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

Good afternoon or good morning wherever you are, and welcome to the CompuGroup Medical Capital Markets Day 2021. My name is Claudia Thomé, and I'm responsible for Investor Relations here at CGM. We appreciate that so many of you have joined us today. As always, let me start with the legal note, and I would like to point you to our disclaimer on Chart 3 of the presentation, especially the information regarding forward-looking statements. Before we begin with our actual event, here's a brief legal note regarding data privacy. This meeting will be recorded, including audio and video, and will later be uploaded and available for retrieval on our website. Since you are registered here with your real name and you might be audible or visible during the question-and-answer session, we are obliged to inform you about this for data protection reasons. If you do not agree with this, you may turn off the camera and refrain from verbal statements so that you do not appear personally in the recording. If there are any further questions or concerns about this topic, you can contact Investor Relations or use the chat window below to contact the team here. Now let's turn to the agenda today. We split the afternoon into 2 sessions. Session 1 will start with our CEO, Dr. Dirk Wossner, with an overview on the strategy and how we are digitizing health care. Next speaker on the agenda is Derek Pickell, CEO of our U.S. operations, who's dialing in from the U.S. This will be followed by Hannes Reichl, Managing Director of the Hospital Information Systems, talking about scale and digitization in his field. After that, all 3 speakers of the first session will be joined by our CFO, Michael Rauch, for a first round of Q&A. I will come back to this second session later. And with that, I wish you an insightful afternoon, and I now hand over to our CEO, Dirk Wossner. Over to you, Dirk.

Thank you, Claudia. Welcome to our Capital Markets Day from my side as well. It's great to have you with us. It's been an exciting journey during my first 8 months here at CompuGroup Medical. We operate in a very attractive market, a true sweet spot in terms of servicing the megatrends, digitization in health care. This is where you want to be right now, a fantastic growth opportunity, and that is what the team and I will be talking about to you today, profitable growth. There's true purpose in what we do here at CompuGroup Medical. Our founder, Frank Gotthardt, has put this into words many years ago and this is still what we get up for in the morning, "Nobody should suffer or die because at some point medical information was missing." There's still too many people suffering or dying every year due to adverse drug reaction, rare diseases that go undiagnosed for too long or other avoidable costs. Facilitating the intelligent flow of information between all the relevant health care providers, while protecting personal data and ensuring the security of the systems used, will make a huge difference. The health care industry is a laggard in digitization, and industries like retail, travel or telecoms have shown that digitization means transformation and change, creating massive opportunities. Now this is happening in health care, and the pandemic has even accelerated this development. Everywhere patients are taking a more active role. They want to access their health records, handle medication and communicate with doctors in an easy-to-use digital way from their mobile phone. This is changing the dynamic significantly. Just take vaccination certificates. Currently, nobody carries them around in paper, everybody wants them on their smartphone. New digital offers are emerging for those parts of health care that do not require physical interaction. Telemedicine is one example, the increasing use of video consultations we saw last year. Doctors are now prescribing health apps, and country by country, the number of digital use cases is increasing for the benefit of the patient. New ecosystems are emerging to support the patient journey in the digital world and the rise of big data and artificial intelligence has significant potential to create value for doctors and patients. For CompuGroup Medical, doctors are at the center of all these developments. They see the patient, diagnose, prescribe medication, perform surgery, control, document the situation and write a bill. Any transformation in the health care needs to start there. Our customers, the doctor's world, is transforming massively. Many doctors are working in small 1 to 2 doctor practices, still using fax machines and paper forms. Now practices are growing with more doctors. Interaction with other health care providers massively increases as part of managed care environment. Paper is disappearing and processes are digitized from ePrescription to EHR at the same time. Parts of the patient interaction can be managed much more effectively in a digital workflow now, resulting in efficiencies and allowing for more quality time for better care. The access to big data and AI tools allows for better decision support and automation. Integrated speech recognition will make work faster and less cumbersome. Our goal is to support our customers in the best possible way on their path throughout this transformation. To illustrate this tremendous opportunity that lies ahead, let me share some facts. There's still significant catch-up potential in Europe versus the U.S. The Nordics, like in other industries, are the European forerunners in terms of digitization also in health care. Our core market, Germany, is lagging behind. In 2019, only 19% of hospitals in Germany were digitized compared to 73% in the U.S. Only 44% of health care professionals exchange data via digital channels in 2020. And a recent study quote 60% of doctors think that Germany needs to speed up digitization efforts in health care. Other key CGM markets like France, Italy and Austria are at a similar stage. Germany has been on a path of accelerating digitization and enabling interoperability for years with the telematics infrastructure road map. In addition, the German government passed the Hospital Future Act last year. Within only a few months, a EUR 4.3 billion bill to provide significant funds for the digitization of hospitals within the next couple of years. Hannes Reichl will talk about this later. In France, the Segur de la Santé, a powerful EUR 2 billion initiative by the French government to fundamentally modernize and digitize the French health care system. The goal is to speed up the adoption of new digital usage by both health care professionals and patients. It requires enabling digital production in exchange of structured and interoperable documents, like other clinic health records and prescriptions. The first phase is starting now and is anchored around the enhancements to the practice management systems. We serve over 40,000 doctors in France, and our team will provide the support they need to implement the required changes and bring the new standards to life. Other governments have launched similar projects to -- or extend existing ones like PGO the Netherlands, ELGA extension in Austria or P1 in Poland. For CompuGroup, we see 3 main opportunities to support the transformation from a doctor's perspective. The first area, the mandatory elements of the regulatory road map in any country doctors have to follow, to digitize and modernize, typically government funded; second, new models and features, bringing additional value or efficiency against the doctors; and third, the whole universe of the doctor-patient interaction that can be a huge game changer going forward. Let me give you some examples. Let's start with the mandatory steps doctors have to implement what are driving -- that are driving our growth. We see this happening across the board with the 2 most significant initiatives driven by the regulators happening in France and Germany right now. For example, handling new prescriptions and serving EHRs are big priorities in both countries, and we will provide the additional needed functionality in the respective practice management systems. Just to highlight the effect a regulatory push can have in terms of speeding up digitization, our software has been instrumental in the vaccination challenge in Europe. Our broad set up, our deep industry knowledge, our customer access and our ability to act quickly has enabled us to contribute support tools here. In a number of European countries, we have quickly developed and implemented vaccination modules, certificates, admin tools and other support functions. Most of these modules have been widely adopted and funded by the respective government. Let's turn to the additional functions and offerings that doctors pay for as they add substantial value in day-to-day work. Many of these are plug-ins into our installed systems, often cloud-based and highly scalable, intelligent solutions to make doctors lives easier, improve decision-making, ensure quality or optimize billing. We believe these will be essential growth driver for the future. We're only at the beginning. Increasing interoperability will speed up this trend going forward. Eckart Pech is going to explain this in detail. Our products like THERAFOX enable doctors to identify adverse drug reactions or rare diseases, making use of the available aggregated, of course, anonymized data. And finally, the third game changer from our customers' perspective, the evolving ecosystem and platforms. Our CLICKDOC platform is developing into an open, interoperable ecosystem in partnership with traditional and digital health care providers, payers and patients. Our goal is to empower patients along the full treatment journey from prevention to recovery. To access health care providers and health data in a trustworthy, secure and simple way. The cloud-based CLICKDOC calendar is now available as an integrated module in our AIS systems in Germany and France, and will replace the existing legacy calendars in the future. It will facilitate doctor-patient communication directly out of the primary system and is open for third-party apps like DiGAs, et cetera. We've already entered a number of partnerships and are open for more. Looking at CompuGroup as a whole now. Why are we perfectly positioned to succeed in this huge transformation? Thanks to many years of building up the current day throughout organic growth and targeted M&A, we are now servicing the entire health care ecosystem. This puts us into an ideal position to not only contribute to the development, but to actually drive digitization and interoperability, where we think and work in the interoperable ecosystem, connecting the essential players in the game. In our Ambulatory Information Systems segment, representing almost half of our revenues, we're servicing doctors, meaning general practitioners and specialists, but also new health care providers such as therapists, nurses or midwives in Europe and the U.S... A quarter of our business is now in Hospital Information Systems, where we're catering towards acute, post-acute and lab customers. So the whole range from small clinics to large hospital groups, from traditional hospitals to highly advanced university clinics. The Consumer & Health Management Information Systems segment, 15% of our revenues, addresses all health care professionals, but also a broader customer base with pharma and insurance companies as well as patients. And finally, with now 12% of revenues, our strong base of pharmacy customers in Germany and Italy. We're in excellent position to realize growth opportunities with strong market positions in Europe and the U.S. In the AIS segment, we're the leading player in a number of countries and have developed a broad setup. In the HIS segment, we're the clear #2 in Germany and the DACH region, and Poland and Spain have shown strong growth recently. In the PCS segment, the pharmacy segment, we're the #1 player in Italy and the #4 in Germany. This enables us a unique best practice exchange and knowledge within our teams and will facilitate the growth. Now what is our starting position for the growth story we're presenting today? We'll be reaching EUR 1 billion revenues this year and the long-term growth leading up to this point since 2002 has been spectacular, with a CAGR of 17%, obviously including lots of M&A steps as well. The EBITDA development has been just as strong with a CAGR of 16% over all these years, and the same goes for EPS. This is a great track record. However, organic growth has been more in the low single-digit percentage range over the past decade. Given the numerous growth opportunities and funding initiatives, we're now entering the next growth phase. And the first half year results have already shown a first step into that direction. Our ambition is to organically grow revenues annually with 5% and more per year until 2025. We're also introducing midterm margin targets for the first time. We aim at increasing the adjusted EBITDA margin to around 25% in '23 and to around 27% in '25. At the same time, we're increasing the quality of our revenues, taking the share of recurring revenues to more than 70%. Let me give you an overview of the 5 key growth drivers. First of all, our ambulatory segment, ex U.S. This, I talked about the growth opportunities here, will show good growth over a couple -- over the next coming years and driven by the 3 key areas, which I mentioned earlier, the mandatory requirements that will be implemented, additional modules that we can send and the opportunities we have along the patient journey. The U.S. business will be a strong growth business for us, and Derek Pickell will show how we will leverage the potential we have from combining our 2 businesses, the legacy CGM business in the U.S. and the eMDs business, and cross-fertilizing those businesses in addition to realizing further growth. Our Hospital business, again, shows strong growth momentum. And Hannes Reichl will go in the details there, how we will leverage our new G3 platform that's now being adopted in many hospitals and the tailwind we get from initiatives like the Hospital Future Act. Eckart Pech will talk about our TI and Data business. In TI, we expect moderate growth, and we will focus primarily on increasing the recurring share of our revenues. We'll see additional users coming on here. We'll see technology being replaced and renewed. And hence, we believe there's growth opportunities here with focusing on recurring revenues. And on data, last but not least, very strong growth area with all the potential we have in big data, AI, which Eckart will elaborate on. Last but not least, Michael will conclude with a more detailed view on the figures, and let me just close with talking about why I think that we're ideally positioned to capture this fantastic opportunity. As I said, it's an exciting market. It's innovation-driven, and we're very well set up to deliver deep-down innovation in the systems that we have. We have deep industry knowledge, and we have a mentality to win. We're ready to transform, we understand that ecosystems are evolving and we'll be the next game to play. We have a clear ambition to drive our growth and our margins. We have an entrepreneurial spirit as a founder-backed company. And we can execute fast and agile as we have very, very effective decision-making. Thanks for your attention, and I'm happy to hand over to Derek, who has huge experience in the U.S. health care market and is running our U.S. operations as CEO. Over to you, Derek.

Great. Thanks, Dirk. Hello, all, Derek Pickell here, the CEO of the CGM U.S. business. As most of you probably know, I became part of this team with the acquisition of eMDs in December of 2020. Just as a way of background on me, I've been working in the U.S. health care technology and tech-enabled services business for over 35 years, actually started in health care technology right out of college. I've run health care businesses that provide solutions like hospital information systems, practice management systems, electronic health records, electronic data interchange and revenue cycle-related services, mostly to hospitals, physicians, payers, but pretty much any health care provider. And I would say I'm truly excited to be part of the CGM leadership team here and really optimistic about the future potential of the combined CGM-eMDs U.S.-based businesses. So for the next 25 minutes, I'll provide a high-level overview of the current CGM U.S. business, describe our strategic focus, mostly around achieving the synergies as we integrate the eMDs and the CDM businesses as well as the more organic growth drivers in our business over the next 5 years. So when you look at the -- our CGM U.S. business today, very different than it was if you had seen this business a year ago, as well as the expertise in the leadership team that's going to drive this business in the coming years. So right now, we're a top-tier ambulatory software and services vendor. We've had a really large operation that ranks at the top 4 of the ambulatory software U.S. market and one of the leading players in the lab information systems space also. And we've been a leader in these sectors for many years, and we have recognized brands in the markets we serve. And we always say one of our marketing differentiators is that we eat our own cooking. So what do I mean by that? We have an office of the Chief Medical Officer, which is really a group of practicing physicians, and they all use our electronic health record solutions, and they are really very actively involved in our product strategy, product direction and our planning. At the same time, we have our own revenue cycle staff, both in India and the U.S., that use our practice management software as part of our ARIA services organization, which we'll talk a little bit more about later. So in our view, unlike much of our competition, we're building systems with the end user in mind, which is absolutely critical in success in the U.S. space. We always hear about our physician burnout in the U.S. because they're having to document too many things, and we're building our systems to really attempt to make it easier for the physicians to spend time with their patients versus spending time in front of a computer. Our mission has been and continues to be focused on being the premier provider of ambulatory [indiscernible] revenue services. And these solutions really enables our clients to achieve clinical excellence, financial success and frankly, most importantly, achieve the best patient health outcomes, which is very in line obviously with what everything CGM Corporate is all about. Now at the same time, we're focused on our customers and our patients. We also obviously help to serve our company and our investors, right? So strive -- we're going to strive to achieve double-digit revenue growth in our key growth areas, which we'll talk a little bit more about, the [ medical ] EDI, ARIA RCM, while we maintain an overall across the business growth rate, we believe, in the 6% to 9% range over the next 5 years. And I'm a big believer in the theory that if you visualize success, you're halfway there, to achieving that success. Our leadership team have been big believers in our ability to succeed and that belief has really gotten us to the success that we've had so far. And I believe it's depicted on this next slide. We have a vast solution set available to our clients and potential clients, things like the electronic record system, which handles clinical documentation; practice management systems that handle the administrative and financial side of the physician office; revenue cycle management services, which actually do the billing and the accounts receivable management for a practice; as well as the clearinghouse and electronic data interchange transactions that basically handle interactions between the providers and the payers. Things like gathering patient eligibility for insurance, right? So the providers understand that, yes, this patient is eligible for this insurance. We're processing a claim for payment by the payer and posting these payments electronically to the practice management system. In addition to these core solutions, we also have many wraparound in adult modules that include telehealth, patient portals, remote patient monitoring, et cetera. Now on the right side of the slide, you can see the large scale in the business in the U.S. Top Tier 4 is in the U.S. inventory market now. And I think one item that you've already started to hear and you'll hear a lot more about in -- from the CGM Group in general, is how can we better monetize our very large client base by building an ecosystem that provides a recurring revenue stream to the company. In the U.S., we started that a few years ago. We started that process with our electronic medication prescribing system, or eRX solutions. And since we started that process, we've already recognized royalties via our new eRX solution, and we continue to find other ways to add to those royalties. And one of the -- I think one of the next major areas where we'll need to create a monetization strategy is going to be finding a way to package our vast patient clinical and financial data. The good news from my perspective and from my team's perspective is that my counterparts here in CGM, like Eckart than others, have already started that process. So we will right away utilize that in the U.S. over the coming years as well. So when you talk about the leadership team, just I think it's important to understand, I mean, in my mind, the leadership team is the basis for our success. With the addition of the eMDs' team, combined with some of the key existing CDM U.S.-based leaders, we really now have a proven, well-respected leadership team in the U.S. health care industry. Over 85% of that team has more than 15 years of actual industry experience in health care IT and revenue cycle. And frankly, has a pretty long tenure with the company, over 5 years. So we think the team is well positioned to help take the CDM U.S. business to the next level of success and growth. So we're going to spend a couple of minutes now on our progress regarding the expected eMDs and CMG (sic) [ CGM ] synergies as part of the investment case. On this slide, you'll see the synergies that we really focus on, and they fall into 1 of 3 major categories, and we believe we're well on our way to achieving many of these. The first one is on the clearinghouse and EDI migration of the existing CGM eMEDIX product into the eMDs' clients and reseller base. And up to this point, we've completed much of the development work to integrate eMEDIX into the eMDs' products and we're actually starting to move some of those clients into a pilot phase to eMEDIX. So when we do this, we're able to replace third-party partnerships, which are costly for us, obviously less favorable to our top and bottom line and using our own EDI solutions for things like eligibility, claims processing, payment processing, et cetera. So great move there. We're excited about that. Really, really great opportunity. The second part of the integration strategy is consolidating some of the legacy CGM EHR solutions into the Aprima platform. And that's going to be our major go-forward solution. We're putting money into that and we're continuing to move that over the next years out into the market. It will also obviously help us to remove some duplicate costs that we had. So making really good progress on that. On the next slide, I'm going to go into more detail on the time line to recognize the synergies on number 3 here, which is the migration of the former CGM U.S. RCM business to the ARIA RCM blended shore model. The blended shore model under our ARIA services platform includes utilizing our large offshore India operation. We have over 1,200 employees in India. We use them for back-office administrative tasks. And we combine that with our onshore, U.S.-based client management and patient services organizations. So in effect, the clients and patients are typically only interacting with our onshore staff, but our offshore staff is doing much of the back office work, which works out extremely well from an efficiency perspective. One of the things that I would say on this slide, in the eMDs business over the last 5 years, we've completed multiple roll-ups of various RCM businesses and we moved them into our blended shore ARIA RCM model. Now this just depicts a time line for how we successfully migrated the prior CGM RCM onshore and offshore third-party business over to the ARIA blended shore model. So we started that pretty much as soon as we became part of the CGM team, and we've been able to integrate the leadership. We've been able to move out temporary employees. We've been able to take third-party partnerships that CGM had with offshore vendors and obviously move them to us, which is much better from a cost perspective. And then we did move some onshore CGM employees to our offshore operations as well. But the good news, I think, more than anything, in our recent surveys, our customer surveys of that pace of business only that have already migrated over now to the ARIA RCM team, 69% of the respondents have stated that the new ARIA RCM team met or exceeded our expectations across the [ surveyed questions ]. So if you look at that 69%, we typically want higher, but it's very similar to what we have done in the first few months of migration with other businesses that we moved over to our ARIA business. Those same new clients that have done this some time back, like we had on Aprima RCM business that we moved into eMDs and the ARIA business, those satisfaction rates today are upwards of 90% to 92% of respondents stating that we meet or exceed their expectations. So we're really excited and proud of the success that we've had in these migrations as well as the customer satisfaction with our partnership. And I think we're well positioned to continue this type of roll-up strategy for the next few years. And there's a lot of opportunity in the U.S. space with RCM roll-up opportunities. So let me spend a few minutes also now on the main drivers that we think will help us achieve our organic growth objectives over the next 5 years. So when we look at organic growth, I mean obviously there's a lot more detail behind this, but I've tried to net it down as best as I could to these 3 major areas. So we expect to win new customers that have no current relationship with CGM. And the growth drivers here will be selling our Aprima EHR practice management solution to our typical prospect base, which is going to be primary care type, orthopedics, cardiologists, those kinds of things. But because of the way the system works, we have a proven software solution also for some of the high-growth areas within the U.S. health care market, right? So specifically, as the population ages, we all know that, that's going on. There are these fast-growing new providers and organizations that are providing home care primary care settings and where really the clinicians are seeing our parents, our grandparents, what have you, in an assisted living facility or at the home. And then also our system really works well in a palliative and hospice care setting. And these are some of the biggest growth areas within U.S. health care as far as the providers go. So we're doing really, really well in that space. And then in the ARIA services business, we also have a large new client opportunity, where we can provide our services to other businesses that do not have lower-cost offshore models. So we can do it to large hospitals that employ physicians or large physician groups like academic practice plans that need help with the complexity of the ongoing credentialing, payer enrollment as well as the revenue cycle management services that they need to provide. So we see a lot of opportunity there. And of course, on our lab business, we'll continue to see new clients in the physician office labs, which has always been our focus. But then there are also some new growth areas also here like reference and cannabis labs, right? The cannabis market in the U.S. is a nascent market at the moment, but tons of upside as more and more states legalize cannabis for medicinal and recreational purposes. And we're really well suited there to help with the labs associated with that. The second major area of focus is the retention and monetization of obviously, our large client base. Selling into that base, obviously a little bit easier, right, and we already have great relationships there. We just see great growth opportunity with the addition of our ARIA services into those bases. And then now we have a bunch of new modules that CGM has developed and we're now integrating into the eMDs' products as well. So things like remote patient monitoring, patient reminders, additional telehealth solutions that we can now sell into this large base. And then on top of that, obviously, it's the continued expansion of that ecosystem I mentioned earlier, which will bring us more recurring revenue on a go-forward basis. The third major area of growth is the expansion of the CGM clearinghouse and electronic data interchange solution into the eMDs' and reseller client base. Now for those of you who understand and know the U.S. market, every provider in the U.S. health care market has to use some form of clearinghouse or EDI to run their business. So we're in the process of integrating the eMEDIX solution into each of our software platforms, and we're going to make that a very easy migration from any third-party EDI vendor to our new solution. So for each practice that we're able to migrate, we see an increase in top and to our bottom line. So it's really exciting times. And then we're planning for late 2022 to package that solution, the EDI solution with our MEDISOFT and LYTEC practice management system, which is typically a shrink-wrapped kind of onetime license fee. So this will give us an opportunity starting in the latter part of '22 to move much of that onetime revenue to subscription model, which we think obviously will prove support our desire to move one time into recurring subscription revenue over a long period of time and, obviously, much greater value for the company. But probably worthwhile looking at this next slide, which depicts the large upsell opportunity for moving existing EHR software-only clients to bundled clients that include the EHR software and the ARIA revenue cycle management services. So if you look at this, the average revenue for an existing ARIA RCM software customer that uses our RCM services and our software is approximately $65,000 per year. So when you look at that and you multiply that by just our one direct software client opportunity, the total addressable market or the TAM there is over $276 million. Obviously, we're not going to get 100% of the market. I wish we could, but that's not going to be realistic. But if we do what other companies in the space have been doing, we should be able to see penetration that gets north of 20%. So the upside over the next 3 to 5 years in just this one space we think is very large, and it's going to be a great growth driver for the business. Now I know this is probably a quick overview of the CGM U.S. business, but I think it's important to end my discussion on why we, the CGM U.S. leadership team, is more excited than ever about the future potential of the U.S. business. I think first, obviously, the financial and technical prowess that CGM now brings to us is immense as compared to where we've been as a management team in the past. We were private equity-backed. I'm sure there's some of you guys out there. It's a tough business when you're private equity-backed, you run a very tight ship. We're part of a much larger organization that provides so much more support and technology than we ever could have in the past. Really excited about that. And then second, with the addition of the eMDs business, combined with the CGM business in the U.S., I mean we're a known, well-respected organization in U.S. health care at this point in the ambulatory space. In fact, we recently attended our first in-person national conference, HIMSS. Most of you might be familiar with the Healthcare Information and Management Systems Society. It's one of the largest health care technology conferences in the U.S., usually draw somewhere north of 40,000 or 50,000 attendees. And at this conference, we had our coming out in August. Basically, we came out as the combined CGM and eMDs, and we've really started to build the brand of CGM in the U.S. So we're really making -- already making CGM brand more well known, we believe, in the U.S. than it's ever been in the past using the eMDs' [ monikers ] as well. And then third, as we've talked before, we have a very large client base, millions of transactions passing through our systems on a regular basis. And I mean with that, there's always going to be a great upsell monetization opportunity as we develop new modules, as we find ways to monetize that data, as we continue to kind of grow our solution set. And as the market continues to force new modules and new solutions that are needed to run a business. Fourth, significant organic growth opportunities, as I think we've mentioned, and a lot of roll-up opportunities across the space. Now obviously, there are some big M&A opportunities, but I think I'm willing to [ show ] the dirt that we can do these roll-ups, we can do organic growth before we get too big and go after any big M&A activity. And then fifth, the leadership team we've assembled, as I mentioned, experienced and proven. And we've already successfully completed many acquisitions and roll-ups over the past 5.5 years, and we're excited about what we can do in the future. And then finally, we see that the U.S. regulatory and market dynamics, we think are moving in our favor, new regulations coming in, mandating electronic prescriptions, which obviously is going on now. The 21st Century Cures Act, which we and the market believe is going to be very costly for some smaller, underfunded EHR companies, which we think will open up an opportunity to have a big EHR software replacement market over the next 3 years. And with the investments we've made and continue to make from the Aprima platform, we think we're well positioned to be that replacement solution for many of those -- for many practices that they're going to have to change systems if they want to certify product on a go-forward basis. So in our view, it's a d*** great time to be a CGM U.S. client, employee, partner and investor. Excited about it. Excited to be part of the team. And thanks for your attention. I hope I was able to effectively explain the CGM U.S. business and the excitement we actually feel around the business as well. And with that, let me pass it over to Hannes to discuss the scale and digitization in the CGM hospital market. Over to you, Hannes.

Yes. Thank you, Derek, for this exciting presentation. And welcome also from my side to the 2021 Capital Markets Day. I'm Hannes Reichl. I am leading the Hospital Information Systems segment within CGM. Thanks for having me today, and I'm really excited to talk about scale and digitization in HIS today. So after several years of investment in our HIS business, we have now reached so far a kind of inflection point, which is taking us into a more attractive growth path. In 2022, we spoke about building on scale. And today, I would like to give you an update on our execution so far. I'm also happy to briefly touch the major initiatives going forward based on our strong product portfolio and the market trends going forward. Last but not least, I will also elaborate a bit on our HIS growth plans in general and give you an indication on where the journey is going. Next slide, please. So let us look a little bit into the past and the milestones we took so far, how did it all start? Already before 2016, CGM decided, on a group level, to initiate a long-term platform investment. The goal was to bring major product lines into a new software generation, which we call G3. And inside CGM, we as HIS, were one of the frontrunners for G3 and started a major software development road map in 2016 in order to create the next-gen HIS under the brand CGM CLINICAL. These investments are addressing predominantly our core markets in Germany, Austria, Switzerland. And here, we aim from the beginning, on the one hand side, up- and cross-selling on our existing customer platform, but as well to win new clients in the area of solitary hospitals or large providers, delivery networks, and last but not least, also academic hospitals. After we manage the go-to market, we were able to win the first large contract back in 2019 in Austria. The largest project and contract in the company's history with a volume of more than EUR 100 million for more than 10 years of a delivery, the so-called NÖKIS project, which is fully based on G3, respectively, CGM CLINICAL. Last year, in 2020, we won a migration contract with a well-known hospital in Switzerland university clinic, a pediatric clinic in Zurich, which was an existing client already, we convinced this client to migrate into CGM CLINICAL native. And on top, we were already able to complete a go-live also in Switzerland at Felix Platter Hospital. As you can remember, a major milestone was then the acquisition of the Cerner assets, which more than doubled our customer base. This is giving us an adequate scale for our great product portfolio and enables further up- and cross-selling for G3 modules in Germany. At the beginning of this year, '21, and we are really proud about that our sales team succeeded in winning a lighthouse project, the project with University Hospital Hamburg-Eppendorf, the so-called UKE. UKE is one of the leading academic hospitals in Europe, well known for its medical services but also with an excellent track record in digitization. It is one of the few HIMSS Stage 7 hospitals in Europe. This underpins, in my point of view, our strategy and at the same time, it represents the first G3 native project in Germany. Also in the first half year of '21, we complemented our portfolio through 3 further and successful M&A projects. These are, number one, VISUS, a very strong player in enterprise imaging and enterprise content management area; number two, [ Meta IT ], specialist in revenue cycle management, service coding and decision support; and number three, finally, KMS, which is market leader in Germany for business intelligence and data analytics. So now for all of these acquired products, we see a really large opportunity within the group for up and cross-selling. This multiyear path has so far proven to be best in timing because we successfully launched our next-generation product portfolio and significantly increased our scale just before the Hospital Future Act was passed, a major regulatory driver for digitization and growth. I will come back in detail into this topic later on. So in my point of view, as a result, our setup for growth has never been better before. We see a really strong tailwind for the years to come for CGM CLINICAL and the German HIS business. Next slide, please. So looking back a little bit into our last Capital Market Day, I used the same slide. We are really proud to compare now our successful journey over the past 12 months based on some important KPIs. We achieved a strong organic growth of about 7% already in the first half year '21 and increased at the same time our margin level by 1%. Our business trade is stable on a level of 60% in terms of recurring revenue and the combined organic and strategic growth leads our HIS segment to a total revenue of EUR 245 million. So that HIS now comprises roughly 1/4 of the total CGM business. After successfully integrating the acquired Cerner assets into the group, we have now achieved an excellent market reach for scaling the business. We are the clear #2 player in HIS business in the DACH region, but also in Europe, having a strong customer footprint on top -- in countries like Poland, Sweden or Spain. And it is important to know that our HIS activity supports the full patient journey with our products. We supply customers from acute to post-acute into social areas, but also medical labs are in addition to our widespread HIS footprint clients. So this makes, in my point of view, CGM unique, being represented in all segments of health care systems in Europe. So how would I now summarize the key growth drivers going forward. Number one, we are clearly aiming for further market penetration with G3 CGM CLINICAL, that means we are aiming to win new client from the market. Number two, there are on top, numerous opportunities in terms of growth and scale also from our international footprint like in Spain, Sweden, Poland or in the lab business. And the stream number three is clearly the Hospital Future Act, which is providing additional tailwind for our large business in Germany. This is predominantly an up- and cross-selling story with great scale and perfect fit from our product portfolio. Next slide. So let's now turn to -- a little bit to our product portfolio. What you see on the left side, in the dark bullets, our initial investments we're aiming at covering the full workflow for typical HIS clients. We support all processes from admission to discharge, medical documentation, nursing, surgery, any other specialty. And on top, we are supporting clients with multi-resource planning and human resource solutions. G3 offers, additionally, widespread connectivity features which are fully compliant to the German telematic infrastructure or in other countries like the ELGA in Austria. The brand new technology is featuring web-based ease of use and is offering next-level user experience. Under the project named CGM Health Alliance, we are now completing our product in order to address academic hospitals in large delivery networks. Since 2021, and this is the beauty of CGM, we are also benefiting from group-wide investments. For instance, in CGM CLICKDOC with a clear target to open hospital processes for patient interaction and patient empowerment. And finally, what you see on the right side, we with the mentioned acquisitions in '21, we enriched and completed our portfolio so that we are now a clear one-stop shop for our clients. This is a unique portfolio. It brings further momentum into our sales process and delivers a high added value to our clients and prospects. What is fantastic is that our product, CGM CLINICAL has shown already a great track record over the past years in winning new logos or migration projects. In the meantime, there are a number of new client projects, for instance, with the already mentioned UKE project. But we are also winning new clients. Recently, we won or convinced a new client like the Kantonsspital Graubünden to fully migrate to CGM CLINICAL. This project started already a couple of weeks ago. So again, this is a clear proof point that the quality, that the vision, that the strategy behind the product CGM CLINICAL is working. So let me now get into the second growth stream. And if we look a bit into our international portfolio, there are also numerous growth opportunities in terms of up- and cross-selling. Important to say it's on top of -- on top, we have a very strong focus here on gaining operational excellence through sharing best practice, know-how, models, concepts, resources, but also products across the countries. For example, we managed the integration of the Cerner assets in Spain based on our best practice models from Poland and gained a lot of operational experience very early in the process. Another good example for a cross-country benefits is our lab team in Belgium, which is scaling its support service over 5 countries with different languages, what consequently leads to a very high level of efficiency. Again, here, on top of this mentioned high level of operational excellence, we are also winning new logos in these regions. Here, you see some major wins from the last 2 years in Poland or Spain. And these are fairly large projects in huge health care organizations with a rather long-term delivery where we also gained on top or increase our recurring revenue base through increased maintenance or other recurring services. This also underpins the growth strategy on international level in winning new large projects. Let us now get into the third stream and take a look into various European markets. And I think we've already flagged the topic a bit in his presentation in terms of digitization. And here, especially at the market penetration, in terms of clinical data exchange. There are clear front runners, such as Austria, Italy and Netherlands. We invested already strongly into digital data exchange. But if we look at markets like Spain or especially into Germany, there is still more than 50% of communication based on non-digital processes. That is a clear indicator for us and a growth driver for the upcoming years. And we are addressing the market already with software supporting the TI infrastructure to catch up with other countries. Last year, I showed you how German hospitals are lagging behind in terms of digitization versus the U.S. and the picture hasn't changed yet. So looking at Germany, we see many areas where hospitals are only slightly digitized, and there is still big room for improvement. This applies to core processes as well as processes where it is mainly about communication with others or with patients. In addition, modern procedures, and that has become obvious during the pandemic, such as telemonitoring, teleconsulting or decision support have so far only found their way into hospitals to a minor extent. The clear conclusion here is there is high pressure to catch up with other countries. There is consequently a high market potential for us. And based on our product portfolio, we are able to address almost all of these areas already today. So if we now look into the Hospital Future Act, we find clearly that most of this underexposed areas, which you can see on the slide, are addressed by the law, with a clear scope, with clear requirements. And since the beginning of '21, we are intensively consulting our clients in order to improve their situation and help them to catch up in this area. So now let me give you an update on where we stand with regards to the Hospital Future Act. In 2020, as you know, also as a result of the learnings during the pandemic that driven the government decided to support the digitization of hospitals in 11 funding areas with EUR 3 billion governmental funds combined with EUR 1.3 billion funds by the federal state. After the funding framework was released in November, we thoroughly analyzed where and how we can contribute and support our customers in this process. Our product portfolio shows a strong fit for 8 of these funding areas for our German customer base, which is roughly 350 hospitals in the acute business. There is now a rather complex regulation behind these applications for the funding for the clients. So hospitals have to apply on county level, counties have to apply on governmental level, the respective deadline for these applications is end of '21. In many cases, we will also see tenders following these applications as a consequence of the public procurement law. So we brought several products and modules into a really comprehensive sales campaign in the first half year '21, backed up by an intensive recruiting initiative for sales reps, consultants and service resources in order to be prepared to support our customers. So all in all, we see a revenue potential of about EUR 40 million to EUR 60 million over the financing period. Let's now take a little deeper look into the status of our campaign, and I would like to give some details and KPIs of this sales campaign. As you can see, there is strong interest in almost all CGM relevant funding areas. We see a strong demand in innovative areas like the CLICKDOC patient portal as well as in the area of process improvements in core processes like medication management, care and nursing management. In average, we are working on 2 opportunities per customer, and we still expect more to come. At the moment, we placed offers for about 50% of these requests, and we are on a good path to achieve our target of EUR 20 million to EUR 30 million order intake in 2021. Still, as far as the timing is concerned. Our clients are highly dependent on the regulatory process. I have explained before in order intake and resulting revenues will only come hand in hand with the granting of the funds from the government, but we are confident that this process will get more and more speed over the next years until the deadline. Let me now turn into 1 of the funding areas for the Hospital Future Act in particular. And this is a very good example for a perfect match between the funding area, the regulatory requirements and how we benefit from joint investments within CGM. Hospitals are required to digitize their patient interaction. This has become clear during the pandemic. There is a clear demand from patients from the consumer to get into digital processes with hospitals. The Hospital Future Act defines clear process support throughout the whole patient journey, meaning before, during and after the hospital visit. For example, if you need a hospital treatment as a patient, after you visit your GP, either your GP or you as a patient can book an appointment in the hospital. The hospital helps you with digital onboarding, with questionnaires with checklists and this can be supported and you get useful information or education upfront. During this day, you manage your schedule with the hospital via a patient app. For example, you manage your diary, you manage your calendar, you can order And after the inpatient stay, you manage the transfer to post-acute areas or any other following treatment. And now combined with our CLICKDOC platform, we can offer customized patient portals, white label patient portals for hospitals, deeply integrated into their workflows. An interesting side effect is that we automatically can increase the overall reach of this platform with regards to patients and health professionals, which will improve the overall value of the CLICKDOC platform for the users. So if I may conclude or summarize here, I would say our HIS business has a perfect growth setup, which has never been better before. We can see these effects already in the first half year. Through our acquisitions, we now have access to a really large customer base, which perfectly enables us to better scale. Our product portfolio is state-of-the-art, and we are winning new customers. On top, our international business, like in Poland, Spain and Sweden as well as our lab business is performing well in terms of growth is performing well in terms of operational excellence. The Hospital Future Act now kicks in with the perfect timing, and it creates a tailwind for our German business for the next 3 years. So the numerous growth drivers, which I explained today are leading us to an acceleration of growth. And based on the revenue synergies, the new customer wins and the regulatory tailwind, we are confident to reach our goal to grow by a CAGR of 6% to 8% over the next years in the HIS segment. And with that, thanks for your attention, and I'm handing back to Claudia for the Q&A.

So thank you, Hannes. I hope you enjoyed the presentations of the first session. We will now begin the question-and-answer session where the speakers of the first session and our CFO, Michael Rauch, are available for discussion. So please save any questions on TI and the data business for later in the second session. Let me reiterate that the entire meeting is recorded, including audio and video, and will later be uploaded and available for retrieval on our website. This concerns you, especially if you intend to participate in the question-and-answer session with your camera and microphone switched on. If you do not agree to this, we kindly ask you to refrain from turning on the camera while asking your question. Should you not agree to your voice being heard either, you still have the option to ask your question by using the Q&A button below. If time allows, I will read your questions to management. Please inform us in case you do not want me to read your name out loud. If you would like to ask questions, please use the raise your hand function in the control bar at the bottom of the Zoom during the Q&A session. We will then add you to the speaker panel 1 by 1 where you can ask your question. The notice will appear on your screen that you are now becoming a discussion participant. Please confirm this actively by clicking on it. Before asking your question, please unmute yourself when I call your name and if you want to turn your video on, so that we can see you. And as you can see, we've now got all the speakers of the first session lined up. Please also tell us when you're asking your questions which of the speakers you are addressing to. And we've got the first question coming in from Uwe Schupp at Deutsche Bank. Hello, Uwe. Nice to see you, and please go ahead.

Yes, Claudia. Yes, thanks, gentlemen, for this very comprehensive presentation so far. I would have 2 questions. Actually, I would have more, but I limit myself now for 2 questions, if I may. Dirk, in your presentation, you very much focused on the organic growth and the huge opportunities that lie ahead of you as the European health care sector is digitizing. However, when you came on board almost 9 months ago, you were talking a lot about necessary investments and things that need to be improved in the very near term that need to be executed. My question is, has the -- given the plethora of opportunities, do you think most of the investments are done now? Or should we expect another investment wave, big or small, going forward? And then secondly, Derek, first of all, I hope you're not on the West Coast. Otherwise, it's a very early morning for you. Can you talk about the competitive environment for a moment, either by product or by segment or by brand, whatever you like? Maybe most easy, I guess, would be to start on Page 9. Maybe give us an idea about the current market share, who your major competitors are and talk about the market growth, maybe if you can.

Thank you, Uwe. Maybe I'll start with the first question and then hand over to Derek. So thanks a lot. And as we've said before, the year 2021 is an investment year for us, and we have indeed taken some investments and hence, as you know, we've taken the margin somewhat down. I think we've done most of the investments. Now a lot of those investments was actually onboarding developers and to increase our investment development capability as well as investing into sales and service people to push new products into the markets. We've seen an increase in our personnel, and some of that will continue to go in the second half of this year. But then in the next years, we actually expect this to be stable both from a growth personnel growth perspective as well as an investment growth perspective, i.e., a lot of the continued revenue growth that should then flow into the margin. I don't know if that -- I hope that answers your first question. If it does, I'm happy to hand over to Derek.

Great. Good deal, thanks, Dirk. Uwe, good to see you. Luckily, I'm not on the West Coast, but it's all good here. Yes. When you look at our business, we -- you kind of -- I break it up between the software business, so the EHR, PM, kind of that ambulatory software space. And in that space specifically, really the competitors that we see aren't the big guys like they're not going to be the hospital-centric vendors like Epic or Cerner We really focus in that ambulatory space. And the companies that we're typically going to go against are going to be the athenahealths, which you might be familiar with, which recently was just privatized by Veritas and Elliott. And then eClinicalWorks is another one that we see often in that space as well and NextGen are probably the 3 or so really top ones. There's a lot of little players, too. But on a regular basis, so they would be the 3 that we would see in that EHR, PM, kind of the ambulatory software space. In the lab side, Mostly, we see companies like Orchard Software. You might be familiar with Orchard or Medicus. And then when you talk about the ARIA, the RCM business, it's interesting, our biggest competitor there, frankly, is the practice themselves who decides that they don't necessarily want to outsource to somebody else, right? And so we've seen that change over the years. I mean I've been doing RCM for the last 25 years and doing offshore for probably 20 of that 25 years. But I would say that we're starting to see a little bit more of a movement towards a willingness to offshore and to outsource more than ever before. I think because of the landscape in the U.S. is becoming so competitive, the reimbursement schemes are becoming much more complex than they were before. And you really need a larger organization who can do that. So that's really our #1 competitor, frankly. There are some smaller offshore RCM companies that we do see, the GeBBS of the world, the Omegas of the world. But I would say mostly, it's a matter of convincing our staff and our employees that, hey -- or the practice employees and staff that they should outsource to us and they should be a good partner. That's why we really focused heavily on that in the existing client base because we have such a great partnership and relationship already, being able to give their trust and kind of making them feel good about handing over their financials to us becomes a lot easier than doing it kind of net new out.

And I'm sorry, Derek, if you mentioned it in your presentation, I didn't get it. How many of the practices in the U.S. do use their own revenue cycle management or do it internally versus having it already outsourced?

If you look at just -- I'll just talk about our client base, right? In our software client base, still, we only have about 15% penetration at this point in time. So a lot of upside opportunity out there, probably not too dissimilar. I mean if I look at some of the competition like the NextGens and the [ PCWs ] of the world, I mean they probably maybe have a little bit more because they've been doing it for longer -- trying to do it for a longer period of time. They might be into the 20% to 25%. So I mean I would say it's still kind of an 80-20, where most of the practices are trying to do it on their own.

And would it rather be the bigger practices that would be keen to move to your solutions?

Interestingly enough, the answer is yes, right? I mean the practices that are run more like businesses where they really get the fact that they can necessarily do this on their own -- with COVID, frankly -- a perfect example. I mean, literally, the other day, we had a client who called to try to get a payment plan on their invoices. And the person who was talking to them asked a question, well, how can we help you? What's going on as well? Two of my billers, unfortunately, and this sounds horrible, but passed away from COVID and we can't get claims out the door. And so the COVID impact, frankly, is starting to really, I think, give us more opportunity in this whole RCM space since we have such a large operation already. It's easy for us to kind of backfill any people that might leave or quit or whatever.

Great. Thank you, Uwe, nice having you. And the next question comes from Charlotte Friedrichs of Berenberg.

I've got 3. One for Derek Pickell. And the question is, if you look at the -- I believe you said 6% to 9% revenue growth outlook, if you split that between up-selling your existing customer base versus winning new customers, what would the split be? And then the 2 other questions that I have fall more into the area of Hannes Reichl and specifically the Krankenhauszukunftsgesetz. And here, the one question would be how much of the total funding do you believe will be actually utilized by the hospitals given that we're seeing obviously good momentum but we're not obviously seeing a full utilization of the EUR 4.3 billion. And then following on from that, how do you expect your order intake and also your behavior to develop? Do you think you're going to engage in conversations with additional hospitals? Or have you picked out the ones now that are lucrative and interesting from you and you're really going to leave it at that?

Great. I think I have the first question there, so I'll jump on that, Claudia, if that's okay. So Charlotte, I would say the reality of it is, which is the good news for us is that the bigger percentage of the growth is going to come from upselling into the existing client base, not as much having to go out and get a bunch of net new customers. So if I look at our bookings lately, I would say it's probably about a 70-30 split. 70% of those bookings really going into upselling into our client base for things like the ARIA, RCM, selling EDI, selling these other modules, hosting other different opportunities as compared to net new sales. So from my perspective, that's a good thing, right? Much easier to upsell than it is to go out and find that new clients at this point in time. Does that help?

Yes, absolutely.

So then it's up to me, I think, to answer the second and the third question. Charlotte, thank you for the questions. And that's, of course, a question which is driving us as well a lot. So of the EUR 4.3 billion, I think the first question is what is the relevant piece for software only. It's not just software, which is covered by the funding areas. The second question you need to answer is to what extent, in general, the funds were going to be used. So from our experience from previous digitalization funds, there was a rather low level of usage out of that fund. If you would ask me for a best guess, I would say, it will going to be maximum 10%, but not more than that, which will be dedicated to software, and I hope that answers your question. With regards to your second question, the order intake, of course, when we started off the campaign, we first of all focused our existing client platform. So we know exactly where our white spots, where are those hospitals and with regards to the digitization where they need to catch up. So I think that was in the core of the campaign. But after the first 3 to 4 months, it became obvious that there are a lot of new prospects around looking now for, yes, a complete renovation of their system. We recently won another client in Heidelberg, which was not a CGM client. They are using partially the front of Krankenhauszukunftsgesetz in order to replace their system in total. The problematic thing is a little bit that the funding is limited with 2024. And in most cases, if you replace a complete system, you would need, first of all, a procurement process, if it is a part -- that take some time and then you need to be there at the end of '24. So that would be a relatively tough right to do a complete replacement of the system. So that makes it a bit complex. So to answer the question, in general, the big portion is, of course, on the existing client platform where we know exactly what you called the most lucrative where there is a short way to go because the demand is so clear. And there is on top a number of new prospects, which need to be quick now to come to a decision in order to make it within the deadline.

Thanks, Charlotte. And the next question comes from Andreas Wolf of Warburg.

I hope you can hear me well. The first one would be on the calendar functions within CLICKDOC that you are launching the new ones. So maybe you could also provide us some insights on how the economics will look like here. I think competing products basically are betting on the viral distribution. So maybe you could provide us with the details with regard to the economics that you have applied here? And then on R&D, in general, I think R&D staff is a big bottleneck for many IT companies. You've already mentioned that you are obviously expanding the capacity in offshore locations, such as India. What will be your strategy going forward? Will you basically source from local hubs? Or will you basically stronger build on the blended sharing approach going forward?

Okay. So I'll take the first question on the calendar functions and the CLICKDOC calendar. I think it's important to say that the basic calendar, which we will provide over time will replace the existing calendar in the customer system, which they use today. So if you want -- this is part of our platform strategy, where, as you know, we have multiple systems today in France and Germany. Many of them have multiple different calendars which require a lot of work to maintain, plus they're actually not cloud-based. So what we do with the new CLICKDOC calendar is basically 2 things. The first one is we are replacing as part of the modular strategy a part of a legacy system with a modern cloud-based calendar and all our new products, by the way, which are launching already this year and early next year will also already include this as the core basic calendar. The fee for the usage of that calendar is included in the regular package, i.e., the regular package that the doctor has subscribed to. The calendar then comes with additional features, additional features basically being online services, like, for example, the ability to online book and the ability to set reminders and those kind of things, which the doctor can easily just look on top of that. There's no technology needed on top of it. It's integrated into the calendar. You just basically unlock the package by a fee right now, we're charging EUR 49 for that service. And then the second phase that we can launch, which also then includes video consultation and more comfort functions, which is currently around EUR 100. Pricing, obviously, is in the market right now, and we might do some adjustments to that, but I think it gives you -- it gives an area of where we are regarding pricing. Also, what we do is we provide this as a free trial to our customers, right, so they can run it in parallel to their existing calendars so that we give them basically the freedom to try and to really make sure it works well. The beauty of this tool that also comes with a communication capability, i.e., you can send and receive data information and other things to your patients, it comes linked into an electronic health record, which you can exchange to the patients. So there's a lot of functionality embedded into that, which then can be used, and there will be various models on how we monetize on that. Remind me on the second question. Sorry...

R&D.

R&D, the R&D question, how we use outsourced versus in-sourced and offshore capabilities, if I remember that correctly. So we today use both. We have -- I'm not 100% sure about the number of developers, but the vast majority of our developers -- our core developers are actually onshore developers, which we have in the individual markets. It's very important that our developers are close to our customers, and they're very integrated into the processes in specifically our core AIS systems. We then have offshore capability in countries like Ukraine, Romania and other Eastern European countries that we use when we have a bulk development that we can use or bigger pieces of development. So Hannes can talk about parts of the clinical software that's been developed in Ukraine. We have resources in Romania, our own technology center in Romania, which develops big parts of what we call the CLICKDOC and CGM life environment. And we also use third-party developers in certain areas where we need to, a, add skills; or b, just find the number of people that we need because, as you know, it's very difficult to kind of scale to the degree that we want with our own resources. I hope that answers your second question, Andreas.

The next question is from Knut Woller of Baader Bank. Knut, great to have you here. Welcome to the show and please go ahead.

It's actually to both Hannes and Derek. I'm seeing the growth potential for both business lines. So I'm a bit more concerned regarding the margin potential. I assume you have some synergies on the back of recent acquisitions where you can lift profitability. That's a given. And you probably also have a tailwind now from the upselling, cross-selling and the role of CG Clinical. But looking a bit further down the road, how confident are you that no further investors required in sales and marketing, for example, once the low-hanging fruits have been harvested to maintain the growth momentum going forward. Can you give here some color, a, on the synergies in both acquisitions we expect the acquired assets to be by 2025; and then secondly, on the need of invest?

Yes. Knut, thank you for the question. So talking about synergies, I think there is a long-term investment period behind us in the core systems. And I believe after the next 2, 3 years to come, the maturity of the system will be on the levels which then leads to less investments into the system, in my point of view. On the other hand, looking on, let's say, the business model which is behind the years to come from the Krankenhauszukunftsgesetz or the Hospital Future Act speakers more for a relatively strong license business, which will create, I would say, a lot more substantial business. And on top, we will also gain some recurring revenues out of that. I think that is one thing. What I have mentioned also is that we are working like in the international area strongly on gaining in operational excellence. Those are models which are leading to clearly more efficiency because we are sharing resources over the borders, and we are also using resources, let's say, in lower-level salary countries than, for instance, in Germany. I think that is one part of the answer. From the acquisition point of view, I think looking on the 3 targets I explained today, there is a clear upselling opportunity where we simply will have synergies in using sales channels, which are simply there. So we can clearly leverage those products quite easy through the existing footprint. That will also create a higher level of margins than today. Does that answer your question?

To a certain extent, are you also willing to provide targets for this business, Hannes? Or is that something that will be addressed later on by Michael? Or won't you disclose that at all?

No, Knut. I would want to mention that in the later stage. Is that okay?

Yes, of course, of course.

To address the U.S. side, I guess, I would say. When you talk about sales and marketing, we are already pretty heavily invested in the whole S&M area. So we have a pretty good-sized team that's already hitting the streets from an upsell and from a new client perspective and marketing to do a fair amount of that. So there's some minor additional heads in those kinds of things, but nothing major from an investment on -- from a sales and marketing standpoint because we feel we're pretty well positioned for that. When you look at the business, our margins now, I mean, I don't think I'm talking out of turn, Michael stop me if I say anything you don't want me to say. But it's right now very low double digit, right? So 10%, 11% in that environment. But we are investing not in sales and marketing, but more into technology, right? So remember now, we have all these new modules that are coming over from CGM, and we're having to spend money to integrate those modules in a good way, right? So I'll use the clearing house, right, eMEDIX solution. It's fairly expensive for us to take that solution and integrate it so heavily into our core solutions that there's no reason why our customer would want to use a third-party EDI solution. So that's really what we're working on over the -- we've started it already, frankly, and it will continue probably over the next 9, 12 months. But the ultimate goal is to see our margins go from that 10%, 11% range to get up into the high teens to low 20s; I mean that's where we see ourselves being able to go as we get into the 2024, 2025 area, especially because a lot of this, again, as we mentioned earlier, is upselling, right? So we upsell more for the eMEDIX into that and the infrastructure in place.

Thank you, Knut. It's nice having you. And the next question comes from Florian Treisch from ODDO. Great to have you on board for an and please go ahead.

Perfect. I hope you can hear me. I have 3 questions. The first is probably for Dirk. Following the question from Uwe around kind of a potential second wave of investment, I would not call it investment, but probably a headwind to come. We have not really touched on a subscription shift, large shift. So can you update us here on how much of that is really factored in the midterm guidance? And do you really expect the key headwind coming from that during the transition period? And maybe as a last point to that, how much of the current revenues are really already on a G3 platform or cloud-enabled platform? The second point would be a question for Derek on the U.S. In Europe, I would say CompuGroup tends to be a number 1 or top 3 provider, #1, #2, #3. Now we see yes, #4. Is it realistic to become a top 3 now player? And is it really something you would target here? And the last one is I'm not sure if it is more or a better question for the CFO part, but for more general audience. So the 27% EBITDA margin is pretty much in line with where you have been in '18 and '20. So clearly, you will flag in your presentation the key drivers: lower R&D ratio, lower growth investment. So all the other cost items, obviously, not having a positive impact. So is there no operating leverage in your business? Is there no pricing power? So what do I miss to get, whatever, closer to the 30%, which you have targeted in the past, I believe?

Well, Florian, thanks a lot. Let me start actually with your last point, and then I'll go through the rest, and I'm sure Michael in his part will also go more on the margins. I think one thing that's important to remember when you compare margins -- historic margins with the margins that we're talking about today is the mix of the business. So historically, we've been way more AIS Europe-focused, which has much higher margins than parts of the businesses that we added like Derek just talked about the U.S. business, which operates at a significantly lower margin or even the hospital businesses, which operate at lower margins. So partly, if you look at margins, you have to compare apples with apples and adjust for that -- for those acquisitions. I think also it's important to know when we give that guidance, that we will assume that the business mix stays like it is, i.e., if we would do another large hospital [indiscernible] potential second wave and headwinds you mentioned about -- factored in SaaS initiatives. And I think we made it clear that the SaaS shift is considered in this outlook that we have because it's going to happen. [indiscernible] recurring revenues. A lot of that growth is driven by us actually moving towards more SaaS services. I think a big part where we are focusing right now, where currently we live a lot of license services is the TI business. We just had another big release going into TI today. And one of the challenges in our TI business is that there actually, the recurring margins are lower. And Eckart later on will speak about how we will grow in our TI business towards higher recurring margins. And then your last question, how much of revenue is on cloud, on G3. it's not quite easy to say that because we don't -- as I mentioned today, for example, a lot of our -- or some of our components are actually G3 components embedded into 2G services. I talked about the calendar earlier on which is cloud-based, if that's included, but we still charge for the traditional AIS product. So it's a little bit difficult to say. But I would say it's probably under 20% today in a rough estimate, but we don't track that exactly. And I think your last question was about the U.S., I'll hand over to Derek.

Yes, thanks. As much as I'd love to say, we could be the #1 vendor in the U.S. when it comes to a revenue perspective, not likely without a fair amount of M&A activity, I think, Florian, when you look at it. If you look at the top 3 guys, I mean you're talking about people who are -- athenas probably -- it's hard to tell now because they're private, right? But they also added GE, so they've done a fair amount of merger and acquisition too. And I would guess they're in the USD 1.5 billion, USD 1.6 billion range at this point and then ECW and NextGen are probably north of $0.5 billion. So I think it will be difficult to say that we're going to beat out those over the next 2 or 3, 5 years without some significant M&A activity. I will push for that for my friend, Dirk, however, but I don't think that's going to happen.

Thank you, Florian. Yes, thank you very much. And just to say it once again, if there are any further questions before I take the next one, please raise your hand, and I see some more hands coming in. So the next question comes from Niko Mauder from Kepler Cheuvreux. And so please go ahead, Niko.

Yes. Will do, Claudia. Three, if I may, for all speakers in order of appearance and all are dealing with reconciliation of the organic growth guidance that you have provided us with, which you have updated as part of this Capital Markets Day. First question is, I appreciate that your midterm above 5% organic growth guidance includes effects from the Telematics Infrastructure as well as the Hospital Future Act. But you mentioned further regulatory tailwinds outside of Germany, namely in France and the Netherlands. Are those included? And if not, how big could they be? Second one on the U.S. business. Can you give us an indication what growth would look like after you have sort of taken in all the revenue synergies that you're planning with? And third question on the HIS segment would be what part of your impressive growth guidance is coming from the hospitals you check? I think you've given an indication there. And what part is coming from revenue synergies? So what is the underlying portion?

Well, Nikolas, thank you. I'll start with your first question regarding the tailwinds in the government programs. What is in our plans today is what we mentioned, for example, the Hospital Future Act is part of plans. Also the TI as far as it being known, the TI replacements that are famous. And also, we include at least a part of the -- the known part of the programs that we see in the Netherlands, Poland and other countries. I think the challenge about these programs is being passed in record speed, right? And the amount of money that's being poured in there happens over time. So right now, what we've included in our plans is what we know well. But we're actually expecting more programs to come. If you look at the Ségur program in France, it's just been passed, I think, probably the last, I don't know, the last 3, 4 months, and it's still an evolution. There might be more money coming. On the other hand, the problem with those government programs is once they've been passed until they really roll out, usually, there's a certain delay. We see that in Hospital Future Act. Hannes talked about this. So it's a little bit difficult to assess exactly when they're going to hit. I would say we're conservative in the way we look at them. But it's very difficult to predict what exactly is going to happen and what exactly is going to happen at what moment in time. I hope that answers your first part of the question, Nicolas.

It does.

Okay. Then I'll hand over to Derek for the U.S. growth.

Yes. Thanks, Dirk. Yes. I would say from my perspective, I mean, as I mentioned in the presentation, we really see double-digit growth in those synergies, as you call them, which includes the -- it's more than synergies, though, I want to make sure we're clear with that because some of this is even selling our ARIA services into the existing EMVs business that had nothing to do with CGM, right? So there are still pieces of that as we go forward. As we get through a lot of that where we'll see that kind of double-digit growth in EDI components, the ARIA components, our expectation is that on an ongoing basis, after that's kind of most sleep through, we'll still see that single mid- to high-digit growth in the business with no other major M&A.

So I will then take the third question, Nicolas. Thanks for asking that one. So as I indicated, we believe this EUR 40 million to EUR 60 million to come over the next 3, 3.5 years, where I still believe that it will fade in, in '22 being on a relatively high level in '23 and even higher in '24. So it's kind of pulling the weight forward and for the rest. And what you also should keep in mind is that the portion, which comes from the Hospital Future Act is somehow, let's say, overlapping with the anyhow upselling story we are having with G3. So it's not totally on top. For the rest, we -- as I indicated, we have a good potential also in winning new clients. I think that takes in a good portion. I cannot indicate at the moment what is the exact portion out of the growth, 6% to 8%. And also on international level, like in Poland and Spain, there is good growth from these new client initiatives. So it's hard to really split it in parts, but taking the EUR 40 million to EUR 60 million coming from the [indiscernible], I think is a good indicator on what level this Hospital Future Act growth will be out of the total growth.

So I understand basically from everybody. So when you take out those, let's say, boosters, you end up in mid- to high single-digit underlying growth across all these segments.