Cegedim SA (ALCGM) Earnings Call Transcript & Summary

So okay. I believe that we can now start the presentation of Cegedim First Quarter 2024 Revenue, that we are releasing -- that we have just released. So the revenue for the first quarter 2024 was EUR 155.9 million in growth of 6.9% and organic growth of 6%. This solid growth was mainly due to the Digitization Solutions, Marketing and International operations. So you can see here how the growth was done with this bridge. So this EUR 10 million growth between Q1 2023 and Q1 2024 was mainly due to the organic growth for EUR 8.8 million, so a 6% organic growth, as I mentioned before. A positive structural impact of EUR 0.9 million due to the integration of Visiodent at March 1, and a slight positive currency impact of EUR 0.2 million, mainly due to the starting point appreciation from Q1 2023 to Q1 2024. As you may have seen in the press release, we reclassified a few branches because of operational synergies from a division to another. The main impact was on the Software & Services division, where the branch Cegedim Outsourcing and Audiprint, which are both active in the IT infrastructure, reclassified as Cloud & Support. Also, the branch called BSV, which is active in Data Integration, was reclassified from the Flow division to the Cloud & Support division. So you can see on the next slide, you'll see that we always talk about now the Q1 2023 reclassified revenue for comparison. So you can see how the growth was composed between the divisions during this quarter. So the Software & Services division was almost flat. The Flow division grew by 5.5%. The Data & Marketing grew by 9.8%; BPO by 39.7%, sorry, and the Cloud & Support by 7% meaning, as I mentioned before, total growth of 6.9% or EUR 10 million quarter-on-quarter. Now let's dive into the various division. And the first one is the Software & Services division, which represented 48% of the group revenue during the first quarter, meaning EUR 74.3 million. So the organic growth was actually negative during this quarter, about 1.7% down or EUR 1.3 million. Structure impact was positive by EUR 0.9 million, which is what I meant -- what I said before, the Visiodent integration since March 1. And a slight positive currency impact from the sterling pound for EUR 0.3 million. So it's this form of stability for the Software & Services division. So it's decomposed by the Cegedim Santé, as you may have noticed, with revenue down 17% like-for-like. This is mainly due to comparison basis effect due to Ségur de la Santé for which we had received some grants in the first quarter in 2023, which was not the case in 20204. And also some revenue were postponed from Q1 to Q2 this year. These are tablets for nurses, and there was a little delay in the delivery. So it means we had some new business but not renewal business, and we believe we're going to catch up in the next quarter. The positive scope effect is due to the integration of Visiodent since March 1. Other French activities, they grew by 3.6%, mainly due to the HR activity, which is still very -- in very good shape, very good momentum. And also to the Insurance business, which is solid growth. As you may see here, the International business grew by 8.7% on this quarter, quarter-to-quarter. This is mainly due to the pharmacies in the U.K. for which we benefited from the Pharmacy First program for which we had grants in England and Wales. So the Pharmacy First Program for the one of you who are not familiar with this program, is a program from the NHS’s in the U.K., that allows the pharmacists to deliver some medication on 7 clinical pathway meaning that the client or the patient doesn't have to go to the physician and can go to the pharmacist straight and have the medication delivered. Also, the Spanish hospitals performed very well in the first quarter. Thanks to the winning of the contract in the Murcia region in Spain. The second division, the Flow division represented 16% of the group revenue for the first quarter, which is EUR 25.3 million. So the growth was mainly organic by EUR 1.2 million, 5.3%. And a slight positive currency impact on the first quarter, resulting on a total growth of 5.5% or EUR 1.3 million. So the growth in this division mainly came from the e-business subdivision you are quite familiar with this e-business. And both practices contributed to the growth. The Invoices Digitization practice and the Health Flow practice both contributed positively to the growth for the e-business. The third-party payment. At first, it looks like it's stable at 0.5%. But please bear in mind that part of the business has been relocated to the BPO division due to the Allianz contract. If it had not been in this case, it would have been a growth of about mid-single digit and is due to the volumes and also to the good success of our Fraud Detection Solution, sorry. So all in, it's a growth of 5.5% for the Flow division. The third division, the Data & Marketing division, it represented 17% of the group revenue for first quarter or EUR 27 million. It's a growth of 9.8% on this quarter. All of it is organic growth. So it's EUR 2.4 million. The Data subdivision was stable on this during this quarter. Stable activity for the Data, with French sales being a bit more dynamic than the International ones. In Marketing, it's a strong growth in this quarter, about 21% growing from EUR 11.5 million to EUR 14 million. This confirms the soundness of the strategy of the physical strategy of the Marketing in pharmacies. Also, there have been some additional special campaign that contributed on this first quarter to this very good performance. Last but not least, the BPO division, which represented 13% of the sales on the first quarter for the group, so meaning EUR 20.2 million in revenue. It has been mainly organic growth. It's only in organic growth, about 39.7%, so EUR 5.8 million. So it's the Insurance BPO subdivision that contributed to the growth mainly. There are two things about it. First, there's a comparison effect due to the Allianz contract. Please bear in mind that the contract started on April 1 last year, meaning in Q2. So it means that there's some revenue that is not comparable on this first quarter. Also and its organic. There's a very good momentum for the other the overflow solution and about the overflow solution. The Business Services, BPO, which is HR and Digitization activities. BPO was mainly stable on the first quarter. The outlook for the group for the year. So we reiterate our -- what we said previously during the year. So we are believing the growth range of 5% to 8% like-for-like, meaning that the Q1 which is the 6% growth like-for-like was in the range that we mentioned before. Also, on the recurring operating income, we mentioned that there's going to be an increase. And as we have mentioned previously, we believe that even though it's not a formal guidance, we believe we should be able to reach the recurring operating income that we had in 2021, sorry -- about EUR 40 million. The next time we're going to speak together. So on June 14 will be the AGM, the Shareholders Meeting. On July 25, we'll release our First Semester Revenue; September 26, we believe our First Semester Earnings, and on October 24, we will release our Third Quarter Revenue. Hope I have been clear in my presentation, and now we can skip to Q&As.

Please for that, please raise your hand with the button, appropriate, and I will give you the floor to answer the question if you have any. Thank you. And [indiscernible] please, you have the floor.

Hello. So first of all, I would like to congratulate you on the very promising results for the first quarter 2024. And my question concerns the leaving of the International business for U.K. So you said that you were leaving U.K. in your last annual call. And I just want to make sure that this has been the case and that we should not factor in any more losses from your Doctolib in England and Wales, I think it was...

So what we mean -- so in U.K., we have various businesses first. We have the Pharmacies, which are doing good, as we -- as I mentioned today, but we have also the doctors -- the physicians business. And what we said and what we're doing and that we're going to refocus on Scotland. So we'll still have and Scotland will be there, but we'll get off the England, Wales and Northern Ireland. It will take a bit of time because it's mandatory for us to accompany the physicians from our solution to our competitor solution. We believe it will take a few years -- 3 years. So during that time, we still have a bit of sales decreasing and a bit of losses, but decreasing even more. So it means that we'll be out of the physician markets in England Wells and Northern Ireland in 3 years' time. Does it answer your question?

Yes, partly. So it seems like you are scaling down the business? Meaning -- yes, reducing the scope as you see fit?

Yes. Actually, we will be out of the market in 3 years' time. But during that time, as we need to provide the physician from our solution to the competitor solution. We need to [ combine ] them. So we just can't take off the plug from day 1 to day 2. So it means that it will take a bit of time. But the thing is we are getting out of those markets on the physician Market in England, Wales, Northern Island.

So there are still costs associated to getting out, right, which we should be aware of?

There are still some costs, but we don't -- we will lower also our investments, meaning that we just make sure that our system still works, but we don't need to invest in it. Are there some other questions?

You have some Q&A questions.

Okay. So first question is on M&A opportunities this year. And maybe I will let you Pierre talk about this, but I don't know if we have something to say. And also on recovery regarding Cegedim Santé.

So we have no M&A project until the end of the year. And the goal is to be breakeven on Cegedim Santé next year in 2025. So there will be a decrease in the losses compared to 2024 -- 2033 results, but the profits will come only at the end of 2025. That's the budget. And speaking about the current EBIT of 2024. The target is to be roughly at the same level in Euros as 2021, which was not far from EUR 40 million.

Eric, the floor is yours for your question.

I can speak -- Marvelous. Just to understand well, in fact, you decreased the business for doctors in U.K. and you decrease the cost of this business -- I think. So starting from the EUR 10 million loss, that means that we can have EUR 4 million, something like that in recovery coming from this point only..

Yes, roughly EUR 3 million per year in the next 3 years. We will stop all R&D costs and reduce the staff in connection with the decrease of the number of clients. So we should be at 0 in the next -- at the end of the next -- third year.

That means that 2026 will be around 0?

Yes. At the end of the year should be at 0.

You have also Cegedim Santé, where you have a mechanical recovery -- mechanical, not so mechanical, but we start from the loss of 2023. You said that you should be breakeven in 2025?

Yes. I don't know how to say it.

Recovery?

Recovery. We will have 3 -- we will have in the next years short coming years, we will have 3 recoveries. The U.K., the Doctors in U.K., where we are reducing the losses. Cegedim Santé, which will become profitable in 2026. And the Allianz contract, the BPO -- the big BPO contract for Allianz, which is loss-making today because we are at the beginning of the contract that we have not deployed our software. We are using the Allianz Software. And we know by experience with other contracts like the Allianz contract that after a period of 2 to 3 years, we become profitable. So those 3 recoveries we will see really the effect in 2025 and 2026.

Cegedim Santé is losing, in '23, it was EUR 4 million?

Yes, it was EBITDA negative of EUR 4 million.

At the EBITDA level? Okay.

I need to check.

On the recurring operating income for 2023 it was a loss of EUR 2.9 million for Cegedim Santé.

So it was EUR 3 million?

Yes. So I'm speaking of EBITDA cash in fact without capitalization of R&D.

Which is important for Cegedim Santé?

Yes.

Okay. So about the Allianz contract, the loss was, I think you spoke about EUR 1 million, something like that for 2023, but a higher level for 2024?

Yes, we are now in the period where we are constructing -- building. We are building a big team in Agadir in Morocco to make the business made today by an external company in Mauritius. And we have -- while we are building the team, we are paying people, just to be able to use the software of Allianz. So we think we should have something like EUR 3 million losses on this contract during the year 2024 due to this double cost effect. But all the computations we've made show that -- at the end, the cost of the services of our Agadir team, which will be much below the cost of the external company in Mauritius.

So that means that breakeven could come on this contract?

Year after. Yes in 2024. Yes, during the year it will become positive.

That means that if we look forward 2025, if you get the EUR 40 million in 2024, we have -- I don't like the word we have a recovery effect, which is close to EUR 8 million?

Yes. We could be between EUR 45 million and EUR 50 million.

Yes, because the recovery of these 3 elements is...

Yes, it's really positive. It's an expectation of course.

Yes. It's not guidance. It's not guidance. And that means that 2026 the contract Allianz is coming on stream, so should be profitable?

Should be better, yes.

Cegedim Santé, will be positive?

Yes, it should -- then the growth of the profits should be standard. It's not anymore a recovery thing you see.

We have still a recovery from Doctors in the U.K.?

Yes.

An increase in profitability on the other side?

The normal increase of profitability. We don't see any -- unless there are some external big problems. We don't see any difficulties in those perspectives because we are managing the loss-making business since we are -- we have stopped the contract with the 3 NHS, which were really loss-making during the 2 to 3 years -- last 2 to 3 years, heavy loss making. So it's just a cut into the costs and the reducing losses. And the other business, they are just growing. So we feel rather comfortable in the 2 to 3 years of future.

And if you can say one word on the refinancing or it's too early?

We are really working on it. We have contacts with the different [indiscernible], banks and investors, but it's too early. We -- we should have a good vision at the end of June.

We have a question from [ Mr. Besman ] on the growth at Maiia and potential losses [indiscernible] well on this segment? So there is some growth at Maiia. Also, we have integrated Visiodent. So it will give us an impact on the dentist and also on the health centers which is good for us. I don't know, Pierre if you want to add something on Maiia especially.

The thing is now, we are not computing growth only at Maiia because Maiia is more and more linked to the other software. And more and more, we are selling the combined software. So we have Maiia, which is the equivalent of Doctolib but we have Maiia Gestion for doctors. We have Maiia Connect for therapists. And so we are developing more and more combined offer. So we cannot compute exactly the Maiia growth anyway, anyhow. The target for this year, 2024, is to have a growth to compensate the Ségur Santé subsidies we received last year, which was EUR 4.5 million. So we will show a 0% growth, but in fact, the growth of the business will compensate the fact that we are not receiving any subsidies from Ségur Santé in 2024. This is our target, and we must say that this is not what we have achieved on the first quarter. So we are a bit late in this target. As Damien said, we have some delay in providing our software and computers to nurses in France due to the fact that we are buying those computers in China. And for some reason, we have received the computers at the beginning of April instead of during the first quarter. But it is true that we are not reaching on the first quarter target that we have for the year, which is to have a growth of 0%, meaning that, in fact, we have a growth because we don't have the EUR 4.5 million one-off subsidies of Ségur Santé.

You have Visiodent also?

Yes, I'm speaking without Visiodent. And Visiodent will add something of EUR 1 million revenue per month on 10 months. So we will have an increase of EUR 10 million coming from Visiodent this year.

And on the first quarter, Ségur Santé was?

It was EUR 2.8 million. So in fact, it was really -- you see on the EUR 4.5 million of last year, EUR 2.8 million were during the first quarter. So it has been concentrated in the first quarter, meaning that the comparison is not in favor. But anyhow, if we recompute the figures knowing that we had EUR 2.8 million subsidies last year on the first quarter, we see that we are not exactly in our target. We are a bit late.

On the full year, you have this figure?

Yes, we will recover, yes.

Okay. Then a question on the tax problem. So please bear in mind this was a noncash impact of EUR 12.3 million during the first quarter. It actually stands from -- we have a deferred tax asset, which was worth EUR 20 million at the end of 2022. And has been a case low, suggesting that we may be more cautious in the way we accounted it. So it was a EUR 7.7 million deferred tax asset in the balance sheet at the end of 2023. So the EUR 12.3 million impairment, if I may say, during -- that we showed in the -- at the annual results is noncash. So it's not really a problem. It was just an impairment of this tax issue. [indiscernible] I don't know if you have a question also? Because your hand is raised.

I've got a problem with my hands.

No problem. Absolutely no problem. And I think, Eric, you're back.

Just about tax decision discussion you have. When can we have any news coming from the final decision?

Well, it's a question of years. And I would say many years because we have had a lot of discussion with the tax authorities at a very high level. And if I want to summarize at the end, the people we met said, we understand what you are asking for, but we won't make any decision. We will make the judge to decide. So we are going to now have procedure with the justice. So nothing next year, and I think nothing in '26. It's very long. But everything is discussed in good faith. So we have no penalties. As we have explained, we are paying the taxes we think we should not pay. But to be very cautious, we are paying. If at the end, we lose the case that we have already paid. So there is no risk, no cash risk for Cegedim. And if we are successful in our procedure. Then the tax authorities with reimburse all what we have paid. So it could be a good input in cash at the end of the procedure if we succeed.

And it's only on the deductibility of the...

The losses we made.

Some loss in front of short-term profit?

Exactly.

But it could be a jackpot at the end for you?

Yes. But for -- to be safe, we better pay. We are not obliged to pay. We could say we -- to the end of the procedure, and we'll see. But it's better to pay to get the reimbursement if it's a success for us.

Yes. There's one last question, written question. Why doesn't Cegedim publish long-term goals and plan, at least longer-term visions. I think Pierre gave you some flavors on the 3 years' time from now. I think you can understand that we are a bit cautious. But we give during this webcast, some more flavors on the 2- or 3-year time view. I don't know if you want to add something Pierre about this? But...

No. Just what we can say is that we compute the recurrent business which is 2/3 of our business. So there might be some -- on 1/3 of our revenues, we -- it's not legally recurrent, you see. So -- that's the reason why we cannot put some very precise figures on the table.

Okay. Are there any last question, could be written or if you want to raise your hand? I believe there are none or maybe one.

So there is a question about the latest acquisition?

I think you're talking about Visiodent.

I think i answered it. It's EUR 10 million. We will have some synergies in the fact that Visiodent is working with Doctolib. So we got Maiia. Visiodent is using vital database for the drug, drug database. So we will put our [indiscernible] database. And Visiodent is hosting -- hosted . I think it's hosted in Amazon, and we are going to host the clients on our own cloud organization. So it should produce some positive effect on the profit. It will come during the year.

Thank you for this answer Pierre. I believe we're going to end this webcast. Thank you, everyone, for attending. Maybe I can precise that you have the Universal Registration Document in English by the beginning of next week, for our fellow speaking English. And thank you for attending this presentation and see you next time. Thank you very much.

Thank you. Bye.