Cerner (CERN) barely met its revenue guidance when the company reported its third-quarter results in October. Growth in its professional-services and managed-services businesses made the difference for the healthcare technology provider.

The company predicted in October that its fourth-quarter results would show stronger revenue growth. Cerner announced those results after the market closed on Tuesday. Did its prediction come true? Here are the highlights from Cerner's quarterly update. 

Physician holding a tablet next to another physician

Image source: Getty Images.

Cerner results: The raw numbers


Q4 2018 

Q4 2017 

Year-Over-Year Change


$1.37 billion $1.31 billion


Net income from continuing operations

$131.3 million $336.7 million


Adjusted earnings per share (EPS)

$0.63 $0.58


Data source: Cerner.

What happened with Cerner this quarter?

Cerner's previous guidance called for fourth-quarter revenue between $1.37 billion and $1.42 billion. The company again squeaked by to meet the lower end of its projected range. Professional services and managed services yet again came to the rescue.

The company's biggest moneymaker in the fourth quarter was professional services, with revenue climbing 17% year over year to $466.2 million. Managed services came in second, with revenue of $299.1 million, up 14% over the prior-year period. Cerner also posted respectable revenue growth generated by support and maintenance, with revenue up 5.8% to $276.8 million.

However, it was a different story on several other fronts. Cerner's licensed software revenue slipped 1.7% below the prior-year period to $166.5 million. Subscriptions revenue fell 24.1% year over year to $87 million. Technology resale revenue plunged 42% from the fourth quarter of 2017 to $46.1 million.

Cerner's GAAP net income nosedived from the prior-year period, but it wasn't really as bad as it might seem. The company's bottom line took a hit from a $45.3 million pre-tax charge for an allowance against accounts receivable related to a dispute that's been going on since 2008. The year-over-year comparison also was affected by a big tax benefit in the fourth quarter of 2017 and a tax expense in the recent quarter.

The company's non-GAAP adjusted earnings per share provide a better picture of Cerner's progress. Adjusted EPS increased year over year thanks to higher revenue and lower expenses for share-based compensation and related taxes.

One significant positive from Cerner's fourth-quarter results was its $1.96 billion in bookings -- unrecognized revenue from contracts that have been signed. This was the second highest quarterly bookings figure in Cerner's history. The company also reported a total backlog of $15.25 billion, up from $14.7 billion in the third quarter. 

What management had to say

Cerner Chairman and CEO Brent Shafer stated:

We finished the year on a solid note and in line with full-year expectations. After one year at Cerner, I have confirmed my initial view that we have significant opportunity to grow and create value in healthcare, and we are refining our operating model so we can innovate at scale, deliver value to clients faster, and grow profitably. Our confidence in Cerner's growth outlook, combined with strong cash flow and balance sheet, put us in a position to return capital to shareholders by initiating a quarterly dividend. This move, along with the existing share repurchase program, underscores our commitment to delivering shareholder value.

Check out the latest Cerner earnings call transcript.

Looking forward

Shafer's comments mentioned probably the biggest news of all with Cerner's fourth-quarter update: The company is initiating a dividend. Cerner plans to start out with a quarterly cash dividend of $0.15 per share, which translates to a dividend yield of around 1%.

The company also provided guidance for the first quarter and full year 2019. Cerner expects first-quarter revenue between $1.365 billion and $1.415 billion, with adjusted diluted EPS between $0.60 and $0.62. New business bookings in the first quarter are projected to be between $1.1 billion and $1.3 billion. For the full year, the company anticipates revenue between $5.65 billion and $5.85 billion, with adjusted diluted EPS between $2.57 and $2.67. 

Cerner's expected growth probably won't excite investors. However, the company continues to reward shareholders in other ways, including its buyback program and its new dividend program, which, combined with its modest growth, could deliver solid total returns.