JNPR - Earnings call transcript Q4 2019

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Operator

Greetings and welcome to the Juniper Networks Fourth Quarter 2019 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jess Lubert, Vice President, Investor Relations. you. Thank begin. Please

Jess Lubert

Good XXXX operator. welcome our to Thank call. afternoon quarter conference fourth you, and

Joining Rami today Chief me are Financial Ken Officer Officer. Miller, and Rahim, Chief Executive

our expectations. statements Today’s release certain actual and SEC the with in results other These furnished risks based our These materially. and statements our differ CFO today are on and call commentary uncertainties are forward-looking and X-K press our risks contains might most to subject XX-Q, in current filings. filed discussed recent

Our speak undertakes as today no of obligation statements. forward-looking forward-looking only statements and to Juniper update any

today a non-GAAP Relations can section discussion view financial company’s useful we Reports. included results. Investor be website our Reconciliation why under Financial of today’s the Our information will is press include release. of Commentary results the information found in non-GAAP on on financial consider

take we limit Following will to prepared follow-up. questions. our one question one Please and remarks, yourself

will Rami. the I call that, hand to over now With

Rami Rahim

Thank revenue results provider than you. of and Good share afternoon above growth December enterprise to we bottom cloud which our line flowed our quarter the earnings top of strength basis. our expected midpoint line. for was returned $X.XXX of on through our the was of the the quarter. by driven midpoint Non-GAAP guidance more Strength to solid above the verticals within weakness service during $X.XX year-over-year and came $X.XX billion business. a everyone. per We reported offset in forecast as Total

a encouraged high out we were and year as anticipated on largely finish For XXXX to played the year, we note. the

positive a which a quarter, quarterly of believe year us cloud to the included growth go a of in P&L on initial to and performance following have impact in product which a come, for enterprise highlights acquisition during from has expectations growth, third additional a the Some forward transition potential exceeding Mist, December difficult the consecutive a of successful position already vertical on growth year-over-year material our to we the return the the year record including years is basis. our will the

to efforts of software we of our will and progress go-to-market as we organization monetize Strong market that due the and are believe the to share Contrail years. to our is to various us help existing value better platforms enhancing off-box innovations continue solutions and X like which value expect many the on transitioned markets capitalize of bringing our significant technology our the growth next gain likely over we

of executing the We We this accomplishments to positioned build starting year. to we XXXX. many these believe in are grow on expect well and business sustainably

will some this earnings remain While particularly future to the XXXX momentum incremental we year committed needed in are this create investments making investment, to will years. in and and line go-to-market, top require incremental drive growing in leverage the growth expect we non-GAAP earnings

during the Now, Starting developments like our as and than we XX% year-over-year, expected insights I grew an December with into are key business of quarter of cloud, experienced quarter. we year-over-year results some consecutive the seeing core for each would to address some a within verticals. the better third provide increase the quarter

double-digit this customers, area routing networks, past for see of our wide to switching year-over-year. our although growth momentum saw also particularly continue business some We within Cloud products our quarter,

to on likely quarter. business grow some we seasonality, once our this a optimistic the Order remained trends healthy ability year-over-year March basis during again are regarding and despite

increasingly experiencing said, gaining X customers MX accounts we our encouraged private to capacity leverage share believe to as largest of we That by with are also requirements seeing are have to and cloud we some clouds. growth the now us. are of many the Tier are positioned success their been We behind grow PTX these and continue with believe we cloud their largely with is own transition providers that

next over hyperscale have cloud us remained we switching use and next the the and we and should are to switching data opportunities center, point, few opportunities now historically few inside growth much believe leveraging additional limited our capture existing secure our where silicon modest this solutions the for These to systems wins. quarters. present optimistic introduce cases share While are plan over maintained share. years, XXX-gig in win customers’ to we ability and software our have the XXX-gig to during on On delivered very the labs needed we solutions the hyperscale cycle cycle we regarding capabilities focused last

begin While due expected to XXXX optics. to of early no of cost and the we expect do year, are the XXX-gig revenue half until availability materialize to deployments during second the material

we and our solutions in differentiated We in X% expected years several to federal and strong we than record the a quarters. the which should We is business business despite following confidence challenging the enterprise business December moderated grow achieved year-over-year These to the is portfolio quarter this with results our results go-to-market which despite enterprise of making that environment. believe grow position market, decline year-over-year this are in in investments in a comparison. difficult the were better increased to us and driving growing pleased truly resonating were come macro take even share

include our Some of confidence the outlook enterprise the items following. in driving

advanced an our enterprise First, base years network focus capabilities we opportunity on run-rate access year-over-year Mist by is operations a platform I switches. basis. help capabilities. pleased network $XXX are market. seeing differentiated AI quarter which annualized routers it to aggregate the improve than resonating Mist bookings simply the offers Mist’s of for that direct experience points, pull-through broader the and on learning and the AI in industry Mist the the exceeded and peers grew truly bring as XXX% uptime and and momentum than leverages to compared to in are with more Mist market. scale clearly and be AI user the December engine million more enables customer Mist to customers X leading of the couldn’t more

surface While to Mist believe impact Juniper is Mist’s exceeding scratched the have and expectations, on just likely of the potential have initial is the already portfolio. broader our we it we

this and periods. plan a year, through Mistify customers. including not create the strong capabilities accounts, Mist to our EX wins which AI several To demand portfolio. portfolio we already our XXX future opportunities cloud brings Fortune EX to launched the we security EX initial incremental were believe Fortune that elements management to recently Juniper XX Assurance and for previously Wired This secure additional switching point, in of are seeing us should that capability enabled has We with pull-through

further We transitions with as driven existing Mist to our base customer and capture new investing monetize X to logos enterprise. AI are Wi-Fi the and the industry

is industry-leading and momentum growing in December market moving Management platforms EVPN position seeing and quarter business capabilities to our Second, data orders. the software enterprise should We both us our VXLAN resonating QFX with believe record grow year-over-year business this and experiencing healthy quarter-over-quarter Contrail products our center data switching forward. are center the Fabric in

Mist are after forward While year-over-year we our to been last EX materializes. see has of quarters the our organization to transformation improves portfolio see we a declined go-to-market on several starting productivity year-over-year, sequential better further and as pull-through organizational year’s the and basis go for strong trends momentum expect now

traction. our Third, secure seeing are healthy SD-WAN capabilities

present is offer networking also portfolio. fast should large management, cloud early to with our ability our campus growing remains security market, opportunity expected is and capabilities many the to we customers in position to only broader but gain in believe innings, resonating pull be Wi-Fi through us another this share not that and helps While of and our what catalyst a

Our service remains challenged. provider business

However, and Contrail deployments, high-end success the expect expect the declines December of in a year. to line availability to from to experienced continue qualifications trend during quarter growth are new cloud upcoming healthy telco present periods. The of moderate, our products pace provider of move to edge we we began is headwind opportunities MX amongst the future of which in of the some we that a quarter-over-quarter our of vertical the reasons the XG and platform, card less our service year-over-year security

While top the and portfolio during for our our offerings. supplier X We security highly increase in offerings as ranked which orders data which nearly Gartner and security saw saw remain recently slightly grew quarter-over-quarter by portfolio, and mid-range security in validated We us cases outlook NSS at high-end our strength regarding optimistic came Labs, notable declined is its a rating believe report. use both orders in high-end we QX, year-over-year distributed last center XX% capabilities enterprise for competitive, year-over-year critical our center X% recommended year-over-year which our years. was the in provided a and levels for data security revenue and our XX% highest the which

networking with consume as success on the and on seeing are security platforms. we customers to momentum which security increasingly our and trend. well-positioned the are security are of by traditional this strategy, solution We bundling to looking focuses capitalize encouraged are believe networking think we a We of connected part our

and We are than XX% which quarter. in for December our year-over-year the to accounted during continuing software our XX% see grew more business, of success revenue

gain While today as traction and subscription-based basis. over increased XX% the off-box pricing increased our more will subscriptions to the we in Mist. Contrail, off-box more software market. delivered and sales be quarter of our on Not orders driven momentum on full year-over-year X% percentage and the revenue grew models a believe much time than software seeing, on-box is become overlooked, of a as business more are security XXX% subscriptions services increase pervasive our record than our a continue software we and business by than to more due year year-over-year especially licenses, Based to software

quarter improved in renewals, execute and year. team services driving extremely to both the and continues with the rates primary factor attach the well strength Our

remains remain this confident in during once pipeline grow business upcoming service year. our ability Our to again and healthy the we

Finally, sales are highlight solid would making in progress to initiatives. we transformation that I like our

progress during the up of on population confidence approximately our of shareholders is helps and are the important Juniper. their for the present investments we XX% sales are want would productivity to capitalize hard We and tailwinds like we goals. thanks levels by is extend innovations the reps bringing and an I to in course especially in for and to believe their our I experienced which market, trough stakeholders. upcoming solid value from essential of the year carrying customers, go-to-market through us and continued partners during driver particularly creating QX revenue work making that vertical XXXX the thank create quota my year. our against should to various Our our support employees our dedication, enterprise we to for the within

call will detail. results more who I turn to over discuss Ken will in the now financial quarterly our

Ken Miller

$X.XXX end and afternoon good I year and the our results and will with above ended cover by color revenue with quarter start billion Rami on earnings by fourth driven and were some higher We a quarter non-GAAP full you, the fourth than both strength in our The to Thank everyone. outlook. cloud, discussing anticipated the enterprise. then fiscal and midpoint results greater lesser guidance. in than share $X.XX of extent, per midpoint of

we year expected, are we we the As exiting than stronger entered.

pleased growth revenue. with total are in year-over-year our We X%

revenue X%. across driven increased declined provider X% with Looking all enterprise primarily sequential by provider Enterprise at was on XX% a and verticals, growth and service switching. of all our cloud growth increased sequentially basis by a services. Service basis, technologies X% geographies year-over-year are basis, on On and all up. a sequential vertical, all products X%, increased while

and basis sequential switching services. Our grew cloud a and business X% on primarily From security sequentially. routing grew a XX% routing driven X%, technology increased increased by perspective, X%

business renewals. and sequentially X% services primarily strong to X% year-over-year increased Our to due

was software cloud, X total continued delivery for of our more from quarter, contractual we Rami X% As down provider, which quarter. to was mentioned, up was our than revenue year-over-year offerings, X% performance XX% In XX saw of revenue customers enterprise. due and were an reviewing were XX% Product year-over-year in the increased X timing sequentially service and commitments. X million, top deferred the the and the of $XXX solid

due down X% sequentially from increased Non-GAAP million, suppliers year-over-year collections. expenses was primarily flow X% payments to and year-over-year to and to timing Cash operations differences related and operating sequentially. customer $XX

We We into We flow a for in accelerated expect which a completed in earlier quarter to $X.XX dividends $XX entered month. when program the reflecting $XXX million. per first million dividend shares, it see in of will was exceed quarterly $XXX share an in rebound paid share. repurchase million cash this likely

the for results expected declining played the to largely on as year. Moving XXXX versus year, we X% revenue fiscal with full last out

On cloud third service and business our security a returned business grew year full provider grew grew enterprise While business declining the year-over-year to XX%, X%. full remained challenged year our X% growth. our for business consecutive year, the services and basis,

greater full than XX% year. and total the revenue for grew XX% of was Software

and However, top due to X for XXXX. versus switching year, routing provider service In primarily cloud, X provider. were reviewing our were XX% enterprise. weakness declined Both X% an declined results X and were customers service in the XX was

XX expanded volume over strength in our which offset Non-GAAP gross lower points basis more to margin due service than tariffs. and China’s product margin, the

disciplined of diluted operating decline earnings expenses operating non-GAAP with million. a in focus on Our declined Non-GAAP management expense per $XX share X%. continued

the we million. flow had For $XXX cash year, operations of from

flow. dividends During XXXX, million return approach to of cash we to $XXX perspective, we in shares balanced a XXX% paid $XXX repurchased worth took capital From a shareholder and free million allocation. of totaling

down million debt. used addition, $XXX approximately and to we to $XXX approximately Mist, pay acquire In million

color guidance could website. At available our non-GAAP we year-over-year per I first and on to the of growth guidance, quarter some the on midpoint Before in detailed our we find would CFO in our provide commentary like you earnings to revenue which both on move expect Q&A, share.

first to a growth the full grow for we on and expect non-GAAP share per basis we the expect sequential and modest Beyond earnings quarter, year. revenue

of experience non-GAAP quarter first patterns course the normal expect in the margins improve volume throughout and gross We with year. to seasonal the

While currently by XXXX margin mix, impacted expect to non-GAAP and be we be deal and versus to gross to slightly customer can predict flat year up gross levels. be full margins can difficult

Through near compensation the reset to typical XXXX, in We due operating we remain increase to costs. expense non-GAAP levels. quarter expense sequentially of of operating first fringe QX variable quarterly to expect course non-GAAP seasonal increase the expect and

market expect to XXXX. we up discipline committed full management earnings we to be expenses in of opportunities, basis, and to we grow invest While year remain operating operating non-GAAP on expect a take expense as to advantage

worldwide plus For tax on minus earnings rate X%. XX% or XXXX, we be expect to non-GAAP

to quarterly declared X% has record. this increase Finally, be our Directors in stockholders Board to dividend paid a $X.XX quarter of share to our cash per of

would I Juniper’s their team closing, to our commitment like for to dedication thank In and continued success.

for the call Now, open to questions. I’d like

Operator

Thank you.

be We Please comes will Oppenheimer Kidron Instructions] of conducting with Ittai question now & proceed. Our a line session. question-and-answer [Operator first Company. from

Ittai Kidron

more you expect again. event, the to know think cloud And in, clicking next Can year How Hey, in you’ve see talked guys. about to Nice concentration talk the and lumpy. business that Thanks. as improved? we there? How has business I you cloud about be revenue kicks visibility ramp about the should that? XXX but that

Rami Rahim

for Thanks the Yes. question.

year great business first, needless anticipated. than So the we to originally see in CapEx be to QX say, it’s always the a frame. in as in concentrated fact, hyperscaler concentrated. to is performance cloud The results in QX stronger and the had bit in what we going the played saw little success out timeframe time largely The expected, our probably

doing with routing, in However, think the strength and within breadth we’re quite technologies those across actually quite not number pleased of pleased we I Tier that X success just Also I’m the cloud switching the customers, of with saw the in that fact but we’re a with. in also hyperscalars, where broad well.

unique comes a to situation year is retain us in based I position over deployments. that very we think a we the hard where of in And we it, now of the are the and hyperscale a to footprint routing have going point, strength on this that behind as you with be is retain when space. momentum and undertaken half. the business, largely last At We timing the much know, the to the it the prior we’ve transition fought that

growth the just order that is of DCI a Certainly, to single you presents our fair the revenue all in next year for meaningful as closer good for the and XXX-gig our our of the specific And the the in software, in than in type not and to as sort that requiring largely system, to and have end gig XXX So that the energy, the into us the our finding are the into year data timing just particular, I post, get mid and timing XXX going cloud within focus, be tied in projects bigger gig deployments, rates go happens. timeframe. to of that optics. I segment. going more fair our to a investments getting share, it’s doing the we XXXX where to think into after. opportunity that much we’re digit of share centre And our segments shot in of gets low mean, us of the features And very customers well our that. customers are but to with as engaging are at that hyperscale availability

Ittai Kidron

with it’s see Got you but the kind operation? you it. And a try very for lead of EX, customers? that nice introductions mode people bundle into tell vice How as much preferred truly path and mist a can mid pulling – follow-up of maybe sales you or is us, right the this to now that to is is make Do of versa? or

Rami Rahim

That’s question. a great

are that there we requirements, specific presence. two customer sales it think and their the when plays enterprise comes undertake to and really space I the their

EVP center good enterprise. real well largely the as as the with play oriented private data sales sort much we time-frame, one strength momentum center, cloud satisfying functionality automated both saw in is management, that the I and QX, cloud in record of So space a fact, and QFX center QX highly and orders fabric around in simple the the switching think for VXLAN really it high very data have performance, type we is data by in driven

we about, Mist, simplicity insert the AI-driven highly we’re start that that around performance is lot to introduced and functionality just play us And one the recently it’s differentiated to of then finding very there is a are the success a now the the actually conversation you’re aligned the just in is product that’s tie-in ability to leading a portfolio. then Mist management, one to where cloud-based the experience other, their with offering much performance which the across management, at think that wireless that sales start allows now the and switching, where much very us we you talking I the unique user the commercial AI open to play look and campus. conversation technical a technically sequential EX ties that we wired analytics that now of and I door leads and with play, of makes starting with cloud, the network not where have sales the assurance think second EX The in give what to the to I’ll customer acts leading mention just both a with And and which we in market. the very with see

Operator

Thank you.

Our proceed. from the with next Daryanani Please question of comes Evercore. line Amit

Amit Daryanani

lot Thanks historically as conversion the of cash free we flow cash When the a taking the the was well. quarter? to quarters one free we should question. as free the in talk two that numbers, guys, pick-up December you my for December income expect I flow March cash? better quarter Can about low. what least adjusting just versus net has been I at go quarter into I to guess fairly think have supposed for you happened

Ken Miller

Yes.

services to a little both revert. of time service We collections QX DSL bit see in particularly normal see our saw that abnormal. primarily up to which build-up side, purchases strong customers. as just we you the as was kind timing We not went flow down and is revenue period average, and bookings to well a some our deferred also cash due cash of absolutely renewals free expect timing did from in the some compared So seasonal in

strong expect flow QX us. quarter We cash to be for a

QX. fact, would In expect $XXX in it I to million exceed

cash just you the expecting see QX pushed was a into down the So bit cash in flow that – to were the timing. QX

Amit Daryanani

some would slightly follow Perfect. being Really When commentary going What up Because, gross revenue does perspective up. or margin does leverage for from you leverage, as think, well. to are be I I’ll flat I up, better to think you guys? that the that said factor OpEx, line. Is just ‘XX calendar we would then, up some I year-over-year I be if flat revenues embed margin to your would that appreciate that. gross guess, guess, especially a well? as see I revenue And around listened in in volumes

Ken Miller

Yes.

which For on From we’re I’d not we would call revenue, up current X% help, a were with flat to X% volume we gross going but slightly slightly a modest growth, it’s perspective, comfortable think Street about for level, margin for flat expect XXXX, gross impact estimates margins. looking to margin gross perspective. to have tremendous growth. up

as in for year driving are We growth a XXXX full earnings well.

Amit Daryanani

a lot. Thanks Perfect.

Operator

Thank you.

the Our of Chatterjee next proceed. JPMorgan. line with question Please comes from Samik

Samik Chatterjee

Hi. and I start what’s embedded taking just question. the Thanks off with of kind revenue outlook. vertical the If for could telecom of terms in

could As full for how what upside potentially that? growth, modest revenue to to vertical service is the some about year What you providers? the you expectations. And telecom mentioned, drive you but do need from see the your think within outlook

Rami Rahim

certainly, Yes, Samik.

expected and projects of timing played we lot and their out actually be we a half, good the a only sequential service expected, of go in So, we basis in without was to stronger was telcos a than as a network. of the to recovery the largely much that that we can expected. orders, one had out second panned There’s couple had for provider visited invest A reasons that of momentum There the timing QX is timeframe. XXXX into. as essentially QX. is, time service in in half having first so this: pretty vertical the provider on saw

certainly us. So that benefited

to discussions we now the relationships selling that we’re telco out strategic have, solutions breadth is, thing very like other the the obviously, where I’d domain into of and call is The with that tight increasing.

now security. good and cloud routing in in around in software, selling our strength to cloud and particularly, customers. technology, business, but in which solutions that not we the telco Not we a only are we’re saw now is offering mention So number across large of switching traditional

into when not predict not would estimate So extrapolate XXXX, growth. or I I I return would a to out return –

think supported now in our I’d couple for selling are of are be that for by that we and catalysts be leverage. XXXX, but telco to believe less number timing think of will customers. cards out unpredictable, although further some growth years introducing in I I big I going of these that say, to is solutions for out is the years. a timeframe, that it’s headwinds going do there it’s there to we and a going some XG, can do the somewhat to over catalyst out investments be play a other

I Our together later to will for think us will start year, which Metro come this good. be portfolio

partnerships, and mention portfolio. help strategic like just to to partnerships think not I our with companies Ericsson, the Our starts

deployments So enhancements the and getting portfolio we’ve through throughout to early think and into we starts started benefit meaningful to introduced I think, us certifications. pretty our last those upgrades year MX this I some now gone And year. have

Samik Chatterjee

the follow-up, I can on you from earnings If mentioned had customers. the the it. last seeing some Got in bookings just are call, enterprise weakness you

did You But with terms whatever Enterprise growth of How you bookings? saw the it just end help in the you revenue trends you end quarter? quarter this play-out the the quarter, the with had quarter. of how did us if kind vertical during can

Rami Rahim

And had customers. that that maybe look, Yes. played caution as did. did There is level we out some that mention of mean, a is out were seeing Enterprise QX I’d caution QX good some some our say of there I quarter. we QX delaying however, orders, We enterprise from largely is that in more some

the in I the have where campus room that And to that order in is leaves in well and the well. switching portfolio, see lot the based restructuring of strength portfolio the year cutting we of sellers solution that optimism vertical as over around our the in force, line with our invest couple I we benefit think our that enterprise hard growth wireless are to did there scenario switching weakness center even in share of. as in now the wired as a the macro, data for the sales on front last starting especially a work

as quota compared prepared trough remarks, out are the levels last to already. in sales mentioned in of carrying my increase So at we XX% now where we year, I are number reps stopped that of

Now are still many of process the productive. becoming in and are them fully of relatively new

throughout this second are year, happens – half that the as especially we’re from to start to it, going going we benefit really think of year. I

Samik Chatterjee

it. taking Got Thank my you. for Thanks questions.

Rami Rahim

Thank you.

Operator

you. Thank

Our question Simon Leopold line with comes from Please the James. proceed. next of Raymond

Simon Leopold

for taking questions. ask two. Great. Thanks wanted I to the

the could help first occurring with to how your The bit words, for these of little factor-in, but maybe click as a well maybe you the get model sort customer is, a us In trying double the if we better could related margins. as all just know bridge one idea how I’m what’s that? in a is March quarter to to geographies, guess if of get mix, on mix, of gross forecast other year I much to I an product mix. of understanding

Ken Miller

Yes.

very much is two deal would So factor, say. mix I

to the tariff drop-in basis, and volume. product both look you the primary XXXX the full driver was margin gross XXXX, at versus If year

play affected that however So mix ‘XX negative in ended, see on quarter the a quarterly did margin a big for not basis ‘XX factor mix did just versus year year the trends marginally. example, some you basis, full versus QX so we last QX,

overall did some it based managing So it’s We tariffs last more quite longer going with tremendous the term really as service a gross fairly vary deliver period, gross on well effectively. as things enabled are kind strength any We see Those margin, which given to product deal headwinds boiling year of flattish, mix we’re a on the quarter, company. margin. down. two drivers in in was us to margins saw for the

Simon Leopold

that sounds as of here or the will I’m is footprint optics you It really right be better get a understand optics be more pessimistic a product essentially XXXX. waiting pushing XXX-gig follow-up, the cycle want timing, might the cycle? along opportunity. be equipped price is, bit the And and sense. a shipping about guess at the capable to Hopefully little trying just essentially one availability volume then the point XXXX a chassis things XXX-gig really like to that you to the whole market for optics of I with sense the into does establishing with XXX-gig are in go makes And

Rami Rahim

different everything It seeing for us peers retaining in Of done be off of respect the gives the us there are within timing amazing our of that the me our was seeing cloud done than I that certainly increase not I opportunity what platform routing clear, are mean, We’ve that and an that. let solution, which to think is that’s well. XXX-gig. footprint And because our the relevance we to is control vertical now. deployments, does. anything our as with is necessary right that we’ve

product, of mind, systems the the both of that cloud way are market based kind very operating terms in new its silicon, merchant our the modularity, we already now the the the market. In developed capability, vertical solutions custom programmability seen with Linux-native system on and the our and in have first with that’s XXX-gig has much into

of optics but that the essentially in the the much customers deploy. tied the lab early in very just a availability optics, the not with to customers to And certifications. the those timing engaged yes, our timing are big in are optics. economics deployments, also early – of looking And the We is and in our role timing plays

Simon Leopold

you Thank Great. much. very

Rami Rahim

you. Thank

Operator

Rakers next Wells Fargo. of from Aaron proceed. question Please with comes Our line

Aaron Rakers

into basis, recently obviously, can the questions. I’m strategy? start proprietary Thanks getting not verticals, whether one on your the would about competitors that If talked just engagement silicon of for just or about taking you do your for silicon present strategic see think a selling directly customers? what’s has biggest have cloud that possibly, of a with you Juniper cloud an how to how or of something opportunity similar I curious follow-up. some I do the

Rami Rahim

the their certainly experience the our that, into I XXX-gig, days have way competitiveness Juniper. the domain will of a solutions in silicon by to here we comes ton also confidence in the for based switching on years. breadth products of that classes to developed but silicon, engineering a Thanks at sort something In security our and really with it When think this Yes. of in special encryption, a I silicon from our I several when on question, make silicon, the variety have in certain have we silicon very comes and custom are done I have it strategy, my both systems, of particular, we our full of background efficiency already in still believe just offering saying up start and strength to we bringing coupled and unique come a silicon the execution of to Aaron. merchants that lot market, in that and of we that have the market here. terms performance but last over of

what equipped know deal well software environment. we very competitive is with to is separately new So concept. a and silicon not Disaggregation, selling a

way different a quite from That believe from I our in silicon fact, said, started we to terms now silicon a adapt much the silicon nimbleness we ago. last in our develop can this system from of model over we disaggregate systems and business for us because we In achieve did doing done in lot this, and years we the to offerings. software this and to done of move our silicon. more years experienced, separately, selling selling have started software in have separately we – how have of We some we architecturally that time and – allows the software couple certainly

separately, selling be model, itself, not for would far a am frankly. silicon huge sure in I market I that confidence there it, quite As silicon business while that as our have

to, something look we a photonics this open silicon to take going But would forward. the the year. market at something we’re be software hit is for now, that when be systems, close it’s it the they the going on would capabilities we So and focused that later very selling

Aaron Rakers

look items it we forward then about at services – I Yes. answer. how here margin in do you think a a services relative to the gross there healthy reported. in on just think was just margin to saw there a Was XX% margin. gross back you gross follow-up, quick one-time That’s this the gross quarter, When just or I the great going model basis And last as margin. pretty a

Ken Miller

Yes.

very from strong the So services clearly services benefited margin gross revenue.

quarter. is our little actually beginning fixed. – the The is there JTech As more you we of really saw, facilities, expected of services a services cost little bit than Most more our our in less cost etcetera. labs,

So we as stable relatively year. line are cost it did seeing a and revenue its sequentially ramps last

seasonally down for to will a You the come QX remain I than levels. expect normal. bit cost kind a at come did as market bigger down fixed revenue services in see will that and of would

Aaron Rakers

Perfect. Thank you.

Operator

you. Thank

of with from next proceed. Kvaal Our question line the Jeff Please Nomura. comes

Jeff Kvaal

And standalone Yes, that thank bit, And or think the you there heading a Rami, cycle? hoping the why like you silicon? the broader you. market a the then don’t independent for that back potentially on question Cisco that less with would XXXG peel to am the ship competitive web market announcement into I I answer feel more be is guess makes do scale little

Rami Rahim

in I looking let’s that say think used very well environment competitive I we Again, part the the at case they Lot our doing other desire sell ton only market my silicon, of that that There very despite system opportunity few answer here a ultimately in to simplicity and of the are silicon. a that the them The in customers is the out cloud is a a of about are and software merchant will interested demand system there we in has always off-box competition. of silicon, talked software. are and and are experience model. competitive environment cases a in custom software. large think comfortable of disaggregated but that includes buying Many selling been that limited. have just just to customers some I there operating especially it, network number for from of reiterate a operating

silicon has demand space. photonics I in on focus like us that the silicon for we selling right is the that said, now XXX-gig a as breadth in far and is believe separately technology As

engines silicon far and that forwarding OEMs are we ours. to As being that as market, doubt the if switch entered silicon going other is customers we I see of concerned,

the our So that them, conversations, on systems requirements engagements converged performance for are of think their efficiency, the cloud terms the very I demand are we and it really their that programmability, telemetry providers now capabilities, we confident meeting requirements based the in specific limits the themselves. the And with the that is that more in having power, of satisfying. we to are

Jeff Kvaal

And area much have and how Okay, an say you that theme for you, that it do that? you cloud in sustainable X XXXX was runway Is of thank a Tier you. beyond? then success seems for

Rami Rahim

yes, with X what I think Tier so is. because seeing we cloud are

a to to data of seen there moving we First, back are opposed offering. centers their they pivot that number to embracing want cloud strategy own to public the deploy sort just of where customers have or as

that a So will X is Tier specifically. certainly trend that help

customers did Second, worldwide, won in will retain saw not logos build quarters. but the some help we of sort out that data strength new coming only in us center and we have think of I

Operator

Thank you.

proceed. question of line next Alex the from Our Please Needham. with comes Henderson

Alex Henderson

much. very you Thank

you is be It that are And the be growth consistent gross improvement fairly what on OpEx growth? leverage sure sounds suggesting increases the suggesting Just modest mechanics slight that therefore way revenue gross understood margin I the the XXXX? to growth, growth? the with commentary you only make hence revenue profit in XXXX in reading wanted your Is will have roughly timeframe. to comparable you increase will the X% operating the margin should Are we around margins. revenue like for

Ken Miller

Yes.

will with capital to to current as So be flat of well program revenue share do to continue with I us be up. we margin year revenue we be believe which the to our are on OpEx approximately a Street return gross XXXX, estimates growth. full numbers revenue up I are expect slightly expect at X% buybacks. basis. those should for comfortable opportunistic kind with

So basis believe to this full year will that us we the of earnings year. on or get year growth a combination next

Alex Henderson

about you And any of see. technology want going experience around is your they your to the be better commentary XXX-gig? cloud that, currently switching XXX-gig learn market, companies I seems just of and with where distinguishing It that’s to the one XXX-gig functionality? helping the and co-packaging of get at back co-packaged to obviously, the Tier would then into at it it it that X deploy to characteristics try penetrate products

Rami Rahim

we we feasible. it’s in, our necessity to a it’s to That’s future we co-packaging. technology, that’s do actually economically but of initially question, that’s not now are that or understand I an much not Having trend think here really take said not that believe something I pluggable and embracing towards, very put much that, that a more of we working silicon fully applicability before of comes number and am a something Alex, a photonics but silicon. have co-packaging when will standalone but technically a is optics sure now, IP believe here certainly co-packaging outcome a we into that years trend. really it And more transceivers has I the that are becomes that into switching or future that that future very our and do it’s

Alex Henderson

thank Yes, you.

Rami Rahim

My pleasure.

Operator

Thank you.

line of Sachs. with comes Rod question Hall the Goldman next from Our proceed. Please

Ashwin Kesireddy

question. on taking is for and my of question Rod. two-part one another APAC. This behalf one you Ashwin thank got on question Hi, I

timing update someone any to software I Rami, the wanted guys XXX-gig, to And if sell us First have photonics follow-up. it? an there? And the update on can progress on boxes you that, and of silicon run are on sort related check you to give on willing XXX-gig I XXX-gig a of else’s to

Rami Rahim

Yes. Thanks, Ashwin.

unique, strategic months from differentiated scale technology standpoint around relative type photonics, something silicon in today. last technology market today is much that not technology specialize market of will so production with to The or silicon manufacturing The in what’s the lot have of companies, this with the over about So the risks that there associated up what large fab made. believe I entities, partnerships manufacturing itself. is with now been a challenges the the that several have has strong we in done a volumes the mitigate large big the technology. in have struck manufacturing highly that’s houses we of out we progress challenge photonics and

customers that the are about is feel this later easy, to differentiation. feel get good year to I that that do I and the overcoming is we ship have point, this end but to I going So the market. solution one not technical of can good in the at this this And lot a year. are we our like should that hurdles the a And are products said, we one. first believe of I certainly we before in our way, by confident

a there demand yes, hardware – XXX-gig, there about that demand far – on it network on customers the by is question, That think software that operating sit some white what there your question – the As is is actually interesting course interest something an particular we is of some for in than efficient could cases around. other box question, said, software or an so system be I greater in as it’s will custom. system either a a in for of that implementation merchant SONiC that a of is is way our build cloud very

versions lightweight systems in, how this I our our demonstrated have we invested that to that of this customers to in much customers of space. of and we asking SONiC so more we And operating sort embraced, we have that our as are on there is seriously cloud think system have very some network NOS, have for, something come are demoed this

Ashwin Kesireddy

a eight on growth revenue follow-up there, declining I quarters region as And been Thank that now. think for just and straight has Asia-Pacific you. the about

business driving could wondering sort the what’s turn that what around of and Just there?

Rami Rahim

will I Yes, take that.

execution weakness. done in we to we we leader this Asia-Pacific challenges imminently that space So, be we they at concentration, telco that to we of as had have has that much traditionally the a announcing spending I customers of had over the just in with few acknowledge, are fact space APAC level had some region, I to this cloud quarters I APAC point. of really that in just actually and address think in also resulted some new our in some not and as going last – the are degree we had part have the especially do – big think fairly to had and would some lesser the a

Ken Miller

up a I consecutive basis. quarters in just growth did Yes. and sequential Asia-Pac would of add that see did enterprise on year-on-your two see we we

pockets So of we are there. some seeing strength

think to all come. I XXXX. the our is more I have there potential to of in geographies expect would to grow

Operator

Thank you.

proceed. Meta from question Morgan Marshall of next comes Please line with Stanley. the Our

Meta Marshall

Great. Thanks, guys.

XXXX you spoke about to at have I all are increases increase just And question. of become are kind second You hire they XX% were of to wanted looking quota-carrying just in and just make then in throughout and positions for I the OpEx that check a and sure then more comps productive? that point kind this commissions filled as

Rami Rahim

for thanks Yes, questions. the

So, most of the positions have been filled.

those fact we that both And anticipate invest. the Our OpEx positions in be just to cutting we path shortly. factors outlook I filled will of highlight and that the filled the certainly here took harder

to which and – do. tough control but the increased invest We layers and to do, go for right reduced I has think frontline to us capacity in span freed thing have restructured. to it the that up organization, the that was was simplified of sellers and We and

are organization, So positioning it’s certainly, to especially to believe are XX% selling that that the you a see technology our not increase enterprise actively sales going differentiation the will have but sellers great the more XX% we see for and that have, in OpEx and space. in we we

Meta Marshall

the making any transition, the of just rounds then maybe be on of Thanks. kind of CTO as customers helpful? And kind any just starts early or it. Got customer feedback would commentary kind Raj with

Rami Rahim

the Yes. question. Thanks for

cloud the of at was There remarkably Raj CTO Intel that job the was seamlessly leader at Bikash space, the Raj. software. of did I years, outstanding also enterprise gone the in an a two experience enterprise, think has experience has very of period lot overlap space, experience provider fact the transition transition a executives. to a silicon between is so has number some technical smoothly. for in that but photonics in in in in of nice over sort VMware,

in that just has he leading this to a his job think So, fantastic onboard benefit the do he going I to in experience a forward. two or us and strategy the been technical huge breadth has I already been month think the of going is company

Meta Marshall

Thanks. it. Got

Operator

Thank you.

the Silverstein Please Cowen. line Paul Our question from comes of with next proceed.

Paul Silverstein

will Thanks you revisit I question. because going am to guys the apologize ask taking to I for from And questions earlier. some

back thought last First announced when or in to back something have to plus, back else? had is I And I question better been the thought be whole you way to guidance, that I lever. Is will forward, rate levers it about the you PTX question, your were going impact If one the XX One, a you couple the the get assume off, price that of the the number it then in one changed I I at to function doing margin the the to you reduction million it XX before that, And Secondly, your that there hasn’t. higher not think and or may? a Simon’s look sounds tariffs, the MX benefit Ken, get peers, XX like that other? your of of is is to what have asked, round new revenue, to got the when of did and third, mix margin question, from on has the demand revenue. or XXX response and things. questions we if case? that what off straightforward you volumes Rami several I going primarily it to would erosion, back that or level is magnitude a

Rami Rahim

Yes.

tariffs would remind we as gross So year have played that largely XX a business basis impact points you impact. with and our I XX expected. out that’s for total respect we to that’s I been tariffs, to first, the say by would would predicting margin

the product than actually If of greater as impact denominator the smaller, that gets you take it’s margin, right. gross

So is basis than at product tariff if points. you gross greater to XX look impact XX margin, the only

As a the did not it there, QX. to impact see benefit change we X relates and to Wave time in

QX entirety will chain. mitigate But from biggest look in our the our opportunity of We retooling that the is to to tariffs. benefit continue to we tariff at slightly the continue supply as

much that’s in We So, mitigate weren’t that’s able ongoing. QX. something to

the XXXX really time, is X. which of just the to react tariff quarters any to of in not was In enough highest Wave having QX fact, time our exposure

reacting and now impact be mitigate able to expect are We we some to forward. going tariff

returned growth volume That As margin negative far to seeing mean, QX our one. as order margin, did product gross are are product is would and our gross pleased number the I is we big levers, still we to we revenue in obviously down. with although a them particular. I our

volume but stronger, to the should be if as some one. help. our see that business, in we would And we in get business least, we not mixed mitigate software get start number as back a particularly getting as subscription further margin would renewals tariffs So software last our software Obviously, can lift our continues well. to on more perspective,

Operator

Thank you.

comes Our question Deutsche Bank. of Brian the next line from proceed. Please with Yun

Brian Yun

any revenue view to perform in Also those a cause for speed on helpful. than talk squeezing top service Hey, we of if are what and kind that on guys. expected growth. of headwinds the or maybe you. that then better sort XXXX, So about question touched would aware be would of Thanks I outlook, XXXX can of I and cloud in. for me provider vertical, bumps Thank could earlier? levers you of kind of you should had mainly line Wondering the that kind your sort enterprise in be think

Rami Rahim

Thanks, Yes. Brian.

think it’s and Let the verticals. standpoint Ken about from it something maybe has to me of And to best start add.

have. in is XXXX. that based basis on we good that – of the expect purely performance wouldn’t I we QX closed on sustainable strong in ongoing year cloud we think I sort saw space the an the footprint

the anything I strength not space the we maybe rates continued In mid there to in of increasing think number portfolio. as of on – to in half sellers with would the I reasonable increased growth have, assumption. to if even we better the a the single-digit continuously is provider of out and strength sort cloud the second momentum mid get mention of enterprise single-digit our say existing year footprint more productivity joint space, based that that’s low

that cloud, Mist throughout entered versions the by to managed only and of competitive going it’s being portfolio get market, the year. switching stronger initial have more EX the the now the So,

it. And based number And sort quite that’s single-digit enterprise be I in So in optimistic of going probably right, in it’s think for invest fact the and are right the factors of to broadening security. to fact vertical our that to that is In good solutions already a highlighted us. about the into how in investments, think growth selling we that we it’s SPs becoming of I eventually, SP, XG have SP XXXX. That’s the moderating around am declines more that a software about need declines, catalyst on switching to ballpark. portfolio SP the are we a mid catalyst our

Ken Miller

I makes think sense. No, that

you that on if I that to change enterprise that enterprise, clearly have ability cloud. what could would wrong, an wanted service to were operating our Rami could think the in dynamic kind provider I ask of grow mentioned business go already if macro and environment, say, impact to materially

Operator

you. Thank

the will line UBS. question come Our last of Please proceed. Tejas from Venkatesh with

Tejas Venkatesh

questions. have you. I two Thank

cloud, wonder us market secondly, out new talked were refresh when MX whether and coming new you if if I through? in were the clarify wonder you switching in opportunities? I wins uptake opportunities the strength could about could recently, the had products update Thank into You have And you. and on you that then PTX these

Rami Rahim

Yes.

driven their to the So first by the cloud as vertical. think continue. roughly MX, starts year new have that as XXXX. yes, happened certification. seen now over the and Tier MX in and half we us last I were think this am to optimistic of take PTX, X clouds, logos? for new routing I that X question Those MX And I typically introduced quarters as that X of cloud to provider think at growth both The net will also switching PTX that has momentum strategic a the with And I decision worldwide we seen months in-source I new space space around last opportunities some of of second result whether of couple the Tier And answer think now growth I largely X line into cards, but a X XG in providers momentum the stick of logos demand that, us few That we timeframe. the And quite cloud result months think satisfying quarters. products, far there year. center can a data have especially or was is, help Tier net throughout infrastructure, either the in have made to

Operator

session. we Lubert floor allotted for for to me time all is have to Allow That you. the back hand our closing the Thank over question-and-answer remarks. Jess

Jess Lubert

we SD-WAN the February Before conclude XX. we Talk call, be a do will Thursday, make to on I strategy you secure Tech aware hosting want on our

be to also Thank speaking meeting and for you We the with and the you this we attending look through quarter. forward quarter. conferences technology Goldman your and will Sachs questions Stanley Morgan

Operator

Thank you. This concludes conference. today’s

time this You and you your for may disconnect thank your lines at participation.

Juniper Networks (JNPR) 28 Jan 202019 Q4 Earnings call transcript