juniper networks q4 2009 results conference call...q4 2009 financial results conference call...

Q4 2009 FINANCIAL RESULTS CONFERENCE CALL

THURSDAY, JANUARY 28, 2010 1:45 P.M. PACIFIC TIMEKevin Johnson, Chief Executive OfficerRobyn Denholm, Chief Financial Officer

2 Copyright © 2009 Juniper Networks, Inc. www.juniper.net

FORWARD LOOKING STATEMENTSInformation, statements and projections contained in these presentation slides and related conference call concerning Juniper Networks' business outlook, economic outlook, future financial and operating results, and overall future prospects are forward looking statements that involve a number of uncertainties and risks. Actual results could differ materially from those anticipated in those forward-looking statements as a result of certain factors, including: general economic conditions globally or regionally; business and economic conditions in the networking industry; changes in overall technology spending; the network capacity requirements of communication service providers; contractual terms that may result in the deferral of revenue; increases in and the effect of competition; the timing of orders and their fulfillment; manufacturing and supply chain constraints; ability to establish and maintain relationships with distributors, resellers and other partners; variations in the expected mix of products sold; changes in customer mix; changes in geography mix; customer and industry analyst perceptions of Juniper Networks and its technology, products and future prospects; delays in scheduled product availability; market acceptance of Juniper Networks products and services; rapid technological and market change; adoption of regulations or standards affecting Juniper Networks products, services or the networking industry; the ability to successfully acquire, integrate and manage businesses and technologies; product defects, returns or vulnerabilities; the ability to recruit and retain key personnel; significant effects of tax legislation and judicial or administrative interpretation of tax regulations; currency fluctuations; litigation; and other factors listed in Juniper Networks’ most recent report on Form 10-Q filed with the Securities and Exchange Commission (SEC). All information, statements and projections contained in these slides and related conference call speak only as of the date of this presentation and related conference call. Juniper Networks undertakes no obligation to update the information contained in these slides and related conference call in the event facts or circumstances subsequently change.

USE OF NON-GAAP FINANCIAL MEASURESThese presentation slides contain references to certain non-GAAP financial measures. For detailed reconciliation between the non-GAAP financial results presented in these slides and corresponding GAAP measures, please refer to the appendix at the end of this slide deck. In addition, for important commentary on why Juniper Networks considers non-GAAP information a useful view of the company’s financial results, please see the Form 8-K filed today with the SEC. A reconciliation for non-GAAP guidance measures is not available on a forward-looking basis due to the high variability and low visibility with respect to the charges which are excluded from these non-GAAP measures.


OPENING COMMENTS: STRONG FINISH TO 2009

Executed well against our operating principles for 2009

StrategicallyExpanded portfolio of offeringsEstablishing the JUNOS ecosystem

FinanciallyMacro environment continues to improveStrong sequential growth in Service ProviderRecord Enterprise quarter; gaining momentum and visibility

OperationallyExecuted on our R&D roadmapStrengthened our GTM and introduced new partnerships


Software Platform: Fueling Innovation Across the NetworkJunos + Junos Space + Junos Pulse

MX 3DMX 3D

JUNIPER: DELIVERING THE NEW NETWORK

Systems and New Silicon: “3D Scaling” and Universal EdgeJunos Trio Chipset = 3D Scaling BreakthroughMX 3D Routers = First Universal Edge Platform

Data Center 2 Cloud InitiativeFive New Solutions + Eight New ProductsSecurity at Massive Scale for Cloud Services1

Junos-Based PartnershipsDell + IBM = Extended Global Market ReachBLADE Network Technologies = First-Ever Junos Licensing DealDozens of Third Parties Building Applications on Junos


2010 OPERATING PRINCIPLES: PLANNING FOR GROWTH

Maintain a healthy balance sheet and generate strong cash flows Maintain a healthy balance sheet and generate strong cash flows

Accelerate out of the downturn and outpace the market recovery Accelerate out of the downturn and outpace the market recovery

Invest in innovations that deliver long term value to our customers Invest in innovations that deliver long term value to our customers

Drive year over year operating margin expansion Drive year over year operating margin expansion

Assume macro economy will continue to improve Assume macro economy will continue to improve

FINANCIAL SECTIONRobyn Denholm


QUARTERLY REVENUE AND EPS TRENDS: Q4 '09

Revenue grew 14% Q on Q

Diluted non-GAAP EPS grew $0.09

Executed well in a market that appears to be improving

Gross margins improved, returning to long term target range

Good cost and expense management

Strong expansion in operating margins

Chart reflects non-GAAP EPS


Q4 '09 REVENUE MIX

• Americas growth driven by record quarter in US; EMEA sequential growth due to both Service Provider and Enterprise; APAC growth driven by Enterprise

• Segment growth fueled by strong contribution from new products, MX, SRX and EX, which contributed over $236M

• Service provider growth driven by router, security and switching product sales

Service Provider and EnterpriseGeography Segment

APAC $172M; 18.3%

9% Q/Q2% Y/Y

EMEA $255M; 27.1%

5% Q/Q-7% Y/Y

Americas $514M; 54.6%

22% Q/Q7% Y/Y

SLT $246M; 26.1%

8% Q/Q11% Y/Y

IPG $695M; 73.9%

17% Q/Q-1% Y/Y

Service Provider $639M; 67.9%

22% Q/Q1% Y/Y

Enterprise$302M; 32.1%

1% Q/Q5% Y/Y


FULL YEAR '09 REVENUE MIX

• Americas driven by record high US Q4

• SLT record year fueled by new products and market share gains in security

• Switching, security and routing lead Enterprise penetration

• Full portfolio leverage into SP and Enterprise

Service Provider and EnterpriseGeography Segment

APAC $675M; 20.3%

-7% Y/Y

EMEA $953M; 28.8%

-12% Y/Y

Americas $1,688M; 50.9%

-4% Y/Y

SLT $874M; 26.4%

3% Y/Y

IPG $2,442M; 73.6%

-10% Y/Y

Service Provider $2,197M; 66.3%

-14% Y/Y

Enterprise$1,119M; 33.7%

11% Y/Y


COST STRUCTURE AND OPERATIONAL EXCELLENCE

Managed expenses tightly while delivering on innovation roadmap

Reduced annual non-GAAP operating expenses by 3% y/y

Will continue to manage expenses thoughtfully as economy improves

Chart reflects non-GAAP measures


REVENUE $941.5M $823.9M $923.5M 14% 2%

FINANCIAL RESULTS (NON-GAAP)Q4’09 Q3’09 Q4’08

Q/Q Change

Y/Y Change

$172.3M

$194.0M

$33.6M

$170.5M

$166.4M

$34.3M

$168.1M

$196.4M

$33.2M

1%

17%

-2%

3%

-1%

1%

R&D

SALES & MARKETING

G&A

$399.9M

24.4%

$371.2M

20.8%

$397.7M

24.5%

8%

3.6pts

1%

-0.1pts

TOTAL OPERATING EXPENSE

OPERATING MARGIN %

$173.7M

$0.32

$122.5M

$0.23

$169.0M

$0.32

42%

$0.09

3%

$ -

NET INCOME*

EPS (DILUTED)*

GROSS MARGIN % 66.9% 65.8% 67.5% 1.1pts -0.6pts

* Net income and diluted EPS attributable to Juniper Networks exclude net loss pertaining to non-controlling interest

• Sequential revenue growth of 14%• Operating margin improvement of 3.6 pts sequentially due to good operating expense control• Product book to bill >1


Healthy cash positionCash flow from operations in the quarter was $260M; full year $796M Repurchased $212M of stock in the quarter; $454M for the yearCash and investments over $2.6B

No debt

DSO : 44 days

Record deferred revenue balance of $754MQ/Q change of 17%

Product deferred revenue increased 27% Q/QY/Y change of 28%

Product deferred revenue increased 53% Y/Y

CASH FLOW AND BALANCE SHEET METRICS


Q1 '10 GUIDANCE 3 MONTHS ENDING MARCH 31, 2010

REVENUE Plan for $895M; expect range between $880M to $910M

GROSS MARGINS Within long term target range of 66% to 68%

OPERATING MARGINS Expect range of 21% plus or minus half a point

EPS Expect range from $0.23 to $0.26 per diluted share

TAX RATE 31% due to R & D tax credit not yet approved

SHARE COUNT Expect to be flat compared to Q4’09

Non-GAAP (except for revenue and share count)

APPENDIX


ANNUAL REVENUE AND EPS TRENDS

Revenue down 7% while non-GAAP operating expenses down 3%

Diluted non-GAAP EPS lower on lower revenue, while managing operating expenses

Gross margins remained healthy

Good cost and expense management

Consistently improved financial performance sequentially in each quarter

Chart reflects non-GAAP EPS


PERCENT OF REVENUE BY MARKET

Total SP

Total Enterprise

Q3 Q4 Q2Q1 Q3 Q4 Q1 Q2Q1 Q2

20082007

32.1%

71.7%

28.3%

71.9%

28.1%

71.5%

28.5%

69.4%

30.6%

73.8%

26.2%

72.6%

27.4%

68.7%

27.3%

65.3%

34.7%

72.7%

31.3%

68.1%

31.9%

2009

63.6%

36.4%

Q4Q3

67.9%


SEGMENT OPERATING RESULTS


FINANCIAL RESULTS (GAAP)

Special Q4’09 items:Net income on a GAAP basis includes legal settlement of $12.0 million and a restructuring charge of $3.2 million. Combined, these items represent $0.02 per diluted share.

REVENUE $941.5M $823.9M $923.5M 14% 2%

Q4’09 Q3’09 Q4’08Q/Q

ChangeY/Y

Change

$449.7M

18.6%

$131.0M

$0.24

$409.2M

15.5%

$83.8M

$0.16

$429.3M

20.6%

$132.5M

$0.25

10%

3.1pts

56%

$0.08

5%

-2.0pts

-1%

$(0.01)

GROSS MARGIN %

TOTAL OPERATING EXPENSE

OPERATING MARGIN %

NET INCOME*

EPS (DILUTED)*

66.4% 65.2% 67.1% 1.2pts -0.7pts

* Net income and diluted EPS attributable to Juniper Networks exclude net loss pertaining to non-controlling interest


GAAP TO NON-GAAP RECONCILIATIONS(in '000's except per share amounts and

percentages) Q1'08 Q2'08 Q3'08 Q4'08 FY’08 Q1’09 Q2’09 Q3’09 Q4’09 FY’09

GAAP Cost of revenues – Product $191,791 $215,134 $230,060 $230,610 $867,595 $193,061 $207,576 $206,329 $234,756 $841,722

Stock-based compensation expense (784) (687) (754) (727) (2,952) (1,059) (863) (910) (1,074) (3,906)

Stock-based compensation related payroll tax (23) (35) (6) (1) (65) (2) (14) (32) 23 (25)

Amortization of purchased intangible assets (1,369) (1,369) (1,369) (1,369) (5,476) (1,369) (1,369) (1,369) (904) (5,011)

Non-GAAP Cost of revenues – Product $189,615 $213,043 $227,931 $228,513 $859,102 $190,631 $205,330 $204,018 $232,801 $832,780

GAAP Cost of revenues – Service $73,045 $74,147 $77,519 $73,660 $298,371 $75,451 $78,385 $80,379 $81,865 $316,080

Stock-based compensation expense (2,345) (2,251) (2,413) (2,240) (9,249) (2,815) (2,794) (2,904) (3,192) (11,705)


Non-GAAP Cost of revenues – Service $70,615 $71,799 $75,088 $71,418 $288,920 $72,624 $75,547 $77,386 $78,743 $304,300


GAAP TO NON-GAAP RECONCILIATIONS (CONT.)(in '000's except per share amounts and


GAAP Gross margin $558,051 $589,753 $639,383 $619,223 $2,406,410 $495,671 $500,402 $537,204 $624,833 $2,158,110

Stock-based compensation expense 3,129 2,938 3,167 2,967 12,201 3,874 3,657 3,814 4,266 15,611

Stock-based compensation related payroll tax 108 132 24 3 267 14 58 121 (93) 100

Amortization of purchased intangible assets 1,369 1,369 1,369 1,369 5,476 1,369 1,369 1,369 904 5,011

Non-GAAP Gross margin $562,657 $594,192 $643,943 $623,562 $2,424,354 500,928 $505,486 $542,508 $629,910 $2,178,832

GAAP Gross margin % of revenue 67.8% 67.1% 67.5% 67.1% 67.4% 64.9% 63.6% 65.2% 66.4% 65.1%

Stock-based compensation expense % of revenue 0.4% 0.3% 0.3% 0.3% 0.3% 0.5% 0.5% 0.4% 0.4% 0.4%

Stock-based compensation related payroll tax % of revenue - - - - - - - - - -

Amortization of purchased intangible assets % of revenue 0.2% 0.2% 0.2% 0.1% 0.2% 0.2% 0.2% 0.2% 0.1% 0.2%

Non-GAAP Gross margin % of revenue 68.4% 67.6% 68.0% 67.5% 67.9% 65.6% 64.3% 65.8% 66.9% 65.7%




GAAP Research and development expense $170,646 $186,357 $194,014 $180,134 $731,151 $185,400 $183,894 $185,204 $187,210 $741,708



Non-GAAP Research and development expense $160,291 $173,969 $181,173 $168,076 $683,509 $170,689 $168,757 $170,524 $172,323 $682,293

GAAP Sales and marketing expense $185,948 $190,338 $200,600 $206,054 $782,940 $181,243 $170,575 $177,345 204,875 734,038


Stock-based compensation related payroll tax (730) (666) (169) (140) (1,705) (202) (191) (276) 155 (514)

Non-GAAP Sales and marketing expense $178,513 $180,570 $189,485 $196,439 $745,007 $171,197 $160,043 $166,394 $193,960 $691,594




GAAP General and administrative expense $33,634 $35,609 $37,623 $37,971 $144,837 $39,211 $39,175 $39,877 $41,196 $159,459


Stock-based compensation related payroll tax (50) (54) (7) (1) (112) (12) (31) (38) (4) (85)

Non-GAAP General and administrative expense $30,835 $32,243 $35,706 $33,200 $131,984 $34,035 $34,594 $34,301 $33,608 $136,538

GAAP Operating expense $415,357 $429,303 $437,427 $429,349 $1,711,436 $414,473 $404,712 $409,249 $449,650 $1,678,084


Stock-based compensation related payroll tax (988) (1,114) (237) (157) (2,496) (245) (378) (667) 558 (732)

Amortization of purchased intangible assets (20,150) (7,999) (5,190) (5,190) (38,529) (4,390) (3,539) (1,330) (1,157) (10,416)

Restructuring charges - - - - - (4,229) (7,529) (4,493) (3,212) (19,463)

Impairment charges (4,979) - - - (4,979) - - - - -

Other charges – legal settlement - (9,000) - - (9,000) - - (1,000) (12,000) (13,000)

Non-GAAP Operating expense $369,639 $386,782 $406,364 $397,715 $1,560,500 $375,921 $363,394 $371,219 $399,891 $1,510,425




GAAP Operating income $142,694 $160,450 $201,956 $189,874 $694,974 $81,198 $95,690 $127,955 $175,183 $480,026


Stock-based compensation related payroll tax 1,096 1,246 261 160 2,763 259 436 788 (651) 832

Amortization of purchased intangible assets 21,519 9,368 6,559 6,559 44,005 5,759 4,908 2,699 2,061 15,427

Restructuring charges - - - - - 4,229 7,529 4,493 3,212 19,463

Impairment charges 4,979 - - - 4,979 - - - - -

Other charges – legal settlement - 9,000 - - 9,000 - - 1,000 12,000 13,000

Non-GAAP Operating income $193,018 $207,410 $237,579 $225,847 $863,854 $125,007 $142,092 $171,289 $230,019 $668,407




GAAP Operating margin 17.3% 18.3% 21.3% 20.6% 19.5% 10.6% 12.2% 15.5% 18.6% 14.5%

Stock-based compensation expense 2.8% 3.1% 3.0% 3.2% 3.0% 4.4% 4.3% 4.2% 4.1% 4.2%

Stock-based compensation related payroll tax 0.1% 0.1% 0.1% - 0.1% - - 0.1% -0.1% 0.1%

Amortization of purchased intangible assets 2.7% 1.1% 0.7% 0.7% 1.2% 0.8% 0.6% 0.3% 0.2% 0.5%

Restructuring charges - - - - - 0.6% 1.0% 0.6% 0.3% 0.5%

Impairment charges 0.6% - - - 0.1% - - - - -

Other charges – legal settlement - 1.0% - - 0.3% - - 0.1% 1.3% 0.4%

Non-GAAP Operating margin 23.5% 23.6% 25.1% 24.5% 24.2% 16.4% 18.1% 20.8% 24.4% 20.2%




GAAP Other income and expense, net $17,590 $11,688 $9,740 $(5,101) $33,917 $264 $1,273 $1,733 $(1,904) $1,366

Loss on investments - 1,499 - 13,333 14,832 1,686 1,625 - 2,251 5,562

Non-GAAP Other income and expense, net $17,590 $13,187 $9,740 $8,232 $48,749 $1,950 $2,898 $1,733 $347 $6,928

GAAP Provision for income tax $49,929 $51,728 $63,188 $52,297 $217,142 $85,922 $82,194 $45,902 $44,093 $258,111

Non-recurring income tax charge - - - - - - (52,124) (4,559) - (56,683)

Valuation allowance on deferred tax assets - - - - - (61,755) - - - (61,755)

Income tax effect of non-GAAP exclusions 11,147 12,245 8,535 12,765 44,692 11,216 11,120 9,162 14,394 45,892

Non-GAAP Provision for income tax $61,076 $63,973 $71,723 $65,062 $261,834 $35,383 $41,190 $50,505 $58,487 $185,565

Non-GAAP Income tax rate 29.0% 29.0% 29.0% 27.8% 28.7% 27.9% 28.4% 29.2% 25.4% 27.5%

Non-GAAP Income before income taxes and noncontrolling interest $210,608 $220,597 $247,319 $234,079 $912,603 $126,957 $144,990 $173,022 $230,366 $675,335




GAAP Net income (loss) attributable to Juniper Networks $110,355 $120,410 $148,508 $132,476 $511,749 $(4,460) $14,769 $83,786 $130,957 $225,052


Stock-based compensation related payroll tax 1,096 1,246 261 160 2,763 259 436 788 (651) 832

Amortization of purchased intangible assets 21,519 9,368 6,559 6,559 44,005 5,759 4,908 2,699 2,061 15,427

Restructuring charges - - - - - 4,229 7,529 4,493 3,212 19,463

Impairment charges 4,979 - - - 4,979 - - - - -

Other charges – legal settlement - 9,000 - - 9,000 - - 1,000 12,000 13,000

Loss on investments - 1,499 - 13,333 14,832 1,686 1,625 - 2,251 5,562

Non-recurring income tax charge - - - - - - 52,124 4,559 - 56,683

Valuation allowance on deferred tax assets - - - - - 61,755 - - - 61,755

Income tax effect of non-GAAP exclusions (11,147) (12,245) (8,535) (12,765) (44,692) (11,216) (11,120) (9,162) (14,388) (45,886)

Non-GAAP Net income $149,532 $156,624 $175,596 $169,017 $650,769 $91,574 $103,800 $122,517 $173,656 $491,547




Non-GAAP Net income $149,532 $156,624 $175,596 $169,017 $650,769 $91,574 $103,800 $122,517 $173,656 $491,547

Non-GAAP Net income per share:

Basic $0.29 $0.30 $0.32 $0.32 $1.23 $0.17 $0.20 $0.23 $0.33 $0.94

Diluted $0.27 $0.28 $0.32 $0.32 $1.18 $0.17 $0.19 $0.23 $0.32 $0.92

Shares used in computing non-GAAP net income per share:

Basic 523,672 528,963 540,983 527,634 530,337 524,429 523,105 523,878 523,200 523,603

Diluted 560,407 559,328 554,350 534,817 551,433 530,705 532,850 538,132 538,887 534,015

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juniper networks q4 2009 results conference call...q4 2009 financial results conference call...

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