Cerner revenue up slightly in Q3, CFO announces departure

Dive Brief:

  • EHR-giant Cerner posted $1.36 billion in revenue during its third quarter — up slightly from the second quarter, but down roughly 4% year over year and just shy of Wall Street expectations.
  • Cerner reported net income of $356.7 million, up from about $82 million during the same period last year. Bookings came in above the midpoint of Cerner’s guidance range and beat Wall Street at $1.47 billion.
  • The Kansas City, Missouri-based vendor also announced the upcoming departure of its current CFO Marc Naughton, who has been with the company since 1992. Naughton is leaving the company next year, but will remain on during the search for his successor.

Dive Insight:

Cerner’s health system clients are especially warming up to its data tools that can help streamline their own workflows during the COVID-19 pandemic, including revenue cycle management tools and those to help reschedule elective surgeries, President Don Trigg said during a Wednesday call with investors.

“There is strategic leverage in the revenue cycle front end as clients look to decrease downstream cost-to-collect,” Trigg said.

Cerner’s professional services drove revenue for the quarter at nearly $480 million, followed by managed services at about $312 million and support and maintenance at about $260 million.

Licensed software brought in about $172 million and subscriptions revenue was $93.4 million.

The vendor offered fourth quarter guidance, expecting to land within $1.55 billion to $1.75 billion for bookings the next time it reports financials.

Hitting the $1.65 billion midpoint would bring full-year bookings to $5.55 billion, down 7% from 2019, which Naughton attributed to the pandemic and divestitures.

“Given the current environment, especially the uncertainty around how large of an impact colder weather and flu season will have on the pandemic, we continue to caution that our guidance remains subject to a higher than normal amount of risk,” Naughton said.

And while the pandemic threw a wrench in interoperability plans, Cerner is still moving ahead with federal projects to modernize government agencies’ health IT infrastructures.

A U.S. Department of Veterans Affairs hospital went live with a new Cerner EHR platform over the weekend in a major step for the agency’s massive and embattled program.

It’s the first go-live for the beleaguered $16 billion technology project, which has been dogged by delays, management turnover, snowballing spending and operational issues since it launched in 2018.

Wednesday’s results came with another announcement — that Naughton will depart from his role and his successor has yet to be selected.

“While we acknowledge investor fears given [Cerner’s] bumpy history around succession planning, we believe the transition is a net positive that affords [Cerner] the opportunity to take a more thoughtful approach in framing its value proposition to investors,” analysts with SVB Leerink said. “This can create significant opportunity from a valuation standpoint.”