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Juniper Networks Reports Preliminary Second Quarter 2012 Financial Results

July 24, 2012

SUNNYVALE, CA--(Marketwire - Jul 24, 2012) -  Juniper Networks (NYSE: JNPR)

  • Revenue: $1,074 million, up 4% from Q1'12 and down 4% from Q2'11
  • Operating Margin: 8.1% GAAP; 15.0% non-GAAP
  • GAAP Net Income Per Share: $0.11 diluted
  • Non-GAAP Net Income Per Share: $0.19 diluted, up 19% from Q1'12 and down 39% from Q2'11

Juniper Networks (NYSE: JNPR), the industry leader in network innovation, today reported preliminary financial results for the three and six months ended June 30, 2012, and provided its outlook for the three months ending September 30, 2012.

Net revenues for the second quarter of 2012 increased 4% sequentially, and decreased 4% on a year-over-year basis, to $1,074 million.

The Company posted GAAP net income of $58 million, or $0.11 per diluted share, and non-GAAP net income of $103 million, or $0.19 per diluted share, for the second quarter of 2012. 

Non-GAAP net income per diluted share increased 19% compared to the first quarter of 2012, and decreased 39% compared to the second quarter of 2011. The reconciliation between GAAP and non-GAAP results of operations is provided in a table immediately following the Share-Based Compensation Related Payroll Tax by Category table below.

"Juniper's second quarter results delivered sequential top line growth as a result of our focus on execution," said Kevin Johnson, CEO of Juniper Networks. "New products continued to gain traction in the marketplace with key customer wins across our portfolio. In a challenging macro environment, we remain focused on our operational execution, delivering great products, driving revenue and managing our cost base."

Juniper's operating margin for the second quarter of 2012 increased to 8.1% on a GAAP basis from 4.6% in the first quarter of 2012, and decreased from 15.3% in the second quarter of 2011. Non-GAAP operating margin for the second quarter of 2012 increased to 15.0% from 12.0% in the first quarter of 2012 and decreased from 21.6% in the second quarter of 2011.

"In the second quarter Juniper delivered revenue, margins and earnings ahead of our guidance," said Robyn Denholm, CFO of Juniper Networks. "While customers remain cautious in their investment activity near-term, we are focused on executing our strategy to deliver revenue growth while driving disciplined cost management."

Other Financial Highlights
Total cash, cash equivalents and investments as of June 30, 2012 were $4,272 million, compared to $4,216 million as of March 31, 2012 and $4,220 million as of June 30, 2011.

Juniper generated net cash from operations for the second quarter of 2012 of $212 million, compared to net cash provided by operations of $102 million in the first quarter of 2012, and $318 million in the second quarter of 2011. 

Days sales outstanding in accounts receivable ("DSO") was 34 days in the second quarter of 2012, compared to 39 days in the first quarter of 2012 and 39 days in the second quarter of 2011.

Juniper repurchased approximately 5 million shares in the second quarter of 2012, at an average price of $18.76 per share, or approximately $94 million.

Capital expenditures, as well as depreciation and amortization of intangible assets expense during the second quarter of 2012, were $88 million and $46 million, respectively.

Outlook
While the long-term fundamentals driving demand for high-performance networking remain solid, our outlook for the September quarter reflects continued near-term macro uncertainty. While our new products are resonating with our customers, many customers continue to be cautious about their investment prioritization and timing around project deployments. We remain focused on prudently managing our business to ensure disciplined operational execution.

  • Juniper estimates revenue for the third quarter ending September 30, 2012 to be in the range of $1,040 million to $1,075 million. 

  • Juniper estimates that its non-GAAP gross margin for the third quarter will be roughly flat, at the high end of the revenue range.

  • Juniper expects its non-GAAP operating margin for the third quarter will be in the range of 13% to 14%.

  • Juniper estimates that its non-GAAP net income per share will range between $0.15 and $0.18 on a diluted basis, assuming a flat share count and estimated non-GAAP tax rate of 31%. The non-GAAP EPS estimate includes a dilutive impact of approximately $0.02 per share due to net interest expense from our debt.

All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition related charges, restructuring 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.

Conference Call Webcast
Juniper Networks will host a conference call web cast today, July 24, 2012 at 2:00 p.m. (Pacific Time), to be broadcast live over the Internet at: http://www.juniper.net/company/investor/conferencecall.html.

To participate via telephone, in the U.S. the toll free dial-in number is 877-407-8033; outside of the U.S. dial +1-201-689-8033. Please call 10 minutes prior to the scheduled conference call time. The webcast replay of the conference call will be archived on the Juniper Networks website.

About Juniper Networks
Juniper Networks is in the business of network innovation. From devices to data centers, from consumers to cloud providers, Juniper Networks delivers the software, silicon and systems that transform the experience and economics of networking. Additional information can be found at Juniper Networks (www.juniper.net) or connect with Juniper on Twitter and Facebook

Juniper Networks and Junos are registered trademarks of Juniper Networks, Inc. in the United States and other countries. The Juniper Networks and Junos logos are trademarks of Juniper Networks, Inc. All other trademarks, service marks, registered trademarks, or registered service marks are the property of their respective owners.

Statements in this release concerning Juniper Networks' business outlook, economic and market outlook, future financial and operating results, and overall future prospects are forward-looking statements 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 certain factors, including: general economic 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. 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 in this release in the event facts or circumstances subsequently change after the date of this press release.

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. For further information regarding why Juniper Networks believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the discussion below.

   
   
Juniper Networks, Inc.  
Preliminary Condensed Consolidated Statements of Operations  
(in thousands, except per share amounts)  
(unaudited)  
   
    Three Months Ended June 30,     Six Months Ended June 30,  
    2012     2011     2012     2011  
Net revenues:                                
  Product   $ 804,662     $ 891,428     $ 1,576,535     $ 1,768,868  
  Service     269,097       229,116       529,722       453,288  
    Total net revenues     1,073,759       1,120,544       2,106,257       2,222,156  
Cost of revenues:                                
  Product     292,589       292,391       573,218       558,137  
  Service     113,297       105,987       231,111       205,968  
    Total cost of revenues     405,886       398,378       804,329       764,105  
Gross margin     667,873       722,166       1,301,928       1,458,051  
Operating expenses:                                
  Research and development     268,734       257,250       538,336       519,229  
  Sales and marketing     259,455       246,635       517,174       492,926  
  General and administrative     48,775       44,260       103,441       89,184  
  Amortization of purchased intangible assets     1,236       1,332       2,414       2,876  
  Restructuring     3,161       (916 )     5,200       (1,263 )
  Acquisition-related     (206 )     2,685       936       6,786  
    Total operating expenses     581,155       551,246       1,167,501       1,109,738  
Operating income     86,718       170,920       134,427       348,313  
Other income (expense), net     2,770       (13,688 )     (21,661 )     (20,150 )
Income before income taxes and noncontrolling interest     89,488       157,232       112,766       328,163  
Income tax provision     31,769       41,714       38,777       82,985  
Consolidated net income     57,719       115,518       73,989       245,178  
Adjust for net income attributable to noncontrolling interest     --       42       --       132  
Net income attributable to Juniper Networks   $ 57,719     $ 115,560     $ 73,989     $ 245,310  
                                 
Net income per share attributable to Juniper Networks common stockholders:                                
  Basic   $ 0.11     $ 0.22     $ 0.14     $ 0.46  
  Diluted   $ 0.11     $ 0.21     $ 0.14     $ 0.45  
Shares used in computing net income per share:                                
  Basic     527,756       532,909       527,989       531,827  
  Diluted     531,755       546,452       533,753       547,729  
                                 
                                 
                                 
Juniper Networks, Inc.
Preliminary Net Revenues by Reportable Segment
(in thousands)
(unaudited)
 
    Three Months Ended June 30,   Six Months Ended June 30,
    2012   2011   2012   2011
Platform Systems Division:                        
  PSD Products:                        
    Routing   $ 487,358   $ 580,558   $ 944,937   $ 1,163,375
    Switching     139,894     117,144     263,417     217,765
    Security/Other     41,811     53,763     88,085     105,164
      Total PSD Products   $ 669,063   $ 751,465   $ 1,296,439   $ 1,486,304
  PSD Services     202,390     165,417     399,207     329,215
    Total Platforms Systems Division Revenue   $ 871,453   $ 916,882   $ 1,695,646   $ 1,815,519
                         
Software Solutions Division:                        
  SSD Products:                        
    Security/Other   $ 116,986   $ 105,255   $ 239,667   $ 221,861
    Routing     18,613     34,708     40,429     60,703
      Total SSD Products   $ 135,599   $ 139,963   $ 280,096   $ 282,564
  SSD Services     66,707     63,699     130,515     124,073
    Total Software Solutions Division Revenue   $ 202,306   $ 203,662   $ 410,611   $ 406,637
Total Revenue   $ 1,073,759   $ 1,120,544   $ 2,106,257   $ 2,222,156
                         
                         
                         
Juniper Networks, Inc.
Preliminary Net Revenues by Product
(in thousands)
(unaudited)
 
    Three Months Ended June 30,   Six Months Ended June 30,
    2012   2011   2012   2011
Routing   $ 505,971   $ 615,266   $ 985,384   $ 1,224,079
Switching     139,894     117,144     263,417     217,765
Security/Other     158,797     159,018     327,734     327,024
Services     269,097     229,116     529,722     453,288
Total   $ 1,073,759   $ 1,120,544   $ 2,106,257   $ 2,222,156
                         
                         
Juniper Networks, Inc.
Preliminary Net Revenues by Geographic Region
(in thousands)
(unaudited)
 
    Three Months Ended June 30,   Six Months Ended June 30,
    2012   2011   2012   2011
Americas   $ 587,307   $ 578,704   $ 1,118,654   $ 1,160,319
Europe, Middle East, and Africa     299,253     329,061     606,319     628,912
Asia Pacific     187,199     212,779     381,284     432,925
Total   $ 1,073,759   $ 1,120,544   $ 2,106,257   $ 2,222,156
                         
                         
Juniper Networks, Inc.
Preliminary Net Revenues by Market
(in thousands)
(unaudited)
 
    Three Months Ended June 30,   Six Months Ended June 30,
    2012   2011   2012   2011
Service Provider   $ 680,971   $ 729,340   $ 1,366,580   $ 1,471,517
Enterprise     392,788     391,204     739,677     750,639
Total   $ 1,073,759   $ 1,120,544   $ 2,106,257   $ 2,222,156
                         
                         
Juniper Networks, Inc.
Share-Based Compensation by Category
(in thousands)
(unaudited)
 
    Three Months Ended June 30,   Six Months Ended June 30,
    2012   2011   2012   2011
Cost of revenues - Product   $ 1,220   $ 1,211   $ 2,337   $ 2,159
Cost of revenues - Service     4,125     4,486     9,345     8,405
Research and development     28,486     26,583     54,277     48,913
Sales and marketing     21,022     19,171     42,933     32,397
General and administrative     7,027     8,675     17,995     17,291
Total   $ 61,880   $ 60,126   $ 126,887   $ 109,165
                         
                         
Juniper Networks, Inc.
Share-Based Compensation Related Payroll Tax by Category
(in thousands)
(unaudited)
 
    Three Months Ended June 30,   Six Months Ended June 30,
    2012   2011   2012   2011
Cost of revenues - Product   $ 12   $ 24   $ 24   $ 295
Cost of revenues - Service     53     94     87     929
Research and development     122     276     248     3,350
Sales and marketing     329     583     505     3,969
General and administrative     54     66     85     485
Total   $ 570   $ 1,043   $ 949   $ 9,028
                         
                         
Juniper Networks, Inc.  
Reconciliation between GAAP and non-GAAP Financial Measures  
(in thousands, except percentages)  
(unaudited)  
   
        Three Months Ended June 30,     Six Months Ended June 30,  
        2012     2011     2012     2011  
GAAP Cost of revenues - Product       $ 292,589     $ 292,391     $ 573,218     $ 558,137  
Share-based compensation expense   C     (1,220 )     (1,211 )     (2,337 )     (2,159 )
Share-based compensation related payroll tax   C     (12 )     (24 )     (24 )     (295 )
Amortization of purchased intangible assets   A     (7,531 )     (5,438 )     (13,626 )     (10,636 )
Acquisition-related charges   A,B     --       (1,527 )     --       (2,487 )
Non-GAAP Cost of revenues - Product         283,826       284,191       557,231       542,560  
                                     
GAAP Cost of revenues - Service         113,297       105,987       231,111       205,968  
Share-based compensation expense   C     (4,125 )     (4,486 )     (9,345 )     (8,405 )
Share-based compensation related payroll tax   C     (53 )     (94 )     (87 )     (929 )
Non-GAAP Cost of revenues - Service         109,119       101,407       221,679       196,634  
                                     
GAAP Gross margin - Product         512,073       599,037       1,003,317       1,210,731  
Share-based compensation expense   C     1,220       1,211       2,337       2,159  
Share-based compensation related payroll tax   C     12       24       24       295  
Amortization of purchased intangible assets   A     7,531       5,438       13,626       10,636  
Acquisition-related charges   A,B     --       1,527       --       2,487  
Non-GAAP Gross margin - Product         520,836       607,237       1,019,304       1,226,308  
                                     
GAAP Product gross margin as a % of product revenue         63.6 %     67.2 %     63.6 %     68.4 %
Share-based compensation expense as a % of product revenue   C     0.2 %     0.1 %     0.2 %     0.1 %
Share-based compensation related payroll tax as a % of product revenue   C     -- %     -- %     -- %     -- %
Amortization of purchased intangible assets as a % of product revenue   A     0.9 %     0.6 %     0.9 %     0.6 %
Acquisition-related charges as a % of product revenue   A,B     -- %     0.2 %     -- %     0.2 %
Non-GAAP Product gross margin as a % of product revenue         64.7 %     68.1 %     64.7 %     69.3 %
                                     
GAAP Gross margin - Service         155,800       123,129       298,611       247,320  
Share-based compensation expense   C     4,125       4,486       9,345       8,405  
Share-based compensation related payroll tax   C     53       94       87       929  
Non-GAAP Gross margin - Service       $ 159,978     $ 127,709     $ 308,043     $ 256,654  
                                     
GAAP Service gross margin as a % of service revenue         57.9 %     53.7 %     56.4 %     54.6 %
Share-based compensation expense as a % of service revenue   C     1.5 %     2.0 %     1.8 %     1.9 %
Share-based compensation related payroll tax as a % of service revenue   C     -- %     -- %     -- %     0.1 %
Non-GAAP Service gross margin as a % of service revenue         59.4 %     55.7 %     58.2 %     56.6 %
                                     
                                     
                                     
Juniper Networks, Inc.  
Reconciliation between GAAP and non-GAAP Financial Measures  
(in thousands, except percentages)  
(unaudited)  
   
        Three Months Ended June 30,     Six Months Ended June 30,  
        2012     2011     2012     2011  
GAAP Gross margin       $ 667,873     $ 722,166     $ 1,301,928     $ 1,458,051  
Share-based compensation expense   C     5,345       5,697       11,682       10,564  
Share-based compensation related payroll tax   C     65       118       111       1,224  
Amortization of purchased intangible assets   A     7,531       5,438       13,626       10,636  
Acquisition-related charges   A,B     --       1,527       --       2,487  
Non-GAAP Gross margin         680,814       734,946       1,327,347       1,482,962  
                                     
GAAP Gross margin as a % of revenue         62.2 %     64.4 %     61.8 %     65.6 %
Share-based compensation expense as a % of revenue   C     0.5 %     0.5 %     0.6 %     0.5 %
Share-based compensation related payroll tax as a % of revenue   C     -- %     -- %     -- %     -- %
Amortization of purchased intangible assets as a % of revenue   A     0.7 %     0.6 %     0.6 %     0.5 %
Acquisition-related charges as a % of revenue   A,B     -- %     0.1 %     -- %     0.1 %
Non-GAAP Gross margin as a % of revenue         63.4 %     65.6 %     63.0 %     66.7 %
                                     
GAAP Research and development expense         268,734       257,250       538,336       519,229  
Share-based compensation expense   C     (28,486 )     (26,583 )     (54,277 )     (48,913 )
Share-based compensation related payroll tax   C     (122 )     (276 )     (248 )     (3,350 )
Non-GAAP Research and development expense         240,126       230,391       483,811       466,966  
                                     
GAAP Sales and marketing expense         259,455       246,635       517,174       492,926  
Share-based compensation expense   C     (21,022 )     (19,171 )     (42,933 )     (32,397 )
Share-based compensation related payroll tax   C     (329 )     (583 )     (505 )     (3,969 )
Non-GAAP Sales and marketing expense         238,104       226,881       473,736       456,560  
                                     
GAAP General and administrative expense         48,775       44,260       103,441       89,184  
Share-based compensation expense   C     (7,027 )     (8,675 )     (17,995 )     (17,291 )
Share-based compensation related payroll tax   C     (54 )     (66 )     (85 )     (485 )
Non-GAAP General and administrative expense         41,694       35,519       85,361       71,408  
                                     
GAAP Operating expense         581,155       551,246       1,167,501       1,109,738  
Share-based compensation expense   C     (56,535 )     (54,429 )     (115,205 )     (98,601 )
Share-based compensation related payroll tax   C     (505 )     (925 )     (838 )     (7,804 )
Amortization of purchased intangible assets   A     (1,236 )     (1,332 )     (2,414 )     (2,876 )
Restructuring charges   B     (3,161 )     916       (5,200 )     1,263  
Acquisition-related charges   A,B     206       (2,685 )     (936 )     (6,786 )
Non-GAAP Operating expense       $ 519,924     $ 492,791     $ 1,042,908     $ 994,934  
                                     
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