will enter now into our question and answer. And yes, everybody is around also to answer questions, but as -- because of the situation, we said that only Daniel Lack, Dominik and me, we are sitting in front to take that questions. Thanks a lot.

[Operator Instructions]

You mentioned the impact -- positive impact in the first half of emergency activities. Now could you give a bit more granularity here? I mean, how much sales did you generate through these cost, plus to be fair, this also is a one-off effect?

Yes. True. But if you take a net-net effect, we would have been far better in net revenue without the COVID crisis. It helped us a bit to compensate, but it was not that much. The point is for me, it's an impact on reputation because we were able to deliver in some of the projects and our competition was not able to deliver. That was in reputation, we at least have an effect. And the second thing was we also kept our people busy. So...

But still, I mean, was it something...

Yes, yes, you know the exact figure.

I'm not sure.

No. It's okay. Okay. We looked at it and the effect we were losing more than we were gaining, as mentioned by Jeannine. We were losing this project shifts and other things around CHF 7 million.

CHF 7 million?

CHF 7 million.

You were losing?

On constant currency, yes.

Okay. And on the other hand, the positive effect of emergency?

That's already...

That's in. That's the net. Yes.

Okay. And the gross effect?

11.

11. But I have to check it. 11. That's what I have in mind.

I think it was 11, as I remember.

More or less.

Yes. Yes. But the point is that the other things we basically had and that was something we looked at as well. We had not different cancellation of project rate as we have normally. Means like there is a lot that is postponed now and some of the things will be done in the second half, but there are other things like if it's long-lasting projects, where it's even pushed to 21. So there is a large project, for example, we have in the U.S. There should have been a rollout of 20 hospitals this year and they're going to be capable to 11 of it because it's simply a time issue.

Then my second question goes to the COGS, cost of goods sold. Where you mentioned the strong decrease from 5.3% to 52.2%, minus 310 basis points on the cost side, which is significant. However, we've seen that with many companies because we had lower input costs, of course, as well, a lower raw material costs, which have. So could you give us an idea how much of this decrease was due to your own efforts, i.e., costs cutting, higher efficiencies, better purchasing and how much was just due to lower input costs?

What do you mean by lower input cost?

Raw materials were cheaper, right? Material you need to produce your goods did not cost that much as in the previous year? Or is that not the case?

That's not the case. So the raw material costs were not going down significantly.

Same input costs is in the last year. Okay. That's an interesting information. Okay. And on the administration costs, you said that if we adjust this CHF 1.2 million. It was 2.6, the last year. This year, 10 -- no, 10.4 and now 10.6 or something. So it was a slight decrease?

CHF 200,000, yes.

Yes. But still, in percentage terms, the decrease in other items was much stronger. So is there more scope here on the administration side?

We worked, as mentioned in the regions at the beginning. It's a transformation program and now we will work in the other parts too, in the second half.

Okay. So the answer is yes?

Yes.

Yes. As I already mentioned, we're in the middle of the process. It's running well, but we are in the middle. It's not all done yet.

Okay. Any next question? Mr. Iffert, please?

The first question would be, please, on 2021. As you did a lot of -- and I call it, homework in the last 6 to 12 months to improve your operational setup. Do you feel now that you are ready and finished with the product portfolio? I mean, regarding innovation pipelines, regarding the sales team set up, regarding account management, that there should be a very good setup, efficient set up for FY '21 or if anything larger you still need to do? The second question would be, please, on the order backlog. Can you tell us how the average maturity has changed in the last 1 or 2 years? And what is the margin visibility and regarding product mix in the order backlog for the next 2 to 3 years?

I'll take the first one. To formulate it like that, the first question. Our President sometimes is asking, when are we going to be a normal company? And I can tell you that in 2021, we will be on a normal rate of what we invest in innovation, et cetera, et cetera, because there is always going to be things you have to think about because we want to stay in the market. We do not just want to sell what we have and then basically disappear. So it means like there is constant development, also needs of our customers in the future. And I think we saw one of projects where there is still a lot of thinking how we can even improve this with artificial intelligence. And that's the software and solution market that anyway is in. This, we will always have to do, but what is not the case is that this whole so-called clean up that you have to do means like you also have some legacy, et cetera, et cetera. This is worked out. And I think from 2021 on that, that's going to be as a normal company. And the second question to the order backlog, you maybe even have some figures about it.

Yes, the first question about the margin. The margin is similar than the one we had. So there's no big differences. We are not selling projects with higher discounts or different margins. Looking on the maturity. You can take out of the volume when you're taking the order backlog volume. Around half of it is long term, more than 1 year, more than 6 months, sorry.

This is an important one because that shows the shift from a pure hardware company to software and solution because software and solution projects they're normally lasting more several years and it's continuous work you have in this project. And it's not kind of like you sell 2,000 pictures, and then that's it for 5 years and then you come again. So...

Okay. And may I ask one follow-up question. You mentioned this at the beginning, you are sitting in front, but we're also allowed to ask question to other people. Can I direct the question to Mr. Neu? Shall I do it after the conference?

Yes, yes.

Okay. Mr. Neu, maybe can you tell us the key two, three points, what has changed for you in your daily work under the new leadership?

So the key points were already mentioned, in fact, the formation of the Clinical Solutions team has put us in a position to see through or have focused -- commit focused to the more complex and more compelling deals that we have from a global perspective. So we are now in a position that we can improve our support, not only from a value proposition perspective, but also throughout the entire life cycle. So getting visibility to such a transaction, supporting the sales, having the products ready for this, supporting the delivery and later on also the support which then leads to incremental business after this transaction because this constitutes global key accounts that we have, where there is constantly something that happens, that changes where we can add on. Because we're -- in the end of the day, we're putting in a platform rather than just a product. And so the formation, the inception of the Clinical Solutions team is probably the single largest change that we have, which allows us to actively pursue and implement the strategy that we are intending with respect to software and solution sales.

Any further question from your side? Other questions?

I was wondering what's your theory or thoughts about what's going to happen to the IT budgets of hospitals in 2021. I mean, yes, you all don't know what's going to happen. Now I'm just assuming that it stays more or less like it is. Hospital had higher extra cost -- has higher costs. They had lost income. And at the same time, we all see the need for workflow productivity. Do you think budgets will already be ready for that in 2021? Or will that come later?

I give an answer. It's not my personal impression, it's information I have because we have quite some talks in Switzerland, and also other countries with not only CIOs but also CEOs of hospitals. And what they say is that they're going to focus more on the, yes, the buzzword was digitalization, but it is true. It's the workflow. It's more this direct access they will have to the patient, and it's more in areas that we heard now already from the Slingeland case. And maybe it's a bit less entertainment in the room or whatever. So this is -- if you take a wide range of what you have to do in IT, they will refocus this. What we hear and that's now a customer voice from the U.K. is that NHS is having great funds now for improving their systems. Yes, they're starting sometimes at the point where we really have to say, they also have to install some of the basic systems. But on the other hand, they will focus a lot on this workflow. And also on the solutions that will bring them the effect that they can do more analysis and more control, having the alarms ready with less effort than they had in the past. So we expect that there will be a lot of focus, but what we do not expect is that this is next to investments in kind of like super intelligent beds or super high entertainment measures and whatever. But maybe you know it as well from the Slingeland case. That's what we have from our customers.

So the focus is positive for you. That's what you're saying basically?

Yes, this is the case. This is what we feel now at the moment. But for us, it means like we have to really, really be -- we are challenged in really being ready with all that, having resources in place. And also, as André mentioned already being ready with our consulting practice also to have all these projects -- to deliver all these kind of projects. And I can tell you, there are a lot of solutions there are, but each situation is a bit different. And that's something we learned during this COVID crisis. We had 18 different markets. We had 18 different situations, and we had to act 18 times different. There were many things that were the same in all the countries, but there were other things that were very country specific. And this will be in the future as well. And that's the reason why it's very important to have this clinical solution team next to what we do anyway.

Okay. Then I was wondering what was going on in the U.K. and Ireland? I mean, yes, great. Revenue is up more than 20%. I think -- and then order income was down. I mean, is that due to your salespeople, not being able to travel. The NHS is investing? Is there harder competition coming from North America? What's going on there?

Yes, simply had a timing issue in the U.K. We simply had a timing issue. As I can say you by today, they catch up, and they're even better.

Okay. Good to know. Then in U.S., leadership change, I understood that over the last 2 years, you were adding new partners or you were looking for new partners, how much of the growth that you've had is due to new partners or maybe what is meant by -- or what are other reasons? Or what are the reasons that -- or what the new leadership team do to make this happen?

Yes. Okay. It was a lot about execution. We introduced a task force at the beginning of the year. That was led by our CSO, Francis Schmeer. And as you know, he's a U.S. citizen. So he knew quite well what he was jumping into. There was a task list there, and that's a detail now of over 300 tasks they had to do. And they managed really to do this working according to that. And with that, they not only increased sales but they could basically work out a lot of additional opportunities that were basically in our projects as well. So there were easy things like you have to define territories in a different way. And then, and then and go through all the processes, making sure that upselling potential is decently addressed, et cetera, et cetera. And with the new MD, we introduced Kalifa, and we introduced somebody that knows the solution business quite well in the U.S., and that was the most important point for me. I did not wanted to have somebody that is only coming from software or from hardware side. I needed somebody that really knows how to build up solution business in the U.S. market. And that's -- at the moment, we have very good signs that this is working.

Any further questions? Yes, Mark...

Yes, I would have a question concerning the vacant positions. Looking at your web page, you have a substantial amount of unfilled positions in my eyes mission-critical fields. Is that maybe due to the fact that the strategy is not clear yet, and you will probably in October, someone communicate about the new direction?

No, no. At this -- actually, the senior leadership team, we have defined and there are several positions open, but they are open because it was not really easy to hire in the last 4 or 5 months. That's a pragmatic and very simple thing. Yes, and we even managed to hire some people, for example, an HR manager in Australia, just simply over Skype, et cetera. But it's not possible in all different cases. And in some other cases, specifically, if it's R&D, et cetera, et cetera. You need more candidates, you need more time to really making sure that you have the right person on board.

Okay. And then maybe then looking at the size of the Board and if the executive management team and the amount of sales that you generate and the complexity of the business. Is that something that will change and be reduced in the future in order to become a bit more slim and lean?

Yes, I think we want to grow as a company and then the net revenue has to be in a good ratio to the team we have on board. Because there is a certain size, you need the people that you can grow to a certain size. And I think we are ready now, and we are also staffed now that we can do so. But I agree with you the amount of net revenue that we have today, that could be more.

Okay. Does that mean that the ideal situation is that you continue to be an independent company and are not striving for some sort of stronger ties or collaboration and partnerships overtake or, even being taken over by another competitor?

Yes. We did -- we looked at this, the strategic options. You know this that was during the last year, and this is a Board obligation. Basically look all 2, 3 years into -- could there be a better solution or a better strategic option to be so. This will, for sure, also be done in the future. But at the moment, and in last December, the Board decided that as a stand-alone situation, we are at the moment in a better situation. And this has also to do, and I think we described it once a so-called speedboat because if you want to change things, it's good. If you do not have integration projects on the other side, you have to lead as well. And that was a clear decision, and we as the leadership team, we will act according to that.

Can I just ask a last question concerning the transformation program? You call it speed boat, and we've seen the measures taken. And does that mean that if it comes to an end by 2021, the position of [ Suzanne Ro ], for instance, will be obsolete and then there will be no transformation office needed anymore since you're getting into more calm waters and regular business.

Yes. We will not be finished just by 1st of January '21, that's for sure. And we will have this discussion with the Board. We are in the middle of this discussion. I was always a bit wondering why nobody of you asked us about midterm or whatever. But we're in the middle of the discussion about this with the Board, and there will be, for sure, a lot of -- we have to do. That's not yet defined, but we will do so. And [indiscernible] is here, I think, somewhere in the audience, so you can ask her.

Any further questions? I look around, I think.

Everybody ready for questions.

Yes, I've answered to everything. So you still have the opportunity to talk to the management and we have some drinks and coffee afterwards. I thank you very much for coming, despite the COVID crisis. And I hope it was a worthful morning. Thank you very much.

Our next event will be the annual media conference on 11th of March. Its 1 week later than normal because the HIMSS is foreseen to be at the beginning of March. And that's the most important exhibition there is in the U.S. and considering that this will take place, we do all not know than it's the 11th of March, just keep this in mind. All other things in between, we have to make dependent from the situation, how the situation is developing from a COVID standpoint because there are still some countries that are on a blacklist or whatever that are not allowed to travel to Switzerland. So thanks a lot for coming. Yes, and have a coffee and something to eat. Thank you.