Leading healthcare information technology (“HCIT”) solutions provider Cerner Corporation (CERN) reported first-quarter 2013 adjusted earnings per share of 62 cents beating the Zacks Consensus Estimate of 59 cents and the year-ago earnings per share of 51 cents. Net income rose 24% year over year to $110 million (or 62 cents per share).
Revenues
Revenues for the first quarter rose 6.1% year over year to $680 million, missing the Zacks Consensus Estimate of $709 million. The growth in sales was lower than Cerner’s earlier assumptions due to reduced volume of tech resale, which carries a lower margin.
Support, maintenance and services rose 15.5% to $466.6 million in the reported quarter. This was partly offset by a fall in System sales, which was down 11.9% to $198.9 million. Revenues from Reimbursed Travel were up 26.8% to about $14.6 million.
Bookings and Revenue Backlog
Bookings amounted to $801.6 million, up 23% year over year and a record for the company in any first quarter. Total revenue backlog was $7.58 billion at the end of the first quarter, up 21% year over year, including $6.8 billion of contract backlog and $747.9 million of support and maintenance backlog.
Margins
Gross margin for the quarter rose to 81.3% from 75.4% a year ago. Operating margin increased to 23% from 19.9% in the prior-year quarter.
Balance Sheet & Cash flow
Cerner ended the quarter with cash, cash equivalents and short-term investment of $1,005.2 million, down 3.1% on a sequential basis. Long-term debt and capital lease obligations dropped marginally 0.8% to $135.5 million sequentially.
Outlook
For the second quarter of 2013, the company forecasts sales in a band of $705 million and $735 million and earnings per share, before share based compensation expense, of 66 cents to 68 cents. Fresh bookings for the quarter are projected between $825 million and $875 million. Cerner projects stock-based compensation costs to dilute second quarter earnings by about 4 cents to 5 cents.
For 2013, the company continues to forecast sales in the region of $2,950 million and $3,050 million. Earnings per share, before share based compensation expense, are forecast in the range of $2.78 and $2.83 (earlier $2.75 and $2.82). Cerner projects stock-based compensation costs to dilute earnings by about 17 cents to 18 cents (earlier 16 cents to 17 cents).
We believe long-term investors may consider Cerner, which serves a sizeable installed hospital base that requires composite clinically-oriented applications complying with “meaningful use” needs, reimbursement difficulties and coding challenges. The company has long-standing, integrated and seamless solutions for both inpatient and ambulatory settings.