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Juniper Reports Q2 Numbers, Sells Unit

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7/23/2014
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SUNNYVALE, Calif. -- Juniper Networks (NYSE: JNPR), the industry leader in network innovation, today reported preliminary financial results for the three months ended June 30, 2014 and provided its outlook for the three months ending September 30, 2014.

Net revenues for the second quarter of 2014 increased 7% year-over-year and increased 5% sequentially to $1,230 million.

Juniper’s operating margin for the second quarter of 2014 increased to 9.4% on a GAAP basis, including $86 million of restructuring and other charges, from (0.5)% in the first quarter of 2014, and decreased from 12% in the second quarter of 2013. Non-GAAP operating margin for the second quarter of 2014 increased to 22.3% from 17.2% in the first quarter of 2014, and increased from 18.9% in the second quarter of 2013.

Juniper posted GAAP net income of $221.1 million, or $0.46 per diluted share for the second quarter of 2014. The GAAP diluted income per share includes a $0.41 benefit from gain on a legal settlement partly offset by an $0.18 impact from restructuring and other charges. Non-GAAP net income was $190.3 million, or $0.40 per diluted share for the second quarter of 2014. Non-GAAP net income per diluted share increased 38% compared to the first quarter of 2014, and increased 38% compared to the second quarter of 2013.

The reconciliation between GAAP and non-GAAP results of operations is provided in a table immediately following the Preliminary Net Revenue by Market table below.

“Juniper delivered another solid quarter of revenue growth, with continued diversification across our target verticals. With our focused strategy, we are seeing clear signs of success with customers who are in a build cycle for High-IQ networks and Cloud ecosystems,” said Shaygan Kheradpir, chief executive officer, Juniper Networks. “We are relentlessly executing on our Integrated Operating Plan and successfully implemented several initiatives to drive greater efficiencies across our organization. Throughout, we have been working to ignite our culture of innovation and maintain our unwavering commitment to shareholders to drive significant value through profitable growth.”

“I am pleased to report our sixth consecutive quarter of year-over-year strong earnings expansion,” said Robyn Denholm, chief financial and operations officer, Juniper Networks. “We continue to generate strong operating cash flows and have made good progress toward our operating expense and capital allocation goals. We have done so by being very mindful of how we allocate resources to ensure we continue to invest in R&D that will drive Juniper’s growth well into the future.”

Junos Pulse Divestiture
Today, Juniper Networks also announced it has entered into a definitive agreement to sell its Junos Pulse product portfolio to Siris Capital for approximately $250 million. Siris is a leading private equity firm focused on making control investments in data, telecommunications, technology and technology-enabled business service companies Juniper and Siris have agreed to continued support of customers and partners through the transition. Juniper’s sale of Pulse is consistent with the Company’s overall strategy outlined in its Integrated Operating Plan (IOP) and further aligns the company to where its customers and the market is heading with High-IQ networks and building the next-generation of clouds. It is part of the Company’s goal to achieve $160 million in annualized cost savings by Q1 2015.

Other Financial Highlights
Total cash, cash equivalents, and investments as of June 30, 2014 were $3,960 million, compared to $3,479 million as of March 31, 2014, and $3,819 million as of June 30, 2013.

Juniper’s net cash flow from operations for the second quarter of 2014 was $425 million, compared to $126 million in the first quarter of 2014, and $284 million in the second quarter of 2013. This quarter’s net cash flow reflects the gain of $75 million related to our litigation settlement.

Days sales outstanding in accounts receivable or “DSO” was 41 days in the second quarter of 2014, compared to 46 days in the prior quarter, and 40 days in the second quarter of 2013.

During the first quarter of 2014, Juniper Networks initiated a $1.2 billion accelerated share repurchase (ASR) program, of which $900 million of shares were initially delivered. The Company expects the remaining shares to be delivered no later than the end of August.

Juniper Networks also announced the initiation of a quarterly cash dividend of $0.10 per share of common stock. This is the Company’s first cash dividend in history. It will be payable on September 23, 2014 to shareholders of record as of the close of business on September 2, 2014. The Company’s Board of Directors anticipates declaring this dividend in future quarters on a regular basis; however, future declarations of dividends are subject to Board approval and may be adjusted as business needs or market conditions change.

Capital expenditures were $41 million and depreciation and amortization of intangible assets expense was $45.3 million during the second quarter of 2014.

Outlook
In the near term, there are some customer-specific dynamics that the Company is factoring into its outlook. Specifically, within U.S.-based service providers, their market dynamics, including M&A activity, are impacting both sequencing and timing of projects. This is partially offset by signs of strength in emerging verticals. The Company is focused on continued innovation and executing on its Integrated Operating Plan.

Juniper Networks estimates that for the quarter ending September 30, 2014:

  • Revenues will be in the range of $1,150 million to $1,200 million.

  • Non-GAAP gross margin will be approximately 64.0%, plus or minus 0.5%.

  • Non-GAAP operating expenses will be $505 million, plus or minus $5 million.

  • Non-GAAP operating margin will be roughly 21.0% at the midpoint of revenue guidance.

  • Non-GAAP net income per share will range between $0.35 and $0.40 on a diluted basis. This assumes a share count of 475 million and a non-GAAP tax rate flat to the second quarter.

  • Capital Allocation: The Company intends to opportunistically re-purchase a minimum of $550 million in addition to the ASR, by the end of the year.

    All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expense, acquisition-related charges, restructuring and related costs, impairment charges, litigation settlements and resolutions, non-routine stockholder activities, 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.

    Juniper Networks Inc. (NYSE: JNPR)

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