Ladies and gentlemen, welcome to the CompuGroup Medical Q1 Results 2025 conference call and live webcast. I'm Vicky, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Claudia Thomé. Please go ahead.
Good morning, everyone, and welcome to the CompuGroup Medical Investor and Analyst Conference Call for the results of the first quarter of 2025. Thanks for joining us today, whether you have dialed in on the phone or are following the webcast online. As always, you 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 will start with the presentation by our CFO, Daniela Hommel, followed by the Q&A session. Before we start, just some housekeeping remarks. Let me remind you of our Safe Harbor Statement, which is shown at the beginning of the slide presentation, and this applies to the entire call. Thank you for your patience. Now, let us start. I will hand over to our CFO, Daniela Hommel. Daniela, over to you.
Thank you, Claudia. Good morning, ladies and gentlemen, and a warm welcome to all of you. After 2024 marked a year of transition in the long history of CGM, we aim for a return to growth despite continued investments in innovative solutions for the benefit of our customers and their patients. As the pioneer in e-health, with more than 38 years of experience, we make a sustainable impact on the daily work of all healthcare practitioners. With our comprehensive product portfolio for almost all phases of the digital patient journey, we are adding a new dimension to healthcare. Our consistently high R&D ratio ensures that we will continue to be excellently positioned to support our customers and thus improve the entire e-health sector for the benefit of patients. Looking at the transformation, we are focusing on operational excellence.
Customer centricity is the number one priority, driving innovation and performance for our customers while reinforcing a KPI-driven mindset within our organization for higher efficiency. At the same time, we are enhancing our product portfolio with further innovative products and modules. We have expanded and improved our flagship AIS and HIS products and are achieving new milestones such as launching the CGM TI -Messenger to drive connectivity. We are adding a new dimension to healthcare. Leveraging our platform strategy and an unrivaled presence across 19 countries, we aim to engage our current customers, attract new ones, and ultimately inspire, support, and advance the market for digital health solutions. We have this impact, and our products have the power to sustainably improve the healthcare sector and change and enhance the world of all healthcare practitioners. At CGM, this is what drives every one of us to contribute to advancing healthcare.
Now, let's take a look at the timeline with regards to our strategic partner. In December 2024, CompuGroup Medical entered into an investment agreement with CVC Capital Partners. The investment agreement was subject to the successful closing of a tender offer launched by CVC, offering EUR 22 to CGM shareholders. In January, we, the Managing Directors, as well as the Administrative Board and the Supervisory Board, published a joint reason statement recommending shareholders to accept the offer. After the first three weeks of 2025, CVC exceeded the minimum acceptance threshold of 17%. Finally, all regulatory approvals were successfully received on April 17th. As planned, the delisting offer process will start in the current quarter, and the annual general meeting for the financial year 2024 will be held on August 1st, 2025. As a result of the voluntary tender offer, CGM's shareholder structure has changed considerably.
The majority stake held by the Gotthardt family and associated shareholders remains unchanged at over 50%, while the free float has fallen below the mark of 25% due to CVC's now more than 23% minority stake. To fulfill our purpose, we are committed to maintain a high level of investment going forward. CVC is fully aligned and supports our strategy, focused on innovation and growth within the scope of a strong partnership. With CVC's extensive expertise in healthcare and software, their strong commitment, and their global network, this partnership has the potential to accelerate our next phase of innovation, growth, and transformation in the healthcare sector. Now, let's take a look at the financial performance of the first quarter of 2025. We have seen a rather slow start into the year, with overall revenues slightly up by 1% year on year.
Looking at the organic revenue development in Q1 year over year, we are down by 0.5%. This development has been attributable to one-off revenues, which were again down year on year, while recurring revenues have grown again. I will come back to this in a few minutes in more detail. Adjusted EBITDA was down compared to last year's result and ended up with EUR 51 million. The margin was 3 percentage points below Q1 2024 at 18%. Free cash flow stood at EUR 78 million, remarkably higher compared to the same period last year. Adjusted EPS stood at EUR 0.35 compared to EUR 0.47 during the prior year quarter. Recurring revenues have grown with a CAGR of 11% over the past couple of years.
As I already mentioned, after Q1 2025, recurring revenues have grown again, and they account for almost three quarters of the total revenues on an LTM basis. To remind you, the main reason for the revenue decline lies in the development of one-time revenues, where we have seen a slower progress of projects in different areas during the last quarters. For the group, the one-time revenues, i.e., the smaller part of our overall business, are down year on year, while we see continued growth in the recurring revenues. Let's go into more financial detail, starting with our AIS segment, where we recorded a revenue decline of 2%, which is due to the decline in one-time revenues. The reason for the decline in one-time revenues is mainly attributable to high TI revenues in the prior year quarter. Recurring revenues were stable and account for 78% of segment revenues.
The adjusted EBITDA in the AIS segment was impacted by ongoing investments in product innovation, sales, service, and support, and by this increased by 18% with a margin below the prior year's quarter. Coming now to our hospital segment. Revenues grew by 5% quarter on quarter. The revenue growth is attributable to a strong development in recurring revenues, and one-off revenues remained stable compared to Q1 2024. The continued investments into large projects and G3 technology led to a weaker EBITDA margin. Finally, let's talk about our pharmacy segment. In the first quarter of 2025, revenues in the PCS segment grew by 3%, with recurring revenues up by 4% and one-off revenues stable compared to last year's quarter. As usual, in this segment, the margin stood strong at a level of above 30%. Let me now give you a short update of the R&D development.
Investments in our product portfolio and innovative solutions are essential for long-term success and contribute significantly to enhancing our customers' daily work. In Q1 2025, R&D expenses showed a slight increase, while R&D CapEx is stable compared to the prior year's level. R&D expenses as percentage of revenue remained high at 24%. Let's move on to the free cash flow. With EUR 78 million, free cash flow was significantly above prior year level. This is due to two effects. The first quarter of 2024 was impacted by restructuring and tax payments. Secondly, we were able to significantly improve our working capital management as planned. Talking about our financing, net debt has decreased from EUR 773 million to EUR 702 million during the first quarter.
Leverage has also come down since year-end 2024, but we are still recording a leverage above three times EBITDA as of March 2025 due to the weak last 12 months EBITDA. Given our continued growth path and the volatile times we are in, we are pleased that we were able to amend and extend our financing structure. Yesterday, our existing syndicated loan has been amended and extended, now consisting of a revolving credit facility in the amount of EUR 600 million and a term loan of EUR 150 million. At the same time, we have maintained existing financing instruments like our Schuldschein and the R&D financing with the European Investment Bank. Both facilities, the new ones, have a term of five years and will take effect in May 2025. They replace both the existing RCF and the existing term loan and enable us to continue our growth path.
The new structure has a maximum leverage of 4.5 times with an acquisition spike option at 5 times. CGM has thus secured its financing until 2030 and extended the former financing for another two years. On the next slide, you will find the guidance for the full year 2025, which we confirm today. The organic revenue development is expected in low to mid-single-digit % growth range. We expect a continued positive development of recurring revenues with a slight growth year on year. Looking at the adjusted EBITDA, we expect to return to the growth path again, supported by at least a slight organic growth within each segment. With that, thank you for your attention. I'm now looking forward to your questions, and I'm handing over to the operator for the Q&A session. Thank you. We will now begin the question and answer session.
Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star and one at this time. The first question is from Knut Woller, Baader Bank. Please go ahead.
Yeah, good morning, and thank you for taking my questions. Actually, two. First, on the other operating expenses, we have seen quite a noticeable growth of 13% year over year. Apart from the rising impairment losses, what were the drivers here? Can you also provide some color why impairment losses have been up that noticeably in Q1 2025? Should we expect this level also going forward? Briefly on the financial income, which was up to EUR 3.3 million.
Can you give us some color why that was up so strongly in Q1? Lastly, on the cost ramp in 2025 versus the revenue ramp, how do you expect to reach your full year targets? Is it rather backloaded, or should we already expect an improvement in the second quarter? Thank you.
Many thanks for your questions, Knut, and I'll start with the last one, and then I'll go backwards. With regard to the split over the quarters, I can tell you that they build up on each other. Q1 is expected to be better than Q2 is better expected than Q1 and Q3 accordingly. We have concrete projects that we expect to be realized throughout the year, and each quarter new projects start.
With regard to the financial income, I can tell you that what you see, the interest expense at such is basically stable or slightly down, but we have a change in purchase liabilities. Those are valued at fair value, and that effect is also recorded in the financial result that explains the increase of the financial income. Now, please give me a short look at the other operating expenses. We have started several projects, as I mentioned, to bring our business back on track. Those are reflected in the other operating expenses. We consider them as not full year effect, so they are currently running. They will not continue throughout the full year, but they explain why the other expenses have risen in the first quarter. This is not a sustainable effect.
Okay, great. Thank you very much, Daniela.
The next question from Wolfgang Specht , Berenberg. Please go ahead.
Yes, hello. Two additional ones on the operating segments. First one on the hospital segment. We could notice a quite significant downturn in profitability here. Can you give us some more details on what impacted the segment? Second question on the ambulatory side. Have there been any changes to the TI flat rate recently, or are you expecting changes at one point in time? Authorities should, let's say, give you some potential to increase prices here. Any, let's say, development in this direction?
Okay, I start with the second question. We do not expect and we are not aware of any upcoming changes in the TI flat rate. We have seen none, and we currently, at least for the year 2025, do not expect one.
With regard to HIS, let me please point out, I'll give you now a longer answer, that the recurring revenues in HIS grew by 7% year over year, and that was basically driven by projects that we could turn into recurring revenues. However, on the other hand, we continue to invest in our products and customer projects, and the investments in these products and projects did, so the costs related to those projects did not offset or were larger than the revenue increase. I told you already in the summer that we don't want to miss market chances. You all know that we have deadlines to get our customer projects, the big ones, live, and that's why it shouldn't be a surprise that we are still investing to hold those dates that we promised to our customers.
That's the explanation for the cost side in HIS and the profitability.
Okay, thanks a lot.
Okay, since there appear to be no further questions, I will just briefly hold to see whether that's right. Yeah, there are no further questions at this point. We thank all of you for dialing in today and taking the time for CGM and our quarterly call. As always, if there are further questions, Investor Relations is available, so please don't hesitate to give Frederic or me a call or send an email. With that, thank you so much. Have a good day and bye-bye.
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