CERN - Earnings call transcript Q3 2021

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Operator

Welcome to Cerner Corporation’s third quarter 2021 conference call. Today’s date is October 29, 2021 and this call is being recorded. I’d now like to turn the call over to your host, Allan Kells, Senior Vice President of Investor Relations. Sir, please go ahead.

Allan Kells

Thank you. thank joining and everyone morning you us. for Good

with today results and Client David beginning Erceg, our at Feinberg, the the be Travis Chief our then Chief joined Services to month, then call and the Officer. We’ll Dr. the it me with call begin over will Mark by On outlook. President since of Mark are transition CEO, Officer. and David initial his observations Financial joining our to hand discuss and to Q&A Dalton, and

are to Before I’d our uncertainties. you start, about will and are we subject comments other our and contain and statements, like future to for remind projections risks on that comments These expectations based including and our events. statements forward-looking current business assumptions

from Investors could release, law. and our of in or those by results factors to forward-looking required update the our earnings other information due no with actual SEC. differ except statements to by forward-looking section those as posted indicated Cerner statements Our assumes the obligation identified to filings cerner.com, which is materially

also operating will earnings operating referring We non-GAAP our of the turn to share, measures financial or I’ll to A financial prepared financial financial per to flow. in financial measures with a free superior or reconciliation With are over earnings, These and that, found earnings cash margin, discussion our be non-GAAP measures David. be in release. for to not measures meant for substitute to call can non-GAAP GAAP be GAAP. of adjusted measures accordance

David Feinberg

bit morning, to by thank us. why and everyone start joining then about areas Good a provide focus. join I’ll early Cerner, myself to going chose some observations and of This Thanks Allan. I sharing I’m for and morning you

been the way patient on in an conviction successful. has patient satisfaction was to financial more developed and This is was equitable to more more and career, UCLA my more healthcare only where my the strong foundational that on affordable. XX years, focusing turnaround. focus Early true accessible, at understandable, career I making For a operational be our

approach center were such, philosophy we the that to be we As patient-first everything. do, of being established model, underpinned Having At to once payment highest and quality everything patient the showed the to expand that can as we an we has care Geisinger, community. able entire integrated healthcare of the focus and affordable. this my

community knew the to exome in created use We world’s because we we that could whole keep sequencing healthy. also our of largest that was information biobank DNA

there. use As relationship I an ultimately information, technology work On part timely COVID, our community opportunity symptoms, YouTube, to of our Search, reports, proud which Geisinger, vaccines, mobility provided the run world work COVID of we including authoritative the with Maps, extensive did am medical of Health. notifications, at built and we with Google exposure important to on I led and more. an Google

and with other organize their had Our over records, including doctors easily disparate about that so to information billion information Cerner’s, We medical Ascension patients. caregivers partnership page worked in YouTube COVID help nurses, impressions. could find XXX

risk help These conditions improvements through and avoid the to identify the and and they health. something been analytics, requirements, industry time we to has effects to next Cerner’s tech and important real working. joined clients to and automating at done, minimize work they Cerner, or of one, these for of for our wonderful, is risk, digitizing need that’s right how but EHRs initial information and the transitioning Cerner an just health communities, compliance tests interoperability will amazing records that a enable record good our it time. to provide and of insights and made to job become cooperation clinicians suggest offerings potentially Cerner’s patients of medical more progress remain share companies data, flow By to and fact company spend optimize also least be good at usability time and Cerner bedside allowing company a Now list reached actionable things and to the and of very useable to of usability information. done records, the The time at as laid, health can and that readmissions. They of processes need at role interventions is They understand get than a the health it’s right measured we need growth, chronic, to fortify enhance huge must an what easier to more full about. itself, and coordination I’d better the predictive amazing my people world remain Achieving XX less years. solution from right by electronic the the continue to registries, helping pipes treatments are haven’t acknowledge have is so accomplishment, other make helping may require frankly, Digitized like Cerner potential. avoid information, in age. will I’ve that we that was terminal. more caregivers and gleaning need passionate at will improving the be need which the digital lives. a capabilities the has that our like Improving the prevent errors important but EHR. before unnecessary of the helping we observations. them to using the of tech are at we They the what help do care we and of improve true playing the I at medications, health avoid beginning, top feel unnecessary those job best, people’s left us be to to is get admissions of with promise not also of pandemic. to and, the referrals

We ultimately potential improve and accelerate deployment to also outcomes. of of the therapies believe continue harnessing patient discoveries to the data and

great a opportunity this and of through which the combines Cerner have teams. the Enviza, Kantar expertise We health Cerner do to

I’ve We else that cycle plenty to about our just patient to accounting our revenue during with making health will simplify it billing billing starts conference need we and that. integrated solutions. that enhancements month the how heard patients make providers, offering this think important announced is earlier do is more We Cerner Something for RevElate the and seamless. and

caregivers and burned complexity out job them solutions I our Importantly this know inherent and as in together by are make and more today’s attrition. opportunity focus satisfaction have we who inefficiency client we increasingly the client for to reduce our an strengthen dependable, strengthen to relationships work EHRs. will improve

many going tried past, with our too reasonable to are do meet Cerner to and often We clients by them. In and the require ourselves. has set This expectations will focus. things, discipline

going of and of we’re leadership of way by we can approach forward, with the organizations arrival. strong Cerner as to efficient work mission the our the of with progress path number team will my deliver in areas, long which done approach to improving This to believe of as results. up best address is plan sustainable clients, good to lot patients, clients others. of well providers important we a value achieve to has new capable Going for and engage that help change The best achieve some ahead only high showing improved on this most lives us focus small partnering profitable provide term and and and performance a Their current financial growth. highly

helping practices, quickly increasing speed of place to satisfaction, management of Officer get Technology driving while diversity, modernization, helped this has and Client joining Cerner and inclusion R&D to Erceg in platform change in Service since created cost Labat, running belonging; us portfolio, while quality, services supporting partnership lowering our capabilities capex Dalton, which advancing strengthening also operating and products. structure. and Resource we and margin Chief and R&D development. has new arrangements, For equity, and critical compensation business earlier This our reporting year, Mark client Mark free our product the organization. made improving associate grow our Human significant Travis operating Chief our relative Tracy a our our driving improved example, needed continues is our our and progress to investment, clients, approach informed has Jerome are Officer, simultaneously Platt, flow. spending, has and and at cash to our more put navigate our Officer that improvements period Chief on to efficiencies, capabilities decisions adjusted helped the make federal us expand

use better making repurchase sheet share of our our by We’re increasing program. balance

passion I and I’ve numerous of make to digitizing with I’ve pleased long been it profitable also well understand wildly XX,XXX-plus me been impressed the that that team, Cerner direct already and While our leadership records. I’ve by better my my value serve growth. had interactions clear believe than drive associates. they much Cerner enthusiasm job is positioned healthcare, is create term, across meaningful patients, to bigger

success All he for that important been and update. of Thanks. Cerner piece business will with now financial has better showing his and which is discuss this of execution big our Mark? steps Mark before our federal up taken already has A initial results. customary focus, provides the business, in

Mark Erceg

and good David, Thanks morning everyone.

Guard the United deploy Department continuing business Coast Cerner-powered and their Our remains with solid federal of Defense EHR. to States

the August an specific and Guard sick live, California, Coast in it Hawaii, additional Guam, wave in went Alaska, bays with clinics For XX State. located example, XX and bringing Washington

locations, on their in addition, to end and the meet is Hawaii. the end pace Cerner solutions end XXX XX,XXX calendar In year experienced across using DoD X,XXX full The successful XXXX. Together, by the users. September their on deployment of XX on and in users deployment, of we states, X,XXX end expanding schedule over around DoD locations another by now are time budget at serving footprint

Moving to and veterans. Secretary the officials their XX-week we the VA strategic released remain to all VA America’s July of Throughout of remained review. Veterans the to Secretary committed findings in committed and Cerner, the review, Affairs,

also deployments with to implement seamless providers month to just continue additional Medical future month, last we to providing secured that support additional capabilities team locations. same During Mann-Grandstaff veterans, our for leadership and and worked our care VA Center as VA nation’s at funding we

larger to $X.X results, our business federal to up our and bookings that booking XX%. to strong very the a to fourth in pleased third some in the reflect result had we bookings said, note quarter. The billion. quarter was quarter getting done contributions Bookings year the brings year-to-date this included versus footprints. third financial ago than moving Bookings expected some our growth we’re new strength originally from quarter transact please results. the of this were also Now of That transactions strong XX% quarter with overall

$XX.X at billion revenue in was the versus part which quarter Our third and by million in ago. incremental was Health Revenue earlier X% is up strong up year completed large billion, the $XX we driven federal growth from acquisition of Kantar the this X% approximately revenue quarter, grew, ago quarter year. in Organic $X.XX backlog also ending the a growth X%. over approximately of year

points drive in we from in originally margin, due expected driven like slightly was delivering on little work XX.X%, pursuing core, David of reduction Adjusted Gross stronger of continued in-process start, force, XXX Just down points a expense of initial quarter our third finding basis at a upside. that products actions the mix XX.X% the including into profitability cost for with expectations in as a held margin sale, bit bookings remarks. we of quarter, last referenced of as by XX.X%, by the were adjusted from during primarily discussed initial classification services. a however, opportunities as about was which a to for identified quarter revenue Those several focus but driven basis post bookings, primarily fourth our higher we ago operating of impact which expanded actions of and by mid-XX% our a half part fiscal certain goal our the and control, year his towards deprecated the the point quarter, the party XX write-down properties to its R&D the way third namely to are we we third have good XXXX. a operating additional to the actively improve margin than to growth,

since we square square the of feet during the bringing disgorge footprint, total For the of XXX,XXX held buildings These continue physical additional two two amount the designation space, example, or evidenced shrink square our as by million X.X sold sale plan feet the quarter. to represent an additional up we for of to have as third of footage year. start to already buildings

take R&D evaluate review return end-of-life investment We set be decisions are towards channeled profiles. our and products and can our with highest the so critically the product to continuing

of in are number systematically which list currently partnerships We our reviewing extensive the hundreds.

have a or of improve so reduce and performance eliminate or promising our we tremendous the we non-value also While bottom we focus partnerships, the top line relationships. some resources can to of impactful our opportunity precious arrangements most added to plan on many

In support. party software comprehensive of over analysis third perpetual and over unique million costs us addition, we we recently licenses, titles, a which running completed annually are currently subscriptions, and discovered XXX $XXX for

it. taking actively one forward. and going continue, on area, I could I associated costs manage about this let hopefully just more be steps particularly number to will and comment We concerted because me excited but am reduce the

has large it consistently pass for which many as our are years, and along escalators contracts. within past embedded has not satisfaction CPI be, the to Over should been been it client part hard because as our high Cerner several of in

up that cases as in the on many but critically side to drains or to and a distractions. proven challenge we Going important have well, pursuits forward jettison stop to resource and we take nothing only be plan few really patient David’s focus things do

year to this, significant in ahead. and the has strengthen growth which should we we’ve the to a As summary, a per made progress rate, of margin profitable and source XXXX. revenue margins operating by mid-XX% incremental help marketplace, good opportunity do XX% to nearly be $X.XX of which diluted we P&L, the over due of operating price believe plenty improving adjusted an goal have stronger at In to a opportunities I our adjusted Wrapping earnings, was in up potential share the years and this achieve lower is lower our year share, us last up EPS integrity count. tax remain adjusted

quarter, cash brings QX our of $XXX up we million third we by million sheet, spent with from which repurchases billion. million Moving balance the to primarily $XXX down This short $XXX during our investments, the last through $X.X ended is term to of quarter. and end purchases which share quarter the on driven

million, was for After capitalized Operating versus the of ending million. flow $X.X QX was quarter Our position ago. year ago. which free is compared cash is and debt million XX% same million at software, of than higher year at which XX% flow cash the quarter cash in capital million, came billion. $XX flow $XXX $XX to Year-to-date a unchanged $XXX expenditures is up $XXX period free

compared be revenue which growth growth digit quarter includes Moving the QX range. single year range. our single guidance X%, to also implies This in to to revenue with also XXXX mid full would QX to guidance. of approximately This digit from which to guidance, part million digits Organic the year prior grow mid is in we of single low acquisition, consistent the bringing for expect Health organic now Kantar $XX is XXXX. mid the Enviza, fourth revenue approximately of upper of growth

over We year would XX% adjusted be to share, over of EPS of growth XX% of quarter diluted adjusted bring high XXXX. which to QX a this range full last XX% growth expect diluted end about The fourth would of year. EPS $X.XX

provided is $X.XX than the we the higher quarter year we midpoint this year. guidance full of original provided Importantly, beginning of the and the higher $X.XX at guidance than last

communicate year’s record was rate high tax more $XXX free we record by to for the which we amount, achieved, of at quarter, and a to happy expect would also roughly year. If million, a time, be last the fourth that million. new flow $XXX I expect be than our breaking new the that XX%, am very $XXX For generate to cash million approximately now

his financially. very year, make Finally, both while maintaining to In fund ample on strategically organic our how quarter potential sheet directly warmest and to extend I repurchase access has track future team attractive third to performing, provided flow $X.X acquisitions pleased believe we also to and and that take high the opportunities stock balance to want I’m up acquisitions, a course strategy been my quickly year-to-date are use capital and those strong and billion this of to number we connected has of summary, with and which our welcome focus. remain an my to express David clients, results growth return still entire will with contributed entire upon bonded moment David better sharpened of arrival. cash and free strong Cerner with to family, impressive genuine has which of the Cerner results. excitement Cerner’s

allow pieces questions. time realize the potential healthcare are return. higher We to by turn which fully also of will generating over impact feel its to to meaningfully I’ll your together, Operator all levels that, we quickly while David’s coming like energized call the positively over shareholder for With Cerner the and all presence believe significant are total

Operator

Charles from [Operator instructions] comes question Your first Rhyee of the line at Cowen.

open. Your is line

James

community and at about in as the actually on financial should Hi, about changed that looks If meeting, Charles. with of of seems profile four-year operating we unit opportunity there’s James these forward? the I correctly, Enviza the like profile I like a more that you demand for been since at what recall it think then, at think around you data launched and recently XX%. $XX growth of maybe an types talk Cerner TAM acceleration because and XXXX it’s Can that the the CAGR billion solutions. for Has pandemic, maybe the going sized investor about how service

Mark Erceg

few acquisition the going-in margin. high million element. in EBITDA let the with David about versus and about point, Thank economics, that adjusted you fully tell can adjusted I strategy both revenue on performing. this we’re million profile, and high more comment operating things pleased really financial we’re is $X I’ll I’ll a $X integration very on then running how the At question. you say the for just about the

related about of full actually We’re feel at at this as time, that, plan out XX% operating really we’re about is point of running basis roughly really in We points margin so ahead XXX a standpoint looking an are. adjusted playing financial thing to where well. from our it very and this good we

to going as to we how on course about about year revenue, million acquisition more and X. that’s partial of David. April $XXX the effect we think I’ll Then have it turn a that as since full over We’re far of on holistically, closed

David Feinberg

straightforward it’s of data to Thanks James. providers need that that do, the we better pretty what in amount with from been To that actionable. they me, it’s our way, to the we a and think data we all combined understandable a with with, provide the to healthcare sharing there’s that of promise improve people’s data, it really to have privilege our tremendous to that back allows that a bringing make think along, is data a health. and work take I that us then and actions in We Kantar way partners folks understand team can that in and analyze

James

follow-up. one just and Okay,

As is attrition any customer should there mindful large XXXX, we be we approach of?

Mark Erceg

known to to which towards some indicated already contemplated continue past that operating a play the as our and way but it’ll it’s been out come ’XX. line top along revenue lines forward when growth single margin digit think we do mid-XX and by fiscal assume with adjusted is our then will of time, over moving what all us that mid losses previously, algorithm, growth guidance, the we be reasonable has been There’s in about that I think we

David Feinberg

and of when rather may James, be products avoid. in into our built something and models, and My mergers can those acquisitions, not are, problems. can the deliver important attrition and become of I’ve I because services, over might that it’s relationships of and sure that that’s team challenged would to mergers completely to we I’m I and our difficult let how it due my show and actually clients disappointing it’s XXX attrition they make their that’s acquisitions to that some we disappointment issue me, but attrition in sense that. me less first in add Cerner. time is an them and to unacceptable so at that’s The those to to while have expect front that of and solve days build

James

you thank the for color. Okay,

Operator

from SVB Stephanie the of next Leerink. Your comes from Davis line question

Your line is open.

Stephanie Davis

on my on thank guys, a the maybe questions. team-specific seen past, and [indiscernible] more the give in the we’ve to it’s how little Mark historical want I sound thoughts first David, firm and you overall different touch so hoping optimizing one as of was for than bit Hi approaches. of you memos Those could I than me to layoffs. the regarding us of some to taking how the you’re your some some structure

David Feinberg

then me my about let talk I’m the structure, first Yes, to cover layoffs and happy and in to ask general. Mark philosophy

Mark Erceg

six world-class we’ve real the that’s out, our to frankly, more being system drive efficiently have will that I through a fully the way the clients are that business I Yes, about A in have that through and big house serve management we doing processes putting all going piping what to of better. can through enable operate that models our and, all operating the a we allocated so and recognition doing. drive number we’re that think our are and reporting talked to part R&D then the we’ve is we efficiency is to that goes units so us that fact on really going been operating building think, constructs, everything that of we the have patients that able based all else of P&Ls. be That, revenue is so side profile cost can

fully allocated I that, level decisions. think as and level relates can profitability, better see you unit it we’re early wins operating because profitability, make to your your results understand to starting when profitability, client you your product some

per expenses the but years XXXX, we roughly were through operating year, had by our For X% growing revenue growing fiscal example, past five for our X%.

been basis to basis XXX are the your frame, a XXX because by basis X. and our growing been that’s have be X.X%, basis date point revenue’s That’s X to reversal basis in putting on operating XXX good. we’re the points reporting bad points. expected of management are points a that fiscal XXXX, margin place basis expenses now operating time year us our do and year-to-date do growing and revenue’s we’re allowing XXX that to margin, our growing to huge X.X%, so The efficiently and effectively, that’s our why by expenses to get and saw that frankly Well, success, for During going so adjusted contraction to when able we that I’m in points to that’s critical we’ve and be the fiscal I term think to you’re XXX confident to we’re operating ’XX. increased because mid-XXs structures growing long adjusted your an our

David Feinberg

Stephanie, you’re in terrible. so entire how when person, not my family, by add and it’s off four like multiply is a off oftentimes layoff five many person, me impacting I think you being lay philosophy. an are or My you mind sense laying people a to I affected, let are that actually any my about

we will work at discipline those through also layoffs of there’s their Not lack the been our and to folks management oftentimes affects it next, way think ship so survivor organization fear some predicting and what’s coming it’s that remain I that of a stuff affect for there’s in is growth happen. this areas and getting is that’s ways lack only reflection need so going this. of me and We because process the here, individuals guilt but if where think focus. right I of to the part retrained not business and do the the about doesn’t of families,

forward, how way There’s disciplined us be we our I fit thinking these with going about immediate and best we forward. our some positioned to philosophy going corrective business where going Going help my while more no as they going I shrink them, is about are and folks can we’re are we’re to of will think don’t and they our forward. measures to retrain supportive greatness, so way be to am

Stephanie Davis

and you’re have now? be less that pivoting this on a year right should folks Will think a will pull new then. less of project initiatives teams result, internal and spend? thinking is shrinking more, new are about where going more it little given to bit that that we and be or investment R&D Let’s as more How as to out an we something thread

Mark Erceg

it’s Yes, great a question.

about and work XXX talked teams in what the then had have scrum meaningful system investment we the that We a have output is. we do assigned us where those we a actively that about their it’s place that teams, think manage a I area $XXX from million fact to are in year. allows now - but I we modeling $XXX years, it a sales expect line, stay as will percent I our next I to and would that would for the R&D relatively million couple expect that think top grow necessarily, probably constant as to about continue of drop. the wouldn’t to expect increase as we

sales spending at continue For as a R&D of past. we’ve been us in the to get can’t to to rates we a mid-XXs adjusted operating percent ’XX, margin by spend the fiscal

Jerome going to them excited. is focused teams to simple to, generate The I’m where continue that standing scrum the year, Now to our produce it. very, factory about a $XXX we more up, for around here, I very think, and the disciplined we we’re that expect more the put going and automation we what a get think place, roughly we’re digital lot to he’s whole putting that lot in be I is as a spend so fact good news million going somewhat tools be revolutionary and

time as potentially a I percent or little more even spending, get over think of certainly lot with less of a amount traction same we a the sales. can

Stephanie Davis

Super helpful.

how Looking right you to guys forward going the to are ship.

Operator

Your next Capital question comes from Markets. the line Dodge of RBC from Sean

open. is Your line

Sean Dodge

specificity us narrowing David, examples side mentioned being, expect the you here Can Mark, you on of give see near those areas. then your focus small morning. that, winding down couple term? you number high mentioned a value good a are what the you Thanks, pursuits be what on little in you of and to a more

David Feinberg

that words and sense. Thanks Sean. say To particular the the usable, Yes, been at it usable, this the make when that know area, think weeks we’re of but discussion I so I to I’ve allows it’s to that, I’d all mind of systems works that the we’ve blood that be to have the on my tell describe team and around be also has interoperable, health to perfect ability reliable the where grandma’s so need and business to reliable had since we over around needs EHR that same I billing to, tool to today, don’t predictions analytics and that’s I’ll individual means it few means--and only to here record needed to it EHR get me, to you but can describe it, make you I quite say that so last a make it and top starts I around of too, patients, make digital of my bit sugar conduct needs the communities. course with the over, the where in have mind when EHR EHR not has a to for in it get

what what now, the it. population actually--you asked way today’s When we be of EHR, model. a we’re Then to but allows to going of we’ve or that with you that able care I’m predictive have the in so list successful doing. to but I say are really fee-for-value taking to billing be EHR a tools, along Millenium answer right of fix it’s all the fee-for-service use second or parts tools That’s You it’s that ecosystem what the to around important have question broader in to than in Millenium in Millenium does of to done people. Mark, the addition health me a of

kind where doing everything allows get saying down are that going and reliable, we’re make families came of to we’re here sure top that of make We is the You to of went and they not to what it means EHR need layer that make instead also to do-not-do the so sure hole on it and not what information doing on not of it. we’re things can that, that make we’re and of is the fixing usable, for works it. that doing. say asked list. and doing, it else what patients list get it are the we’re that we’re on what information we freely, What the to it’s flow list, the the has That’s billing list if the is things rabbit the is doing,

Sean Dodge

Okay, better Then health you that’s you. us and systems. scale leverage are to proportion data in going you to you’re and of can of there, I composition able your do had back to the to helpful, you versus advantage maybe able just rights data you said others from? help gives an to are market have the the Enviza, to What from thank guess the which what and you footprint set that extent maybe the understand privilege use offering? draw the

David Feinberg

you know get and can don’t we back to I the to on that, that. specifics

Mark Erceg

real I can give you high a that. level on

part clients as and agreements part got worked service heard we strategy, is data think having in for also probably overall us we’re so You’ve network, of I subset with about there’s that a a the the new HealtheIntent data we but or hundred it, health went as where data of with--now learning of rights as updating as talking several basically a records service the them million which, part strategy. clean XX

think as I how of would XXX million close think to of data clients set. records, so that’s those I part represent that the

David Feinberg

Mark. Thanks

Sean Dodge

you. Thank Okay, great.

Operator

Your Bank the from of Cherny America. comes next Michael line of from question

is open. Your line

Michael Cherny

cash morning. your I Good the the David, to welcome in on for to flow well. little a Thanks taking first call dive questions. want dynamics. as bit

comes the to step-up some as balance and so against of know not point payouts of a longer as I’m know think the you do compensation a of team. especially in I about, there’s you compensation, the how this become stock-based guidance, been eventually increase fruition. also That crucial for so in seen but terms dynamics cash of process, that been big could rewarding nice employees, for necessarily a the dynamic said, cash looking thought large a issue bit term where your are that pretty pretty managing rebooting which focus that has ones being stock-based I You’ve in flow, actual

Mark Erceg

Well, that additional flow, and with. expand work it’s balancing profitably margins, gives - cash drive generating more it’s our a we we to like lot right, our been you so free a of have revenue we us said a lot cash act,

increases, that would things any anything to doing else making future giving and us debt and receivables. relates and good things. bad and been really and come a also along that do or job repurchase share specific steps other the potentially is those managing working payables ways, a measured number collections on expense, of of and M&A, then We’re some to lot like very dividend discretion We’ve as any client through it org,

skiis, - to folks, how mentality as skin about and sure gets important aren’t we certainly the practices everyone we to too want do David, here to over our to want using sit we me, it’s that across board, monitor the far we game. we best all with that the the to we’re important we reward everything pay certainly an that balance associates anything have but benchmarked, long respect in we good We feel today. to and as As for the us out to is that’s to far important that’s make about marketplace equity and incentivize constantly we’ve going struck doing so think have ownership equity,

Allan Kells

thing, like just increase add Mike, so you’ve the is you comp. I’d Allan. to in one this share-based seen understand

of Some temporary. is that

so over the that vesting you in restricted three, may from As to vest five impacting shares few that’s over last used vested options what noticed that is years, we’ve you’re overlap over shifted to now be that. seeing have what years

people impacted some some that’s temporary. vesting, factors retention during growth are period accelerated grants that rate it. had the the There’s early you’ve and had have that leave increased and some that seen several also We of senior transformation, when

as you’ll year. think you after growth that quite bit the forward, a I slows see this go

Michael Cherny

quarter? was on the first now If us was Thanks, thing to could sign forward? customers I your maybe even pulled what quarter, terms that a helpful little process from you to earlier what the color Can fourth question a forward and on decide that’s both. moving of really bad expected. things than to it’s in just sure signed the earlier bookings, time What just make was we’re a of sense on give ask the part is decision never

Mark Erceg

for great that’d one you. a be Travis,

Travis Dalton

the from I all we of our business said compete. operate great to thanks a units. entered One had Yes, good good. I Thanks to results I thing we Yes, question, solid role had energy were we would we going for I QX, and Mark. contribution were and it. say the going a were was enthusiasm, and QX, with our when other appreciate year-to-date really

that our in all segments. We’re of market doing

client we one think the really thing have inside that’s our a insights better is that activities. those retention and have us lot extension I side important opportunities into on of for base, and of client we expansion

of a best federal opportunity of there in of extensions, better one quarter them were in more way it. Middle but was to, we the year. had we we and getting the the say competing biggest harder. market also and the reactive a had a we’re three, which in because things orders go activity had at ours, continue how and and, that would on opportunity the great contribution think some I across to discipline, better came value segments, so fiscal at forward fourth We all some done work That’s two, our I expecting board the data early versus one, would proactive insights, were to our large time it data, a from and secured renewal some and keep in had we were able clients we how several great move really caregivers. that our to before we’ve the to more is task clients the opportunities. Medstar, I have the sign, serve drive very of U.S. hard We business so them, good inside East to run conversation we than of client and and sooner a we great way the clients the categorize to with we

Michael Cherny

thank you. Great,

Operator

question Evercore. Elizabeth comes the Anderson next from of from line Your

Your line open. is

Elizabeth Anderson

and sort much as seeing, follow-on to and talk welcome so thanks guys, of COVID Hi Cerner, whether any just everywhere, residual period, question, allowed being to that able question, kind can now of Michael’s to access impacts you a helpful, you’re employees we’re about for to basically that’s David. the Maybe sites any would shift as or then visit thanks. the exiting COVID demand they’re be

David Feinberg

we’re team, met really yet, taking video some I not same different and regional. just take It I’ll visitors now, it think it many the a first of the I’ve it’s conference Elizabeth, via by our with regions, but lot part. the seems and said actually for that me very depends. seems of rest customers so onsite but that’s have

seems better hybrid, of direction I a kind to we’re to optimistic, exception a hotspots. here, but of at like it days be right have to a it in, of is going in light it that’s end of don’t as of first bit the people much of in the so than few where with Then back overly of and that right scattering the course XX and ago, in seems so after the our tunnel. be the now coming at. there’s it’s it it’s want far little a However, plan was year, the workforce the folks like bring as goes, seems

Elizabeth Anderson

though be and terms willing even of the say, that Got from and client that there to hotspots longer obviously or able thought that strategic focus at broader with looking fair your though, so to in solutions process to planning and extending they some it, on product COVID, would thing? of perspective in it are of engage are term and things, sort kind

David Feinberg

how workforce how into to healthcare, coming what to and all out, I better supplies to continuing how world helpful work healthcare healthcare to don’t lining, kind are positive but is think I going and really sets and who’s improve us do to understanding I more remain as in about data think start people up virtual, the using crucial; to a particular we predict say things, - to and up our way set want even going with a Yes, the issues operations. much hospital, actually of be of a way. of burned us is. to One, think in silver I two, important be those I is focus need, in a care they’re us it very tired burned think out, in besides receptive couple Folks so on COVID are, being is usability what would say things. showed we

Elizabeth Anderson

Got it, you. Thank that’s helpful.

Operator

Your from Morgan Hettenbach of next the Stanley. question comes Craig line from

line is open. Your

Craig Hettenbach

is it question A you’re commentary. the think potential few focus R&D at as commentary for a on approaching organic, on prior evaluated do with opportunities? and how there million, kind and you. as thank growth staying the How longer for just consistent flat M&A David an Yes, term from about well you which of implications was a message $XXX of just opportunities, of

David Feinberg

I records to so provide going and allow me, I for caregivers we’re if electronic that think in growth that make it predictions see would health health wildly me I start better able about usable the outlook broader the define for to that this make for systems we is analytics the--I’m way Yes, helping patients, really to term and think decisions saying, opportunity, our reliable the long doctors about growth. and forward. caring optimistic and will nurses If significant continue thing and

speed. M&A, versus getting organic up as I’m still far As to

there, is I more what’s before out Mark about have any continue that’s the so a learn think I’ve mentioned, had got to team to more quickly, thoughtful really me about and rules make organization being too. also moves, about partnerships up speed big we the to evaluate and as of we’ll One

Craig Hettenbach

could Then follow-up your software, margins for get you savings or Mark, the upside? potential be if that to Great, on a mid-XXs, there to the to mentioned save in thank operating the that you just some there, expectation Is get you. million. $XXX some included

Mark Erceg

designation R&D, as held that the the that. using that effected geared Last of reduction towards abilities right talked that’s example to No, a affect the going mid-XXs is drive sale, doing the and capitalized utilize we’re so number by fiscal that to force ’XX, properties areas lot another of everything to we be our to the of quarter. now for time, we’re just in and getting we of about the I think last towards write-down then

million, sale You’ll the properties additional We additional million an and with do up now, $XX limited that about going that’s force of effected - worth associated annualized combined reduction savings. time $XX associates. to recall affect being it for of We’ve put for charges in three now. million, $XX was respectively. XXX is $XX at have each those there that about was things million Those

You earlier, $XX put possible, trying QX of the million take-out and note the important it, associates it’s of those wherever are to two point on that’s to are to we annualized run rate of end of X,XXX really attrition that another cost manage QX. top and also end things through from down savings, to David’s our literally we

other Now, half of the half reduction and effected, the that managing we in was because that of that force from attrition well. was the managing

of where things of case by do in lot we illustrative example another a the a where that and to managing just we money, could lot things get just things of ’XX, better and that lot have deploy We software spend was that do by to we mid-XXs order we can lot a a tighter. fiscal can of things

Craig Hettenbach

for Great, color. the thanks

Operator

Your Keybanc. the next of Donald from comes from line question Hooker

Your line open. is

Donald Hooker

my--you to just I’m you. trying thank around have improvement. margin great here operating Great, had get outcomes obviously guys

some margins forward some understanding there your the earlier of cause the margins? timing My was quarter, in mentioned in some some be around kind is some be bearings of here. walk the you that just the fourth seasonality been software large--it into my up sounded to to even more artificially in quarter, this step timing you could might purchases might to year is margins have that operating inflated get might of that sequentially seasonality trying through pulled QX. this then Just fourth operating like Can so quarter maybe around there there but

Allan Kells

we a result, our a your about fluctuation of a year, Yes, there--this to few you They what you’re go up will and up less a as software less in that so some progress bit back I’d reverse the little upfront, of that, it cause as The portion and total period had guidance higher - that’s being say quarter, time, away upfront it have to have through two-thirds given which switched any software from today margins. in is two-thirds it’s go in fluctuation seasonality thing necessarily margin If and coming QX in over you right? going Allan. ago, you that is is revenue much high of because going go licensed implies, going our one-time what that recurring, there’s recurring dramatically. go the years one-third five-year big but sequentially, it licensed to in, a can not

Donald Hooker

you Are around CROs helpful. you a--going things Enviza the this Is types to them? lot of business CROs? be One interact Okay, you super. kind with do organizations? maybe How new That’s just with going to of this doing, or with business of are that model. doing life are competing partner follow-up, a those envisioning sciences quick

David Feinberg

is then that still and would what’s and about It’s CROs we’re get focused data Donald, I understanding my real insight well then be up this partner is to the but helping on other really trying CROs This Hey be going they’re think not really to us happening, allows what to more positions and with CRO. after. having insights, which academics. maybe take on world evidence, really those have to speed it, more better into a ecosystem that

Donald Hooker

Okay, thank you.

Operator

Your line comes from Percher Eric next from question the of Nephron Research.

open. is line Your

Eric Percher

the the cycle seems product candor. question appreciate rev The significant. very David, you. team. welcome, Thank A and for consolidation

your been been new a have to Can there headwind when that safe as developing combined turning assume base. or for talk maybe for think think multi-year there I and relative and consulting you some about challenges this, how there to there’s Mark is provide long fees. question to headwinds to to I think it license fair you’ve context the do well say product given rollout, this is it’s a client for incremental we no tailwind? you How

Mark Erceg

what working so what and It’s a do, products invest of rev portion is, for guess we’re number that. offer been we’ve I’d look, to key cycle continue key a we to I on behind years. of our part going

our the growth and going suite, are part it’s of them new to part going installed uplift all forward us thinking to something large and for product have there, right that’s to planning so over process, number as years, base it’s of of been taken our but a a about You our into so algorithms. take that’s do think that’s it’s account - we we out

David Feinberg

add this this Yes that should I decision Eric, let brought before. I got me been input done and to when up before here, was just was have speed my made was

should earlier. if philosophy their to get it’s a there’s Eric? isn’t think to But initial you is, built made and response the based a how’s this the we move the I question, I Is talking transition I think--and of was kidney? it they have kind well, is decision. think right etc. here, of Nephron I finally, issues, on There not customers, and be Can with then it’s actually really the ask going best,

Eric Percher

That’s right, the filter.

David Feinberg

filter? has in you’re The an That’s a that background So analyst kidney. the fascinating.

Eric Percher

there given is wait-and-see a history initial you or in approach, of couple weeks That this are there. follow-up as quick a people A up response the lining rev introduced ago, cycle?

David Feinberg

I couple of I team a folks reached the think folks they’ve being that’s years planned do over but get onboard, first already out we have has been--we worked so of a rollout think our number scheduled. right now, to have and and rounds on to

Eric Percher

Perfect, thank you.

Operator

comes question from of Your George Bank. next Deutsche the line from Hill

is line open. Your

George Hill

a either of my to Thanks like we’re provider do in this we’re the of flavors and activity markets at be I I’ll and this themselves? Good a technology provider ambulatory Cerner various population HealtheIntent, which health taking. around a of of want handful expecting feel and where a of morning lot thinking a would space, you’re a provider lot of this the guess is smaller about lot ago capital or product, but is make and organizations, offer about like of a how here question of and risk David, plan risk I provider in companies take were of large the the Cerner segment risk my one you who a had we aboard. and very seeing lot and space, activity a lot as market. how to think here, of hear risk I as positioned to that services taking seeing David, a for taking particularly kind question, welcome point manage know to guys. services, lot of this echo years of traction a

David Feinberg

organization you of of broad Yes, think especially to but thanks information--I see and for doing on early to about we healthcare What are in genomic data going data you of is an social able data George. a executed really it’s been on very health, My a to way anything that on than running cultural it’s think that’s including if to need change us time, incumbents on, important, platform more be you’re to The make I that’s more some out. it think of want changing everything a long records, market population philosophy point not of beating have you electronic health I of this health how fundamentally the system. really, head-to-head you well, but a sets, that manage right push know and to do, probably as point to the are lot and thinking there’s it. determinants those about was mean, predictions solutions that collect we’ve your I including Cerner disparate sort health, some what shift. don’t registries, better otherwise the solutions, view those

old really that is but failures as of big But and cultural been transplants get this the communities think we right help in how really us are sources to a if as thinking of big way and fortunate for month with mindset of think organs in community right often how long many and not had them doing the in an think did not and care is save a we outpatient I doing where shift, even manage really to but care able about be strategy. to things, there of integrated change. to that--or and the rather many those did systems be home patient towards to way to in self the that, of systems caregivers only to individual is but information failures them so allows a bring of in and think was the HealtheIntent histories that care, our those It’s think that lift I’ve as home well data multiple allow and we to month. we here care, the hospitalization a failures we of to of positioned care. populations execute partners, that, care It’s do important and outpatient pull I this they’ve

think we streamline I it. have to

and figure it HealtheIntent about then more the which help, puts bring and so really really exactly competition working of is from because it improving we’re decreasing of achieve out health is how falling to quality, on talking the Some speed. of up position - well behind up us cost we’re it I take great need if also to we it improving think for population we’ll equity we we’re issues, all about just great some in and the we to care get today in, the talking as a everyone, speed, as to health,

George Hill

Great, a is I follow-up, one at at Cerner? know can to what experience that the you from very add and could biggest Google quick value if love have that take I’d your you thing think

David Feinberg

engineers The some have manager care Google an UX ambulatory healthcare or for nurse. by user a product people, machines, team for smartest tech for make interventional population goal is why has in an has a I lab said, built getting was that products surrounded has it been our I nobody but built was--well, they’ve think physician, billions companies think successful was one of this EHRs been as important. billing busy EHR the think some easy users. What been that as I ER, machines, of other built have learned cardiologist, super that and the in these nurse of Google the built at and so is built EHR I I to have I an one mean, and no no for EHR

George Hill

very much. you Thank

Operator

comes question Sandler. from Jeff of last from Garro Piper line Our the

open. is line Your

Jeff Garro

Was that end the to Yes, improving returning provide taking be more improve compare done appropriate satisfaction. Thanks Maybe to hoping of the to good and healthcare out made and with out range of for can by to morning. what in. squeezing of you done it close the maybe over provider what could help side impact me theme we’ll and on the to noise the users. needs which software training the implementation detail needs be on on and side usability, changes those about us be think timelines

David Feinberg

into the we’ll nurse clinically question, to are voice infused If this electronic month to theirs. in infused. as products, What product of XX everything there to there’s that’s sure to the and you, of you well in try hey, not I about our and we to the folks then won’t means to nurse I that to that is is you Jeff, the think that The years make team build we’re what to Cerner kind a mind, thought clinically it that the you folks and folks, doing we very up you not we’re make to about will person and and everything Hey Where a visiting may I’ve ER has a this in build it we’re partner as the haven’t actually by our that, worked do heard or, this you’re us. XX as, need send the way I makes as here improve record to of means their think things job and What this with well over customers, pneumovax important is go, the and last our kind sure and clicking diabetes, make that worse, engineering input, and so that think very, feedback open to that vaccine. so to help need internal very I many doc focused my back it’s current are it. saying that We it everything our have own say with frontline be about on a they did That’s customers through way. a need you the record our you’re on that system build key clinical to times you’re synced that. the here’s best as want we have be we going as our health last wide listened, our is to so been taking when looks systems, to somebody picked message user success, their tied do building to and they’re are when using you is clinically like any we’re get sure or LDL diabetes, us don’t no record usability. ideas says products if It yes, building we’re to to that to you’re patient, Tylenol, looking way, means have talking that have you bold matter. to start--currently find

story doing don’t been You matter and mean we’ve job. says social that, become looking we doctors and know complete help you, nurses you documentation, you the out be got the what back to you’re to flip thinking couple auto is you’re and and going noise We on your saying and head, a you together, XX a things, to looking just that of that population. its and or billing not but we’ve last patient clerk, work and T-max the improve thinking by pharmacists really about of compiled doing, paste, about we’re we’ve record as care clinician. it’s that community for do need a hours, your but the when the letters, you’re that’s taking type a that managers, That’s really that trying we all data a over about or about, need what the cut out or and to you’re so a the back, been all we’re including temperature, going when we’ve frontline on the temperatures that and really to workers fills put the for story temperature and anticipating when to

Jeff Garro

to the client from base up make a top wanting provide the things bit rebuilding you that maybe Maybe clients on product that little of and satisfied, areas some particular from more up. follow using on helps. more versus Thanks, your those are clients help. ground broadly Maybe really are to detail performing learn bit what changes learnings in some could efficiently broad little could the and a just to swiftly reapplying

David Feinberg

well some med clients doing need reconciliation. around. with spread Yes, that to We are really

and so there’s--by OB something predictor well. using care really pulmonary clients that a Some that our was management med very tools about risk factor of There’s our in disease. That’s that trouble having than management, just are product and being out that really I bigger the than and are COPD, that using with the learned found chance I’m of hospitalization learning team clients that using well others and our care hospitalization school. increased that’s of the is obstructive saying, bedside, to heard learning for our where in administration having team that chronic the flu, the to at used I’ve history something for about also a data, two found HealtheIntent, HealtheIntent, lot not the population, and there listening those heard flu med disabilities for the or we folks, had that. of that the nurses so there of U.K for I’ve evaluate a HealtheIntent your times greater disabilities flu a

folks with and Now, actionable that flu not up then flu clinic of hospitalization people get a shot disabilities, lives. saves decreases the that came in becomes that the to XX% and cost, set only and they learning for decreases

because it than people that need to something of create that information days is to lot doc when I’m what do else. probably sick. getting there, I’ve we now it XX to individual - promise system know is that tap get that and the lives to people’s really came we That’s from make okay, done here world, we to for, really an or positive. have say, like people I better of learning out the sick lives to happened for how what and and of more sharing up disabilities there, learning Now, accelerate taking I a folks there’s of out could is we need lot where into our been will with ever save here our a all starts job they everyone as more that with only such prevent to that. clinics some getting over and flu set do that information

Jeff Garro

thank you. great a example, That’s

David Feinberg

you. Thank

Allan Kells

to that follow-up for take any All we’re right, with everybody calls. thank going happy joining, to and

David Feinberg

Thank you.

Mark Erceg

it. Appreciate

Operator

and concludes today’s this for call. Ladies Thank participating. gentlemen, conference you

You may now disconnect.

CERNER (CERN) 29 Oct 212021 Q3 Earnings call transcript