JUNIPER NETWORKS REPORTS PRELIMINARY THIRD QUARTER 2012 FINANCIAL RESULTS

 

SUNNYVALE, CA--Juniper Networks (NYSE: JNPR)

 

Revenue: $1,118 million, up 4% from Q2'12 and up 1% from Q3'11

Operating Margin: 3.8% GAAP; 16.9% non-GAAP

GAAP Net Income Per Share: $0.03 diluted, includes $0.16 impact from restructuring and other charges

Non-GAAP Net Income Per Share: $0.22 diluted, up 16% from Q2'12 and down 21% from Q3'11

 

Juniper Networks (NYSE: JNPR), the industry leader in network innovation, today reported preliminary financial results for the three and nine months ended September 30, 2012, and provided its outlook for the three months ending December 31, 2012.

 

Net revenues for the third quarter of 2012 increased 4% sequentially, and increased 1% on a year-over-year basis, to $1,118 million.

 

The Company posted GAAP net income of $17 million, or $0.03 per diluted share for the third quarter. The GAAP diluted income per share includes $0.16 impact from restructuring and other charges. Non-GAAP net income was $118 million, or $0.22 per diluted share, for the third quarter of 2012.

 

Non-GAAP net income per diluted share increased 16% compared to the second quarter of 2012 and decreased 21% compared to the third quarter of 2011. The reconciliation between GAAP and non-GAAP results of operations is provided in a table immediately following the Share-Based Compensation Related Payroll Tax by Category table below.

 

Juniper's operating margin for the third quarter of 2012 decreased to 3.8% on a GAAP basis from 8.1% in the second quarter of 2012, and from 12.4% in the third quarter 2011. Non-GAAP operating margin for the third quarter of 2012 increased to 16.9% from 15.0% in the second quarter of 2012 and decreased from 20.0% in the third quarter of 2011.

 

"Juniper delivered top line revenue growth in the third quarter as we focus on excellence in execution throughout our business," said Kevin Johnson, chief executive officer of Juniper Networks. "Our new products continue to gain traction in the marketplace, and we're aligning our organization to sharpen our focus, enable agility and drive efficiency as we position for 2013."

 

"Our third quarter results demonstrated a return to year-over-year revenue growth and improved operational performance," said Robyn Denholm, chief financial officer of Juniper Networks. "Long-term demand fundamentals for high-performance networking continue to be positive, yet customers remain cautious in the near-term environment. We remain focused on executing our strategy to drive revenue growth, and with our workforce restructuring largely complete, we're well prepared to capture the market opportunity ahead."

 

Other Financial Highlights

 

Total cash, cash equivalents and investments as of September 30, 2012 were $4,048 million, compared to $4,272 million as of the second quarter of 2012 and $4,130 million as of the third quarter of 2011.

 

Juniper generated net cash from operations for the third quarter of 2012 of $173 million, compared to net cash provided by operations of $212 million in the second quarter of 2012, and $185 million in the third quarter of 2011.

 

Days sales outstanding in accounts receivable ("DSO") was 32 days in the third quarter of 2012, compared to 34 days in the prior quarter and 36 days in the third quarter of 2011.

 

Juniper repurchased approximately 14 million shares in the third quarter of 2012, at an average price of $18.00 per share, or approximately $250 million.

 

Capital expenditures, as well as depreciation and amortization of intangible assets expense during the third quarter of 2012 were $87 million and $48 million, respectively.

 

Outlook

 

 Long-term fundamentals driving demand for networking solutions are positive, and we are making good progress toward our revenue targets for our new products. Our outlook for the December quarter reflects our customers' continued caution in their investment decisions in what continues to be a challenging environment. 

 

Juniper estimates revenue for the fourth quarter ending December 31, 2012 to be in the range of $1,100 million to $1,130 million. 

 

Juniper estimates that its non-GAAP gross margin will be in the range of 63.5% to 64.5% for the fourth quarter. 

 

Juniper estimates that its non-GAAP operating expenses will be flat compared to the September quarter. 

 

Juniper expects its non-GAAP operating margin for the fourth quarter will be in the range of 14% to 16%. 

 

Juniper estimates that its non-GAAP net income per share will range between $0.19 and $0.22 on a diluted basis, assuming a flat share count and estimated non-GAAP tax rate of 32%. 

 

All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition-related charges, restructuring charges, litigation settlement charges, gain or loss on equity investments, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and income tax effect of non-GAAP exclusions. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis.

 

Discussion of Non-GAAP Financial Measures

 

The table above includes the following non-GAAP financial measures derived from our Preliminary Condensed Consolidated Statements of Operations: cost of product revenue; cost of service revenue; product gross margin, product gross margin as a percentage of product revenue; service gross margin; service gross margin as a percentage of service revenue; gross margin; gross margin as a percentage of revenue; research and development expense; sales and marketing expense; general and administrative expense; operating expense; operating income; operating margin; net other income and expense; income before income taxes and noncontrolling interest; provision for income taxes; income tax rate; net income; net income per share and net income as a percentage of revenue. These measures are not presented in accordance with, nor are they a substitute for U.S. generally accepted accounting principles or GAAP. In addition, these measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes. The non-GAAP financial measures used in the table above should not be considered in isolation from measures of financial performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

 

We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, forecasting and planning for future periods, and determining payments under compensation programs. We consider the use of the non-GAAP measures presented above to be helpful in assessing the performance of the continuing operation of our business. By continuing operations we mean the ongoing revenue and expenses of the business excluding certain items that render comparisons with prior periods or analysis of on-going operating trends more difficult, such as expenses not directly related to the actual cash costs of development, sale, delivery or support of our products and services, or expenses that are reflected in periods unrelated to when the actual amounts were incurred or paid. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for financial measures prepared in accordance with GAAP, allows for greater transparency in the review of our financial and operational performance. In addition, we have historically reported non-GAAP results to the investment community and believe that continuing to provide non-GAAP measures provides investors with a tool for comparing results over time. In assessing the overall health of our business for the periods covered by the table above and, in particular, in evaluating the financial line items presented in the table above, we have excluded items in the following three general categories, each of which are described below: Acquisition-Related Charges, Other Items, and Share-Based Compensation Related Items. We also provide additional detail below regarding the shares used to calculate our non-GAAP net income per share. Notes identified for line items in the table above correspond to the appropriate note description below. Additionally, with respect to future financial guidance provided on a non-GAAP basis, we have excluded estimates for amortization of intangible assets, share based compensation expenses, acquisition related charges, restructuring charges, litigation settlement charges, gain or loss on equity investments, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and income tax effect of non-GAAP exclusions.

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