juniper networks q4 2009 results conference call...q4 2009 financial results conference call...
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Q4 2009 FINANCIAL RESULTS CONFERENCE CALL
THURSDAY, JANUARY 28, 2010 1:45 P.M. PACIFIC TIMEKevin Johnson, Chief Executive OfficerRobyn Denholm, Chief Financial Officer
2 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
FORWARD LOOKING STATEMENTSInformation, statements and projections contained in these presentation slides and related conference call concerning Juniper Networks' business outlook, economic outlook, future financial and operating results, and overall future prospects are forward looking statements that involve a number of uncertainties and risks. Actual results could differ materially from those anticipated in those forward-looking statements as a result of certain factors, including: general economic conditions globally or regionally; business and economic conditions in the networking industry; changes in overall technology spending; the network capacity requirements of communication service providers; contractual terms that may result in the deferral of revenue; increases in and the effect of competition; the timing of orders and their fulfillment; manufacturing and supply chain constraints; ability to establish and maintain relationships with distributors, resellers and other partners; variations in the expected mix of products sold; changes in customer mix; changes in geography mix; customer and industry analyst perceptions of Juniper Networks and its technology, products and future prospects; delays in scheduled product availability; market acceptance of Juniper Networks products and services; rapid technological and market change; adoption of regulations or standards affecting Juniper Networks products, services or the networking industry; the ability to successfully acquire, integrate and manage businesses and technologies; product defects, returns or vulnerabilities; the ability to recruit and retain key personnel; significant effects of tax legislation and judicial or administrative interpretation of tax regulations; currency fluctuations; litigation; and other factors listed in Juniper Networks’ most recent report on Form 10-Q filed with the Securities and Exchange Commission (SEC). All information, statements and projections contained in these slides and related conference call speak only as of the date of this presentation and related conference call. Juniper Networks undertakes no obligation to update the information contained in these slides and related conference call in the event facts or circumstances subsequently change.
USE OF NON-GAAP FINANCIAL MEASURESThese presentation slides contain references to certain non-GAAP financial measures. For detailed reconciliation between the non-GAAP financial results presented in these slides and corresponding GAAP measures, please refer to the appendix at the end of this slide deck. In addition, for important commentary on why Juniper Networks considers non-GAAP information a useful view of the company’s financial results, please see the Form 8-K filed today with the SEC. A reconciliation for non-GAAP guidance measures is not available on a forward-looking basis due to the high variability and low visibility with respect to the charges which are excluded from these non-GAAP measures.
3 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
OPENING COMMENTS: STRONG FINISH TO 2009
Executed well against our operating principles for 2009
StrategicallyExpanded portfolio of offeringsEstablishing the JUNOS ecosystem
FinanciallyMacro environment continues to improveStrong sequential growth in Service ProviderRecord Enterprise quarter; gaining momentum and visibility
OperationallyExecuted on our R&D roadmapStrengthened our GTM and introduced new partnerships
4 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
Software Platform: Fueling Innovation Across the NetworkJunos + Junos Space + Junos Pulse
MX 3DMX 3D
JUNIPER: DELIVERING THE NEW NETWORK
Systems and New Silicon: “3D Scaling” and Universal EdgeJunos Trio Chipset = 3D Scaling BreakthroughMX 3D Routers = First Universal Edge Platform
Data Center 2 Cloud InitiativeFive New Solutions + Eight New ProductsSecurity at Massive Scale for Cloud Services1
Junos-Based PartnershipsDell + IBM = Extended Global Market ReachBLADE Network Technologies = First-Ever Junos Licensing DealDozens of Third Parties Building Applications on Junos
5 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
2010 OPERATING PRINCIPLES: PLANNING FOR GROWTH
Maintain a healthy balance sheet and generate strong cash flows Maintain a healthy balance sheet and generate strong cash flows
Accelerate out of the downturn and outpace the market recovery Accelerate out of the downturn and outpace the market recovery
Invest in innovations that deliver long term value to our customers Invest in innovations that deliver long term value to our customers
Drive year over year operating margin expansion Drive year over year operating margin expansion
Assume macro economy will continue to improve Assume macro economy will continue to improve
FINANCIAL SECTIONRobyn Denholm
7 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
QUARTERLY REVENUE AND EPS TRENDS: Q4 '09
Revenue grew 14% Q on Q
Diluted non-GAAP EPS grew $0.09
Executed well in a market that appears to be improving
Gross margins improved, returning to long term target range
Good cost and expense management
Strong expansion in operating margins
Chart reflects non-GAAP EPS
8 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
Q4 '09 REVENUE MIX
• Americas growth driven by record quarter in US; EMEA sequential growth due to both Service Provider and Enterprise; APAC growth driven by Enterprise
• Segment growth fueled by strong contribution from new products, MX, SRX and EX, which contributed over $236M
• Service provider growth driven by router, security and switching product sales
Service Provider and EnterpriseGeography Segment
APAC $172M; 18.3%
9% Q/Q2% Y/Y
EMEA $255M; 27.1%
5% Q/Q-7% Y/Y
Americas $514M; 54.6%
22% Q/Q7% Y/Y
SLT $246M; 26.1%
8% Q/Q11% Y/Y
IPG $695M; 73.9%
17% Q/Q-1% Y/Y
Service Provider $639M; 67.9%
22% Q/Q1% Y/Y
Enterprise$302M; 32.1%
1% Q/Q5% Y/Y
9 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
FULL YEAR '09 REVENUE MIX
• Americas driven by record high US Q4
• SLT record year fueled by new products and market share gains in security
• Switching, security and routing lead Enterprise penetration
• Full portfolio leverage into SP and Enterprise
Service Provider and EnterpriseGeography Segment
APAC $675M; 20.3%
-7% Y/Y
EMEA $953M; 28.8%
-12% Y/Y
Americas $1,688M; 50.9%
-4% Y/Y
SLT $874M; 26.4%
3% Y/Y
IPG $2,442M; 73.6%
-10% Y/Y
Service Provider $2,197M; 66.3%
-14% Y/Y
Enterprise$1,119M; 33.7%
11% Y/Y
10 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
COST STRUCTURE AND OPERATIONAL EXCELLENCE
Managed expenses tightly while delivering on innovation roadmap
Reduced annual non-GAAP operating expenses by 3% y/y
Will continue to manage expenses thoughtfully as economy improves
Chart reflects non-GAAP measures
11 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
REVENUE $941.5M $823.9M $923.5M 14% 2%
FINANCIAL RESULTS (NON-GAAP)Q4’09 Q3’09 Q4’08
Q/Q Change
Y/Y Change
$172.3M
$194.0M
$33.6M
$170.5M
$166.4M
$34.3M
$168.1M
$196.4M
$33.2M
1%
17%
-2%
3%
-1%
1%
R&D
SALES & MARKETING
G&A
$399.9M
24.4%
$371.2M
20.8%
$397.7M
24.5%
8%
3.6pts
1%
-0.1pts
TOTAL OPERATING EXPENSE
OPERATING MARGIN %
$173.7M
$0.32
$122.5M
$0.23
$169.0M
$0.32
42%
$0.09
3%
$ -
NET INCOME*
EPS (DILUTED)*
GROSS MARGIN % 66.9% 65.8% 67.5% 1.1pts -0.6pts
* Net income and diluted EPS attributable to Juniper Networks exclude net loss pertaining to non-controlling interest
• Sequential revenue growth of 14%• Operating margin improvement of 3.6 pts sequentially due to good operating expense control• Product book to bill >1
12 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
Healthy cash positionCash flow from operations in the quarter was $260M; full year $796M Repurchased $212M of stock in the quarter; $454M for the yearCash and investments over $2.6B
No debt
DSO : 44 days
Record deferred revenue balance of $754MQ/Q change of 17%
Product deferred revenue increased 27% Q/QY/Y change of 28%
Product deferred revenue increased 53% Y/Y
CASH FLOW AND BALANCE SHEET METRICS
13 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
Q1 '10 GUIDANCE 3 MONTHS ENDING MARCH 31, 2010
REVENUE Plan for $895M; expect range between $880M to $910M
GROSS MARGINS Within long term target range of 66% to 68%
OPERATING MARGINS Expect range of 21% plus or minus half a point
EPS Expect range from $0.23 to $0.26 per diluted share
TAX RATE 31% due to R & D tax credit not yet approved
SHARE COUNT Expect to be flat compared to Q4’09
Non-GAAP (except for revenue and share count)
APPENDIX
15 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
ANNUAL REVENUE AND EPS TRENDS
Revenue down 7% while non-GAAP operating expenses down 3%
Diluted non-GAAP EPS lower on lower revenue, while managing operating expenses
Gross margins remained healthy
Good cost and expense management
Consistently improved financial performance sequentially in each quarter
Chart reflects non-GAAP EPS
16 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
PERCENT OF REVENUE BY MARKET
Total SP
Total Enterprise
Q3 Q4 Q2Q1 Q3 Q4 Q1 Q2Q1 Q2
20082007
32.1%
71.7%
28.3%
71.9%
28.1%
71.5%
28.5%
69.4%
30.6%
73.8%
26.2%
72.6%
27.4%
68.7%
27.3%
65.3%
34.7%
72.7%
31.3%
68.1%
31.9%
2009
63.6%
36.4%
Q4Q3
67.9%
17 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
SEGMENT OPERATING RESULTS
18 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
FINANCIAL RESULTS (GAAP)
Special Q4’09 items:Net income on a GAAP basis includes legal settlement of $12.0 million and a restructuring charge of $3.2 million. Combined, these items represent $0.02 per diluted share.
REVENUE $941.5M $823.9M $923.5M 14% 2%
Q4’09 Q3’09 Q4’08Q/Q
ChangeY/Y
Change
$449.7M
18.6%
$131.0M
$0.24
$409.2M
15.5%
$83.8M
$0.16
$429.3M
20.6%
$132.5M
$0.25
10%
3.1pts
56%
$0.08
5%
-2.0pts
-1%
$(0.01)
GROSS MARGIN %
TOTAL OPERATING EXPENSE
OPERATING MARGIN %
NET INCOME*
EPS (DILUTED)*
66.4% 65.2% 67.1% 1.2pts -0.7pts
* Net income and diluted EPS attributable to Juniper Networks exclude net loss pertaining to non-controlling interest
19 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
GAAP TO NON-GAAP RECONCILIATIONS(in '000's except per share amounts and
percentages) Q1'08 Q2'08 Q3'08 Q4'08 FY’08 Q1’09 Q2’09 Q3’09 Q4’09 FY’09
GAAP Cost of revenues – Product $191,791 $215,134 $230,060 $230,610 $867,595 $193,061 $207,576 $206,329 $234,756 $841,722
Stock-based compensation expense (784) (687) (754) (727) (2,952) (1,059) (863) (910) (1,074) (3,906)
Stock-based compensation related payroll tax (23) (35) (6) (1) (65) (2) (14) (32) 23 (25)
Amortization of purchased intangible assets (1,369) (1,369) (1,369) (1,369) (5,476) (1,369) (1,369) (1,369) (904) (5,011)
Non-GAAP Cost of revenues – Product $189,615 $213,043 $227,931 $228,513 $859,102 $190,631 $205,330 $204,018 $232,801 $832,780
GAAP Cost of revenues – Service $73,045 $74,147 $77,519 $73,660 $298,371 $75,451 $78,385 $80,379 $81,865 $316,080
Stock-based compensation expense (2,345) (2,251) (2,413) (2,240) (9,249) (2,815) (2,794) (2,904) (3,192) (11,705)
Stock-based compensation related payroll tax (85) (97) (18) (2) (202) (12) (44) (89) 70 (75)
Non-GAAP Cost of revenues – Service $70,615 $71,799 $75,088 $71,418 $288,920 $72,624 $75,547 $77,386 $78,743 $304,300
20 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
GAAP TO NON-GAAP RECONCILIATIONS (CONT.)(in '000's except per share amounts and
percentages) Q1'08 Q2'08 Q3'08 Q4'08 FY’08 Q1’09 Q2’09 Q3’09 Q4’09 FY’09
GAAP Gross margin $558,051 $589,753 $639,383 $619,223 $2,406,410 $495,671 $500,402 $537,204 $624,833 $2,158,110
Stock-based compensation expense 3,129 2,938 3,167 2,967 12,201 3,874 3,657 3,814 4,266 15,611
Stock-based compensation related payroll tax 108 132 24 3 267 14 58 121 (93) 100
Amortization of purchased intangible assets 1,369 1,369 1,369 1,369 5,476 1,369 1,369 1,369 904 5,011
Non-GAAP Gross margin $562,657 $594,192 $643,943 $623,562 $2,424,354 500,928 $505,486 $542,508 $629,910 $2,178,832
GAAP Gross margin % of revenue 67.8% 67.1% 67.5% 67.1% 67.4% 64.9% 63.6% 65.2% 66.4% 65.1%
Stock-based compensation expense % of revenue 0.4% 0.3% 0.3% 0.3% 0.3% 0.5% 0.5% 0.4% 0.4% 0.4%
Stock-based compensation related payroll tax % of revenue - - - - - - - - - -
Amortization of purchased intangible assets % of revenue 0.2% 0.2% 0.2% 0.1% 0.2% 0.2% 0.2% 0.2% 0.1% 0.2%
Non-GAAP Gross margin % of revenue 68.4% 67.6% 68.0% 67.5% 67.9% 65.6% 64.3% 65.8% 66.9% 65.7%
21 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
GAAP TO NON-GAAP RECONCILIATIONS (CONT.)(in '000's except per share amounts and
percentages) Q1'08 Q2'08 Q3'08 Q4'08 FY’08 Q1’09 Q2’09 Q3’09 Q4’09 FY’09
GAAP Research and development expense $170,646 $186,357 $194,014 $180,134 $731,151 $185,400 $183,894 $185,204 $187,210 $741,708
Stock-based compensation expense (10,147) (11,994) (12,780) (12,042) (46,963) (14,680) (14,981) (14,327) (15,294) (59,282)
Stock-based compensation related payroll tax (208) (394) (61) (16) (679) (31) (156) (353) 407 (133)
Non-GAAP Research and development expense $160,291 $173,969 $181,173 $168,076 $683,509 $170,689 $168,757 $170,524 $172,323 $682,293
GAAP Sales and marketing expense $185,948 $190,338 $200,600 $206,054 $782,940 $181,243 $170,575 $177,345 204,875 734,038
Stock-based compensation expense (6,705) (9,102) (10,946) (9,475) (36,228) (9,844) (10,341) (10,675) (11,070) (41,930)
Stock-based compensation related payroll tax (730) (666) (169) (140) (1,705) (202) (191) (276) 155 (514)
Non-GAAP Sales and marketing expense $178,513 $180,570 $189,485 $196,439 $745,007 $171,197 $160,043 $166,394 $193,960 $691,594
22 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
GAAP TO NON-GAAP RECONCILIATIONS (CONT.)(in '000's except per share amounts and
percentages) Q1'08 Q2'08 Q3'08 Q4'08 FY’08 Q1’09 Q2’09 Q3’09 Q4’09 FY’09
GAAP General and administrative expense $33,634 $35,609 $37,623 $37,971 $144,837 $39,211 $39,175 $39,877 $41,196 $159,459
Stock-based compensation expense (2,749) (3,312) (1,910) (4,770) (12,741) (5,164) (4,550) (5,538) (7,584) (22,836)
Stock-based compensation related payroll tax (50) (54) (7) (1) (112) (12) (31) (38) (4) (85)
Non-GAAP General and administrative expense $30,835 $32,243 $35,706 $33,200 $131,984 $34,035 $34,594 $34,301 $33,608 $136,538
GAAP Operating expense $415,357 $429,303 $437,427 $429,349 $1,711,436 $414,473 $404,712 $409,249 $449,650 $1,678,084
Stock-based compensation expense (19,601) (24,408) (25,636) (26,287) (95,932) (29,688) (29,872) (30,540) (33,948) (124,048)
Stock-based compensation related payroll tax (988) (1,114) (237) (157) (2,496) (245) (378) (667) 558 (732)
Amortization of purchased intangible assets (20,150) (7,999) (5,190) (5,190) (38,529) (4,390) (3,539) (1,330) (1,157) (10,416)
Restructuring charges - - - - - (4,229) (7,529) (4,493) (3,212) (19,463)
Impairment charges (4,979) - - - (4,979) - - - - -
Other charges – legal settlement - (9,000) - - (9,000) - - (1,000) (12,000) (13,000)
Non-GAAP Operating expense $369,639 $386,782 $406,364 $397,715 $1,560,500 $375,921 $363,394 $371,219 $399,891 $1,510,425
23 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
GAAP TO NON-GAAP RECONCILIATIONS (CONT.)(in '000's except per share amounts and
percentages) Q1'08 Q2'08 Q3'08 Q4'08 FY’08 Q1’09 Q2’09 Q3’09 Q4’09 FY’09
GAAP Operating income $142,694 $160,450 $201,956 $189,874 $694,974 $81,198 $95,690 $127,955 $175,183 $480,026
Stock-based compensation expense 22,730 27,346 28,803 29,254 108,133 33,562 33,529 34,354 38,214 139,659
Stock-based compensation related payroll tax 1,096 1,246 261 160 2,763 259 436 788 (651) 832
Amortization of purchased intangible assets 21,519 9,368 6,559 6,559 44,005 5,759 4,908 2,699 2,061 15,427
Restructuring charges - - - - - 4,229 7,529 4,493 3,212 19,463
Impairment charges 4,979 - - - 4,979 - - - - -
Other charges – legal settlement - 9,000 - - 9,000 - - 1,000 12,000 13,000
Non-GAAP Operating income $193,018 $207,410 $237,579 $225,847 $863,854 $125,007 $142,092 $171,289 $230,019 $668,407
24 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
GAAP TO NON-GAAP RECONCILIATIONS (CONT.)(in '000's except per share amounts and
percentages) Q1'08 Q2'08 Q3'08 Q4'08 FY’08 Q1’09 Q2’09 Q3’09 Q4’09 FY’09
GAAP Operating margin 17.3% 18.3% 21.3% 20.6% 19.5% 10.6% 12.2% 15.5% 18.6% 14.5%
Stock-based compensation expense 2.8% 3.1% 3.0% 3.2% 3.0% 4.4% 4.3% 4.2% 4.1% 4.2%
Stock-based compensation related payroll tax 0.1% 0.1% 0.1% - 0.1% - - 0.1% -0.1% 0.1%
Amortization of purchased intangible assets 2.7% 1.1% 0.7% 0.7% 1.2% 0.8% 0.6% 0.3% 0.2% 0.5%
Restructuring charges - - - - - 0.6% 1.0% 0.6% 0.3% 0.5%
Impairment charges 0.6% - - - 0.1% - - - - -
Other charges – legal settlement - 1.0% - - 0.3% - - 0.1% 1.3% 0.4%
Non-GAAP Operating margin 23.5% 23.6% 25.1% 24.5% 24.2% 16.4% 18.1% 20.8% 24.4% 20.2%
25 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
GAAP TO NON-GAAP RECONCILIATIONS (CONT.)(in '000's except per share amounts and
percentages) Q1'08 Q2'08 Q3'08 Q4'08 FY’08 Q1’09 Q2’09 Q3’09 Q4’09 FY’09
GAAP Other income and expense, net $17,590 $11,688 $9,740 $(5,101) $33,917 $264 $1,273 $1,733 $(1,904) $1,366
Loss on investments - 1,499 - 13,333 14,832 1,686 1,625 - 2,251 5,562
Non-GAAP Other income and expense, net $17,590 $13,187 $9,740 $8,232 $48,749 $1,950 $2,898 $1,733 $347 $6,928
GAAP Provision for income tax $49,929 $51,728 $63,188 $52,297 $217,142 $85,922 $82,194 $45,902 $44,093 $258,111
Non-recurring income tax charge - - - - - - (52,124) (4,559) - (56,683)
Valuation allowance on deferred tax assets - - - - - (61,755) - - - (61,755)
Income tax effect of non-GAAP exclusions 11,147 12,245 8,535 12,765 44,692 11,216 11,120 9,162 14,394 45,892
Non-GAAP Provision for income tax $61,076 $63,973 $71,723 $65,062 $261,834 $35,383 $41,190 $50,505 $58,487 $185,565
Non-GAAP Income tax rate 29.0% 29.0% 29.0% 27.8% 28.7% 27.9% 28.4% 29.2% 25.4% 27.5%
Non-GAAP Income before income taxes and noncontrolling interest $210,608 $220,597 $247,319 $234,079 $912,603 $126,957 $144,990 $173,022 $230,366 $675,335
26 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
GAAP TO NON-GAAP RECONCILIATIONS (CONT.)(in '000's except per share amounts and
percentages) Q1'08 Q2'08 Q3'08 Q4'08 FY’08 Q1’09 Q2’09 Q3’09 Q4’09 FY’09
GAAP Net income (loss) attributable to Juniper Networks $110,355 $120,410 $148,508 $132,476 $511,749 $(4,460) $14,769 $83,786 $130,957 $225,052
Stock-based compensation expense 22,730 27,346 28,803 29,254 108,133 33,562 33,529 34,354 38,214 139,659
Stock-based compensation related payroll tax 1,096 1,246 261 160 2,763 259 436 788 (651) 832
Amortization of purchased intangible assets 21,519 9,368 6,559 6,559 44,005 5,759 4,908 2,699 2,061 15,427
Restructuring charges - - - - - 4,229 7,529 4,493 3,212 19,463
Impairment charges 4,979 - - - 4,979 - - - - -
Other charges – legal settlement - 9,000 - - 9,000 - - 1,000 12,000 13,000
Loss on investments - 1,499 - 13,333 14,832 1,686 1,625 - 2,251 5,562
Non-recurring income tax charge - - - - - - 52,124 4,559 - 56,683
Valuation allowance on deferred tax assets - - - - - 61,755 - - - 61,755
Income tax effect of non-GAAP exclusions (11,147) (12,245) (8,535) (12,765) (44,692) (11,216) (11,120) (9,162) (14,388) (45,886)
Non-GAAP Net income $149,532 $156,624 $175,596 $169,017 $650,769 $91,574 $103,800 $122,517 $173,656 $491,547
27 Copyright © 2009 Juniper Networks, Inc. www.juniper.net
GAAP TO NON-GAAP RECONCILIATIONS (CONT.)(in '000's except per share amounts and
percentages) Q1'08 Q2'08 Q3'08 Q4'08 FY’08 Q1’09 Q2’09 Q3’09 Q4’09 FY’09
Non-GAAP Net income $149,532 $156,624 $175,596 $169,017 $650,769 $91,574 $103,800 $122,517 $173,656 $491,547
Non-GAAP Net income per share:
Basic $0.29 $0.30 $0.32 $0.32 $1.23 $0.17 $0.20 $0.23 $0.33 $0.94
Diluted $0.27 $0.28 $0.32 $0.32 $1.18 $0.17 $0.19 $0.23 $0.32 $0.92
Shares used in computing non-GAAP net income per share:
Basic 523,672 528,963 540,983 527,634 530,337 524,429 523,105 523,878 523,200 523,603
Diluted 560,407 559,328 554,350 534,817 551,433 530,705 532,850 538,132 538,887 534,015
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