Cerner fourth-quarter revenue dips 3.3%, net earnings down 8.3%

Cerner Corp. on Wednesday posted $1.39 billion in revenue for 2020’s fourth quarter, down from $1.44 billion in revenue that the company reported for the same period in 2019.

Cerner executives attributed the 3.3% year-over-year dip in revenue to recent divestitures, as well as the impact of the COVID-19 pandemic.

The company also reported $177.5 million in operating income, down 2.9% from $182.8 million posted in the year-ago quarter, and $141.5 million in net earnings, down 8.3% from $154.3 million one year prior.

The $1.39 billion revenue figure is consistent with earnings guidance the Kansas City, Mo.-based electronic health records company released in October, in which it pegged fourth quarter revenue to be in the range of $1.365 billion to $1.415 billion.

Cerner posted $478.1 million in revenue from professional services, down 6.1% year-over-year, and $317.1 million in revenue from managed services, up 2.5% year-over-year, for the quarter.

Cerner’s bookings were $1.7 billion for the fourth quarter, up 1.1%.

There could be “some limited level of divestiture activity” in 2021 as Cerner continues to evaluate its portfolio to “make sure that we’re investing in the things that we think will drive future growth,” said Marc Naughton, who will step down from his post as Cerner’s chief financial officer later this month, on a call with investment analysts Wednesday. But the focus moving forward will be acquiring assets that support opportunities for growth—such as its so-called “data-as-a-service” business.

That includes the company’s Learning Health Network, a project that collects de-identified patient data from systems including EHRs to share with researchers at health systems, universities and pharmaceutical and life sciences companies, and recent investment in Elligo Health Research and planned $375 million acquisition of Kantar Health.

“We’re deploying capital to advance Cerner’s growth strategies,” said Brent Shafer, Cerner’s CEO. Part of Cerner’s Learning Health Network effort involves connecting life sciences and pharmaceutical companies with participating provider organizations who are interested in clinical trials, which could generate revenue opportunities for provider organizations, Shafer added.

The Kantar acquisition also represents a step into the pharmaceutical market for Cerner, according to company executives, and is expected to contribute $125 million from the second to fourth quarters of 2021.

Cerner’s other core focus this year is its federal business, which accounted for nearly $1 billion of Cerner’s business at the close of 2020. The Defense Department, Coast Guard and Veterans Department are all rolling out EHRs from Cerner.

“Federal continues to be an opportunity for us,” said Travis Dalton, chief client and services officer at Cerner. “I think we have opportunity beyond our core contracts. I see potential for us with new agency work.”

Cerner two years ago launched a set of 165 cost cutting, portfolio management and business simplification efforts as part of a move to improve its adjusted operating margin, with plans to target a 22.5% margin in 2020. The company’s adjusted operating margin in 2020’s fourth quarter was 21.5%, up from 20.3% in the year-ago quarter.

Adjusted operating margin for full-year 2020 was 19.9%, compared to 18.5% in 2019.

“We’re happy with our operating margin improvement in 2020, given the circumstances,” Naughton said.


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