Juniper Networks, Inc. Reports Q1’06 Financial Results Q1’06 Net Revenue of $566.7M, up 26% from Q1’05; GAAP EPS $0.13; Non-GAAP EPS up 20% to $0.19 from Q1’05
SUNNYVALE, CA – April 19, 2006 — Juniper Networks, Inc. (NASDAQ: JNPR) today reported its results for the first quarter ended March 31, 2006.
Net revenues for the first quarter of 2006 were $566.7 million, compared with $449.1 million for the first quarter of 2005, an increase of 26 percent.
With the adoption of Statement of Financial Accounting Standards No. 123R (FAS 123R) as of January 1, 2006, Juniper is reporting stock-based compensation expense in its generally accepted accounting principles (GAAP) results for the first time. Net income on a GAAP basis for the first quarter of 2006 was $75.8 million or $0.13 per share, compared with a GAAP net income of $75.4 million or $0.13 per share for the first quarter of 2005. Non-GAAP net income for the first quarter of 2006 was $113.4 million or $0.19 per share, compared with non-GAAP net income of $91.9 million or $0.16 per share for the first quarter of 2005. The reconciliation between non-GAAP and GAAP net income is provided in a table immediately following the Non-GAAP Condensed Consolidated Statements of Operations.
For comparative purposes, net income excluding stock-based compensation for the first quarter of 2006 was $91.9 million or $0.15 per share, compared with a net income excluding stock-based compensation of $77.8 million or $0.13 per share for the first quarter of 2005. The reconciliation between net income excluding stock-based compensation and GAAP net income is provided in a table below the Condensed Consolidated Statements of Operations.
Net cash flows from operations for the first quarter of 2006 were $83.0 million, compared to cash provided by operations of $134.4 million for the first quarter of 2005. For comparative purposes, non-GAAP cash flows from operations in the first quarter of 2006 were $139.1 million including the tax benefit from the exercise of employee stock options which were previously included in the operating cash flows. As a result of the adoption of FAS 123R, tax benefits from the exercise of employee stock options totaling $56.1 million are included in cash flows from financing activities. The reconciliation between non-GAAP and GAAP cash flows from operations is provided in a table immediately following the Condensed Consolidated Statements of Cash Flows.
Capital expenditures and depreciation during the first quarter of 2006 were $18.2 million and $17.2 million, respectively.
“The first quarter reflected the continuing acceptance of Juniper’s product portfolio with both our enterprise and service provider customers,” commented Scott Kriens, chairman and CEO, Juniper Networks. “We will intensify our focus on execution in order to capitalize in an environment where our capabilities and the market requirements are aligning more clearly than ever before.”
Juniper’s ongoing focus on serving the needs of its global service provider and enterprise customers was reflected in a number of key accomplishments this quarter.
•
Juniper continued to support its service provider customers as they transition to Next Generation Network infrastructures. China Telecom Shanghai and Cox Communications, for example, chose the T-series to provide the performance, reliability and scale to support the build-outs of their core IP infrastructures, while BT is deploying Juniper at both the core and the edge of its 21st Century Network. IPTV continued to drive demand for Juniper products. Working side by side with its partner, Siemens, Juniper garnered wins at T-Com and Fastweb in Europe. In addition, Juniper remains the sole sourced provider for the world’s largest IPTV network, PCCW. Juniper was also chosen by Germany’s leading TV station, RTL, to ensure quality of service and scalability for live broadcast content, via the M-series, multi-service edge router.
•
On the enterprise side Juniper saw solid demand across the portfolio. Sharper Image, for example is deploying Juniper’s Firewall/IPSec VPNs, SSL VPNs and WX appliances as it redesigns its network to increase performance, security and meet government mandates. Other key wins include Sara Lee, Canada’s Globe and Mail, Daimler Chrysler, the North Atlantic Treaty Organization (NATO), which is securing its global network with Juniper’s IDP solutions and the US Air force.
•
Juniper’s innovation engine continued this quarter with the delivery of the Secure Services Gateway (SSG), a new line of high performance firewall/VPN platforms with integrated local-area and wide-area interfaces. Strong customer traction has validated Juniper’s strategy of delivering integrated branch solutions with no compromise between security and performance.
Juniper Networks will host a conference call web cast today, April 19, 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 May 19, 2006. A replay will be accessible by telephone on April 19, 2006 after 4:00 p.m. Pacific Time through April 26, 2006 by dialing 800-633-8284 (or 402-977-9140), reservation number, 21288675. 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 is a registered trademarks of Juniper Networks, Inc. in the United States and other countries.
This release includes non-GAAP net income, non-GAAP net income per share data and other non-GAAP line items from the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows, including operating expenses, other income and expenses, income before income taxes, provision for income taxes and net income and cash flows from operations. 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. These non-GAAP adjustments are provided to enhance the user’s overall understanding of our operating performance and our prospects for the future. Juniper Networks believes that the presentation of these non-GAAP measures, when shown in conjunction with the corresponding GAAP measures, provides useful information to both management and investors regarding financial and business trends relating to its financial condition and results of operations, in particular by excluding certain expense and income items that we believe are not indicative of our core operating results. In addition, since we have historically reported non-GAAP results to the investment community, we believe the inclusion of non-GAAP numbers provides consistency in our financial reporting For its internal budgeting and planning, Juniper Networks’ management uses financial statements that do not include employee stock-based compensation; 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
March 31,
2006
2005
Net revenues:
Product
$
474,125
$
392,280
Service
92,589
56,832
Total net revenues
566,714
449,112
Cost of revenues:
Product
140,995
112,555
Service
43,952
31,099
Total cost of revenues
184,947
143,654
Gross margin
381,767
305,458
Operating expenses:
Research and development
113,688
78,135
Sales and marketing
129,429
92,111
General and administrative
23,099
15,741
Amortization of purchased intangibles
23,221
18,541
Special charges
1,404
–
Total operating expenses
290,841
204,528
Operating income
90,926
100,930
Interest and other income
20,767
11,077
Interest and other expense
(1,089
)
(779
)
Income before income taxes
110,604
111,228
Provision for income taxes
34,841
35,793
Net income
$
75,763
$
75,435
Net income per share:
Basic
$
0.13
$
0.14
Diluted
$
0.13
$
0.13
Shares used in computing net income per share:
Basic
565,927
542,651
Diluted
603,589
587,659
Certain prior period amounts have been reclassified to conform to the current period presentation.
Stock-based compensation is included in the following cost and expense categories by period (in thousands):
Three Months Ended
March 31,
2006
2005
Cost of revenues – Product
$
487
$
75
Cost of revenues – Service
1,396
384
Research and development
10,013
2,007
Sales and marketing
7,627
683
General and administrative
3,542
274
Total
$
23,065
$
3,423
2
Juniper Networks, Inc. Condensed Non-GAAP Consolidated Statements of Operations (in thousands, except per share amounts)
Three Months Ended
March 31,
2006
2005
Net revenues:
Product
$
474,125
$
392,280
Service
92,589
56,832
Total net revenues
566,714
449,112
Cost of revenues:
Product
139,139
112,480
Service
42,556
30,715
Total cost of revenues
181,695
143,195
Gross margin
385,019
305,917
Operating expenses:
Research and development
103,675
76,128
Sales and marketing
121,802
91,428
General and administrative
19,557
15,467
Total operating expenses
245,034
183,023
Operating income
139,985
122,894
Interest and other income
20,767
11,077
Interest and other expense
(1,089
)
(779
)
Income before income taxes
159,663
133,192
Provision for income taxes
46,302
41,290
Net income
$
113,361
$
91,902
Net income per share:
Basic
$
0.20
$
0.17
Diluted
$
0.19
$
0.16
Shares used in computing net income per share:
Basic
565,927
542,651
Diluted
603,589
587,659
3
Juniper Networks, Inc. Reconciliation between GAAP to non-GAAP Net Income (in thousands)
Three Months Ended
March 31,
2006
2005
Non-GAAP net income
$
113,361
$
91,902
Amortization of purchased intangibles
(24,590
)
(18,541
)
Stock-based compensation
(23,065
)
(3,423
)
Special charges
(1,404
)
–
Income tax effect
11,461
5,497
Net income
$
75,763
$
75,435
Diluted Non-GAAP net income per share
$
0.19
$
0.16
Diluted net income per share
$
0.13
$
0.13
Juniper Networks, Inc. Net Income, excluding Stock-based Compensation Expense (in thousands)
Three Months Ended
March 31,
2006
2005
Net income
$
75,763
$
75,435
Stock-based compensation expense
23,065
3,423
Income tax effect
(6,920
)
(1,027
)
Stock-based compensation expense, net of tax
$
16,145
$
2,396
Net income, excluding stock-based compensation expense, net of tax
$
91,908
$
77,831
Diluted net income per share
$
0.13
$
0.13
Diluted net income per share, excluding stock-based compensation expense
$
0.15
$
0.13
Juniper Networks, Inc. Net Product Revenue by Operating Segment (in thousands)
Three Months Ended
March 31,
2006
2005
Infrastructure
$
363,004
$
304,131
Service Layer Technologies
111,121
88,149
Total
$
474,125
$
392,280
4
Juniper Networks, Inc. Condensed Consolidated Balance Sheets (in thousands)
March 31, 2006
December 31, 2005
ASSETS
Current assets:
Cash and cash equivalents
$
904,295
$
918,401
Short-term investments
510,606
510,364
Accounts receivable, net of allowance for doubtful of accounts
304,750
268,907
Deferred tax assets
92,539
74,108
Prepaid expenses and other current assets
41,382
46,676
Total current assets
1,853,572
1,818,456
Property and equipment, net
321,388
319,885
Investments
623,269
618,342
Restricted cash
59,894
66,074
Goodwill
4,904,306
4,904,239
Purchased intangible assets, net
245,332
269,921
Other long-term assets
28,003
29,682
Total assets
$
8,035,764
$
8,026,599
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
160,278
$
165,172
Accrued compensation
68,942
97,738
Accrued warranty
28,416
28,187
Deferred revenue
240,344
213,482
Income taxes payable
65,617
56,360
Other accrued liabilities
67,779
66,461
Total current liabilities
631,376
627,400
Deferred revenue
53,486
39,330
Other long-term liabilities
31,359
60,200
Long-term debt
399,944
399,959
Commitments and contingencies
Stockholders’ equity
6,919,599
6,899,710
Total liabilities and stockholders’ equity
$
8,035,764
$
8,026,599
Juniper Networks, Inc. Cash and Cash Equivalents and Investments (in thousands)
March 31, 2006
December 31, 2005
Cash and cash equivalents
$
904,295
$
918,401
Short-term investments
510,606
510,364
Long-term investments
623,269
618,342
Total Cash and cash equivalents and Investments
$
2,038,170
$
2,047,107
5
Juniper Networks, Inc. Condensed Consolidated Statements of Cash Flows (in thousands)
Three Months Ended
March 31,
2006
2005
OPERATING ACTIVITIES:
Net income
$
75,763
$
75,435
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization
41,828
30,276
Stock-based compensation
23,065
3,423
Non-cash portion of debt issuance costs and disposal of property and equipment
363
363
Tax benefit of employee stock option plans
—
28,910
Changes in operating assets and liabilities:
Accounts receivable, net
(35,437
)
2,517
Prepaid expenses and other assets
(11,585
)
(19,601
)
Accounts payable
(5,149
)
(7,167
)
Accrued compensation
(28,797
)
(27,618
)
Accrued warranty
444
(691
)
Other accrued liabilities
(18,511
)
1,793
Deferred revenue
41,018
46,749
Net cash provided by operating activities
83,002
134,389
INVESTING ACTIVITIES:
Purchases of property and equipment, net
(18,228
)
(22,549
)
Purchases of available-for-sale investments
(132,949
)
(235,235
)
Maturities and sales of available-for-sale investments
126,733
191,422
Decrease (increase) in restricted cash
6,180
(73
)
Minority equity investments
(90
)
(968
)
Net cash used in investing activities
(18,354
)
(67,403
)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock
51,521
39,380
Retirement of common stock
(186,388
)
—
Tax benefit of employee stock option plans
56,113
—
Net cash (used in) provided by financing activities
(78,754
)
39,380
Net (decrease) increase in cash and cash equivalents
(14,106
)
106,366
Cash and cash equivalents at beginning of period
918,401
713,182
Cash and cash equivalents at end of period
$
904,295
$
819,548
Juniper Networks, Inc. Reconciliation between GAAP to non-GAAP Cash Flows from Operations (in thousands)
Three Months Ended
March 31,
2006
2005
GAAP cash flows from operations
$
83,002
$
134,389
Tax benefit of employee stock option plans
56,113
—
Non-GAAP cash flows from operations
$
139,115
$
134,389
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