Leading healthcare information technology (“HCIT”) solutions provider Cerner Corp (CERN) reported second quarter fiscal 2011 earnings per share of 42 cents, beating the Zacks Consensus Estimate of 41 cents, and exceeding the year-ago earnings of 33 cents per share. Net income jumped 29.9% year over year to $72 million due to buoyant bookings.
Sales for the second quarter increased 15% year over year to $524.2 million, and easily beat the Zacks Consensus Estimate of $516 million. Higher revenue from Support, Maintenance and Services (up 14% to $355.3 million) was supported by increase in System sales (up 15.6% to $157.1 million). Revenues from Reimbursed Travel jumped 37.8% to about $11.7 million.
Bookings and Revenue Backlog
Bookings were $649.6 million, up 39% year over year, which was the second highest in the company’s history. Total revenue backlog amounted to $5.41 billion at the end of the second quarter, higher 21% year over year, including $4.74 billion of contract backlog and $678.6 million of support and maintenance backlog.
Gross margin for the quarter dropped moderately to 81.2% from 82.8% a year ago. Operating margin picked up to 20.6% from 18.9% in the prior-year period.
Balance Sheet & Cash flow
Cerner exited the quarter with cash, cash equivalents and short-term investment of $682 million, up 7.8% on a year-over-year basis. Total long-term debt dropped 6.4% year over year to about $84.9 million.
Cash flow from operation was $122.1 million (up 10.8%) in the reported quarter. Free cash flow increased 8.6% year over year to $71.2 million.
Outlook
Cerner has revised its financial forecasts for fiscal 2011. The company now expects revenues in a slightly higher band of $2.09 billion and $2.12 billion (earlier $2.07 billion to $2.12 billion) and adjusted earnings per share between $1.80 and $1.83 (earlier $1.78 to $1.81) for the year.
For the third quarter, the company expects revenues in a range of $520 million to $540 million and adjusted earnings per share, before share based compensation expense, of 46 cents to 48 cents. New bookings for the quarter are forecast between $560 million and $600 million.
Cerner projects stock-based compensation costs to dilute third quarter and full year earnings by about 2 to 3 cents and 10 to 13 cents, respectively.
Missouri-based Cerner is a leader in HCIT solutions, serving hospitals and health care providers, primarily in the U.S. Its solutions, which can be implemented as standalone, combined, or enterprise-wide systems, are created to provide clinical, financial and information management tools for the healthcare marketplace. Cerner competes with Allscripts Healthcare Solutions (MDRX) among others.
Cerner is well placed to benefit from higher HCIT spending levels as it already enjoys a large customer base and a broad product offering. Its international operations help provide a more diversified revenue stream. Cerner boasts of a large installed hospital base that requires more integrated clinically-focused applications complying with “meaningful use” requirements, reimbursement challenges and complex coding requirements. Of late, the company has targeted smaller hospitals as clients.
