CompuGroup Medical SE & Co. KGaA (COP) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Emma, your Chorus Call operator. Welcome, and thank you for joining us today. [Operator Instructions] I would now like to turn the conference over to the Head of Investor Relations Claudia Thomé. Please go ahead.

Hello, everyone, and welcome to our Capital Markets Day 2020. We appreciate that you have taken the time to dive a bit deeper today into our equity story. And obviously, we would have loved to welcome you here in Koblenz, but due to the COVID-19 pandemic decided to move this to a virtual format. As always, please consider the disclaimer regarding forward-looking statements and other information contained in today's presentations on the second chart as read and taken to the notes. And with that, a quick overview on today's agenda, we've got all 6 members of our Board of Directors presenting to you today in 2 sessions. The first session is starting with our esteemed Founder, Chairman and CEO Frank Gotthardt, talking about his vision and what is driving everyone here at CGM. Second presentation will be held by Ralph Körfgen, focusing on the Ambulatory and Pharmacy Information Systems. And we will then move on to Hannes Reichl with his view on the Hospital Information Systems. Just to say that you know in advance, we will swiftly move through all 3 presentations. So please save your questions for all 3 speakers for the joint Q&A following Hannes' presentation. And our CFO, Michael Rauch, is also here and will be available during both Q&A sessions. We will then have a short break and start the second session at 4:00 p.m. Central European summertime. And with that, I wish you an insightful Virtual Capital Markets Day and would now like to hand over to Frank Gotthardt.

A warm welcome to the Capital Markets Day 2020 to all of you also from my side. We are living in remarkable times. A worldwide pandemic is affecting every single one of us, and health care is in spotlight like never before. For CompuGroup Medical, this represents an enormous challenge for the sake of our customers, but also a great opportunity. Across our many activities in health care team, we see an increasing trend towards digitization, and we are committed to support our customers in the best possible way and to increase shareholder value. Let's take a look at the drivers for increasing digitization. First of all, patients are more and more self-determined regarding their health. They expect to be informed about their health, to have access to data regarding their health and to be at least involved in decisions regarding their health. Some countries, we are open -- we are operating in further down the line than others in the aspect of digitization. But the main countries we are operating in have some way to go still, and CGM is actively participating in this process. Complexity in medicine and care is still rising and so is the mass of information. Here, digitization can help to process, store, identify, display relevant information. This will be the only way for health care professionals to work effectively and efficiently in the future. In addition, we experienced technological leaps, further increase in computing power, miniaturization for less money, the combination of biotech and informatics are only some examples. This increasingly enables the availability of digital health in everyone's hands. And another trend is becoming an important driver for digitization, so-called precision medicine is an approach that takes into account the individual variability in genes, lifestyle and environment for each person to find the right therapy or prevention. This multiplies the complexity even further. And these drivers got a remarkable visibility and importance, especially in times of a pandemic. I'm sure you know this already. From my point of view, this is my conviction and has been for a long time. The most important driver is our vision. Nobody should suffer or die because of some point medical -- because at some point, medical information was missing. We can contribute to a world where the availability of data or the connectivity of health care providers helps to prevent those worst-case scenarios from happening. It is the ulterior motive for all our activities. Lives can be saved by connecting the dots and synchronizing relevant information. Let me give you some examples. A recent survey from a big health care insurance company indicated around 30,000 deaths per year occurring due to adverse drug reactions only in Germany. Our products are offering solutions to help. Patients can manage their electronic health records in our CGM LIFE platform. There is a proven product of ours called THERAFOX. It uses pharmaceutical know-how in databases to notify health care professionals directly in their workflow about possible adverse drug reactions. And the electronic medication plan is finally becoming available now with the offerings we are supplying to doctors, pharmacies and hospitals within the Telematics Infrastructure framework. Or just consider this tragic case that happened last month in a larger German hospital. A healthy young man with a trivial therapy died because of a mixup of medication with another patient in the same room. The only cause for his death was a simple and avoidable error. CGM has been committed for providing solutions to reduce such fatal errors. In this case, our closed-loop medication solution, which we offer with our CGM CLINICAL product, could have supported the process. One part of this process is a smartphone-based mandatory doublecheck via patient wrist bands with the near field communication and bar code on the pill dispensers before any medication is given to the patient. Or just consider that 1 of 3 patients hospitalized is admitted without any additional information. This means that the hospital personnel is potentially making decisions without being aware of allergies, chronic diseases, former diagnosis, medication and so on, and so on. In the mildest course of events, this is just extremely inefficient and producing extra costs with the hospital staff carrying out all the necessary investigations to get this information repeatedly. In the worst-case scenario, this might become quite dangerous for the patient. The list of solutions CGM is offering to support here is long. Just to name a few, our CGM LIFE and CLICKDOC platforms and the so-called KIM, Kommunikation im Medizinwesen, a secure e-mail system now being introduced as a part of the Telematics Infrastructure rolled out in Germany. Some -- for the next example, 30% -- same for the next example, 30% of all discharged patients stated that they received no information about drug therapy. CGM has solutions ready to support all health care providers in this respect. On the next chart, you see our positioning in 18 locations with products in 56 countries worldwide. More than 6,100 employees are working hard to bring about a real change and support our unique customer base. We will remain committed to continue investing into R&D and drive innovation to realize solutions along the patient journey and synchronizing health care for the benefit of the patients. The next slide visualize the patient journey across the institutions and we have aligned our organizational setup along that. My Board colleagues are going to talk through -- you through to take -- to talk you through each of these segments in detail. We are servicing doctors' practices, hospitals, pharmacies, laboratories, care facilities and patients for a better and more efficient health care system. A couple of words on the big challenge of our time, the COVID-19 pandemic. It has been our utmost priority to keep our employees safe, while maintaining full productivity, because we are well aware of the significance of our customers, the front-line fighters here. I have to say I'm very proud of what the CGM team has achieved in this crisis. Not only did they secure full-time support for our customers throughout the lockdown, the team also added and invented new features tailored to our customers' need in this specific and existential challenge. We had a massive increase of registrations for our CLICKDOC video consultation. The team invented a telemonitoring solution adapted to COVID-19 with the pulse oximeter in a very short time frame. And we expanded and enhanced solutions for mobile practice management supporting the teams in practices during lockdown. All in all, we had the team, we had the spirit, we had the know-how and all of this resulted in the right solutions. And on this occasion, a big thank to our customers, the front-line fighters, for health, partly under extreme circumstances due to the pandemic. I would like to thank all these health care professionals for their dedication and their commitment. Providing our customers with innovative products and the best possible support and service remains our top priority. I am convinced that we have got the right team in place now for a successful path of profitable growth going forward. It is a mix of experienced managers that have been with CGM for a long time, like Hannes Reichl, who runs the hospital business and has been with CGM for more than 15 years and joined the Board in 2018. Or like our new Chief Technology Officer, Frank Brecher, who has been with CGM for 22 years and joined the Board in 2015. And on the other hand, we have taken onboard further expertise from outside the company, Ralph Körfgen, who is heading our ambulatory and pharmacy business, joined CGM and the Board roughly 2 years ago. Our CFO, Michael Rauch, 1 year ago; and Eckart Pech, who is heading the consumer and health management segment last November. All of them contributing the long-standing experience from larger companies. The transition will be completed with Dirk Wössner joining as a new CEO at the end of this year and taking over from me. I am convinced that we are set for the next growth phase of CGM with this excellent team. Be assured that I will remain committed to the success of CGM as a major shareholder and Chairman. Our company is set for the next growth phase and ideally positioned for future growth and shareholder value generation because we benefit from the big movement of digitization in health care and because we will keep investing the high -- with high R&D into innovation and product quality. We know our track record in terms of M&A. This will -- you know our track record in terms of M&A, this will remain an additional growth pillar also going forward. And we have the financial strength and great team to drive our future growth. Thank you very much. Now I would like to pass on to Ralph Körfgen for his presentation.

A warm welcome also from my side. And welcome to the segments I have the pleasure to be responsible for. First, Ambulatory Information Systems, including our Dental Information Systems; and secondly, the second segment of the Pharmacy Information Systems. What can you expect from the next 20 minutes? You can expect an overview on our customer base and market position, the main financial figures and operational drivers. And you can equally expect an outlook on our industry and what is our strategy to act within this industry and to allow our company to reach further growth. Let me start with our biggest business, the Ambulatory Information Systems. This has obviously been Frank's starting point for building up CGM several decades ago. And doctors are still at the core of everything we do here at CGM. We reached excellent market positions, which is especially true for our 2 biggest markets, Germany and France. In Germany, we reached the clear #1 competitive position in the doctor segment with quite a distance to the next competitor. We service more than 80,000 doctors and roughly 48,000 practices with our Ambulatory Information Systems. To count in those practices, what we have connected to Telematics Infrastructure that are not using our AIS systems to get to an overall installed customer base for TI of roughly 56,000 practices. My colleague, Eckart will come back to TI in the second session, but our overall customer base in the doctor space is a major asset, while Germany is moving forward in digitization and the connectivity in health care. In our second largest market, France, we have #1 positions in the doctors market as well as -- since the beginning of this year in this huge and fast-growing market of physiotherapists and nurses. Having good and mostly excellent and leading market positions in Ambulatory Information Systems is also true for Italy, Scandinavia, Austria, Benelux, Czech Republic and Slovakia. Comparatively, smaller market positions we have in the U.S., Africa and Spain. Now I want to update you on 2 highlights of the recent months. For CGM, M&A is a major pillar for our additional growth, as Frank mentioned. The latest addition to our international AIS portfolio has been the acquisition of the French company, EPSILOG, in December 2019. EPSILOG is leading in the French physiotherapist market and is one of the leading companies in France in the paramedics market. This is the part of the health care market beyond doctors, physiotherapists, nurses, speech therapists, orthopedist, et cetera. This is especially, but not only in France, the huge and growing market and also subject to growing digitization. Furthermore, we see a trend towards business models with several health care providers offering integrated services or even being integrated in one company. By acquiring EPSILOG, we enlarged our customer base by more than 47,000 health care providers in the paramedics space. The integration process into the CDM group is running smoothly. EPSILOG continues to grow, and we see first interesting synergies within the CGM Group, both in terms of cross-selling as well as in terms of transferring the powerful business model of EPSILOG to other markets. The second highlight which I'd like to illustrate is the worldwide success of CLICKDOC video consultation during the COVID-19 pandemic. This is, from our point of view, a good example, how we scale at CGM, our broad product portfolio to other countries. At the beginning of the COVID-19 pandemic, we had the video consultation product ready in the shelf. And in a very short time frame, we were able, with our broad marketing and sales structure, to provide it globally to the markets. Big thanks here to the team that delivered an exceptional effort and [ improved ] performance during that time. Within a few weeks, we reached with the free version more than 90,000 registrations globally, which more than 50% were not CGM customers before. As expected, not all registered customers really use video consultation on an ongoing basis. After getting back to a more normalized course of business from the peak we saw in April, the usage significantly went down. We are now at roughly 1/4 of the initial registrations being active users, of which, again, roughly 1/3 are regular users with more than 3 sessions per week. In June, we started to transfer our users into paid models, and we already turned more than 7,000 into paying customers dated end of August. We expect this to gain more traction and consider revenues in the low double-digit million euro range in a full rollout scenario by 2022 feasible. Let's have a quick snapshot on the AIS segment financials. The headline figures, revenue and EBITDA, show a more or less stable development in the last 12 months year-on-year. As you know, the headline figures of the AIS segment are very much driven by the wave of the Telematics Infrastructure business with significant phasing effects resulting the TI rollout until June 2019. Looking at the underlying business development, excluding TI, for our real organic growth, we had a significant increase of between 4% and 10% in overall revenues and between 8% and 12% in recurring in the last 4 quarters. Growth rates in the past 2 quarters have remained quite strong despite COVID-19, which underlines the resilience of the business. The strong underlying growth pattern in this segment is attributable to our excellent customer base and the increasing need of intelligent, user-friendly, compliant and connected software and IT services which CGM is providing. Now I'd like to switch to the second segment, the pharmacy business. The biggest markets of our PCS segment are Germany and Italy. In Italy, we have a market share of above 50% with a clear #1 market position. In the highly concentrated German market, we are #4 with a market share of about 20%. We are serving around 4,000 pharmacies. This quarter, pharmacies are starting to get connected to Telematics Infrastructure as well as we have received more than 5,000 orders. Like in the case of doctors, our market share in Telematics Infrastructure is even bigger due to the fact that we have been the first mover in both target groups with our [ connector ]. Again, Eckart Pech will touch on this in more detail later. In the PCS segment, we achieved an excellent 7% growth in revenue and even 10% in EBITDA during the last 12 months in a year-on-year comparison. This is mainly driven by organic growth. And like in the AIS segment, growth has remained quite strong during the past 12 quarters in the COVID-19 pandemic. Let me now get to my second point, an outlook on the industry and our strategy. The eHealth market is driven by a number of big trends, which I already described in more detail at the Capital Markets Day last year. Let me just repeat a few. Consolidation and integration takes place with the health care providers. There is, because of cost pressure, a need for efficiency, generation changes taking place, interaction with patients is getting more and more important, and last but not least, regulation is continuing. These strengths are still in place, and the intensity is rather increasing than decreasing. These trends allow us to invest, first, in a number of areas of product innovations, like making sure that our practices and pharmacies are compliant, supporting the efficiency and the practices, consulting services, et cetera. We're investing also in new markets and business models. An example will come later. And we invest in the introduction of our new generation of the G3 products with the G3 technology. The beauty of the market, our business model and our market position is, and this is very important, but we do not rely on 1 or 2 volatile trends. We fortunately have a huge number of stable trends that we can base our business on. The same is true for our products and business models. We have a broad product portfolio, a lot of innovations and business models. And our growth in the past as well as in the future is based on and driven by this broad approach. As I just pointed out, a major trend we see in the market is the increasing consumerization of health care and the increasing interaction between doctors and patients. This is, by the way, heavily supported by regulation. There are a number of use cases, which are getting more and more digital since this is much more efficient or much more convenient. Example of those use cases are online appointments, video consultation and eQuestionnaires. eQuestionnaires, for example, for the anamneses. The math behind those use cases is that only in Germany, we have about 1 billion contacts between practices and patients per year, which can be digitally supported. Another example, which will be introduced next year into the German market, is the ePrescription. Also here the math. There are about 480 million prescriptions each year. Those use cases usually start at the doctor or in the AIS of the doctor and then move on to the patient. Some of these workflows continue further in the pharmacies and need an interface to the Pharmacy Information Systems. Due to our extensive experience with all participants involved and due to our comprehensive product portfolio, we have all the assets in place that need to come together for an ecosystem that would enable the ideal patient journey. We assume that the patient will prefer to manage all those use cases, which combined all his patient journey within one app. And we will provide such an integrated app also as an offer to our doctors to have one single point of contact to their patients. For the patient, the integration of not only one use case, but all use cases in one app is also convenient. And additionally, there was another strong driver for one patient journey app. From the patient's point of view, each single-use case is not occurring often. And therefore, the motivation is not strong enough to get used to an app. In the combination or most -- or ideally of all use cases, we reach significantly frequency and regularity to meet this threshold. A few words on ePrescription. For CGM, this is one of many use cases we are working on. But we are obviously aware of the extra attention that is caught from a capital markets perspective. We are going to provide our doctors with the necessary functionality they need for ePrescription. Our pharmacy customers also need an interface in their system which we will be providing. The exact specifications and overall setup still depend on the regulatory requirements, which have not been finally defined yet. Since the ePrescription and the potential value-added services around the ePrescription is one of the most frequent use cases, it will drive the value of CLICKDOC. Since the details of the regulation are not yet clear, there are still some questions open on our final business model. One major pillar of our future growth is our full product pipeline. Some examples are shown on the next slide. Without getting too much into details, you will see that there are a lot of new features which we will introduce to the markets within the next years. There are 4 examples of some product innovations, which now use the infrastructure backbone, which is now provided by TI. For example, new secure messaging for practices, hospitals, insurances and pharmacies, which allows the secure mailing of medical documents between health care providers using TI. On an emergency set, data like medication, allergies, et cetera, which will be stored by the doctors on the health care card of the patients or the eSickNote, which allows direct information of the practice to the insurance. Then we have the DVG, Digitale-Versorgung-Gesetz, which address the IT security of practices. But we also work on innovation like conversational AI, which should allow the doctor to interact with our AIS or DIS in a normal dialogue. Furthermore, we engage in new business models. We will enter in CLICKDOC in several countries within the next years, and we enter new markets, for example, the French market with a dental product even in this year. In addition to that, we will launch step-by-step our new product generation, G3. There will be the introduction of a product for physiotherapists with certification for statutory health insurances and the first launch of our new AIS in Italy. And in 2022, our new dental product will be introduced in Italy, and there is more to come. The same will take place in our PCS business, as you see in the respective product pipeline. With the most relevant drivers resulting from the TI rollout, the increasing digitization like ePrescription, but also, as always in our business, efficiency gains and regulatory requirements. Product innovations, we have, for example, introduced the smart courier, a product which allows pharmacies to organize their home delivery services efficiently and convenient for the customer. Next year, we will provide a new UX to our German product, [indiscernible]. And we will offer a tool to our Italian pharmacies to arrange their home delivery services. New products we have for pharmacies that they are getting more and more to a point of care, and we offer the appropriate products around that. From therapy adherence and telemonitoring to video consultation. And next year, we will also having a first step introducing our new pharmacy software into the market. Summarizing, let me say that CGM is uniquely positioned to drive digitization for doctors and pharmacies. We have an attractive customer base and very strong market positions. We are highly resilient due to our strong recurring revenue base. We have a proven capability to introduce new products into the market. And we constantly show that we are able to drive the industry to the next level of digitization and connectivity. And given our high profitability, we are able to continue to invest in R&D and innovation. In a nutshell, we are ready for further growth. Thank you for your attention. And now I hand over to my colleague, Hannes, for the hospital side of our business.

Yes. Thank you, Ralph, and welcome also from my side to this year's Capital Markets Day and to the so-called HIS segment, also known inpatient and social care, we provide hospitals and related inpatient institutions with information technology. In our HIS segment, we are taking a major transformational step forward this year in terms of scaling. Despite the pandemic, we successfully completed the largest M&A transaction in our company history at the beginning of July, and we are in the middle of the integration process now. In my today's session, I will go into the essential background and the rationale behind the takeover of larger parts of Cerner's European hospital business. I will also address the impact of the pandemic on our existing business and how we assess the situation. And finally, I'm going to give you an update on recent changes in the regulatory environment that may accelerate the ongoing digitization in the hospital space going forward in Germany. So let me start with a brief overview of the segment. As you know it, before the transformational M&A step we took this year, looking at the size on last 12-month basis of June this year, we are talking about revenues of approximately EUR 140 million with an EBITDA margin of approximately 15%. Our revenue profile is built on a very solid foundation with 60% recurring. We mainly serve the European market and here, especially Germany, Austria and Switzerland. The segment can be logically divided into 3 customer areas or verticals. And our client group with the highest turnover is in the acute hospital sector, followed by the post-acute sector in which we mainly serve; rehab clinics, but also nursing and elderly homes; and last but not least, our medical laboratories. We are talking about an excellent base of more than 2,000 customers, roughly half of them actually in the acute hospital space with around 380 acute hospitals with core systems and almost as many clinical pharmacies. And on the other half, in the post-acute sector, where we service rehab hospitals and social care facilities. And on top, we have about 200 lab clients. We are addressing a highly attractive market, which is characterized by the fact that the basic market itself is growing and that there is enormous catch up potential in terms of digitization. It is not breaking news for you that the aging population is creating new challenges for -- in general, for the world's health systems and leading to a constantly rising demand for health services. Our customers optimize their business models on the basis of scaling. The resulting and ongoing consolidation on our customer side, the large providers, usually also leads to standardization and large IT initiatives in order to benefit from this scaling. Another trend is that our customers in the inpatient sector in particular are increasingly controlling the treatment of patients in an integrated manner. They try to reduce and shorten highly specialized and more expensive inpatient cases, while moving other cases into outpatient areas where they can be optimally cared for from a medical but also from an economical point of view. These trends usually trigger large IT projects that aim to automate processes and services and to make the organization more efficient, respectively connect organizations with IT. This is where CGM comes into play and our opportunities lie. On top, we aim to optimize the use of resources to provide the doctors and nurses with the right information at the right time in order to improve the quality of decisions and thus, the overall treatment. Last remark on the trends driving our business as for now. A continuous patient journey should, in future, also significantly improve the patient experience. Modern approaches, such as patient portals, care management and population health, which are already practiced in the U.S. and partially also in Scandinavia, are also considered potentially very effective in Europe and will again lead to even more intense digitization. Let me now briefly touch on the effects of the COVID-19 pandemic compared to other industries. And in the countries we are operating in the HIS segment, the pandemic has only had a slight negative impact on our business. And all in all, in the largest area of our HIS business, the acute hospitals, COVID-19 impacted operations mainly during the first weeks. And overall, due to the fortunately mild cost so far in the countries we are operating in, there hasn't been a large impact on our business. Even though some -- and here, especially the bigger hospitals are still suffering economically from the pandemic, IT operations are regarded as business-critical and this lowered the impact on our business. However, it led to delayed IT procurements or projects in general, but it also recovered very quickly and faster than we initially expected. In contrast, the post-acute area in here, the nursing homes and rehab clinics were affected severely as many of the rehab facilities had to close during the lockdown. So here we could see significant negative influences on business development, especially in Germany in the full second quarter. And please keep in mind that our German HIS business has a rather big portion of rehab and nursing home clients. But also here, we have experienced a clear normalization in June and especially then in July and August. In our medical lab sector, on the other hand, we have experienced a short-term booster. The demand in especially COVID-related IT-based workflows or workarounds has pushed this business. We actually saw a high single-digit growth in Q2 year-on-year. So you see, you have to look at sector by sector, which, in total, leads us to the relatively good Q2 figures compared to other industries, which you can see on the next slide. As a result of what I just discussed, organic growth slowed down to 1% in the second quarter year-on-year, but already at the end of May, we saw that the situation was recovering faster than we had initially thought. In July, we then saw a catch-up from Q2 impact with a strong growth year-on-year. Even though our projects and assignments had been postponed in some cases, we were able to confirm our underlying guidance for the full year with the publication of the half year figures in August and added the consolidation effects from the transaction we closed as of July 1. Looking at the longer-term impact that COVID-19 should have, there is a common understanding that it should result in an acceleration of the digitization efforts that have already been drivers of our business so far. And also the recent initiative of the German federal government under the Hospital Future Act, [Foreign Language], proves this very clearly, and we see a great upcoming dynamic over the years to come. I would now like to come to our recent acquisition. As we reported back in February, we signed a contract to purchase essential assets from Cerner. We closed this transaction on July 1. And since then, the German Medico business, the Soarian Health Archive and the Spanish Selene business are part of CGM. With Medico and Selene, we are acquiring 2 business areas in products with market-leading positions in Germany and in Spain. And it is, therefore, massively expanding our customer platform, especially with core HIS installations. In the last 12 months, the acquired business has made approximately EUR 75 million in revenues, and it has grown with a 5% CAGR over recent years. The share of recurring revenues is in line with ours and thus underlines the high quality of revenues. We acquired 3 products that fit perfectly into our strategy and portfolio. Historically, our inpatient business in Germany was particularly strong in the area of rehab facilities and now adding the Medico business is a meaningful step to address our so far slight underexposure in the inpatient or acute area in Germany. Now exactly, this area is of enormous importance when it comes to digitizing an entire patient journey, which is the overall target and vision of CGM. With the Medico product, the medical team, but above all, with our new customers, we are closing this gap, and at the same time, becoming the clear #2 in the German inpatient market. With Selene, we succeeded in entering the Spanish markets. And through this transaction, we automatically become a major player and the #1 in the field of public health IT. Selene is now servicing 6 out of 19 regions in Spain and here, the largest regions. At the end of July, we completed on top of that a second transaction relating to the Selene business. In the course of the takeover, we were able to agree with business -- with a business-critical subcontractor or a supplier to take over the support and development team of around 65 employees. And we now own the full value chain of this business, which leads to better customer access and slightly higher profitability on top. The combined profile of the new HIS business that you see on the next chart is based on 2019 figures. On this basis, the HIS segment is a EUR 210 million revenue operation with an EBITDA margin of around 17%. One quick comment on the margin here. We have been investing significantly and probably overproportionally to our market position into our next-generation G3 platform in the segment over the past years, and the margin has obviously been impacted by those investments. We remain committed to these investments into our products, and innovation has enabled us for the overall digitization in the sector, but the transaction and the increasing scale is bringing -- will take us to a slightly higher-margin level. I already talked about the step-up in terms of market position. The new and combined HIS business at CGM is the #2 in Europe in the DACH region and in Germany now with a total of more than 700 customers only in the acute sector run by a dedicated team of around 1,500 employees. If we now look at the resulting target picture, on the next slide. From a market perspective, you can see immediately that CGM is massively expanding its reach through this transaction. The entire transaction is primarily a scaling story. So we are talking about around 350 customers only in Germany. And with the new joint customer base, we are in an excellent position to roll out our next-generation products. New features and make us use of upselling opportunities in general. Overall, with the new setup across the different categories and countries, we feel well prepared for rolling out our innovative product pipeline over the next years. Our plan is to deliver enormous value to our customers and support their digitization process going forward. In the HIS segment, we therefore follow a very clear and comprehensive technology road map which we call the CGM HEALTH ALLIANCE. Within this program or road map, which reaches over the next 5 years, we are addressing major trends in our market, as I have already shown earlier at the beginning of my presentation. Part of this road map is also our product, CGM CLINICAL, which has been actively marketed in the DACH market since 2018, and it is being introduced, among other things, in our major project in Lower Austria, the largest order in CGM's history that we won last year. In the meantime, we have been able to gain the trust from one further client in Germany and Switzerland each as new clients to be implemented over the next quarters. This followed the planned go-to-market initiative for Switzerland and Germany with the CGM CLINICAL native suite started in early 2019. Here on the left side of the slide, you can see an overview of the product areas we primarily address. We are talking about a total of around 20 to 30 module clusters within totaling about more than 150 add-on features, which should deliver added value to our clients. Important to know with our G3 technology road map, we have pursued 3 goals from the start. The first goal is product convergence. It is the clear objective in the medium term to step-by-step replace products from previous technology generations and thus, we aim at cost effects or better scale on our side. The second and even more important goal is up and cross-selling. And thus, the development and commercialization of new functions and features to finally advance the digitization of our existing customers. And the third goal is, of course, also to acquire new customers based on the new technology stack. And by the way, our new G3 technology is the only one in the DACH market at the moment that has been built to operate in a native cloud environment. And now the second objective is to make this transaction of Medico and Selene a successful upselling story. We have identified a number of opportunities within our portfolio as blank spots, especially our G3 and connectivity features. With our broad setup in terms of product portfolio, also including CLICKDOC video consultation and TI, we see an excellent opportunity for upselling across the portfolio. Ralph already spoke about the CLICKDOC offering, and my colleague Eckart will elaborate in detail on the TI subject in the second session a bit later. But given the fact that CGM is the first mover in TI -- the large German government initiative to drive digitization for all health providers, including hospitals, we are motivated to fill the right spots in our portfolio over time in that respect, too. Finally, I would like to go back to the massive potential with regard to digitization in the DACH region. And here, especially in Germany, what you see here is an assessment of IT penetration based on the HIMSS, the Healthcare Information and Management Systems Society. They have developed the so-called EMRAM model, which measures the digitization level in 7 stages for hospitals. The highest level that can be achieved is 7. And to my knowledge, there has only been one hospital in Germany to date that reached level 7 at some point, but lost it in the meantime. There is a significant gap between the average in Europe and the USA -- and the U.S. In the U.S., an average of 5.3 has been achieved in the meantime, while Germany only achieved 2.3. It is also remarkable that there is -- there are still around 40% of clinics in Germany that are close to very low levels, even 0. If you analyze the logic behind that, you very quickly come across the fundamental reason. More than roughly 10 years ago, the so-called Meaningful Use program was started under the Obama administration, which aimed to cofinance digitization in the health care sector. This program has supported the development massively and raised the U.S. from approximately 3 to 5.3. In June, the German government decided with the Hospital Future Act, the [Foreign Language], to invest significantly more than EUR 3 billion into the digitization in the hospital space in order to catch up to more advanced countries like the U.S. The current expectation is that the Hospital Future Act is going to be passed in autumn this year with our new setup of our Hospital Information Systems at CGM in terms of scale and our state-of-the-art product portfolio. And now with the bigger reach, we feel extremely well positioned to benefit from those initiatives going forward, and we'll do our best to provide our customers with the best possible support and services. Let me briefly summarize the most important points on my last slide. First, the COVID-19 impact was low compared to other industries and countries. We expect a further recovery and are well on track to achieve our guidance in 2020. Second, the recently completed Cerner transaction is a big transformational step forward in terms of market position. And we are committed to benefit from scaling effects. Based on our new products, we will benefit from up and cross-selling in the short, medium and long term. Our product road map addresses the main trends and puts us in an outstanding competitive position. And last but not least, the German government is sending strong signals that it wants to catch up with the digitization of hospitals, and we are ready to support those initiatives. Thank you for your attention, and I now hand back over to Claudia for the Q&A.

Thank you, Hannes. As explained at the beginning, we will now start the Q&A session with Frank, Ralph, Hannes and Michael available for your questions. And I turn immediately over to the operator, who will explain you what you have to do to ask a question.

[Operator Instructions] The first question comes from the line of Charlotte Friedrichs with Berenberg.

I have a couple on the hospital segment. So specifically, can you comment a little bit on the competitive dynamics that you're seeing in the market right now? So one of your competitors [ TelePlus ] has been quite active on the M&A side. And my first question here would be, do you also see an impact on the pricing behavior from your competitors as a result?

So Charlotte, this is Michael. We take your questions as you pose them. So the first one goes to Hannes.

Yes. I will start with your second question, the pricing behavior. So I think that the pricing situation still differs from country to country. On the German market, the pricing -- the competition over price was already in the past very dynamic and competing with larger competitors now didn't really change the behavior. So on the other hand, we see that with these future initiatives, especially the Hospital Future Act could bring a little bit of positive dynamic with regards to the pricing behavior because if you only look on the big volume, I would say, there is a lot of volume on the market. The competitive dynamic in general, with the takeover, if you speak about that of -- or specifically ask about that of Agfa, we don't see a big change of that. On top, we heard from this DXC takeover, I think that's not finished and concluded, and we cannot really see an impact from that side.

Okay. Understood. And then continuing with the Hospitals Future Act. So I'm guessing it's a little bit too early to quantify what the potential impact would be. But in your conversations with hospitals, is it your feeling that access to funding is one of the major roadblocks for new projects?

So what we can foresee is that the access to funding will be easier than in the past because the threshold for the cofinancing of the counties is much lower than before. So I expect less roadblocks on that. As an indicator from the potential side, looking on the draft of this law, the elements, which will be funded are completely in the core of our product strengths. So from the functional point of view, that fits quite well. On top, there comes a lot of cyber and IT security. We will hear about that from Eckart as well. So we see rather positive impacts here.

Okay. Understood. And you mentioned in your remarks that you had recently won 2 new customers for your G3 offering, one in Switzerland and one in Austria -- sorry, in Germany. Is it possible to quantify? Are they of a similar size of the Austrian project? Or are they rather smaller?

They are smaller, they are in a high single-digit million volume.

Okay. And my final question would be on your sort of target margin, if you will, for the Hospital segment. You mentioned that you've been investing a lot in R&D. What kind of a margin level in the longer term are you aiming for this segment?

Yes, we are aiming roughly 20% here.

The next question comes from the line of Uwe Schupp with Deutsche Bank.

Firstly, for Ralph, please. On the ePrescription and as you already alluded to, the regulatory picture is still rather fluid from -- but from today's perspective, maybe can you give us some idea what the pricing of a connection or, I think, interface was the word you were using. What the interface module to the doctor and also to the pharmacy could be costing? And maybe do you also see potential to be ultimately even be paid on a per prescription basis? Or what are some of the puts and takes that you think are currently being discussed on the regulatory front? And then my second question would be for Hannes. You have been obviously investing quite heavily into the G3 product. And obviously, the first successes are coming through, which is good to see. But how long do you think the current investment phase, including the high R&D, will be continuing for hospital G3? And second part of the second question, really, in terms of the revenue synergies with Cerner, is the idea to kind of rip and replace the very strong [ Orbus ] brand that Cerner is currently using -- I beg your pardon, not the [ Orbus ] brand, but the brand that Cerner is using and replace it with the G3 brand or would be G3 coming on top of this existing brand that just escapes me that Cerner is using?

Yes. This is Michael again. Many thanks for your questions. I suggest we start with Ralph on the ePrescription question.

Yes. Uwe, thank you for your question. As you mentioned, the regulatory framework is still moving and not yet clear. So it's -- as I pointed out, it's -- we are not yet in every detail clear with the business model we are going to apply. And this is also true for the pricing. So it's too early to answer your question at this point of time.

Okay. And then we'll move on Hannes regarding the HIS questions.

Yes. Thank you, Uwe, the question. The first question was about the G3 investments. So we expect that it's peaking in '21 and will then step-by-step slow down up from '22. And the second question was about the Medico product. So as a first step, we see it rather complementary, so there is a lot of white space coming from our products. Some third-party vendors, we could replace. On the very long term, as you -- as I indicated in the last year's session already, we are aiming future models like SaaS and other operations. So on the long term, we are addressing a technology change, but this is really for the long term.

And just related to that, Hannes, and sorry, if I missed it in your presentation, did you also quantify the potential synergy? Or is it still too early to think as you're still doing the math on the total transaction?

Yes, we could quantify the upside on revenue with a high single-digit million euro volume in the next 12 to 18 months.

And that would be purely -- just to understand that, that would be purely really on the top line, would there be any cost synergies on top of that?

No, it's on the top line predominantly.

The next question comes from line of Knut Woller with Baader Bank.

Yes. Actually, the first 2 questions to Ralph. Ralph, you talked about the market position that you have in the PCS segment in Italy and Germany. There are still some markets they are not as active in and that are quite fragmented like the Spanish market. Can you give us some idea, since you mentioned M&A plays a major role in your strategy, whether we should expect here that CompuGroup also tries to enter new markets or strengthen the position in markets outside of the 2 strongholds? And then basically, you invest a lot in innovation. Is that done to maintain the growth rates that you highlighted, the organic growth rates? Or is that aiming to accelerate even the growth rates that we have seen that you showed in the last 4 quarters? And lastly, on the U.S. market, it's quite subscale compared to the overall market shares you're holding in all the European markets. Can you update us here on your ideas and also with regards to potential further strengthening of your position here? And then I would have also a question for Hannes.

Yes. Knut, this is Michael again. So let me just make one upfront remark. As usual, obviously, we will not comment on any specific M&A activities. But nevertheless, I don't want to shy away from Ralph giving a little bit of color regarding the PCS markets. Over to Ralph.

Yes. I think as Michael already indicated, we are constantly screening the markets in terms of getting into new markets, but also what might be attractive targets in the markets we are already in. So this might ask your third question, which is true for the U.S. And in addition to your first question concerning the PCS market, we already have some small business in the PCS market in Spain, which is, using your previous comment, which is still a little subscale. So we need to increase our market share there to be a powerful player in the market as we are used to in the other markets. So there was definitely room for improvement in Spain. And for other markets for PCS, it's true what I said in the beginning, we are constantly screening markets and looking for interesting targets. Your second question concerning innovation. It's both what you meant, I'm sure that we maintain our market position with good modern products, but definitely, it's also for improving our market position. And the broad range of our products show that it's always not only a question of market share, but also a question of how broad is the product portfolio and are there any demands we can fulfill with an additional product. And this is what we are looking for constantly. And definitely, this is -- this aims for both gaining increasing market share, but also increasing volume per customer.

And just -- maybe just I tried to phrase it differently. Is the investment you're doing there to maintain the growth rates you have shown in the past? Or do you -- so is it a necessary invest to maintain the growth? Or is it rather something where you are expecting to see an acceleration of the growth in the both segments?

Yes. Definitely, we invest also for further growth.

Okay. And then for Hannes, 2 quick questions. The first one, Hannes, you talked about the catch-up effect in July. So just to get a better feeling for that, are the tenders that have been delayed finally then signed? And then lastly, can you give us some color on the split of the EUR 3 billion invest you cited for the [Foreign Language] to get a better feeling where the invest will go?

Yes. Knut, thank you for the quick questions. Here are some quick answers. Yes, we catch up with all the postponed tenders or sales projects, so that we can clearly see in July and August. So if your question is if we lost something out of that, the clear answer is no. And could you please repeat the second question?

Yes. The second would be on -- you mentioned the EUR 3 billion invest based on the [Foreign Language] can you give us some color in which areas this invest will -- whether there's a split or something to get an idea in which areas you could benefit?

Yes. So the law doesn't speak 100% clear about it, what I can indicate is that 15% from that is foreseen for cyber, IT and security. The rest is splitted in main domains like medication process, like the nursing planning and documentation. There is patient portal mentioned. There is also investments for emergency rooms, planned investments for conversational AI switch recognition, so all those areas I mentioned are completely in line with our recent investments. I cannot give you a clear indication how the investments will be splitted. I think that will be dependent on the regions and the counties on where they would have their initiatives or highlights.

The next question comes from the line of Andreas Wolf with Warburg Research.

It's Andreas Wolf, Warburg Research. My first question is on online appointments/ePrescriptions. So you mentioned that you basically plan an approach to the patient which covers basically several use cases, which would probably be then the differentiator compared to other participants in the market. What would be actually the tool that would allow you to access then the patient? Because the online appointments are already being targeted by some start-ups, I would call it, and then in the ePrescription market, there are also online pharmacies that are trying to squeeze themselves in, so would that be the electronic health record and apps related to that? So what would be basically your tool here? That's my first question. And the second is related to G3 for AIS. What should we assume in terms of cost savings resulting from the launch of G3 in R&D? And maybe you could also elaborate on to what extent you can leverage the R&D in G3 internationally? And what proportion of the product development still has to reflect local requirements or product requirements in terms of user interface, for example?

Okay. First question, the different use cases. You're right that there are a lot of companies out there trying to attack one of those use cases from different angles. But as I pointed out, almost all use cases starts at the practice or the doctor's place, and the digital use cases start in the AIS. This is a point where we come into the game, and this is what we want to leverage, that all of the use cases are somehow interlinked with normal, already existing functionalities in an AIS online appointment is strongly linked, obviously, to a calendar. ePrescription is obviously strongly interlinked with the normal prescribing of prescriptions. And this is also true for other use cases. So where we come from is that we started the normal daily work of the doctors, and we provide the doctor with a single point of interface to his patient. This is -- this should be CLICKDOC as mentioned in my chart, which is then a brand which is used to the patient. And we learned from our experience, also what we discussed with the doctors, that this is something they welcome, that they have this strong interaction and totally integration into their daily workflow and then a single point of contact to their patients. Coming to your second question, G3. The G3 is not meant to save costs, this was not our first intention. First intention is to have a better product, to have better solutions for our customers and they have a better basis for growth. And this is what you also asked concerning our -- the international footprint for G3. The product is meant to work internationally. And we definitely need to adopt it to the specific market. This might be true, as you mentioned, for the user interface. This is definitely true for the billing since this is pretty different in the different market. This might also be true for some other functionalities, but learning from the deep analysis we made over the different countries, we have, as a rule of thumb, 70% to 80% of the system, which has the same code, and we need to adopt the remaining 20% to 30%. What we expect in the future is not that we save significantly cost, but that we have more resources for innovation, and this is what we aim for.

The next question comes to the line of Nathalie Casali with MFS.

This is a more of a corporate governance question. The annual report states that the company has a target of 0 women for the management Board. And that seems like a highly demotivating target for CompuGroup's female employees. Does the company not have the processes in place to identify and nurture the talented female employees of the group, such that the management Board might not be 100% male? And are you planning on updating this target?

So Nathalie, this is Michael. You seriously want me to comment on that? So obviously, we also promote female, and we have female here on senior ranks within the company. But just out of precautionary measures, this goal is actually revisited every year, and then it's put to 0. But obviously, we have a clear ambition to go full throttle here in diversity. And we have a lot of applications coming to the company from many talented managers from the outside, and we also promote from within a lot of female management to upper ranks.