Cerner's Q1 revenue grows to $1.4B but misses target due to impact of COVID-19

Cerner CEO Brent Shafer giving keynote speech on a stage
Cerner CEO Brent Shafer speaks during a 2019 Cerner conference. (Cerner)

Cerner's first-quarter 2020 fell short of its expectations as the company felt the impact of the COVID-19 pandemic in mid-March.

The company's first-quarter revenue grew 2% to $1.41 billion, compared to $1.4 billion in the first quarter of 2019. 

Cerner expected first-quarter 2020 revenue between $1.4 billion and $1.5 billion. First-quarter revenue also missed Wall Street estimates with a consensus revenue estimate of $1.43 billion.

The Kansas City, Missouri-based health IT company's bottom line totaled $147 million, or $0.47 per share. That declined compared with $166 million, or $0.51 per share, in last year's first quarter.

Cerner reported adjusted earnings of $222 million or $0.71 per share for the period. Adjusted earnings were up 16% to $0.61 of adjusted earnings per share in the year-ago quarter. Earnings beat Street expectations. Analysts had expected the company to earn $0.70 per share, according to figures compiled by Thomson Reuters.

First-quarter revenue was impacted by a lower level of bookings in the quarter as well as travel restrictions implemented by the company in response to the pandemic.

Bookings in the first quarter of 2020 came to $1.1 billion.

The biggest COVID-19 financial hit will occur in the second quarter, Cerner CEO Brent Shafer said during the company's first-quarter 2020 earnings call Tuesday.

"I’m pleased we delivered a solid first quarter with only minor impacts from the early stages of the pandemic," he said.

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"While we expect the pandemic to continue affecting our results, we currently believe that the largest impact will occur in the second quarter of 2020 and expect resiliency in our future financial performance," he said.

The company expects project and sales activity to improve if pandemic-related restrictive measures are relaxed.

John Peterzalek, Cerner’s chief client officer, said health systems and hospitals want to move forward with technology projects and strategic plans once the emergency period of the health crisis has passed.

During the pandemic, there has been a heightened focus on interoperability, secure access to information and analytics, he said.

In the long run, this will lead to healthcare further embracing technology, according to Peterzalek.

"We are cautiously optimistic about this business activity being able to resume as the funding providers receive from the CARES Act helps them to recover from the significant near-term impact of the pandemic and puts them in a better position to move forward with strategic projects and consider new ones," he said.

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Cerner Chief Financial Officer Marc Naughton said the company expects second-quarter 2020 revenue between $1.34 billion and $1.39 billion, down $95 million from its expected revenue of $1.36 billion for that quarter.

The company updated its guidance for its full-year 2020 revenue to between $5.55 billion and $5.7 billion, down from a prior range of $5.7 billion to $5.9 billion.

The midpoint of this range is $5.6 billion, down $225 million from the previous midpoint of $5.8 billion.

Cerner expects 2020 revenue to be down 1% compared to 2019 revenue of $5.7 billion, Naughton said.

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The company expects second-quarter 2020 earnings per share between $0.60 and $0.64. Cerner is projecting full-year 2020 earnings per share between $2.78 and $2.90, down from a prior range of $3.09 to $3.19.

The company also expects new business bookings in the second quarter between $1 billion and $1.2 billion.

COVID-19 response

Cerner has taken several steps to support its provider clients during the pandemic including introducing new technology offerings and joining with other companies to offer virtual health solutions.

The company provided the technology to help the National Health Service in the U.K. stand up a 4,000-bed temporary field hospital.

The company is using its data stores to aid with disease surveillance, Shafer said. "We're working with the CDC (Centers for Disease Prevention and Control) to participate in a surveillance network that can better scope and mitigate the impact of COVID," he said.

About one-third of Cerner's clients have given consent to provide de-identified data to this surveillance network, Shafer said.

Cerner also is offering health systems and academic research centers access to de-identified patient data for research and vaccine developed. The data are stored on Cerner HealtheDataLab, which sits on the Amazon Web Services cloud platform.