2014 annual shareholder meeting - cerner corporation
TRANSCRIPT
May 23, 2014
2014 Annual Shareholder Meeting
Neal Patterson
Chairman, CEO and Co-Founder
May 23, 2014
2014 Annual Shareholder Meeting
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Agenda
WelcomeNeal Patterson
Chairman, Chief Executive Officer and Co-Founder
IntroductionsCliff Illig
Vice Chairman and Co-Founder
Business MeetingMarc Naughton
Executive Vice President & Chief Financial Officer
2013 HighlightsZane Burke
President
Corporate Imperatives
& Cerner's Growth
Mike Nill
Executive Vice President & Chief Operating Officer
Chairman's Comments
& Q&A
Neal Patterson
Chairman, Chief Executive Officer and Co-Founder
Cliff Illig
Vice Chairman and Co-Founder
May 23, 2014
Introductions
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Introductions
Cerner Board
• Neal L. Patterson
• Clifford W. Illig
• Dr. Gerald E. “Gary” Bisbee
• Dr. Denis A. Cortese
• The Honorable John C. “Jack” Danforth
• Mitchell E. Daniels, Jr.
• Linda M. Dillman
• Dr. William B. “Bill” Neaves
• William D. “Bill” Zollars
Auditors
• Dana Foote, Erik Sisel & Mike Torti
KPMG LLP
Inspectors of Election
• Jim Allen and Craig Evans
Stinson Leonard Street LLP
Cerner Executive Presenters
• Marc Naughton, EVP & Chief Financial Officer
• Zane Burke, President
• Mike Nill, EVP & Chief Operating Officer
Other Cerner Executives
• Joanne Burns, SVP & Chief Strategy Officer
• Katie Chaffee, SVP, Worldwide Consulting
• Dick Flanigan, SVP, Client Organization
• Paul Gorup, SVP, Chief of Innovation & Co-Founder
• Mike Neal, SVP, Strategic Business Units
• John Peterzalek, SVP, Client Relationships
• Randy Sims, SVP, Secretary & Chief Legal Officer
• Matthew Swindells, SVP, Population Health & Global Strategy
• Don Trigg, President, Cerner Health Ventures
• Julie Wilson, EVP & Chief People Officer
Marc Naughton
Executive Vice President and Chief Financial Officer
May 23, 2014
Business meeting
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Record Date: Shareholders of record as of March 26, 2014 are entitled to vote
Notice of Meeting: Randy Sims, Secretary, has confirmed notice of meeting was properly given in accordance with our bylaws
Quorum: Randy has determined a quorum is represented, either in person or by proxy
Voting:
• If you have not yet voted or turned in your proxy, the voting table is open and located outside the auditorium
• Voting will close 10 minutes following the conclusion of this meeting
Agenda/Rules: We will follow the Agenda and Rules distributed at the registration table. Please see the registration table if you did not receive a copy.
Administrative Items
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Order of Business:
1. Election of three Class I Directors to a
three-year term:
• John C. Danforth
• Neal L. Patterson
• William D. Zollars
2. Ratification of the appointment of
KPMG LLP as the independent
registered public accounting firm of
Cerner Corporation for 2014.
3. Advisory vote to approve the
compensation of our Named
Executive Officers.
Business Meeting
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Preliminary Results
A preliminary tally of proxies and votes indicates:
• Agenda Item 1
• A majority vote in favor of each Director nominee
• Agenda Item 2
• A majority vote in favor of approving the ratification of KPMG as Cerner Corporation’s independent registered public accounting firm for 2014
• Agenda Item 3
• A majority vote in favor of the advisory vote on the executive compensation of our Named Executive Officers
The final tally and verification of all votes will be completed by the
Inspectors following the conclusion of this meeting
Business Meeting Continued
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Safe Harbor Statement
This presentation may contain forward-looking statements, including without limitation, those regarding
projections of future revenues or earnings, operating margins, operating expenses, product development and
new markets or prospects for the Company’s solutions. Actual results may differ materially from those
expressed in such forward-looking statements. Factors that could cause or contribute to such differences
include, but are not limited to:
(a) the possibility of product-related liabilities; (b) potential claims for system errors and warranties; (c) the possibility of interruption at
our data centers or client support facilities; (d) our proprietary technology may be subject to claims for infringement or misappropriation
of intellectual property rights of others, or may be infringed or misappropriated by others; (e) risks associated with our non-U.S.
operations; (f) risks associated with our ability to effectively hedge exposure to fluctuations in foreign currency exchange rates; (g) the
potential for tax legislation initiatives that could adversely affect our tax position and/or challenges to our tax positions in the United
States and non-U.S. countries; (h) risks associated with our recruitment and retention of key personnel; (i) risks related to our
dependence on third party suppliers; (j) risks inherent with business acquisitions and combinations; (k) the potential for losses resulting
from asset impairment charges; (l) risks associated with volatility and disruption resulting from global economic conditions; (m) managing
growth in the new markets in which we offer solutions, health care devices and services, (n) changing political, economic, regulatory and
judicial influences; (o) government regulation; (p) significant competition and market changes; (q) variations in our quarterly operating
results; (r) potential inconsistencies in our sales forecasts compared to actual sales; (s) volatility in the trading price of our common
stock and the timing and volume of market activity; (t) our directors’ authority to issue preferred stock and the anti-takeover provisions in
our corporate governance documents; and (u) material adverse resolution of legal proceedings.
Additional discussion of these and other risks, uncertainties and factors affecting the Company's business is
contained in the Company's periodic filings with the Securities and Exchange Commission. You should not
place undue reliance on forward-looking statements, since the statements speak only as of the date that they
are made. The Company undertakes no obligation to update forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition
or business over time.
Zane Burke
President
May 23, 2014
2013 Highlights
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2013 Highlights
Record Bookings of $3.8B
• Up 20% on very tough comparable
• Growth in base and new footprints
• >$1B of new footprint bookings
• Strong win rate
Physician market success
• Bookings/Revenue growth of 42%/24%
• 18 signature displacements
• Added 16,000 providers, now over
60,000
Strong ITWorks and Revenue Cycle
• ITWorks revenue up 53% to $184M
• Revenue Cycle up 51% to $156M
Launch of
• Platform Delivered
• Four Regional Pilots Launched
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Strong Pipeline and Competitiveness
Pipeline
More than doubled since end of
2010
After bookings of $9.6B in 2011-
2013
• All categories experiencing
sustained upward trend
Competitiveness
• Win rate doubled since 2010
• Investments in physician experience and
revenue cycle paying off
• Differentiation in population health, which is
playing bigger role in selection process
• EMR-agnostic solutions contributing to
success outside base
• Population health and device connectivity
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Marketplace Trends
Raining Measures
and Mandates
Driving Focus on Quality and
Costs
IT biggest remaining lever
– Cerner solutions &
services align with client challenges
Consolidation
Providers seeking scale
across continuum
Cerner Clients Leading
Industry Winners and
Losers
Gap after top two widening
Cerner trend very positive
Another EMR Wave
Expect approx. half of market
to evaluate options
Cerner well positioned
Revenue Cycle
Integrated clinical /
revenue cycle clearly favored
Significant Cerner
Opportunity
Population Health
Shift to at-risk model
Cerner’s approach:
Real Time
Actionable in Workflow
Programmable
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Potential HIT impact of Hospital M&A 2013 Cumulative Year
MEDITECH
*Total Acquisitions – Total acquisitions by clients
**Potential Losses – Total acquisitions by competitors clients
Source: HIMSS Analytics 2013
**
*
-30
-10
10
30
50
70
90
110
130128
26 23
12
2 6
116
24 18
-12 -13
-25
104
11
-7
Acq
uir
ed H
osp
ita
ls
EMR footprint in 17 of top 30
U.S. Health Systems
Cerner clients accounted for 61% of buying activity
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EMR Waves Transition to Population Health
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
HITECH MU Stage 1
Starts
VBP &
Readmissions
MU Stage 2
Starts
ICD-10
Transition
MU Stage 3
Starts
P.P.A.C.A
MU Stage 1
Rules Finalized
MU Stage 2
Rules Finalized
ACO Rules
Released
Population Health
Adoption Curve (Estimated)
EMR Adoption Curves (Estimated)
EMR Next Wave Drivers Replacing Outdated Technology
Cost Control
Health System Consolidation
Choosing Supplier With Vision
Fee-for-Service Shifts to At-Risk
Mostly
Replacement Two suppliers share
most of business
Greenfield and
upgrades of
existing EMR Multiple suppliers
benefit
Greenfield New Competitive
Landscape
Incumbent
Advantage
Mike Nill
Executive Vice President and Chief Operating Officer
May 23, 2014
Corporate Imperatives and
Cerner’s Growth
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Physician Population
Revenue... & Cost Continuum
Intelligence
Member +1
One plan connecting all...
Including the Home, Home care,
Behavioral, Long term care and Hospice
P P R C I M +1
Tell the story - The power of the team
Now accountable for health
Now... & Next
Discover > Predict > Prevent
Know me, engage me...
Because it starts with me
I’m unique…
So personalize my plan
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Cerner’s Growth and Community Impact
Jobs
•9,598 KC-based jobs; largest public company employer in KC
•4,000 KC jobs created last three years
•~$700M in local payroll
•New and expanded campuses
•Kansas City, KS (Legends)
•Kansas City, MO (Bannister)
Economy
•Annual Cerner Health Conference: ~10,000 guests
•Estimated $7M+ in economic impact
•$170M spent with local suppliers in last year
Community Impact
•First Hand Foundation
•$22M granted and 164,000+ lives impacted since 1995
•Healthe Kids Institute
•43,000+ free health screenings since 2007
•Impact Associate Volunteer Program
•155,000 volunteer hours at 650 organizations since 2008
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Asso
ciates
Rev
enu
e (m
illio
ns)
Associates
KC Based Associates
Revenue
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Two nine-story towers
• 648,000 S.F.
• First tower opened in 2013
• Second tower opened Feb 2014
Designed for “Continuous”
24x7 support of health care IT
projects and operations
• Support strong growth of “Works”
businesses
Incentives will cover
approximately half of
construction costs
Continuous Campus, Kansas City, Kansas
Updated photos?
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Three Trails Crossing, Kansas City, MO
237 acres adjacent to our
Innovation Campus
• Purchased Dec 2013 for $42.5M
Space to accommodate
decade+ of growth
• Potential to accommodate
15,000 jobs when fully built out
• To include training center, health
clinic, day care, fitness center
and retail
Over $1 billion of potential
incentives as we build out
space
Rendering
(s) of new
campus
Neal Patterson
Chairman, CEO and Co-Founder
May 23, 2014
Chairman’s Closing Comments and Q&A
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Changing lives in Nevada, Mo.
Q&A
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Closing
Since there is no further business, this 2014
Annual Shareholders’ Meeting of Cerner
Corporation is hereby closed.
May 23, 2014
2014 Annual Shareholder Meeting