Cerner Corp. posted $1.3 billion in revenue for this year's second quarter, down 7% from the year-ago period and narrowly missing the company's own revenue expectations.
Cerner's net earnings were $134.7 million for the second quarter, up 6.1% from $127 million during the same period last year.
Company officials attributed the revenue drop to lower technology resale revenue, which decreased 30.7%, on account of the COVID-19 pandemic, as well as to the termination of a revenue cycle contract with Adventist Health in Roseville, Calif., in late 2019.
Cerner's subscription revenue also rose 2.5%, lower than expected, in part because of lower patient volumes as ambulatory visits dwindled at the height of the COVID-19 outbreak.
"Overall, we are pleased with our results and outlook given our prior guidance was provided in the early stages of an unprecedented environment," Marc Naughton, Cerner's chief financial officer, said on a call with investment analysts Wednesday.
Cerner in April had adjusted its revenue expectations for the full 2020 year, shifting the guidance range down by nearly $200 million. The company in April also said it expected to post between $1.34 billion and $1.39 billion in second-quarter revenue, a range it missed by about $10 million.
Although company officials said they expect project and sales activity to improve in the second half of the year, Cerner on Wednesday moved down its full-year revenue expectations again to reflect the "lower Q2, more current view of the COVID impact going forward and the anticipated sale of our remaining RevWorks services," Naughton said. R1 RCM in June announced an agreement to buy Cerner RevWorks for $30 million.
The company's new revenue guidance includes anticipated full-year revenue in the range of $5.45 billion to $5.55 billion, down from the $5.55 billion to $5.7 billion guidance range it issued in April.
Cerner's adjusted operating margin for the quarter was 18.44 %, up from 18% in 2019's second quarter. Naughton said he expects the company's margin for the full year to be around 20%, repeating a forecast he shared in April.
The company posted $1.3 billion in bookings, down 6% from the year-ago quarter but more than $100 million above the high end of its guidance range issued in April, "primarily due to strong levels of managed services bookings in the quarter," according to Naughton.
The company posted $307.2 million in managed services for the quarter, up 3.2% year-over-year.
Moving forward, Naughton said Cerner would be looking at possible acquisitions to spur the company's "strategic growth" areas, such as behavioral health or data analytics.
Cerner in the second quarter acquired a cybersecurity company for $35 million. Naughton did not share the name of the company, but characterized it as small. "We already offered those services through our professional services organization," he said. "Being able to bring on resources that have contacts outside of our client base, where we can extend that service capability beyond our existing clients, was something that was attractive to us."
Cerner has continued to work on its EHR projects with the Defense Department and Veterans Affairs Department, despite the agencies' delaying rollouts amid COVID-19, said John Peterzalek, Cerner's chief client and services officer. "We're preparing for the first go-live and subsequent go-lives," he said of the VA rollout during the earnings call. "The exact dates of those, while not public, have been proposed."
Peterzalek in an interview after the earnings call said DOD will move forward with EHR go-lives in the fall. The Coast Guard will go live with a pilot site in San Francisco at the end of August.
While the VA hasn't set a new go-live date for its EHR, it is moving forward with implementing a scheduling tool at an initial site in Ohio in the "near future," he said.
Peterzalek declined to share specific go-live dates.
There are some adjustments being made to the agencies' EHR go-lives on account of the pandemic, he said. They'll involve fewer workers on site, and instead involve more virtual support from off-site Cerner employees.
"The primary difference is how many people we put on site," Peterzalek said. "It'll be more of a hybrid type of activity."