Softer bookings dampen Cerner's Q3 growth
- Cerner's new bookings fell short of expectations in the third quarter of 2018, leading to lower than expected revenue for the period. While sales of licensed software grew 43% from a year ago to $1.59 billion, the EHR vendor didn't match the second quarter's $1.78 billion.
- Third quarter revenue totaled $1.34 billion, up 5% from the same period the prior year.
- The earnings report comes as Cerner is under fire again for its performance on a Department of Defense contract. According to Politico, independent investigators for the Pentagon gave the company poor marks on its MHS Genesis EHR implementation, calling the system "not effective and not suitable" and "not interoperable." The low assessment echoes an April DOD report.
Cerner attributed the lower-than-expected software bookings to timing and pointed to a strong pipeline of potential business hookups. Technology resales were also somewhat off in the third quarter.
"There isn't anything that's forcing clients to go get deals done," Cerner CFO Marc Naughton said during a Thursday earnings call. "The market is still active. We just didn't get much of it in Q3."
Cerner also said it is not yet seeing the full impact of government contracts. Nonetheless, officials called it a strong quarter with solid results.
"We continue to have good contributions from our key growth areas" of population health, revenue cycle management and health IT outsourcing, said Chief Client Officer John Peterzalek, who replaces departing President Zane Burke starting next week.
"As we look at our portfolio and our investment plans, there's some transformation of our own that we need to do to make sure we're positioned well for the opportunities in front of us,” said Cerner Chairman and CEO Brent Shafer. "Part of that work is creating an operating model that is really designed to support innovation at scale. We are at scale now and want to continue to scale."
Meanwhile, Cerner faces fresh competition from commercial health giant UnitedHealth, which is expanding into EHRs with a fully integrated system in 2019. During a recent earnings call, UnitedHealth CEO David Wichmann said the company will launch a "fully individualized, fully portable" EHR early next year leveraged off its Rally mobile wellness platform.