The following Management Discussion and Analysis ("MD&A") is intended to help
the reader understand the results of operations and financial condition of
Cerner Corporation ("Cerner," the "Company," "we," "us" or "our"). This MD&A is
provided as a supplement to, and should be read in conjunction with, our
condensed consolidated financial statements and the accompanying notes to
condensed consolidated financial statements ("Notes") found above. Certain
statements in this quarterly report on Form 10-Q contain forward-looking
statements within the meanings of the Private Securities Litigation Reform Act
of 1995, as amended, regarding our future plans, objectives, beliefs,
expectations, representations and projections. See the end of this MD&A for more
information on our forward-looking statements, including a discussion of the
most significant factors that could cause actual results to differ materially
from those in the forward-looking statements, and the information in Part II,
"Item 1A. Risk Factors" below.

All references to periods in this MD&A represent the respective three months
ended on such dates, unless otherwise noted. Refer to Note (1) of the Notes for
information regarding our fiscal period ends.

Management Overview
Our revenues are primarily derived by selling, implementing, operating and
supporting software solutions, clinical content, hardware, devices and services
that give health care providers and other stakeholders secure access to
clinical, administrative and financial data in real or near-real time, helping
them to improve quality, safety and efficiency in the delivery of health care.

Our core strategy is to create organic growth by investing in research and development ("R&D") to create solutions and tech-enabled services for the health care industry. We may also supplement organic growth with acquisitions or strategic investments and partnerships.

Cerner's long history of growth has created an important strategic footprint in
health care, with Cerner holding more than 25 percent market share in the U.S.
acute care EHR market and a leading market share in several non-U.S. regions.
Foundational to our growth going forward is delivering value to this core client
base, including executing effectively on our large U.S. federal contracts and
cross-selling key solutions and services in areas such as revenue cycle. We are
also investing in platform modernization, with a focus on delivering a software
as a service platform that we expect to lower total cost of ownership, improve
clinician experience and patient outcomes, and enable clients to accelerate
adoption of new functionality and better leverage third-party innovations.

We also expect to continue driving growth by leveraging our HealtheIntent®
platform, which is the foundation for established and new offerings for both
provider and non-provider markets. The EHR-agnostic HealtheIntent platform
enables Cerner to become a strategic partner with health care stakeholders and
help them improve performance under value-based contracting. The platform, along
with our CareAware® platform, also supports offerings in areas such as long-term
care, home care and hospice, rehabilitation, behavioral health, community care,
care team communications, health systems operations, consumer and employer, and
data-as-a-service.

Beyond our strategy for driving revenue growth, we are also focused on earnings
growth. After several years of margin compression related to slowing revenue
growth, increased mix of low-margin services, and lower software demand due to
the end of direct government incentives for EHR adoptions, Cerner implemented a
new operating structure and introduced other initiatives focused on cost
optimization and process improvement in 2019. To assist in these efforts, we
engaged an outside consulting firm to conduct a review of our operations and
cost structure. We made good progress in 2019 and expect this progress to be
reflected in improved profitability in 2020 and beyond. We are focused on
ongoing identification of opportunities to operate more efficiently and on
achieving the efficiencies without impacting the quality of our solutions and
services and commitments to our clients.

We are also focused on delivering strong levels of cash flow which we expect to
accomplish by continuing to grow earnings and prudently managing capital
expenditures. We expect to use future cash flow and debt, as appropriate, to
meet our capital allocation objectives, which include investing in our business,
potential acquisitions or other strategic investments to drive profitable
growth, and returning capital to shareholders through share repurchases and
dividends.


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Results Overview
Bookings, which reflects the value of executed contracts for software, hardware,
professional services and managed services, was $1.09 billion in the first
quarter of 2020, which is a decrease of 12% compared to $1.24 billion in the
first quarter of 2019, with the decrease primarily reflecting lower than usual
contracts being signed in the last two weeks of the quarter as clients focused
on the Coronavirus disease pandemic ("COVID-19") and a more selective approach
to low-margin, long-term contracts that typically represent large bookings
values.

Revenues for the first quarter of 2020 increased 2% to $1.41 billion, compared
to $1.39 billion in the first quarter of 2019. The increase in revenue reflects
ongoing demand from new and existing clients for Cerner's solutions and services
driven by their needs to keep up with regulatory requirements, adapt to changing
reimbursement models, and deliver safer and more efficient care.

Net earnings for the first quarter of 2020 decreased 11% to $147 million,
compared to $166 million in the first quarter of 2019. Diluted earnings per
share decreased 8% to $0.47, compared to $0.51 in the first quarter of 2019. The
overall decrease in net earnings and diluted earnings per share was primarily a
result of increased operating expenses, including expenses incurred in
connection with our operational improvement initiatives discussed below,
partially offset by increased revenues.

We had cash collections of receivables of $1.37 billion in the first quarter of
2020, compared to $1.36 billion in the first quarter of 2019. Days sales
outstanding was 74 days for the 2020 first quarter, compared to 72 days for the
2019 fourth quarter and 76 days for the 2019 first quarter. Operating cash flows
for the first quarter of 2020 were $284 million, compared to $317 million in the
first quarter of 2019.

Operational Improvement Initiatives



We transitioned to a new operating structure in the first quarter of 2019. The
Company has been focused on leveraging the impact of this reorganization and
identifying additional efficiencies. We continue to be focused on reducing
operating expenses and generating other efficiencies that are expected to
provide longer-term operating margin expansion. We are also considering exiting
certain low-margin businesses and being more selective as we consider new
business opportunities. To assist in these efforts, we engaged an outside
consulting firm to conduct a review of our operations and cost structure. We
continue to be focused on ongoing identification of opportunities to operate
more efficiently and on achieving the efficiencies without impacting the quality
of our solutions and services and commitments to our clients.

In the near term, we expect to incur expenses in connection with these efforts.
Such expenses may include, but are not limited to, consultant and other
professional services fees, employee separation costs, contract termination
costs, and other such related expenses. Expenses recognized in the first quarter
of 2020 primarily related to professional services fees and employee separation
costs, which are included in operating expenses in our condensed consolidated
statements of operations. We expect to incur additional expenses in connection
with these initiatives in future periods, which may be material.

COVID-19



Our business and results of operations for the first quarter of 2020 were
impacted by the ongoing COVID-19 pandemic. It has caused us to modify certain of
our business practices, including encouraging most of our employees to work
remotely; restricting employee travel; developing social distancing plans for
our associates; and cancelling or postponing in person participation in certain
meetings, events and conferences. It is not possible to quantify the full
financial impact that the COVID-19 pandemic has had on our results of
operations, cash flows, or financial condition, due to the uncertainty
surrounding the pandemic, the difficulty inherent in identifying and measuring
the various impacts that have or may stem from such an event and the fact that
there are no comparable recent events that provide guidance as to how to predict
the effect the COVID-19 pandemic may have on our business. However, we believe
COVID-19 has impacted, and will continue in the near-term to impact, our
business results, primarily, but not limited to, in the following areas:

•Bookings - A decline in new business bookings as certain client purchasing
decisions and projects are delayed to focus on treating patients, procuring
necessary medical supplies, and managing their own organizations through this
crisis. This decline in bookings flows through to reduced backlog and lower
subsequent revenues.

•Associate productivity - A decline in associate productivity, primarily for our
services personnel, as a large amount of work is typically done at client sites,
which is being impacted by travel restrictions and our clients' focus on the
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pandemic. Our clients' focus on the pandemic has also led to pauses on existing
projects and postponed start dates for others, which translates into lower
professional services revenues and a lower operating margin percentage. We are
mitigating this by doing more work remotely than we have in the past, but we
cannot fully offset the negative impact.

•Travel - Associate travel restrictions reduce client-related travel, which
reduces reimbursed travel revenues and lowers our costs of revenue as a percent
of revenues. Such restrictions also reduce non-reimbursable travel, which lowers
operating expenses.

•Cash collections - A delay in client cash collections due to COVID-19's impact
on national reimbursement processes, and client focus on managing their own
organizations' liquidity during this time. This translates to lower cash flows
from operating activities. Lower cash flows from operating activities may impact
how we execute under our capital allocation strategy.

We believe the impact of COVID-19 on our results of operations for the first
quarter of 2020 was limited, with the largest impact in the area of reduced
bookings and lower technology resale revenue, due to the mid-March 2020 timing
of when we implemented changes to our business practices in response to COVID-19
and the nature of the industry in which we operate. We expect a greater
financial impact in the rest of 2020, particularly in the second quarter, as
such practices will have been in place for a greater period of time. However,
the impact will be difficult to quantify as there are many factors outside of
our control, so any forward looking statements that we make regarding our
projections of future financial performance, new solution, services and offering
development, and capital allocation plans; cost optimization and operational
improvement initiatives; and the expected benefits of our acquisitions,
divestitures or other collaborations will all be subject to increased risks, as
discussed further below and in Part II, Item 1A of this Quarterly Report on Form
10-Q. Additionally, we may make further modifications to our operations or
business plans that have a negative financial impact as required by government
authorities, our clients or as we determine are in the best interests of our
associates, clients and business partners. While we expect COVID-19 to have an
impact on our results of operations, cash flows, and financial position in the
near-term, we believe the nature of our solutions and services offerings will
continue to be in demand, regardless of this pandemic. However, the COVID-19
pandemic and related restrictive measures have created significant economic
uncertainty and the duration and magnitude of the impact of the pandemic is
unknown at this time; therefore, there can be no assurance that the ultimate
impact of the pandemic will not adversely affect our future operational and
financial performance.

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Results of Operations

Three Months Ended March 31, 2020 Compared to Three Months Ended March 30, 2019

The following table presents a summary of the operating information for the first quarters of 2020 and 2019:



                                                                             % of                                      % of
(In thousands)                                          2020               Revenue                2019               Revenue              % Change

Revenues                                           $ 1,411,741                  100  %       $ 1,389,877                  100  %                   2  %
Costs of revenue                                       254,416                   18  %           253,204                   18  %                   -  %

Margin                                               1,157,325                   82  %         1,136,673                   82  %                   2  %

Operating expenses
Sales and client service                               636,649                   45  %           640,187                   46  %                  (1) %
Software development                                   185,320                   13  %           180,361                   13  %                   3  %
General and administrative                             139,852                   10  %            96,196                    7  %                  45  %
Amortization of acquisition-related intangibles         17,128                    1  %            21,985                    2  %                 (22) %

Total operating expenses                               978,949                   69  %           938,729                   68  %                   4  %

Total costs and expenses                             1,233,365                   87  %         1,191,933                   86  %                   3  %


Operating earnings                                     178,376                   13  %           197,944                   14  %                 (10) %

Other income, net                                        5,595                                     8,432
Income taxes                                           (36,812)                                  (40,157)

Net earnings                                       $   147,159                               $   166,219                                         (11) %



Revenues & Backlog

Revenues increased 2% to $1.41 billion in the first quarter of 2020, as compared
to $1.39 billion in the same period of 2019. The growth in revenues was
primarily driven by increased implementation activity within our federal
business; inclusive of ongoing projects with the U.S. Department of Defense and
the U.S. Department of Veterans Affairs. In the first quarter of 2020, 17% of
our total revenues were attributable to our relationships (as the prime
contractor or a subcontractor) with U.S. government agencies, compared to 10% in
the same period of 2019. The growth was partially offset by a $42 million
reduction in revenues in the first quarter of 2020 due to the termination of
certain revenue cycle outsourcing contracts effective in the fourth quarter of
2019. Refer to Note (2) of the Notes for further information regarding revenues
disaggregated by our business models.

Backlog, which reflects contracted revenue that has not yet been recognized as
revenue, was $13.47 billion at March 31, 2020, compared to $14.87 billion at
March 30, 2019. This decrease was primarily driven by the termination of certain
revenue cycle outsourcing contracts discussed above. We expect to recognize 30%
of our backlog as revenue over the next 12 months.

We believe that backlog may not necessarily be a comprehensive indicator of
future revenue as certain of our arrangements may be canceled (or conversely
renewed) at our clients' option; thus contract consideration related to such
cancellable periods has been excluded from our calculation of backlog. However,
historically our experience has been that such cancellation provisions are
rarely exercised. We expect to recognize approximately $772 million of revenue
over the next 12 months under currently executed contracts related to such
cancellable periods, which is not included in our calculation of backlog.

Costs of Revenue

Costs of revenue as a percent of revenues were 18% in the first quarter of both 2020 and 2019.

Costs of revenue include the cost of reimbursed travel expense, sales commissions, third party consulting services and subscription content and computer hardware, devices and sublicensed software purchased from manufacturers for


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delivery to clients. It also includes the cost of hardware maintenance and
sublicensed software support subcontracted to the manufacturers. Such costs, as
a percent of revenues, typically have varied as the mix of revenue (software,
hardware, devices, maintenance, support, and services) carrying different margin
rates changes from period to period. Costs of revenue does not include the costs
of our client service personnel who are responsible for delivering our service
offerings. Such costs are included in sales and client service expense.

Operating Expenses

Total operating expenses increased 4% to $979 million in the first quarter of 2020, compared to $939 million in the same period of 2019.



•Sales and client service expenses as a percent of revenues were 45% in the
first quarter of 2020, compared to 46% in the same period of 2019. These
expenses decreased 1% to $637 million in the first quarter of 2020, from $640
million in the same period of 2019. Sales and client service expenses include
salaries and benefits of sales, marketing, support, and services personnel,
depreciation and other expenses associated with our managed services business,
communications expenses, unreimbursed travel expenses, expense for share-based
payments, and trade show and advertising costs. The decrease in sales and client
service expenses was primarily driven by a decrease in associate headcount in
connection with our operational improvement initiatives discussed above;
inclusive of associate headcount reductions in connection with the termination
of certain revenue cycle outsourcing contracts, also discussed above.

•Software development expenses as a percent of revenues were 13% in the first
quarter of both 2020 and 2019. Expenditures for software development include
ongoing development and enhancement of the Cerner Millennium® and HealtheIntent
platforms, with a focus on supporting key initiatives to enhance physician
experience, revenue cycle, population health management, and health network
solutions. In addition, the first quarter of 2020 includes costs incurred in
connection with our efforts to modernize our platforms, with a focus on
development of a software as a service platform. A summary of our total software
development expense in the first quarters of 2020 and 2019 is as follows:
                                                         Three Months Ended
(In thousands)                                          2020            2019

Software development costs                          $ 198,164       $ 198,667
Capitalized software costs                            (72,504)        (74,099)

Capitalized costs related to share-based payments (1,351) (452) Amortization of capitalized software costs

             61,011          

56,245



Total software development expense                  $ 185,320       $ 

180,361





•General and administrative expenses as a percent of revenues were 10% in the
first quarter of 2020, compared to 7% in the same period of 2019. These expenses
increased 45% to $140 million in the first quarter of 2020, from $96 million in
the same period of 2019. General and administrative expenses include salaries
and benefits for corporate, financial and administrative staffs, utilities,
communications expenses, professional fees, depreciation and amortization,
transaction gains or losses on foreign currency, expense for share-based
payments, certain organizational restructuring and other expense. In the first
quarter of 2020, general and administrative expenses include $40 million of
expenses incurred in connection with our operational improvement initiatives,
discussed above, compared to $2 million in the same period of 2019. We expect to
incur additional expenses in connection with these efforts in future periods,
which may be material.

•Amortization of acquisition-related intangibles as a percent of revenues was 1%
in the first quarter of 2020, compared to 2% in the same period of 2019. These
expenses decreased 22% to $17 million in the first quarter of 2020, from $22
million in the same period in 2019. Amortization of acquisition-related
intangibles includes the amortization of customer relationships, acquired
technology, trade names, and non-compete agreements recorded in connection with
our business acquisitions. The decrease in amortization of acquisition-related
intangibles includes the impact of certain intangible assets from the Health
Services acquisition in February 2015 becoming fully amortized in the first
quarter of 2020.
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Non-Operating Items

•Other income, net was $6 million in the first quarter of 2020, compared to $8
million in the same period of 2019. The decrease is primarily attributable to
increased interest expense from the $600 million of revolving credit loans we
borrowed under our Credit Agreement in May 2019.

•Our effective tax rate remained relatively flat at 20.0% for the first quarter
of 2020, and 19.5% for the same period of 2019. Refer to Note (7) of the Notes
for further discussion regarding our effective tax rate.

Operations by Segment



We have two operating segments: Domestic and International. The Domestic segment
includes revenue contributions and expenditures associated with business
activity in the United States. The International segment includes revenue
contributions and expenditures linked to business activity outside the United
States, primarily from Australia, Canada, Europe, and the Middle East. Refer to
Note (11) of the Notes for further information regarding our reportable
segments.

The following table presents a summary of our operating segment information for the first quarters of 2020 and 2019:



(In thousands)                                                     2020             % of Revenue              2019             % of Revenue           % Change

Domestic Segment
Revenues                                                      $ 1,246,415               100%             $ 1,230,830               100%                  1%

Costs of revenue                                                  228,567                18%                 228,559                19%                  -%
Operating expenses                                                570,094                46%                 572,018                46%                  -%
Total costs and expenses                                          798,661                64%                 800,577                65%                  -%

Domestic operating earnings                                       447,754                36%                 430,253                35%                  4%

International Segment
Revenues                                                          165,326               100%                 159,047               100%                  4%

Costs of revenue                                                   25,849                16%                  24,645                15%                  5%
Operating expenses                                                 66,555                40%                  68,169                43%                 (2)%
Total costs and expenses                                           92,404                56%                  92,814                58%                  -%

International operating earnings                                   72,922                44%                  66,233                42%                  10%

Other, net                                                       (342,300)                                  (298,542)                                    15%

Consolidated operating earnings                               $   178,376                                $   197,944                                    (10)%



Domestic Segment

•Revenues increased 1% to $1.25 billion in the first quarter of 2020, from $1.23
billion in the same period of 2019. The growth in revenues was primarily driven
by increased implementation activity within our federal business; inclusive of
ongoing projects with the U.S. Department of Defense and the U.S. Department of
Veterans Affairs. This growth was partially offset by a $42 million reduction in
revenues in the first quarter of 2020 due to the termination of certain revenue
cycle outsourcing contracts effective in the fourth quarter of 2019. Refer to
Note (2) of the Notes for further information regarding revenues disaggregated
by our business models.

•Costs of revenue as a percent of revenues were 18% in the first quarter of
2020, compared to 19% in the same period of 2019. The marginally lower costs of
revenue as a percent of revenues was primarily driven by a lower mix of
reimbursed travel revenue, which carries a 100% cost of revenue.

•Operating expenses as a percent of revenues were 46% in the first quarter of both 2020 and 2019.





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International Segment

•Revenues increased 4% to $165 million in the first quarter of 2020, from $159
million in the same period of 2019. The growth in revenues includes a $5 million
increase in professional services revenue, driven by increased implementation
activity. Refer to Note (2) of the Notes for further information regarding
revenues disaggregated by our business models.

•Costs of revenue remained relatively flat at $26 million in the first quarter of 2020, and $25 million in the same period of 2019.

•Operating expenses remained relatively flat at $67 million in the first quarter of 2020, and $68 million in the same period of 2019.

Other, net



Operating results not attributed to an operating segment include expenses such
as software development, general and administrative expenses, share-based
compensation expense, certain amortization and depreciation, certain
organizational restructuring and other expense. These expenses increased 15% to
$342 million in the first quarter of 2020, from $299 million in the same period
of 2019. The increase is primarily due to increased expenses incurred in 2020 in
connection with our operational improvement initiatives discussed above.

Liquidity and Capital Resources
Our liquidity is influenced by many factors, including the amount and timing of
our revenues, our cash collections from our clients and the amount we invest in
software development, acquisitions, capital expenditures, and our share
repurchase and dividend programs.
Our principal sources of liquidity are our cash, cash equivalents, which consist
of money market funds and time deposits with original maturities of less than 90
days, short-term investments, and borrowings under our Credit Agreement and
other sources of debt financing. At March 31, 2020, we had cash and cash
equivalents of $285 million and short-term investments of $113 million, as
compared to cash and cash equivalents of $442 million and short-term investments
of $100 million at December 28, 2019.

We have entered into a Credit Agreement with a syndicate of lenders that
provides for an unsecured $1.00 billion revolving credit loan facility, along
with a letter of credit facility up to $100 million (which is a sub-facility of
the $1.00 billion revolving credit loan facility). We have the ability to
increase the maximum capacity to $1.20 billion at any time during the Credit
Agreement's term, subject to lender participation and the satisfaction of
specified conditions. The Credit Agreement expires in May 2024. As of March 31,
2020, we had outstanding revolving credit loans and letters of credit of $600
million and $30 million, respectively; which reduced our available borrowing
capacity to $370 million under the Credit Agreement.

We believe that our present cash position, together with cash generated from
operations, short-term investments and, as appropriate, remaining availability
under our Credit Agreement and other sources of debt financing, will be
sufficient to meet anticipated cash requirements for the next 12 months.
The following table summarizes our cash flows in the first three months of 2020
and 2019:

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