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Juniper Networks Reports Preliminary Second Quarter 2016 Financial Results
Company Delivers Solid Sequential Revenue and Profit Growth
Net revenues for the second quarter of 2016 were $1,221.3 million, flat year-over-year and an increase of 11% sequentially.
Juniper's GAAP operating margin for the second quarter of 2016 was 16.7%, a decrease from 19.9% in the second quarter of 2015, and an increase from 13.5% in the first quarter of 2016. Non-GAAP operating margin for the second quarter of 2016 was 22.5%, a decrease from 25.2% in the second quarter of 2015, and an increase from 19.3% in the first quarter of 2016.
Juniper posted GAAP net income of $140.0 million, a decrease of 11% year-over-year and an increase of 53% sequentially. GAAP diluted earnings per share for the second quarter of 2016 was $0.36. Non-GAAP net income was $191.6 million, a decrease of 8% year-over-over and an increase of 35% sequentially. Non-GAAP diluted earnings per share for the second quarter of 2016 was $0.50.
The reconciliation between GAAP and non-GAAP results of operations is provided in a table immediately following the Preliminary Net Revenues by Market table below.
"Despite an uncertain macro environment, we delivered solid revenue performance and profitability metrics in the second quarter," said Rami Rahim, chief executive officer at Juniper Networks. "There is no shortage of appetite for network innovation. Our diversification strategy and differentiated portfolio enabled us to deliver sequential growth across all geographies, technologies and sectors. We remain as committed as ever to innovating for our customers and to executing with excellence in everything we do."
"We are focused on delivering solid financial results and strengthening shareholder returns," said Ken Miller, chief financial officer at Juniper Networks. "Our underlying fundamentals remain strong and we intend to remain focused on operational discipline and believe we are well positioned for the long term."
Other Financial Highlights
Total cash, cash equivalents, and investments as of June 30, 2016 were $3,491 million, compared to $3,417 million as of March 31, 2016, and $3,076 million as of June 30, 2015.
Juniper's net cash flow provided by operations for the second quarter of 2016 was $354 million, compared to net cash provided by operations of $172 million in the first quarter of 2016, and $263 million in the second quarter of 2015.
Days sales outstanding in accounts receivable, or "DSO," was 55 in the second quarter of 2016, compared to 64 days in the first quarter of 2016, and 39 days in the second quarter of 2015.
Capital expenditures were $68 million and depreciation and amortization expense was $49 million during the
second quarter of 2016.
Juniper's Board of Directors has declared a quarterly cash dividend of $0.10 per share to be paid on Sept. 22, 2016 to shareholders of record as of the close of business on Sept. 1, 2016.
During the second quarter of 2016, the Company repurchased approximately $126 million of common stock and paid $38 million in dividends. Since the first quarter of 2014, inclusive of share repurchases and dividends, the Company has returned approximately $3.91 billion of capital to shareholders against its commitment to return a total of $4.1 billion by the end of 2016 and reduced its diluted share count by 22%.
Juniper Networks remains constructive on revenue for 2016 and expects modest growth despite the current macro environment. The Company will continue to prudently manage operating expenses. However, it expects gross margins to remain approximately at their Q2 levels in the near-term. As a result, Juniper expects operating margins for the full year 2016 to decline slightly relative to the full year 2015. Juniper remains confident in its long-term model and remains focused on growth and operating margin expansion.
Juniper's guidance for the quarter ending Sept. 30, 2016 is as follows:
Revenues will be approximately $1,250 million, plus or minus $30 million.
Non-GAAP gross margin will be approximately 63%, plus or minus 0.5%.
Non-GAAP operating expenses will be approximately $500 million, plus or minus $5 million.
Non-GAAP operating margin will be approximately 23% at the midpoint of revenue guidance.
Non-GAAP tax rate of approximately 26.5% for the third quarter, which includes the benefit of the permanent R&D tax credit.
Non-GAAP net income per share will range between $0.48 and $0.54 on a diluted basis. This assumes a flat share count from the second quarter.
The outlook assumes that the exchange rate of the U.S. dollar to other currencies will remain relatively stable at current levels.
All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition-related charges, restructuring charges (benefits), impairment charges, professional services related to non-routine stockholder matters, litigation settlement and resolution charges, gain or loss on equity investments, retroactive impact of certain tax settlements, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and the income tax effect of non-GAAP exclusions. Juniper is unable to provide a reconciliation of non-GAAP guidance measures to corresponding GAAP measures on a forward-looking basis without unreasonable effort due to the overall high variability and low visibility of most of the foregoing items that have been excluded. Material changes to any one of these items could have a significant effect on our guidance and future GAAP results. Certain exclusions, such as amortization of intangible assets and share-based compensation expenses, are generally incurred each quarter, but the amounts have historically and may continue to vary significantly from quarter to quarter.
Second Quarter 2016 Financial Commentary Available Online
A CFO Commentary reviewing the Company's second quarter 2016 financial results, as well as third quarter 2016 financial outlook will be furnished to the SEC on Form 8-K and published on the Company's website at http://investor.juniper.net. Analysts and investors are encouraged to review this commentary prior to participating in the conference call webcast.
Conference Call Webcast
Juniper Networks will host a conference call webcast today, July 26, 2016, at 2:00 pm PT, to be broadcast live over the Internet at http://investor.juniper.net. To participate via telephone in the US, the toll free dial-in number is 1-877-407-8033. Outside the US, dial +1-201-689-8033. Please call 10 minutes prior to the scheduled conference call time. The webcast replay will be archived on the Juniper Networks website.
Statements in this release concerning Juniper Networks' business outlook, economic and market outlook, future financial and operating results (including full-year revenue growth), planned approach to manage its business, ability to execute its strategy, focus on growth and operating margin expansion, capital return program, and overall future prospects are forward-looking statements within the meaning of the Private Securities Litigation Reform Act that involve a number of uncertainties and risks. Actual results or events could differ materially from those anticipated in those forward-looking statements as a result of several factors, including: general economic and political conditions globally or regionally; business and economic conditions in the networking industry; changes in overall technology spending and spending by communication service providers and major customers; the network capacity requirements of communication service providers; contractual terms that may result in the deferral of revenue; increases in and the effect of competition; the timing of orders and their fulfillment; issues resulting from the transition to our new ERP system; manufacturing and supply chain constraints, changes or disruptions; availability of key product components; ability to establish and maintain relationships with distributors, resellers and other partners; variations in the expected mix of products sold; changes in customer mix; changes in geography mix; customer and industry analyst perceptions of Juniper Networks and its technology, products and future prospects; delays in scheduled product availability; market acceptance of Juniper Networks products and services; rapid technological and market change; adoption of regulations or standards affecting Juniper Networks products, services or the networking 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; significant effects of tax legislation and judicial or administrative interpretation of tax regulations; currency fluctuations; litigation settlements and resolutions; the potential impact of activities related to the execution of capital return and product rationalization; and other factors listed in Juniper Networks' 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.
Juniper Networks believes that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to the company's financial condition and results of operations. For further information regarding why Juniper Networks believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the discussion below. The following tables and reconciliations can also be found on our Investor Relations website at http://investor.juniper.net.
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