Ladies and gentlemen, thank you for standing by. I'm Sasha, your call operator. Welcome and thank you for joining today, CompuGroup Medical Preliminary Figures Q4 Full Year 2023 call. Throughout today's recorded presentation, all participants will be in listen-only mode. The presentation will be followed by a question and answer session. Questions are possible for those participants dialing in via the telephone. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Press the star key followed by zero for operator assistance. I would now like to turn the conference over to Senior Vice President, Corporate Communication and Investor Relations, Claudia Thomé. Please go ahead.
Good morning, everyone, and welcome to the CompuGroup Medical Investor and Analyst Conference Call for the full year 2023 preliminary results. It's great to have you with us, whether you have dialed in via the phone or are following the webcast. You'll find all the relevant information, such as the presentation, the quarterly statement, and the press release, which we published early this morning on our website. Our CEO, Michael Rauch, will be presenting today, and we also have Daniela Hommel with us, our new CFO. As always, there will be the opportunity to ask questions. Before we start, as always, some housekeeping remarks. Let me remind you on our safe harbor statement, which is shown at the beginning of the slide presentation, and this is valid for the entire call. Thanks for your patience. Now let's start.
I would like to hand over to CEO, Michael Rauch. Michael, over to you.
Thank you, Claudia. Good morning, ladies and gentlemen, and a warm welcome to all of you to the first Investor and Analyst event of CompuGroup Medical in another exciting year. Let me start directly with a summary of our financial performance in 2023. CompuGroup Medical again took revenues to a new height. With 5% top line growth, we achieved around EUR 1.2 billion in group revenues. Organically, we recorded the projected growth despite tough prior years comparison. Excluding the telematics infrastructure business, organic revenue ended up 5.3% higher compared to last year. Again, driven by numerous growth opportunities generated and executed throughout the excellent product offerings. Recurring revenues grew over proportionately by 12% and exceeded with a share of 69%, EUR 800 million in revenues.
With 13% growth, adjusted EBITDA grew more than double the rate of revenue, showing the awaited improvement of our bottom line. Adjusted EPS was also up double-digit. So summarizing, we've taken revenue growth to a new level of mid-single-digit organic growth now for the fourth year in a row, and we are now showing over proportionate earnings, revenue growth - sorry, earnings growth. Before we deep dive into the numbers and the strategic milestones we laid out in 2023, I want to talk about the exciting opportunities we are facing in a rapid transformation of the healthcare market. This market transformation is a dynamic process influenced by many factors, most noticeably by macroeconomic changes, technology advancements, and healthcare priorities. Two implications on the macroeconomic side. The demographic change is accompanied by a growing and accordingly more costly healthcare market. This development has consequences.
Healthcare systems will continue to adapt to this change. The pressure to work more efficiently and sustainably will remain high. Hence, the benefits of software and IT, particularly its ability to reduce process cost, will be a key factor in all areas of healthcare. Thanks to the advantage of rapid technological advancements, we have all it takes to adequately cater for the macroeconomic changes. Technology advancements, including artificial intelligence, telehealth, and wearable devices, are going to improve healthcare support, easing patient care, enhancing diagnostics, and streamlining processes for healthcare providers. The key to success for us will be to continue staying at the forefront of this development with our innovative products and services at highest IT security standards. It is imperative that medical data stays secure.
All of this will shape the healthcare priorities going forward with personalized medicine, patient-centered care, predictive analytics, and highly secured interoperability means allowing seamless, real-time, and secure medical information exchange. This isn't science fiction, it's real, and it's happening now. So let me just use three numbers to illustrate the current dynamics in technology in healthcare. Who would have thought that it took only five days for ChatGPT to win 1 million users? We at CompuGroup Medical have been quick in adopting generative AI for our company. In less than six months, we rolled out our own AI tool, ChatCGM, for all of our employees, and the learning curve is steep for all of us. This changes the way we work, and we fully embrace it. Medical knowledge is now doubling every 72 days.
This represents the biggest challenges for our customers, the physicians, hospitals, pharmacies, laboratories, and institutes out there. Given the increasing scarcity of healthcare providers, we need to support them ever more with intelligent IT solutions in this daily challenge, and we have the means to do so. And last but not least, one proof point to the magnitude of AI in healthcare.... Studies revealed a 90% accuracy of AI-driven algorithms in detecting cancer on mammograms. For radiologists, the comparative figure is 70%. That demonstrates the benefit AI support can have for human doctors. Just imagine how many more lives can be saved by the increased usage of AI. Hence, we at CompuGroup Medical are ever more committed to our purpose in these times of change. Nobody should suffer or die because at some point, medical information was missing. Health and well-being is deeply personal for everyone.
However, relevant medical information needs to be made readily available and accessible at every point along the entire patient journey. We at CompuGroup Medical enable the connected patient journey by servicing the entire customer base. This drives us every day and motivates us to continually improve. Making medical information interoperable saves lives, detects rare diseases, and improves healthcare overall. The big challenge is to connect data for it to be used by all significant players in the healthcare market. As CompuGroup Medical, servicing the entire customer base of the healthcare system, we are perfectly positioned to unleash the true value of data for our customers, because data needs to be shared to unlock its full potential. Thus, interoperability amongst healthcare systems, providers, and patients is crucial for seamless coordination of care, efficient information exchange, and improved patient outcomes.
At the same time, data needs to travel safely, hence IT security is of the utmost importance, since the data that is traveling, patients' medical data, is the most sensitive there is. Thus, at CompuGroup Medical, we are investing more into IT and into IT security every year to protect our customers' data. And we utilize the benefits of artificial intelligence to enhance our products with new, innovative features and identify the biggest value for our customers and the patients. Now is the time to make use of the power of AI in the realm of advancing software usability and enhancing the doctor-patient interaction. As mentioned earlier, with the example of AI-driven algorithms in detecting cancer on mammograms, AI can process and interpret complex visual data with high precision and speed in the field of image analysis. And AI also plays a pivotal role in medical decision support.
The technology is able to analyze vast amounts of data to provide evidence-based recommendation, reducing the risk of human error and improving the quality of care. AI can optimize documentation and reimbursement processes in healthcare. It can automate administrative tasks, ensuring accurate, timely records and claims, reducing costs, and increasing efficiency. The power of AI, when harnessed properly, will bring significant advancements in various fields, driving innovation and growth. We have the unique strengths to address those opportunities successfully. Superior market and R&D expertise, a unique database, and an e-health ecosystem filled with a full service approach form the basis and an excellent position. We are the only company in the sector to cover the full value chain, underpinned with excellent customer relationships, serviced with sophisticated and deeply integrated medical software and services. Hence, we are in an excellent position.
Due to our strengths, our USPs are broadly present, an outstanding market position in Europe and a growing relevance in the US. We're strong number one or number two in many markets, and we all know the market position in our business matters because it is the base to further scale products and services. This is important for our growth path going forward, and we strive to continuously improve our market positions, never becoming complacent. This is exactly the right time for accelerating our performance. In order to best participate in these massive opportunities, we need excellence. Excellence in technology, performance, quality, and people. What does it mean? We are constantly evaluating the team skills and fostering people development in our company. We are growing together in our endeavor to become more professional every year, to deliver high quality and excellent performance.
If and when necessary, we embrace the change, take action, adjust our skill set, and make necessary adjustments like it was done in selective business units in the last quarter of 2023. At the same time, we are fully embracing the AI opportunities for the intelligent use of data, for more quality in our processes, and to innovate in a more efficient way. It is a process of constant learning, optimization, professionalization for the benefit of our customers with a clear ambition: we are the leading medical software company. Let me now underpin our ambition with last year's financials. Before discussing the financial performance of the segments, let me highlight our top-line development. Total revenues are up 5% reported and 4.3% organically in 2023. Organic growth, excluding TI, resulted in a 5.3% increase year-over-year.
Recurring revenues increased over proportionately by 12%, resulting in a share of recurring revenues of 69%. The jump by four percentage points is due to the TI business moving away from the high one-offs and thus away from the high volatility. Overall, we are now close to 70% in recurring revenues, a great achievement, and by the way, the target was 70% and higher for 2025. A quick look at the organic growth rates, which have been in the mid-single-digit percentage range now for 4 years in a row, compared to a rather stable development in the years before our investment phase. Moving on to the adjusted EBITDA. We also see here an over proportionate development compared to revenues.
Adjusted EBITDA grew by 13% to EUR 265 million, resulting in an adjusted EBITDA margin uplift of 1.6 percentage points, so 1.6 percentage points margin uplift, 2023 over 2022, delivering a 22.3% margin for fiscal 2023. This is a result of focused cost management and follows a path we will continue to pursue profitable growth and margin uplift. We are committed to clearly increase the margin further while maintaining the attractive growth organically, which we have delivered in the past years already. Please let me go into more financial details with a segment overview. Starting with our flagship, the Ambulatory Information System segment, which is driving the digitization in doctor's practices across Europe and in the U.S. In 2023, we strengthened the basis for further growth.
The U.S. business showed the anticipated development with an organic growth rate above segment average, accompanied by a constant improvement in margins. In our core market, Germany, we've seen an ongoing growing relevance of our market presence. The rollout of additional billing modules strengthened our position in German dental offices, and with the ultimately mandatory e-prescription, more than 15 million e-prescriptions have been processed within our ambulatory information systems so far year to date. This is more just in the first weeks of this year than in one and a half years before, until December 2023. E-prescription traffic in our ClickDoc tool has also increased massively, which is reflected in doubling of transmissions only in the last four weeks. On the earnings side, we've extra invested into patient portals. Going forward, we're confident that we will see a margin rebound in the Ambulatory Information System segment.
Coming to our hospital segment, we've seen the strong year-end finish as expected. A double-digit gross CAGR, reported and organically, as well as the margin rebound, not only supported by the execution of projects related to the Hospital Future Act, but also through customer wins across all regions. So short and crisp, HIS is back on track and will support our growth and success story further with strong growth and significant EBITDA improvement. And please let me remind you, the future is not only dependent on the German governmental initiative. We expect further growth tailwinds in the coming years due to increased demand for our next generation product offerings and the consolidation of the market. Let's move on to the consumer and health management segment, which will be reported separately for the very last time after the successful integration into the AIS segment.
In our Consumer and Health Management Information System segment, we delivered a double-digit revenue CAGR over the past couple of years, with an over proportionate growth in adjusted EBITDA. We successfully implemented the TI flat rate in the second half of 2023, which is reflected in a strong growing share of recurring revenues. We also achieved major milestones on our path towards the goal of becoming a leading European provider of medical data solutions. With our AI initiative started in 2023, which will sustainably enhance our product portfolio, we are really excited about the steps we will take in building up new opportunities. And there is a growing market demand for our solutions from healthcare providers, pharmaceutical companies, insurances, and other healthcare constituents. Finally, let's talk about our pharmacy segment.
Again, the PCS segment and our PCS colleagues recorded an excellent, no, let me really say, an outstanding performance exceeding our expectations. So thanks and congratulations, colleagues. You delivered against a very strong prior year, 2022, outstanding results for 2023. Revenue growth has been driven again by our teams in Italy and Germany, and the margin has seen another step up due to efficient cost management in Germany and Italy, resulting in an amazing 36% adjusted EBITDA margin in 2023. Besides the outstanding revenue performance and record profitability, the relevance of our presence in the German pharmacy market is reflected by around 6 million e-prescriptions processed within CGM's pharmacy information systems in January 2024 only. And of course, we look forward to continue to support our customers on their path towards further digitization.
Let me now address a short update about the development of our personnel expenses As you know, we shifted gears significantly in mid-2022 after the strong ramp-up in headcount during the investment phase. Since then, the development of our personnel expenses is in line with our expectations.... Even with wage inflation, we only recorded an organic increase of 3% last year, well below the average inflation rate in personnel expenses We are fully focused on cost control by significantly reducing our personnel expenses in relation to revenue growth. This will enable additional increases in efficiency in the future. And supported by the means of increased AI usage, we will further improve our ways of working going forward. Moving on to free cash flow. With EUR 113 million, we managed to bring back the free cash flow well above the EUR 100 million target.
After a challenging 2022, free cash flow is now fully restored. Despite ongoing M&A activities, higher interest rates, and additional investments in next-generation technologies, we reduced the leverage from 3.1 times to 2.8 times in 2023. We will continue to focus on deleveraging and cash flow generation in the future. Now, that actually brings me to our special guest today. I'm delighted to hand over the CFO task to my successor as CFO, Daniela Hommel, and she's here with us today on day seven in office. Daniela, a very warm welcome to the CGM family. Great to have you on board, and now over to you.
Thank you, Michael, and a warm welcome to all of the analysts and our investors of CGM. My name is Daniela Hommel, as you heard, and I'm very happy to have finally started with CGM as of February 1. To my personal details, I'm married, and I have a daughter, which is a young lady of nearly 16.5 years now. Healthcare is a great sector to be in, I have to say. It's been 25 years for me now, and especially compelling is the purpose of CGM, as Michael just iterated. My other passion, as you can guess, is finance. I had various finance and controlling positions within the Fresenius Group since 2012, and in my previous last role, I was responsible for the performance of the hospital business within Fresenius, which is Helios, as a CFO since 2018.
In 2022, I started as Chief Financial and Innovation Officer of Helios Global Health, taking care of the international business. In addition, I was responsible for Fresenius digital subsidiary, Curalie, as CEO since 2022 also. Now to my priorities as CGM. One of them will be cash management and especially working capital and debt reduction to allow us further growth. Michael has also talked about the focus on cost and margins. That will be one of my priority also, and I will focus on R&D management, which plays a vital role here. I will also be responsible for ESG and our path towards net carbon zero. I'm very much looking forward to taking over the baton from Michael to establish best-in-class finances, financing processes powered by AI here at CGM to support the business units even better. I'm convinced that my new role...
In my new role, new role as CFO at CGM, I will be able to further advance this fascinating company, which has great employees, and to drive digitization in the healthcare sector even further. I look forward to meeting many of you soon and to be in close contact and exchange with you. But enough about me now. Michael, back over to you.
Thank you, Daniela. So let's move on to talk about the goals we want to achieve together in the current financial year. Having achieved our 2023 guidance, we are now fully focused on achieving another year of profitable growth for 2024, with further margin expansion. For 2024, we expect organic revenue growth in a range of 4%-6%. We expect adjusted EBITDA to be in a range of EUR 270 million-EUR 310 million, while growth in adjusted earnings per share is expected to be around 10%. This development will be supported by an anticipated recurring revenue share between 65% and 70%. We expect the free cash flow to be in a range of EUR 70 million-EUR 100 million in the current year. Now, why is that the case?
For 2024, we will see the cash impact from the different initiatives to drive excellence and efficiency I mentioned earlier on this call, which we took in the fourth quarter of 2023 to upscale our skill set level and to further enhance the performance in the selected business units. These initiatives resulted in a EUR 26 million one-off in late 2023 and will materialize in a corresponding cash out in 2024. We expect significant savings from these initiatives to materialize within the next 18 months, positively impacting 2024 already with a mid-single-digit million EUR amount. We, of course, will see a full swing back of free cash flow in 2025.
Talking about our segment guidance for 2024, we expect an organic growth rate for our ambulatory segment, where the former CHS segment is now included in the low- to mid-single-digit % range. For the hospital segment, an organic growth rate in the range of mid- to high single-digit % is anticipated. And finally, our segment for pharmacies is expected to grow organically in a low- to mid-single-digit % amount.
In closing, we are fully committed to deliver on our 2024 targets and to further uplift our EBITDA margin, while supporting all the healthcare practitioners out there in their daily work and on their digital journey. In line with our mission, we create the future of e-health. With that, I want to thank you for your attention, and I'm looking now forward to your questions and handing over back to the operator. Thank you.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wish to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please leave the handset before making your selections. Anyone who has a question may press star followed by one at this time. The first question comes from the line of Knut Woller with Baader Bank. Please go ahead.
Thank you. Actually, two questions to start with. Michael, when you announced the Q3 results on ninth November, there wasn't any mentioning of potential restructuring ahead. So what has happened since then that justifies such a huge amount of money spent for restructuring EUR 26 million since ninth November and the end of the year? And can you give us some more color on which segments have been affected? And I wasn't sure whether I gathered really the expected benefits out of it. And then, secondly, on the margin expansion path, your former midterm ambition looked for a margin of 27%, around 27% in 2025.
While I see that you're expecting ongoing margin expansion, if I would just keep the margin momentum, we would come in noticeably below this former margin ambition of around 27%. Can you give us here some more color on the margin trajectory, also looking beyond 2024? Thank you very much.
Thank you, Knut. Two important topics you're addressing, of course, and I'm very happy to answer those. So going back to your first question: so indeed, the magnitude, the speed of change that comes with the introduction of artificial intelligence is enormous, and we need to adapt and react to that, providing the best service to our customers. So as a growth company in a dynamic market, we are, of course, constantly transforming, and if we need the opportunity to upgrade our skill sets and to put the right people in the right position, we will of course do so, and that's why we took action in the end of the fourth quarter. Your question was with regard to the segments. All of the segments in various business units were affected. A larger chunk actually happened in the HIS segment here.
The second question was addressing the topic of the 27% margin. So today, we publish our guidance for 2024, and that's why we want to focus on achieving our margin uplift in 2024. You saw 1.6% margin uplift, 2023 versus 2022. So the same 1.6% margin uplift would bring us to 24%, as you see in the midpoint of our guidance for 2024. And from there on, we will then move with the further margin increase into 2025. Thank you.
Thank you, Michael. Just a quick follow-up on the restructuring. Is that now behind us, or should we expect that the AI-driven change will result in the necessity, potentially, also for one-offs in 2024? And that would be it from my side. Thank you very much, Michael.
Yeah, very good follow-up, and you also asked about the expected benefits, so I want to answer both in one go. So, we took the large charge of EUR 26 million in the last couple of weeks for 2023, with a cash out coming now in 2024. And yes, if there is a need to further adapt our structures, we will not hesitate to do so, but not in that magnitude anymore. So if you ask me what's going to come and to be expected, I would never rule out any further restructuring and adaptation of changes or structures going forward, but the magnitude will be significantly lower. Second point of your question was earlier on regarding the expected benefits.
I just want to repeat, we expect already a mid-single-digit EUR amount of profitability improvement from those measures in 2024, and we expect the full impact to be realized over the next 18 months.
Thank you, Michael.
The next question is from Martin Jungfleisch with BNP Paribas. Please go ahead.
Hey, good morning. Two questions, please. First of all, on the guidance, on the EBITDA guidance. Can you describe a bit what needs to happen to see the upper and the lower ends of the guidance? And then why have you chosen such a wide range again of EUR 40 million? I believe last year you took that EUR 40 million range because of the uncertainty to the telematics infrastructure, but now, this year, you shouldn't have this uncertainty really. So just wondering why this big range again. And the second question is on the recurring revenue guidance, where you see 65%-70% compared to the 69% last year, right? And last year you had a lot of hardware revenues from the connector exchange.
So, and this year you should have the TI flat, which should be beneficial. So why is this relatively weak recurring revenue target for this year? That's it from my side. Thank you.
Thank you, Martin. Also, two important questions to be tackled. The first one on the guidance range. The range, basically, if that is being put into percentage, is obviously the more revenue we as a company achieve always to be a bigger than it used to be in the past. But there are also many moving parts. So I just want to illustrate one which, you, for instance, also spotted when you look to the development of the fourth quarter. So in fourth quarter, 2022, we had Ségur de la Santé in our program for the first phase. We didn't know whether the second phase would come in Q4 2023. It did not materialize. Now it's coming, most likely in the second half of 2024.
These are moving parts which are not in our hands, because that depends on when regulatory bodies basically allow us to also invoice. And the same thing, by the way, could happen when we talk about programs like the Hospital Future Act, where we also need to have the cooperation of the corresponding hospitals to say, "Okay, now we put the order volume in," but the question is, when can we realize the revenues? When can we actually bring the projects into fruition? So there, there are quite some moving parts which are not always fully in our hands. Of course, we want to achieve as much as we can, the upper end of the guidance. You also asked with regard to the recurring revenue portion, and that has to do with the project.
If I take, again, for instance, the Ségur project as an example, then this is a one-time revenue to be recognized. And so as we expect this to be recognized this year, there's of course a one-time component to come. Similarly, with the Hospital Future Act project, you also re-recognize, in addition to recurring revenue, also a lot of one-time project revenue with professional services of deployment that you actually do in order to cater for the customer's needs. So besides the stabilization, which you rightly pointed out on telematics infrastructure, yes, this is definitely a much more stable business going forward. We will also see one of in different areas of development in AIS and HIS.
Okay, thank you.
The next question is from Laura Metayer with Morgan Stanley. Please go ahead.
Morning. Thanks for taking my question. Three questions, please. The first one, I just want to be 100% clear on, on the EBITDA margin target for 2024, because if you take the low end of the EBITDA guidance and the high end of the revenue, you get to, like, a very wide margin range. So can you just clarify what is the EBITDA margin guidance range for 2024, please? Secondly, you mentioned that you've seen customer wins across all regions in 2023. Do you mind giving us a bit more details on this? Is there any specific divisions where you saw customer wins? And then lastly, for the HIS segment, you guide to mid- to high single-digit% growth in 2024.
Is that not too low, given the organic growth that you achieved in Q4 in the light of the Hospital Future Act? Thank you.
Thank you, Laura. I want to start with your last question, and, yes, one could always say, has Michael now become a bit shy or timid to give a more progressive guidance? I want to stick to that guidance, but of course, as you've seen, also in Q4 of last year, we overachieved on HIS, and we are banking here also on a strong performance of our colleagues by sticking to our guidance. With regard to your second question, different regions where we win. Yes, we actually often talk, and that's in our biggest market, only about Germany, but we did, for instance, a fantastic project here on HIS in Spain and also in Poland, where we are getting also territorial wins. So that is really nice.
And also on the AIS side, we are winning significant new customer business, not only in Germany, but also in the other jurisdictions where we operate in, for instance, in the Nordics, with nice customer wins. Your earlier question was, or the first question was on the EBITDA margin, and if I read your note this morning correctly, I think you did the calculation with a 4 and 6% and with the 270 and the 310, and you figured it out, it's between 22% and 25%. I just said earlier, and I want to be a bit more precise, we achieved 1.6% margin uptake from 2022 to 2023, and I want to target that margin uptake again. And if I can achieve more, it's perfect, and I will do so.
We are early in the year, so let's see on how we can develop. We are firmly committed to margin increase.
Thank you.
As a reminder, if you wish to ask a question, you may press star one on your telephone. The next question is from Wolfgang Specht with Berenberg. Please go ahead.
Yes, hello, and good morning. Two additional ones from my side. First one on the ambulatory segment-
Wolfgang, I'm sorry. Can you speak a bit louder?
Yes, I'll give it a try. First question on the AIS segment: can you give us an indication of the growth trajectory? What is currently higher, let's say, the number of customers you're adding, or is it rather an upselling of existing customers? Question: what's driving your growth here? And then on the free cash flow bridge, are there any other moving parts we can think of, or is it just restructuring charges that's gonna impact free cash flow this year? Is there something different, for example, on the CapEx side versus 2023? That's it from my side.
Thank you, Wolfgang. On your first question on the AI side, yes. So if I were to classify, customer gains and net customer balance versus ARPU, so average revenue per user, we are more swinging towards the ARPU side, so increasing a bit more ARPU than, net customer gains. But actually we are progressing on both sides. But since your specific question was on those two elements, it is more on the ARPU, so average revenue per user. On the second question with regard to free cash flow, we don't spike out a specific guidance here on CapEx, but in the past we typically had, CapEx between EUR 50 million and EUR 70 million. That kind of CapEx number, maybe it's this time towards a bit more of the lower end.
We don't know yet, but that is probably the same range to target, that is affecting the free cash flow. The main impact is really from the EUR 26 million, which will turn now into a cash out in 2024.
Thanks a lot.
The next question comes from the line of Andreas Voss with Verbund Research . Please go ahead.
Yes, hi, good morning. Thank you for taking my question. I'm interested to know in which functional areas you are actually implementing the cost savings or which efficiency measures. Is it mainly R&D? Is it the administrative part of the company? Some more information regarding these functional areas would be helpful, and maybe you could mention some examples, what is actually being carried out. Thank you.
Yeah. Thank you, Andreas. And I want to connect your question also towards the benefits that we actually see and the huge benefits we see coming here with artificial intelligence. So for us, we have defined four main focal points where we actually see the benefits of artificial intelligence to come. First and foremost, developing products and solutions for our customers. That, however, and that was part of your question, does not mean that we want to increase significantly our over, overall R&D spend. On the contrary, as we have always said, in previous capital market days, we want to keep the absolute amount of R&D spend rather constant, but we will redirect funds, and we will redirect more funds towards solutions for customers implementing artificial intelligence. So that's stream number one.
Stream number 2 is, we also want to become more efficient in software development, so we have a lot of possibility to actually, on the coding side, in cases and so forth, become more efficient using artificial intelligence in the field of R&D development itself. Thirdly, in service and support, we will go for solutions using artificial intelligence and also have here some impact on the way we actually look into our setup from a people skill set. And we also have the last point, which is all administrative tasks, where we also think we can benefit from the higher usage of AI.
Great. Thank you, Michael.
We have a follow-up question from Knut Woller with Baader Bank. Please go ahead.
Yeah. Thank you. Michael, just to get a better feeling for the momentum in 2024, if I keep in mind the tough comps that you're particularly facing in H1, which still benefited from the software upgrade, TI software upgrade, as well as the connector replacement cycle, is it then fair to assume that we should see margin expansion predominantly in the second half? And then the second question is just a housekeeping question. If I spotted correctly, amortization was around EUR 16.2 million in Q3, and we went to EUR 26.9 million in Q4. Can you give some color here? What drove this sharp increase in Q4, which took me a bit by surprise? Thank you very much.
Yes. Thank you, Knut. So I want to start with your first question, and, honestly, all of you know that, you rightly pointed that out many times with regards to development. So it's a clear yes to your question. We are more back-end loaded in terms of the margin. There were one-timers with the connector exchange in Q1, and there were, the software update on the connector in Q2 and last year. That's true that we're running against, but we don't want to go into a specific quarterly guidance, but by and large, yes, confirmed, we are more back-end loaded. On your, other point with regard to the amortization charge, so let me just, differ a little bit.
When we look to the recognition of self-developed software, that actually has been the lower amount than we had in past years. So for 2023, we only have recognized EUR 40 million in full year. Last year, 2022, it was EUR 34 million. But we actually here had a one-off charge, writing off actually an old module on the HIS side, a very old module, which we are no longer having in usage. Those things sometimes happen, and then we just follow the regulation.
Thank you very much.
We have a follow-up question from Martin Jungfleisch with BNP Paribas. Please go ahead.
Yeah. Yeah, morning, Michael, again. So, just a follow-up on free cash flow, right? So it's EUR 70 million-EUR 100 million this year, but when you adjust for the EUR 26 million restructuring, you are basically flat year on year at the midpoint compared to 2023. You also said that you see CapEx more towards the EUR 50 million, so also lower. So what do you think is the moving part, when you expect EBITDA growth 10%, this year at the midpoint, but then, free cash flow flattish at the midpoint? What is this mainly interest expense? Just that.[crosstalk]
So the interest expense.
Sorry[crosstalk].
I'm sorry. [Background noise]Just already jumping into your question. The interest expense in general, as you've seen, has been higher. We don't expect interest to come down. So yes, we were very wise and well advised to have our capped, but still there are some interest cash outs that we have to live with. And we also want to be a bit cautious here on the free cash flow. Maybe a bit too cautious, but we don't know how the customer side is also going to develop. Yes, we will work significantly on what the capital management, as Daniela pointed out, but for the time being, we don't know in which direction it's going to go.
Okay, thank you. And then maybe one more question on this other adjustment that you were talking about. How much was this adjustment that you made with the license costs and tax audits? That's EUR 7 million in the fourth quarter, and what was that relating to?
So this is a one-time charge, so this is something we haven't talked about yet. So this is a one-time charge, of actually, a license audit going many years back, which we had to report because we noticed that in one area we were actually using products that were under license, and we had to basically take that charge in Q4.
Okay. Thank you. Makes sense.
Okay, and since we do not have any further questions at this point, as always, let me point out that Investor Relations, so Frederik and I will be available for further questions. Please don't hesitate to give us a call or send an email, and we'll be in touch shortly. Thanks for taking the time to dial in today, and we wish you a great day. Bye-bye.
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