Cegedim: third quarter revenues grew 3.5%

Regulatory News:

Cegedim, an innovative technology and services company, generated consolidated third quarter 2015 revenues from continuing activities of €120.4 million, up 0.9% like for like and 3.5% on a reported basis compared with the same period in 2014.

The decline in like-for-like revenues at the Healthcare Professionals division was more than offset by relative stability at the Cegelease division and growth at the Health Insurance, HR and e-services division. The Health Insurance, HR and e-services division made a noteworthy return to strong growth despite the migration of clients towards SaaS and cloud offerings.

The Group is laying the groundwork for its future by migrating its software offerings from a perpetual license model to an SaaS / cloud model, but the effort has a short-term cost in terms of revenues and profitability. In the long term, the move will enhance Cegedim’s customer loyalty, bring it closer to its customers, and simplify its operating processes. As a result, the share of recurring revenues will increase, making growth stronger and more predictable.

At the same time, the Group continues to strengthen its businesses through targeted acquisitions. In late July, the Group bought Activus in the UK in order to bolster its presence in software for the health insurance and personal insurance fields in English-speaking countries. In early October, Cegedim bought the US assets of Nightingale to enhance its offerings of EHR products in cloud / SaaS format in the US.

Lastly, the Group is actively working to improve its debt profile.

In light of the rapid development of its BPO (Business Process Outsourcing) and SaaS / cloud business, which requires personnel investments to get clients up and running, and given the investments necessary for migrating all of its software products from perpetual license models to cloud / SaaS format, Cegedim is having to revise downward its expectations for 2015 revenue and EBIT before special items. Cegedim now expects like-for-like revenue growth of 1% and a 5% increase in EBITDA.

• The change in revenues per division for the third quarter is as follows:

In the third quarter of 2015, Cegedim generated consolidated revenues from continuing activities of €120.4 million, up 3.5% on a reported basis and 0.9% like for like compared with the same period in 2014. Acquisitions and currencies have a positive impact of respectively 1.0% and 1.5%.

• The change in revenues per division for the first nine months is as follows:

Over the first nine months of 2015, continuing activities had revenues of €366.6 million, up 3.3% on a reported basis and 1.0% like-for-like compared with the same period in 2014. Acquisitions and currencies have a positive impact of respectively 0.3% and 1.9%. Group revenues, including the Q1 revenues of the activities sold on April 1, 2015, came to €468.2 million, down 27.1% on a reported basis and up 1.6% like for like compared with the year-earlier period.

Analysis of business trends by division

• Health Insurance, HR and e-services

Over the first nine months of 2015, division revenues came to €167.5 million, up 6.0% on a reported basis. The acquisition of Activus, in July 2015 in the UK, made positive contributions of 0.7%. Currencies had virtually no impact. Like-for-like revenues grew 5.2% over the period.

The Health Insurance, HR and e-services division represented 45.7% of consolidated revenues from continuing activities, compared with 44.5% during the same period a year earlier.

In the third quarter of 2015, division revenues came to €55.9 million, up 8.7% on a reported basis. The acquisition of Activus, in July 2015 in the UK, made positive contributions of 2.2%. Currencies had virtually no impact. Like-for-like revenues grew 6.4% over the period.

Robust Q3 revenue growth was chiefly the result of:

• Growth at Cegedim Health Insurance despite the transition of part of its product range to the cloud. Growth was driven mainly by double-digit growth in processing third-party payments and in BPO activities. The acquisition of health and personal insurance software publisher Activus gave Cegedim Health Insurance access to new markets (UK, US, Middle East, APAC, etc.) and contributed 2.2% to third quarter growth.
• Double-digit growth in the management of the SaaS HR management platform of Cegedim SRH, which got a boost from numerous commercial successes and from the successful development of its BPO activities.
• Double-digit growth in the management to the GIS SaaS platform from Cegedim e-business, digital flow management, including payment platforms,
• Growth in digital communication activities.
• Healthcare Professionals

Over the first nine months of 2015, division revenues came to €113.0 million, up 1.4% on a reported basis. Currency effects made positive contributions of 6.0 %. Acquisitions had virtually no impact. Like-for-like revenues fell 4.7% over the period.

The Healthcare Professionals division represented 30.8% of consolidated revenues from continuing activities, compared with 31.4% during the same period a year earlier.

In the third quarter of 2015, division revenues amounted to €36.5 million, a 1.3% decrease on a reported basis. There were no acquisitions or divestments, and currencies made a positive contribution of 4.8%. Like-for-like revenues fell 6.1% over the period.

This performance was chiefly the result of:

• Weaker trends in the computerization of UK doctors following the market’s migration to cloud-based offerings. However, the Group’s investments in cloud offerings should allow this segment to gradually return to growth.
• The revenue impact of rolling out Revenue Cycle Management (RCM) products in the US. This product range allows doctors to manage reimbursements from multiple US insurers. This is a BPO-like offering that required, before requested work could begin with clients, the size of the RCM team to be doubled. This significantly increased costs at our Pulse Systems subsidiary. As business with clients gradually ramps up over Q4 2015 and H1 2016, Pulse Systems will start to see renewed growth and profitability. The regulator definitively adopted ICD-10 standards in October, so we can expect a gradual pick-up in EHR sales momentum following a period in which doctors have been hesitant to invest. Revenues related to RCM offerings are recognized over the life of the contract, unlike EHR products. Lastly, the September 2015 acquisition of Nightingale’s US assets gives the Group product ranges that use both client-server and cloud models.
• Growth in the computerization of doctors in France, Spain, Belgium and Romania, and the computerization of nurses and physical therapists in France.
• Growth in the medication database (Base Claude Bernard), sales of which are also rising in the UK.
• Growth in SoCall appointment scheduling services in France.
• Cegelease

Over the first nine months of 2015, division revenues came to €83.3 million, up 0.3% on a reported basis and like for like. There were no acquisitions or divestments, and currencies had no impact.

The Cegelease division represented 22.7% of consolidated revenues from continuing activities, compared with 23.4% during the same period a year earlier.

In the third quarter of 2015, division revenues came to €27.2 million, down 0.3% on a reported basis and like for like. There were no acquisitions or divestments, and currencies had no impact.

Sales were virtually unchanged in the third quarter, mainly because of a different mix of self-financed and resold contracts in 2015 than in 2014. The favorable trend in financing conditions led the Group to reduce the proportion of self-financed contracts.

• Activities not allocated

Over the first nine months of 2015, division revenues came to €2.8 million, up 18.5% on a reported basis and like for like. There were no acquisitions or divestments, and currencies had no impact.

The Activities not allocated division represented 0.8% of consolidated revenues from continuing activities, compared with 0.7% during the same period a year earlier.

In the third quarter of 2015, division revenues came to €0.8 million, up 17.5% on a reported basis and like for like. There were no acquisitions or divestments, and currencies had no impact.

The third-quarter increase was chiefly attributable to services, including IT services, invoiced to IMS Health.

3^rd quarter highlights

• Redemption of the 7.0% 2015 bond

Cegedim redeemed the full amount of the €62.6 million remaining in circulation of the 7.0% 2015 bond upon maturity on July 27, 2015 (ISIN : FR0010925172).

• Redemption of Cegedim Bonds

Between July 1, 2015, and the release date of this document, Cegedim redeemed on the market its 6.75% bond, maturing April 1, 2020, ISIN code XS0906984272, for a total principal amount of €19,470,000. The company then cancelled these bonds. As a result, a total principal amount of €343,346,000 remains in circulation.

• Acquisition in the UK of Activus

On July 20^th 2015, Cegedim announces the acquisition of 100% of Activus, one of the UK’s leading suppliers of health and protection insurance software. This deal gives Cegedim Health Insurance access to new markets (UK, US, Middle East, APAC, Africa,…) and strengthens its software offering for international clients. Activus generated revenue of around €7 million in 2014.

This move is part of the Group’s strategy of making bolt-on acquisitions to expand its international positions. The deal was financed with internal financing. It will contribute to Cegedim consolidated results starting from the acquisition date.

• Favorable exchange rate movements

At end-September, movements in exchange rates were positive, contributing €1.8 million to consolidated third quarter revenues from continuing activities.

• Competition Authority

On September 24, 2015, the Paris Court of Appeal rejected Cegedim’s request and upheld the Competition Authority decision of July 8, 2014. Because the fine was paid in full in September 2014, this decision has no impact on Cegedim’s accounts.

Cegedim had appeal of this decision to the Court of Cassation.

Apart from the items cited above, to the best of the company’s knowledge, there were no events or changes during the period that would materially alter the Group’s financial situation.

Significant post-closing transactions and events

• Acquisition of Nightingale’s US assets

In early October 2015, Cegedim announced that its US subsidiary, Pulse Systems, Inc., acquired the US healthcare management activities of Nightingale Informatix Corporation, including Medrium, Ridgemark, Secure Connect and Northern Health Products. Pulse will now be able to offer its clients healthcare and EHR management products in client-server and cloud format.

Apart from the items cited above, to the best of the company’s knowledge, there were no post-closing events or changes that would materially alter the Group’s financial situation.

Outlook

In light of the rapid development of its BPO and SaaS / cloud business, which requires personnel investments to get clients up and running, and given the investments necessary for migrating all of its software products from perpetual license models to cloud / SaaS format, Cegedim is having to revise downward its expectations for 2015 revenue and EBIT before special items. Cegedim now expects like-for-like revenue growth of 1% and a 5% increase in EBITDA.

The Group does not anticipate any significant acquisitions for 2015 and does not disclose profit projections or estimates.

Financial calendar

November 26, 2015 (after the stock market closes)

• Q3 2015 Results announcement

December 17, 2015 at 2pm CET

• 6^th Investor Summit - Cegedim Auditorium
  17 Rue de l’Ancienne Mairie - Boulogne-Billancourt

Additional information

Complete financial information and a presentation on Cegedim’s third quarter revenue are available on our website: www.cegedim.com/finance.

This information is also available on Cegedim IR, the Group’s financial communications app for smartphones and iOS and Android tablets. To download the app, visit: http://www.cegedim.fr/finance/profil/Pages/CegedimIR.aspx.

Appendices

• Revenues by division and by quarter^#:

# Figures rounded to the nearest unit

Year 2015

Year 2014

• By division and geographic zone, the distribution of revenues for the 1^st nine months of 2015 is as follows:

• By division and currency, the distribution of revenues for 1^st nine months of 2015 is as follows:

• Glossary

Public company with share capital of 13,336,506.43 euros
Trade and Commercial Register: Nanterre B 350 422 622
www.cegedim.com

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