Cerner Corp CERN
Q1 2013 Earnings Call Transcript

Transcript Call Date 04/25/2013

Operator: Welcome to Cerner Corporation's First Quarter 2013 Conference Call. Today's date is April 25, 2013 and this call is being recorded. The Company has asked me to remind you that various remarks made here today by Cerner's management about future expectations, plans, perspectives and prospects constitute forward-looking statements for purpose of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by the forward‐looking statements.

Additional information concerning factors that could cause actual results to differ materially from those in the forward‐looking statements may be found under the heading 'Risk Factors' under Item 1A in Cerner's Form 10‐K together with other reports that are furnished to or filed with the SEC. A reconciliation of non‐GAAP financial measures discussed in this earnings call can be found in the Company's earnings release that was furnished to the SEC today and posted on the investor section of

At this time, I'd like to turn the call over to Marc Naughton, Chief Financial Officer of Cerner Corporation.

Marc Naughton - EVP and CFO: Thank you, Kimberly. Good afternoon everyone and welcome to the call. I'll lead off today with a review of the numbers. Zane Burke, Executive Vice President of our client organization, will follow me with sales highlights and marketplace trends. Mike Nill, Executive Vice President and Chief Operating Officer will discuss operations and our Works businesses. Neal Patterson, our Chairman, CEO and President, will be available during Q&A. Jeff Townsend, Executive Vice President and Chief of Staff, is traveling today.

Now I will turn to our results. We delivered excellent results in the first quarter across all metrics except revenue, which was impacted by reduced levels of low margin technology resale that had little impact on our earnings, which were above expectations.

Our total bookings revenue in Q1 was $801.6 million, which is an all‐time high for a first quarter. Bookings exceeded the mid‐point of our guidance range by more than $60 million and were up 23% from Q1 of '12, when bookings grew 24%. Bookings margin in Q1 was $717 million, or 89% of total bookings. Our bookings performance drove a 21% increase in total backlog to $7.58 billion.

Contract revenue backlog of $6.83 billion is 23% higher than a year ago. Support revenue backlog totals $748 million, up 6% year‐over‐year.

Revenue in the quarter was $680 million, which is up 6% over Q1of '12. The revenue composition for Q1 was $199 million in system sales, $161 million in support and maintenance, $306 million in services, and $14 million in reimbursed travel.

System sales revenue reflects a 12% decline from Q1 of '12, which had grown 61% over the prior year, creating a very tough comparable. The decline this quarter was driven by a significant year-over-year decline in technology resale, which overshadowed growth in subscriptions and software.

As you may recall, in Q1 of '12 we had approximately $40 million of upside driven by strong hardware sales and strong growth in device resale. In Q1 of '13, hardware was at more normal levels while device resale declined. Since device resales are often driven by the third party's sales force, our visibility to that revenue is not as high as the rest of our business.

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