Healthcare information services provider Cerner Corp. (CERN), Tuesday reported a decline in profit for the fourth quarter, reflecting higher operating expenses. Quarterly revenues were nearly flat with last year. Both earnings and revenues, however, improved sequentially and came in ahead of analysts' estimates. Looking ahead, the company provided next quarter and fiscal year 2010 guidance, which is expected to come in line with analysts' estimates.
The North Kansas City, Missouri-based company's net earnings for the fourth quarter declined to $60.50 million or $0.71 per share from $71.54 million or $0.86 per share in the previous year.
Results for the quarter included share-based compensation expense of $0.04 per share. Prior-year quarter results include share-based compensation expense of $0.03 per share and margin catch up related to London contract of $0.24 per share.
On an adjusted basis, net earnings were $63.40 million or $0.75 per share, compared to $53.60 million or $0.65 per share a year ago.
On average, 22 analysts polled by Thomson Reuters expected the company to earn $0.72 per share for the quarter. Analysts' estimate typically exclude special items.
Total revenue for the quarter was $466.32 million, compared to $465.73 million last year. Prior-year revenues included $28.6 million related to a one-time catch up on the company's contract in London as part of the National Health Services initiative to automate clinical processes and digitize medical records in England.
Excluding the one-time catch up in 2008, fourth quarter revenue increased 7% from the year-ago period. Analysts expected revenues of $451.17 million for the quarter.
In the preceding third quarter, the company reported an increase in net earnings driven by higher bookings. Net earnings increased to $48.39 million or $0.57 per share, compared with $45.01 million or $0.54 per share in the year-ago period. Non-GAAP net earnings for the quarter increased to $51.35 million or $0.61 per share from $47.45 million or $0.57 per share last year. Total revenue for the quarter declined 3% to $409.41 million from $422.73 million in the previous year.
System sales increased to $171.74 million from $147.99 million a year ago. Support, maintenance and services revenues declined to $287.41 million from $308.93 million in the comparable quarter last year. Reimbursed travel revenues were $7.17 million, down from $8.81 million last year.
Total gross margin was $387.02 million, compared to $378.14 million in the previous year.
Total operating expenses increased to $293.86 million from $276.70 million a year ago. Sales and client service expenses were $184.24 million, up from $182.76 million last year. Software development expenses rose to $74.47 million from $69.37 million in the previous year. General and administrative expenses increased to $35.15 million from $24.56 million in the prior-year quarter.
Interest income declined to $2.74 million from $3.53 million a year ago.
Income tax expense were $33.21 million, compared to $30.92 million in the previous year.
Bookings in the fourth quarter were $680.4 million, up 68% from $404.9 million in the comparable quarter last year. Total revenue backlog was $4.21 billion, up 21% over the year-ago quarter. This comprised of $3.59 billion of contract backlog and $621 million of support and maintenance backlog.
Days sales outstanding for the quarter were 90 days, compared to 92 days in the year-ago quarter.
Neal Patterson, Cerner co-founder, chairman and chief executive officer, said, "Our fourth quarter results reflect a very strong finish to the year, with record bookings, and strong earnings and cash flow."
"2009 represents the end of a decade of strong performance for Cerner, including growing our revenue and adjusted earnings per share at compound annual growth rates of 17 percent and 37 percent, respectively," Patterson added.
For the fiscal year 2009, net earnings increased to $193.46 million or $2.31 per share from $188.66 million or $2.26 per share in the previous year. Adjusted earnings were $204.03 million or $2.43 per share, compared to $182.57 million or $2.19 per share. Total revenue for the year declined to $1.67 billion from $1.68 billion a year ago.
Analysts expected earnings of $2.40 per share on revenues of $1.66 billion for the fiscal year 2009.
Patterson said looking forward, "We enter the new decade very well positioned to benefit from demand driven by the Health Information Technology for Economic and Clinical Health provisions in the American Recovery and Reinvestment Act of 2009. Beyond opportunities associated with HITECH, we are investing in several long-term growth initiatives that position us to build upon the stimulus-driven growth and deliver another decade of strong performance."
For the first quarter of fiscal year 2010, the company currently expects adjusted earnings before share based compensation expense between $0.57 and $0.62 per share. First-quarter revenues are expected in the range of $420 million and $435 million.
Analysts currently expect earnings of $0.62 per share on revenues of $431.79 million for the first quarter.
For the full year 2010, adjusted earnings per share before share based compensation expense are expected between $2.80 and $2.90. Full year revenues are estimated to range from $1.80 billion and $1.875 billion.
Analysts currently expect earnings of $2.84 per share on revenues of $1.85 billion for the fiscal year 2010.
CERN closed Tuesday's regular trading at $78.96, up 1.61 or 2.08%, on a volume of 1.21 million shares on the Nasdaq. In after hours, the stock further gained 1.47 or 1.86%, trading at $80.43. In the past 52-week period, the stock traded in a range of $34.50 to $91.49, on a 3-month average volume of 0.78 million shares.
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