Cerner Reports Fourth Quarter and Full Year 2013 Results

Cerner Press Release:

Cerner Reports Fourth Quarter and Full Year 2013 Results

February 04, 2014

Strong Bookings and Revenue

KANSAS CITY, Mo. — Feb. 4, 2014 — Cerner Corporation (Nasdaq: CERN) today announced results for the 2013 fourth quarter and full year that ended December 28, 2013, delivering strong levels of bookings and revenue performance.

Bookings in the fourth quarter of 2013 were $1.11 billion, an all-time high and an increase of 9 percent compared to fourth quarter 2012 bookings of $1.02 billion, which was the previous all-time high. Full-year 2013 bookings were a record $3.77 billion, up 20 percent compared to 2012 bookings of $3.14 billion.

Fourth quarter revenue was $795.3 million, an increase of 12 percent compared to $710.4 million in the year-ago period. Full year 2013 revenue was $2.91 billion, up 9 percent compared to 2012 revenue of $2.67 billion.

On a U.S. Generally Accepted Accounting Principles (GAAP) basis, fourth quarter 2013 net earnings were $60.1 million and diluted earnings per share were $0.17. Fourth quarter 2012 GAAP net earnings were $111.8 million and diluted earnings per share were $0.32. For the full year, 2013 GAAP net earnings were $398.4 million and diluted earnings per share were $1.13. Full year 2012 GAAP net earnings were $397.2 million and diluted earnings per share were $1.13.

The number of shares and the per share amounts for all periods presented within reflect the two-for-one stock split effective June 28, 2013.

Adjusted (non-GAAP) Net Earnings

Adjusted net earnings for fourth quarter 2013 were $136.7 million, an increase of 16 percent compared to $118.2 million of adjusted net earnings in the fourth quarter of 2012. Adjusted diluted earnings per share were $0.39 in the fourth quarter of 2013 compared to $0.34 of adjusted diluted earnings per share in the year-ago quarter. Analysts’ consensus estimate for fourth quarter 2013 adjusted diluted earnings per share was $0.39. For the full year 2013, adjusted net earnings were $496.8 million and adjusted diluted earnings per share were $1.41, compared to full year 2012 adjusted net earnings of $420.8 million and adjusted diluted earnings per share of $1.20.

Adjusted net earnings is not a recognized term under GAAP and should not be substituted for net earnings as a measure of Cerner’s performance but instead should be utilized as a supplemental measure of financial performance in evaluating our business. Following is a description of adjustments made to net earnings. For more detail, please see the accompanying schedule, titled “Reconciliation of GAAP Results to Non-GAAP Results.”

Fourth quarter 2013 adjusted net earnings and diluted earnings per share exclude share-based compensation expense and a settlement charge. These items reduced fourth quarter 2013 net earnings and diluted earnings per share by $76.6 million and $0.22, respectively. Fourth quarter 2012 adjusted net earnings and diluted earnings per share exclude share-based compensation expense, which reduced net earnings and diluted earnings per share by $6.4 million and $0.02, respectively. Share based compensation expense and the settlement charge reduced full-year 2013 net earnings and diluted earnings per share by $98.4 million and $0.28, respectively. Share based compensation expense reduced full year 2012 net earnings and diluted earnings per share by $23.5 million and $0.07, respectively.

Other 2013 Fourth Quarter and Full-Year Highlights:

• Fourth quarter cash collections of $781.8 million and operating cash flow of $141.5 million. For the full year, cash collections were $3.05 billion and operating cash flow was $695.9 million.
• Fourth quarter free cash flow of negative $41.7 million, reflecting the impact of the settlement charge. For the full year, free cash flow was $168.3 million, compared to $424.7 million in 2012, with the decline due to an increase in capital expenditures and capitalized software related to facilities needs and growth initiatives and the fourth quarter settlement charge. Free cash flow is a non-GAAP financial measure defined as GAAP cash flows from operating activities less capital purchases and capitalized software development costs. For more detail, please see the accompanying schedule, titled “Reconciliation of GAAP Results to Non-GAAP Results.”
• Fourth quarter days sales outstanding of 67 days, which is down from 74 days in the year-ago quarter.
• Total backlog of $8.91 billion, up 23 percent over the year-ago quarter. This was comprised of $8.13 billion of contract backlog and $786.0 million of support and maintenance backlog.

“Cerner’s fourth quarter results reflect a strong finish to the year,” Neal Patterson, Cerner chairman, CEO and co-founder said. “In addition to delivering strong operating results in 2013, we invested heavily in our cloud solutions and infrastructure, and I believe these investments are positioning Cerner for growth through the decade. IT is growing in importance as health care undergoes an unprecedented amount of change, and we believe Cerner’s solutions and services are well aligned with helping stakeholders improve quality and lower costs while adapting to the evolving landscape.”

Future Period Guidance

Cerner currently expects:

• First quarter 2014 revenue between $770 million and $810 million.
• Full year 2014 revenue between $3.2 billion and $3.4 billion.
• First quarter 2014 adjusted diluted earnings per share before share based compensation expense between $0.36 and $0.37.
• Full year 2014 adjusted diluted earnings per share before share based compensation expense between $1.62 and $1.67.
• First quarter 2014 new business bookings between $860 million and $930 million.
• Share based compensation expense to reduce diluted earnings per share by approximately $0.03 in the first quarter of 2014 and between $0.11 and $0.12 for the year.

Earnings Conference Call

Cerner will host an earnings conference call to provide additional detail on these results at 3:30 p.m. CT on February 4. The dial-in number for the conference call is (857)-244-7551; the passcode is Cerner. Cerner recommends joining the call 15 minutes early for registration. The re-broadcast of the call will be available from 6:30 p.m. CT, February 4 through 11:59 p.m. CT, February 7. The dial-in number for the re-broadcast is (617)-801-6888; the passcode is 61186290.

An audio webcast will be available live and archived on Cerner’s website at www.cerner.com under the About Cerner section (click Investor Relations, then Presentations and Webcasts).

About Cerner

Cerner is contributing to the systemic change of health and care delivery. For more than 30 years Cerner has been executing its vision to make health care safer and more efficient. We started with the foundation of digitizing paper processes and now offer the most comprehensive array of information software, professional services, medical device integration, remote hosting and employer health and wellness services. Cerner systems are used by everyone from individual consumers, to single-doctor practices, hospitals, employers and entire countries. Taking what we’ve learned over more than three decades, Cerner is building on the knowledge that is in the system to support evidence-based clinical decisions, prevent medical errors and empower patients in their care.

Cerner® solutions are licensed by approximately 14,000 facilities around the world, including more than 3,000 hospitals; 4,900 physician practices; 60,000 physicians; 590 ambulatory facilities, such as laboratories, ambulatory centers, behavioral health centers, cardiac facilities, radiology clinics and surgery centers; 3,500 extended care facilities; 150 employer sites and 1,790 retail pharmacies.

Certain trademarks, service marks and logos (collectively, the “Marks”) set forth herein are owned by Cerner Corporation and/or its subsidiaries in the United States and certain other countries throughout the world. All other non-Cerner Marks are the property of their respective owners. Nasdaq: CERN. For more information about Cerner, please visit www.cerner.com, Twitter, Facebook and YouTube.