Good morning, ladies and gentlemen. Thank you for standing by. I am Francie, your cross call operator. Welcome, and thank you for joining today's CompuGroup Medical Investor and Analyst Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. Questions are possible for those participants dialed in via telephone. If you would like to ask a question, you may press Star followed by one. Press the Star key followed by zero for operator assistance. It's my pleasure, and I would now like to turn the conference over to Senior Vice President, Investor Relations, Claudia Thomé. Please go ahead, ma'am.
Good morning and welcome to the CompuGroup Medical Investor and Analyst Conference Call for the third quarter and the first nine months results 2022. It's great to have you with us, whether you have dialed in via phone or are following the webcast. You'll find all the relevant information, such as this presentation, the quarterly statement and the press release, which we published early this morning on our website. We're going to start with the presentation by the spokesman for the Managing Directors and CFO, Michael Rauch, followed by the Q&A session. Before we start, there are some housekeeping remarks. Let me remind you on our safe harbor statement, which is shown at the beginning of the slide presentation and is valid for the entire call. Thanks a lot for your patience. Now let us begin. I hand over to Michael Rauch. Michael, over to you.
Thank you, Claudia. Good morning, ladies and gentlemen, and a warm welcome to all of you. In the last nine months, we reported revenue growth across all segments. With 8% growth, we achieved more than EUR 800 million in group revenues. Organic growth impacted by strong prior year's quarter showed 1.5% growth. A quick reminder, the results of the third quarter 2021 had a strong positive one-off effect due to the one-time revenue recognition of a telematics infrastructure connector software update, the so-called product type version four update or in short, PTV 4 update. The next generation of TI software update, called PTV 5, is expected in 2023, as we announced last week.
Adjusted for the 2021 PTV 4 upgrade, organic growth stood at 4.5% after the first nine months 2022. Recurring revenues grew even stronger by 11%, and the share of recurring revenues increased by 2 percentage points, a strong proof of our resilient and sustainable business model. Looking at profitability, Q3 was another small step into the right direction of leaving the margin trough behind, with a slight increase of the margins throughout the year 2022, achieving 21.4% in the third quarter. When talking about the strategic milestones we laid out over the last months, I want to start with the Ambulatory Information System segment, which is fully prepared for a strong fourth quarter.
Around 14 million eSig nodes, approximately 16 million KIM messages, and 60,000 e-prescriptions have been processed within the CGM network by the end of September, which is a strong proof of our ongoing growing relevance in the healthcare sector. Ségur de la Santé, the governmental healthcare initiative to push the digitalization in France, is now in the rollout phase, and the more than EUR 7 million order intake are starting to convert into revenues. On our Capital Markets Day in September, we updated you on our progress in the U.S. business. The team has reached an important milestone by starting to replace a third-party provider with our own solution, eMEDIX.
Also at the Capital Markets Day, we talked about the fact that our customer's world is transforming the trend towards larger practices and multi-provider facilities, where we are well prepared with our CGM M1 PRO product offering, specifically tailored to fulfill those needs. In Q3, we won a significant tender project in Germany to equip 90 emergency practices with CGM M1 PRO to allow a uniform workflow for cross-practice use. With the rollout of this project, CGM is at the forefront of this market trend. The winning of this tender is a strong signal and a clear confirmation to our future-oriented product offering. Now, looking at our hospital system segment, it is visibly clear that the demand for our next-generation technology is unbroken.
High order intake is continuing, proven by the recent customer win in Switzerland, as well as a continuously growing order intake from the Hospital Future Act, which now, as all of the products total to EUR 65 million and gives us strong confidence in our revenue target of EUR 50 million-EUR 80 million related to the German governmental initiative. Initial projects related to the Hospital Future Act have started, and we expect a ramp-up in revenues over the next quarters. Summarizing the development in HIS, the hospital segment shows strong momentum, and it's well on track towards our midterm ambitions. Convincing evidence of our M&A strategy and execution has been delivered within the consumer and health management information systems segment in the third quarter.
Within only 8 weeks, a new product offering for pharma companies jointly developed by CGM and the recently acquired INSIGHT Health has been launched. The new product, DARWIN, which is a combination of CGM Ambulatory Information Systems data and INSIGHT Health prescription data, offers deep insights about distribution of diagnoses for pharmaceutical drugs and prescribing doctor specialist groups. The first strategic customer has already been won, underlying our focus on the promising data business. Let's now move to the financial details. During the first 9 months of 2022, group revenues have grown by 8% year-on-year, leading to an adjusted EBITDA of EUR 166 million. The corresponding EBITDA margin stood at 21%. Our adjusted earnings per share advanced to EUR 1.33 for the first 9 months. Free cash flow was below previous year, resulting in EUR 24 million after 3 quarters.
I will, of course, provide more details on the development in a couple of minutes. Coming to our organic growth rates, it is important to mention that the growth rates for the first nine months, and especially during Q3, have been impacted by high one-off revenues in the prior year Q3. As already said, organic growth on group level recorded a 1.5% after nine months and 4.5% adjusted for prior years connector software update PTV 4, which is fully reflected in the negative organic growth rates in the CHS segment. AIS came up against a strong prior year quarter with 10% organic growth in the prior year Q3, while the HIS segment showed again strong performance with an organic growth rate of 6%.
We see a continued strong performance in the pharmacy business, leading to an organic growth of 7%. Despite the delayed Connector software update PTV 5, we still expect a strong finish of the year and anticipate an organic growth rate in the range of 4%-6% for the full year 2022, as a number of growth opportunities are materializing in the fourth quarter. For the third quarter, impacted by intra-year phasing effects, our revenue grew by 3%. Adjusted for acquisitions and foreign exchange effects, it showed a decline of 3%, like explained on the previous slide. Organic growth adjusted for last year's Connector software update resulted in a 5% increase year-over-year for Q3. Recurring revenues increased over proportionately by 8% and represent 65% of total revenues in Q3.
Please let me go even in more financial details now, starting with the Ambulatory segment. Against tough prior year comps, revenues grew by 1%, supported by FX effects, resulting mainly from our US operations. Organic revenue growth stood at -4% against the strong prior year's quarter, with additional rollouts of new modules like eHealth Record and the vaccination certificates in the DACH region, so Germany, Austria, during Q3 2021, as mentioned before. Recurring revenues amounted to a strong 80% of total revenues, representing a growth of 8% compared to the previous year, underlining the continued strength of the segment. In the DACH region, Germany, Austria, growth of recurring revenues was even stronger at +12% due to the recurring revenue contribution from the modules I just mentioned, which we started rolling out last year in Q3.
Now coming to the Hospital segment. We can say that revenue growth was again very strong with 7%, mainly driven by a strong organic growth rate of 6%, which is remarkable given the fact that the Hospital Future Act effect is only starting to ramp up in revenues as we speak. Recurring revenues increased by 7% and the share of total revenue stood at 68%. Due to the investments to execute on the Hospital Future Act and further rollout of our G3 technology, adjusted EBITDA decreased year-on-year and so did the margin. These investments are paying off now. Revenues in the context of Hospital Future Act are hitting the P&L as we speak and as you know, the main revenue impact will come in the years 2023 and following.
Let's move to the segment with the largest shifts during the year or the biggest impact due to a strong prior-year quarter, the Consumer and Health Management Systems segment. Revenues grew here by 2% against strong prior-year's quarter, including the recently acquired INSIGHT Health. Like for like, so adjusted for last year's Connector software upgrade, organic revenues increased by 5%, driven by the beginning of the TI Connector hardware exchange. Excluding the TI, organic revenues stood stable. Here we've seen an impact due to macro crisis related headwinds in the pharma industry. As described earlier, last year's Connector software update has also impacted the adjusted EBITDA comparison. Year-over-year, we report an adjusted EBITDA of EUR 10 million, resulting in an adjusted EBITDA margin of 17%. Let me emphasize this again.
The rollout of the PTV 5 Connector software update is merely postponed to the coming year. The Connector hardware exchange, on the other hand, is ramping up at full throttle and will support our strong fourth quarter. Finally, let's talk about our Pharmacy Information System segment. Again, the PCS segment recorded a very strong quarter with revenue growth of 8%, partly driven by two smaller acquisitions in Italy for drug home delivery and the cloud-based admin software. Also the organic growth of 4% was driven by strong, continued good business. Due to a controlled and very prudent cost management here from the colleagues, the adjusted EBITDA grew by 29%, leading to a margin of 30%, up five percentage points versus the prior year quarter. Recurring revenues grew by 11%. All in all, a very satisfactory quarter in the PCS segment.
Thank you, colleagues. The development of the free cash flow requires some explanation. Now, you've seen that we adjusted our expectations for free cash flow from more than EUR 100 million down to now EUR 40- EUR 70 million last week. Let me start with the most important message. The overwhelming part of the change in guidance is phasing. Cash inflow from large growth initiatives and from projects we are starting to see falling into next year instead of this year. Shedding some light on the free cash flow development during the first nine months of 2022. While the second quarter has been influenced by the purchases of connectors, so for the TI hardware exchange, which began in September, free cash flow in the third quarter was impacted by payments resulting from management changes and restructuring.
Now, what's our view on free cash flow in the fourth quarter? We know that the PTV five connector software upgrade is postponed into next year. Together with the expenses for management changes and restructuring, this brings the new upper end of the range in our guidance to EUR 70 million. There's the development of free cash flow in the fourth quarter, depending on the cash to invoice ratio of the connector hardware exchange and the cash realization of projects related to the Hospital Future Act and Ségur. While we recognize the revenue of these projects in Q4, the question is when can the cash flow be recognized? Including these uncertainties of timing, we see the new lower end of our free cash flow guidance now at EUR 40 million.
Let me emphasize again, free cash flow 2022 is impacted by phasing, while our fundamental business model is on a rock solid basis. Net debt at the end of the first nine months was around EUR 90 million, higher compared to end of December 2021, as dividends and the INSIGHT Health acquisition impacted the development over the first three quarters, leading to a leverage of 3.2 times EBITDA. We secured a crisis resilience financing at attractive conditions, mainly protected against rising interest rates. Our financial firepower is still strong, as beside the EUR 400 million term loan and the EUR 600 million revolving credit facility, we have also accessed a EUR 200 million credit line of the European Investment Bank, as you know, for R&D development projects.
Looking ahead to the last eight weeks of 2022, please let me highlight the revenue boosters that are here to come. The telematics infrastructure connector hardware exchange is in full swing, and we're seeing ramp up in the current quarter compared to Q3. The governmental program, the Hospital Future Act, is up and running, and we have already more than EUR 65 million order intake, and the revenue recognition is getting higher until the end of the year. The more than EUR 7 million order intake related from the French governmental digitization initiative, Ségur, has started transforming into revenue during the current quarter. Even within the adjusted revenue guidance range, after knowing that the connector software update, PTV 5, will fall into next year, we still expect a strong fourth quarter. Let me now reiterate the adjustments we announced to our guidance last week.
Due to the postponement of the PTV 5 connector software upgrade into 2023, we now expect group revenues between EUR 1.1 billion and EUR 1.13 billion, supported by an organic growth rate between 4% and 6%, in line with our midterm ambitions, resulting in total adjusted EBITDA in the range of EUR 220 million to EUR 240 million. In the light of the midterm ambitions, let me address the first proof point we achieved in the third quarter on the cost side. Having invested for future sustainable growth, we noticeably drive profitability from next year onwards, and we have shifted gears towards a margin expansion in 2023. With our investment initiative started in December 2020, we ramped up personnel expenses.
Organic growth of personnel expenses has been very strong in 2021, lessened slightly in the first half of this year. In the third quarter of 2022, we now see organic personnel expenses, meaning adjusted for acquisitions and FX effects, almost stable for the first time in more than two and a half years, despite increasing revenues and ongoing growth opportunities. That's the first milestone towards our midterm goals and the result of the focused efforts of all of our CGM employees. However, there's more to be done post-investment mode as we are steering the company towards significant margin expansion. We already implemented a centralized purchasing, which will improve the gross margin onwards.
Increasing recurring revenues, an ongoing easing of R&D intensity, and an optimized spend base are the drivers on our way towards the 2023 margin expansion. Together with all our teams, staffed with highly motivated employees, we are fully dedicated to make our customers happy, thus delivering on our midterm ambitions of growing with a CAGR of more than 5% in organic growth until 2025. To deliver a recurring revenue share of more than 70% by 2025, and to significantly improve the adjusted EBITDA margin back to a level of around 25%, where it used to be in the past, and then further up to 27% in 2025.
Looking forward in terms of upcoming disclosure events in the next reporting milestone, that is the publication of Q4 and full year 2022 results, including the guidance for 2023, which will all happen on February 9, 2023. With that, I would like to thank you for your attention, and we are now looking forward to your questions, and I'm handing over to the operator for the Q&A session. Thank you.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one. If you wish to remove yourself from the question queue, you may press star followed by two. Anyone who has a question may press star followed by one at this time. One moment for the first question. The first question comes from Knut Woller from Baader Bank. Please go ahead.
Yeah. Thank you. Michael, can you just give us some more color for the reasons of the delay of the PTV 5 update? Is it something like a back and forth here for the certification of the update, or any other reasons here? Do you already have some insights when we should expect the PTV 5 update to happen? Is it rather an H1 expectation or H2 2023? Looking at the personnel expenses, I think that's quite encouraging still. I would assume that this year had the tailwind probably from already agreed inflationary tendencies.
What is the expectation for personal expenses going into 2023, looking at the rising inflation, particularly now from the second quarter onwards, how should we think about these cost items? Then, looking at the margin target for 2023, you said in your midterm ambition, it's around 25% in 2023. I know you're not providing guidance, but with the high margin PTV update delayed now into 2023, I think there should be some. Or is it fair to assume some more confidence that we should be, not only around, but rather be at 25% in 2023? Thank you.
Thank you, Knut. If I recall, those were all three forward-looking questions. With a little bit of caveat, I tried to answer as much as possible. The question regarding the PTV 5, and please, I ask everybody for understanding, this is a situation whereby we're in discussion with three parties. This is a federal authority for information security. This is a certification institute which in Germany is called TÜV, and then there is gematik, which is the approval authority. So there are things happening which are not always in our hand, but we are very confident that we will get the PTV 5 update in the first half of 2023.
Now, with that, I wanna answer also your third question because you said, "Okay, Michael, if that is moved now from 2022 into 2023, how should we think about it in terms of the EBITDA margin?" Well, as you might know, there is not only this time an update of PTV 5, but there's also the next update then around the corner, which then depending on when we get our PTV 5 update, might be then postponed into 2024. That's why at this moment in time, we are sticking to our guidance of around 25% as we gave it out. Now, that brings me to your second question. Second question regarding personnel expenses, how should we think about that? Here's what we do.
We have been hiring significantly new people on board in the year 2021, with a net headcount increase before acquisitions of 700 FTEs. This is what we have done and continued in 2022. We are now in a kind of like a steady mode, full swing stage, and we will make sure that we will do the best with our internal in-house resources we have. We have a program out here, CGM First, to make sure that we have internal career developments for all of our people. And this will mitigate the increase in personnel expenses. At the same time, we also look into external parties, so subcontracted labor, which we've taken on board on contractor side.
That's a cost position which we will be managing much more closely in the year 2023 to come than versus prior years. The question is how much is the inflation impact going to be? That's of course an effect which we are watching out for and why we also do a lot of price increases on our recurring revenue base, which has also been, I think, picked up by the press to some degree already. Thank you.
Thank you, Michael.
The next question is from Laura Metayer, from Morgan Stanley. Please go ahead.
Hi, Michael. Two questions from me, please. One, could you please comment more on the macro-driven headwinds that you're seeing in the data business, and what share of the business exactly is impacted? Are you seeing a worsening of the situation in Q4? Second question, are the project postponements going to be incremental to your previous expectations for 2023? Have your expectations lowered in other areas such as the data business, and basically you would expect this project to offset this? Thank you.
Yes. Thank you, Laura. Let me be more explicit on the projects that we postponed. The main project postponed is the PTV five. The other ones are rather smaller and minor projects. We didn't wanna be too explicit in the way when we announced or I talked, but I can confirm to you the main project here is PTV five. The second question or your first question was regarding the data business in general. Let me just basically give a little bit more glimpse on the way we see our data business. INSIGHT Health, which is not yet organic, as you might know, we closed the transaction in May, is growing nicely. Growing here with mid- to high-single-digit number.
Our already onboarded data business which we have here on the organic growth rate is kind of flat. This is where the comment refers to with regard to the spend of the pharma business. As we do, for instance, also some e-advertising here for pharma business and other data related activities, these have been scaled back. That's probably something which we might see also continuing into Q4 and Q1 of next year.
Ms. Metayer? Thank you.
I think we can break here. Thank you.
Okay. The next question is from Martin Jungfleisch from BNP. Please go ahead.
Yes, hi. Morning. Two questions, please. The first one is on pricing. It's a follow-up. Could you share if you are able to implement some price increases to your customers already, and that's mainly in the hospital and the AIS segment? Are you able to increase the entire maintenance of support revenue base next year, or would that be a step-by-step process whenever contracts expire or roll over? Would you expect that price increases would also offset wage inflation next year? That's the first question. The second question is on the AIS growth, which was quite weak at -4% organically. Can you comment on the organic performance of the US business? Is that already in line with the 6%-9% target? Thank you.
Yes. Thank you. I'll start, Martin, with the question on the AIS growth regarding particularly the U.S. business. The U.S. business is ramping up in organic growth, and we are not yet at that overall CAGR which we gave until 2025. But we are making very nice convergence of basically replacing a third-party provider now here with our own eMEDIX solution, and we will see ramp up of organic sales growth here on the AIS side in the U.S. over the next quarters to come. Now your first question was basically a series of questions regarding price increases. Yes, you're right. We will mitigate wage inflation with price increases. We will actually even overcompensate it.
We have issued price increases in the AIS field on HIS, on PCS, and typically the price increases are, as you rightly say, on the recurring revenue base. Most of the contracts, that was also a question from you, run for 12 months, some contracts and then have three months notice period, but basically you could cancel the contract if you wanted to. As you see, the stickiness of the business, that is rarely happening. Most 12 months, some run for 24 months, some for 36 months. There will be a step-by-step impact, also on the price effect going through. We have already started with price increases on the HIS side, on the PCS side, and also on the AIS side, significant price increases are planned for the first and second quarter next year.
Cool. That's very helpful. Thank you.
Ladies and gentlemen, as a reminder, if you wish to ask a question, you may press star followed by one. The next question is from Florian Treisch from Kepler Cheuvreux. Please go ahead.
Thank you very much for taking my question. I have three. One is a follow-up just on this PTV 5 update. I can understand that you cannot guide us for specific months, but if you were quite confident at the Capital Markets Day at the beginning of September, there must be something happening in between. Can you simply shed some light here, i.e. we are at 95% completeness, and we are really talking about little configurations? Or is there like a major obstacle as we are now seeing with e-prescription, which is basically a stop project as of now? The second one is on the TI hardware replacement. In the last call you gave us some order numbers. Can you tell us where we are here when it comes to orders?
What has been the contribution in Q3 and what you are expecting in Q4? The last one is on free cash flow. If I listen to your comment on the free cash flow, a lot of shifts, I would say, and not kind of cancellations. Is it then simply fair to assume that you will catch up a majority of that in H1, i.e. you will see a significant push in H1 2023 on the free cash flow side? Thank you.
Yeah. Thank you, Florian. Again, with the caveat that we are very careful regarding forward-looking statements, I would confirm the tendency of your third question regarding the free cash flow that we expect, the free cash flow to ramp up in the first half of 2023. Now your first question on the PTV 5. Yes, maybe just for everybody, throughout the update process, it is always possible that the three relevant parties I mentioned before can change specifications and can ask basically for those that have not received yet the certification that they need to follow basically the changes in specifications and build those into the program. That's why some of the specifications have been changed and the gematik Gesellschafterversammlung is yet to take place and to approve those.
Depending on the timing, the certification might be a little bit delayed. That's why. But we remain highly confident that we will achieve that, as I also mentioned to Knut a bit earlier, in the first half of 2023 to get the PTV 5 certification. Now, your second question was regarding the hardware exchange on telematics infrastructure. Besides the software upgrade PTV 5, we also have and are in the ongoing exchange of the hardware connectors that has started in September, so we recognize the first revenues now in Q3, and we will see a significant ramp up over Q4 and Q1. We always said that we have about 30,000 connectors to be exchanged until the end of Q1 2023, and we are making good progress here.
We will give you the next update on how many have been actually exchanged in full, in the call on February nine when we talk about our fourth quarter.
Great. Thank you very much.
Since we do not have any further questions at this point, we thank you all very much for dialing in. Should there be any more questions, investor relations is available for you after the call on the phone or by email, so don't hesitate to contact Frederic or myself. With that, thanks a lot and have a nice day. Bye-bye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you very much for joining, and have a pleasant day. Goodbye.