Cerner Corp. posted $1.41 billion in revenue for this year's first quarter, missing its own revenue expectations.
That figure is a 2% rise from the year-ago quarter, when the Kansas City, Mo.-based electronic health records vendor reported revenue of $1.39 billion. Professional services accounted for most of Cerner's quarterly revenue at $511.4 million, followed by managed services revenue at $309.4 million.
Cerner in February had pegged its expected revenue for the first quarter in the range of $1.415 billion to $1.465 billion.
The company largely attributed missing its target to lower-than-expected bookings, as the COVID-19 outbreak led to a lower volume of contracts in the last two weeks of March, according to company officials.
Cerner posted $1.09 billion in bookings for the first quarter, but in February had said it expected bookings to be in the range of $1.1 billion and $1.3 billion.
"We do expect the pandemic to impact our results for the rest of the year," Marc Naughton, the company's chief financial officer, said on a call with investment analysts Tuesday. "While we remain on track with our planned cost-optimization efforts and are implementing additional measures to mitigate the impacts of the crisis, we do not expect to fully offset the impact."
Cerner's adjusted operating margin for the quarter was 19.38%—posing a challenge for the company, which has been trying to improve its margin since last year. Naughton said he expects the company's margin for the full year to be around or slightly below 20%, down from the previous expectation of 21%.
Cerner had met its targeted adjusted operating margin of 20% in 2019's fourth quarter after implementing a set of 165 cost cutting, portfolio management and business simplification initiatives.
The company on Tuesday also adjusted its revenue expectations for the full 2020 year, now indicating it expects to hit between $5.55 billion and $5.7 billion in 2020, down from its previous expectation of $5.725 billion to $5.975 billion.
Cerner officials said they anticipate seeing a larger impact from COVID-19 on its revenue next quarter as projects and new sales are stalled, and issued guidance of between $1.34 billion and $1.39 billion in revenue for the second quarter. However, they expect activity to pick back up in the second half of 2020.
Cerner's EHR contracts with the Defense Department and the Veterans Affairs Department are two of the projects that have paused go-lives amid the COVID-19 outbreak.
Despite the halted go-live schedule, Cerner is still working with the DOD and the VA to build and prepare the EHR systems for deployment, said John Peterzalek, Cerner's chief client and services officer, in an interview with Modern Healthcare.
"The programs have not stopped," Peterzalek said. He noted the schedule for the initial EHR implementations could be affected by when different states reopen.
Peterzalek on the call with investment analysts Tuesday said one reason he's "cautiously optimistic" about business activity later in the year is due to healthcare providers getting funding from the CARES Act, putting them in a "better position to move forward with planned projects and consider new ones as they look to address needs that have been identified during this crisis."
"The pandemic has created a heightened focus on the need for interoperability, secure access to information, analytics and other needs that align with our capabilities," he said.
Cerner is one of the biggest brands in the EHR space, accounting for 26% of the EHR market among acute-care hospitals in the U.S., according to a report KLAS Research released last year. Cerner's top rival, Epic Systems Corp., a privately held company, has 28% of the market.
