Form 8-K JUNIPER NETWORKS INC For: Jul 26
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) July 26, 2022
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
Registrant’s telephone number, including area code (408 ) 745-2000
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On July 26, 2022, Juniper Networks, Inc. (“we”, “our” or the “Company”) issued a press release in which we announced preliminary financial results for the quarter ended June 30, 2022. The Company also posted on the Investor Relations section of its website (www.juniper.net) prepared remarks with respect to the quarter ended June 30, 2022. Copies of the press release and prepared remarks by the Company are furnished as Exhibits 99.1 and 99.2, respectively, to this report. Information on our website is not, and will not be deemed, a part of this report or incorporated into any other filings the Company makes with the Securities and Exchange Commission.
The information furnished pursuant to this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed as “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File - the cover page iXBRL tags are embedded within the Inline XBRL document | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Juniper Networks, Inc. | |||||||||||
| July 26, 2022 | By: | /s/ Robert Mobassaly | |||||||||
| Name: | Robert Mobassaly | ||||||||||
| Title: | Senior Vice President and General Counsel | ||||||||||
Exhibit 99.1
Investor Relations:
Jess Lubert
Juniper Networks
(408) 936-3734
jlubert@juniper.net
Media Relations:
Leslie Moore
Juniper Networks
(408) 936-5767
llmoore@juniper.net
JUNIPER NETWORKS REPORTS PRELIMINARY SECOND QUARTER 2022 FINANCIAL RESULTS
SUNNYVALE, Calif., July 26, 2022 - Juniper Networks (NYSE: JNPR), a leader in secure, AI-driven networks, today reported preliminary financial results for the three months ended June 30, 2022 and provided its outlook for the three months ending September 30, 2022.
Second Quarter 2022 Financial Performance
Net revenues were $1,269.6 million, an increase of 8% year-over-year and an increase of 9% sequentially.
GAAP operating margin was 8.5%, an increase from 7.3% in the second quarter of 2021, and an increase from 5.0% in the first quarter of 2022.
Non-GAAP operating margin was 13.9%, a decrease from 15.8% in the second quarter of 2021, and an increase from 11.8% in the first quarter of 2022.
GAAP net income was $113.4 million, an increase of 83% year-over-year, and an increase of 104% sequentially, resulting in diluted net income per share of $0.35.
Non-GAAP net income was $136.4 million, a decrease of 3% year-over-year, and an increase of 34% sequentially, resulting in non-GAAP diluted net income per share of $0.42.
The reconciliation between GAAP and non-GAAP financial measures is provided in a table immediately following the Preliminary Net Revenues by Geographic Region table below.
“We exceeded our revenue forecast during the June quarter and delivered a second consecutive quarter of double-digit year-over-year product revenue growth,” said Juniper’s CEO, Rami Rahim. “Demand signals remain healthy and we are seeing attractive opportunities across our enterprise, cloud and service provider markets. Based on this momentum, the backlog we have built, and our latest expectations regarding supply, I am increasingly optimistic regarding our revenue growth prospects for the year.”
“Our teams executed well against the backdrop of an extremely challenged supply chain environment in the June quarter,” said Juniper’s CFO, Ken Miller. “We have taken actions to improve delivery of our products to customers. While some of these actions are likely to impact profitability over the next few quarters, they are enabling us to better meet customer demand, which should have positive long-term implications for our business. We remain focused on driving improved profitability and expect margins to improve in 2023.”
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Balance Sheet and Other Financial Results
Total cash, cash equivalents, and investments as of June 30, 2022 were $1,285.6 million, compared to $1,815.4 million as of June 30, 2021, and $1,668.9 million as of March 31, 2022.
Cash flow used in operations for the second quarter of 2022 was $266.9 million, compared to $257.2 million of cash flow provided by operations in the second quarter of 2021, and $193.1 million of cash flow provided by operations in the first quarter of 2022.
Days sales outstanding in accounts receivable was 74 days in the second quarter of 2022, compared to 59 days in the second quarter of 2021, and 65 days in the first quarter of 2022.
Capital expenditures were $24.5 million, and depreciation and amortization expense was $53.9 million during the second quarter of 2022.
Outlook
These metrics are provided on a non-GAAP basis, except for revenue and share count. Non-GAAP earnings per share is on a fully diluted basis. The outlook assumes that the exchange rate of the U.S. dollar to other currencies will remain relatively stable at current levels.
There is a worldwide shortage of semiconductors and other components impacting many industries. Similar to others, we are experiencing ongoing supply chain challenges, which have resulted in extended lead times, as well as elevated logistics and component costs. We continue to work to resolve supply chain challenges and have increased inventory levels and purchase commitments. We are working closely with our suppliers to further enhance our resiliency and mitigate the effects of disruptions outside of our control. We believe that even with these actions, extended lead times and elevated costs will likely persist for at least the remainder of the year. While the situation is dynamic, at this point in time we believe we will have access to sufficient supplies of semiconductors and other components to meet our financial forecast.
For the third quarter, we expect to see solid revenue growth driven by the strength of our backlog, strong demand and an improved supply outlook. Our better than expected supply outlook is the result of strategic actions we have taken to improve our access to components. We will continue to prioritize delivering products to our customers as timely as possible. We are incurring higher costs to secure supply, which will negatively impact margins over the next several quarters. In addition, we expect to see a similar software mix in the third quarter as we saw in the second quarter. These factors will continue to pressure our gross margin and overall profitability.
Our guidance for the quarter ending September 30, 2022 is as follows:
•Revenue will be approximately $1,350 million, plus or minus $50 million.
•Non-GAAP gross margin will be approximately 56.5%, plus or minus 1.0%.
•Non-GAAP operating expenses will be approximately $550 million, plus or minus $5 million.
•Non-GAAP operating margin will be approximately 15.8% at the mid-point of revenue guidance.
•Non-GAAP other income and expense (OI&E) will be near Q2'22 levels.
•Non-GAAP tax rate will be approximately 19.5%.
•Non-GAAP net income per share will be approximately $0.50, plus or minus $0.05. This assumes a share count of approximately 330 million.
For more detailed insight on guidance, please refer to the CFO Commentary that can be found on our website.
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Capital Return
Our Board of Directors has declared a cash dividend of $0.21 per share to be paid on September 22, 2022 to stockholders of record as of the close of business on September 1, 2022. We remain committed to paying our dividend and remain opportunistic with respect to share buybacks.
Second Quarter 2022 Financial Commentary Available Online
A CFO Commentary reviewing the Company’s second quarter 2022 financial results, as well as the third quarter and full-year 2022 outlook will be furnished to the SEC on Form 8-K and published on the Company’s website at http://investor.juniper.net. Analysts and investors are encouraged to review this commentary prior to participating in the conference call webcast.
Conference Call Webcast
Juniper Networks will host a conference call webcast today, July 26, 2022, at 2:00 pm PT, to be broadcast live over the Internet at http://investor.juniper.net. To participate via telephone in the US, the toll-free number is 1-888-506-0062. Outside the US, dial +1-973-528-0011. Please call 10 minutes prior to the scheduled conference call time. The webcast replay will be archived on the Juniper Networks website.
About Juniper Networks
Juniper Networks challenges the inherent complexity that comes with networking in the multicloud era. We do this with products, solutions and services that transform the way people connect, work and live. We simplify the process of transitioning to a secure and automated multicloud environment to enable secure, AI-driven networks that connect the world. Additional information can be found at Juniper Networks (www.juniper.net).
Investors and others should note that the Company announces material financial and operational information to its investors using its Investor Relations website, press releases, SEC filings and public conference calls and webcasts. The Company also intends to use the Twitter account @JuniperNetworks and the Company’s blogs as a means of disclosing information about the Company and for complying with its disclosure obligations under Regulation FD. The social media channels that the Company intends to use as a means of disclosing information described above may be updated from time to time as listed on the Company’s Investor Relations website.
Juniper Networks, the Juniper Networks logo, Juniper, Junos, and other trademarks are registered trademarks of Juniper Networks, Inc. and/or its affiliates in the United States and other countries. Other names may be trademarks of their respective owners.
Safe Harbor; Forward-Looking Statements
Statements in this release concerning Juniper Networks’ business, economic and market outlook, including currency exchange rates; our financial guidance; and the expected continuing impact of manufacturing and supply constraints, and the consummation and integration of, and financial impact resulting from any acquisitions and divestitures on our guidance; our expectations regarding our liquidity, capital return program, supply constraints and access to sufficient supplies of semiconductors and other components; deal, customer and product mix; costs; backlog; share buybacks; and our overall future prospects are forward-looking statements within the meaning of the Private Securities Litigation Reform Act that involve a number of uncertainties and risks. Actual results or events could differ materially from those anticipated in those forward-looking statements as a result of several factors, including: the duration, extent and continuing impact of the ongoing COVID-19 pandemic; general economic and political conditions globally or regionally, including any impact due to armed conflicts (such as the continuing conflict between Russia and Ukraine as well as governmental sanctions imposed in response); inflationary pressures; business and economic conditions in the networking industry; changes in overall technology spending by our customers; the network capacity and security requirements of our customers and, in particular, Cloud and telecommunication service providers; contractual terms that may result in the deferral of revenue; the timing of
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orders and their fulfillment; continuing manufacturing and supply chain challenges and logistics costs, constraints, changes or disruptions; availability and pricing of key product components, such as semiconductors; delays in scheduled product availability; our customers canceling orders that are included in the calculation of backlog, which they may do without significant penalty; adoption of or changes to laws, regulations, standards or policies affecting Juniper Networks' operations, products, services or the networking industry; product defects, returns or vulnerabilities; significant effects of tax legislation and judicial or administrative interpretation of new tax regulations, including the potential for corporate tax increases and changes to global tax laws; legal settlements and resolutions, including with respect to enforcing our proprietary rights; the potential impact of activities related to the execution of capital return, restructurings and product rationalization; the impact of import tariffs and changes thereto; and other factors listed in Juniper Networks’ most recent report on Form 10-Q or 10-K filed with the Securities and Exchange Commission. In addition, many of the foregoing risks and uncertainties are, and could be, exacerbated by the ongoing COVID-19 pandemic and any worsening of the global business and economic environment as a result of the pandemic. We cannot at this time predict the extent of the continuing impact of the COVID-19 pandemic and any resulting business or economic impact, but it could have a material adverse effect on our business, financial condition, results of operations and cash flows. Note that our estimates as to the tax rate on our business are based on current tax law and regulations, including current interpretations thereof, and could be materially affected by changing interpretations as well as additional legislation and guidance. All statements made in this press release are made only as of the date set forth at the beginning of this release. Juniper Networks undertakes no obligation to update the information made in this release in the event facts or circumstances subsequently change after the date of this press release. We have not filed our Form 10-Q for the quarter ended June 30, 2022. As a result, all financial results described in this earnings release should be considered preliminary, and are subject to change to reflect any necessary adjustments or changes in accounting estimates, that are identified prior to the time we file our Form 10-Q.
All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition, divestiture, and strategic investment related charges, restructuring benefits or charges, impairment charges, strategic partnership-related charges, legal reserve and settlement charges or benefits, gain or loss on equity investments, loss on extinguishment of debt, retroactive impact of certain tax settlements, significant effects of tax legislation and judicial or administrative interpretation of tax regulations, including the impact of income tax reform, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and the income tax effect of non-GAAP exclusions, and do not include the impact of further changes to tariffs and the impact of any future acquisitions, divestitures, or joint ventures that may occur in the period. Material changes to any one of these items could have a significant effect on our guidance and future GAAP results. Certain exclusions, such as amortization of intangible assets and share-based compensation expenses, are generally incurred each quarter, but the amounts have historically varied and may continue to vary significantly from quarter to quarter.
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Juniper Networks, Inc.
Preliminary Condensed Consolidated Statements of Operations
(in millions, except per share amounts)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net revenues: | |||||||||||||||||||||||
| Product | $ | 839.8 | $ | 759.2 | $ | 1,584.1 | $ | 1,431.6 | |||||||||||||||
| Service | 429.8 | 413.1 | 853.7 | 815.1 | |||||||||||||||||||
| Total net revenues | 1,269.6 | 1,172.3 | 2,437.8 | 2,246.7 | |||||||||||||||||||
| Cost of revenues: | |||||||||||||||||||||||
| Product | 431.9 | 350.4 | 810.4 | 666.9 | |||||||||||||||||||
| Service | 143.6 | 140.0 | 283.9 | 282.3 | |||||||||||||||||||
| Total cost of revenues | 575.5 | 490.4 | 1,094.3 | 949.2 | |||||||||||||||||||
| Gross margin | 694.1 | 681.9 | 1,343.5 | 1,297.5 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 244.3 | 245.8 | 492.9 | 500.5 | |||||||||||||||||||
| Sales and marketing | 274.3 | 257.8 | 547.6 | 510.5 | |||||||||||||||||||
| General and administrative | 67.2 | 71.0 | 127.4 | 132.1 | |||||||||||||||||||
| Restructuring charges | 0.5 | 21.6 | 9.3 | 40.9 | |||||||||||||||||||
| Total operating expenses | 586.3 | 596.2 | 1,177.2 | 1,184.0 | |||||||||||||||||||
| Operating income | 107.8 | 85.7 | 166.3 | 113.5 | |||||||||||||||||||
| Gain on divestiture | 45.8 | — | 45.8 | — | |||||||||||||||||||
| Loss on extinguishment of debt | — | — | — | (60.6) | |||||||||||||||||||
| Other expense, net | (8.1) | (10.9) | (21.0) | (15.9) | |||||||||||||||||||
| Income before income taxes and loss from equity method investment | 145.5 | 74.8 | 191.1 | 37.0 | |||||||||||||||||||
| Income tax provision | 31.6 | 12.8 | 21.5 | 6.1 | |||||||||||||||||||
| Loss from equity method investment, net of tax | 0.5 | — | 0.5 | — | |||||||||||||||||||
| Net income | $ | 113.4 | $ | 62.0 | $ | 169.1 | $ | 30.9 | |||||||||||||||
| Net income per share: | |||||||||||||||||||||||
| Basic | $ | 0.35 | $ | 0.19 | $ | 0.53 | $ | 0.09 | |||||||||||||||
| Diluted | $ | 0.35 | $ | 0.19 | $ | 0.51 | $ | 0.09 | |||||||||||||||
| Weighted-average shares used to compute net income per share: | |||||||||||||||||||||||
| Basic | 321.0 | 324.5 | 321.1 | 325.4 | |||||||||||||||||||
| Diluted | 328.1 | 330.4 | 329.3 | 331.5 | |||||||||||||||||||
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Juniper Networks, Inc.
Preliminary Net Revenues by Customer Solution
(in millions)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Customer Solutions: | |||||||||||||||||||||||
| Automated WAN Solutions | $ | 462.9 | $ | 396.1 | $ | 853.6 | $ | 782.5 | |||||||||||||||
| Cloud-Ready Data Center | 200.9 | 201.9 | 389.7 | 359.3 | |||||||||||||||||||
| AI-Driven Enterprise | 227.3 | 195.1 | 441.3 | 356.3 | |||||||||||||||||||
| Hardware Maintenance and Professional Services | 378.5 | 379.2 | 753.2 | 748.6 | |||||||||||||||||||
| Total | $ | 1,269.6 | $ | 1,172.3 | $ | 2,437.8 | $ | 2,246.7 | |||||||||||||||
Juniper Networks, Inc.
Preliminary Net Revenues by Vertical
(in millions)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Cloud | $ | 331.0 | $ | 320.6 | $ | 638.0 | $ | 591.3 | |||||||||||||||
| Service Provider | 470.8 | 443.7 | 898.8 | 881.9 | |||||||||||||||||||
| Enterprise | 467.8 | 408.0 | 901.0 | 773.5 | |||||||||||||||||||
| Total | $ | 1,269.6 | $ | 1,172.3 | $ | 2,437.8 | $ | 2,246.7 | |||||||||||||||
Juniper Networks, Inc.
Preliminary Net Revenues by Geographic Region
(in millions)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Americas | $ | 748.6 | $ | 652.7 | $ | 1,403.6 | $ | 1,235.7 | |||||||||||||||
| Europe, Middle East, and Africa | 337.2 | 323.9 | 671.1 | 635.0 | |||||||||||||||||||
| Asia Pacific | 183.8 | 195.7 | 363.1 | 376.0 | |||||||||||||||||||
| Total | $ | 1,269.6 | $ | 1,172.3 | $ | 2,437.8 | $ | 2,246.7 | |||||||||||||||
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Juniper Networks, Inc.
Preliminary Reconciliations between GAAP and non-GAAP Financial Measures
(in millions, except percentages and per share amounts)
(unaudited)
| Three Months Ended | ||||||||||||||||||||
| June 30, 2022 | March 31, 2022 | June 30, 2021 | ||||||||||||||||||
| GAAP operating income | $ | 107.8 | $ | 58.5 | $ | 85.7 | ||||||||||||||
| GAAP operating margin | 8.5 | % | 5.0 | % | 7.3 | % | ||||||||||||||
| Share-based compensation expense | C | 47.2 | 45.2 | 50.5 | ||||||||||||||||
| Share-based payroll tax expense | C | 2.0 | 3.7 | 0.6 | ||||||||||||||||
| Amortization of purchased intangible assets | A | 19.5 | 19.7 | 20.1 | ||||||||||||||||
| Restructuring charges | B | 0.5 | 8.8 | 21.6 | ||||||||||||||||
| Acquisition related charges | A | 0.8 | 1.7 | 4.3 | ||||||||||||||||
| Gain (loss) on non-qualified deferred compensation plan ("NQDC") | B | (4.8) | (2.2) | 2.0 | ||||||||||||||||
| Others | B | 3.9 | 2.0 | — | ||||||||||||||||
| Non-GAAP operating income | $ | 176.9 | $ | 137.4 | $ | 184.8 | ||||||||||||||
| Non-GAAP operating margin | 13.9 | % | 11.8 | % | 15.8 | % | ||||||||||||||
| GAAP net income | $ | 113.4 | $ | 55.7 | $ | 62.0 | ||||||||||||||
| Share-based compensation expense | C | 47.2 | 45.2 | 50.5 | ||||||||||||||||
| Share-based payroll tax expense | C | 2.0 | 3.7 | 0.6 | ||||||||||||||||
| Amortization of purchased intangible assets | A | 19.5 | 19.7 | 20.1 | ||||||||||||||||
| Restructuring charges | B | 0.5 | 8.8 | 21.6 | ||||||||||||||||
| Acquisition related charges | A | 0.8 | 1.7 | 4.3 | ||||||||||||||||
| Gain on divestiture | B | (45.8) | — | — | ||||||||||||||||
| Loss (gain) on equity investments | B | (5.6) | 0.9 | 3.3 | ||||||||||||||||
| Loss from equity method investment | B | 0.5 | — | — | ||||||||||||||||
| Income tax effect of Assets Held for Sale and tax legislation | B | — | (12.9) | — | ||||||||||||||||
| Income tax effect of non-GAAP exclusions | B | — | (23.2) | (21.4) | ||||||||||||||||
| Others | B | 3.9 | 2.0 | — | ||||||||||||||||
| Non-GAAP net income | $ | 136.4 | $ | 101.6 | $ | 141.0 | ||||||||||||||
| GAAP diluted net income per share | $ | 0.35 | $ | 0.17 | $ | 0.19 | ||||||||||||||
| Non-GAAP diluted net income per share | D | $ | 0.42 | $ | 0.31 | $ | 0.43 | |||||||||||||
| Shares used in computing GAAP diluted net income per share | 328.1 | 331.1 | 330.4 | |||||||||||||||||
| Shares used in computing Non-GAAP diluted net income per share | 328.1 | 331.1 | 330.4 | |||||||||||||||||
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Discussion of Non-GAAP Financial Measures
Juniper Networks believes that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to the company’s financial condition and results of operations. Juniper is unable to provide a reconciliation of non-GAAP guidance measures to corresponding U.S. generally accepted accounting principles or GAAP measures on a forward-looking basis without unreasonable effort due to the overall high variability and low visibility of most of the foregoing items that have been excluded from these non-GAAP measures. For example, share-based compensation expense is impacted by the Company’s future hiring needs, the type and volume of equity awards necessary for such future hiring, and the price at which the Company’s stock will trade in those future periods. Amortization of intangible assets is significantly impacted by the timing and size of any future acquisitions. The items that are being excluded are difficult to predict and a reconciliation could result in disclosure that would be imprecise or potentially misleading.
This press release, including the tables above, includes the following non-GAAP financial measures derived from our Preliminary Consolidated Statements of Operations: operating income; operating margin; net income; and diluted net income per share. These measures are not presented in accordance with, nor are they a substitute for GAAP. In addition, these measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes. The non-GAAP financial measures used in the table above should not be considered in isolation from measures of financial performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. Certain of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.
We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, forecasting and planning for future periods, and determining payments under compensation programs. We consider the use of the non-GAAP measures presented above to be helpful in assessing the performance of the continuing operation of our business. By continuing operation, we mean the ongoing revenue and expenses of the business, excluding certain items that render comparisons with prior periods or analysis of on-going operating trends more difficult, such as expenses not directly related to the actual cash costs of development, sale, delivery or support of our products and services, or expenses that are reflected in periods unrelated to when the actual amounts were incurred or paid. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for financial measures prepared in accordance with GAAP, allows for greater transparency in the review of our financial and operational performance. In addition, we have historically reported non-GAAP results to the investment community and believe that continuing to provide non-GAAP measures provides investors with a tool for comparing results over time. In assessing the overall health of our business for the periods covered by the table above and, in particular, in evaluating the financial line items presented in the table above, we have excluded items in the following three general categories, each of which are described below: Acquisition Related Charges, Other Items, and Share-Based Compensation Related Items. We also provide additional detail below regarding the shares used to calculate our non-GAAP net income per share. Notes identified for line items in the table above correspond to the appropriate note description below. With respect to the items excluded from our forward-looking non-GAAP measures and reconciliation of such measures, please see the “Outlook” section above.
The above tables and reconciliations can also be found on our Investor Relations website at http://investor.juniper.net.
Note A: Acquisition Related Charges. We exclude certain expense items resulting from acquisitions including amortization of purchased intangible assets associated with our acquisitions. The amortization of purchased intangible assets associated with acquisitions results in recording expenses in our GAAP financial statements that were already expensed by the acquired company before the acquisition and for which we have not expended cash. Moreover, had we internally developed the products acquired, the amortization of intangible assets, and the expenses of uncompleted research and development would have been expensed in prior periods. Accordingly, we analyze the performance of our operations in each period without regard to such expenses. In
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addition, acquisitions result in non-continuing operating expenses, which would not otherwise have been incurred by us in the normal course of our business operations. We believe that providing non-GAAP information for acquisition-related expense items in addition to the corresponding GAAP information allows the users of our financial statements to better review and understand the historic and current results of our continuing operations, and also facilitates comparisons to less acquisitive peer companies.
Note B: Other Items. We exclude certain other items that are the result of either unique, infrequent or unplanned events, including the following, when applicable: (i) strategic investment-related gain or loss, including gain or loss from our equity method investment; (ii) legal reserve and settlement charges or benefits; (iii) gain or loss on significant isolated events or transactions, including divestitures and the Russia-Ukraine conflict, which are directly related to the events, objectively quantifiable, and not expected to occur regularly in the future that are not indicative of our core operating results; (iv) loss on extinguishment of debt; (v) significant effects of tax legislation and judicial or administrative interpretation of tax regulations, including the impact of income tax reform; (vi) recognition of previously unrecognized tax benefits that are non-recurring in nature; and (vii) the income tax effect on our financial statements of excluding items related to our non-GAAP financial measures. Additionally, the non-GAAP results exclude the effects of NQDC-related investments. It is difficult to estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financial statements, these transactions may limit the comparability of our on-going operations with prior and future periods.
In addition, we exclude restructuring benefits or charges as these result from events that arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. As such, we believe these expenses do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred or comparisons to past operating results. We also exclude gains or losses related to the strategic investments as well as significant isolated events as they are directly related to an event that is distinct and does not reflect current ongoing business operations. In the case of legal reserves and settlements, these gains or losses are recorded in the period in which the matter is concluded or resolved even though the subject matter of the underlying dispute may relate to multiple or different periods. As such, we believe that these expenses do not accurately reflect the underlying performance of our continuing operations for the period in which they are incurred. Additionally, we exclude previously unrecognized tax benefits that are non-recurring in nature which are recorded in the period in which applicable statutes of limitation lapse or upon the completion of tax review cycles as the tax matter may relate to multiple or different periods. Further, certain items related to global tax reform may continue to impact the business and are generally unrelated to the current level of business activity. We believe these tax events limit the comparability with prior periods and that these expenses or benefits do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred. We also believe providing financial information with and without the income tax effect of excluding items related to our non-GAAP financial measures provide our management and users of the financial statements with better clarity regarding the on-going performance and future liquidity of our business. Because of these factors, we assess our operating performance with these amounts both included and excluded, and by providing this information, we believe the users of our financial statements are better able to understand the financial results of what we consider our continuing operations.
Note C: Share-Based Compensation Related Items. We provide non-GAAP information relative to our expense for share-based compensation and related payroll tax. Due to the varying available valuation methodologies, subjective assumptions and the variety of award types, which affect the calculations of share-based compensation, we believe that the exclusion of share-based compensation and related payroll tax allows for more accurate comparisons of our operating results to our peer companies and is useful to investors to understand the impact of share-based compensation on our results of operations. Further, expense associated with granting share-based awards does not reflect any cash expenditures by the company as no cash is expended.
Note D: Non-GAAP Net Income Per Share Items. We provide diluted non-GAAP net income per share. The diluted non-GAAP net income per share includes additional dilution from potential issuance of common stock, except when such issuances would be anti-dilutive.
Page 9 of 11
Juniper Networks, Inc.
Preliminary Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
| June 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 721.8 | $ | 922.5 | |||||||
| Short-term investments | 294.3 | 315.5 | |||||||||
| Accounts receivable, net of allowances | 1,048.4 | 994.4 | |||||||||
| Inventory | 394.9 | 272.6 | |||||||||
| Prepaid expenses and other current assets | 612.6 | 451.6 | |||||||||
| Total current assets | 3,072.0 | 2,956.6 | |||||||||
| Property and equipment, net | 675.7 | 703.0 | |||||||||
| Operating lease assets | 145.2 | 161.3 | |||||||||
| Long-term investments | 269.5 | 455.5 | |||||||||
| Purchased intangible assets, net | 196.2 | 284.3 | |||||||||
| Goodwill | 3,733.8 | 3,762.1 | |||||||||
| Other long-term assets | 768.6 | 564.2 | |||||||||
| Total assets | $ | 8,861.0 | $ | 8,887.0 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 360.6 | $ | 273.7 | |||||||
| Accrued compensation | 276.1 | 336.0 | |||||||||
| Deferred revenue | 940.4 | 937.9 | |||||||||
| Other accrued liabilities | 372.8 | 328.9 | |||||||||
| Total current liabilities | 1,949.9 | 1,876.5 | |||||||||
| Long-term debt | 1,625.8 | 1,686.8 | |||||||||
| Long-term deferred revenue | 522.2 | 475.7 | |||||||||
| Long-term income taxes payable | 274.3 | 330.5 | |||||||||
| Long-term operating lease liabilities | 125.1 | 142.2 | |||||||||
| Other long-term liabilities | 115.0 | 58.4 | |||||||||
| Total liabilities | 4,612.3 | 4,570.1 | |||||||||
| Total stockholders' equity | 4,248.7 | 4,316.9 | |||||||||
| Total liabilities and stockholders' equity | $ | 8,861.0 | $ | 8,887.0 | |||||||
Page 10 of 11
Juniper Networks, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 169.1 | $ | 30.9 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Share-based compensation expense | 92.4 | 108.0 | |||||||||
| Depreciation, amortization, and accretion | 111.5 | 120.9 | |||||||||
| Operating lease assets expense | 20.3 | 24.8 | |||||||||
| Gain on divestiture | (45.8) | — | |||||||||
| Loss on extinguishment of debt | — | 60.6 | |||||||||
| Other | 8.4 | 4.7 | |||||||||
| Changes in operating assets and liabilities, net of acquisitions: | |||||||||||
| Accounts receivable, net | (54.2) | 195.1 | |||||||||
| Prepaid expenses and other assets | (473.1) | (55.4) | |||||||||
| Accounts payable | 88.5 | (18.5) | |||||||||
| Accrued compensation | (54.7) | (4.4) | |||||||||
| Income taxes payable | (3.9) | (3.4) | |||||||||
| Other accrued liabilities | 17.1 | (71.8) | |||||||||
| Deferred revenue | 50.6 | 45.5 | |||||||||
| Net cash (used in) provided by operating activities | (73.8) | 437.0 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment | (49.5) | (41.1) | |||||||||
| Proceeds from divestiture, net | 89.1 | — | |||||||||
| Purchases of available-for-sale debt securities | (104.1) | (314.4) | |||||||||
| Proceeds from sales of available-for-sale debt securities | 74.8 | 352.3 | |||||||||
| Proceeds from maturities and redemptions of available-for-sale debt securities | 218.8 | 200.5 | |||||||||
| Purchases of equity securities | (12.2) | (6.1) | |||||||||
| Proceeds from sales of equity securities | 3.3 | 5.0 | |||||||||
| Payments for business acquisitions, net of cash and cash equivalents acquired | (3.9) | (175.0) | |||||||||
| Other | 1.4 | (0.6) | |||||||||
| Net cash provided by investing activities | 217.7 | 20.6 | |||||||||
| Cash flows from financing activities: | |||||||||||
| Repurchase and retirement of common stock | (226.3) | (243.1) | |||||||||
| Proceeds from issuance of common stock | 29.1 | 28.9 | |||||||||
| Payment of dividends | (134.8) | (129.9) | |||||||||
| Payment of debt | — | (423.8) | |||||||||
| Payment for debt extinguishment costs | — | (58.3) | |||||||||
| Other | — | (3.4) | |||||||||
| Net cash used in financing activities | (332.0) | (829.6) | |||||||||
| Effect of foreign currency exchange rates on cash, cash equivalents, and restricted cash | (14.0) | (1.6) | |||||||||
| Net decrease in cash, cash equivalents, and restricted cash | (202.1) | (373.6) | |||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 942.7 | 1,383.0 | |||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 740.6 | $ | 1,009.4 | |||||||
| Non-cash investing activity: | |||||||||||
| Equity method investment | $ | 40.3 | $ | — | |||||||
Page 11 of 11
Exhibit 99.2
Juniper Networks, Inc.
1133 Innovation Way
Sunnyvale, CA 94089
July 26, 2022
CFO Commentary on Second Quarter 2022 Preliminary Financial Results
Related Information
The following commentary is provided by management and should be referenced in conjunction with Juniper Networks’ second quarter 2022 preliminary financial results press release available on its Investor Relations website at http://investor.juniper.net. These remarks represent management’s current views of the Company’s financial and operational performance and outlook and are provided to give investors and analysts further insight into the Company's performance in advance of the earnings call webcast.
Q2 2022 Preliminary Financial Results
GAAP
| (in millions, except per share amounts and percentages) | Q2'22 | Q1'22 | Q2'21 | Q/Q Change | Y/Y Change | ||||||||||||||||||||||||
| Revenue | $ | 1,269.6 | $ | 1,168.2 | $ | 1,172.3 | 9 | % | 8 | % | |||||||||||||||||||
| Product | 839.8 | 744.3 | 759.2 | 13 | % | 11 | % | ||||||||||||||||||||||
| Service | 429.8 | 423.9 | 413.1 | 1 | % | 4 | % | ||||||||||||||||||||||
| Gross margin % | 54.7 | % | 55.6 | % | 58.2 | % | (0.9) | pts | (3.5) | pts | |||||||||||||||||||
| Research and development | 244.3 | 248.6 | 245.8 | (2) | % | (1) | % | ||||||||||||||||||||||
| Sales and marketing | 274.3 | 273.3 | 257.8 | — | % | 6 | % | ||||||||||||||||||||||
| General and administrative | 67.2 | 60.2 | 71.0 | 12 | % | (5) | % | ||||||||||||||||||||||
| Restructuring charges | 0.5 | 8.8 | 21.6 | (94) | % | (98) | % | ||||||||||||||||||||||
| Total operating expenses | $ | 586.3 | $ | 590.9 | $ | 596.2 | (1) | % | (2) | % | |||||||||||||||||||
| Operating margin % | 8.5 | % | 5.0 | % | 7.3 | % | 3.5 | pts | 1.2 | pts | |||||||||||||||||||
| Net income | $ | 113.4 | $ | 55.7 | $ | 62.0 | 104 | % | 83 | % | |||||||||||||||||||
| Diluted net income per share | $ | 0.35 | $ | 0.17 | $ | 0.19 | 106 | % | 84 | % | |||||||||||||||||||
1
Non-GAAP
| (in millions, except per share amounts and percentages) | Q3'22 Guidance | Q2'22 | Q1'22 | Q2'21 | Q/Q Change | Y/Y Change | |||||||||||||||||||||||||||||
| Revenue | $1,350 +/- $50 | $ | 1,269.6 | $ | 1,168.2 | $ | 1,172.3 | 9 | % | 8 | % | ||||||||||||||||||||||||
| Product | 839.8 | 744.3 | 759.2 | 13 | % | 11 | % | ||||||||||||||||||||||||||||
| Service | 429.8 | 423.9 | 413.1 | 1 | % | 4 | % | ||||||||||||||||||||||||||||
| Gross margin % | 56.5% +/- 1.0% | 56.2 | % | 57.5 | % | 60.0 | % | (1.3) | pts | (3.8) | pts | ||||||||||||||||||||||||
| Research and development | 226.5 | 231.3 | 224.7 | (2) | % | 1 | % | ||||||||||||||||||||||||||||
| Sales and marketing | 258.4 | 256.3 | 238.0 | 1 | % | 9 | % | ||||||||||||||||||||||||||||
| General and administrative | 52.2 | 46.3 | 55.9 | 13 | % | (7) | % | ||||||||||||||||||||||||||||
| Total operating expenses | $550 +/- $5 | $ | 537.1 | $ | 533.9 | $ | 518.6 | 1 | % | 4 | % | ||||||||||||||||||||||||
| Operating margin % | ~15.8% at the midpoint | 13.9 | % | 11.8 | % | 15.8 | % | 2.1 | pts | (1.9) | pts | ||||||||||||||||||||||||
| Net income | $ | 136.4 | $ | 101.6 | $ | 141.0 | 34 | % | (3) | % | |||||||||||||||||||||||||
| Diluted net income per share | $0.50 +/- $0.05 | $ | 0.42 | $ | 0.31 | $ | 0.43 | 35 | % | (2) | % | ||||||||||||||||||||||||
Q2 2022 Overview
We ended the second quarter of 2022 at $1,270 million in revenue, above the mid-point of our guidance, and up 8% year-over-year. Non-GAAP earnings per share was $0.42, below the mid-point of our guidance range due entirely to lower than expected gross margin. We continue to be in a supply constrained environment with unprecedented costs to procure components and deliver our products. We prioritized delivering products to our customers as timely as possible which resulted in higher costs and lower gross margin.
Product orders remained strong during the second quarter and exceeded our expectations. As a reminder, we are experiencing some order strength attributable to industry supply chain challenges resulting in customers placing orders ahead of their normal order rate to account for the extended lead time. While product orders declined single-digits year-over-year, due to a difficult comparison, adjusted orders grew double-digits year-over-year. We saw particularly strong demand in the Enterprise vertical, with both gross and adjusted orders growing on a year-over-year basis. Our backlog1 increased more than $250 million on a sequential basis.
From a customer solution perspective, revenue for Automated WAN Solutions and AI-Driven Enterprise increased 17% year-over-year. Cloud-Ready Data Center revenue was essentially flat year-over-year.
Looking at our revenue by vertical, all verticals grew sequentially and on a year-over-year basis. Enterprise was up 15% year-over-year, followed by Service Provider growing 6% year-over-year, and our Cloud business grew 3% year-over-year.
Total Software and Related Services revenue was $213 million, which was an increase of 24% year-over-year. ARR2 grew approximately 34% year-over-year.
Looking at our revenue by vertical, all verticals grew sequentially and on a year-over-year basis. Enterprise was up 15% year-over-year, followed by Service Provider growing 6% year-over-year, and our Cloud business grew 3% year-over-year.
Total Software and Related Services revenue was $213 million, which was an increase of 24% year-over-year. ARR2 grew approximately 34% year-over-year.
Total Security revenue was $159 million, down 8% year-over-year.
In reviewing our top 10 customers for the quarter, six were Cloud, three were Service Provider, and one was an Enterprise. Our top 10 customers accounted for 34% of our total revenue as compared to 33% in Q2'21.
Non-GAAP gross margin was 56.2%, which was below our guidance range primarily due to elevated supply costs related to the challenging supply chain environment and lower than anticipated software mix. We experienced a greater volume of supply decommits in the quarter which resulted in increased expedite and component costs, as we prioritized delivering products to our customers as timely as possible. If not for elevated supply chain costs, we
Non-GAAP gross margin was 56.2%, which was below our guidance range primarily due to elevated supply costs related to the challenging supply chain environment and lower than anticipated software mix. We experienced a greater volume of supply decommits in the quarter which resulted in increased expedite and component costs, as we prioritized delivering products to our customers as timely as possible. If not for elevated supply chain costs, we
1 Our product backlog consists of confirmed orders for products expected to be shipped to our distributors, resellers, or end-customers within the next twelve months.
2 ARR represents annual recurring revenue from renewable contracts with customers for software licenses, software support and maintenance, and SaaS expected to be recognized over an annual period of time. This metric includes the implied annualized billing value of contracts that are active as of the end of the periods presented. This metric excludes software licenses recognized as revenue at a point in time.
2
estimate that we would have posted non-GAAP gross margin of approximately 59%. We expect the supply chain environment to remain challenged through at least the second-half of the year.
Non-GAAP operating expense increased 4% year-over-year and was up 1% sequentially.
Non-GAAP operating margin was 13.9% for the quarter, which was below our expectations due to lower than expected gross margin.
Non-GAAP operating margin was 13.9% for the quarter, which was below our expectations due to lower than expected gross margin.
Cash flow used in operations was $267 million. We paid $67 million in dividends, reflecting a quarterly dividend of $0.21 per share, and repurchased $100 million worth of shares in the quarter.
Total cash, cash equivalents, and investments at the end of the second quarter of 2022 was $1.3 billion.
Revenue
Product and Service
•Product Revenue: $840 million, up 11% year-over-year and up 13% sequentially.
•Service Revenue: $430 million, up 4% year-over-year and up 1% sequentially. The year-over-year increase was primarily driven by strong sales of software subscriptions.
Customer Solution
•Automated WAN Solutions: $463 million, up 17% year-over-year and up 18% sequentially. The year-over-year and sequential increases were across all verticals.
•Cloud-Ready Data Center: $201 million, flat year-over-year and up 6% sequentially. The sequential increase was driven by Cloud and Enterprise, partially offset by a decrease in Service Provider.
•AI-Driven Enterprise: $227 million, up 17% year-over-year and up 6% sequentially. The year-over-year and sequential increase was primarily driven by Enterprise, and to a lesser extent, Service Provider, partially offset by a decrease in Cloud. Our Mist product family grew year-over-year.
•Hardware Maintenance and Professional Services: $379 million, flat year-over-year and up 1% sequentially.
Vertical
•Cloud: $331 million, up 3% year-over-year and up 8% sequentially. The year-over-year increase was driven by Automated WAN Solutions, partially offset by declines in AI-Driven Enterprise, Cloud-Ready Data Center and Hardware Maintenance and Professional Services. The sequential increase was primarily driven by Automated WAN Solutions, Cloud Ready Data Center, and to a lesser extent, Hardware Maintenance and Professional Services, partially offset by a decline in AI-Driven Enterprise.
•Service Provider: $471 million, up 6% year-over-year and up 10% sequentially. The year-over-year increase was primarily driven by Automated WAN Solutions, and to a lesser extent, Cloud-Ready Data Center and AI-Driven Enterprise, partially offset by a decrease in Hardware Maintenance and Professional Services. The sequential increase was primarily driven by Automated WAN Solutions, and to a lesser extent, AI-Driven Enterprise and Hardware Maintenance and Professional Services, partially offset by a decline in Cloud-Ready Data Center.
•Enterprise: $468 million, up 15% year-over-year and up 8% sequentially. The year-over-year increase was primarily driven by AI-Driven Enterprise, and to a lesser extent, Automated WAN Solutions and Hardware Maintenance and Professional Services, partially offset by a decrease in Cloud-Ready Data Center. The sequential increase was across all customer solutions.
3
Geography
•Americas: $749 million, up 15% year-over-year and up 14% sequentially. The year-over-year and sequential increase was across all customer verticals.
•EMEA: $337 million, up 4% year-over-year and up 1% sequentially. Year-over-year, the increase was primarily driven by Enterprise, and to a lesser extent, Cloud, partially offset by a decline in Service Provider. The sequential increases were primarily driven by Cloud, and to a lesser extent, Enterprise, partially offset by a decrease in Service Provider.
•APAC: $184 million, down 6% year-over-year and up 3% sequentially. Year-over-year, the decrease was primarily due to Enterprise and Cloud, partially offset by an increase in Service Provider. The sequential increase was primarily driven by Service Provider.
Additional Disclosures
•Software and Related Services: $213 million, up 24% year-over-year and down 6% sequentially. The year-over-year increase was driven by software license subscriptions and perpetual software licenses. The sequential decrease was caused by a decline in operating system software due to certain large customers buying patterns, partially offset by an increase in software subscriptions.
•Total Security: $159 million, down 8% year-over-year and 1% sequentially. Year-over-year, the decrease was due to product, partially offset by an increase in services. The sequential decrease was due to a decline in product.
Gross Margin
•GAAP gross margin: 54.7%, compared to 58.2% from the prior year and 55.6% from last quarter.
•Non-GAAP gross margin: 56.2%, compared to 60.0% from the prior year and 57.5% from last quarter.
•GAAP product gross margin: 48.6%, down 5.2 points from the prior year and down 0.5 points from last quarter.
•Non-GAAP product gross margin: 50.5%, down 5.6 points from the prior year and down 1.0 points from last quarter.
The year-over-year decreases in GAAP and Non-GAAP product gross margin were primarily due to elevated logistics and other supply chain costs and unfavorable product mix, partially offset by pricing actions and higher revenue.
On a sequential basis, the decreases in GAAP and non-GAAP product gross margin were primarily due to unfavorable software mix, and to a lesser extent, elevated logistics and other supply chain costs, partially offset by pricing actions and higher revenue. Although software mix as a percent of revenue was down in Q2'22 relative to Q1'22, due to lower sales of certain perpetual licenses, we continue to see consistent growth in software revenue, deferred SaaS and subscription revenue, as well as ARR.
•GAAP service gross margin: 66.6%, up 0.5 points from the prior year and down 0.3 points from last quarter.
•Non-GAAP service gross margin: 67.4%, up 0.2 points from the prior year and down 0.6 points from last quarter.
4
The year-over-year increases in service gross margin, on a GAAP and non-GAAP basis, were primarily driven by strong sales of hardware maintenance and software subscriptions and lower delivery costs. The sequential decrease was driven by higher delivery costs, partially offset by higher revenue.
Operating Expenses
•GAAP operating expenses: $586 million, a decrease of $10 million year-over-year, and a decrease of $5 million sequentially.
The year-over-year decrease in operating expenses was primarily due to lower restructuring charges, partially offset by higher headcount-related costs. The sequential decrease in operating expenses was primarily driven by lower restructuring charges.
GAAP operating expenses were 46.2% of revenue, down 4.7 points year-over-year and down 4.4 points sequentially.
•Non-GAAP operating expenses: $537 million, an increase of $19 million year-over-year, and an increase of $3 million sequentially.
The year-over-year and sequential increases in non-GAAP operating expenses were primarily due to higher employee-related costs.
Non-GAAP operating expenses were 42.3% of revenue, down 1.9 points year-over-year and down 3.4 points sequentially.
Operating Margin
•GAAP operating margin: 8.5%, an increase of 1.2 points year-over-year and an increase of 3.5 points sequentially.
•Non-GAAP operating margin: 13.9%, a decrease of 1.9 points year-over-year and an increase of 2.1 points sequentially.
Tax Rate
•GAAP tax rate: 21.7% provision, compared to 17.1% provision in the prior year and 21.9% benefit last quarter.
The year-over-year and quarter-over-quarter increase in the effective tax rate, on a GAAP basis, was primarily due to the effect of the gain recognized on the divestiture of our silicon photonics business in the current quarter and the beneficial impact of one-time items in the comparative periods.
•Non-GAAP tax rate: 18.8%, compared to 19.5% in the prior year and 20.4% last quarter.
The year-over-year and quarter-over-quarter decreases in effective tax rate, on a non-GAAP basis, were due to changes in the geographic mix of earnings.
Diluted Earnings Per Share
•GAAP diluted earnings per share: $0.35, an increase of $0.16 year-over-year and an increase of $0.18 sequentially.
The year-over-year increase in EPS on a GAAP basis, was primarily driven by lower operating expenses and higher revenue, and to a lesser extent, a one-time gain realized from the sale of our silicon photonics business, partially offset by lower gross margin.
5
Sequentially, the increase in GAAP EPS was primarily driven by lower operating expenses, higher revenue, and to a lesser extent, one-time gain realized from the sale of our silicon photonics business, partially offset by an increase in tax rate.
•Non-GAAP diluted earnings per share: $0.42, a decrease of $0.01 year-over-year and an increase of $0.11 sequentially.
The year-over-year decrease in EPS on a non-GAAP basis was primarily due to lower gross margin, partially offset by higher revenue.
Sequentially, the increase in non-GAAP EPS was driven by higher revenue, partially offset by lower gross margin.
Balance Sheet, Cash Flow, Capital Return, and Other Financial Metrics
| (in millions, except days sales outstanding ("DSO"), and headcount) | Q2'22 | Q1'22 | Q4'21 | Q3'21 | Q2'21 | ||||||||||||||||||||||||
Cash(1) | $ | 1,285.6 | $ | 1,668.9 | $ | 1,693.5 | $ | 1,835.8 | $ | 1,815.4 | |||||||||||||||||||
Debt(2) | 1,625.8 | 1,648.4 | 1,686.8 | 1,692.0 | 1,694.4 | ||||||||||||||||||||||||
Net cash(3) | (340.2) | 20.5 | 6.7 | 143.8 | 121.1 | ||||||||||||||||||||||||
| Operating cash flow | (266.9) | 193.1 | 116.0 | 136.7 | 257.2 | ||||||||||||||||||||||||
| Capital expenditures | 24.5 | 25.0 | 30.5 | 28.4 | 21.4 | ||||||||||||||||||||||||
| Depreciation and amortization | 53.9 | 54.7 | 56.3 | 56.7 | 58.9 | ||||||||||||||||||||||||
| Share repurchases | 100.0 | 112.2 | 148.3 | 50.0 | 110.0 | ||||||||||||||||||||||||
| Dividends | $ | 67.3 | $ | 67.5 | $ | 64.2 | $ | 65.0 | $ | 64.7 | |||||||||||||||||||
| Diluted shares | 328.1 | 331.1 | 332.2 | 331.1 | 330.4 | ||||||||||||||||||||||||
| DSO | 74 | 65 | 69 | 59 | 59 | ||||||||||||||||||||||||
| Headcount | 10,535 | 10,385 | 10,191 | 10,093 | 9,898 | ||||||||||||||||||||||||
______________________
(1) Includes cash, cash equivalents, and investments.
(2) Debt includes change in fair value of fixed-rate debt swapped to floating rate, equally offset on the balance sheet by a swap asset/liability.
(3) Net cash includes cash, cash equivalents, and short and long-term investments, net of debt.
Cash Flow
•Operating Cash Flow: $267 million cash outflow, compared to $257 million cash flow from operations in Q2'2021 and $193 million cash flow from operations last quarter.
Our Q2 cash outflow includes approximately $165 million of additional payments to suppliers in pre-paid deposits as well as strategic inventory purchases in an attempt to meet our customers delivery demands; approximately $115 million of lower customer collections related to invoicing linearity; and approximately $75 million of additional cash tax payments related to the capitalization and amortization requirements for research and development expenditures of the Tax Cuts and Jobs Act of 2017 ("Tax Act"), which went into effect on January 1, 2022.
Our Q2 cash outflow includes approximately $165 million of additional payments to suppliers in pre-paid deposits as well as strategic inventory purchases in an attempt to meet our customers delivery demands; approximately $115 million of lower customer collections related to invoicing linearity; and approximately $75 million of additional cash tax payments related to the capitalization and amortization requirements for research and development expenditures of the Tax Cuts and Jobs Act of 2017 ("Tax Act"), which went into effect on January 1, 2022.
•The year-over-year decrease was primarily driven by higher supplier payments, lower customer collections, and higher cash taxes.
•The sequential decrease was primarily due to lower collections, higher supplier payments, and higher cash taxes, partially offset by lower payments for variable compensation.
6
Days Sales Outstanding (DSO)
•DSO: 74 days, a 9-day increase from prior quarter, driven by a significant increase in product invoicing which occurred later in the quarter, partially offset by higher revenue.
Capital Return
•In the quarter, we paid a dividend of $0.21 per share for a total of $67 million.
•In the quarter, we repurchased $100 million worth of shares.
Demand Metrics
•Total deferred revenue was $1,463 million, up $131 million year-over-year and down $4 million sequentially.
•Deferred revenue from customer solutions3 was $503 million, up $147 million year-over-year and up $34 million sequentially.
The year-over-year and sequential increases were mainly driven by an increase in SaaS and software license subscriptions.
•Deferred revenue from hardware maintenance and professional services was $960 million, down $16 million year-over-year and down $38 million sequentially.
The year-over-year and sequential decreases were primarily driven by the timing of contract renewals.
Deferred Revenue
| (in millions) | June 30, 2022 | March 31, 2022 | June 30, 2021 | ||||||||||||||
| Deferred product revenue, net | $ | 112.4 | $ | 110.8 | $ | 118.1 | |||||||||||
| Deferred service revenue, net | 1,350.2 | 1,355.8 | 1,213.2 | ||||||||||||||
| Total | $ | 1,462.6 | $ | 1,466.6 | $ | 1,331.3 | |||||||||||
| Deferred revenue from customer solutions | $ | 503.1 | $ | 469.5 | $ | 355.8 | |||||||||||
| Deferred revenue from hardware maintenance and professional services | 959.5 | 997.1 | 975.5 | ||||||||||||||
| Total | $ | 1,462.6 | $ | 1,466.6 | $ | 1,331.3 | |||||||||||
Headcount
•Ending headcount for Q2'22 was 10,535, an increase of 637 employees year-over-year and an increase of 150 employees sequentially. The year-over-year increase was primarily a result of additional hires in our go-to-market and R&D organizations. The sequential increase was primarily a result of additional hires in our go-to-market organizations, partially offset by a reduction of employees resulting from the sale of our silicon photonics business.
Outlook
These metrics are provided on a non-GAAP basis, except for revenue and share count. Non-GAAP earnings per share is on a fully diluted basis. The outlook assumes that the exchange rate of the U.S. dollar to other currencies will remain relatively stable at current levels.
There is a worldwide shortage of semiconductors and other components impacting many industries. Similar to others, we are experiencing ongoing supply chain challenges, which have resulted in extended lead times, as well as elevated logistics and component costs. We continue to work to resolve supply chain challenges and have increased
3 Includes deferred revenue from hardware solutions, software licenses, software support and maintenance and SaaS offerings sold in our Automated WAN Solutions, Cloud-Ready Data Center, and AI-Driven Enterprise customer solution categories.
7
inventory levels and purchase commitments. We are working closely with our suppliers to further enhance our resiliency and mitigate the effects of disruptions outside of our control. We believe that even with these actions, extended lead times and elevated costs will likely persist for at least the remainder of the year. While the situation is dynamic, at this point in time we believe we will have access to sufficient supplies of semiconductors and other components to meet our financial forecast.
For the third quarter, we expect to see solid revenue growth driven by the strength of our backlog, strong demand and an improved supply outlook. Our better than expected supply outlook is the result of strategic actions we have taken to improve our access to components. We will continue to prioritize delivering products to our customers as timely as possible. We are incurring higher costs to secure supply, which will negatively impact margins over the next several quarters. In addition, we expect to see a similar software mix in the third quarter as we saw in the second quarter. These factors will continue to pressure our gross margin and overall profitability.
For the third quarter, we expect to see solid revenue growth driven by the strength of our backlog, strong demand and an improved supply outlook. Our better than expected supply outlook is the result of strategic actions we have taken to improve our access to components. We will continue to prioritize delivering products to our customers as timely as possible. We are incurring higher costs to secure supply, which will negatively impact margins over the next several quarters. In addition, we expect to see a similar software mix in the third quarter as we saw in the second quarter. These factors will continue to pressure our gross margin and overall profitability.
Q3 2022
Our guidance for the quarter ending September 30, 2022 is as follows:
•Revenue will be approximately $1,350 million, plus or minus $50 million.
•Non-GAAP gross margin will be approximately 56.5%, plus or minus 1.0%.
•Non-GAAP operating expenses will be approximately $550 million, plus or minus $5 million.
•Non-GAAP operating margin will be approximately 15.8% at the mid-point of revenue guidance.
•Non-GAAP other income and expense (OI&E) will be near Q2'22 levels.
•Non-GAAP tax rate will be approximately 19.5%.
•Non-GAAP net income per share will be approximately $0.50, plus or minus $0.05. This assumes a share count of approximately 330 million.
Full-Year 2022
Given the strong order momentum we have seen coupled with our current backlog as well as an improved supply outlook, we are raising our revenue growth expectation for the year to approximately 10%. This assumes the current supply chain environment remains constrained throughout the year and does not deteriorate.
We also anticipate backlog to remain at elevated levels through the remainder of the year.
We also anticipate backlog to remain at elevated levels through the remainder of the year.
Non-GAAP gross margin for the full year 2022 is expected to be approximately 57%, down from our original expectations of 58-60%. As a result of the supply constrained environment, we now expect to absorb approximately $155 million of elevated component and freight cost in 2022, more than 50% higher than we had anticipated at the beginning of the year. We believe these elevated costs will be transitory over time. In addition, software, as a percentage of total revenue in the second half is expected to remain close to Q2'22 levels.
In 2021, we implemented some pricing actions which have begun to partially offset some, but not all of the increased costs we are incurring. We are planning to take additional pricing actions to further offset these incremental costs. However, given the size of our backlog these actions will take time to positively impact our results.
We remain committed to disciplined expense management, and we expect operating expense to grow slower than revenue. That said, we will continue to invest to take advantage of market opportunities, and non-GAAP operating expense is expected to be up on a full-year basis.
Given the pressure we are seeing on non-GAAP gross margin, we no longer have line of sight to at least 100 basis points expansion of non-GAAP operating margin. Our current expectation is non-GAAP operating margin will be flat to slightly down for the full year.
8
Our non-GAAP tax rate on worldwide earnings is expected to be 19.5% plus or minus 1%.
Our non-GAAP EPS is expected to grow on a full-year basis.
2023 Outlook
While the current global macroeconomic environment and the ongoing pandemic pose some uncertainty, we would like to provide some early color on our outlook for 2023.
With the order momentum we are seeing as well as our elevated backlog, and current expectations for supply, we expect revenue growth of at least mid-single digits on a full-year basis. We expect margin expansion and improved profitability in 2023.
Our non-GAAP EPS is expected to grow on a full-year basis.
2023 Outlook
While the current global macroeconomic environment and the ongoing pandemic pose some uncertainty, we would like to provide some early color on our outlook for 2023.
With the order momentum we are seeing as well as our elevated backlog, and current expectations for supply, we expect revenue growth of at least mid-single digits on a full-year basis. We expect margin expansion and improved profitability in 2023.
Capital Return
Our Board of Directors has declared a cash dividend of $0.21 per share to be paid on September 22, 2022 to stockholders of record as of the close of business on September 1, 2022. We remain committed to paying our dividend and remain opportunistic with respect to share buybacks.
9
Forward-Looking Statements
Statements in this CFO Commentary and related conference call concerning Juniper Networks' business, economic and market outlook, including currency exchange rates; our financial guidance and the expected continuing impact of manufacturing and supply constraints, and the consummation and integration of, and financial impact resulting from any acquisitions and divestitures on our guidance; our expectations regarding our liquidity, capital return program, supply constraints and access to sufficient supplies of semiconductors and other components; deal, customer and product mix; costs; backlog; share buybacks; and our overall future prospects are forward-looking statements within the meaning of the Private Securities Litigation Reform Act that involve a number of uncertainties and risks. Actual results or events could differ materially from those anticipated in those forward-looking statements as a result of several factors, including: the duration, extent and continuing impact of the ongoing COVID-19 pandemic; general economic and political conditions globally or regionally, including any impact due to armed conflicts (such as the continuing conflict between Russia and Ukraine as well as governmental sanctions imposed in response); inflationary pressures; business and economic conditions in the networking industry; changes in overall technology spending by our customers; the network capacity and security requirements of our customers and, in particular, Cloud and telecommunication service providers; contractual terms that may result in the deferral of revenue; the timing of orders and their fulfillment; continuing manufacturing and supply chain challenges and logistics costs, constraints, changes or disruptions; availability and pricing of key product components, such as semiconductors; delays in scheduled product availability; our customers canceling orders that are included in the calculation of backlog, which they may do without significant penalty; adoption of or changes to laws, regulations, standards or policies affecting Juniper Networks' operations, products, services or the networking industry; product defects, returns or vulnerabilities; significant effects of tax legislation and judicial or administrative interpretation of new tax regulations, including the potential for corporate tax increases and changes to global tax laws; legal settlements and resolutions, including with respect to enforcing our proprietary rights; the potential impact of activities related to the execution of capital return, restructurings and product rationalization; the impact of import tariffs and changes thereto; and other factors listed in Juniper Networks’ most recent report on Form 10-Q or 10-K filed with the Securities and Exchange Commission. In addition, many of the foregoing risks and uncertainties are, and could be, exacerbated by the ongoing COVID-19 pandemic and any worsening of the global business and economic environment as a result of the pandemic. We cannot at this time predict the extent of the continuing impact of the COVID-19 pandemic and any resulting business or economic impact, but it could have a material adverse effect on our business, financial condition, results of operations and cash flows. Note that our estimates as to the tax rate on our business are based on current tax law and regulations, including current interpretations thereof, and could be materially affected by changing interpretations as well as additional legislation and guidance. All statements made in this CFO Commentary and related conference call are made only as of the date set forth at the beginning of this document. Juniper Networks undertakes no obligation to update the information made in this document or the related conference call in the event facts or circumstances subsequently change after the date of this document. We have not filed our Form 10-Q for the quarter ended June 30, 2022. As a result, all financial results described in this CFO Commentary should be considered preliminary, and are subject to change to reflect any necessary adjustments or changes in accounting estimates, that are identified prior to the time we file our Form 10-Q.
All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition, divestiture, and strategic investment related charges, restructuring benefits or charges, impairment charges, strategic partnership-related charges, legal reserve and settlement charges or benefits, gain or loss on equity investments, loss on extinguishment of debt, retroactive impact of certain tax settlements, significant effects of tax legislation and judicial or administrative interpretation of tax regulations, including the impact of income tax reform, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and the income tax effect of non-GAAP exclusions, and do not include the impact of further changes to tariffs and the impact of any future acquisitions, divestitures, or joint ventures that may occur in the period. Material changes to any one of these items could have a significant effect on our guidance and future GAAP results. Certain exclusions, such as amortization of intangible assets and share-based compensation expenses, are generally incurred each quarter, but the amounts have historically varied and may continue to vary significantly from quarter to quarter.
10
Non-GAAP Financial Measures
This CFO Commentary contains references to the following non-GAAP financial measures: gross margin; product gross margin; service gross margin; research and development expense; sales and marketing expense; general and administrative expense; operating expense; operating expense as a percentage of revenue; operating income; operating margin; provision for income tax; income tax rate; net income; and diluted earnings per share. For important commentary on why Juniper Networks considers non-GAAP information a useful view of the company’s financial results, please see the press release furnished with our 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, divestiture, and strategic investment related charges, restructuring benefits or charges, impairment charges, strategic partnership-related charges, legal reserve and settlement charges or benefits, supplier component remediation charges and recoveries, gain or loss on equity or equity method investments, gain on divestiture, loss on extinguishment of debt, retroactive impact of certain tax settlements, significant effects of tax legislation and judicial or administrative interpretation of tax regulations, including the impact of income tax reform, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and the income tax effect of non-GAAP exclusions, and do not include the impact of changes to tariffs and the impact of any future acquisitions, divestitures, or joint ventures that may occur in the applicable period. These measures are not presented in accordance with, nor are they a substitute for U.S. generally accepted accounting principles, or GAAP. In addition, these measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes. The non-GAAP financial measures used in this CFO Commentary should not be considered in isolation from measures of financial performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.
Juniper is unable to provide a reconciliation of non-GAAP guidance measures to corresponding U.S. generally accepted accounting principles or GAAP measures on a forward-looking basis without unreasonable effort due to the overall high variability and low visibility of most of the foregoing items that have been excluded from these non-GAAP measures. For example, share-based compensation expense is impacted by the Company’s future hiring needs, the type and volume of equity awards necessary for such future hiring, and the price at which the Company’s stock will trade in those future periods. Amortization of intangible assets is significantly impacted by the timing and size of any future acquisitions. The items that are being excluded are difficult to predict and a reconciliation could result in disclosure that would be imprecise or potentially misleading.
11
Juniper Networks, Inc.
Preliminary Supplemental Data
(in millions, except percentages)
(unaudited)
Deferred Revenue
| As of | |||||||||||
| June 30, 2022 | December 31, 2021 | ||||||||||
| Deferred product revenue | $ | 112.4 | $ | 129.1 | |||||||
| Deferred service revenue | 1,350.2 | 1,284.5 | |||||||||
| Total | $ | 1,462.6 | $ | 1,413.6 | |||||||
| Deferred revenue from customer solutions | $ | 503.1 | $ | 442.1 | |||||||
| Deferred revenue from hardware maintenance and professional services | 959.5 | 971.5 | |||||||||
| Total | $ | 1,462.6 | $ | 1,413.6 | |||||||
| Reported as: | |||||||||||
| Current | $ | 940.4 | $ | 937.9 | |||||||
| Long-term | 522.2 | 475.7 | |||||||||
| Total | $ | 1,462.6 | $ | 1,413.6 | |||||||
Customer Solution: Revenue Trend
| Q2'21 | Q3'21 | Q4'21 | Q1'22 | Q2'22 | Q/Q Change | Y/Y Change | |||||||||||||||||||||||||||||||||||||||||||||||
| Customer Solutions: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Automated WAN Solutions | $ | 396.1 | $ | 384.5 | $ | 498.0 | $ | 390.7 | $ | 462.9 | $ | 72.2 | 18.5 | % | $ | 66.8 | 16.9 | % | |||||||||||||||||||||||||||||||||||
| Cloud-Ready Data Center | 201.9 | 194.7 | 173.1 | 188.8 | 200.9 | 12.1 | 6.4 | % | (1.0) | (0.5) | % | ||||||||||||||||||||||||||||||||||||||||||
| AI-Driven Enterprise | 195.1 | 229.8 | 244.3 | 214.0 | 227.3 | 13.3 | 6.2 | % | 32.2 | 16.5 | % | ||||||||||||||||||||||||||||||||||||||||||
| Hardware Maintenance and Professional Services | 379.2 | 379.8 | 384.5 | 374.7 | 378.5 | 3.8 | 1.0 | % | (0.7) | (0.2) | % | ||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 1,172.3 | $ | 1,188.8 | $ | 1,299.9 | $ | 1,168.2 | $ | 1,269.6 | $ | 101.4 | 8.7 | % | $ | 97.3 | 8.3 | % | |||||||||||||||||||||||||||||||||||
Additional Disclosures: Software and Security Products and Services: Revenue Trend
| Q2'21 | Q3'21 | Q4'21 | Q1'22 | Q2'22 | Q/Q Change | Y/Y Change | |||||||||||||||||||||||||||||||||||||||||||||||
| Software and Related Services | $ | 172.5 | $ | 204.0 | $ | 241.5 | $ | 228.1 | $ | 213.4 | $ | (14.7) | (6.4) | % | $ | 40.9 | 23.7 | % | |||||||||||||||||||||||||||||||||||
| Total Security | $ | 171.7 | $ | 160.4 | $ | 161.7 | $ | 161.0 | $ | 158.6 | $ | (2.4) | (1.5) | % | $ | (13.1) | (7.6) | % | |||||||||||||||||||||||||||||||||||
Vertical Reporting: Revenue Trend
| Q2'21 | Q3'21 | Q4'21 | Q1'22 | Q2'22 | Q/Q Change | Y/Y Change | |||||||||||||||||||||||||||||||||||||||||||||||
| Cloud | $ | 320.6 | $ | 303.3 | $ | 333.4 | $ | 307.0 | $ | 331.0 | $ | 24.0 | 7.8 | % | $ | 10.4 | 3.2 | % | |||||||||||||||||||||||||||||||||||
| Service Provider | 443.7 | 445.8 | 511.4 | 428.0 | 470.8 | 42.8 | 10.0 | % | 27.1 | 6.1 | % | ||||||||||||||||||||||||||||||||||||||||||
| Enterprise | 408.0 | 439.7 | 455.1 | 433.2 | 467.8 | 34.6 | 8.0 | % | 59.8 | 14.7 | % | ||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 1,172.3 | $ | 1,188.8 | $ | 1,299.9 | $ | 1,168.2 | $ | 1,269.6 | $ | 101.4 | 8.7 | % | $ | 97.3 | 8.3 | % | |||||||||||||||||||||||||||||||||||
12
Juniper Networks, Inc.
Preliminary Reconciliations between GAAP and non-GAAP Financial Measures
(in millions, except percentages and per share amounts)
(unaudited)
| Three Months Ended | |||||||||||||||||
| June 30, 2022 | March 31, 2022 | June 30, 2021 | |||||||||||||||
| GAAP gross margin - Product | $ | 407.9 | $ | 365.8 | $ | 408.8 | |||||||||||
| GAAP product gross margin % of product revenue | 48.6 | % | 49.1 | % | 53.8 | % | |||||||||||
| Share-based compensation expense | 1.2 | 1.4 | 1.0 | ||||||||||||||
| Share-based payroll tax expense | — | 0.2 | — | ||||||||||||||
| Amortization of purchased intangible assets | 15.5 | 15.7 | 16.1 | ||||||||||||||
| Gain (loss) on non-qualified deferred compensation plan ("NQDC") | (0.2) | (0.1) | 0.1 | ||||||||||||||
| Non-GAAP gross margin - Product | $ | 424.4 | $ | 383.0 | $ | 426.0 | |||||||||||
| Non-GAAP product gross margin % of product revenue | 50.5 | % | 51.5 | % | 56.1 | % | |||||||||||
| GAAP gross margin - Service | $ | 286.2 | $ | 283.6 | $ | 273.1 | |||||||||||
| GAAP service gross margin % of service revenue | 66.6 | % | 66.9 | % | 66.1 | % | |||||||||||
| Share-based compensation expense | 3.7 | 4.5 | 3.9 | ||||||||||||||
| Share-based payroll tax expense | 0.4 | 0.5 | 0.1 | ||||||||||||||
| Gain (loss) on NQDC | (0.7) | (0.3) | 0.3 | ||||||||||||||
| Non-GAAP gross margin - Service | $ | 289.6 | $ | 288.3 | $ | 277.4 | |||||||||||
| Non-GAAP service gross margin % of service revenue | 67.4 | % | 68.0 | % | 67.2 | % | |||||||||||
| GAAP gross margin | $ | 694.1 | $ | 649.4 | $ | 681.9 | |||||||||||
| GAAP gross margin % of revenue | 54.7 | % | 55.6 | % | 58.2 | % | |||||||||||
| Share-based compensation expense | 4.9 | 5.9 | 4.9 | ||||||||||||||
| Share-based payroll tax expense | 0.4 | 0.7 | 0.1 | ||||||||||||||
| Amortization of purchased intangible assets | 15.5 | 15.7 | 16.1 | ||||||||||||||
| Gain (loss) on NQDC | (0.9) | (0.4) | 0.4 | ||||||||||||||
| Non-GAAP gross margin | $ | 714.0 | $ | 671.3 | $ | 703.4 | |||||||||||
| Non-GAAP gross margin % of revenue | 56.2 | % | 57.5 | % | 60.0 | % | |||||||||||
| GAAP research and development expense | $ | 244.3 | $ | 248.6 | $ | 245.8 | |||||||||||
| Share-based compensation expense | (19.3) | (16.6) | (20.1) | ||||||||||||||
| Share-based payroll tax expense | (0.4) | (1.6) | (0.2) | ||||||||||||||
| Loss (gain) on NQDC | 1.9 | 0.9 | (0.8) | ||||||||||||||
| Non-GAAP research and development expense | $ | 226.5 | $ | 231.3 | $ | 224.7 | |||||||||||
13
Juniper Networks, Inc.
Preliminary Reconciliations between GAAP and non-GAAP Financial Measures
(in millions, except percentages and per share amounts)
(unaudited)
| Three Months Ended | |||||||||||||||||
| June 30, 2022 | March 31, 2022 | June 30, 2021 | |||||||||||||||
| GAAP sales and marketing expense | $ | 274.3 | $ | 273.3 | $ | 257.8 | |||||||||||
| Share-based compensation expense | (12.4) | (12.5) | (14.9) | ||||||||||||||
| Share-based payroll tax expense | (1.1) | (1.2) | (0.3) | ||||||||||||||
| Amortization of purchased intangible assets | (4.0) | (4.0) | (4.0) | ||||||||||||||
| Loss (gain) on NQDC | 1.6 | 0.7 | (0.6) | ||||||||||||||
| Non-GAAP sales and marketing expense | $ | 258.4 | $ | 256.3 | $ | 238.0 | |||||||||||
| GAAP general and administrative expense | $ | 67.2 | $ | 60.2 | $ | 71.0 | |||||||||||
| Share-based compensation expense | (10.6) | (10.2) | (10.6) | ||||||||||||||
| Share-based payroll tax expense | (0.1) | (0.2) | — | ||||||||||||||
| Acquisition related charges | (0.8) | (1.7) | (4.3) | ||||||||||||||
| Loss (gain) on NQDC | 0.4 | 0.2 | (0.2) | ||||||||||||||
| Others | (3.9) | (2.0) | — | ||||||||||||||
| Non-GAAP general and administrative expense | $ | 52.2 | $ | 46.3 | $ | 55.9 | |||||||||||
| GAAP operating expenses | $ | 586.3 | $ | 590.9 | $ | 596.2 | |||||||||||
| GAAP operating expenses % of revenue | 46.2 | % | 50.6 | % | 50.9 | % | |||||||||||
| Share-based compensation expense | (42.3) | (39.3) | (45.6) | ||||||||||||||
| Share-based payroll tax expense | (1.6) | (3.0) | (0.5) | ||||||||||||||
| Amortization of purchased intangible assets | (4.0) | (4.0) | (4.0) | ||||||||||||||
| Restructuring charges | (0.5) | (8.8) | (21.6) | ||||||||||||||
| Acquisition related charges | (0.8) | (1.7) | (4.3) | ||||||||||||||
| Loss (gain) on NQDC | 3.9 | 1.8 | (1.6) | ||||||||||||||
| Others | (3.9) | (2.0) | — | ||||||||||||||
| Non-GAAP operating expenses | $ | 537.1 | $ | 533.9 | $ | 518.6 | |||||||||||
| Non-GAAP operating expenses % of revenue | 42.3 | % | 45.7 | % | 44.2 | % | |||||||||||
| GAAP operating income | $ | 107.8 | $ | 58.5 | $ | 85.7 | |||||||||||
| GAAP operating margin | 8.5 | % | 5.0 | % | 7.3 | % | |||||||||||
| Share-based compensation expense | 47.2 | 45.2 | 50.5 | ||||||||||||||
| Share-based payroll tax expense | 2.0 | 3.7 | 0.6 | ||||||||||||||
| Amortization of purchased intangible assets | 19.5 | 19.7 | 20.1 | ||||||||||||||
| Restructuring charges | 0.5 | 8.8 | 21.6 | ||||||||||||||
| Acquisition related charges | 0.8 | 1.7 | 4.3 | ||||||||||||||
| Gain (loss) on NQDC | (4.8) | (2.2) | 2.0 | ||||||||||||||
| Others | 3.9 | 2.0 | — | ||||||||||||||
| Non-GAAP operating income | $ | 176.9 | $ | 137.4 | $ | 184.8 | |||||||||||
| Non-GAAP operating margin | 13.9 | % | 11.8 | % | 15.8 | % | |||||||||||
14
Juniper Networks, Inc.
Preliminary Reconciliations between GAAP and non-GAAP Financial Measures
(in millions, except percentages and per share amounts)
(unaudited)
| Three Months Ended | |||||||||||||||||
| June 30, 2022 | March 31, 2022 | June 30, 2021 | |||||||||||||||
| GAAP other expense, net | $ | (8.1) | $ | (12.9) | $ | (10.9) | |||||||||||
| GAAP other expense, net % of revenue | (0.6) | % | (1.1) | % | (0.9) | % | |||||||||||
| Loss (gain) on equity investments | (5.6) | 0.9 | 3.3 | ||||||||||||||
| Loss (gain) on NQDC | 4.8 | 2.2 | (2.0) | ||||||||||||||
| Non-GAAP other expense, net | $ | (8.9) | $ | (9.8) | $ | (9.6) | |||||||||||
| Non-GAAP other expense, net % of revenue | (0.7) | % | (0.8) | % | (0.8) | % | |||||||||||
| GAAP income tax provision (benefit) | $ | 31.6 | $ | (10.1) | $ | 12.8 | |||||||||||
| GAAP income tax rate | 21.7 | % | (21.9) | % | 17.1 | % | |||||||||||
| Income tax effect of Assets Held for Sale and tax legislation | — | 12.9 | — | ||||||||||||||
| Income tax effect of non-GAAP exclusions | — | 23.2 | 21.4 | ||||||||||||||
| Non-GAAP provision for income tax | $ | 31.6 | $ | 26.0 | $ | 34.2 | |||||||||||
| Non-GAAP income tax rate | 18.8 | % | 20.4 | % | 19.5 | % | |||||||||||
| GAAP net income | $ | 113.4 | $ | 55.7 | $ | 62.0 | |||||||||||
| Share-based compensation expense | 47.2 | 45.2 | 50.5 | ||||||||||||||
| Share-based payroll tax expense | 2.0 | 3.7 | 0.6 | ||||||||||||||
| Amortization of purchased intangible assets | 19.5 | 19.7 | 20.1 | ||||||||||||||
| Restructuring charges | 0.5 | 8.8 | 21.6 | ||||||||||||||
| Acquisition related charges | 0.8 | 1.7 | 4.3 | ||||||||||||||
| Gain on divestiture | (45.8) | — | — | ||||||||||||||
| Loss (gain) on equity investments | (5.6) | 0.9 | 3.3 | ||||||||||||||
| Loss from equity method investment | 0.5 | — | — | ||||||||||||||
| Income tax effect of Assets Held for Sale and tax legislation | — | (12.9) | — | ||||||||||||||
| Income tax effect of non-GAAP exclusions | — | (23.2) | (21.4) | ||||||||||||||
| Others | 3.9 | 2.0 | — | ||||||||||||||
| Non-GAAP net income | $ | 136.4 | $ | 101.6 | $ | 141.0 | |||||||||||
| GAAP diluted net income per share | $ | 0.35 | $ | 0.17 | $ | 0.19 | |||||||||||
| Non-GAAP diluted net income per share | $ | 0.42 | $ | 0.31 | $ | 0.43 | |||||||||||
| Shares used in computing GAAP diluted net income per share | 328.1 | 331.1 | 330.4 | ||||||||||||||
| Shares used in computing Non-GAAP diluted net income per share | 328.1 | 331.1 | 330.4 | ||||||||||||||
15
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