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Edited Transcript of COP.DE earnings conference call or presentation 7-May-20 8:00am GMT

Q1 2020 Compugroup Medical SE Earnings Call

KOBLENZ Jun 14, 2020 (Thomson StreetEvents) -- Edited Transcript of Compugroup Medical SE earnings conference call or presentation Thursday, May 7, 2020 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Claudia Thomé

CompuGroup Medical Societas Europaea - Head of IR

* Michael Rauch

CompuGroup Medical Societas Europaea - CFO & Member of Management Board

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Conference Call Participants

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* Andreas Wolf

Warburg Research GmbH - Research Analyst

* Charlotte Friedrichs

Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst

* Florian Treisch

Commerzbank AG, Research Division - Research Analyst

* Knut Woller

Baader-Helvea Equity Research - Analyst

* Uwe Schupp

Deutsche Bank AG, Research Division - Small and Mid-Cap Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen. Welcome to the conference call of CompuGroup Medical. At our customer's request, this call will be recorded. (Operator Instructions) May I now hand over the call to the Head of Investor Relations, Claudia Thomé. Please go ahead.

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Claudia Thomé, CompuGroup Medical Societas Europaea - Head of IR [2]

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Hello, everyone. Good morning from Koblenz, and welcome to our call for the first quarter results of 2020 of CompuGroup Medical. I hope you're all well. We published the results this morning. You can access the presentation and the quarterly statement on our website. As always, Michael, our CFO, will start with the presentation, and we will then move on to the question-and-answer session. And with that, I hand over to Michael.

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Michael Rauch, CompuGroup Medical Societas Europaea - CFO & Member of Management Board [3]

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Thank you, Claudia. Good morning, and a warm welcome also from my side. I hope that you're all fine and in good condition. The world has changed since our last results call on February 5.

CompuGroup Medical has closed the first quarter better than planned, outperforming in this worldwide COVID-19 pandemic. In the last month, we saw the needs of our customers, doctors, hospitals, pharmacies, insurance and pharmaceutical companies changing as quickly as never before and their importance to society being reemphasized dramatically. In this rapidly changing environment, we've reacted quickly, determined to serve our customers in the best possible way. We have also continued and even increased our investments into software development with corresponding headcount buildup.

In today's presentation, I will give you an overview on the operational highlights followed by the financials, including segment trends, and I will be closing with the guidance, which we are confirming.

Please consider the disclaimer on Chart 2 as read and taken through the notes as usual.

Now let me start by expressing our deepest gratitude to all personnel working day and night in the health care sector worldwide under tremendously troubling circumstances to treat and help patients and to establish containment measures against COVID-19. Our #1 priority during the past months has also been the health and safety of our employees and also our customers. We decided early on to move as many employees as possible to home office. Our IT did an outstanding job. The result was a seamless transition of more than 5,000 out of currently 5,800 employees within 48 hours to home office, everyone fully operational. We made sure that the necessary support for our customers is available. We've established a close loop and regular exchange with the authorities in this exceptional situation.

This worldwide pandemic is highlighting the fundamental importance of what we are doing at CompuGroup in a dramatic way, underlying the long voice purpose, as reiterated by our founder and CEO, Frank Gotthardt, of our company that nobody should suffer or die because at some point, medical information was missing. We're extremely proud of the commitment and the dedication of our employees working hard, thinking innovative and embracing change for the benefit of our customers and thereby, society overall. And we bow our heads to thank all the doctors, nurses, health care practitioners and researchers worldwide for their excellent community service. So many thanks to everybody.

Let's now turn to some examples of how we have been taking responsibility and are supporting the health care systems in the crisis. The TELEMED Mobile Praxis Center is enabling patient teams to take care of accounting and reimbursement from home, just plugging a USB stick into their laptop or computer and thereby running the admin task functions from home. We are offering this solution for free at the moment to support our customers during the crisis.

The telemonitoring application is a project that was initiated and offered to customers within just 2 weeks. Applying the telemonitoring solution, which we're otherwise offering to nursery homes, now to cater for the specific needs in the COVID-19 situation. We have combined it with a pulse oximeter, measuring the heartbeat and oxygen saturation in order to avoid hospitalization of patients who are infected with the virus but not in a critical state. This application is implemented by a number of hospitals, allowing them to better steer the hospitalization of patients during the severe phase of the pandemic.

Moving on to CLICKDOC video consultation. CompuGroup Medical had already introduced the video consultation application to the market in the past, which was called elVi. With the latest system upgrading and rebranding into CLICKDOC video consultation, we've stepped up our efforts right in time. Since mid-March, we are providing our CLICKDOC video consultation free of charge, and we have encountered huge demand. The number of registrations has increased massively. And within less than 2 months, we've recorded more than 80,000 registrations. Our home market, Germany, is leading with 40% of registration, followed by France and the Netherlands. The main customer group is doctors, but we've also seen pharmacies, hospitals, nursery homes, psychotherapists and midwives making use of technology.

Our USP versus a pure video conferencing tool, for example, in Germany that we registered according to regulatory standards for reimbursement and for CGM customers, there's a seamless process and link with their practice management systems. While the offering is for free at the moment and the support during the early phase of the crisis for the health care system is of highest importance to us, we are considering potential path for the monetization for the different customer groups at a later stage. However, it's too early at this point to speculate about either the starting point or the monetization level. We will keep you posted, of course, and we haven't included it in the 2020 guidance.

Let's now talk about the financial performance in the first quarter of 2020. Allow me to remind you that from this quarter onwards, we will be reporting adjusted earnings figures as the main KPIs, responding to the requests from many of you to have a better comparability of the underlying performance, as laid out in detail during the last call on 5th of February. For your convenience, we've included an overview on the definition of the adjustments and the specific adjustments made in the current quarter in the appendix on Charts 28 and 29 as well as a P&L with reported earnings figures on Chart 30.

CompuGroup Medical has posted a strong first quarter, even beating our expectations. On February 5, so before the actual impact of the COVID-19 pandemic became apparent, we had guided for a softer EBITDA margin in Q1. The reasons being, first, the strong prior year in terms of the rollout of the Telematics Infrastructure and the prior year onetime effect of IFRS 3; and second, the fact that we are continuing to invest into R&D. Adjusted for the one-offs, we would have even outperformed prior year adjusted EBITDA figures. Not only did EBITDA come out better than expected, but so did free cash flow, thus, contributing nicely to further deleveraging.

Our revenue growth of plus 5% in Q1 does include the EPSILOG acquisition and small acquisitions like H&S Qualità. So excluding acquisitions, we have been growing plus 2% and adjusted for TI, even a strong plus 8%. Whilst the overall growth year-on-year is plus 5%, our recurring revenues grew even plus 10% and now account for 67% of Q1 2020 revenues.

So walking down the P&L, we see revenue growth translating into a decline of adjusted EBITDA, mainly driven by the increase in personnel expense. Now this increase in personnel expense reflects our growth path and is attributable to new employees from acquisitions and investments into software development. Let's please also not forget that in Q1 2019, we had recorded a EUR 4 million EBITDA onetimer due to IFRS 3 in other operating income, and we have benefited from the onetime EBITDA for the rollout of Telematics Infrastructure in the AIS segment. Adjusted EBITDA, hence, turned out better than expected and would have been, as I said before, above prior year on a like-for-like basis.

Also, our free cash flow last year had been positively impacted by one-offs from the TI rollout. Thus, in comparison, we saw this year a strong cash flow in the first quarter of 2020, which we mainly use to bring down net debt significantly, reducing also our leverage from 2.4x at year-end 2019 to 2.2x adjusted EBITDA at the end of March. Please note that from now on, we will be reporting net debt, including the impact from leasing liabilities according to IFRS 16, which we consider to be the relevant net debt as we also include the IFRS 16 EBITDA benefits.

Last, but not least, we finalized in February our undertaking to significantly increase our debt financing funds. We've closed a new debt facility in the size of EUR 1 billion, replacing the former EUR 400 million revolving credit facility, which was established in June 2018. The new loan facility runs over 5 years with the 1 plus 1 extension option and is split into a EUR 400 million term loan and a EUR 600 million revolving credit facility. This facility can be tapped for acquisitions and general corporate purposes. And hence, the purchase price of the Cerner assets can be paid from it upon closing, which is still expected to happen in Q3 this year. As a reminder, the segment reporting we are turning on to now is according to the new segment structure we published in Q4 as of last year. So for your convenience, we have published the segment financials for 2019 beforehand on our website, and you'll find it for 2019 in the appendix on Chart 27.

Let's carry on with the segment financial overview. All 4 operating segments contributed to revenue growth, even the AIS segment with its strong prior year comparisons due to TI one-off revenues. And all segments show now a double-digit EBITDA margin.

I propose we deep dive directly into the first segment, the Ambulatory Information Systems segment. Our largest segment, AIS, has shown excellent organic growth, again, with now plus 10%, excluding TI. The reported revenue increase stood at 3%, and revenues of EUR 109 million included the first-time consolidation of EPSILOG. Excluding acquisition effects, the organic revenue development was marginally down year-on-year. The 10% growth ex TI was mainly driven by a strong performance in the German ambulatory business and was also supported by the phasing out of Windows 7 in a number of other countries. Recurring revenues have grown by 9% year-on-year and now represent 74% of revenues in the AIS segment. When looking at the adjusted EBITDA, please keep in mind that the prior year quarter in AIS was impacted by positive one-offs from the TI rollout and IFRS 3.

Regarding the further rollout of the connector software upgrade to AIS customers, CGM was the first to have received the gematik approval. And as you know, the start of the rollout is depending on the field tests that are still ongoing. We are convinced that this is a pure timing question as to when in 2020 we will be given green light to start the upgrade process.

Having completed the field tests successfully is also the precondition for the rollout of the TI connector to pharmacies. So looking at the segment financials of our Pharmacy Information Systems segment, we can see that the business has been continuing to perform well in the first quarter despite the COVID-19 situation and despite our specific exposure to Italy in this segment. This was mainly driven by a strong order intake in Q4 last year, and also Windows 7 phasing out supported revenue growth as well. And let me make also a remark here to our Italian colleagues. Excellent job, guys.

Revenues increased by 6% to almost EUR 30 million, most of that growth being organic with a 5% increase. Recurring revenues also increased by 5% year-on-year and represents 65% of total segment revenues. Adjusted EBITDA development was in line with revenue development, and the margin was stable year-on-year. Revenues in our hospital business grew by 8% overall and 6% organically. This was mainly driven by the German hospital business and by the rollout of the NÖKIS project, the large order which we won this time of last year in Austria. Recurring revenues increased by 12% and represents 65% of segment revenues now.

In terms of adjusted EBITDA, the margin is down to 13% due to the extra project invest we incurred in addition to already higher planned R&D spend for this year.

In the Consumer & Health Management Information Systems segment, the revenues increased by 8% to almost EUR 11 million. The revenue growth is mainly driven by software solutions in the health insurance sector. Regarding the adjusted EBITDA, the prior year was impacted by a positive one-off effect from IFRS 3, similarly to the IAS segment -- sorry, AIS segment, explaining the margin decrease in the first quarter 2020.

Having reflected the results of our first quarter performance brings me now directly to the outlook for the full year. Our guidance for the full year 2020 remains unchanged from when we first published it on February 5. So we still expect revenues in the range of EUR 765 million to EUR 815 million and adjusted EBITDA in the range of EUR 195 million to EUR 215 million. The guidance reflects our current best estimate, especially on any potential impact the COVID-19 pandemic might have as well as the uncertainty around the TI rollout.

Whilst we confirm our full year 2020 guidance for Feb 5, as stated before -- from Feb 5, as stated before, I would like to keep you informed of some moving parts for the sake of transparency. To start with the potential downside risks. It is impossible to assess right now what the impact would be on our customers if the COVID-19 crisis were to intensify further. So far, as you can see from our Q1 numbers, the impact has been limited. And among other things, thanks to the high share of recurring revenues, we are quite protected even if COVID-19 situation were to worsen. Still on the downside, we also cannot exclude any further delays in the TI rollout. The whole TI road map has been characterized by delays rather regularly, for those of you that follow us for longer term, and the installation at the pharmacies requires a physical step as opposed to the software upgrade for doctors. And mind you, both depend still on the successful completion of the field test. We have, however, no reason to believe that we will not be granted permission for both, for the software upgrade for AIS and the TI rollout to the pharmacies, but there may be timing implications.

So particularly with regard to the current second quarter of 2020, we had originally assumed to be by now rolling out TI to pharmacies already and also to start upgrading the AIS customers. If this moves now into Q3, then we will see a softer Q2 than originally foreseen. But for the full year 2020, we are still convinced to be able to complete the TI connector upgrades and also to get our fair share of pharmacies connected into the TI environment.

And then there are upside opportunities, too. So we said that only -- that we are only going to incorporate the revenue and earnings contributions from the Cerner assets into our guidance once the deal has closed. Q3 2020 is still the most likely time frame for this to happen. And also, we haven't included any monetization contribution from the video consultation offering during 2020. While it is certainly too early to specify any impact this might have going forward, there is a chance for potential upside towards the end of the year. But to make it clear, we haven't included any of this into the guidance yet.

In summarizing and already looking beyond 2020, it is becoming clear that we will benefit from further digitization in health care. We are at the core of digitization and connectivity in the health care sector, ideally positioned with our strong market positions and our reliable business model. And we've heard from many investors over the past weeks that they appreciate the high level of recurring revenues and our crisis-resilient business model. And the annual 3-digit million euro spend in R&D cost is well invested to also quickly adopt in crisis situations, as we have been showing with the highly crisis-relevant digital tools like mobile practice management, telemonitoring and of course, the video consultations. The first quarter has also shown our strong cash flow profile. And going forward, we will keep building on our long-standing track record of value-enhancing M&A activities, with the Cerner closing coming up soon.

As next upcoming touch points in terms of capital markets communication, we see each other virtually, this time really virtually at the AGM next week, and we will report our Q2 financials on August 6. And we have our Capital Markets Day scheduled for September 16.

With that, I want to thank you for your attention, and I'm now looking forward to your questions and hand back to the operator. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll take our first question.

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Andreas Wolf, Warburg Research GmbH - Research Analyst [2]

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It's Andreas Wolf, Warburg Research. Yes. Congratulations on the solid start, and thank you for supporting the medical staff with your extra efforts. Three questions from my side. The first is on CLICKDOC. Could you maybe provide us some insight into the reimbursement of the doctors with regard to video consultation? Has it changed? Was it increased? Because I remember that in the past, reimbursement was pretty low. That was why doctors would not implement the solution without the COVID-19 impact. And then also related to CLICKDOC, to what extent does the software solution integrate with soft -- with third-party software? That would be helpful. Third question is on hospitals. You had strong momentum in Q1. How do you see the pipeline for bigger deals right now as I would assume that bigger deals would require a physical presence?

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Michael Rauch, CompuGroup Medical Societas Europaea - CFO & Member of Management Board [3]

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Many thanks, Andreas. And also, I appreciate your opening remarks. So coming back on your CLICKDOC question, you're fully right. So in the German market, the original reimbursement policy for video consultations was that only every fifth video consultation was reimbursed, so 20% only. And by now, it's in full. And we have no reason to believe this is going to change going forward.

Then you had the question with regards to connectivity. Yes, our CLICKDOC video consultation offering is fully connectable to also other practice management software providers. So we have no problem of connecting to third-party software, and that is also something which we are already installing now and which people are using. So there's benefit here.

And then your third question with regards to the hospital situation. Yes, obviously, during the height of the crisis basically towards the end of March and in the middle of April, we didn't see so many tenders being put out. But there's activity still ongoing, and we will see throughout the year on how it's going to impact then the year 2021. And it has not so much of a financial impact for 2020.

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Operator [4]

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We have our next question from Uwe Schupp from Deutsche Bank.

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Claudia Thomé, CompuGroup Medical Societas Europaea - Head of IR [5]

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Uwe, that's you.

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Uwe Schupp, Deutsche Bank AG, Research Division - Small and Mid-Cap Analyst [6]

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It's Uwe Schupp from Deutsche Bank. 2 or 3 questions from me. Firstly, a brief follow-up to Andreas' question on the video consultation. Can you maybe give us an indication of how many of the larger than 80,000 customers you saw are actually your customers on the software side already? Obviously, the background would be that pricing -- maybe pricing discussions with those customers may be easier than with others. At least that would be my working assumption. Secondly, the hospital margin weakness, you gave some explanation there. The question I would have, whether the Austrian project, which obviously was a dominant factor, was potentially taken in as -- at sub-usual margins, slightly unfavorable prices because it was a competitive issue. Or what was -- or was pricing actually okay in that project? And then thirdly, with regard to the hirings of the software developers that we saw in Q1, are we done with most of the investments there? Or should we assume a similar increase in coming quarters as well?

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Michael Rauch, CompuGroup Medical Societas Europaea - CFO & Member of Management Board [7]

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Yes. Thank you, Uwe. We were basically discussing the CLICKDOC situation before so it fits perfectly that you have a follow-up question and clearly stated, the majority of those 80,000 are our customers. So that is the current case. Obviously, as I said, we are also offering it to non-CGM customers yet, but the majority is our customers.

Now with regard to your second question on the hospital side, I have no reason to shy away from a direct answer. The answer is we incurred higher costs here than originally planned for the NÖKIS project because we had some extra development efforts here to take into account. So that's where the EBITDA impact comes from because we stated we have 2 EBITDA impacts. One is the originally higher planned R&D spend, and the other one is actually the project invest that we incurred some higher costs here in the first quarter. That is absolutely true.

With regard to your third question, just if somebody can -- the hiring, sorry, okay. Sorry, I forgot almost here. On the hiring side, the hiring will continue. We really are a software development company. And as I said, with a 3-digit million amount in R&D, this is at the heart of our competence. And you will also see that continuing in the next quarters to come, but also in the next years to come. The magnitude, however, of extra R&D spend that we, for instance, have with our G3 upgrading in the hospital systems side, as we said on the Capital Markets Day, will be peaking towards 2021. But for the next couple of quarters, we will still continue to invest into R&D.

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Uwe Schupp, Deutsche Bank AG, Research Division - Small and Mid-Cap Analyst [8]

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Just a brief follow-up. It's very clear. Just a brief follow-up on the second one on the Austrian project. Is pretty much all the extra work being done by now? Or do you expect some follow-up costs that should also burden the margin in Q2 and Q3 as this project is being installed?

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Michael Rauch, CompuGroup Medical Societas Europaea - CFO & Member of Management Board [9]

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Yes. So this, for us, is a key project, as we have been communicating since the start of the project. Just to remind everybody on this NÖKIS project here for the Austrian region, we said we're going to recognize about EUR 100 million in revenue over a 10-year period. And with that on such a long-term project, you cannot foresee per individual quarter the costs you would incur. So this could be moving over time. So overall, the financial of the projects are fully firm, but we cannot exclude that in second or third quarter. We might incur also a bit higher costs than originally budgeted. But it will not be to an effect that the guidance for CompuGroup would be in any way impacted.

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Operator [10]

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We have our next question from Charlotte Friedrichs.

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Charlotte Friedrichs, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [11]

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This is Charlotte Friedrichs from Berenberg. Could you give us maybe a feel for current trading, what you've been seeing in April so far? Have you been relatively insulated from COVID still here? Or is there a negative impact that you're seeing?

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Michael Rauch, CompuGroup Medical Societas Europaea - CFO & Member of Management Board [12]

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Yes. Charlotte, nice try, right? I'm always careful on forward-looking statements, but you're right. April is about to come into the books. So if I take a comment here maybe towards the end of March. Yes, as I said, on the hospital side, we have seen some postponement of some projects. And we have also seen that on the dentist side, for instance, the turnover for some of our customers went down. But so far, we have not been affected. And I also congratulated during the call our colleagues in Italy, who did an outstanding job on the pharmacy side. So are we fully unaffected? No. But is there something which we are seeing which would basically infringe on our guidance comments which we gave today? No. That's why we said we have no reason yet to change anything on the guidance.

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Charlotte Friedrichs, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [13]

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Okay. Understood. And could you give us an update as to where the field tests are roughly? I know the visibility on this one can be quite low, but do you have a sort of best guess as to when those may be completed?

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Michael Rauch, CompuGroup Medical Societas Europaea - CFO & Member of Management Board [14]

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Yes. Well, originally, as I said, we had hoped for the field tests to start already when going -- or coming out of year 2019, in the first quarter of 2020. And now that was moved to start during the April period. So the question when it's going to be ended and then approved, we still hope that we get the approval during Q2. That's our current state.

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Charlotte Friedrichs, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [15]

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Okay. Understood. And then lastly, to better understand the scenarios that you gave also for the guidance, do you have a sort of idea with the 80,000 registrations for CLICKDOC? How many of those doctors may be staying on when you put on basically the pay wall? I understand a lot of doctors who would normally not use video consultations are doing it now. But in terms of the specializations of those doctors, is there a sort of way to guess roughly for how many of those it would make sense to keep on using CLICKDOC?

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Michael Rauch, CompuGroup Medical Societas Europaea - CFO & Member of Management Board [16]

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So we monitor the situation very closely, and we will obviously keep you all updated when we have more visibility on the situation. What clearly would help if the reimbursement in full for video consultation stays and if also in other markets there is a good reimbursement policy for the doctors to use video consultation, that clearly would help. So let's see on how the situation evolves going forward.

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Operator [17]

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We have our next question from Florian Treisch from Commerzbank.

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Florian Treisch, Commerzbank AG, Research Division - Research Analyst [18]

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This is Florian speaking from Commerzbank. I have some questions. First, I would also start with a follow-up on the video conference product here. The one question from my side, I agree you can probably hardly forecast what really will be a penetration rate and so on. But maybe you can give us an update on your pricing model if you have obviously offered the same product or to be -- for COVID-19. So what are you charging a doctor a month or a year for using your product here? The second part here is to better understand what really is the USP. i.e., what would be the difference to if I'm, as a doctor, use your practice management system, coupled with Microsoft Teams, with Zoom, whatever kind of video teleconferencing tool, compared to using kind of CompuGroup stand-alone integrated product? And then I have a question on the upcoming change of being an AG compared to the KGaA. What is the initial feedback from investors? Are you confident to get the required approval rates here? And the last one is on AIS. So you highlighted the strong 10% organic growth achieved in Q1 excluding TI. Just as I kind of -- to get that confirmed. TI means only TI hardware, i.e., it's fair to say that 10% organic basically is, to a very good extent, driven by TI service revenues, which are now kicking in and less -- to a less extent, really by underlying organic growth, i.e., the pricing, maintenance increases are probably lower single-digit in Q1.

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Michael Rauch, CompuGroup Medical Societas Europaea - CFO & Member of Management Board [19]

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Okay. I'll start in order of your questions. So on the pricing, like I said, it's too early to speculate here on the monetization. Two frontiers. One is we haven't decided yet on the monthly charge, which we would put forward towards the doctors. The second one is we don't know yet on how many doctors are going to keep adopting it going forward or who are going to opt out and don't want to use it anymore. But typically, ancillary tools like this, and you made reference to elVi, for instance, earlier, could be in the magnitude of, I don't know, EUR 25 to EUR 50 on a monthly basis. So we will see on how this is going to be charged. We heard also some notion of others, and you mentioned some players, and I come to your second question, let's say, EUR 99. But basically, we would rather go back to reference to our own historic charging models.

Now the question was, what is so specific about our solution? No, this is a fully integrated solution, which is part of our full suite of practice software management systems for the doctors to be used. So everything is included, which means the full reimbursement is possible and also the full transfer of data is possible. And we also customize the interfaces to other practice management software programs. So with that, basically, we have a lot of benefits here versus others. So in Germany, in addition, what is very important is you need to have your tool officially certified and registered. And that is also something which not many companies achieve. I mean you mentioned a couple of general players that basically use just video systems. That would not be enough.

Now on the question of the KGaA. So that is right. We have the change of our legal structure up for vote in the AGM next week. And that is, the KGaA, just to translate, a partnership limited by shares, which we want to move into for the company. And that is up for vote. And I would be the last one to basically preempt already the opinion of our shareholders here. They are free to vote against or in favor. And obviously, we want them to vote in favor.

Then on the last point regarding AIS. I say it loud and clear, the 10% ex organic, excluding TI, is also not taking into account the increase in recurring revenue for TI. So it is not only the hardware component, so the rollout, but is also not taking this one into account. So this is really pure AIS software success and AIS selling success on our base. AIS system has nothing to do with TI for the 10%. Thank you, Florian.

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Florian Treisch, Commerzbank AG, Research Division - Research Analyst [20]

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Okay. And then maybe just one -- a little follow-up to your comments that if you want to get full reimbursement, you basically need these kind of integrated systems. Can you just remind us what is really needed to get full reimbursement in a video call situation assuming, in the end, if you have the practice management system and every doctor has the...

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Michael Rauch, CompuGroup Medical Societas Europaea - CFO & Member of Management Board [21]

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No. No. No. For the reimbursement -- yes, sorry, I directly jumped in. The registration is necessary for the reimbursement, right?

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Florian Treisch, Commerzbank AG, Research Division - Research Analyst [22]

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Okay. Perfect.

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Operator [23]

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The next question is from Knut Woller from Baader.

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Knut Woller, Baader-Helvea Equity Research - Analyst [24]

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I hope the line stays now open. Yes. The first one, a technical question with regards to the M&A costs that have been incurred in the first quarter. Have they been tied to the Cerner acquisition? Then on TI, can you give us some ideas about your thoughts first on -- we still haven't seen the adoption of TI on the AIS side as originally planned. Do you think that here, the experience we have made with COVID-19 might change the view of the German lawmakers, which could basically imply a more pronounced long tail of the TI rollout also in the AIS segment? And can you share with us what the AIS installations were in the first quarter? And then lastly, maybe on the U.S. business, can you give some insights here how the U.S. business is currently performing?

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Michael Rauch, CompuGroup Medical Societas Europaea - CFO & Member of Management Board [25]

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Thank you, Knut. So I want to start with the M&A one. Yes. So the major part here is related, obviously, to the ongoing M&A activity for the Cerner costs. A clear statement, yes. Then on the TI side, a clear statement, no. In the sense of -- there is not so much movement anymore of doctors being connected to the Telematics Infrastructure from the market. So I want to be very specific. We closed the year with a bit more than 54,000 installations. And now we are around 55,000 installations. So you see the movement in the fifth quarter -- sorry, or in the first quarter of 2020 is less than 1,000. So there's not so much on the long tail, as you call it, still to be connected. And that's why I think when we had our February 5 call, we said we take the current base basically as a multiplier for any features coming in addition moving forward.

Then the last question. Knut, if you can just remind me of the last question.

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Knut Woller, Baader-Helvea Equity Research - Analyst [26]

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Yes, it was regarding the U.S. business.

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Michael Rauch, CompuGroup Medical Societas Europaea - CFO & Member of Management Board [27]

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Yes. Sorry, yes. I apologize. The U.S. business, yes. The U.S. business in the first quarter was a bit affected by COVID-19. We saw that particularly because we have the schooling software, which we talked about last time. So here, we saw an impact in the month of March. That is also something, by the way, back to Charlotte's question, which we see in the month of April also continuing. So the U.S. business was not as strong anymore as it was in the previous quarters.

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Knut Woller, Baader-Helvea Equity Research - Analyst [28]

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And just one clarification. I didn't expect a strong tailwind from AIS in the first quarter. The question is rather related to the fact, I mean, there are still a good part of the doctors in Germany not connected to the TI despite the sanctions that have been built into the law. The question is, from my perspective, whether COVID-19 might change here the view with -- of basically politicians, that they can see that here's the clear necessity to connect everybody to the TI to also enable people in these times to take the full service. And hence, the question is whether there might be then at a later stage a more pronounced long tail from the TI rollout also in the AIS segment.

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Michael Rauch, CompuGroup Medical Societas Europaea - CFO & Member of Management Board [29]

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Yes. So I mean we're on speculative grounds here, and I clearly see where you're coming from. And obviously, I would have hoped for the same kind of reaction that everybody is hoping for, that we see all of health care participants connected to the TI. But we have no visibility on it, clearly, and it's, if I may say so, also something which obviously is of concern also to some politicians, that not everybody is connected to the TI. But that's nothing we basically can enforce on our end here. And let me just say it's not part of our guidance so we're not speculating on it.

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Claudia Thomé, CompuGroup Medical Societas Europaea - Head of IR [30]

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All right. And since there are no further questions on the line, we thank everyone for dialing in today. And as always, Investor Relations is available for further questions so don't hesitate to contact me by e-mail or on the phone. And we wish you a great day, and stay healthy.