March 7, 2005

Innovation You Can Trust

March 7, 2005

Cerner Corporation

Marc NaughtonSenior Vice President and

Chief Financial Officer

Raymond James Institutional Investors

Conference


Safe Harbor Statement

This presentation may contain forward-looking statements that involve a number of risks and uncertainties. It is important to note that the Company’s performance, and actual results, financial condition or business could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: quarterly operating results may vary, stock price may be volatile, market risk of investments, potential impairment of goodwill, changes in the healthcare industry, significant competition, the Company's proprietary technology may be subjected to infringement claims or may be infringed upon, regulation of the Company's software by the U.S. Food and Drug Administration or other government regulation, the possibility of product-related liabilities, possible system errors or failures or defects in the performance of the Company's software, risks associated with the Company’s global operations and the recruitment and retention of key personnel. Additional discussion of these and other factors affecting the Company's business is contained in the Company's periodic filings with the Securities and Exchange Commission. The Company undertakes no obligation to update forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition or business over time.


Cerner at a Glance

Largest company focused on clinical information and transformational solutions for healthcare

Founded in 1979; founders still actively leading company Most comprehensive suite of solutions on single architecture (Cerner Millennium) 2005E Revenues of $1.08B - $1.1B

10-year CAGR of 20% (mostly organic growth) Over 5,800 Associates Worldwide (including recent acquisition of VitalWorks Medical Div.)

1,600 member Services Organization; 1,800 person Intellectual Property (IP) Organization

Why is CERN a compelling investment opportunity? Market leader in a strong market Expanding addressable markets by leveraging R&D investments Strengthening Business Model

Strong cash flow and margin expansion Increasing levels of recurring and more visible revenue


U.S. Healthcare IT MarketWashington is engaged

Increased efforts to formalize a national architecture (Brailer)

Series of interconnected regional health information networks

Physician offices have become focal point

President Bush has called for PHR for each American in 10 years

Looking for ROI proof points

Cerner is well-positioned Proven performance on Choose and

Book national transaction system in England

Reach additional 3,500 physician offices through VitalWorks Medical Division acq.

Now reach 130,000 physicians $4B ambulatory market opportunity

Cerner providing PHR’s to 1.3M children with juvenile diabetes

Cerner co-sponsored a RAND study that will make compelling economic case for IT investments in healthcare


Market Leadership: Delivering CPOE

Accelerated delivery of CPOE in 2004

378 live locations 65 acute care (more than double

2003 levels) 313 physician office/clinic

KLAS Recognition Cerner Millennium PowerChart

highest rated solution in the CDR, Orders, & Charting category

‘Primary/Detail indicators’, January 2005

Top CPOE choice for third year in a row when respondents asked first choice if they could ‘start fresh today’

0

100

200

300

400

2000 2001 2002 2003 2004

Live Cerner CPOE Locations


CPOE: Acute Care Market Share

*Source: HIMSS Analytics Database, January 2005

(Based on survey of 3,989 acute care hospitals)

Cerner has strong market share lead, particularly vs. currently marketed platforms

CPOE Market still has room for growth HIMSS Analytics estimates only 9% have CPOE installed & another 11% have contracted to do so KLAS estimates less than 3% penetration of ‘real’ CPOE (over 50% of orders electronic)

All Existing Platforms*(Includes currently marketed and old platforms)

Currently Marketed Platforms*(Top 7 Suppliers)

IDX5%

McKesson9%

Epic2%

Siemens5%

Eclipsys13%

Meditech11%

Cerner55%

Cerner27%

Eclipsys10%

Siemens11%

Epic7%

McKesson7%

IDX6%

CPSI3%

Misys2% Other

8%

Meditech19%


Global Healthcare IT Market

Global represents large opportunity Over half of world healthcare IT spending is outside U.S. Cerner has a presence in 70% of global clinical IT markets

United Kingdom, Germany, Austria, Canada, Australia, Malaysia, Singapore, Saudi Arabia, UAE, Grand Cayman

United Kingdom Cerner continues to meet all milestone on England’s Choose and Book project Delivering value at Newham Healthcare & Homerton University Hospital Our performance to date could create additional opportunities

Other areas of opportunity France, Australia, Malaysia, Germany, Ireland, UAE


Investing heavily in R&D has lead to unmatched depth and breadth and strong growth

$1B of R&D in past 10 years Over 55 Major Solution Categories Expanded Delivery Platforms and New

Markets Remote Hosting, Community

Hospitals, Global

Cerner leading way in new MillenniumGrew almost as much as combined growth of competitors between 2000 and 2004

$3.4B of Bookings, >30% from new clients Millennium ready at the right time

– Only single, comprehensive healthcare architecture

Strong execution delivering solutions– More than 3,700 Millennium solutions

at nearly 750 facilities

R&D investments have lead to leadership position

Revenue Growth 2000-2004$ in Millions

$0

$100

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*Estimate0

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Focus for 2005 and BeyondContinue evolving architecture & broadening service offerings

Guaranty reliability; support of real-time evidenced-based medicine; native Web Broaden Managed Services: Hosting, Application Management Services, Help Desk Pharmaceutical / Data, Clinical Trials

Enhance Client Value from our Solutions Significantly reduce implementation and operating costs – ‘Bedrock’ Consulting practice focused on improving clinical processes using data-driven best

practices – ‘Lighthouse’

‘Grid Services’ will extend platform beyond large providers & significantly increase market opportunity

Physician and Metro Grid to offer hosted solutions to physician offices State & Regional Grid to drive RHIO (Regional Health Information Organization) strategy

Governments, Employers & Payers become potential clients Also includes Population Surveillance: BioSentry / HealthSentry

Condition & Disease Grid to drive condition management strategy (PHR) Transactional Services Grid will create a ‘new transaction’ that reduces waste and

friction


Cerner Corporation

Financial Snapshot & Business Model


Financial Snapshot – Income Statement

2004 revenue of $926M; 2005E $1.08B-$1.1BLong-term history of profitability

Profitable every quarter since going public in 1986 Met or exceeded expectations 20 of last 21 quarters

Sharpened focus on productivity Driving strong margin expansion (9% OM 2003; 12% OM 2004)

Improving revenue quality and visibility Backlog up 23% YoY in 2004 to $1.5 billion Recurring/Visible components 64% of revenue in 2004

compared to 61% in 2003 and 57% in 2002 revenue Strong Managed Services Business is enhancing visibility VitalWorks’ Medical Division also adds to visibility

Maintain long-term goal of 20% operating margins


Financial Snapshot – Balance Sheet & Cash Flow

$190M Cash & $131M Debt (as of Q404)

Decreasing DSO and Improving Cash Flow 2004 Operating Cash Flow of $168M vs. $134M in 2003 and $68M in 2002 2004 Free Cash Flow of $53M vs. ($8M) in 2003 Full-year 2004 DSO of 105 vs. 110 in 2003

Improvements driven by strong execution delivering solutions to clients– Industrial strength IP creates more predictable and successful projects and lower

DSOs

*FCF = Operating CF less Capital Expenditures and Capitalized Software

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$(50)

$-

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$ in

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Operating Cash Flow Free Cash Flow*


Margin Expansion Update

2004 Progress Increased operating margins 310 basis points in 2004 (9.3% to 12.4%)

Ahead of plan on Professional Services Margins in 2004– 23% contribution margin in 2004 vs. 15% in 2003

Strong leverage in Support & Maintenance (margins 57% in 2004 vs. 53% in 2003) R&D and SG&A leverage

– R&D leverage expected to accelerate in 2006 and 2007 as amortization of software capitalization moderates

– SG&A leverage will be limited in 2005 due to non-cash expense related to Vitalworks acquisition

Still target 20% by 2007 Management Target – 20% for full year 2007 External ‘guidance’ – 20% in at least one quarter during 2007 2005 will have less margin expansion due to Vitalworks’ acquisition

$70M of revenue and minimal GAAP earnings (is Cash earnings accretive) Still driving >20% EPS growth in 2005


New Contract BookingsNew Contract Bookings Support Support

ContractsContracts

Support & Maintenanc

e $241M

Sales PipelineSales Pipeline

Managed Services$50M

Contract BacklogContract Backlog

Operating Margin

x88%x88% x20%x20% x20%x20%x12%x12% x57%x57%

$115M, 12%$115M, 12%

($303M)($303M)

Professional Services

$251M

x23%x23%

Total 2004 Revenue = $926M

$137M$187M $58M$23M $10M$3M

Less: Indirect Costs


Note: Total Revenue includes $32M of reimbursed travel revenue.

Total 2004 Contribution Margin=$418M (45% of Revenue)

R&D19% of revenue

($172M)

SG&A14% of revenue

($131M)

Support BacklogSupport Backlog

Technology Resale$113M

Licensed Software$213M

Subscriptio

ns$26M

Services, Maintenance & Support

Contribution Margin %

Contribution Margin $

System Sales

D&A

$91M$91M

+ EBITDA

$206M, 22%$206M, 22%

=


New Contract BookingsNew Contract Bookings Support Support

ContractsContracts

Support & Maintenanc

e $241M

Sales PipelineSales Pipeline

Managed Services$50M

Contract BacklogContract Backlog

Operating Margin

x88%x88% x20%x20% x20%x20%x12%x12% x57%x57%

$115M, 12%$115M, 12%

($303M)($303M)


$251M

x23%x23%

Total 2004 Revenue = $926M

$137M$187M $58M$23M $10M$3M



Note: Total Revenue includes $32M of reimbursed travel revenue.

Total 2004 Contribution Margin=$418M (45% of Revenue)

R&D19% of revenue

($172M)

SG&A14% of revenue

($131M)

Support BacklogSupport Backlog

Technology Resale$113M

Licensed Software$213M

Subscriptio

ns$26M

Services, Maintenance & Support

Contribution Margin %

Contribution Margin $

System Sales

D&A

$91M$91M

+ EBITDA

$206M, 22%$206M, 22%

=

89%89% 17%17% 18%18%10%10% 53%53%15%15%

2003 Revenue & Contribution Margins

$188M$188M $129M$129M $34M$34M$16M$16M $210M$210M$233M$233M


Margin Expansion

Path to 20% operating margins by 2007 Improving consulting margins from 23% to 32% expected to add 160 basis points Leveraging R&D expected to add 190 basis points Leveraging SG&A expected to add 120 basis points Growth & margin expansion in managed services and subscription business

expected to contribute 100 basis points Growth and margin expansion in Support expected to contribute 150 basis points

Key AssumptionsOrganic revenue growth of ~10% per yearContribution margins for licensed sales and technology resale flat for duration (similar to historical experience)

Drivers of Margin Expansion (Cumulative)

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2003 2004 2005 2006 2007

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s P

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7%

12%

17%

22%

27%

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argin

%

SG&ALeverage

R&D Leverage

SupportLeverage

Managed Svc /Subscription

Prof. ServicesMargins

EBITDA

OperatingMargin

Contribution Margins 2003A 2004A 2005E 2006E 2007E

Professional Services 15% 23% 26% 29% 32%

R&D (% of Total Rev.) (19%) (19%) (18%) (17%) (16%)

SG&A (% of Total Rev.) (13%) (14%) (14%) (13%) (13%)

Managed Services 18% 20% 23% 25% 27%

Content & Subscription 10% 12% 15% 18% 23%

Support & Maintenance 53% 57% 60% 62% 65%


Revenue Mix Trend

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2001 2002 2003 2004 2005E2006E2007E

Technology Resale

Licensed Software

Content andSubscription


Managed Services

Support &Maintenance

Evolving Business Model

Revenue mix shifting 70% of revenue from highly visible

or recurring sources by 2007 versus 56% in 2001 and 64% in 2004

Industrial strength software and strong Professional Services driving Support & Maintenance growth

Strong Managed Services business creates recurring revenue and reduces non-recurring hardware sales

Future business models to be more visible & recurring

– VitalWorks’ Medical Division adds >$50M of Recurring Rev.

– Transaction processing– Employer/payer market

3-year Backlog CAGR of 25%

System Sales

Support, Maintenance, & Services

Recurring and Visible

Revenue


Guidance as of February 5, 2005

Q105Revenue $250M – $255MEPS $0.41 – $0.42Bookings $215M – $230M

Revenue $1.08B – $1.1BEPS $2.07 – $2.12

2005

Documents

March 7, 2005