Juniper Networks (NYSE: JNPR), a leader in secure, AI-driven networks, today reported preliminary financial results for the three months ended September 30, 2019 and provided its outlook for the three months ending December 31, 2019.
Third Quarter 2019 Financial Performance
Net revenues were $1,133.1 million, a decrease of 4% year-over-year, and an increase of 3% sequentially.
That $1.133 billion sales number was below analyst forecasts of $1.145 billion.
GAAP operating margin was 12.2%, a decrease from 13.6% in the third quarter of 2018, and an increase from 7.5% in the second quarter of 2019.
Non-GAAP operating margin was 18.3%, a decrease from 20.0% in the third quarter of 2018, and an increase from 15.8% in the second quarter of 2019.
GAAP net income was $99.3 million, a decrease of 56% year-over-year, and an increase of 115% sequentially, resulting in diluted earnings per share of $0.29.
Non-GAAP net income was $166.6 million, a decrease of 13% year-over-year, and an increase of 19% sequentially, resulting in non-GAAP diluted earnings per share of $0.48.
Non-GAAP net income resulted in $0.48 in adjusted EPS versus analyst expectations of $0.46.
“We believe we are executing well in a dynamic environment," said Rami Rahim, Juniper’s, Chief Executive Officer. “While we are encouraged to see improved momentum with our Cloud customers, Service Provider spending remains challenged and we experienced weaker than expected Enterprise orders in the September quarter. Despite this backdrop, we still expect to deliver modest year-over-year growth during the December quarter and remain optimistic regarding our long-term growth prospects.”
“We demonstrated strong financial management during the September quarter as our non-GAAP measures for gross margin, operating profit, and EPS all exceeded the mid-point of our guidance,” said Ken Miller, Juniper’s Chief Financial Officer. “Our board of directors has approved an incremental $1.0 billion share repurchase authorization and we intend to enter into a new $200 million accelerated share repurchase plan this quarter and expect to be opportunistic about capital return, as we remain optimistic regarding the prospects of our business.”
Balance Sheet and Other Financial Results
Total cash, cash equivalents, and investments as of September 30, 2019 were $2,826.7 million, compared to $3,648.0 million as of September 30, 2018, and $2,875.0 million as of June 30, 2019.
Net cash flows provided by operations for the third quarter of 2019 was $185.0 million, compared to $207.3 million in the third quarter of 2018, and $88.8 million in the second quarter of 2019.
Days sales outstanding in accounts receivable was 51 days in the third quarter of 2019, compared to 49 days in the third quarter of 2018, and 54 days in the second quarter of 2019.
Capital expenditures were $28.3 million, and depreciation and amortization expense was $56.1 million during the third quarter of 2019.
Juniper’s Board of Directors has declared a quarterly cash dividend of $0.19 per share to be paid on December 23, 2019 to shareholders of record as of the close of business on December 2, 2019.
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.
Our revenue outlook shows a modest return to year-over-year growth at the mid-point. However, it is lower than previously expected due to continued business challenges at some of our largest Service Provider customers, lingering impacts from our sales force transformation and macro-economic uncertainty.
We remain confident in our position in the markets we serve, and in our relationships with our customers.
Q4'19 non-GAAP gross margin guidance reflects the recent increase in China tariffs, which is offset partially by the expected increased revenue. We continue to undertake specific efforts to improve our gross margin. These efforts include value engineering, optimizing our supply chain and Service business, pricing management and increasing software and solution sales.
We expect a Q4'19 non-GAAP tax rate of 17%, due to the anticipated reduction in India’s corporate tax rate.
Despite the lower than expected revenue outlook, we continue to manage costs prudently, and still expect to achieve the low-end of our $1.70-$1.80 earnings per share range for the full-year 2019.
We remain committed to shareholder return and we are confident in our long-term growth prospects. To that end, our Board of Directors has authorized an additional $1.0 billion in our share repurchase authorization, which brings our current authorization to $1.9 billion. In addition, we intend to enter into an accelerated share repurchase program for $200 million in Q4'19. We expect to be opportunistic about capital return in the future.
Our guidance for the quarter ending December 31, 2019 is as follows:
- Revenue will be approximately $1,185 million, plus or minus $30 million.
- Non-GAAP gross margin will be approximately 61.0%, plus or minus 1%.
- Non-GAAP operating expenses will be approximately $485 million, plus or minus $5 million.
- Non-GAAP operating margin will be approximately 20.1% at the mid-point of revenue guidance.
- Non-GAAP tax rate will be approximately 17%.
- Non-GAAP net income per share will be approximately $0.57, plus or minus $0.03. This assumes a share count of approximately 340 million.
All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition 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 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 previously announced tariffs and 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 2019 Financial Commentary Available Online
A CFO Commentary reviewing the Company’s third quarter 2019 financial results, as well as the fourth quarter 2019 financial outlook will be furnished to the SEC on Form 8-K and published on the Company’s website at https://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, 2019, at 2:00 pm PT, to be broadcast live over the Internet at https://investor.juniper.net. To participate via telephone in the US, the toll-free 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 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, 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 currency exchange rates; our future financial and operating results; our expectations regarding our sales execution and investments in our go-to-market organization; the strength of our solution portfolio and strategy; our expectations around our capital return program, including entering into an accelerated share repurchase program; our expectations around obtaining revenue and margin growth (including a return to year-over-year growth during the fourth quarter of 2019); the impact of tariffs; our future financial and operating results, including our financial guidance; 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, including Cloud providers and Service Providers; the network capacity 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; manufacturing and supply chain costs, constraints, changes or disruptions; availability and pricing of key product components; delays in scheduled product availability; adoption of regulations or standards affecting Juniper Networks products, services or the networking industry; product defects, returns or vulnerabilities; significant effects of tax legislation and judicial or administrative interpretation of tax regulations, including the Tax Cuts and Jobs Act, and judicial or administrative interpretation of tax regulations; legal settlements and resolutions; the potential impact of activities related to the execution of capital return, restructurings and product rationalization; the impact of import tariffs, depending on their scope and how they are implemented; and other factors listed in Juniper Networks’ most recent report on Form 10-Q or 10-K filed with the Securities and Exchange Commission. Note that our estimates as to tax rate on our business are based on current tax law, including current interpretations of the Tax Cuts and Jobs Act, and could be materially affected by changing interpretations of the Act, as well as additional legislation and guidance around the Act. 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 https://investor.juniper.net.