Health IT giant Cerner brought in $206 million in net earnings for the first quarter of 2022, up 20% from $172 million during the same period a year ago.
The company's bottom line grew slightly, up 3% from $1.39 billion during the first quarter in 2021 to $1.43 billion this past quarter, according to its financial release (PDF).
The company's GAAP-diluted earnings per share was 70 cents, a 25% increase from the first quarter of 2021. Earnings, adjusted for one-time gains and costs, were 89 cents per share, up 17% from a year ago, and the results met Wall Street estimates.
Cerner's first-quarter revenue did not meet Street forecasts. Three analysts surveyed by Zacks expected $1.47 billion. Cerner shares have climbed 1% since the beginning of the year, while the S&P's 500 index has decreased 13%. The stock has climbed 25% in the last 12 months.
Given the proposed acquisition by Oracle, Cerner said it would not be hosting an earnings conference call, issuing prepared remarks, providing financial guidance nor repurchasing shares.
“I am pleased with Cerner’s solid results in the first quarter,” said David Feinberg, M.D., president and CEO, in a statement. “Our results reflect solid execution across the business and strong contributions from Cerner Enviza, which is well-positioned to build on a terrific first year by accelerating the discovery, development and deployment of therapies."
Enviza is the company's data and research unit focused on the life sciences market.
Feinberg said Cerner continues to "make progress towards the closing of the proposed acquisition by Oracle."
"I remain excited by the potential for the combination to further our purpose of empowering those devoted to delivering care and keeping people healthy," he said.
In December, Cerner and Oracle jointly announced an agreement for the global software giant to acquire the EHR company in a $28 billion deal. In its financial report, Cerner said it expects the deal to close in 2022.
Oracle extended its tender offer to acquire Cerner a third time until May 11. The company said the decision was made to allow additional time to complete the remaining conditions.
Oracle Corp.’s proposed $28 billion purchase of Cerner passed through U.S. antitrust scrutiny back in February. The deal was reviewed under the Hart-Scott-Rodino Act, which evaluated whether the combination of the cloud-computing giant and the North Kansas City-based healthcare IT company posed any antitrust concerns, the Kansas City Business Journal reported.
Late last month, Cerner shares ticked higher after a report that Oracle's planned purchase of the company is likely to see few issues with a European antitrust review.
"During the first quarter, we delivered revenue growth in line with our expectations and expanded adjusted operating margin by 130 basis points, resulting in strong adjusted diluted EPS growth of 17%,” said Mark Erceg, executive vice president and chief financial officer, in a statement.
“The margin expansion this quarter was on top of strong margin expansion over the past two years. Since the first quarter of 2020, our GAAP operating margin has expanded 500 basis points and our adjusted operating margin has expanded 330 basis points, reflecting the ongoing impact of our organizational transformation, productivity measures, more focused product strategy and cost control initiatives. These efforts are improving our ability to create value for our clients while also driving better financial performance," Erceg said.
The evolving EHR market in the U.S., Europe
When the Oracle was deal was announced—one of the software company’s biggest acquisitions ever and one of the largest takeovers this year—the software giant said it planned to expand the health IT company's business into more international markets.
"Working together, Cerner and Oracle have the capacity to transform healthcare delivery by providing medical professionals with better information—enabling them to make better treatment decisions resulting in better patient outcomes," said Larry Ellison, chairman and chief technology officer at Oracle, in a statement.
With this deal, database giant Oracle is pushing deeper into the healthcare market, and the acquisition should help the company scale up its cloud business.
“Oracle’s acquisition of Cerner may be a play to get a strong foothold in the emerging cloud opportunity in healthcare. Cerner is a leading EHR vendor and healthcare is in the early stages of the cloud journey," said Paddy Padmanabhan, founder and CEO of Damo Consulting, a growth strategy and digital transformation advisory firm.
The U.S. EHR market has become saturated as most hospitals and physician offices have adopted health IT systems. But 2021 was a busy year for health IT purchasing, according to a KLAS Research analysts in a recent EMR market share report.
Close to 350—from specialty hospitals to critical access facilities to large health systems—were impacted in 2021 by an EMR purchase decision, including migrations, 44% increase over 2020, KLAS reported.
After losing market share to competitor Epic last year, Cerner stabilized its market share in 2021, gaining five hospitals. However, Cerner's net-new customers continue to be mostly small standalone hospitals. Outside of Cerner’s government contracts, "no net-new large health systems have selected Cerner since 2013," KLAS Research analysts wrote.
Cerner continues to gain traction in the European market and grows its hospital customer base, KLAS Research reported. At the end 2020, Cerner was third in Europe for number of contracted hospitals, according to KLAS data.
The company also has massive federal contracts to build EHR systems for the departments of Defense and Veterans Affairs as well as the Coast Guard.
Oracle is known for its massive database technology, and acquiring Cerner expands the company's reach to major health systems and presents potentially lucrative cross-selling opportunities, Brad Haller, a partner in the M&A practice at consulting firm West Monroe, told Fierce Healthcare.
The company plans to leverage its autonomous database, low-code development tools and voice digital assistant user interface to rapidly modernize Cerner's systems and move them to Oracle's Gen2 Cloud. This will provide medical professionals with a new generation of easier-to-use digital tools that enable access to information via a hands-free voice interface to secure cloud applications, executives said.
When the deal was announced, Feinberg said joining Oracle as a dedicated industry business unit provides an "unprecedented opportunity to accelerate Cerner's work modernizing EHRs, improving the caregiver experience and enabling more connected, high-quality and efficient patient care."
Editor's note: This story has been updated to reflect that Cerner stabilized its U.S. EHR market share in 2021.