Cerner CEO Brent Shafer Announces Exit During Q1 Earnings Call

Cerner Board will begin a search to replace Brent Shafer, chairman and chief executive officer, the EHR vendor revealed during its 2021 Q1 earnings call.

The EHR vendor also announced 2021 Q1 revenue of $1.39 billion, which was down 2 percent from $1.41 billion during the same period in 2020. 

“Cerner is on the right trajectory, with increased financial guidance based on actions we are taking to improve performance,” Shafer said. “With the support of the entire organization, we have simplified the business while implementing a new operating model to make Cerner more efficient and effective. We have strengthened our senior leadership team, including the recent addition of Mark Erceg as our CFO, and I believe we now have the right team assembled to drive our company forward.”

Until the search is complete and the board has identified and appointed a successor, Shafer will continue to serve as the chairman and CEO of the company, Cerner said. Shafer will transition to a senior advisor role for the first year after the vendor appoints a successor.

“On behalf of the Board, I want to thank Brent for his leadership, dedication and commitment to advancing client success and the quality of healthcare, particularly with the unprecedented events of the last year,” said William Zollars, lead independent director of the Cerner Board. “The Board believes that now is the right time to identify a successor to Brent who will lead Cerner through its next chapter of growth and shareholder value creation.”

“Because succession planning is one of the Board’s most important duties, we are proceeding on a comprehensive process to identify the best chief executive for Cerner,” Zollars continued. “As the Board conducts its search, we are focused on selecting a strong leader with a proven track record of operating successfully while executing a strategy driven by innovation, performance excellence and world-class talent practices.”

As noted, Cerner’s 2021 Q1 revenue dipped from this time last year.

Excluding divestitures, Cerner said its 2020 Q1 revenue growth would have been roughly 2 percent, which was yet another example of the COVID-19 impact.

“Cerner’s first quarter results reflect a solid start to the year,” said Shafer. “We are sharpening our focus and moving forward with a renewed sense of urgency in delivering value to our clients and shareholders. These efforts are reflected in Cerner’s improved earnings outlook for the year.”

Cerner noted its GAAP operating margin was up 310 basis points to 15.7 percent, from 12.6 percent in 2020 Q1. The company also reported its GAAP cash flow hit $450 million, up 59 percent compared to $284 million in 2020 Q1. Its adjusted operating margin (non-GAAP) was also up 200 basis points from 19.4 in 2020 Q1 to 21.4 percent in 2021 Q1.

Cerner reported a net earnings increase from $147.2 million at the same time last year to $172.2 million. The vendor’s free cash flow reached $291 million. This number is up 81 percent from $160 million in 2020 Q1.

 Looking forward to 2021 Q2, Cerner said it expects revenue growth in the high-single digits over 2020 Q2, when revenue dropped significantly, primarily due to COVID-19 and the company folding its revenue management outsourcing services earlier in the year.

COVID-19 had a more significant impact than Cerner initially expected, but it had minimal impact on low margin areas, such as travel reimbursement and technology resale.

The EHR vendor also expects its 2021 full-year revenue growth in the mid-single digits.

Additionally, the Cerner Board approved a new share repurchase program that allows the vendor to repurchase up to $3.75 billion in shares through the end of 2023. The company said it plans to repurchase shares opportunistically and it is based on market conditions and other key factors, such as price.

“The new repurchase program reflects the Board of Directors’ and our entire leadership team’s belief in Cerner’s long-term potential and emphasizes our ongoing commitment to returning capital to shareholders,” said Erceg, Cerner’s executive vice president and new chief financial officer. “With our strong balance sheet and anticipated future cash flow, we are well-positioned to continue making investments in growth while also executing a balanced capital allocation strategy.”