q4 2012 financial results conference call...jan 24, 2013 · these presentation slides contain...

Q4 2012 FINANCIAL RESULTS CONFERENCE CALL

Thursday, January 24, 2013

2:00 P.M. Pacific Time

Forward Looking Statements Information, statements and projections contained in these presentation slides and related conference call concerning Juniper Networks' business outlook, economic and market outlook, future financial and operating guidance, 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 and political conditions globally or regionally; business and economic conditions in the networking industry; changes in overall technology spending and spending by communication service providers; 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 Measures These 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. With respect to future financial

guidance provided on a non-GAAP basis, we have excluded estimates for amortization of intangible assets, share-based

compensation expenses, acquisition related charges, restructuring charges, impairment charges, litigation settlement charges,

gain or loss on equity investments, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and

income tax effect of non-GAAP exclusions.

A reconciliation of non-GAAP guidance measures to corresponding GAAP 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.

COMPANY REVIEW

Kevin Johnson

CHIEF EXECUTIVE OFFICER

2012: FOCUSED ON IMPROVING EXECUTION

1

2

3

Strengthened Product Portfolio

Excellence in Execution

Thoughtful Capital Allocation

1. Focused, agile operations

Make solid progress on long-term targets

2. Strong product portfolio

Take share in routing and switching; continue adding

customers for data center offerings; further

strengthen security offerings

3. Beginning to show results in Enterprise

Security

Complement strong position in Service Provider

2013: POSITIONED FOR GROWTH

SDN & SECURITY UPDATE

Bob Muglia

EXECUTIVE VICE PRESIDENT, SSD

1. Make networks more agile and reduce opex

2. Take leadership role and deliver disruptive

innovation

3. Embrace focus on silicon, systems and

software

Juniper Software Advantage to deliver customer

value and drive incremental revenue growth

Contrail acquisition to play key role in development of

controller

SDN STRATEGY & VISION

1. Capturing opportunities with SRX

2. Delivering great products that meet the needs of

enterprise customers

Security Director off to a solid start; Mykonos receiving

significant interest

3. Committed to growing market share

EXECUTING ON RE-ENERGIZING SECURITY STRATEGY

FINANCIAL REVIEW

Robyn Denholm

CHIEF FINANCIAL OFFICER

Q4 2012 RESULTS: REFLECT CONTINUED GROWTH AND OPERATING IMPROVEMENTS

$1,121

$1,032

$1,074

$1,118 $1,141

$0.28

$0.16

$0.19

$0.22

$0.28

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

$0.40

$500

$600

$700

$800

$900

$1,000

$1,100

$1,200

Q4' 11 Q1' 12 Q2' 12 Q3' 12 Q4' 12

Revenue ($M) EPS ($) Financial Overview

Revenue up 2% Q/Q; up 2% Y/Y

Non-GAAP Operating Margin of 18.2%

Non-GAAP Diluted EPS up $0.06 Q/Q;

flat Y/Y

Demand Metrics

Book to bill greater than 1

Product backlog of $410M, up 17% Q/Q

and up 37% Y/Y

Product deferred revenue decreased

Q/Q, as expected

Revenue and Non-GAAP Diluted EPS

FY 2012 RESULTS: SOLID PERFORMANCE IN CHALLENGING ENVIRONMENT

$4,093

$4,449 $4,365

$1.32

$1.19

$0.85

$0.00

$0.50

$1.00

$1.50

$2.00

$0

$1,000

$2,000

$3,000

$4,000

$5,000

2010 2011 2012

Revenue ($M) EPS ($) Financial Overview

Revenue down 2% Y/Y

Non-GAAP Operating Margin of 15.6%

Non-GAAP Diluted EPS down $0.34 Y/Y

Strong Balance Sheet exiting the year

with ~$3.8B gross cash and investments

Revenue and Non-GAAP Diluted EPS

Segment Market

PSD

$930 82%

4% Q/Q

4% Y/Y

EMEA $339

30%

5% Q/Q

-15% Y/Y

APAC

$195 17%

-18% Q/Q

-2% Y/Y

Q4 2012 REVENUE MIX

Geography

Revenue in $ Millions

Americas: Q/Q and Y/Y

growth in U.S. SP

EMEA: Early signs of

improvement in demand

environment

APAC: Q/Q decline due to

weakness in China SP

SSD

$211 18%

-6% Q/Q

-7%Y/Y Americas

$607 53%

8% Q/Q

16% Y/Y

Service

Provider

$740 65%

5% Q/Q

9% Y/Y

Enterprise

$401 35%

-3% Q/Q

-10% Y/Y

PSD Routing: $514M

Record MX; Y/Y growth in

MX offset declines in M

and E

Total Switching: $146M

Q/Q revenue flat, orders

up, backlog strong

Total Security: $170M

Q/Q Branch SRX up, High

End SRX declined

Service Provider: Broad

strength in Americas and

modest improvement in

demand in EMEA

Enterprise: Q/Q declines

in the Americas, primarily

Federal

Segment Market

PSD

$3,518 81%

-2% Y/Y

EMEA $1,266

29%

-5% Y/Y

APAC

$813 19%

-7% Y/Y

FY 2012 REVENUE MIX

Geography

Revenue in $ Millions

Americas: Increase in U.S.

Service Provider demand

EMEA: Decrease in

Service Provider demand

APAC: Decreased Service

Provider demand in Japan

SSD

$847 19%

-2%Y/Y

Americas

$2,286 52%

2% Y/Y

Service

Provider

$2,811 64%

-1% Y/Y

Enterprise

$1,554 36%

-4% Y/Y

PSD Routing: $1,947M

MX up 7% Y/Y

Total Switching: $555M

EX up 8% Y/Y

Total Security: $676M

SRX up 17% Y/Y

Service Provider: Growth

in Americas with Verizon

over 10% of revenue;

offset by declines in EMEA

and APAC

Enterprise: Strength in

APAC offset by declines in

Americas and flat

performance in EMEA; US

Federal approx. 4% of

revenue

Non-GAAP Except Revenue

FINANCIAL RESULTS

Q4‘12 Q3‘12 Q4‘11 Q/Q Change Y/Y Change

Revenue $1,140.8M $1,118.3M $1,120.8M 2% 2%

Gross Margin % 65.3% 65.6% 63.3% -0.3 pts 2.0 pts

R&D

Sales & Marketing

G&A

$246.1M

$246.5M

$44.3M

$262.1M

$239.6M

$42.8M

$228.2M

$235.3M

$37.9M

-6%

3%

4%

8%

5%

17%

Total Operating Expense

Operating Margin %

$536.9M

18.2%

$544.5M

16.9%

$501.4M

18.6%

-1%

1.3 pts

7%

-0.4pts

Net Income*

EPS (Diluted)

$144.6M

$0.28

$117.9M

$0.22

$150.1M

$0.28

23%

$0.06

-4%

$0.00

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

CASH FLOW AND BALANCE SHEET METRICS

Strong Cash Position

Gross cash and investments ~$3.8B; 43% onshore

Net cash and investments ~$2.8B

Cash flow from operations of $155M

Share Repurchase

$250M or 14.5M shares, average price of $17.24

For full year 2012, $646M or 35.8M shares, average

price of $18.05

DSO 35 days

Deferred Revenue $923.4M, down 7% Q/Q, down 5% Y/Y

Product deferred revenue down Q/Q and up Y/Y

1. Macroeconomic environment to remain uncertain

2. Modest growth in the markets we serve

3. Take share in Routing and Switching and

stabilize share in Enterprise Security

4. Expand 2013 operating margins over 2012

5. Continue to generate solid cash flows and

prudently allocate capital

2013 OPERATING PRINCIPLES

3 Months Ending March 31, 2013

Q1 2013 OUTLOOK

Revenue Between $1,050 million and $1,070 million

Gross Margins 64%, plus or minus half a point

OPEX $515M, plus or minus $5 million

Operating Margins Between 14% to 16%

EPS

Between $0.18 and $0.22 per diluted share

Excludes approx $0.03 cent one-time benefit of 2012 Full

year Tax Credit

Tax Rate 29%, reflects the Q1 2013 application of the R&D tax credit

Share Count Assume Flat with Q4’12

Non-GAAP (Except for Revenue and Share Count)

APPENDIX

SEGMENT OPERATING RESULTS

Three Months Ended

(in millions, except per share amounts and percentages) Q4'12 Q3'12 Q4'11

Platform Systems Division:

Product revenue $706.1 $681.5 $689.0

Service revenue 223.7 211.4 204.1

Total PSD revenue $929.8 $892.9 $893.1

Non-GAAP PSD contribution margin $ $397.5 $356.1 $371.9

Non-GAAP PSD contribution margin % 42.8 % 39.9 % 41.6 %

Software Solutions Division:

Product revenue $141.2 $156.7 $158.5

Service revenue 69.8 68.7 69.2

Total SSD revenue $211.0 $225.4 $227.7

Non-GAAP SSD contribution margin $ $84.4 $99.8 $94.7

Non-GAAP SSD contribution margin % 40.0 % 44.3 % 41.6 %

Total revenue $1,140.8 $1,118.3 $1,120.8

SEGMENT OPERATING RESULTS

Three Months Ended


Non-GAAP Segment contribution margin $ $481.9 $455.9 $466.6

Non-GAAP Segment contribution margin % 42.2 % 40.8 % 41.6 %

Corporate unallocated expenses $274.4 $266.5 $258.5

Non-GAAP Total segment operating margin $ $207.5 $189.4 $208.1

Non-GAAP Total segment operating margin % 18.2 % 16.9 % 18.6 %

Amortization of purchased intangible assets (7.2) (9.0) (6.9)

Share-based compensation expense (57.5) (59.1) (52.5)

Share-based payroll tax expense (0.1) (0.1) (0.2)

Restructuring and other charges (11.1) (83.4) (15.0)

Acquisition-related charges (0.7) (0.3) (0.3)

Other — 5.3 —

GAAP Operating income $130.9 $42.8 $133.2

GAAP TO NON-GAAP RECONCILIATIONS

Three Months Ended


GAAP Gross margin - Product $551.2 $503.5 $536.9

GAAP Product gross margin % of product revenue 65.1 % 60.1 % 63.4 %

Share-based compensation expense 1.1 1.2 1.2

Share-based compensation related payroll tax — — 0.1

Amortization of purchased intangible assets 6.0 7.9 5.7

Restructuring and other charges 0.5 52.4 —

Other — (5.3) —

Non-GAAP Gross margin - Product $558.8 $559.7 $543.9

Non-GAAP Product gross margin % of product revenue 66.0 % 66.8 % 64.2 %

GAAP Gross margin - Service $181.8 $170.3 $162.0

GAAP Service gross margin % of service revenue 62.0 % 60.8 % 59.3 %


Share-based compensation related payroll tax — 0.1 —

Non-GAAP Gross margin - Service $185.6 $174.2 $165.6

Non-GAAP Service gross margin % of service revenue 63.2 % 62.2 % 60.6 %


Three Months Ended


GAAP Gross margin $733.0 $673.8 $698.9

GAAP Gross margin % of revenue 64.3 % 60.3 % 62.4 %


Share-based compensation related payroll tax — 0.1 0.1


Restructuring and other charges 0.5 52.4 —

Other — (5.3) —

Non-GAAP Gross margin $744.4 $733.9 $709.5

Non-GAAP Gross margin % of revenue 65.3 % 65.6 % 63.3 %


Three Months Ended


GAAP Research and development expense $275.1 $288.2 $250.5


Share-based compensation related payroll tax (0.1) (0.1) —

Non-GAAP Research and development expense $246.1 $262.1 $228.2

GAAP Sales and marketing expense $263.8 $261.0 $253.2


Share-based compensation related payroll tax — — (0.1)

Non-GAAP Sales and marketing expense $246.5 $239.6 $235.3


Three Months Ended


GAAP General and administrative expense $50.7 $49.4 $45.5


Share-based compensation related payroll tax — 0.1 —

Non-GAAP General and administrative expense $44.3 $42.8 $37.9

GAAP Operating expense $602.1 $631.0 $565.7


Share-based compensation related payroll tax (0.1) — (0.1)

Amortization of purchased intangible assets (1.2) (1.1) (1.2)

Restructuring and other charges (10.6) (31.0) (15.0)

Acquisition-related charges (0.7) (0.3) (0.3)

Non-GAAP Operating expense $536.9 $544.5 $501.4


Three Months Ended


GAAP Operating income $130.9 $42.8 $133.2

GAAP Operating margin 11.5 % 3.8 % 11.9 %


Share-based compensation related payroll tax 0.1 0.1 0.2


Restructuring and other charges 11.1 83.4 15.0

Other — (5.3) —

Acquisition-related charges 0.7 0.3 0.3

Non-GAAP Operating income $207.5 $189.4 $208.1

Non-GAAP Operating margin 18.2 % 16.9 % 18.6 %

GAAP Income Tax Provision $44.2 $22.0 $26.3

GAAP Income Tax Rate 31.6 % 56.7 % 21.5 %

Income tax effect of non-GAAP exclusions 8.8 39.7 20.3

Non-GAAP Provision for income tax $53.0 $61.7 $46.6

Non-GAAP Income tax rate 26.8 % 34.4 % 23.7 %


Three Months Ended


GAAP Net income attributable to Juniper Networks $95.7 $16.8 $96.2


Share-based compensation related payroll tax 0.1 0.1 0.2


Restructuring and other charges 11.1 83.4 15.0

Other — (5.3) —

Acquisition-related charges 0.7 0.3 0.3

Gain on equity investments (18.9) (5.8) (0.7)

Income tax effect of non-GAAP exclusions (8.8) (39.7) (20.3)

Non-GAAP Net income $144.6 $117.9 $150.1

GAAP Diluted net income per share $0.19 $0.03 $0.18

Non-GAAP Diluted net income per share $0.28 $0.22 $0.28

Shares used in computing diluted non-GAAP net income per share 513.1 524.5 533.3

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