Q1 2020 Earnings Call

Today, they if they put the 28 2020 and this call is being recorded.

The company has asked me to remind you that first remarks made here today constitute forward looking statements, including without limitation those regarding projections of future revenue or earnings.

Operating margin operating and capital expenses booking no solution services offering development and capital allocation. Please.

Cost optimization, and operational improvement initiative future business outlook, including new markets or prospects for the company solutions and services.

Fixed the expected benefits.

Acquisition, It first citrus and other collaboration and the impact and they expect the impact of the cold 19 pandemic.

Actual results may differ materially from those indicated by the forward looking statements.

Please see service earnings release.

Which is furnished to the FTC today, it posted to the Investor section of Cerner Dotcom.

The filings with the FCC for additional information concerning factors that could cause actual results could differ materially for those into forward looking statements.

A reconciliation of the non-GAAP financial measures discussed in the earnings call can also be felt in the Companys earnings release.

So now assumes no obligation to update any forward looking statements or information, except as required by law.

At this time I'd like to turn the call Britt Shaffer, Chairman and CEO of Cerner Corporation, you may begin.

Thank you very much.

Good afternoon, everyone welcome to the coal.

Before we started just like to express our appreciation free being with us and hope that you and your families are healthy insight.

Like most of you were doing this call from different remote locations. So please bear with us if we have any technical challenges today, we'll do the best we can make it Smith.

I'll spend the first few minutes so much so just giving my thoughts about the business and our current environment then handed over to the leadership team, including our CFO Mark not Chief client services offers officer, John Peters out.

President John Dawn trick.

So as we all know would be an understatement to say that this was an eventful quarter it's been.

In an extreme since we talked or last virtual investment community meeting the weekends was canceled the corona virus pandemic has affected nearly all aspects of a daily lives.

And in mid March we made the decision to transition our associates to a remote workplace.

As part of our longstanding business continuity plans, we were move seamlessly the vast majority of or 27000 associates to virtual environment.

And we've been really pleased with the productivity in performance since taking this important step.

So first and foremost foremost I'd like to express my appreciation for the incredible dedication all sterner associates working tirelessly.

While balancing home commitments.

To ensure that we're delivering on our mission during this critical time.

The driver of our associates to support our clients and improve health care has always been impressive but over the past six weeks, it's been simply humbly.

I'm grateful for all our associates to do for Cerner and for our clients.

In addition to be an acting or virtual workforce continuity plans.

Also immediately activator to covert 19 task force to inform our clinical business and operational decision making.

Task Force has regular interactions with the CDC.

World Health organization, and other global health agencies to guide their input.

In protecting the health and wellbeing of our associates is of Paramount concern as they provide critical supports cerners global client base.

Really never before has our mission been brought more to life than in these last couple of months.

Cerner is engage rapidly to support health care providers around the world is they respond to respond on the front lines.

You may have read in the United Kingdom. For example, there's been tremendous pressure on the ability of the National Health service to manage surging demands for care.

Cerner teams have worked around the clock with the NHS clients to provide digital innovation and technology to stand up a 4000 beds temporary hospital.

So the Nightingale field hospital sits on 100 like hundred acre re purpose Convention center and is fully utilizing cerners millennium platform.

We've also supported our clients by hardening, our infrastructure to fortify capacity increase uptime and provide greater flexibility of the systems.

We recognize the importance of their their routine excuse me of their front line work and have prioritize cerner resources to ensure compliance system stability.

I've talked I personally talk with many health system Ceos in recent weeks.

Witness Cerner Swift actions and are very appreciative of our tireless efforts.

Another important role for Cerner. During this pandemic has been to effectively six truly unresponsive, we use our vast data stores to provide actionable insights.

We're working with the CDC to participate in surveillance network that can better scope and mitigate the impact of covert 19.

So far nearly one third of Cerners clients have given consent to provide de identified data to the surveillance network.

We're also providing health systems and researchers access to Cerners healthy data lab.

That's a next generation secure research tool.

Good healthy data labs sits on the E.W. as cloud platform.

Labels, researchers aquari healthcare data to identify demographics spread trends underlying conditions treatments and outcomes that could drive future decisions.

The solution has been well received by existing clients number of researchers and charitable organizations.

Putting the bill and Melinda Gates Foundation.

Last week, we partnered with the U.S. Department of Defense and Veterans Affairs organizations on a successful go live of a joint health information exchange that supports each departments efforts to come but covert 19 through simplified and streamlined data sharing when they needed most.

The exchange allows the OATI and V.A. providers to access and retrieve consolidated records from community partners or health systems, providing them a standardized more holistic view the patients health.

This is the crucial in vain advancement in Cerners continued efforts advocating for and developing open cognitive platforms to deliver true entropic upper ability.

D.N.V.A. will further advanced nationwide interoperability via the H.I.E. by connecting to the Commonwell Health Alliance of 15000 community providers later this year.

This is yet another example of Cerner delivery onto division of a seamless and connected world.

Which of course has taken on greater importance since the outbreak of covert 19.

There are challenging months ahead.

Cerner is prepared to support our clients associates in communities, where we live and work.

This crisis has validated our strategies and underscores that will need to work at an even greater pace to provide innovation technology and data analysis across many care revenues.

Whether it's in traditional care settings field hospitals.

Our remote tele health environment, Cerners technology will be prominence in the support of our clients.

The future of how health care is delivered will undoubtedly change as we navigate beyond this pandemic.

Rules around reimbursements for example will need to be reevaluated as ritual care becomes more of a normal course for the physician patient relationship.

Additionally, increasing adoption of Tele health. During this crisis also emphasize continued need for for for providers to opt into national data exchange frameworks like Commonwell.

To that end, we're pleased that more than half of our acute provider clients are active participants on the Commonwell network.

More than anything the world's collective response to cope with 19 makes me proud of the affiliate to be affiliated with so many health care professionals.

And today it Cerner, we employ nearly 2000 clinical associates, including 800 nurses approximately 200 physicians.

Over 200, pharmacists and many other clinical technicians and therapists.

Dozens of them had a volunteered to work in acute settings in the U.S. and UK.

We've also they also had many associates, who are rotary service volunteer paramedics during their off hours at Cerner.

As for the results I'm pleased we delivered a solid first quarter with only minor impacts from the early stages of the pandemic.

As Mark will discuss we do expect a bigger impact the rest of the year, particularly in the second quarter.

However, we're fortunate to have a resilient business model relevant technology for health care.

So it transformation plan.

We continue to advance.

All of which positions us to manage through the pandemic with less impact than many other companies.

And then I'll hand, the call over to Mark to take you through the numbers.

Thanks, Brett good afternoon, everyone I'm going to cover our Q1 results to ensure our current views on the impact of Cobas 19.

This quarter were delivered bookings and revenue slightly below our expectations due to some impact of cobot 19 are ongoing expense control helped drive earnings at the high end of our guidance.

As well discuss if we do expect an impact on our results for the rest of the year, but we're taking several steps to mitigate the impact and currently expect most of it to be in Q2.

Now I'll go through Q1 results, starting with bookings, which were 1.09 billion and just below our guidance range, we saw lower than normal volume of contracts signed in the last two weeks of the quarter due to our clients rightfully shifting their focus to caring for patients maybe corona virus outbreak.

Looking at the quarter, we're on track to come in at the high end were above our guidance range prior to be outbreak and the resulting business disruptions. These opportunities remain in our pipeline. We believe will close in the future quarters as a global environment stabilizes.

We ended the quarter with revenue backlog of 30.47 billion, which was down 9% from year ago, primarily due to the termination of a rather works agreement that I discussed on our Q3 call as well as a little lower level of bookings in the first quarter.

Backlog revenue combined with other contracted revenue that is excluded from the AMC six so six backlog definition provide revenue visibility of approximately 85% over the next 12 months.

Obviously additional delays on being able to work with services backlog could impact from the backlog rolls out, but this is consistent with our current view.

Revenue in the quarter was 1.41 billion up 2% over Q1 of 19.

As a slightly lower expectations were but would have been comfortably in our guidance range no work for lower technology resale software bookings and lower reimbursed travel revenue related to the cold weather 19 crisis.

No the business model detail in year over year growth compared to Q1 90.

Licensed software revenue in Q1, or 2% over Q1 of 19 to 158 million, primarily due to strong growth in our SAS offerings offset by decline in traditional licensed software attributable to lower bookings in the quarter.

Technology resale 51 million in Q1 was also impacted by the lower level of bookings decreasing 7% compared to Q1 of 90.

Subscriptions revenue grew 12% in Q1 to 94 million.

Professional services revenue grew 4% in Q1 to 511 million, primarily driven by solid growth in implementation services, partially offset by 42 million less outsourcing revenue due to the termination of the rather works agreement with previously discussed.

Managed services was up 2% Q1 to 309 million inline with our expectations.

The board maintenance and 274 million was down 1% year over year flat to last quarter, which is our expectation range and reflects the impact of attrition and reduced hardware maintenance right.

Finally, reimbursed travel 13 million was down 43% in Q1 due to travel restrictions that went into place mid March.

Looking at revenue by geographic segment domestic revenue was up 1% from a year ago quarter, and 1.25 billion and non U.S. revenue of 165 million was up 4% from a year ago. We're.

Moving to gross margin our gross margin for Q1 was 82% up from 80.8% in Q4, 19, 91.8% year over year, but the improvement primarily driven by the reduction in outsourcing and reimbursed travel revenue slightly offset by higher third party services.

Now I'll discuss spending operating margin in that or.

Well these items, we provide both GAAP and adjusted or non-GAAP results.

The adjusted results exclude share based compensation expense acquisition related adjustments organizational restructuring and other expenses Kobin 19 related expense and other adjustments that are detailed in reconciled to GAAP and our earnings release.

Looking at operating spending our first quarter GAAP operating expenses of 940 979 million were up 4% compared to 939.

Your I know period.

Our adjusted operating expenses were down 1% compared to Q1, 19, primarily resulting from our cost optimization efforts looking at two line items for Q1 sales declined service expense decreased 2% year over year, primarily driven by a decrease in personnel expense.

Software development expense increased 3% on Q1 of 19 as gross R&D was essentially flat amortization increased by 8% capitalized software was down 1%.

Your next best in Q1 was down 5% driven by a decline in both personnel Nonpersonnel expenses.

Moving to operating margins are not GAAP operating margin in Q1 was 12.6% compared to 14.2% in the year ago period.

Our adjusted operating margin for the quarter was 19.4% up from 17.5% in Q1 of the 19, reflecting the impact of our cost optimization efforts and improved revenues.

As I discussed when I get the guidance, we do expect a pandemic to impact our results for the rest of the year.

Well, we remain on track with our plant cost optimization efforts and our implementing additional measures to mitigate the impact of the crisis, we do not expect to fully offset the impact.

As a result, we expect our full year adjusted operating margin to be around or slightly below 20% compared with previous expectation that we could be closer to 21%.

I'd note that this would still reflects approximately 150 basis points employer market expansion, which we view as impressive given the extreme circumstances for.

For Q4, we currently expect or operating margin to be 5200 basis points, lower 22.5% target, reflecting the reality that even with going beyond our original optimization targets, we won't fully offset the topline impact at Cobiz 19 by the end of year.

Similar to the full year. This would reflect strong margin expansion of approximately 150 basis points compared to Q4 of 19, which was our strongest Martin quarterly and year.

We also believe the framework for ongoing margin expansion you shared at our Investor Day remains about and we expect to continue improving margins beyond this year, we implement additional optimization effort and aim to realize the longer term opportunity to benefit from platform modernization.

Moving to that earnings in the yes, our GAAP net earnings in Q1 were 147 million or 47 cents per diluted share, which is down from 51 cents in Q1 of 19.

Justin adjusted net earnings in Q1, or 223 million adjusted diluted EPS was 71 cents compared to 61 cents in Q1 of 19.

Our GAAP and non-GAAP tax rates were 20% order.

For the remainder of 2020, we continue to expect our GAAP non-GAAP tax rates to be between 20 and 22%.

Moving to our balance sheet, we remain a solid position, which is good given the uncertain environment.

We ended Q1 with 399 million of cash and short term investments and 1.34 billion of debt. After deploying 650 million for share repurchases and 56 million through dividends are definitely question 300 million issue in Q1, and 2.5 or seven to 10 years under our shelf agreement.

Given our relatively low leverage we remain well positioned to access additional capital is needed to support our growth and capital allocation strategy.

Total receivables ended the quarter 1.15 billion essentially flat relative to the 1.14 billion in Q4 19. Our Q1 Dsos were 74 days, which is up from 72 days in Q4 of 19 down from 76 days a year ago period.

We expect some impact on collections from Cowen 19 in the near to intermediate term. This impact is difficult to measure, but we do not currently expecting to materially impact our operations have viewed as more of a timing issue we collectability issue.

Operating cash flow for the quarter was 284 million Q1 capital expenditures were 49 million capitalized software was 74 million.

Free cash flow defined as operating cash flow, let the capital purchases capitalized software development costs was 160 million Kitty corner.

For Q2, we expect lower operating free cash flow as we believe that is more cash collections, maybe most impacted and there's also the seasonally high quarter for capital expenditures, we expect both operating and free cash flow improvement in second half year based on our assumption that the impact is a pandemic will moderate rate after Q2.

Moving to capital allocation, we repurchased 9.2 million chairman first quarter for 650 million that brings our total for the past 12 months to 28 million shares repurchased 1.95 billion, an average price the $69 in 50 mindset.

This exceeded our initial plan repurchased 1.5 billion of shares by the end of Q1 20 leaves US with 1.3 billion remaining on our current authorization.

Given the uncertain nature of the current environment, where significant level. We purchased in Q1, we expected pause our repurchase activity for now, but we'll continue to evaluate our program, which may also be impacted baby amount of funding use rather purposes, such as acquisitions or investments.

Moving to our dividend program, we pay the dividend Q1 of 18 cents per share were 56 million.

I realize some companies suspended their dividend due to the pandemic, but our strong financial position allows us to continue our dividend program subject to board approval.

Before moving to guidance I'd like to comment on the announcement, we made in February the coffee with medical agreed to purchase certain service assets in Germany and Spain.

Transaction is consistent with the portfolio management activities, we've been discussing right over 200 million after working capital another closely.

Adjustments for ongoing capital allocation and allow us to focus on profitable growth.

In our core non U.S. regions.

The transaction is expected to close in early Q3 subject to certain closing conditions. We are factored in approximately 40 million less revenue into our full year guidance to reflect as timing.

These assets are profitable, but we expect to largely offset the impact on earnings cost optimization efforts.

We expect to remain active in M&A and portfolio management. This year as we continue to rely on portfolio was our growth strategy.

Moving to guidance, while it is not possible to precisely quantify the extent to it's become a 19 pandemic will affect our business operations and financial results going forward. We believe it is helpful to investment to provide our current view expected results for the second quarter and full year.

Our business in general we were Zillions significant recurring elements I would comment at this guidance is subject to a higher than normal amount of risk given the unprecedented environment, which we are operating.

Now I'll walk through the guidance with some additional commentary on how we are factoring in the expected impact as a pandemic.

For Q2, we expect revenues to be between $1.34 cents 1.34 billion and 1.39 billion.

The 1.365 billion midpoint of this range is approximately 95 million less than our original plan for Q2, representing the biggest expected impacted the pandemic.

A copy of this impact was in professional service, which is expected to have lower utilization in Q2 due to several parts and delay projects that can't be fully worked promoting.

We expect utilization to approve in Q3 AMCU for most of the remaining impact is lower expected levels of software technology resale reimbursed travel revenue.

For the full year, we expect revenue between 5.55 billion 5.7 billion with the 5.6 to 5 billion midpoint, reflecting a 1% decrease from 2019.

This is down approximately 225 point from our previous mid 0.5, 0.8 5 billion.

<unk> 40 million of this reduction is due to the expected Q3 closing them or local divestiture, which is expected to reduce both Q3 and Q4 revenue by approximately $20 million.

We believe the remaining 185 million reduction is largely attributable to cope with.

The rough breakdown of this impact is 30 million already realized in Q1 95 million expected impact in Q2, which I discussed.

80 million of additional expected impact spread over Q3 in Q4.

Well no one knows on revenue growth recall that our full year revenue was also impacted by and large reports contract in late 2019.

If you adjust for this down the global divestiture, our expected 2020 grocery we'd be 2%.

Adjusting out the revenue from our able that's acquisition would bring pure organic revenue growth back to one person, but we don't you all the revenue from able best as inorganic because we are leveraging their associates Olivier contract as it ramps up.

I mentioned, there could be additional portfolio management in M&A activity. This year the could further impact revenue overall 2020 remains a reset your for our top line in the unexpected edition of the over 19 pandemic amplifying the magnitude of that reset.

Moving to EEP, Yes, we expect Q2 adjusted diluted EPS to be 60 to 64 cents per share the midpoint of his ranges, 6% lower than Q2 of 19, reflecting the expected impact in the pandemic.

We expect adjusted diluted EPS to return to growth after Q2.

For full year, we expect adjusted diluted EPS to be two daughters, and 78 close to $2.90, where the $2 and 40 gig $42 and 84% midpoint.

Reflecting 6% growth over 2019.

This is down from the previous range $3, a nine to $2.19 and do the projected impact as a pandemic with about half of the impact related to the second quarter guidance.

Moving to booking bookings guidance, we expect bookings revenue in Q2.

A 1 billion to 1.2 billion.

The midpoint of his main reflects a 23% decrease compared to the second core group 2019, reflecting our expectation and sales activity will be most impacted in Q2 with improvement expected later on in the year.

Now I'd like to discuss the assumptions that factored into our guidance and how we're approaching the rest of the year as I mentioned, our current expectation is the largest impact from pandemic will occur in the second quarter due primarily to lower expected sales activity and the impact of multiple project delays and clauses that result in lower utilization for professional services.

Resource, we do expect project in sales activities to begin improving in the second half year, assuming the impact of dependent and related restrictive measures subside during the second quarter, but there's still an impact through Q4 is a project delays in more bookings expected in the middle quarters flow through impact on future orders.

Mitigating the impact to the extent possible by shifting to services resources to other work in our backlog that can be done less client engagement and doing as much work remotely as possible.

We've also identified optimization opportunities, but beyond the significant amount we already had in place.

We believe taking more aggressive managed could impact our ability to remember our IP commitments and meet project demand as our clients Reengage.

We also don't think it makes sense to reduce our capacity to much now given our expectation that activity will pick up as men who the year.

In summary business I'm, an unprecedented and very fluid situation, we're constantly testing our assumptions will adjustments needed throughout the year, we feel like our current guidance catches a reasonable range of scenarios. The midpoint replacement assumption. The project activity begins ramping late Q2, our lowest leaves room for a slower returned to normal sales and probably.

Correct activity and our high end captures a scenario where clients we engage sooner.

In conclusion, we are pleased we were able to deliver solid results in the first quarter. Despite the initial impact to cope with Nike well, a pandemic has decreased our financial outlook for the remainder of the year, we're still things that we're projecting solid margin expansion and earnings growth in a very challenging environment, which would have been very difficult we hadn't.

That is our new operating model started putting optimization never took place last year, well that turn call over to John.

Thanks, Mark Good afternoon, everyone today on Friday results highlights and an update on our federal business I'll start with our bookings as Mark mentioned, we delivered very solid bookings given the circumstances and we were on track to come in at the high end or above our guidance range prior to the outbreak in the resulting business through its just.

Options, we do not believe these opportunities and the loss, we expect to close them in future quarters as the environment stabilizes.

Right to the quarter when large expansion with investor owned client that purchased our HR solutions for 11 additional sites to displace two different competitors as strong contribution from our federal business and our large client purchasing care work connect our care team communication offering for 25 sites, we had a lower level of long term.

Bookings compared to last year, which contributed to the decline in overall bookings for the quarter the percent of bookings coming from long term contracts was 27% compared to 30% the Q1 of last year.

Moving to a federal update many of you FC headlines about pauses in the beauty and be a projects due to the coldest pandemic like the vast majority of our clients have had to ship attention to the cobot 19 pandemic. We're doing all we can to support them. During this time included reducing interaction with the frontline staff.

Enabling them to focus on their patients and insurance, ensuring they have the key technology capabilities they need.

The program continues to progress as we actively working push forward on critical elements, including virtual deployment activities technical build interfaces and program management further evidence of the continued progress with both BA and Deo D. There's the recent HR you go lives at breakfast gosh.

Oh.

As you look for future to future deployments were currently working with both programs to revise timelines. Accordingly, we believe the impact is manageable and we had factored it into the guidance Mark shared.

Looking at the bottom broader marketplace as Mark and Brent discussed, we're an unprecedented environment well. This has created some disruption the business activity in the near term I've been pleased that a clear message. We are here apart clients is they want to move forward with their strategic plans and the Cerner is an essential part of their strategies.

The timeframe for some clients remain uncertain as they work through the various stages of the Kobin surge and recovery. However, the message is clear maybe cerner to help with master initiatives and strategy.

In the near term we are focused on supporting our clients in any way, we can with a focus on supporting those experiencing a surgeon cobot 19 basis. We're also advancing projects by doing as much work remotely as possible and the short time, even doing this we've learned a lot about how we can how much work can be done remotely and our clients willingness to engage.

Page virtually not only is this helping us mitigate the financial impact of the pandemic. These learnings represent an opportunity to rethink how we approach projects going forward I believe will walk you modeled it requires less travel and less on site presence, which will save cerner and our clients time and money.

More broadly the pandemic has created a heightened focus on the need for interoperability secure access to information analytics and other need the aligned with our capabilities. We believe this could be a catalyst for an industry to move faster to realize the potential nested yet to be realized from a base level of digitization.

Then it was established during the meeting fees era, not doing so would be a missed opportunity.

Another reason, we're cautiously optimistic about business activity being able to assume this we believe the funding providers received from the carriers that.

To help them recover from the significant near term impact as a pandemic and put them in a better positioned to move forward with planned projects and considered new ones as they look to address needs that had been identified during this crisis in summary, I'm pleased to probably a magnitude. This pandemic today and I believe that in the long run.

This will lead to health care further embracing technology with that I'll turn the call over to Don.

Thanks, John.

In his opening comments Brent frame the impact to the pandemic on our client our associates and our communities for work and live.

Want to talk for a few minutes. This afternoon about what we believe because the crisis will mean for health care and our work to systemically transformer.

The first order impact of any crisis as an acceleration of macro trends already playing out the federal government became the top regulator in pair for health care in the 22, and we think of it will accelerate Washington's Grad Raul health system consolidation has been a multiyear trend we believe it will accelerate.

In the quarters to calm the home in the venue to include Tele services has had a quickening adoption curve. The pandemic has already accelerating that.

For behavioral health to deployment value in the cloud acceleration of existing forces of change is the now none of any crisis.

As we think about our strategies for capital allocation, we look for areas with significant macro trend clearly understood regulatory requirements leverage from existing Cerner assets high gross margin business models and speed to revenue. It's created a set of strategic growth businesses that into many are important to pandemic response.

And a central for durable recovery.

Within the four wall in the hospital are real time Hospital system solutions are comprised of enterprise communication hospital operations and workforce and capacity management.

Providers have surged to deliver additional supply our care where capacity management RBS solutions.

Our.

I've had a significant impact.

Surfacing data set to drive near real time decision, making on workforce equipment that management outside the hospital.

Yeah, Mark not think Healtheintent platform also had been quarter Craig for spot.

Healtheintent aggregates and normalize in central information that the clinical administrator.

Geospatial data, our Healtheintent team developed and fully deployed pellets in Dravet surveillance, all client and Jeff day.

Thanks, just the Powell from New Jersey, you called it the key tool and the Arsenal as their clients move from crisis response to durable recovery. The same tools can help restart their health systems and larger health networks. We believe these reactivation campaign will drive critical revenue recovery and over time be part of how our clients three a match.

There are larger health network strategies and business model.

We also believe physical and virtual help networks will be a medium term tailwind for cyber security.

We're all the disruptive promise of data liquidity alternative venues of care like and new staffing models to support them secure protection of health information will be Paramount and as policymakers increasingly view health care is critical infrastructure for National security Cyber will be further elevated our latest announcement.

Look forward to find help gives us a compelling total solution offering and the businesses on path for another solid year.

Beyond the health network, our data business has also continued the momentum.

The release of information doesn't the signed multiple new legal in life insurance clients in the first quarter. In addition, our Cerner learning Health network, a life Sciences and pharmaceutical space also made solid progress our Glasgow and his team have grown our learning health network to represent one of the largest clinical data sets in the U.S., but 89 million de identified pace.

Since never 11.5 billion lab results, we leave the first quarter confident our ability to drop to drive strong year over year organic growth.

Finally.

Our efforts across the enterprise the health network in the larger health economy Center on the person David branch on his consumer training drove strong bookings in Q4 and again in Q1 or digital experience platform is helping clients connect and deliver important continuity amend the pandemic disruption and the first quarter event as Hell.

Onto the new digital patient experience built on the Cerner consumer framework and there's just one step closer the digital front door for health care and we believe consumers are seeking.

And this recent shareholder letter, Jamie Jamie Diamond said entering into a crisis is not a time to figure out if you want to be.

I, just don't just accelerate existing trends they offer the opportunity to shape and lead them.

The crisis response of provider organizations worldwide has had an impact on every center subject. We then hobbled by the efforts of frontline caregivers and see what we call the spirit of Cerner and our businesses like workforce tell where were directly supporting a central workers. The pursuit of a durable recovery for its part will once again place our technology.

And services front and center, we look forward to that challenge and that opportunity in the quarters, the cob and with that we'll turn the call over for questions.

Thank you, ladies and gentlemen, my mother to ask the question you would need to press Star then one on your telephone.

Well your question press the pound cake.

Again, it's not wanting to ask the question.

And the interests of time, we ask that you limit yourself to one question filter.

Free to rejoin the queue for follow up question.

Our first question comes from the line up Charles Rhyee.

Cowen Your line is open.

Yeah. Thanks for taking the question just wanted to ask really about how you're thinking about this durable recovery I think you yourself along with many other companies as that we've seen them reports. So far you looking at two kids to worsen obviously two degrees getting better as we get through the course of the year, but when you think about.

Your clients since a particular hospitals as they are you sort of up.

As a derivative impact as they kind of get their business back online how do you see sort of that kind of timeframe.

In terms of when they start recovering to when you think they'll start spending.

And do things like do you know stimulus plan of the Cures Act do those funds do you see them, helping that mitigate some of the impact in terms of sort of spending slowdown you might expect or otherwise.

Yeah. This is mark.

I think that.

The.

Primary impact on us as our services business pushed a lot of that implementation projects. Many of our clients that were forced to pause a project or to first start are eager to get all of those projects, but I think everything that's going on.

Currently is is emphasizing how important are these projects are for them to further operations as operate more efficiently certainly up the cares act and likely subsequent stimulus packages.

We're going to help our clients to be financially able to go and run their businesses I think that the fact that in the U.S.. We've seen how critical health care really is and how many how important that we have adequate health care, an adequate number beds inadequate facilities. So funny that health care, we believe is likely to.

We need to be maintained or strengthen and we think our clients are going to be looking as Don mentioned in his comments or something that not only help them. A response, but also recover and then take advantage of what the next opportunities are that somebody went to sort of open such as tele health and other things.

John I assume you.

Sorry, if I could I think now we're at our vast when we're aligned with our clients around business strategy and this is put up front and center in terms of.

That dialogue with our clients and I think thats, a structural advantages that we have because our our systems are heavily deployed at our mission critical and so what we're really talking about what clients now and how can we be relevant to cold in response, we are having a parallel conversation around how can they begin to think about.

Hi strategies around recovery and many other solutions that are part of response, a the care aware solution suite that I use that as an example, integrate integrate use case, where you were working on surge capacity and how they think about management of their supply side, but those are the same tools and capabilities.

When they're going to be relevant to them in terms of how they think about.

Medium term strategy into manage the expense line I think about labor and workforce strategies and what it looks like to make money at Medicare and Medicaid rates, So I think where relevant to kind of in response, we're gonna be central to those economic recovery strategies and as revenue recur.

Every strategies and that we're smart will play into larger strategies around.

Efforts of our clients to rethink their business strategies on a multi year basis.

Greetings and maybe just a follow real quick in that 1 billion to 1.2 billion a bookings guidance for next quarter. You maybe is it possible give us a sense on.

Maybe how much of the mix in your expectations for new sales.

Shifting to more of a cold responds more of how do you realigned your business post post pandemic versus what you might have expected lets say, there's there's plenty of started the year. Thanks.

Yes. This is mark with the job Yeah, I mean I'd comment on data what we're looking at is believed to 1.2 billion in bookings it frankly isn't much different than we normally see yes.

And in terms of what our clients are doing and when they're willing to engage in their strategy, it's a little bit by depending on where you are in the world dependent on where you are geographically in the U.S. in terms of when you start but the mix isn't much different than we normally see in any quarter. It's just a bottoms up a little bit off from what we'd see.

In a normal quarter.

Great. Thank you.

<unk>.

Thank you. Our next question comes from alone or purchase.

Research Your line is open.

Thank you.

I want to continue on the assumption on purchase.

<unk> different tax, which is you've been through its a couple of recessions.

2001, 2008 experience might be helpful. As we think about.

How hospitals will manage through you know what goes beyond Oh, the experience can we start with that.

Sure the there's the marketing in the old Guy in the room life remember all of those the clearly back and as you know so said another way timeframe the capital market shutdown health care. It didnt have access to cash.

For the first in a period of time that that just shut the spigot also I think what you're seeing now is a much of health care economically is doing okay. Prior to the to this environment Oh.

We believe that the stimulus packages will help them get back on their feet post this environment.

So I think in my mind. This is much different from those in that this is a relatively no short term to find.

Bask, where they're busy.

Providing care to their patients.

They don't have a cycles to go work on their infrastructure.

We believe that will dissipate and as we kind of get out start rolling out in Q2, they will be reengage and when they use a higher level of passion on.

Taking advantage of somebody opportunities a lot of these projects were already in flight and we slowed some of them are still work at all actually because if you look at you really look at the revenue impacted when we're talking about for Q2, we're still delivering 90% of our services rather it's still a significant amount of that revenues coming through but working in remote another life.

So from our expectation I don't see them stopping that as we saw in several delay time from I think this is different to me.

My experience would be that it's a little bit more short term in nature, we should we should.

Finished cummins pretty strong houses once people are really ready to reengage, where the.

Asian contract discussions engage in project activity yeah. They build the other thing I would say.

You tend to see sector specific orientations to previous downturns, So I'll focus on the transportation sector and the tariff lag of 911 financial sector.

And Oh seven to nine I think one of the focal points for government emphasis here will be up the provider supply side and it will feature in a meaningful way in terms of their thinking and approach.

In particular start thinking about our providers supply side client that's critical infrastructure and it's probably too early to started describe what that will mean from a government focused perspective, but that's a that's a perspective, we share and then we think our technology strategy as well enable.

That's helpful and services element is that primarily that today, you don't want to take up the cycles and attention or is there need to reinvent some of the model for services that really were always delivered on the ground you may not be now.

Well certainly it's a little bit the boat John Yeah, I think I think it's a good points because as we're working through a different new normal right now I think both us and our clients Arden are looking at different ways to deliver the services as we mentioned in previous question. It's important to note that does that the majority of our clients have not stopped.

Their projects, we continue to make progress.

And we're working on new and innovative innovative ways to fill those services and I do believe we'll see a new normal will walk both due both to impact the reality is up today as we gradually come back to work, but I I give I look look at dawn give a lot of credit to our clients and how we work with our clients that we've been able to weren't very effectively.

Virtual a and I think some of that will become the new normal.

Thank you.

Thank you.

Our next question comes from the line, it's Steven Valiquette <unk> with Barclays. Your line is open.

Thanks, Good afternoon, everyone and let me give Andrew on the work that Cerner does just to keep hospitals running efficiently during the pandemic.

A couple of questions here first.

I guess given that a lot of hospital still have fiscal years that and September thirtyth.

I guess I'm curious if there's any variable in your guidance for the full year that with a reset of some hospital budgets for their fiscal 21.

Starting October 1st of this year that your calendar Fourq you could see some rebound the result.

For the more related just to the flow of volume across the overall acute care hospital a customer base.

Yeah. This is mark none of our guidance is obviously tied to our forecasting process. We go through each opportunity.

Based on when the fives can engage there when we think the processes are going to result in a completed contract. We didnt see a lot of changes already concept thoughts around budget process is though our clients are fairly busy providing care.

Two two people I mean, so it's what we've done it what we always do laid out.

Forecast data.

Folded into a projection in them and that's what makes our guidance all we provide a little wider range just to give us some some room for upside and downside relative to what could happen, but there isn't anything that's that's inside the health care purchase nurse relative to them changing their view as to the purchasing behave.

<unk> at this point.

Okay. One other quick one this one's kind of tough the.

Ask about her answer a little bit, but I guess that big picture from from our view there seems to be.

Very strong them out the federal.

The minister lead being provided too.

To your broad customer base when they get from your perspective and is there any concern that you see in relation to.

Theres solvency of hospitals and or client in the ambulatory setting or do you think.

There's also enough federal liquidity and stimulus to avoid that sort of risk. How do you think about that just in general in this environment.

I think the to your point I think it's incredibly difficult speculate.

I'm sure that you have having said that.

We do think that that there's an accelerating impact that the current environment is happening I think one of the things that is going to accelerate and the level of hospital consolidation and so that is going to extend out into.

The the ambulatory and Arvan accident, and health network space, I think you're you're gonna see trends around practiced on larger health system consolidation I had a meaningful feature.

Outside what the landscape looks like over the next 24 to 36 mile and what we need to be delaying as thinking about how the in time and our healtheintent platform as a key enabling technology for the integration strategies that need to feature.

And those acquisition approaches.

It was built it was purpose built that is on the HR agnostic platform had its as very well suited to the kinds of strategies that will be required to make those.

Practice acquisitions work inside of larger clinically integrated networks. So we think there is a trend there when they get to try and that probably accelerates and we need to be smart enough active in terms of positioning healtheintent our capabilities to make it work.

Okay, Alright appreciate the extra color. Thanks.

Thank you.

Ladies and gentlemen, as a reminder, interest of time, we ask that you limit yourself to one question. Please.

Our next question comes from the line of Jamie Stockton with Wells Fargo. Your line is open.

Hi, Good evening. Thanks for taking my question I guess and I know this is doubling down on some of what's already been asked but on the pro services front since that seems to be a the area where things are relatively weak incrementally.

Are there others some activities, where it's just not possible to do them remotely or is this really a question of.

Coming up with creative solutions.

Or maybe the client having staffing available to kind of work with your people to get the work done on if you could just qualitatively touch on that that'd be great.

Oh this is John I'll expand on that a little bit yeah. There are things that are you really can do virtually so you can't do everything virtually if you think about a large activation or those type of thanks.

Does tend to be.

People have any type of a go lives and likely so because of the patient safety aspects and those type of things, So where you see some of our challenge is being as if your mid project working along are you tend to go on course and continue as it is as you get closer to activation, depending on where you are and the possibility.

Being able to come back on site and those type of things are you may see pushes pushes a go lives as you get as you get closer but that's the primary issue.

That's pretty difficult to do to virtually however, I will say that we have done some virtual activations in some of our mall smaller projects and they've actually gone well so it'll be a combination of both but the expectation that is you can't do everything or tool.

Okay. Thank you.

Thank you.

Our next question comes from the line of Dave Windley with Jefferies. Your line is open.

Thank you so another follow up there.

But on guidance does does your guidance today reflect.

Kind of the maximum amount of conversion to remote activity in professional services or would there be upside there.

And then maybe a sneak in a second part of the question would be is it we're calculating incremental decremental margin of slow Fortys is that reflective of your decision to keep professional services employees fully employed.

Or is that more a mix of the revenue that's coming out. Thank you.

Yeah. This is mark the Oh, yeah, the impact and which might not that.

Been fully realized by by some investors is that when the revenue from those services go away.

Because of a we think that relatively near term nature of the impact we are not reducing our workforce in the normal of world. We will adjust our professional services workforce to match the demand and you would be basically missing out on the.

Contribution margin that business in this case, we know there's a lot of demand out there. We have government contracts that are wrapping up we have a commercial contracts ramping up so we need to have those people they're trained.

They're going to be ready when those client is ready. So we are deprecating that workforce, which means that every dollar revenue. When we don't give is basically a dollar operating earnings that were getting so I think that's an important point to make and up and it is because our expectation.

We are going to see the bounce back and we're going to meet every one of those people working on it I actually do believe we will get some efficiencies and how we do our projects and ideally that will be reflected a higher utilization utilization rate all those consultants that there'll be a higher for southern tide is effective perhaps from from reduced travel perhaps just.

From techniques were learn even as we go through this there are things we have to do on site absolutely go lives in our interface with the users in a meaningful way, but I think we're gonna come out here more efficient.

And be able to drive these prices keep in mind most of our projects are fixed speaking nature. So any efficiencies we can drive on implementing those.

Are you know can benefit us a relative to the bottom line I think doing a once again from an upside perspective, we've tried to give a fairly wide guidance range. Certainly if we can be more efficient. If we can get continue to expand what we do virtually a before the project start opening up a that's potential for upside.

If there's no. It is just last longer if there's something something in the fall that slows us down and that's that's a downside opportunity, but right now given our best view, we think our guidance reflects when we think we're going to get back to work.

Okay. Thank you thanks Mark.

Thank you. Our next question comes from a lot of shop.

Your line is open.

Hi, Thank you very much. So you mentioned tele medicine is going to become part of the norm course, which I think many would agree with but specifically what changes are you making to help your clients with this transition from a go to market perspective from a product and work flow perspective and.

Any other perspectives you'd like to add.

Yeah childless Donovan said Craig question, So I think.

The first thing we've attempted to do and thinking about workflow as we've tried to think through what it means actually have an enterprise strategy for our clients a and what it means to provide tele health services and.

Higher acuity sat hang with our hospital capability and our outpatient server capability, but then also that in fact that strategy outside the hospital predominantly through our relationship with them well and so what's it look like given an end to end capabilities across the.

Enterprise I think secondly, we think as you see normalization around the regulatory and payment landscape, which are really sort of been the twin.

Certain Clinton, Adam and probably less some changing dynamics relative to provider and how they want to think about the provider patient relationship as as we see those impediments fall back we think there because this sort of interesting conversation around what's it look like to think about the mix up is it going digital capabilities.

Acquire shale optimized for business strategy, we think that lets walk away and fee for service at once and other weighing fee for value and so we see some pretty interesting opportunities. There in terms of helping our clients think through that next and then the final thing I'd say as I and the strategic growth businesses I think.

There's some very interesting emerging conversations around how we think about net new offerings.

In areas like security, saying, the BH space, where we now there's going to be elevated levels, a sentence sensitivity and where the solutions technically need to jail.

Ah things like support group business. So I think you'll see us let to support the enterprise strategy I think through it from a business model perspective, and then really left to capitalize on niche areas that we think have macro trend.

Thank you very much.

Thank you next question comes from the line of Stephanie Davis Demko with SVB Leerink. Your line is open.

Hey, guys. Thank you for taking my question I bought a another one on virtual how should you anyway with only a few burchill care players that they like video.

Do you plan on remaining aligned with only a few players are clinton's expand as you look at them again see I'm.

Sure the Brexit there.

And at the quick thought to that how should we think about economic seems like a lot.

Yes.

So a couple things on that stuff and they are one.

We support.

Integration strategies and all of our major client.

Across multiple.

Player and the talent base so it.

Large client had the relationship with Teladoc or with MD lie for doctors on demand, we're going to support that strategy and help them make it successful.

The second thing as we do have some preferred.

Partnership strategy includes above the strategy with Amwell and that's fairly keyed out we think about go to market, particularly with our large enterprise class day.

The final thing I would say relative to the economics as and we think our view is there some commodity trend around the technology Ah So about a b Michael mobile we think it will become a expectation of the provider.

To be able to provide those services to the market against their business strategy and so the more interesting question for us just like the questions around.

Mix of channel and how we think about mobility and what are the business model strategies that are activating around the tell us services. So how do we think about the obvious that neo and tell us service relative to the Medicare advantage space and how we think about differentiating and helping clients manage.

First dollar, whereas those they're gonna be the kind of things that we're going to push ourselves I think frail and we think that ends up being a bigger and longer term and pack up from a market perspective.

<unk>.

Understood. Thank you for that.

<unk>.

Thank you.

Our next question comes from a lot of Michael Cherny American Security Your line is open.

Good afternoon, thanks for the colors so far.

I wanted to step back and take another Big picture question I. Appreciate all the commentary that you've given us regarding your conversations with customers going out of your way to make sure that they're doing as best they can you that being said somebody that did points that we see continued to point to them essentially having no idea.

What the pathway forward is for their operations when collectives, you're gonna come back cash flow dynamics et cetera. So as you think about your guidance going forward. How does some of that variability in terms of the lack of client understanding of parts of their own business play into the thought process on your guidance or is it a straightforward we.

And Mark about.

Essentially a massive debt and then the necessity for so many of your clients as key participants within that local geographies allows them to get back to normal operations at least in terms of how they think about running their business. Even if volumes are still slower to come back.

Yeah. This is mark it clearly our business.

As a lot of visibility to it right. It's fairly durable. So we have a lot of recurring revenues, we have a lot of relatively highly visible revenue so up waiting when you're getting to the point of no wonder you really can see maybe 5% of our kind of revenues being in that that categories. As you get further in a that can you know that come even.

Go up as you are.

Shorter period of time to get to the end of year. So I think from you know as we look at the backlog, which is how we look at opportunities and then new business pipeline.

We've gone through we've tried to handicap based on our knowledge of each individual client.

What we think their focus is going to be at their work through the next 60 90 days.

The majority of what we're hearing from our clients or certainly the recurring there's going to continue all those elements, but that's a project work is things are very interested in getting startup sort of back up.

We're starting to get into conversations of when can I get in the queue for the restart because I think our clients realize that there's going to be a lot of demand for those services bye bye.

By a broad client group and they're going to want to be able to be in line being sure that they're getting getting getting good just if you will know services. So I.

Yeah clearly many of them are are trying to go figure out how are they going to address all of you elective procedures that didnt get done I think some of the things. We can you know, but we do in that space. So that we can do that space is helping to analyze has finally appointments got canceled.

One of the I'm not you know how is that are an effective ways of using some of our tools to help them start we schedule when those procedures and we have tools that help with managed care facilities, we have tool to help manage their workforce. So how can they use all these tools to maximize the opportunities to go addressed those deferred elective procedures. So I think.

All of those things.

As you know we talk to our clients, they're looking for us to help them solve business problems would agree the right now they're business problem, it's making sure there people are safe and if there were living in high quality care, but that's kind of more pretty quickly into all right now how do I will cover and that's what I'm talking about earlier and I would add that I think you'd mentioned that.

Your comment you probably didn't mean it this way they don't have a but they don't understand when they can get back I wouldn't I would say that the vast majority of all speaks to our clients many of them already taken post surge. They have plans in terms of when they believe they can open up they we've been doing activity I'll call. It on search activity as we work to convert.

And if that were converted.

For the pandemic back to.

What would be considered an overview. So I think the planning has begun there's there is a it isn't certain by any means but theres an idea when you get back when it came back to a as close to normal as they can and they're preparing for how to address some of this volume that is going to come back to them. So I think preparations are underway.

Hi, and the uncertainty is getting less on certain every day.

Hey, John This is Brent I'd, just add to that I think Mark you. Both made important point Mark made a very important one which is these elective procedures that demand is not gone right. It's delayed so when I give you talk with hospital system Ceos, there, they're trying to figure out how do they a comp.

Todays that demand that demand the electric demand as it does come back and if you think about it theres going to go Theres a lot of delayed elective procedures, where.

You know people want to move ahead or need to move ahead for various reasons. So.

You know everything that we continue to help claim that is key.

Thank you probably call it really appreciate it.

Thank you.

Our next question comes from the line of Jeff Garro with William Blair. Your line is open.

Good afternoon. Thanks for taking the question I think I've, a follow up and that last one a little bit maybe try to translate it up a little to the Cerner business model, just trying to better understand the impact of Kobin 19, and then looking ahead to a more normalized business outlook and then what areas of the business would you expect that 2020 revenue is Uh huh.

A new base to grow off of 2021, and then what areas would you call out its expecting higher growth due to a catch up element in 2021.

Well. This is mark I would first of all indicate that I don't know that there's a catch up inc. element for summer certainly our clients are looking to catch up with some of those elective procedures.

But for us, but yeah. The that's certainly the services revenue that is going to be no. We're not going to be able to dress from Q2, it'll occur, but it's going to occur in future periods. As we have the same size workforce, we're not going to.

Expand our workforce another thing to meet a higher short term demand well just continue to work through ideally to more effective way, which might drive more revenue for associate how does that organization, but I don't I don't see a a service the manner as we go into 2021.

Necessarily so I think thats from my perspective, I think Don might want to address some of the opportunities from a strategic growth perspective that we see relative to kind of coming out and how those things are.

Really.

Helping to jumpstart some of those businesses Yeah. I think if you. If you just think about a bad where we've got covered response terrible recovery and the chance of that process for folks to really create elevated levels answered certainty around their business model on a five year basis, that's the sweet.

But we see more engagement with our clients and so if I'm using healtheintent.

To think about an engagement strategy with elderly a senior just add to that I'm, taking first dollar risk ought to keep them out the E.D. and utilizing the hospital. That's part of my surge strategy those same capabilities to Mark's use case become the opportunity to start to.

I think about recovery strategies around key procedures around service like let's say a a service line like orthopedics.

And that overlay that network capability is also them the same capacity that I need on a multi year basis to start thinking through ship and payment model and what it looks like to manage the top and bottom line. So to John's point, I think theres a lot a fair degree of sophistication in the client base.

Terms or how to think about that progression, there's a lot of noise, but that's the signal that you see in the dialogue with the market.

And I think you know what we believe on an out here basis as the areas that we have made big bets on from a strategic growth perspective are a set of things that are going to have significant track. We love the real time hospital space I talked about up we think it's gonna have elevated rate some trend.

Behavioral health husband, an area, we've talked consistently with you about and DLP Act space, we think the aging while being end up being a big area of focus on a multi quarter basis, and then finally I think as you're seeing in the bookings data a you're going to continue to see us have traction and trend around our concern.

Our strategies are you may see some shifts in mix, including things like Amwell and virtual being a more material piece of the revenue mix, but it's absolutely going to be something that has traction and trend.

There are other areas, where we are watching.

And thinking actively about a headwind tailwind dynamics employer wouldn't be one that I think we believe a given our engagement with our clients around return to work on that said, there's a son traveling to the employer and that employer employee dynamic right now that could create some somehow quarter out your trend around that.

Yes, I will see and and so I think across all the strategic growth businesses.

We're playing through near term and medium term dynamics, but I think in the main we feel very good about next and long term potential.

Yeah, and I would add one thing to Das list is data.

That's a one of the things we've learned in that timeframe is how valuable safety is and what you can you tell what kind of how certain tools can help us predicts a pandemic areas where are the hot spots going to be how what are they dying down so.

You know, we've announced somebody activity methodology will be going quickly.

It's a great point. So if you just think about the main businesses that make up the data strategy from a release of information perspective, a ton a trend there kind of interestingly. The success, we've had around legal in life insurance.

This is the same dialogue, we're having around professional services. How do you think about virtual interactions and away that deals slip current situation reality, so a ton of trend around the core ROI business. Similarly, Brent talked about the work we've been doing.

Put together a purpose built data sat for for co bid and to allow academic researchers to explore a key protocols.

And discovery strategy again part of a larger narrative that really plays into the opportunity sat around life Sciences and pharma so.

Unquestionably, we think a lot of what's playing out in this space.

Ends up being that positive in terms of the focal point areas that we have for that business.

Great. Thanks much.

Our next question comes from a lot of George Hill with Deutsche Bank. Your line is open.

Hey, good afternoon, guys and thanks for taking the question Mark a lot of course has been provided here I don't know if I tell these old but I remember 2007 2008 in 2002 2003.

My question is on that.

So on the bookings guide I guess can you talk about how much has been hand.

And given that you guys have a high visibility recurring revenue model I guess can you talk about how much of this years revenue is already contracted for I guess, what I'm thinking about is how much of the bookings guide where the revenue and earnings guidance at risk if the crisis persist longer than expected.

Yes. This is mark clearly the key element for us is a.

A lot of revenue is already in backlog, it's already contracted for the key on the services side is the ability to be able to deliver that revenue. That's really the question isn't that indeed, the key thing with the we're working through today is how can we deliver that revenue at Arkansas and are certainly a personal services model.

As things get back to two to normal.

Meet all demands our clients gonna have at that point. So a lot of it is already contracted so that.

Certainly the new bookings are things that we need to deliver whenever we have a lower than expected bookings quarter, that's going to impact of snatched towards me following quarters and that's another impact on the lower guide for this year is lower Q2 is not going to give me that Q3 in Q4 lip right normally be looking for.

But really for a lot from visibility standpoint, we have a significant amount of visibility a lot of it but well, it's contracted wallets and backlog and while we're working on strategy to deliver those projects, that's where the that's where we don't know the exact impact or the exact timing.

In there must be able being able to get back in the field, we're very focused on our clients being able to deliver what they do you do very focused on the safety of our associates were not going to be able to send associates out there because it's not absolutely say for them to be on site would be doing the work.

So those are the two things are running at a certain were balanced for you, but our expectation is we will get back to work our clients were here do it our associates are already going into it there are ready to start buying plane ticket they actually want to be out there, helping our clients. So.

At this point.

A lot of visit we haven't it's in the backlog in signed there's not a lot of contractor there has to be done rather than for that at certain element of serve that of the revenue that happens during the year, but key after she was delivering on that backlog.

Okay. Thank you.

How about do we take one more question.

Thank you.

A question comes from the line of Robert Jones with Goldman Sachs. Your line is open.

Great. Thanks for sneaking me and obviously a lot of the questions had been asked and answered at this point I guess, maybe John I appreciate the update on the government.

Business government work going on I, just just curious if maybe you could specifically share a little bit more on on the V.A.

What revenue do you still expect if any to be in guidance for this year.

No that they you know there was a pause a you know relative to the work there just curious if the roughly 250 million a year increase that you guys had shared previously what what if any is is contemplated in this years work and then how do you think about that playing catch up next year.

Yeah, but this is Bob this is mark.

Yeah, we don't disclose specific revenue from for the B.A. or you know person or specific government government contracts.

Certainly the V.A. isn't in a similar position to many of our clients are there. They're look there's work we can do virtually.

But they are starting to get into a go wide space and some of that work as a needs to be Dom south so.

They are not a lot different than many of our clients and in a similar like.

There isn't necessarily a catch up time life for these projects. These projects tend to tend to kind of beyond a timeline and if the initial project is going to be delayed a little bit and those that that can waterfall now.

Depending on when we're able to get back to work in relative to the V.A. There is an opportunity to perhaps to more localized in the fall. They can get us back on track, which would mean that would kind of get caught up and get back to tour, we would normally be in the process.

But that would just allow us to bend deliver the revenue than we originally expected to come in 2021, which we actually ups. We haven't talked about at this point. So that would give you any more specific guidance than that but just to say third there in the same the both in many of our clients are but we do have an opportunity there perhaps a good working on multiple cross.

Yes at one time as opposed to do a sequential work and we could let us get caught up by the end of year.

Thank you.

Well. Thank you all for your time. This afternoon, please be safe and take care of yourselves and their families. Good afternoon.

Ladies and gentlemen, this concludes todays conference. Thank you for your participation you may now disconnect everyone have a wonderful day.

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