Cerner reports third-quarter revenue growth but misses forecast

Kansas City-based Cerner Corp. on Tuesday reported third-quarter revenue of $1.128 billion, a 34 percent jump from $840.1 million in the third quarter a year ago.

Despite the jump, Cerner chief financial officer Marc Naughton said revenues were lower than expected based on projections and were based on factors throughout the business in addition to currency exchange issues involving the company’s overseas business.

The company pointed to bookings — new business under contract — valued at $1.59 billion in the quarter ending Oct. 3. That was an all-time high and up 44 percent from $1.1 billion in the third quarter of 2014.

Cerner president Zane Burke said the company scored a record number of “new footprints,” measured by dollars and sites using Cerner software and services.

Burke said the new bookings in the quarter included 45 contracts over $5 million and 31 over $10 million, with some of the business coming from hospitals and physician offices that are switching from Cerner competitors.

Net earnings for the recent quarter stood at $147.3 million, and diluted earnings per share were 42 cents. That compared to the third quarter of 2014, which had net earnings of $129 million and diluted earnings per share of 37 cents.

Still, Cerner shares fell in after-hours trading in a likely reaction to the revenue results.

“The highlight of our results in the third quarter was our strong bookings, which again included a record number of new clients joining Cerner,” said Neal Patterson, Cerner’s chairman, CEO and co-founder. “We have signed more new clients in the first three quarters of 2015 than any full year in our history.”

Patterson said he attributed that success to the company’s “strong competitive position in an active marketplace.”

The CEO also emphasized Cerner’s HealtheIntent line of business. Cerner is working to use its information technology and health records information to “position Cerner to play a major role as health care continues to shift from a fee-for-service model to outcomes-based reimbursement models,” Patterson said.

The company said it expected fourth-quarter 2015 revenue to land between $1.15 billion and $1.2 billion, with the midpoint reflecting an increase of 27 percent from the fourth quarter of 2014. It said it expects new business bookings between $1.45 billion and $1.55 billion, with the midpoint reflecting 29 percent growth from the fourth quarter of 2014.

In a preliminary outlook, Cerner said it expects 2016 revenue to exceed $5 billion, or a growth of 13 percent “on top of what is projected to be approximately 30 percent growth in 2015.”

Cerner said it expected the much-publicized Department of Defense contract, which it won in a consortium with Leidos and other companies, to have a minimal effect on 2015 results.

This story was originally published November 3, 2015 at 3:19 PM with the headline "Cerner reports third-quarter revenue growth but misses forecast."