Business

Cerner continues growth, reporting its best year ever in new business bookings

Cerner president Zane Burke said the company expects an even stronger 2015 based predominantly on Cerner business but also recognizing integration of Siemens Health’s clients.
Cerner president Zane Burke said the company expects an even stronger 2015 based predominantly on Cerner business but also recognizing integration of Siemens Health’s clients. The Kansas City Star

When fast-growing Cerner Corp. this year pulled Siemens Health Services into its corporate fold, it gained, among other assets, a health information software product called Soarian.

How appropriate for high-flying Cerner. The North Kansas City-based Cerner is soaring. On Tuesday it reported its best year ever in new business bookings.

Cerner said its fourth-quarter bookings reached $1.16 billion, an all-time high and nearly 5 percent more than its previous quarterly bookings record of $1.11 billion in the fourth quarter of 2013.

Full-year 2014 bookings — the amount of new business under contract — were a record $4.25 billion, 13 percent higher than 2013 bookings of $3.77 billion.

“It was a solid Q4 and a very strong year,” Cerner’s chief financial officer, Marc Naughton, said in a conference call with stock analysts.

Cerner president Zane Burke said the company expects an even stronger 2015 based predominantly on Cerner business but also recognizing integration of Siemens Health’s clients.

Over time, Soarian clients may gravitate to Cerner software, but for the time being, Siemen Health’s existing contracts with hospitals and other health providers add a welcome bump to Cerner’s far larger stable of electronic medical records clients.

“The pipeline reflects more new business opportunities than we’ve ever had going into a year,” Burke said. “We expect 2015 to be a very good year for new business.”

He said the company also projects increased demand for its “population health” services. The company is reaching beyond selling technology to selling consulting services that aim to reduce health care costs by keeping people healthier. Cerner intends for its “big data” collection, analysis and software applications to help spot small, individual health problems before they become major medical expenses.

Cerner trumpets bookings, but it also reported strong financials, including fourth-quarter revenue of $926 million, which represents money that actually came in. For the fourth quarter, revenue was up 16 percent compared with $795.3 million in the year-earlier period.

Full-year 2014 revenue was $3.4 billion, up 17 percent compared with 2013 revenue of $2.91 billion. Analysts had expected Cerner to report that $3.4 billion amount.

Naughton said growth came in Cerner’s software sales, systems sales, subscription revenue and consulting services. All were up over the year, domestically and globally.

The company reported fourth-quarter 2014 net earnings of $147.9 million and diluted earnings per share of 42 cents. That compared with fourth-quarter 2013 net earnings of $60.1 million and diluted earnings per share of 17 cents.

For the full year, 2014 net earnings were $525.4 million and diluted earnings per share were $1.50, compared with full-year 2013 net earnings of $398.4 million and diluted earnings per share of $1.13.

Additional information about the company’s calculations for adjusted net earnings, reflecting changes related to Cerner’s acquisition of Siemens Health, can be found in the investors section at Cerner.com.

Other highlights in the report:

▪ Fourth-quarter cash collections were $910.8 million and operating cash flow was $223.4 million. For the full year, cash collections were $3.48 billion and operating cash flow was $847 million.

▪ Fourth-quarter free cash flow was $100.2 million. For the full year, free cash flow was $392.6 million, compared with $168.3 million in 2013.

“Cerner’s solid fourth-quarter results contributed to a very strong year,” Neal Patterson, Cerner’s chairman, CEO and co-founder, said in a news release. “We are well positioned for good growth in 2015 and beyond as we see significant opportunities to grow by delivering solutions that support health care’s shift” from a fee-for-service model to one with incentives for “improving the health of populations and providing better outcomes at lower costs.”

Cerner’s $1.3 billion cash acquisition of Siemens Health Services was announced last August, approved by regulators in the fall and sealed with a wire transfer last week.

Even without the Siemens acquisition, Cerner was pedaling a healthy growth cycle. It reported hiring 1,645 associates last year, passing a 10,000 milestone in the Kansas City area alone. That’s about 3,000 more than work for Sprint in the metro area.

With Siemens Health, Cerner gained about 5,000 workers, boosting worldwide employment to more than 21,000. Most of the former Siemens Health employees are based in Malvern, Pa., with no current relocation plans announced.

Cerner says it has clients in 18,000 hospitals, physicians’ offices, ambulatory care centers and pharmacies in more than 30 countries. It claims the top spot in its health technology industry over its biggest competitor, privately owned Epic Systems, which does not release financial information as publicly traded Cerner does.

Both companies sell software and consulting services to health care providers. Combined, the company will pour more than $650 million into annual research and development investment, officers pledged.

“Software is never finished,” Burke said in an interview last week.

Cerner has just begun the earthmoving stage to develop its fourth major office campus in the Kansas City area. It broke ground this winter on a planned $4.45 billion development in south Kansas City on the former Bannister Mall site. Within the decade, the site is intended to house 16,000 new Cerner workers.

Cerner officers said work on the south Kansas City campus and upgrading some former Siemens assets will affect capital expenditures for the next two years. But, Naughton said, Cerner still expects to have more free cash flow in 2015 and 2016.

Cerner shares closed Tuesday at $67.41, up 54 cents.

To reach Diane Stafford, call 816-234-4359 or send email to stafford@kcstar.com. Read more from Diane at kansascity.com/workplace. Twitter: @kcstarstafford.

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