Cerner Corp. reported revenue and operating earnings growth for the first quarter of 2019, despite an 11% dip in bookings.
The Kansas City, Mo.-based electronic health record giant posted $1.39 billion in revenue for the quarter, an 8% rise year over year. Professional services accounted for 35% of this total at $490.4 million, with the remaining revenue attributed to segments such as managed services and licensed software.
Cerner's operating earnings were up 1% year-over-year at $197.9 million.
Cerner recently launched a set of "improvement initiatives" to strengthen its operating performance. The company's leadership said it expects these efforts to begin positively impacting earnings results in the second half of 2019.
"The changes we expect to make revolve around focus," Marc Naughton, Cerner's chief financial officer, said during an earnings call Thursday. "We are doing too many things, and we believe we can do better if we target our attention."
Cerner CEO Brent Shafer said some of these issues revolved around lack of focus in the research and development process. "We found we were developing some great new functionality and then never really getting it to market," Shafer said on the call. "We weren't seeing it all the way through."
Cerner reported $1.24 billion in bookings for the quarter, down 11% from $1.4 billion posted in the first quarter of 2018 and lining up with the first quarter of 2017, when the company reported $1.25 billion in bookings. Naughton called the dip "anticipated," as last year's first quarter included higher than normal levels of large, long-term bookings.
He added that Cerner is expecting a roughly 24% year-over-year decrease in bookings next quarter, in part because last year's second quarter included a bump from the initial task order with the Veterans Affairs Department. The VA's first go-live on Cerner's EHR is scheduled for 2020.
Cerner is being more "selective" as it considers "low-margin, long-term contract opportunities," according to John Peterzalek, Cerner's chief client officer. He said on the call they will focus on "making sure that the margins are right long term for us."
For the fourth quarter of 2018, Cerner boasted near-record bookings at $1.96 billion, the second-highest quarterly bookings recorded in the company's history.
Shafer acknowledged Cerner's recent decision to restructure its board of directors as part of an agreement with Starboard Value, an activist investment fund that owns roughly 1.2% of the company's outstanding stock. The reorganization involved changing more than half of the company's board since 2017.
"Starboard's focus on operational improvements and board refreshment was consistent with our objectives and plans," he said. "We had existing efforts underway in both areas."
Cerner reaffirmed its expectations for 2019, projecting $5.65 billion to $5.85 billion in full-year revenue.
