Leading healthcare information technology (“HCIT”) solutions provider Cerner Corporation (CERN) reported fourth-quarter and 2012 earnings per share of 63 cents and $2.26, respectively, beating the corresponding Zacks Consensus Estimates of 60 cents and $2.23 and the year-ago earnings per share of 52 cents and $1.76 per share, respectively.
Net income rose 22.6% year over year to $111.8 million (or 63 cents per share) due to buoyant bookings.
Revenues
Revenues for the fourth quarter rose 15% year over year to $710.4 million, handily beating the Zacks Consensus Estimate of $697 million. The corresponding figure for 2012 was $2,665.4 million, an increase of 21% year over year, surpassing the Zacks Consensus Estimate of $2,652 million.
In the reported quarter, higher revenue from Support, Maintenance and Services (up 15.9% to $445.1 million) was supported by robust System sales (up 14.2% to $251.8 million). Revenues from Reimbursed Travel were up 21% to about $13.5 million.
Bookings and Revenue Backlog
Bookings amounted to $1.02 billion, up 13% year over year and an all time high for the company. Total revenue backlog came to $7.27 billion at the end of the fourth quarter, up 19% year over year, including $6.53 billion of contract backlog and $738.2 million of support and maintenance backlog.
Margins
Gross margin for the quarter dropped slightly to 78.4% from 78.6% a year ago. Operating margin increased marginally to 22.6% from 22.4% in the prior-year quarter.
Balance Sheet & Cash flow
Cerner ended the quarter with cash, cash equivalents and short-term investment of $1,036.8 million, up 33.8% on a year-over-year basis. Total long-term debt and other obligations rose 57.3% year over year to about $136.6 million.
Cash flow from operation was $180.6 million in the reported quarter, up 7.2% year over year. Free cash flow was $99.4 million, down 15.9%.
Outlook
For the first quarter of 2013, the company forecasts sales in a band of $690 million and $715 million and earnings per share, before share based compensation expense, of 61 cents to 63 cents. Fresh bookings for the quarter are projected between $720 million and $760 million. Cerner projects stock-based compensation costs to dilute first-quarter earnings by about 4 cents.
For 2013, the company forecasts sales in the region of $2,950 million and $3,050 million. Earnings per share, before share based compensation expense, are expected to be in the neighborhood of $2.75 and $2.82. Cerner projects stock-based compensation costs to dilute earnings by about 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” requirements, reimbursement difficulties and complicated coding challenges. The company has long-standing, integrated and seamless solutions for both inpatient and ambulatory settings.