Juniper Networks (NYSE: JNPR), an industry leader in automated, scalable and secure networks, today reported preliminary financial results for the three months ended September 30, 2017 and provided its outlook for the three months ending December 31, 2017.
Q3 2017 Financial Performance
Net revenues were $1,257.8 million, a decrease of 2% year-over-year and 4% sequentially.
GAAP operating margin was 19.4%, a decrease from 19.5% in the third quarter of 2016, and a decrease from 19.7% in the second quarter of 2017.
Non-GAAP operating margin was 23.5%, a decrease from 24.4% in the third quarter of 2016, and a decrease from 24.2% in the second quarter of 2017.
GAAP net income was $174.4 million, an increase of 1% year-over-year and a decrease of 3% sequentially, resulting in diluted earnings per share of $0.46.
Non-GAAP net income was $211.1 million, a decrease of 5% year-over-year and 4% sequentially, resulting in diluted earnings per share of $0.55.
The reconciliation between GAAP and non-GAAP results of operations is provided in a table immediately following the Preliminary Net Revenues by Geographic Region table below.
“While we are disappointed in our third quarter revenue results which were impacted by timing of switching deployments, we have made significant progress on executing on our cloud strategy,” said Rami Rahim, chief executive officer, Juniper Networks. “We believe our deliberate and intentional strategy of focusing on cloud-oriented architectures and solutions has resulted in a strong footprint and a compelling product pipeline. We are excited about the opportunity we have in front of us.”
“Despite lower than anticipated revenue growth impacting third quarter results, we have still been able to manage costs effectively,” said Ken Miller, chief financial officer, Juniper Networks. “We continue to remain committed to delivering shareholder value through our innovative products and services, operational excellence, and capital returns.”
Balance Sheet and Other Financial Results
Total cash, cash equivalents, and investments as of September 30, 2017 were $4,199 million, compared to $3,480 million as of September 30, 2016, and $4,215 million as of June 30, 2017.
Net cash flows provided by operations for the third quarter of 2017 was $202 million, compared to $245 million in the third quarter of 2016, and $299 million in the second quarter of 2017.
Days sales outstanding in accounts receivable, or “DSO,” was 52 days in the third quarter of 2017, compared to 53 days in the third quarter of 2016, and 52 days in the second quarter of 2017.
Capital expenditures were $33 million and depreciation and amortization expense was $56 million during the third quarter of 2017.
Juniper’s Board of Directors has declared a quarterly cash dividend of $0.10 per share to be paid on December 22, 2017 to shareholders of record as of the close of business on December 1, 2017.
During the third quarter of 2017, the Company repurchased $140 million of shares and paid $38 million in dividends. In 2017, the Company is committed to returning approximately 50% of annual free cash flow to its shareholders, inclusive of share repurchases and dividends, and expects to be opportunistic with its share repurchases. Free cash flow is calculated as net cash provided by operating activities less capital expenditures.
These metrics are provided on a non-GAAP basis, except for revenue and share count. 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.
The Q4 revenue outlook reflects continued large deployment timing delays as Juniper expects its large customers to continue their architectural transition.
The Company expects gross margins for the quarter to remain at current levels.
Juniper will continue to manage operating expenses prudently and increase operational efficiencies. The Company initiated a realignment of its workforce in Q4, as it continues to prioritize its investments in the most critical areas of its business.
Juniper remains committed to its long-term financial principles of driving revenue growth, earnings expansion, and an optimized capital structure.
Juniper’s guidance for the quarter ending December 31, 2017 is as follows:
- Revenues will be approximately $1,230 million, plus or minus $30 million.
- Non-GAAP gross margin will be approximately 62.0%, plus or minus 0.5%.
- Non-GAAP operating expenses will be approximately $485 million, plus or minus $5 million.
- Non-GAAP operating margin will be approximately 22.6% at the midpoint of revenue guidance.
- Non-GAAP tax rate will be approximately 26.5%.
- Non-GAAP net income per share will be approximately $0.52, plus or minus $0.03. This assumes a share count of approximately 380 million.
All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition-related charges, restructuring charges, impairment charges, litigation settlement and resolution charges, supplier component remediation charges and recoveries, gain or loss on equity investments, retroactive impact of certain tax settlements, 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 any future acquisitions, divestitures, or joint ventures that may occur in the period. 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. 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. 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 and may continue to vary significantly from quarter to quarter.
Third Quarter 2017 Financial Commentary Available Online
A CFO Commentary reviewing the Company’s third quarter 2017 financial results, as well as fourth quarter 2017 financial 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, October 24, 2017, 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 dial-in number is 1-877-407-8033. Outside the US, dial +1-201-689-8033. 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 (NYSE: JNPR) challenges the status quo with products, solutions and services that transform the economics of networking. Our team co-innovates with our customers and partners to deliver automated, scalable and secure networks with agility, performance and value. Additional information can be found at Juniper Networks (www.juniper.net) or connect with Juniper on Twitter and Facebook.
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, and Junos 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.
Statements in this release concerning Juniper Networks’ business outlook, economic and market outlook, including pricing pressure and product mix; our future financial and operating results; expectations with respect to our market trends, including with cloud providers; the expected benefits of our strategic focus on cloud-oriented architectures and solutions; the timing of switching deployment delays and the transition of routing architectures; execution and optimization of our capital structure and capital return program; our revenue growth and diversification; our future strategy; the strength of our product portfolio; our ability to expand business opportunities; our gross margin expectations; our cost management and operating expense discipline; 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: general economic and political conditions globally or regionally; business and economic conditions in the networking industry; changes in overall technology spending by our customers and spending by communication service providers and major customers, including Cloud providers; the network capacity requirements of our customers and, in particular, cloud and 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, changes or disruptions; availability of key product components; 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 settlements and resolutions; the potential impact of activities related to the execution of capital return, restructurings and product rationalization; 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 made in this release in the event facts or circumstances subsequently change after the date of this press release.
Use of Non-GAAP Financial Information
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 of Non-GAAP Financial Measures” section of this press release. The following tables and reconciliations can also be found on our Investor Relations website at http://investor.juniper.net.