Cerner Corporation (CERN) barely met its revenue guidance the last time the company reported its quarterly results in February. However, the healthcare-technology provider gave investors reasons to smile, including near-record bookings and the initiation of a dividend program. The company also hinted at incremental improvement expected in the first quarter of 2019.
Investors were able to find out just how well Cerner performed in the first quarter when the company announced earnings results after the market closed on Thursday. Here are the highlights from Cerner's first-quarter update.
Cerner results: The raw numbers
|$1.39 billion||$1.29 billion||
Net income from continuing operations
|$166.2 million||$160 million||
Adjusted earnings per share (EPS)
What happened with Cerner this quarter?
Three months ago, Cerner predicted that its first-quarter revenue would come in between $1.365 billion and $1.415 billion. The company squarely hit the midpoint of that range.
Cerner's professional-services revenue climbed 11.1% year over year, to $490.4 million. Managed-services revenue growth was even better, jumping 13.5% over the prior-year period, to $304.4 million. Licensed software sales rose 14.6%, to $154.5 million. Subscriptions revenue also increased by 10% year over year, to $84.3 million.
However, there were a couple of weak spots in the first quarter. Support and maintenance revenue fell 2.7%, to nearly $277 million. Technology resale revenue also dropped by 12.4%, to $55.5 million.
Cerner reported strong operating cash flow in the first quarter of $317.3 million, with free cash flow of $123.5 million. The company ended the quarter with cash and cash equivalents totaling $503.2 million.
What management had to say
Cerner CEO Brent Shafer stated:
I am pleased with our first quarter results, which were in line with our expectations. During the quarter, we rolled out a refined operating model, which is designed to improve our operating efficiency and speed value creation for our clients. These refinements are foundational to significant improvements in profitably we expect to deliver as part of recently announced operational improvement initiatives.
He added, "Collectively, our operational improvement initiatives, recently announced dividend program, and expanded share repurchase program underscore our commitment to creating value for clients and shareholders."
Cerner expects second-quarter revenue between $1.41 billion and $1.46 billion. Adjusted earnings per share (EPS) for the second quarter are expected to come in between $0.63 and $0.65. The midpoint of that range reflects year-over-year growth of 3.2%.
The company also reiterated its full-year 2019 revenue guidance of $5.65 billion to $5.85 billion. Cerner upped its 2019 adjusted EPS outlook to a range of $2.64 to $2.72, compared to its previous guidance of adjusted EPS between $2.57 and $2.67.
This improved guidance stems, in part, from expected benefits from Cerner's operational-improvement initiatives. The company's expanded share-repurchase program will also help boost its adjusted EPS.
One of the best barometers of how Cerner is likely to perform in the near-to-mid term is its level of bookings. The company announced bookings in the first quarter of $1.24 billion, in line with management's expectations.