Health IT

Cerner will add 600 new hires, but VA deal is still pending

On an earnings call, Cerner unveiled plans to hire an additional 600 workers at its Kansas City campus. But the company also reported lower-than-expected earnings, which executives said was due in part to the yet-to-be-signed VA contract.

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On a February 6 earnings call, Cerner unveiled plans to hire an additional 600 workers at its Kansas City campus. The new hires will support the company’s ITWorks business.

In its fourth-quarter financial results, Cerner also reported lower-than-expected earnings.

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The Kansas City, Missouri-based company saw adjusted diluted earnings per share of $0.58, compared to $0.61 in Q4 of 2016. Analysts anticipated Q4 adjusted diluted EPS of $0.61. Additionally, adjusted net earnings for the fourth quarter were $195.7 million, compared to $206.2 million during the same time period in 2016.

On the earnings call, Cerner CFO Marc Naughton partially attributed this earnings drop to the fact that the VA deal hasn’t gone through yet.

“Recall that on our last call we indicated we expected the VA to sign in Q4,” he said, according to the Seeking Alpha transcript of the call. “As you likely know, the signing did not occur in Q4. While we didn’t factor in a significant amount for Q4, this timing, along with lower upfront revenue than expected on some of the larger fourth quarter contracts, did impact our results.”

Later, when pressed by analysts, Naughton added that Cerner’s 2018 plan did have elements of the VA deal in it, but the company has since revised the initial plan to have less of an emphasis on the pending contract.

“When we’re talking about bookings in Q4, were we thinking there was going to be a $300 million, $400 million number coming through from the VA? We absolutely didn’t think that,” he said.

Instead, the company expected to start getting revenue from an initial task force relating to the VA deal, Naughton noted.

The EHR vendor initially expected to sign the deal last November.

President Zane Burke commented on the reason behind the delay: The VA chose to conduct an external validation procedure to make sure their interoperability requirements can be met with Cerner’s product.

Cerner executives didn’t predict a date that they expect the deal to go through. Burke only said they anticipate the contract will be signed “soon.”

The earnings call proved to be an ideal time to introduce the company’s new CEO, Brent Shafer, who officially took the reins a mere six days ago. Shafer was on the call, but only made a few comments. His predecessor, company cofounder Neal Patterson, died last summer due to unexpected complications that arose after a recurrence of cancer.

In its financial results, Cerner also reported record Q4 and full-year bookings. In the fourth quarter, bookings hit $2.3 billion, compared to $1.4 billion in Q4 of 2016. For 2017, bookings were at $6.3 billion, versus $5.4 billion in 2016.

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