Juniper Networks, Inc. Reports Q405 and Year End 2005 Financial Results: 2005 Net Revenue up 54% to $2.06B; 2005 GAAP EPS up 136% to $0.59 ; and 2005 Non-GAAP EPS up 64% to $0.72, from 2004
SUNNYVALE, CA – January 25, 2006 — Juniper Networks, Inc. (NASDAQ: JNPR) today reported its results for the fourth quarter and year ended December 31, 2005.
Net revenues for the fourth quarter of 2005 were $575.5 million, compared with $430.1 million for the fourth quarter of 2004, an increase of 34 percent.
Net income on a generally accepted accounting principles (GAAP) basis for the fourth quarter of 2005 was $105.5 million or $0.17 per share, compared with a GAAP net income of $66.0 million or $0.11 per share for the fourth quarter of 2004. Non-GAAP net income was $119.6 million or $0.20 per share, compared with non-GAAP net income of $85.9 million or $0.15 per share for the fourth quarter of 2004. A reconciliation between non-GAAP and GAAP net income is provided in a table immediately following the Non-GAAP Condensed Consolidated Statements of Operations.
Net revenues for fiscal 2005 were $2,064.0 million, compared with $1,336.0 million for fiscal 2004, an increase of 54 percent.
GAAP net income for fiscal 2005 was $354.0 million or $0.59 per share, compared to $135.7 million or $0.25 per share for fiscal 2004. Non-GAAP net income for fiscal 2005 was $430.6 million or $0.72 per share, compared to $238.6 million or $0.44 per share, for fiscal 2004. A reconciliation between non-GAAP and GAAP net income is provided in a table immediately following the Non-GAAP Condensed Consolidated Statements of Operations.
Cash provided by operations for the fourth quarter of 2005 was $197.5 million, compared to cash provided by operations of $142.5 million for the fourth quarter of 2004. Cash provided by operations for fiscal 2005 was $642.9 million, up from $439.4 million for 2004.
Capital expenditures and depreciation during the fourth quarter of 2005 were $39.3 million and $15.4 million, respectively.
“I’m pleased to report another strong quarter and the completion of a year characterized by growth across multiple dimensions,” commented Scott Kriens, chairman and CEO, Juniper Networks. “Juniper remains at the intersection of opportunity, where the increasing and strategic importance of today’s network demands the integrated best-in-class solutions that the company was built to deliver. As we surpass annual revenues of $2 billion on the eve of our 10th anniversary we see a bright future, founded in the confidence our customers have placed in Juniper.”
Juniper continued to invest in and deliver innovation throughout 2005 with significant new product and feature announcements this year, all focused on serving the evolving needs of its customers.
•
Highlights include new products and features to strengthen support for the cost-effective deployment of assured Triple Play services, such as IPTV, over a converged network infrastructure. These include the E320 Broadband Services Router, the industry’s highest capacity broadband router and new features such as Dynamic Bandwidth Allocation for the E320, and SDX Network Resource Manger for the E-, M- and T-series routers.
•
Juniper remained at the forefront of performance delivery with the introduction of the new OC-768c interface module for the T-series, the fastest optical interface available today.
•
Juniper continued to innovate in the security arena with the introduction of its Unified Access Control solution, incorporating the Infranet Controller appliance and Infranet Agent. Numerous industry partners voiced their support for the most comprehensive access control solution on the market that allows customers to leverage existing infrastructure. The solution uses a combination of identity-based policy and endpoint intelligence to give enterprises real-time visibility and policy control throughout the network.
•
The company also announced the availability of the ISG 1000 and 2000 with Intrusion Detection and Prevention, which integrates best-in-class security for comprehensive delivery and threat control. The company witnessed significant momentum for the product with customers such as AvantGo®, a mobile Internet service of iAnywhere; ProBusiness, a division of ADP National Account Services and Yakult, one of the largest food distributors in Korea.
•
Additionally, Juniper continued its SSL VPN leadership with introductions of 4 new hardware platforms, the SA 700, 2000, 4000 and 6000 appliances that provide enterprises with enhanced delivery and threat control with high performance.
•
The result of this innovation is the continued market share momentum Juniper enjoyed throughout 2005. Juniper is positioned in the leaders quadrant of Gartner Group’s Magic Quadrant for all of the security segments in which it competes, including Firewall, IPSec VPN, SSL VPN and IPS. In addition, Juniper earned the number two slot in the High End Enterprise Router market with more than 25 per cent share according to Synergy Research Group. Juniper also retained its nearly one third market share and its number two position in the overall Service Provider Routing market with more than 30 per cent share in the Core, Edge & Broadband subcategories.
Juniper Networks will host a conference call web cast today, January 25, 2006 at 1:45 p.m. (Pacific Time), to be broadcasted live over the Internethttp://www.juniper.net/company/investor/conferencecall.html. The conference call will be archived on the Juniper Networks website until February 25, 2006. A replay will be accessible by telephone on January 25th after 3:00 p.m. Pacific Time through February 2nd, 2006 by dialing 800-633-8284 (or 402-977-9140), reservation number, 21280063. The replays will be available 24 hours/day, including weekends.
About Juniper Networks, Inc.
Juniper Networks is the leader in enabling secure and assured communications over a single IP network. The company’s purpose-built, high performance IP platforms enable customers to support many different services and applications at scale. Service providers, enterprises, governments and research and education institutions worldwide rely on Juniper Networks to deliver products for building networks that are tailored to the specific needs of their users, services and applications. Juniper Networks’ portfolio of proven networking and security solutions supports the complex scale, security and performance requirements of the world’s most demanding networks. Additional information can be found atwww.juniper.net.
Juniper Networks, the Juniper Networks logo, NetScreen, NetScreen Technologies, the NetScreen logo, NetScreen-Global Pro, ScreenOS, and GigaScreen are registered trademarks of Juniper Networks, Inc. in the United States and other countries.
Statements in this release concerning Juniper Networks’ business 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; increases in competition; the timing of orders and their fulfillment; availability and cost of key parts and supplies; ability to establish and maintain relationships with distributors and resellers; variations in the expected mix of products sold; changes in customer mix; customer and industry analyst perceptions of Juniper Networks and its technology, products and future prospects; delays in scheduled product availability; market acceptance of our products and services; rapid technological and market change; adoption of regulations or standards affecting our products, services or 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; currency fluctuations; litigation; and other factors listed in our 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.
This release includes non-GAAP net income, non-GAAP net income per share data and other non-GAAP line items from the Consolidated Statements of Operations, including operating expenses, other income and expenses, income before income taxes, provision for income taxes and net income. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. Juniper Networks believes that the presentation of these non-GAAP measures, when shown in conjunction with the corresponding GAAP measures, provides useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations. Juniper Networks further believes that where the adjustments used in calculating non-GAAP net income and non-GAAP net income per share are based on specific, identified charges that impact different line items in the statements of operations (including cost of revenues, research and development, sales and marketing, and general and administrative expense), that it is useful to investors to know how these specific line items in the statements of operations are affected by these adjustments. For its internal budgets, Juniper Networks’ management uses financial statements that do not include amortization of purchased intangible assets; in-process research and development; restructuring, impairment and related charges; integration costs; patent cross licensing expense; gain (loss) on investments; and the income tax effects of the foregoing, as applicable. Juniper Networks’ management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in determining objectives for compensation programs or reviewing the financial results of Juniper Networks.
1
Juniper Networks, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share amounts)
Three Months Ended
Year Ended
December 31,
December 31,
2005
2004
2005
2004
Net revenues:
Product
$
488,549
$
379,834
$
1,770,988
$
1,162,928
Service
86,915
50,219
292,969
173,091
Total net revenues
575,464
430,053
2,063,957
1,336,019
Cost of revenues:
Product
139,858
100,110
506,112
320,466
Service
42,086
27,317
146,754
92,958
Total cost of revenues
181,944
127,427
652,866
413,424
Gross margin
393,520
302,626
1,411,091
922,595
Operating expenses:
Research and development
99,276
73,976
355,417
259,856
Sales and marketing
126,318
104,995
439,596
320,030
General and administrative
16,291
14,982
74,756
55,188
Amortization of purchased intangibles
23,733
18,447
85,174
56,782
In-process research and development
5,300
–
11,000
27,500
Restructuring, impairments and special charges, net
6,170
–
(582
)
(5,058
)
Integration costs
–
–
–
5,087
Total operating expenses
277,088
212,400
965,361
719,385
Operating income
116,432
90,226
445,730
203,210
Interest and other income
19,082
11,526
59,144
28,233
Interest and other expense
(1,199
)
(412
)
(3,925
)
(5,379
)
Gain (loss) on investments
(448
)
–
1,250
(2,939
)
Loss on redemption of convertible subordinated notes
–
–
–
(4,107
)
Income before income taxes
133,867
101,340
502,199
219,018
Provision for income taxes
28,337
35,339
148,170
83,272
Net income
$
105,530
$
66,001
$
354,029
$
135,746
Net income per share:
Basic
$
0.19
$
0.12
$
0.64
$
0.28
Diluted
$
0.17
$
0.11
$
0.59
$
0.25
Shares used in computing net income per share:
Basic
565,875
538,158
554,223
493,073
Diluted
606,767
588,583
598,907
542,625
Certain prior period amounts have been reclassified to conform to the current period presentation. The reclassifications pertain to amortization of deferred stock compensation which had previously been reported as separate line item to the following cost and expense categories by period:
Three Months Ended
Year Ended
December 31,
December 31,
(In millions)
2005
2004
2005
2004
Cost of revenues – Product
$
312
$
676
$
848
$
2,850
Cost of revenues – Service
234
–
1,118
–
Research and development
1,623
5,217
9,894
21,493
Sales and marketing
1,413
3,800
4,761
17,685
General and administrative
214
383
1,016
1,927
Total
$
3,796
$
10,076
$
17,637
$
43,955
2
Juniper Networks, Inc. Non-GAAP Condensed Consolidated Statements of Operations (in thousands, except per share amounts)
Three Months Ended
Year Ended
December 31,
December 31,
2005
2004
2005
2004
Net revenues:
Product
$
488,549
$
379,834
$
1,770,988
$
1,162,928
Service
86,915
50,219
292,969
173,091
Total net revenues
575,464
430,053
2,063,957
1,336,019
Cost of revenues:
Product
��
139,546
99,434
505,264
317,616
Service
41,852
27,317
145,636
92,958
Total cost of revenues
181,398
126,751
650,900
410,574
Gross margin
394,066
303,302
1,413,057
925,445
Operating expenses:
Research and development
97,653
68,759
345,523
238,363
Sales and marketing
124,905
101,195
434,835
302,345
General and administrative
16,077
14,599
63,900
53,261
Total operating expenses
238,635
184,553
844,258
593,969
Operating income
155,431
118,749
568,799
331,476
Interest and other income
19,082
8,024
59,144
24,731
Interest and other expense
(1,199
)
(412
)
(3,925
)
(5,379
)
Income before income taxes
173,314
126,361
624,018
350,828
Provision for income taxes
53,727
40,436
193,445
112,265
Net income
$
119,587
$
85,925
$
430,573
$
238,563
Net income per share:
Basic
$
0.21
$
0.16
$
0.78
$
0.48
Diluted
$
0.20
$
0.15
$
0.72
$
0.44
Shares used in computing net income per share:
Basic
565,875
538,158
554,223
493,073
Diluted
606,767
588,583
598,907
542,625
3
Juniper Networks, Inc. Reconciliation between GAAP to non-GAAP Net Income (in thousands)
Three Months Ended
Year Ended
December 31,
December 31,
2005
2004
2005
2004
Non-GAAP net income
$
119,587
$
85,925
$
430,573
$
238,563
Amortization of purchased intangibles
(23,733
)
(18,447
)
(85,174
)
(56,782
)
Compensation expense related to acquisitions
(4,123
)
(10,076
)
(17,804
)
(43,955
)
In-process research and development
(5,300
)
–
(11,000
)
(27,500
)
Restructuring, impairments and related costs
(5,843
)
–
909
5,058
Patent cross-licensing expense
–
–
(10,000
)
–
Integration costs
–
–
–
(5,087
)
Gain from non-recurring engineering contract
–
3,502
–
3,502
Gain (loss) on investments
(448
)
–
1,250
(2,939
)
Loss on redemption of convertible subordinated notes
–
–
–
(4,107
)
Income tax effect
25,390
5,097
45,275
28,993
Net income
$
105,530
$
66,001
$
354,029
$
135,746
Certain reclassifications have been made to the prior period amounts to conform to the current period presentation.
Juniper Networks, Inc. Net Product Revenue by Operating Segment (in thousands)
Three Months Ended
Year Ended
December 31,
December 31,
2005
2004
2005
2004
Infrastructure
$
376,039
$
299,863
$
1,367,811
$
975,729
Service Layer Technologies
112,510
79,971
403,177
187,199
Total
$
488,549
$
379,834
$
1,770,988
$
1,162,928
4
Juniper Networks, Inc. Condensed Consolidated Balance Sheets (in thousands)
December 31, 2005
December 31, 2004
ASSETS
Current assets:
Cash and cash equivalents
$
918,401
$
713,182
Short-term investments
510,364
404,659
Accounts receivable, net of allowance for doubtful of accounts
268,907
187,306
Prepaid expenses and other current assets
120,784
108,586
Total current assets
1,818,456
1,413,733
Property and equipment, net
319,885
275,612
Long-term investments
618,342
595,234
Restricted cash
66,074
31,226
Goodwill
4,904,239
4,427,930
Purchased intangible assets, net
269,921
241,879
Other assets
29,682
14,100
Total assets
$
8,026,599
$
6,999,714
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
165,172
$
113,890
Deferred revenue
213,482
159,750
Accrued liabilities
248,746
229,197
Total current liabilities
627,400
502,837
Deferred revenue, net of current portion
39,330
22,700
Convertible senior notes and other long-term liabilities
460,159
481,440
Commitments and contingencies
Stockholders’ equity:
Common stock and additional paid-in capital
6,431,960
5,888,220
Deferred stock compensation
(15,582
)
(32,394
)
Accumulated other comprehensive loss
(8,324
)
(716
)
Retained earnings
491,656
137,627
Total stockholders’ equity
6,899,710
5,992,737
Total liabilities and stockholders’ equity
$
8,026,599
$
6,999,714
Juniper Networks, Inc. Cash and Cash Equivalents and Investments (in thousands)
December 31, 2005
December 31, 2004
Cash and cash equivalents
$
918,401
$
713,182
Short-term investments
510,364
404,659
Long-term investments
618,342
595,234
Total Cash and cash equivalents and Investments
$
2,047,107
$
1,713,075
5
Juniper Networks, Inc. Condensed Consolidated Statements of Cash Flows (in thousands)
Year Ended December 31,
2005
2004
OPERATING ACTIVITIES:
Net income
$
354,029
$
135,746
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization
138,904
97,625
Stock based compensation
17,637
43,955
In-process research and development
11,000
27,500
Loss on redemption of convertible subordinated notes
–
4,107
Loss (gain) on sale or write-down of investments
(364
)
2,939
Restructuring, impairment, and related charges
6,170
321
Non-cash portion of debt issuance costs and disposal of property, plant and equipment
1,735
4,094
Tax benefit of employee stock option plans
129,492
65,988
Changes in operating assets and liabilities:
Accounts receivable, net
(68,053
)
(81,398
)
Prepaid expenses and other assets
(26,201
)
(56,253
)
Accounts payable
50,310
29,390
Accrued liabilities
(35,996
)
71,786
Deferred revenue
64,280
93,648
Net cash provided by operating activities
642,943
439,448
INVESTING ACTIVITIES:
Purchases of property and equipment, net
(98,192
)
(63,185
)
Purchases of available-for-sale investments
(936,031
)
(739,437
)
Maturities and sales of available-for-sale investments
805,047
704,740
Increase in restricted cash
(34,848
)
(249
)
Minority equity investments
(9,823
)
(1,225
)
Acquisitions of businesses, net of cash and cash equivalents acquired
(309,889
)
40,889
Net cash used in investing activities
(583,736
)
(58,467
)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock
146,012
175,172
Redemption of convertible subordinated notes
–
(144,967
)
Retirement of common stock
–
(63,610
)
Net cash provided by (used in) financing activities
146,012
(33,405
)
Net increase in cash and cash equivalents
205,219
347,576
Cash and cash equivalents at beginning of period
713,182
365,606
Cash and cash equivalents at end of period
$
918,401
$
713,182
6
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