[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements of Juniper Networks, Inc. for the periods ended June 30, 2021, and December 31, 2020, along with management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This item includes the unaudited condensed consolidated financial statements, comprising statements of operations, comprehensive income, balance sheets, cash flows, and changes in stockholders' equity, along with detailed notes [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The Condensed Consolidated Statements of Operations show increased net revenues for both periods, but a significant decrease in net income for the six-month period, primarily due to a loss on extinguishment of debt Condensed Consolidated Statements of Operations (in millions) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Revenues | $1,172.3 | $1,086.3 | $2,246.7 | $2,084.3 | | Cost of Revenues | $490.4 | $466.7 | $949.2 | $885.4 | | Gross Margin | $681.9 | $619.6 | $1,297.5 | $1,198.9 | | Operating Income | $85.7 | $90.5 | $113.5 | $129.9 | | Loss on Extinguishment of Debt | — | — | $(60.6) | — | | Other Expense, Net | $(10.9) | $(4.4) | $(15.9) | $(15.5) | | Income Before Income Taxes | $74.8 | $86.1 | $37.0 | $114.4 | | Income Tax Provision | $12.8 | $24.9 | $6.1 | $32.8 | | Net Income | $62.0 | $61.2 | $30.9 | $81.6 | | Basic EPS | $0.19 | $0.18 | $0.09 | $0.25 | | Diluted EPS | $0.19 | $0.18 | $0.09 | $0.24 | - Net revenues increased by **8%** for both the three and six months ended June 30, 2021, compared to the same periods in 2020[15](index=15&type=chunk)[342](index=342&type=chunk) - Net income for the six months ended June 30, 2021, decreased by **62%** to **$30.9 million** from **$81.6 million** in the prior year, largely due to a **$60.6 million** loss on extinguishment of debt[15](index=15&type=chunk)[342](index=342&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) The Condensed Consolidated Statements of Comprehensive Income show a decrease in comprehensive income for both the three and six months ended June 30, 2021, compared to the prior year, primarily driven by changes in cash flow hedges and foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Income (in millions) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Income | $62.0 | $61.2 | $30.9 | $81.6 | | Other Comprehensive (Loss) Income, Net: | | | | | | Available-for-sale debt securities | $1.1 | $8.5 | $(0.9) | $6.0 | | Cash flow hedges | $(26.9) | $22.2 | $2.7 | $(1.3) | | Foreign currency translation adjustments | $0.4 | $5.6 | $(1.5) | $(9.1) | | Total Other Comprehensive (Loss) Income, Net | $(25.4) | $36.3 | $0.3 | $(4.4) | | Comprehensive Income | $36.6 | $97.5 | $31.2 | $77.2 | - Comprehensive income for the three months ended June 30, 2021, decreased to **$36.6 million** from **$97.5 million** in the prior year, and for the six months, it decreased to **$31.2 million** from **$77.2 million**[18](index=18&type=chunk)[345](index=345&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and liabilities decreased as of June 30, 2021, primarily due to reduced current assets, including cash and cash equivalents Condensed Consolidated Balance Sheets (in millions) | Metric | June 30, 2021 | December 31, 2020 | | :----------------------------- | :------------ | :---------------- | | **Assets:** | | | | Cash and cash equivalents | $986.7 | $1,361.9 | | Short-term investments | $335.5 | $412.1 | | Accounts receivable, net | $768.3 | $964.1 | | Inventory | $211.5 | $210.2 | | Prepaid expenses and other current assets | $344.1 | $322.9 | | Total current assets | $2,646.1 | $3,271.2 | | Property and equipment, net | $725.1 | $762.3 | | Operating lease assets | $180.9 | $184.6 | | Long-term investments | $493.2 | $656.6 | | Purchased intangible assets, net | $315.3 | $266.7 | | Goodwill | $3,754.1 | $3,669.6 | | Other long-term assets | $608.7 | $567.3 | | Total assets | $8,723.4 | $9,378.3 | | **Liabilities:** | | | | Accounts payable | $259.8 | $277.0 | | Accrued compensation | $264.2 | $270.7 | | Deferred revenue | $891.2 | $867.3 | | Short-term portion of long-term debt | — | $421.5 | | Other accrued liabilities | $275.7 | $324.6 | | Total current liabilities | $1,690.9 | $2,161.1 | | Long-term debt | $1,694.4 | $1,705.8 | | Long-term deferred revenue | $440.1 | $418.5 | | Long-term income taxes payable | $324.5 | $312.5 | | Long-term operating lease liabilities | $160.7 | $163.5 | | Other long-term liabilities | $71.9 | $73.4 | | Total liabilities | $4,382.5 | $4,834.8 | | **Stockholders' Equity:** | | | | Total stockholders' equity | $4,340.9 | $4,543.5 | | Total liabilities and stockholders' equity | $8,723.4 | $9,378.3 | - Total assets decreased by **$654.9 million (7%)** from **$9,378.3 million** at December 31, 2020, to **$8,723.4 million** at June 30, 2021[20](index=20&type=chunk)[347](index=347&type=chunk) - Cash and cash equivalents decreased by **$375.2 million (28%)** from **$1,361.9 million** to **$986.7 million**[20](index=20&type=chunk)[347](index=347&type=chunk) - Short-term portion of long-term debt was fully paid off, decreasing from **$421.5 million** to **$0**[20](index=20&type=chunk)[347](index=347&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The Condensed Consolidated Statements of Cash Flows indicate a significant increase in net cash provided by operating activities for the six months ended June 30, 2021, but a substantial decrease in net cash provided by investing activities and a large increase in net cash used in financing activities, primarily due to debt redemption and business acquisitions Condensed Consolidated Statements of Cash Flows (in millions) | Metric | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :-------------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $437.0 | $369.8 | | Net cash provided by investing activities | $20.6 | $189.5 | | Net cash used in financing activities | $(829.6) | $(304.7) | | Effect of foreign currency exchange rates | $(1.6) | $(9.9) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(373.6) | $244.7 | | Cash, cash equivalents, and restricted cash at beginning of period | $1,383.0 | $1,276.5 | | Cash, cash equivalents, and restricted cash at end of period | $1,009.4 | $1,521.2 | - Net cash provided by operating activities increased by **$67.2 million (18%)** to **$437.0 million** for the six months ended June 30, 2021[22](index=22&type=chunk)[349](index=349&type=chunk) - Net cash provided by investing activities decreased by **$168.9 million (89%)** to **$20.6 million**, largely due to a **$175.0 million** payment for the acquisition of Apstra[22](index=22&type=chunk)[349](index=349&type=chunk) - Net cash used in financing activities increased by **$524.9 million (172%)** to **$829.6 million**, driven by debt redemption and related extinguishment costs[22](index=22&type=chunk)[349](index=349&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) The Condensed Consolidated Statements of Changes in Stockholders' Equity show a decrease in total stockholders' equity for the six months ended June 30, 2021, primarily due to common stock repurchases and dividend payments, partially offset by net income and share-based compensation Condensed Consolidated Statements of Changes in Stockholders' Equity (in millions) | Metric | Shares (millions) | Common Stock and Additional Paid-in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Stockholders' Equity | | :-------------------------------------- | :---------------- | :------------------------------------------ | :------------------------------------- | :------------------ | :------------------------- | | Balance at December 31, 2020 | 327.7 | $7,156.9 | $55.6 | $(2,669.0) | $4,543.5 | | Net income | — | — | — | $30.9 | $30.9 | | Other comprehensive income, net | — | — | $0.3 | — | $0.3 | | Issuance of common stock | 5.8 | $31.6 | — | — | $31.6 | | Repurchase and retirement of common stock | (9.5) | $(123.4) | — | $(119.7) | $(243.1) | | Share-based compensation expense | — | $107.6 | — | — | $107.6 | | Payments of cash dividends | — | $(129.9) | — | — | $(129.9) | | Balance at June 30, 2021 | 324.0 | $7,042.8 | $55.9 | $(2,757.8) | $4,340.9 | - Total stockholders' equity decreased by **$202.6 million** from **$4,543.5 million** at December 31, 2020, to **$4,340.9 million** at June 30, 2021[29](index=29&type=chunk)[356](index=356&type=chunk) - Repurchase and retirement of common stock amounted to **$243.1 million** for the six months ended June 30, 2021[29](index=29&type=chunk)[356](index=356&type=chunk) - Cash dividends paid totaled **$129.9 million** for the six months ended June 30, 2021[29](index=29&type=chunk)[356](index=356&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited condensed consolidated financial statements, covering basis of presentation, significant accounting policies, business combinations, investments, fair value measurements, derivative instruments, goodwill and intangible assets, other financial information, restructuring charges, debt, equity, employee benefit plans, segments, income taxes, net income per share, commitments and contingencies, and subsequent events [Note 1. Basis of Presentation and Summary of Significant Accounting Policies](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) The financial statements are prepared in accordance with U.S. GAAP for interim information and should be read with the annual 10-K, with no material impact from ASU No. 2019-12 and ongoing evaluation of LIBOR transition ASUs - The Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP for interim financial information and do not include all information required for complete financial statements[33](index=33&type=chunk)[360](index=360&type=chunk) - On January 1, 2021, the Company adopted ASU No. 2019-12 (Topic 740) Income Taxes, which had no material impact on the financial statements[36](index=36&type=chunk)[363](index=363&type=chunk) - The Company is currently evaluating the impact of ASU No. 2020-04 and ASU No. 2021-01 on Reference Rate Reform (LIBOR transition) on its financial statements[37](index=37&type=chunk)[364](index=364&type=chunk) [Note 2. Business Combinations](index=10&type=section&id=Note%202.%20Business%20Combinations) On January 27, 2021, Juniper acquired 100% of Apstra, Inc. for $179.4 million, aiming to enhance its data center networking portfolio, resulting in recognized goodwill and intangible assets - On January 27, 2021, Juniper Networks, Inc. acquired 100% ownership of Apstra, Inc. for **$179.4 million**[40](index=40&type=chunk)[367](index=367&type=chunk) - The acquisition consideration included **$176.7 million** in cash and **$2.7 million** in share-based awards[40](index=40&type=chunk)[367](index=367&type=chunk) Apstra Acquisition - Fair Value of Assets Acquired and Liabilities Assumed (in millions) | Item | Amount | | :------------------------------ | :----- | | Cash and cash equivalents | $1.8 | | Goodwill | $84.0 | | Intangible assets | $87.8 | | Other assets acquired | $12.6 | | Liabilities assumed | $(6.8) | | Total | $179.4 | - The goodwill recognized (**$84.0 million**) is primarily due to anticipated synergies and is not deductible for income tax purposes[41](index=41&type=chunk)[368](index=368&type=chunk) [Note 3. Cash Equivalents and Investments](index=11&type=section&id=Note%203.%20Cash%20Equivalents%20and%20Investments) This note details the Company's investments in available-for-sale debt securities and equity securities, as well as restricted cash and investments, showing decreases in both categories as of June 30, 2021 Investments in Available-for-Sale Debt Securities (in millions) | Metric | June 30, 2021 (Estimated Fair Value) | December 31, 2020 (Estimated Fair Value) | | :-------------------------------------- | :----------------------------------- | :--------------------------------------- | | Total fixed income securities | $915.2 | $1,395.8 | | Privately-held debt and redeemable preferred stock securities | $61.1 | $55.7 | | Total available-for-sale debt securities | $976.3 | $1,451.5 | Investments in Equity Securities (in millions) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------------- | :------------ | :---------------- | | Money market funds | $387.1 | $536.6 | | Mutual funds | $31.9 | $29.3 | | Publicly-traded equity securities | $7.2 | $6.6 | | Equity investments without readily determinable fair value | $145.1 | $146.2 | | Total equity securities | $571.3 | $718.7 | Reconciliation of Cash, Cash Equivalents, and Restricted Cash (in millions) | Metric | June 30, 2021 | December 31, 2020 | | :---------------------------------------------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $986.7 | $1,361.9 | | Restricted cash included in Prepaid expenses and other current assets | $19.0 | $19.2 | | Restricted cash included in Other long-term assets | $3.7 | $1.9 | | Total cash, cash equivalents, and restricted cash | $1,009.4 | $1,383.0 | [Note 4. Fair Value Measurements](index=14&type=section&id=Note%204.%20Fair%20Value%20Measurements) This note details the fair value measurements of assets and liabilities, categorized into Level 1, Level 2, and Level 3 inputs, showing a decrease in total assets measured at fair value on a recurring basis Assets Measured at Fair Value on a Recurring Basis (in millions) | Asset Category | June 30, 2021 Total | December 31, 2020 Total | | :-------------------------------------- | :------------------ | :---------------------- | | Total available-for-sale debt securities | $976.3 | $1,451.5 | | Total equity securities | $426.2 | $572.5 | | Total derivative assets | $90.9 | $89.0 | | Total assets measured at fair value | $1,493.4 | $2,113.0 | Liabilities Measured at Fair Value on a Recurring Basis (in millions) | Liability Category | June 30, 2021 Total | December 31, 2020 Total | | :-------------------------------------- | :------------------ | :---------------------- | | Total derivative liabilities | $(5.9) | $(0.5) | - The Company's Level 2 available-for-sale debt securities and derivative instruments are valued using observable market data and pricing models[67](index=67&type=chunk)[394](index=394&type=chunk) - Privately-held debt and redeemable preferred stock securities, and equity securities without readily determinable fair value, are classified as Level 3 assets due to lack of observable inputs[68](index=68&type=chunk)[69](index=69&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk) [Note 5. Derivative Instruments](index=17&type=section&id=Note%205.%20Derivative%20Instruments) Juniper uses derivative instruments, including foreign currency forward contracts and interest rate swaps/locks, to manage foreign currency and interest rate risks, not for speculative purposes, with the total notional amount increasing to $2,186.3 million as of June 30, 2021 Notional Amount of Derivative Instruments (in millions) | Derivative Type | June 30, 2021 | December 31, 2020 | | :-------------------------------------- | :------------ | :---------------- | | Designated derivatives: | | | | Foreign currency contracts (cash flow hedges) | $811.0 | $722.1 | | Interest rate lock contracts (cash flow hedges) | $650.0 | $650.0 | | Interest rate swap contracts (fair value hedges) | $600.0 | $300.0 | | Total designated derivatives | $2,061.0 | $1,672.1 | | Non-designated derivatives | $125.3 | $174.1 | | Total | $2,186.3 | $1,846.2 | Fair Value of Derivative Instruments on Condensed Consolidated Balance Sheets (in millions) | Derivative Type | June 30, 2021 | December 31, 2020 | | :-------------------------------------- | :------------ | :---------------- | | Total derivative assets | $90.9 | $89.0 | | Total derivative liabilities | $5.9 | $0.5 | - For cash flow hedges, the Company recognized an unrealized loss of **$26.9 million** for the three months and an unrealized gain of **$26.1 million** for the six months ended June 30, 2021[81](index=81&type=chunk)[408](index=408&type=chunk) - Foreign currency forward contracts reclassified a gain of **$8.1 million** (three months) and **$18.1 million** (six months) into cost of revenues and operating expenses for the period ended June 30, 2021[82](index=82&type=chunk)[409](index=409&type=chunk) [Note 6. Goodwill and Purchased Intangible Assets](index=19&type=section&id=Note%206.%20Goodwill%20and%20Purchased%20Intangible%20Assets) Goodwill increased to $3,754.1 million as of June 30, 2021, primarily due to additions from business combinations, specifically the Apstra acquisition, with no impairment charges recognized Goodwill Activity (in millions) | Metric | Total | | :-------------------------------------- | :------ | | Balance as of December 31, 2020 | $3,669.6 | | Additions due to business combinations | $84.5 | | Balance as of June 30, 2021 | $3,754.1 | Purchased Intangible Assets, Net (in millions) | Asset Category | June 30, 2021 Net | December 31, 2020 Net | | :-------------------------------------- | :---------------- | :-------------------- | | Finite-lived intangible assets | $266.3 | $217.7 | | Indefinite-lived intangible assets (In-process R&D) | $49.0 | $49.0 | | Total purchased intangible assets | $315.3 | $266.7 | - Amortization expense for finite-lived intangible assets was **$19.8 million** for the three months and **$38.8 million** for the six months ended June 30, 2021[89](index=89&type=chunk)[416](index=416&type=chunk) [Note 7. Other Financial Information](index=20&type=section&id=Note%207.%20Other%20Financial%20Information) This note provides details on total inventory, a non-interest bearing deposit to a contract manufacturer, and changes in the warranty reserve, with inventory remaining stable and the warranty reserve slightly increasing Total Inventory (in millions) | Category | June 30, 2021 | December 31, 2020 | | :----------------------------- | :------------ | :---------------- | | Production and service materials | $167.5 | $158.1 | | Finished goods | $54.8 | $63.8 | | Total inventory | $222.3 | $221.9 | - The Company has a non-interest bearing deposit of **$66.4 million** (net of discount) with a contract manufacturer, classified as an other long-term asset[94](index=94&type=chunk)[421](index=421&type=chunk) Changes in Warranty Reserve (in millions) | Metric | Amount | | :------------------------------------------------ | :----- | | Balance as of December 31, 2020 | $30.2 | | Provisions made during the period | $19.4 | | Actual costs incurred during the period | $(18.8) | | Balance as of June 30, 2021 | $30.8 | Unrecognized Revenue by Period (in millions) | Category | Total | Less than 1 year | 1-3 years | More than 3 years | | :---------- | :-------- | :--------------- | :-------- | :---------------- | | Product | $120.9 | $102.3 | $15.5 | $3.1 | | Service (*) | $1,225.2 | $798.3 | $350.2 | $76.7 | | Total | $1,346.1 | $900.6 | $365.7 | $79.8 | Other Expense, Net (in millions) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :---------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Interest income | $3.4 | $9.3 | $7.5 | $24.4 | | Interest expense | $(12.6) | $(19.3) | $(26.3) | $(39.5) | | (Loss) gain on investments, net | $(1.2) | $6.5 | $2.6 | $0.7 | | Other | $(0.5) | $(0.9) | $0.3 | $(1.1) | | Other expense, net | $(10.9) | $(4.4) | $(15.9) | $(15.5) | [Note 8. Restructuring Charges](index=22&type=section&id=Note%208.%20Restructuring%20Charges) In Q1 2021, Juniper initiated a restructuring plan to reinvest in key priority areas, incurring $40.9 million in charges for the six months ended June 30, 2021, primarily for severance and contract terminations - The Company initiated a 2021 Restructuring Plan in Q1 2021 to enable reinvestment in key priority areas, expected to be substantially completed by H1 2022[106](index=106&type=chunk)[433](index=433&type=chunk) Changes in Restructuring Liabilities (in millions) | Category | Balance as of Dec 31, 2020 | Charges during period | Cash Payments | Other | Balance as of June 30, 2021 | | :---------------------------- | :------------------------- | :-------------------- | :------------ | :---- | :-------------------------- | | Severance | $50.7 | $13.8 | $(62.9) | $1.0 | $2.6 | | Facility consolidations | — | $6.9 | $(0.2) | $(6.3) | $0.4 | | Contract terminations and other | — | $20.2 | — | $(5.3) | $14.9 | | Total | $50.7 | $40.9 | $(63.1) | $(10.6) | $17.9 | - Total restructuring charges for the six months ended June 30, 2021, amounted to **$40.9 million**, including **$13.8 million** for severance and **$20.2 million** for contract termination and other costs[107](index=107&type=chunk)[434](index=434&type=chunk) [Note 9. Debt](index=23&type=section&id=Note%209.%20Debt) Juniper's total debt decreased to $1,694.4 million as of June 30, 2021, from $2,127.3 million at December 31, 2020, primarily due to the redemption of $482.1 million in Senior Notes, which resulted in a $60.6 million loss on extinguishment of debt Total Debt (in millions) | Senior Notes | Maturity Date | Effective Interest Rates | June 30, 2021 | December 31, 2020 | | :---------------------------- | :------------ | :----------------------- | :------------ | :---------------- | | 4.500% fixed-rate notes (2024 Notes) | March 2024 | 4.70% | — | $265.8 | | 4.350% fixed-rate notes (2025-I Notes) | June 2025 | 4.47% | — | $158.0 | | 1.200% fixed-rate notes (2025-II Notes) | December 2025 | 1.37% | $400.0 | $400.0 | | 3.750% fixed-rate notes (2029 Notes) | August 2029 | 3.86% | $500.0 | $500.0 | | 2.000% fixed-rate notes (2030 Notes) | December 2030 | 2.12% | $400.0 | $400.0 | | 5.950% fixed-rate notes (2041 Notes) | March 2041 | 6.03% | $400.0 | $400.0 | | Total Notes | | | $1,700.0 | $2,123.8 | | Unaccreted discount and debt issuance costs | | | $(13.6) | $(16.8) | | Hedge accounting fair value adjustments | | | $8.0 | $20.3 | | Total | | | $1,694.4 | $2,127.3 | - In January 2021, the Company redeemed **$482.1 million** of its 2024 and 2025-I Senior Notes, resulting in a **$60.6 million** loss on extinguishment of debt[112](index=112&type=chunk)[439](index=439&type=chunk) - The Company has an unsecured revolving credit facility of up to **$500.0 million**, expiring in April 2024, with no outstanding amounts as of June 30, 2021[114](index=114&type=chunk)[441](index=441&type=chunk) [Note 10. Equity](index=24&type=section&id=Note%2010.%20Equity) Juniper continued its capital return program, repurchasing 9.3 million shares for $235.0 million and paying $129.9 million in cash dividends during the six months ended June 30, 2021, with approximately $1.1 billion remaining authorized under the 2018 Stock Repurchase Program Dividends and Stock Repurchase Activity (in millions, except per share amounts) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Dividends Per share | $0.20 | $0.20 | $0.40 | $0.40 | | Dividends Amount | $64.7 | $66.3 | $129.9 | $131.8 | | Repurchased Shares | 4.2 | — | 9.3 | 10.3 | | Average price per share | $26.34 | — | $25.30 | $23.83 | | Repurchase Amount | $110.0 | — | $235.0 | $200.0 | - As of June 30, 2021, approximately **$1.1 billion** of authorized funds remained under the 2018 Stock Repurchase Program[118](index=118&type=chunk)[445](index=445&type=chunk) Accumulated Other Comprehensive Income, Net of Tax (in millions) | Metric | Unrealized Gains/Losses on Available-for-Sale Debt Securities | Unrealized Gains/Losses on Cash Flow Hedges | Foreign Currency Translation Adjustments | Total | | :----------------------------------------------------------------- | :------------------------------------------------------------ | :------------------------------------------ | :--------------------------------------- | :---- | | Balance as of December 31, 2020 | $34.1 | $57.7 | $(36.2) | $55.6 | | Other comprehensive income (loss) before reclassifications | $0.1 | $18.8 | $(1.5) | $17.4 | | Amount reclassified from accumulated other comprehensive income (loss) | $(1.0) | $(16.1) | — | $(17.1) | | Other comprehensive income (loss), net | $(0.9) | $2.7 | $(1.5) | $0.3 | | Balance as of June 30, 2021 | $33.2 | $60.4 | $(37.7) | $55.9 | [Note 11. Employee Benefit Plans](index=26&type=section&id=Note%2011.%20Employee%20Benefit%20Plans) This note details the Company's equity incentive plans, including stock options, RSUs, and PSAs, and the Employee Stock Purchase Plan (ESPP), with total unrecognized compensation cost of $303.7 million as of June 30, 2021 - As of June 30, 2021, **10.0 million** shares were available for future issuance under the 2015 Equity Incentive Plan and **10.1 million** shares under the ESPP[126](index=126&type=chunk)[453](index=453&type=chunk) RSU, RSA and PSA Activity (in millions, except per share amounts and years) | Metric | Number of Shares | Weighted Average Grant-Date Fair Value per Share | Weighted Average Remaining Contractual Term (In Years) | Aggregate Intrinsic Value | | :------------------------------------------------ | :--------------- | :----------------------------------------------- | :----------------------------------------------------- | :------------------------ | | Balance as of December 31, 2020 | 19.9 | $23.05 | | | | Granted | 3.3 | $23.95 | | | | Awards assumed upon the acquisition of Apstra | 2.2 | $25.49 | | | | Vested | (4.4) | $24.47 | | | | Canceled | (1.4) | $24.25 | | | | Balance as of June 30, 2021 | 19.6 | $23.08 | 1.4 | $536.1 | Share-Based Compensation Expense by Cost Category (in millions) | Cost Category | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of revenues - Product | $1.0 | $1.1 | $2.3 | $2.5 | | Cost of revenues - Service | $3.9 | $3.4 | $8.4 | $7.6 | | Research and development | $20.1 | $19.0 | $44.3 | $34.2 | | Sales and marketing | $14.9 | $13.2 | $31.4 | $27.0 | | General and administrative | $10.6 | $7.3 | $21.6 | $14.7 | | Total | $50.5 | $44.0 | $108.0 | $86.0 | - Total unrecognized compensation cost related to unvested share-based awards was **$303.7 million** as of June 30, 2021, with a weighted-average recognition period of **1.89 years**[134](index=134&type=chunk)[461](index=461&type=chunk) [Note 12. Segments](index=28&type=section&id=Note%2012.%20Segments) Juniper operates as one reportable segment, with revenue disaggregated by customer solution, customer vertical, and geographic region, and changed its revenue reporting categories in Q1 2021 to align with strategic growth drivers - Juniper operates in one reportable segment, with financial performance reviewed on a consolidated basis[137](index=137&type=chunk)[464](index=464&type=chunk) - Effective Q1 2021, revenue reporting categories changed to Automated WAN Solutions, Cloud-Ready Data Center, AI-Driven Enterprise, and Hardware Maintenance and Professional Services to align with strategic growth drivers[137](index=137&type=chunk)[464](index=464&type=chunk) Net Revenues by Customer Solution (in millions) | Customer Solutions | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Automated WAN Solutions | $396.1 | $406.8 | $782.5 | $722.3 | | Cloud-Ready Data Center | $201.9 | $157.6 | $359.3 | $332.0 | | AI-Driven Enterprise | $195.1 | $152.7 | $356.3 | $296.1 | | Hardware Maintenance and Professional Services | $379.2 | $369.2 | $748.6 | $733.9 | | Total | $1,172.3 | $1,086.3 | $2,246.7 | $2,084.3 | Net Revenues by Customer Vertical (in millions) | Customer Vertical | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cloud | $320.6 | $285.5 | $591.3 | $547.4 | | Service Provider | $443.7 | $436.2 | $881.9 | $811.7 | | Enterprise | $408.0 | $364.6 | $773.5 | $725.2 | | Total | $1,172.3 | $1,086.3 | $2,246.7 | $2,084.3 | Net Revenues by Geographic Region (in millions) | Geographic Region | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Americas | $652.7 | $608.8 | $1,235.7 | $1,188.3 | | Europe, Middle East, and Africa (EMEA) | $323.9 | $294.1 | $635.0 | $549.1 | | Asia Pacific (APAC) | $195.7 | $183.4 | $376.0 | $346.9 | | Total | $1,172.3 | $1,086.3 | $2,246.7 | $2,084.3 | [Note 13. Income Taxes](index=29&type=section&id=Note%2013.%20Income%20Taxes) The effective tax rate decreased to 17.1% for the three months and 16.5% for the six months ended June 30, 2021, primarily due to discrete items, including the loss on extinguishment of debt and restructuring charges, with a potential decrease of up to $3.5 million in unrecognized tax benefits within 12 months Income Taxes (in millions, except percentages) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :----------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Income before income taxes | $74.8 | $86.1 | $37.0 | $114.4 | | Income tax provision | $12.8 | $24.9 | $6.1 | $32.8 | | Effective tax rate | 17.1% | 28.9% | 16.5% | 28.7% | - The effective tax rate for the six months ended June 30, 2021, reflects the impact of a **$60.6 million** loss on extinguishment of debt and **$40.9 million** in restructuring charges[145](index=145&type=chunk)[472](index=472&type=chunk) - As of June 30, 2021, gross unrecognized tax benefits totaled **$118.9 million**, with a greater than remote likelihood of decreasing by up to **$3.5 million** within the next twelve months[145](index=145&type=chunk)[472](index=472&type=chunk) - The Company is currently under examination by the IRS for 2017-2018 and India tax authorities for 2017[146](index=146&type=chunk)[473](index=473&type=chunk) [Note 14. Net Income per Share](index=30&type=section&id=Note%2014.%20Net%20Income%20per%20Share) Basic and diluted net income per share for the three months ended June 30, 2021, increased slightly to $0.19, but decreased significantly for the six-month period to $0.09, reflecting the lower net income Net Income per Share (in millions, except per share amounts) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :----------------------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $62.0 | $61.2 | $30.9 | $81.6 | | Weighted-average shares used to compute basic income per share | 324.5 | 331.0 | 325.4 | 330.9 | | Dilutive effect of employee stock awards | 5.9 | 2.1 | 6.1 | 3.8 | | Weighted-average shares used to compute diluted income per share | 330.4 | 333.1 | 331.5 | 334.7 | | Basic Net income per share | $0.19 | $0.18 | $0.09 | $0.25 | | Diluted Net income per share | $0.19 | $0.18 | $0.09 | $0.24 | - Diluted EPS for the six months ended June 30, 2021, decreased by **62.5%** to **$0.09** from **$0.24** in the comparable prior-year period[151](index=151&type=chunk)[478](index=478&type=chunk) [Note 15. Commitments and Contingencies](index=31&type=section&id=Note%2015.%20Commitments%20and%20Contingencies) Juniper has significant purchase commitments with contract manufacturers and suppliers totaling $1,795.0 million as of June 30, 2021, and is subject to various legal proceedings, none of which are expected to have a material adverse effect on its financial position - Purchase commitments with contract manufacturers and suppliers totaled **$1,795.0 million** as of June 30, 2021[154](index=154&type=chunk)[481](index=481&type=chunk) - The Company is subject to various legal proceedings and records accruals for loss contingencies when an unfavorable outcome is probable and estimable[155](index=155&type=chunk)[482](index=482&type=chunk) - Management believes that none of the currently existing claims or proceedings are likely to have a material adverse effect on its financial position[155](index=155&type=chunk)[482](index=482&type=chunk) [Note 16. Subsequent Events](index=32&type=section&id=Note%2016.%20Subsequent%20Events) On July 27, 2021, the Board declared a cash dividend of $0.20 per share of common stock, payable on September 22, 2021, to stockholders of record as of September 1, 2021 - On July 27, 2021, the Board declared a cash dividend of **$0.20 per share** of common stock[157](index=157&type=chunk)[484](index=484&type=chunk) - The dividend is payable on September 22, 2021, to stockholders of record as of September 1, 2021[157](index=157&type=chunk)[484](index=484&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an executive overview of Juniper Networks' business, market environment, financial results, and key performance metrics, along with a detailed discussion of its financial condition and results of operations for the periods ended June 30, 2021 - Juniper Networks designs, develops, and sells products and services for high-performance networks, focusing on AI-Driven Enterprise, Automated WAN Solutions, and Cloud-Ready Data Center[162](index=162&type=chunk)[489](index=489&type=chunk) - The Company's operations have been impacted by the COVID-19 pandemic, leading to supply chain disruptions, extended lead times, and increased logistics costs, but did not have a substantial net impact on operating results or liquidity in Q2 2021[166](index=166&type=chunk)[167](index=167&type=chunk)[169](index=169&type=chunk)[493](index=493&type=chunk)[494](index=494&type=chunk)[496](index=496&type=chunk) - A global semiconductor shortage is causing ongoing component shortages and extended lead times (over **50 weeks** for some products), potentially impacting gross margins due to increased costs[171](index=171&type=chunk)[498](index=498&type=chunk) [Business and Market Environment](index=33&type=section&id=Business%20and%20Market%20Environment) Juniper Networks provides high-performance networking products and services across AI-Driven Enterprise, Automated WAN Solutions, and Cloud-Ready Data Center categories, with its strategy focusing on "experience-first networking" and capitalizing on the industry's transition to cloud architectures, despite supply chain challenges from COVID-19 and global semiconductor shortages - Juniper Networks' core business involves designing, developing, and selling products and services for high-performance networks, with a focus on "experience-first networking"[162](index=162&type=chunk)[489](index=489&type=chunk) - Key customer solution categories include AI-Driven Enterprise (client-to-cloud, wired/wireless, SD-WAN), Automated WAN Solutions (MX, PTX, ACX, Netrounds), and Cloud-Ready Data Center (QFX, Apstra, Contrail, SRX security)[163](index=163&type=chunk)[164](index=164&type=chunk)[490](index=490&type=chunk)[491](index=491&type=chunk) - The acquisition of Apstra in January 2021 aims to expand the data center networking portfolio and transform data center operations[164](index=164&type=chunk)[491](index=491&type=chunk) - The COVID-19 pandemic has caused supply constraints, component shortages, extended lead times, and increased logistics costs, negatively impacting revenue recognition and gross margins[167](index=167&type=chunk)[229](index=229&type=chunk)[494](index=494&type=chunk)[556](index=556&type=chunk) - A global semiconductor shortage is leading to extended lead times (over **50 weeks** for some products) and increased component costs, impacting gross margins[171](index=171&type=chunk)[498](index=498&type=chunk) [Financial Results and Key Performance Metrics Overview](index=36&type=section&id=Financial%20Results%20and%20Key%20Performance%20Metrics%20Overview) Juniper Networks reported an 8% increase in net revenues for both the three and six months ended June 30, 2021, with improved gross margin percentage but decreased operating and net income due to higher operating expenses and a significant loss on debt extinguishment, while operating cash flows improved and capital return continued Financial Results and Key Performance Metrics Overview (in millions, except percentages and per share amounts) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change % | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change % | | :-------------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Net revenues | $1,172.3 | $1,086.3 | 8% | $2,246.7 | $2,084.3 | 8% | | Gross margin | $681.9 | $619.6 | 10% | $1,297.5 | $1,198.9 | 8% | | Gross margin % of net revenues | 58.2% | 57.0% | | 57.8% | 57.5% | | | Operating income | $85.7 | $90.5 | (5)% | $113.5 | $129.9 | (13)% | | Operating income % of net revenues | 7.3% | 8.3% | | 5.1% | 6.2% | | | Net income | $62.0 | $61.2 | 1% | $30.9 | $81.6 | (62)% | | Net income % of net revenues | 5.3% | 5.6% | | 1.4% | 3.9% | | | Basic EPS | $0.19 | $0.18 | 6% | $0.09 | $0.25 | (64)% | | Diluted EPS | $0.19 | $0.18 | 6% | $0.09 | $0.24 | (63)% | | Operating cash flows (6 months) | | | | $437.0 | $369.8 | 18% | | Stock repurchase plan activity (6 months) | | | | $235.0 | $200.0 | 18% | | Cash dividends declared per common stock | $0.20 | $0.20 | 0% | $0.40 | $0.40 | 0% | | DSO | 59 | 63 | (6)% | | | | - Net revenues increased across all verticals, with service net revenues rising due to strong sales of support contracts, renewals, and software subscriptions[173](index=173&type=chunk)[500](index=500&type=chunk) - Operating margin decreased due to higher personnel-related expenses (variable compensation, headcount) and increased restructuring charges[175](index=175&type=chunk)[502](index=502&type=chunk) - Deferred revenue increased as of June 30, 2021, primarily driven by growth in the software business and timing of maintenance support renewals[176](index=176&type=chunk)[503](index=503&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) This section provides a detailed breakdown of revenues by customer solution, customer vertical, and geographic region, as well as gross margins and operating expenses, showing increased net revenues across most categories, improved service gross margins, and higher operating expenses due to compensation and restructuring Net Revenues by Customer Solution, Vertical, and Geographic Region (in millions, except percentages) | Category / Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change % | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change % | | :-------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | **Customer Solutions:** | | | | | | | | Automated WAN Solutions | $396.1 | $406.8 | (3)% | $782.5 | $722.3 | 8% | | Cloud-Ready Data Center | $201.9 | $157.6 | 28% | $359.3 | $332.0 | 8% | | AI-Driven Enterprise | $195.1 | $152.7 | 28% | $356.3 | $296.1 | 20% | | Hardware Maintenance & Professional Services | $379.2 | $369.2 | 3% | $748.6 | $733.9 | 2% | | Total Net Revenues | $1,172.3 | $1,086.3 | 8% | $2,246.7 | $2,084.3 | 8% | | **Customer Verticals:** | | | | | | | | Cloud | $320.6 | $285.5 | 12% | $591.3 | $547.4 | 8% | | Service Provider | $443.7 | $436.2 | 2% | $881.9 | $811.7 | 9% | | Enterprise | $408.0 | $364.6 | 12% | $773.5 | $725.2 | 7% | | Total Net Revenues | $1,172.3 | $1,086.3 | 8% | $2,246.7 | $2,084.3 | 8% | | **Geographic Regions:** | | | | | | | | Americas | $652.7 | $608.8 | 7% | $1,235.7 | $1,188.3 | 4% | | EMEA | $323.9 | $294.1 | 10% | $635.0 | $549.1 | 16% | | APAC | $195.7 | $183.4 | 7% | $376.0 | $346.9 | 8% | | Total Net Revenues | $1,172.3 | $1,086.3 | 8% | $2,246.7 | $2,084.3 | 8% | - Software and related services revenue increased by **59%** to **$172.5 million** for the three months and **30%** to **$315.4 million** for the six months ended June 30, 2021[185](index=185&type=chunk)[512](index=512&type=chunk) - Total security revenue increased by **11%** to **$171.7 million** for the three months and **$334.7 million** for the six months ended June 30, 2021[185](index=185&type=chunk)[512](index=512&type=chunk) Gross Margins (in millions, except percentages) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change % | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change % | | :--------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Product gross margin | $408.8 | $370.6 | 10% | $764.7 | $710.4 | 8% | | Percentage of product revenues | 53.8% | 53.5% | | 53.4% | 54.6% | | | Service gross margin | $273.1 | $249.0 | 10% | $532.8 | $488.5 | 9% | | Percentage of service revenues | 66.1% | 63.2% | | 65.4% | 62.4% | | | Total gross margin | $681.9 | $619.6 | 10% | $1,297.5 | $1,198.9 | 8% | | Percentage of net revenues | 58.2% | 57.0% | | 57.8% | 57.5% | | - Product gross margin as a percentage of product revenues increased for the three months ended June 30, 2021, due to customer/product mix and lower logistics costs, but decreased for the six months due to higher intangible amortization and supply constraints[189](index=189&type=chunk)[191](index=191&type=chunk)[516](index=516&type=chunk)[518](index=518&type=chunk) - Service gross margin as a percentage of service net revenues increased for both periods due to lower delivery costs and higher revenue[190](index=190&type=chunk)[192](index=192&type=chunk)[517](index=517&type=chunk)[519](index=519&type=chunk) Operating Expenses (in millions, except percentages) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change % | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change % | | :--------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Research and development | $245.8 | $241.0 | 2% | $500.5 | $473.5 | 6% | | Sales and marketing | $257.8 | $224.2 | 15% | $510.5 | $463.4 | 10% | | General and administrative | $71.0 | $59.1 | 20% | $132.1 | $118.4 | 12% | | Restructuring charges | $21.6 | $4.8 | 350% | $40.9 | $13.7 | 199% | | Total operating expenses | $596.2 | $529.1 | 13% | $1,184.0 | $1,069.0 | 11% | - Total operating expenses increased for both periods primarily due to higher variable compensation, increased headcount-related costs, and higher restructuring charges[196](index=196&type=chunk)[197](index=197&type=chunk)[523](index=523&type=chunk)[524](index=524&type=chunk) - A **$60.6 million** loss on extinguishment of debt was incurred during the six months ended June 30, 2021, due to early redemption of Senior Notes[198](index=198&type=chunk)[525](index=525&type=chunk) Other Expense, Net (in millions, except percentages) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change % | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change % | | :---------------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Interest income | $3.4 | $9.3 | (63)% | $7.5 | $24.4 | (69)% | | Interest expense | $(12.6) | $(19.3) | (35)% | $(26.3) | $(39.5) | (33)% | | (Loss) gain on investments, net | $(1.2) | $6.5 | (118)% | $2.6 | $0.7 | 271% | | Other | $(0.5) | $(0.9) | (44)% | $0.3 | $(1.1) | (127)% | | Total other expense, net | $(10.9) | $(4.4) | 148% | $(15.9) | $(15.5) | 3% | Income Tax (Benefit) Provision (in millions, except percentages) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change % | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change % | | :--------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Income tax (benefit) provision | $12.8 | $24.9 | (49)% | $6.1 | $32.8 | (81)% | | Effective tax rate | 17.1% | 28.9% | | 16.5% | 28.7% | | [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) Juniper's working capital and total cash, cash equivalents, and investments decreased significantly as of June 30, 2021, compared to December 31, 2020, primarily due to substantial cash used in financing activities and a business acquisition, though the company believes existing resources will be sufficient to fund operations and capital return for at least the next twelve months Capital Resources (in millions, except percentages) | Metric | June 30, 2021 | December 31, 2020 | Change % | | :---------------------------------------------------- | :------------ | :---------------- | :------- | | Working capital | $955.2 | $1,110.1 | (14)% | | Cash and cash equivalents | $986.7 | $1,361.9 | (28)% | | Short-term investments | $335.5 | $412.1 | (19)% | | Long-term investments | $493.2 | $656.6 | (25)% | | Total cash, cash equivalents, and investments | $1,815.4 | $2,430.6 | (25)% | | Short-term portion of long-term debt | — | $421.5 | (100)% | | Long-term debt | $1,694.4 | $1,705.8 | (1)% | | Cash, cash equivalents, and investments, net of debt | $121.0 | $303.3 | (60)% | Summary of Cash Flows (in millions, except percentages) | Metric | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change % | | :---------------------------------------------------- | :--------------------------- | :--------------------------- | :------- | | Net cash provided by operating activities | $437.0 | $369.8 | 18% | | Net cash provided by investing activities | $20.6 | $189.5 | (89)% | | Net cash used in financing activities | $(829.6) | $(304.7) | 172% | - Net cash used in financing activities increased significantly due to **$423.8 million** in debt redemption and **$58.3 million** in debt extinguishment costs, as well as **$235.0 million** in stock repurchases[213](index=213&type=chunk)[215](index=215&type=chunk)[540](index=540&type=chunk)[542](index=542&type=chunk) - The Company expects existing cash, investments, operating cash flows, and its **$500.0 million** revolving credit facility to be sufficient to fund operations and capital return for at least the next twelve months[217](index=217&type=chunk)[219](index=219&type=chunk)[544](index=544&type=chunk)[546](index=546&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company's exposures to market risk have not materially changed since December 31, 2020, with further details incorporated by reference from the Form 10-K - Market risk exposures have not materially changed since December 31, 2020[221](index=221&type=chunk)[548](index=548&type=chunk) - Quantitative and qualitative disclosures about market risk are incorporated by reference from the Company's Form 10-K[221](index=221&type=chunk)[548](index=548&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes in internal control over financial reporting during the second quarter of 2021, despite most employees working remotely due to the COVID-19 pandemic - The Company's disclosure controls and procedures were effective as of June 30, 2021[223](index=223&type=chunk)[550](index=550&type=chunk) - No material changes in internal control over financial reporting occurred during Q2 2021[224](index=224&type=chunk)[551](index=551&type=chunk) - Remote work due to COVID-19 has not significantly impacted internal controls, as processes and controls allow for secure remote execution[224](index=224&type=chunk)[551](index=551&type=chunk) [PART II - OTHER INFORMATION](index=46&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered sales of equity securities, other information, and exhibits, highlighting various risks that could affect Juniper's business, financial condition, and results of operations [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 15, Commitments and Contingencies, in Part I, Item 1 of this report - Legal proceedings information is incorporated by reference from Note 15, Commitments and Contingencies[226](index=226&type=chunk)[553](index=553&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various factors that could materially and adversely affect Juniper Networks' business, financial condition, operating results, and stock price, categorized into business strategy and industry, technology and business operations, legal, regulatory, and compliance, and financial risks - The Company operates in rapidly changing economic and technological environments with numerous uncontrollable and unpredictable risks[227](index=227&type=chunk)[554](index=554&type=chunk) - Risks are categorized into business strategy and industry, technology and business operations, legal, regulatory, and compliance, and financial risks[227](index=227&type=chunk)[554](index=554&type=chunk) [RISKS RELATED TO OUR BUSINESS STRATEGY AND INDUSTRY](index=46&type=section&id=RISKS%20RELATED%20TO%20OUR%20BUSINESS%20STRATEGY%20AND%20INDUSTRY) This section details risks related to Juniper's business strategy and industry, including the ongoing impact of the COVID-19 pandemic on operations, supply chain, and demand; the unpredictable nature of quarterly results; fluctuations in gross and operating margins; reliance on a limited number of customers; intense competition; and challenges in managing resources and acquisitions - The COVID-19 pandemic continues to negatively affect operations, including supply constraints, component shortages, extended lead times, and increased logistics costs, impacting revenue recognition and gross margins[228](index=228&type=chunk)[229](index=229&type=chunk)[555](index=555&type=chunk)[556](index=556&type=chunk) - Quarterly results are unpredictable and subject to substantial fluctuations due to factors like customer ordering patterns, product/service mix, market conditions, supply chain disruptions, and competition[231](index=231&type=chunk)[232](index=232&type=chunk)[558](index=558&type=chunk)[559](index=559&type=chunk) - Gross margins and operating margins are expected to vary due to factors such as product/service mix, pricing, manufacturing costs, and supply chain issues[234](index=234&type=chunk)[561](index=561&type=chunk) - A material portion of revenues comes from a limited number of customers, and consolidation in customer industries could adversely affect sales[235](index=235&type=chunk)[562](index=562&type=chunk) - Inability to compete effectively against well-established and integrated competitors with greater resources could harm business and financial results[236](index=236&type=chunk)[563](index=563&type=chunk) - Acquisitions or divestitures carry risks such as integration problems, unanticipated costs, diversion of management attention, and potential dilution of stockholder ownership[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk)[566](index=566&type=chunk)[567](index=567&type=chunk)[568](index=568&type=chunk) - Long sales and implementation cycles, coupled with unpredictable large orders, can cause significant quarter-to-quarter variations in revenues and operating results[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk)[569](index=569&type=chunk)[570](index=570&type=chunk)[571](index=571&type=chunk) [RISKS RELATED TO OUR TECHNOLOGY AND BUSINESS OPERATIONS](index=49&type=section&id=RISKS%20RELATED%20TO%20OUR%20TECHNOLOGY%20AND%20BUSINESS%20OPERATIONS) This section addresses risks concerning Juniper's technology and operational execution, including dependence on the growth of network and IP systems, the need to anticipate technological shifts, challenges in expanding the software business, product interoperability issues, reliance on licensed third-party technology, difficulties in enforcing proprietary rights, and significant dependence on contract manufacturers and single-source suppliers, particularly for semiconductors - Business and revenues depend on the continued growth of secure IP infrastructure; any reduction or suspension of spending on IP infrastructure could adversely affect financial results[247](index=247&type=chunk)[574](index=574&type=chunk) - Failure to anticipate technological shifts, market needs, or to timely introduce new products/enhancements could lead to loss of customers and harm business[248](index=248&type=chunk)[575](index=575&type=chunk) - Expanding the software business involves risks such as development costs, uncertain customer adoption, potential erosion of revenue/gross margins, and regulatory compliance[249](index=249&type=chunk)[576](index=576&type=chunk) - Products must interoperate with diverse customer networks; failure to do so could delay installations, harm reputation, and negatively affect operating results[251](index=251&type=chunk)[578](index=578&type=chunk) - Reliance on licensed third-party technology poses risks if licenses are not available on reasonable terms, or if licensors infringe on others' IP[252](index=252&type=chunk)[579](index=579&type=chunk) - Difficulties in enforcing proprietary rights (patents, copyrights, trade secrets) or preventing unauthorized use could lead to costly redesigns, product discontinuation, and competitive harm[253](index=253&type=chunk)[256](index=256&type=chunk)[580](index=580&type=chunk)[583](index=583&type=chunk) - Significant dependence on contract manufacturers and single/limited-source suppliers (especially for semiconductors) creates risks of supply shortfalls, delays, increased costs, and production disruptions[257](index=257&type=chunk)[584](index=584&type=chunk) - The worldwide semiconductor shortage has resulted in extended lead times (over **50 weeks** for some products) and increased component costs[257](index=257&type=chunk)[589](index=257&type=chunk)[584](index=584&type=chunk) - System security risks, data protection breaches, and cyberattacks could compromise proprietary information, disrupt operations, harm public perception, and lead to significant costs and liabilities[264](index=264&type=chunk)[265](index=265&type=chunk)[267](index=267&type=chunk)[591](index=591&type=chunk)[592](index=592&type=chunk)[594](index=594&type=chunk) - Disruptions in distribution channels (value-added resellers, distributors) could seriously harm future revenue and financial condition, as most partners also sell competitors' products[269](index=269&type=chunk)[596](index=596&type=chunk) - Reliance on third-party business systems and IT services (e.g., IBM) exposes the company to risks of damage, interruption, and potential liabilities if these systems fail or transition poorly[271](index=271&type=chunk)[272](index=272&type=chunk)[598](index=598&type=chunk)[599](index=599&type=chunk) - Inability to retain or hire key personnel, especially those with specialized technical skills, or impacts on employee health (e.g., COVID-19), could harm product development, marketing, and sales[273](index=273&type=chunk)[274](index=274&type=chunk)[600](index=600&type=chunk)[601](index=601&type=chunk) [LEGAL, REGULATORY, AND COMPLIANCE RISKS](index=54&type=section&id=LEGAL,%20REGULATORY,%20AND%20COMPLIANCE%20RISKS) This section highlights legal, regulatory, and compliance risks, including exposure to lawsuits (employment, patent infringement, governmental claims), the impact of non-standard contract terms with large customers, and the effects of various governmental regulations covering product sales, environmental laws, IT system security for government contracts, international trade controls (tariffs, sanctions), and data privacy laws (GDPR, CCPA, CPRA, AI regulation) - The Company is a party to various lawsuits and investigations (employment, commercial, patent infringement, governmental claims), which can be costly, divert management attention, and result in reputational harm or substantial penalties[275](index=275&type=chunk)[276](index=276&type=chunk)[602](index=602&type=chunk)[603](index=603&type=chunk) - Non-standard contract terms with large telecommunications, cable, and cloud service providers can lead to less favorable terms, increased costs, and negative impacts on revenue recognition[278](index=278&type=chunk)[279](index=279&type=chunk)[605](index=605&type=chunk)[606](index=606&type=chunk) - Regulation of the industry or customers, including country-specific safety/security certifications, local content requirements, and environmental laws, could harm operating results and future prospects[280](index=280&type=chunk)[282](index=282&type=chunk)[607](index=607&type=chunk)[609](index=609&type=chunk) - Governmental regulations, economic sanctions, and legal restrictions on international trade (e.g., U.S. and Chinese tariffs, Russian encryption product import controls, ICTS Rule) can negatively affect revenues and operating results[287](index=287&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk)[614](index=614&type=chunk)[616](index=616&type=chunk)[617](index=617&type=chunk) - Failure to adequately protect personal data or comply with evolving global data privacy laws (GDPR, Brexit implications, CCPA, CPRA, AI regulation) could result in enforcement actions, fines, reputational damage, and increased costs[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk)[619](index=619&type=chunk)[620](index=620&type=chunk)[621](index=621&type=chunk)[622](index=622&type=chunk)[623](index=623&type=chunk)[624](index=624&type=chunk) [FINANCIAL RISKS](index=57&type=section&id=FINANCIAL%20RISKS) This section addresses financial risks, including potential impairment of goodwill and purchased intangible assets, volatility in effective tax rates due to various factors and ongoing tax examinations, risks associated with international operations (economic, political, currency fluctuations), and risks related to outstanding and future indebtedness (covenants, cash flow sufficiency, credit ratings, LIBOR transition) - Impairment of goodwill (**$3,754.1 million**) or purchased intangible assets (**$315.3 million**) could adversely affect results of operations, as analysis is sensitive to key assumptions[298](index=298&type=chunk)[299](index=299&type=chunk)[625](index=625&type=chunk)[626](index=626&type=chunk) - Effective tax rates are subject to volatility due to geographic mix of earnings, changes in deferred tax assets/liabilities, R&D tax credits, transfer pricing adjustments, and changes in tax laws (e.g., proposed U.S. corporate tax increases, OECD guidelines)[300](index=300&type=chunk)[301](index=301&type=chunk)[627](index=627&type=chunk)[628](index=628&type=chunk) - International operations expose the Company to economic, business regulatory, social, and political conditions in foreign countries, including COVID-19 impacts, trade controls, currency fluctuations, and Brexit consequences[303](index=303&type=chunk)[304](index=304&type=chunk)[630](index=630&type=chunk)[631](index=631&type=chunk) - Risks associated with indebtedness include the ability to generate sufficient cash flow to service debt, compliance with covenants (leverage ratio, interest coverage ratio), and potential negative impacts on credit ratings[306](index=306&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk)[633](index=633&type=chunk)[634](index=634&type=chunk)[635](index=635&type=chunk)[636](index=636&type=chunk) - The elimination of LIBOR after June 2023 could result in higher interest costs if LIBOR-based borrowings convert to alternative rates like SOFR[312](index=312&type=chunk)[639](index=312&type=chunk) - Investments are subject to credit, liquidity, market, sovereign debt, and interest rate risks, which may cause losses and affect liquidity[310](index=310&type=chunk)[311](index=311&type=chunk)[637](index=637&type=chunk)[638](index=638&type=chunk) [GENERAL RISK FACTORS](index=60&type=section&id=GENERAL%20RISK%20FACTORS) This section covers general risks, including the need to continuously evolve financial and managerial control systems, potential adverse effects on investor perception from internal control weaknesses, and limitations on stockholders' ability to obtain a favorable judicial forum due to exclusive forum provisions in the bylaws - Failure to adequately evolve financial and managerial control and reporting systems, or weaknesses in internal controls, could adversely affect investor perception and stock price[313](index=313&type=chunk)[640](index=313&type=chunk) - Exclusive forum provisions in the bylaws (Delaware Court of Chancery) may limit stockholders' ability to choose a favorable judicial forum for disputes, potentially increasing costs if provisions are deemed inapplicable[314](index=314&type=chunk)[641](index=314&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of

Juniper Networks, Inc. (NYSE:JNPR) Q2 2021 Earnings Conference Call July 27, 2021 5:00 PM ET Company Participants Jess Lubert - Vice President of Investor Relations Rami Rahim - Chief Executive Officer Ken Miller - Chief Financial Officer Conference Call Participants Joseph Cardoso - JP Morgan Jeff Kvaal - Wolfe Research. Bala Reddy - Goldman Sachs Irvin Liu - Evercore ISI Tim Long - Barclays Alex Henderson - Needham Simon Leopold - Raymond James Sami Badri - Credit Suisse Paul Silverstein - Cowen Operator ...

| --- | --- | --- | |-------|--------------------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | Juniper Networks | | | | | | | | Investor Relations | | | | May 2021 | | | | | | | | | | | | | | | | | | © 2021 Juniper Networks 1 Juniper Public Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve subs ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited Q1 2021 financials show increased revenues but a **$31.1 million** net loss, driven by debt extinguishment and reduced cash from debt and acquisitions [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2021 vs Q1 2020 Statement of Operations (in millions, except per share data) | Financial Metric | Q1 2021 | Q1 2020 | Change (%) | | :--- | :--- | :--- | :--- | | **Total Net Revenues** | **$1,074.4** | **$998.0** | **+7.7%** | | Product Revenue | $672.4 | $608.8 | +10.4% | | Service Revenue | $402.0 | $389.2 | +3.3% | | **Gross Margin** | **$615.6** | **$579.3** | **+6.3%** | | **Operating Income** | **$27.8** | **$39.4** | **-29.4%** | | Loss on Extinguishment of Debt | ($60.6) | $0.0 | N/A | | **Net (Loss) Income** | **($31.1)** | **$20.4** | **-252.5%** | | **Diluted EPS** | **($0.10)** | **$0.06** | **-266.7%** | - The company experienced a significant shift from net income to a net loss, primarily due to a one-time **$60.6 million** loss on the extinguishment of debt[15](index=15&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) - Comprehensive loss narrowed to **$5.4 million** in Q1 2021 from **$20.3 million** in Q1 2020 This improvement was mainly driven by a net change on cash flow hedges, which shifted from a loss of **$23.5 million** to a gain of **$29.6 million**[17](index=17&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Comparison (in millions) | Account | March 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $989.1 | $1,361.9 | | Total current assets | $2,600.3 | $3,271.2 | | Goodwill | $3,753.3 | $3,669.6 | | **Total Assets** | **$8,711.1** | **$9,378.3** | | Total current liabilities | $1,607.7 | $2,161.1 | | Long-term debt | $1,685.2 | $1,705.8 | | **Total Liabilities** | **$4,281.5** | **$4,834.8** | | **Total Stockholders' Equity** | **$4,429.6** | **$4,543.5** | - Goodwill increased from **$3.7 billion** to **$3.8 billion** due to the acquisition of Apstra, Inc[19](index=19&type=chunk)[35](index=35&type=chunk) - The short-term portion of long-term debt was eliminated, decreasing from **$421.5 million** to zero, reflecting debt redemption activities during the quarter[19](index=19&type=chunk)[104](index=104&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary (in millions) | Cash Flow Category | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $179.8 | $272.2 | | Net cash provided by investing activities | $102.4 | $168.9 | | Net cash used in financing activities | ($651.0) | ($241.6) | | **Net (decrease) increase in cash** | **($370.8)** | **$183.3** | - Cash from operations decreased by **34%** YoY, primarily due to higher payments to suppliers and for restructuring costs[21](index=21&type=chunk)[195](index=195&type=chunk) - Cash used in financing activities increased significantly due to a **$423.8 million** payment for debt redemption and **$58.3 million** for debt extinguishment costs[21](index=21&type=chunk) - Investing activities included a **$175.0 million** payment for a business acquisition (Apstra), a notable increase from the prior year[21](index=21&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) - Total stockholders' equity decreased from **$4,543.5 million** at the end of 2020 to **$4,429.6 million** at the end of Q1 2021[24](index=24&type=chunk) - Key drivers for the decrease in equity were the net loss of **$31.1 million**, common stock repurchases of **$131.9 million**, and dividend payments of **$65.2 million**[24](index=24&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - On January 27, 2021, the company acquired Apstra, Inc for **$179.4 million** to expand its data center networking portfolio The acquisition added **$84.0 million** in goodwill and **$87.8 million** in intangible assets[35](index=35&type=chunk)[36](index=36&type=chunk) - In Q1 2021, the company initiated a restructuring plan, recording charges of **$19.3 million**, primarily for employee severance and facility consolidations[98](index=98&type=chunk) - The company redeemed its 2024 Notes and 2025-I Notes for an aggregate principal of **$482.1 million**, resulting in a loss on debt extinguishment of **$60.6 million**[104](index=104&type=chunk) - During Q1 2021, the company repurchased **5.1 million shares** for **$125.0 million** and paid **$65.2 million** in dividends (**$0.20 per share**)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - Purchase commitments with contract manufacturers and suppliers totaled **$1,319.2 million** as of March 31, 2021[145](index=145&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported an **8%** revenue increase to **$1,074.4 million**, driven by Service Provider and WAN Solutions, despite gross margin decline from acquisitions and supply chain costs [Business and Market Environment](index=32&type=section&id=Business%20and%20Market%20Environment) - The company's strategy is focused on 'experience-first networking' across three customer solution categories: AI-Driven Enterprise, Automated WAN Solutions, and Cloud-Ready Data Center[153](index=153&type=chunk) - The COVID-19 pandemic continued to cause supply chain disruptions in Q1 2021, leading to extended lead times, increased logistics costs, and a negative impact on revenue recognition and gross margins[158](index=158&type=chunk) - A worldwide semiconductor shortage is causing ongoing supply constraints and extended lead times, which are expected to persist for several quarters However, management believes they have access to sufficient supply to meet the full-year financial forecast[162](index=162&type=chunk) [Financial Results and Key Performance Metrics Overview](index=36&type=section&id=Financial%20Results%20and%20Key%20Performance%20Metrics%20Overview) Q1 2021 Key Financial Metrics (in millions, except percentages and per share data) | Metric | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | $1,074.4 | $998.0 | 8% | | Gross Margin % | 57.3% | 58.0% | -0.7 p.p. | | Operating Margin % | 2.6% | 3.9% | -1.3 p.p. | | Net (Loss) Income | ($31.1) | $20.4 | -252% | | Diluted EPS | ($0.10) | $0.06 | -267% | | Operating Cash Flows | $179.8 | $272.2 | -34% | - Net revenue growth was primarily driven by the Service Provider vertical, which saw strong performance in Automated WAN Solutions[166](index=166&type=chunk) - Gross margin percentage decreased due to higher intangible amortization from recent acquisitions (Apstra and 128 Technology) and increased logistics and supply chain costs related to the COVID-19 pandemic[167](index=167&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Net Revenues by Customer Solution (in millions) | Customer Solution | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Automated WAN Solutions | $386.4 | $315.5 | +22% | | Cloud-Ready Data Center | $157.4 | $174.4 | -10% | | AI-Driven Enterprise | $161.2 | $143.4 | +12% | | Hardware Maintenance & Professional Services | $369.4 | $364.7 | +1% | | **Total Net Revenues** | **$1,074.4** | **$998.0** | **+8%** | Net Revenues by Customer Vertical (in millions) | Customer Vertical | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Cloud | $270.7 | $261.9 | +3% | | Service Provider | $438.2 | $375.5 | +17% | | Enterprise | $365.5 | $360.6 | +1% | - Product gross margin as a percentage of product revenues decreased from **55.8%** to **52.9%** YoY, primarily due to higher intangible amortization from acquisitions and increased supply chain costs[179](index=179&type=chunk)[180](index=180&type=chunk) - Total operating expenses increased by **9%** YoY to **$587.8 million**, driven by higher personnel-related expenses from increased headcount and a **$10.4 million** increase in restructuring charges[183](index=183&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity Position (in millions) | Metric | March 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash, cash equivalents, and investments | $1,764.6 | $2,430.6 | | Total Debt (Short & Long-term) | $1,685.2 | $2,127.3 | | **Cash, net of debt** | **$79.4** | **$303.3** | - Net cash from operations decreased **34%** YoY to **$179.8 million**, mainly due to higher payments to suppliers and for restructuring[194](index=194&type=chunk)[195](index=195&type=chunk) - The company has a **$500.0 million** unsecured revolving credit facility expiring in April 2024, with no amounts outstanding as of March 31, 2021[201](index=201&type=chunk) - Management believes existing cash, investments, and cash from operations are sufficient to fund operations, capital returns, and growth for at least the next twelve months[203](index=203&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states no material changes to market risk exposures since December 31, 2020, referring to its Annual Report on Form 10-K - There were no material changes to the company's market risk exposures since December 31, 2020[205](index=205&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal financial controls - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[207](index=207&type=chunk) - No changes in internal control over financial reporting occurred during Q1 2021 that have materially affected, or are reasonably likely to materially affect, these controls[208](index=208&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal proceedings, but management believes none will materially affect its financial position - The company incorporates by reference the information on legal proceedings from Note 15 of the financial statements[210](index=210&type=chunk) - Management does not believe that any currently existing claims or proceedings are likely to have a material adverse effect on the company's financial position[146](index=146&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) Key risks include COVID-19 impacts, semiconductor shortages, unpredictable results, customer concentration, cybersecurity, acquisitions, debt, and data privacy laws [Risks Related to Business Strategy and Industry](index=44&type=section&id=RISKS%20RELATED%20TO%20OUR%20BUSINESS%20STRATEGY%20AND%20INDUSTRY) - The COVID-19 pandemic continues to negatively affect operations through supply constraints, component shortages, and increased logistics costs, which has harmed revenue recognition and gross margins[212](index=212&type=chunk)[213](index=213&type=chunk) - Quarterly results are unpredictable and subject to fluctuations due to unpredictable ordering patterns, changes in customer mix, and disruptions in the global supply chain[215](index=215&type=chunk)[216](index=216&type=chunk) - A material portion of revenues is derived from a limited number of customers, and consolidation in their industries could adversely affect purchasing decisions[219](index=219&type=chunk) - The success of acquisitions is not guaranteed and involves risks such as integration challenges, unanticipated costs, and potential loss of key employees or customers[223](index=223&type=chunk) [Risks Related to Technology and Business Operations](index=48&type=section&id=RISKS%20RELATED%20TO%20OUR%20TECHNOLOGY%20AND%20BUSINESS%20OPERATIONS) - The business depends on the ability to anticipate technological shifts and market needs; failure to do so could lead to loss of customers and market acceptance[232](index=232&type=chunk) - The company depends on contract manufacturers and single-source suppliers for key components like semiconductors, and is currently experiencing extended lead times due to a worldwide shortage[241](index=241&type=chunk)[246](index=246&type=chunk) - System security risks and cyberattacks pose a significant threat, potentially compromising proprietary information, disrupting operations, and harming public perception of products[248](index=248&type=chunk) - The majority of revenues are derived through resellers and distributors, and disruption in these channels could seriously harm future revenue[254](index=254&type=chunk) [Legal, Regulatory, and Compliance Risks](index=53&type=section&id=LEGAL%2C%20REGULATORY%2C%20AND%20COMPLIANCE%20RISKS) - The company is party to various lawsuits and investigations, including matters of patent infringement and past inquiries into FCPA compliance, which can be costly and divert management attention[260](index=260&type=chunk) - Governmental regulations affecting international trade, including import/export controls on encryption technology and economic sanctions, could negatively affect revenues and operating results[272](index=272&type=chunk) - Evolving and complex data privacy laws, such as GDPR in Europe and CCPA/CPRA in California, create significant compliance costs and risks of enforcement actions and fines[277](index=277&type=chunk)[278](index=278&type=chunk)[280](index=280&type=chunk) [Financial Risks](index=56&type=section&id=FINANCIAL%20RISKS) - The company holds significant goodwill (**$3.8 billion**) and purchased intangible assets (**$335.1 million**), which are subject to impairment risk that could adversely affect results of operations[283](index=283&type=chunk) - Effective tax rates are subject to volatility from changes in geographic earnings mix, valuation of deferred tax assets, and potential changes in tax laws, such as proposals by the current U.S administration[285](index=285&type=chunk)[286](index=286&type=chunk) - The company has **$1.7 billion** in aggregate principal of senior notes, and covenants associated with its debt limit its ability to conduct certain business activities[291](index=291&type=chunk)[292](index=292&type=chunk) - The planned elimination of LIBOR after June 2023 may affect financial results, as LIBOR-based borrowings will need to be converted to a replacement rate like SOFR, potentially increasing interest costs[297](index=297&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2021, the company repurchased **5.1 million shares** for **$125.0 million** under its 2018 Stock Repurchase Program, with **$1.2 billion** remaining Q1 2021 Stock Repurchase Activity | Period | Total Shares Purchased (millions) | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2021 | 0 | N/A | | Feb 2021 | 4.7 | $24.50 | | Mar 2021 | 0.4 | $23.91 | | **Total** | **5.1** | **~ $24.45** | - As of March 31, 2021, approximately **$1.2 billion** remained available for repurchase under the **$3.0 billion** 2018 Stock Repurchase Program[303](index=303&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) The company disclosed authorized dealings with Russian FSB in Q1 2021 for import permits, generating no revenue or profit from these specific activities - The company disclosed activities related to Section 13(r) of the Securities Exchange Act, concerning dealings with sanctioned entities[305](index=305&type=chunk) - In Q1 2021, the company filed for import licenses and permits from the Russian Federal Security Service (FSB), as authorized by a U.S OFAC General License, to enable product distribution in Russia No revenue or profit was associated with these filings[306](index=306&type=chunk)[307](index=307&type=chunk) [Item 6. Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including Master Services Agreement amendments, CEO/CFO certifications, and iXBRL financial statements - A list of all exhibits filed with the quarterly report is provided, including CEO/CFO certifications and financial data files in iXBRL format[309](index=309&type=chunk) [Signatures](index=62&type=section&id=SIGNATURES) The report was officially signed on April 30, 2021, by Thomas A Austin, VP, Corporate Controller and Chief Accounting Officer, for Juniper Networks, Inc - The Form 10-Q report was officially signed and authorized on April 30, 2021[311](index=311&type=chunk)

Juniper Networks, Inc. (NYSE:JNPR) Q1 2021 Earnings Conference Call April 27, 2021 5:00 PM ET Company Participants Jess Lubert – Vice President of Investor Relations Rami Rahim – Chief Executive Officer Ken Miller – Chief Financial Officer Conference Call Participants Rod Hall – Goldman Sachs Amit Daryanani – Evercore Simon Leopold – Raymond James Joe Cardoso – JP Morgan Jake Wilhelm – Wells Fargo Tim Long – Barclays Meta Marshall – Morgan Stanley George Notter – Jefferies Sami Badri – Credit Suisse David L ...

PART I [ITEM 1. Business](index=4&type=section&id=ITEM%201.%20Business) Juniper Networks provides high-performance networking products and services to Cloud, Service Provider, and Enterprise customers globally, expanding its AI-driven software business - Juniper Networks provides **high-performance network products and services** across routing, switching, Wi-Fi, network security, and SDN technologies to customers in Cloud, Service Provider, and Enterprise verticals globally[615](index=615&type=chunk) - The company is actively expanding its **software business**, focusing on cloud-managed, AI-enabled enterprise networking operations, supported by acquisitions like Mist Systems (**2019**), **128** Technology (**2020**), and Netrounds (**2020**)[617](index=617&type=chunk)[642](index=642&type=chunk)[643](index=643&type=chunk) - Key strategic priorities include seizing the cloud transition, differentiating through innovation in networking, security, and software orchestration, and leveraging automation and AI for operational simplicity[619](index=619&type=chunk) - As of **December 31, 2020**, Juniper Networks employed **9,950 full-time employees** globally, with significant investments in R&D (**4,044 employees**) and sales & marketing (**2,880 employees**)[698](index=698&type=chunk)[665](index=665&type=chunk)[668](index=668&type=chunk) Product Backlog (2019-2020) | Metric | 2020 (Millions) | 2019 (Millions) | | :--------------- | :-------------- | :-------------- | | Total Product Backlog | $419.6 | $341.1 | [Overview](index=5&type=section&id=Overview) [Strategy](index=6&type=section&id=Strategy) [Customer Verticals](index=7&type=section&id=Customer%20Verticals) [Products, Services, and Technology](index=9&type=section&id=Products%2C%20Services%2C%20and%20Technology) [Research and Development](index=15&type=section&id=Research%20and%20Development) [Sales and Marketing](index=15&type=section&id=Sales%20and%20Marketing) [Manufacturing and Operations](index=16&type=section&id=Manufacturing%20and%20Operations) [Backlog](index=17&type=section&id=Backlog) [Seasonality](index=17&type=section&id=Seasonality) [Competition](index=17&type=section&id=Competition) [Material Government Regulations](index=18&type=section&id=Material%20Government%20Regulations) [Intellectual Property](index=19&type=section&id=Intellectual%20Property) [Human Capital Resources](index=20&type=section&id=Human%20Capital%20Resources) [Information about our Executive Officers](index=21&type=section&id=Information%20about%20our%20Executive%20Officers) [Available Information](index=22&type=section&id=Available%20Information) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from COVID-19, market fluctuations, competition, and legal/regulatory challenges - The COVID-19 pandemic has negatively impacted operations, causing supply constraints, component shortages, extended lead-times, and increased logistics costs, which affected revenue recognition and gross margins in fiscal **2020**[718](index=718&type=chunk)[719](index=719&type=chunk)[720](index=720&type=chunk) - Quarterly results are highly unpredictable due to factors like customer ordering patterns, product/service mix, market conditions, competition, and seasonal fluctuations[721](index=721&type=chunk)[722](index=722&type=chunk) - Gross margins and operating margins are expected to vary due to customer/product/geographic mix shifts, price competition, currency fluctuations, increased costs (materials, labor, logistics), and tariffs[724](index=724&type=chunk) - The company faces significant competition from larger, more integrated companies (e.g., Cisco, Nokia, Huawei) with broader portfolios and resources, as well as specialized security vendors[726](index=726&type=chunk)[777](index=777&type=chunk)[778](index=778&type=chunk) - Risks related to technology and business operations include failure to anticipate technological shifts, product interoperability issues, reliance on licensed third-party technology, difficulties enforcing proprietary rights, and dependence on single/limited source suppliers and contract manufacturers[739](index=739&type=chunk)[742](index=742&type=chunk)[743](index=743&type=chunk)[744](index=744&type=chunk)[747](index=747&type=chunk) - Legal and regulatory risks encompass lawsuits (employment, patent infringement, FCPA), non-standard contract terms with large customers, industry-specific regulations (e.g., security product certifications, conflict minerals, environmental laws), global trade restrictions (export controls, sanctions, tariffs), and evolving data privacy laws (GDPR, CCPA, CPRA)[765](index=765&type=chunk)[768](index=768&type=chunk)[770](index=770&type=chunk)[772](index=772&type=chunk)[776](index=776&type=chunk)[783](index=783&type=chunk)[786](index=786&type=chunk) - Financial risks include potential impairment of goodwill (**$3,669.6 million as of Dec 31, 2020**) and purchased intangible assets (**$266.7 million**), changes in effective tax rates, risks from international operations (economic, political, currency fluctuations), and risks associated with outstanding indebtedness and investments[789](index=789&type=chunk)[790](index=790&type=chunk)[794](index=794&type=chunk)[798](index=798&type=chunk)[802](index=802&type=chunk) [ITEM 1B. Unresolved Staff Comments](index=35&type=section&id=ITEM%201B.%20Unresolved%20Staff%20Comments) There are no unresolved written comments from the SEC staff regarding the company's periodic reports [ITEM 2. Properties](index=35&type=section&id=ITEM%202.%20Properties) Juniper Networks' headquarters is in Sunnyvale, California, with owned buildings and leased facilities globally, deemed adequate - Corporate headquarters in Sunnyvale, California, includes **0.7 million square feet** of owned buildings on **80 acres**[806](index=806&type=chunk) - Leases approximately **1.7 million square feet** worldwide, with **36%** in North America, expiring through **May 2031**[806](index=806&type=chunk) [ITEM 3. Legal Proceedings](index=36&type=section&id=ITEM%203.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from Note 15, Commitments and Contingencies - Legal proceedings information is **incorporated by reference** from Note **15**, Commitments and Contingencies[808](index=808&type=chunk) [ITEM 4. Mine Safety Disclosures](index=36&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Juniper Networks PART II [ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=ITEM%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Juniper Networks' common stock trades on NYSE, with details on stockholders, cash dividends, and stock repurchase activities - Common stock (JNPR) is **traded on the New York Stock Exchange (NYSE)**[810](index=810&type=chunk) - As of **February 10, 2021**, there were **599 stockholders of record**[811](index=811&type=chunk) Cash Dividends Paid (2020) | Year | Dividends per Share | Total Amount (Millions) | | :--- | :------------------ | :---------------------- | | 2020 | $0.80 | $264.1 | - A quarterly cash dividend of **$0.20 per share** was declared in **January 2021**, payable **March 22, 2021**[812](index=812&type=chunk) Stock Repurchase Activity (2020) | Period | Total Shares Purchased (Millions) | Average Price Paid per Share | Amount (Millions) | | :------------------------- | :-------------------------------- | :--------------------------- | :---------------- | | December 1 - December 31, 2020 | 3.4 | $21.83 | $1,325.0 (remaining) | | Total 2020 | 16.1 | $23.36 | $375.0 | - As of **December 31, 2020**, **$1.3 billion remained authorized** under the **$3.0 billion** stock repurchase program[884](index=884&type=chunk) [ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=ITEM%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Juniper Networks' financial performance for 2020 vs 2019, covering key metrics, COVID-19 impact, policies, and liquidity Key Financial Results (2020 vs. 2019) | Metric | 2020 (Millions) | 2019 (Millions) | Change (Millions) | % Change | | :------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Net revenues | $4,445.1 | $4,445.4 | $(0.3) | — % | | Gross margin | $2,573.7 | $2,616.8 | $(43.1) | (2)% | | Percentage of net revenues | 57.9 % | 58.9 % | | | | Operating income | $353.1 | $442.2 | $(89.1) | (20)% | | Percentage of net revenues | 7.9 % | 9.9 % | | | | Net income | $257.8 | $345.0 | $(87.2) | (25)% | | Percentage of net revenues | 5.8 % | 7.8 % | | | | Basic EPS | $0.78 | $1.01 | $(0.23) | (23)% | | Diluted EPS | $0.77 | $0.99 | $(0.22) | (22)% | | Operating cash flows | $612.0 | $528.9 | $83.1 | 16 % | | Stock repurchase activity | $375.0 | $550.0 | $(175.0) | (32)% | | Cash dividends per share | $0.80 | $0.76 | $0.04 | 5 % | | DSO | 71 | 66 | 5 | 8 % | | Deferred revenue | $1,285.8 | $1,223.4 | $62.4 | 5 % | - **Net revenues were flat year-over-year in 2020**, with growth in Enterprise (driven by Switching) and Cloud (driven by Routing) offset by a decline in Service Provider (partially due to COVID-19 supply constraints) Service net revenues increased due to strong support contract renewals[823](index=823&type=chunk)[848](index=848&type=chunk)[850](index=850&type=chunk) - **Gross margin decreased to 57.9%** (from **58.9% in 2019**) primarily due to increased logistics and supply chain costs related to COVID-19, customer and product mix shifts, and higher intangible asset amortization from the Mist acquisition[824](index=824&type=chunk)[852](index=852&type=chunk)[853](index=853&type=chunk) - **Operating income decreased by 20%** due to lower gross margins, higher restructuring charges (**$68.0 million in 2020 vs. $35.3 million in 2019**), and increased personnel-related costs, partially offset by reduced travel expenses[823](index=823&type=chunk)[824](index=824&type=chunk)[857](index=857&type=chunk)[860](index=860&type=chunk) - **Net cash provided by operations increased by 16% to $612.0 million**, driven by higher invoicing and improved customer collections, despite increased payments to suppliers and for employee compensation[823](index=823&type=chunk)[877](index=877&type=chunk) - The company incurred a **$55.0 million loss on extinguishment of debt in 2020** due to early repayment of senior notes, compared to **$15.3 million in 2019**[863](index=863&type=chunk) - The **effective tax rate decreased significantly to 2.8% in 2020** (from **16.7% in 2019**) due to a **$63.7 million** benefit from unrecognized tax benefits and a **$20.1 million** charge for cost sharing related to share-based compensation[869](index=869&type=chunk) [Executive Overview](index=43&type=section&id=Executive%20Overview) [Critical Accounting Policies and Estimates](index=46&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) [Recent Accounting Pronouncements](index=49&type=section&id=Recent%20Accounting%20Pronouncements) [Results of Operations](index=50&type=section&id=Results%20of%20Operations) [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) [ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=ITEM%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details Juniper Networks' market risk exposure, primarily interest rate and foreign currency, and its hedging strategies - The company's investment portfolio is diversified across various holdings, types, and maturities (e.g., asset-backed securities, corporate debt, government securities) to preserve principal, maintain liquidity, and maximize yield, while minimizing interest rate risk[896](index=896&type=chunk) - Juniper uses interest rate swaps to convert fixed-rate notes to floating rates, hedging against interest rate risk As of **December 31, 2020**, the **notional amount of these swaps was $300.0 million**, with a **fair value asset of $20.3 million**[899](index=899&type=chunk) - In **2020**, the company entered into interest rate locks for **$650.0 million** to hedge future debt issuance, **recorded as a $30.7 million asset** in fair value as of **December 31, 2020**[900](index=900&type=chunk) - Foreign currency forward contracts are used to hedge forecasted foreign currency transactions and mitigate variability in gains/losses from re-measurement of foreign-denominated assets/liabilities These derivatives are designated as cash flow hedges[901](index=901&type=chunk)[902](index=902&type=chunk) - A **hypothetical 10% movement in foreign currency exchange rates** would **change the U.S. dollar value** of cash, cash equivalents, and investments by **$33.4 million (1.4%) as of December 31, 2020**[903](index=903&type=chunk) - Investments in privately-held companies, totaling **$201.9 million as of December 31, 2020**, are **subject to equity price risk** due to their early development stages and potential for market non-materialization[904](index=904&type=chunk) [ITEM 8. Financial Statements and Supplementary Data](index=56&type=section&id=ITEM%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Juniper Networks' audited consolidated financial statements for 2018-2020, including balance sheets, income statements, cash flows, and notes - The consolidated financial statements for **2020**, **2019**, and **2018** are presented in conformity with U.S GAAP and have been audited by Ernst & Young LLP, who expressed an **unqualified opinion**[909](index=909&type=chunk)[912](index=912&type=chunk) - Management concluded that **internal control over financial reporting was effective as of December 31, 2020**, excluding recent acquisitions (**128 Technology** and Netrounds) which were **immaterial to total assets and net revenues**[935](index=935&type=chunk) Consolidated Statements of Operations (Selected Data, in millions) | Metric | 2020 | 2019 | 2018 | | :----------------- | :-------- | :-------- | :-------- | | Total net revenues | $4,445.1 | $4,445.4 | $4,647.5 | | Gross margin | $2,573.7 | $2,616.8 | $2,741.2 | | Operating income | $353.1 | $442.2 | $572.2 | | Net income | $257.8 | $345.0 | $566.9 | Consolidated Balance Sheets (Selected Data, in millions) | Asset/Liability | Dec 31, 2020 | Dec 31, 2019 | | :------------------------------ | :----------- | :----------- | | Cash and cash equivalents | $1,361.9 | $1,215.8 | | Total current assets | $3,271.2 | $3,209.8 | | Goodwill | $3,669.6 | $3,337.1 | | Total assets | $9,378.3 | $8,837.7 | | Total current liabilities | $2,161.1 | $1,543.9 | | Long-term debt | $1,705.8 | $1,683.9 | | Total liabilities | $4,834.8 | $4,227.1 | | Total stockholders' equity | $4,543.5 | $4,610.6 | Consolidated Statements of Cash Flows (Selected Data, in millions) | Activity | 2020 | 2019 | 2018 | | :----------------------------- | :-------- | :---------- | :-------- | | Net cash from operating activities | $612.0 | $528.9 | $861.1 |\ | Net cash used in investing activities | $(288.9) | $(528.2) | $564.8 |\ | Net cash used in financing activities | $(222.4) | $(1,228.8) | $(968.6) | [Reports of Independent Registered Public Accounting Firm](index=57&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) [Report of Independent Registered Public Accounting Firm (Internal Control)](index=59&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20%28Internal%20Control%29) [Management's Report on Internal Control Over Financial Reporting](index=61&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) [Consolidated Statements of Operations](index=62&type=section&id=Consolidated%20Statements%20of%20Operations) [Consolidated Statements of Comprehensive Income](index=63&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) [Consolidated Balance Sheets](index=64&type=section&id=Consolidated%20Balance%20Sheets) [Consolidated Statements of Cash Flows](index=65&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) [Consolidated Statements of Changes in Stockholders' Equity](index=66&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) [Notes to Consolidated Financial Statements](index=67&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [Note 1. Description of Business, Basis of Presentation and Significant Accounting Policies](index=67&type=section&id=Note%201.%20Description%20of%20Business%2C%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) [Note 2. Business Combinations](index=76&type=section&id=Note%202.%20Business%20Combinations) [Note 3. Cash Equivalents and Investments](index=78&type=section&id=Note%203.%20Cash%20Equivalents%20and%20Investments) [Note 4. Fair Value Measurements](index=81&type=section&id=Note%204.%20Fair%20Value%20Measurements) [Note 5. Derivative Instruments](index=83&type=section&id=Note%205.%20Derivative%20Instruments) [Note 6. Goodwill and Purchased Intangible Assets](index=85&type=section&id=Note%206.%20Goodwill%20and%20Purchased%20Intangible%20Assets) [Note 7. Other Financial Information](index=86&type=section&id=Note%207.%20Other%20Financial%20Information) [Note 8. Restructuring Charges](index=89&type=section&id=Note%208.%20Restructuring%20Charges) [Note 9. Debt and Financing](index=90&type=section&id=Note%209.%20Debt%20and%20Financing) [Note 10. Equity](index=92&type=section&id=Note%2010.%20Equity) [Note 11. Employee Benefit Plans](index=94&type=section&id=Note%2011.%20Employee%20Benefit%20Plans) [Note 12. Segments](index=99&type=section&id=Note%2012.%20Segments) [Note 13. Income Taxes](index=101&type=section&id=Note%2013.%20Income%20Taxes) [Note 14. Net Income per Share](index=105&type=section&id=Note%2014.%20Net%20Income%20per%20Share) [Note 15. Commitments and Contingencies](index=106&type=section&id=Note%2015.%20Commitments%20and%20Contingencies) [Note 16. Selected Quarterly Financial Data (Unaudited)](index=109&type=section&id=Note%2016.%20Selected%20Quarterly%20Financial%20Data%20%28Unaudited%29) [Note 17. Subsequent Events](index=110&type=section&id=Note%2017.%20Subsequent%20Events) [ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=111&type=section&id=ITEM%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure matters [ITEM 9A. Controls and Procedures](index=111&type=section&id=ITEM%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of December 31, 2020, with no material internal control changes - Disclosure controls and procedures were **deemed effective as of December 31, 2020**, following evaluation by management, including the principal executive and financial officers[1194](index=1194&type=chunk) - **No material changes in internal control over financial reporting occurred in Q4 2020**, with remote work due to COVID-19 **not significantly impacting effectiveness** due to adaptable control design[1195](index=1195&type=chunk) PART III [ITEM 10. Directors, Executive Officers and Corporate Governance](index=112&type=section&id=ITEM%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, corporate governance, and Section 16(a) compliance is incorporated by reference from the Proxy Statement - Information on directors, executive officers, corporate governance, and Section **16(a)** compliance is **incorporated by reference** from the **2021** Proxy Statement[1197](index=1197&type=chunk) [ITEM 11. Executive Compensation](index=112&type=section&id=ITEM%2011.%20Executive%20Compensation) Executive compensation details, including director compensation and committee reports, are incorporated by reference from the Proxy Statement - Executive compensation details, including director compensation and compensation committee reports, are **incorporated by reference** from the Proxy Statement[1199](index=1199&type=chunk) [ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=112&type=section&id=ITEM%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information for beneficial owners and management, plus equity compensation plan details, is incorporated by reference from the Proxy Statement - Security ownership information for beneficial owners and management, along with equity compensation plan details, is **incorporated by reference** from the Proxy Statement[1200](index=1200&type=chunk) [ITEM 13. Certain Relationships and Related Transactions, and Director Independence](index=112&type=section&id=ITEM%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Details on certain relationships, related transactions, and director independence are incorporated by reference from the Proxy Statement - Details on certain relationships, related transactions, and director independence are **incorporated by reference** from the Proxy Statement[1201](index=1201&type=chunk) [ITEM 14. Principal Accounting Fees and Services](index=112&type=section&id=ITEM%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees, services, and audit committee pre-approval policies is incorporated by reference from the Proxy Statement - Information on principal accounting fees and services and audit committee pre-approval policies is **incorporated by reference** from the Proxy Statement[1202](index=1202&type=chunk) PART IV [ITEM 15. Exhibits and Financial Statement Schedules](index=113&type=section&id=ITEM%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists consolidated financial statements, schedules, and exhibits, including Schedule II for Valuation and Qualifying Accounts - The report includes consolidated financial statements and financial statement schedules, specifically **Schedule II - Valuation and Qualifying Accounts**[1203](index=1203&type=chunk)[1204](index=1204&type=chunk) Allowance for Doubtful Accounts (in millions) | Year | Balance at Beginning of Year | Charged to Expenses | Write-offs, Net of Recoveries | Balance at End of Year | | :--- | :--------------------------- | :------------------ | :---------------------------- | :--------------------- | | 2020 | $5.5 | $4.4 | — | $9.9 | | 2019 | $4.9 | $1.7 | $(1.1) | $5.5 | | 2018 | $5.7 | $(0.8) | — | $4.9 | Sales Return Reserve (in millions) | Year | Balance at Beginning of Year | Charged as a Reduction in Revenues | Used | Balance at End of Year | | :--- | :--------------------------- | :--------------------------------- | :----- | :--------------------- | | 2020 | $24.8 | $60.7 | $(57.1) | $28.4 | | 2019 | $32.7 | $59.5 | $(67.4) | $24.8 | | 2018 | $44.5 | $70.7 | $(82.5) | $32.7 | [ITEM 16. Form 10-K Summary](index=115&type=section&id=ITEM%2016.%20Form%2010-K%20Summary) This item indicates that a Form 10-K Summary is not applicable SIGNATURES This section contains the required signatures for the Annual Report on Form 10-K from key executives and the Board of Directors - The report is **signed by key executives including the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, along with the Board of Directors**, on **February 12, 2021**[1209](index=1209&type=chunk)[1212](index=1212&type=chunk)

Juniper Networks, Inc. (NYSE:JNPR) Q4 2020 Earnings Conference Call January 28, 2021 5:00 PM ET Company Participants Jess Lubert – Investor Relations Rami Rahim – Chief Executive Officer Ken Miller – Chief Financial Officer Conference Call Participants Simon Leopold – Raymond James Paul Silverstein – Cowen Tim Long – Barclays Samik Chatterjee – JP Morgan Rod Hall – Goldman Sachs Jeff Kvaal – Wolfe Research Sami Badri – Credit Suisse David Vaughn – UBS Alex Henderson – Needham Ryan Koontz – Rosenblatt Securi ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Juniper Networks' unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2020, including statements of operations, balance sheets, cash flows, and detailed accounting notes [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Total net revenues for Q3 2020 slightly increased to $1,138.2 million, with net income significantly rising to $145.4 million, while nine-month net revenues remained flat with increased net income Key Financial Metrics (Unaudited) | Financial Metric | Three Months Ended Sep 30, 2020 (Millions USD) | Three Months Ended Sep 30, 2019 (Millions USD) | Nine Months Ended Sep 30, 2020 (Millions USD) | Nine Months Ended Sep 30, 2019 (Millions USD) | | :--- | :--- | :--- | :--- | :--- | | **Total net revenues** | **$1,138.2** | **$1,133.1** | **$3,222.5** | **$3,237.3** | | Product Revenue | $733.7 | $743.2 | $2,034.8 | $2,075.8 | | Service Revenue | $404.5 | $389.9 | $1,187.7 | $1,161.5 | | **Gross margin** | **$657.8** | **$678.4** | **$1,856.7** | **$1,897.5** | | **Operating income** | **$125.1** | **$138.5** | **$255.0** | **$263.6** | | **Net income** | **$145.4** | **$99.3** | **$227.0** | **$176.6** | | **Diluted EPS** | **$0.43** | **$0.29** | **$0.68** | **$0.50** | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased slightly to $8,694.7 million as of September 30, 2020, with total liabilities also decreasing, while cash and cash equivalents increased Condensed Consolidated Balance Sheets (Unaudited) | Balance Sheet Item | Sep 30, 2020 (Unaudited, Millions USD) | Dec 31, 2019 (Millions USD) | | :--- | :--- | :--- | | **Total current assets** | **$3,038.5** | **$3,209.8** | | Cash and cash equivalents | $1,341.5 | $1,215.8 | | Goodwill | $3,337.1 | $3,337.1 | | **Total assets** | **$8,694.7** | **$8,837.7** | | **Total current liabilities** | **$1,501.6** | **$1,543.9** | | Long-term debt | $1,714.1 | $1,683.9 | | **Total liabilities** | **$4,133.9** | **$4,227.1** | | **Total stockholders' equity** | **$4,560.8** | **$4,610.6** | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities increased to $486.2 million for the nine months ended September 30, 2020, with a significant shift to cash provided by investing activities and reduced cash used in financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity (Nine Months Ended Sep 30) | 2020 (Millions USD) | 2019 (Millions USD) | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$486.2** | **$433.2** | | **Net cash provided by (used in) investing activities** | **$86.0** | **($704.1)** | | **Net cash used in financing activities** | **($444.4)** | **($965.3)** | | Repurchase of common stock | ($305.7) | ($354.9) | | Payment of dividends | ($198.0) | ($196.4) | | **Net increase (decrease) in cash** | **$125.3** | **($1,239.8)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details accounting policies and financial results, covering investments, debt, equity transactions, segment revenues, income taxes, and subsequent events like acquisitions - The company adopted new accounting standards for Fair Value Measurement (Topic 820), Goodwill Impairment (Topic 350), and Credit Losses on Financial Instruments (Topic 326) on January 1, 2020, with **no material impact** on the financial statements[28](index=28&type=chunk)[29](index=29&type=chunk)[31](index=31&type=chunk) - Total debt as of September 30, 2020, was **$1,714.1 million**, consisting of various senior notes with maturities ranging from 2024 to 2041, and the company also has an undrawn **$500.0 million** unsecured revolving credit facility expiring in April 2024[83](index=83&type=chunk)[86](index=86&type=chunk) - Subsequent to the quarter end, the company announced an agreement to acquire 128 Technology for approximately **$450.0 million** and completed the acquisition of Netrounds for approximately **$35.0 million**, with a quarterly dividend of **$0.20 per share** also declared[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) Revenue by Segment (Q3 2020) | Revenue by Segment (Q3 2020) | Net Revenues (Millions USD) | YoY Change (%) | | :--- | :--- | :--- | | **Product** | **$733.7** | **-1%** | | Routing | $432.0 | +6% | | Switching | $229.0 | -5% | | Security | $72.7 | -23% | | **Service** | **$404.5** | **+4%** | | **Total** | **$1,138.2** | **~0%** | Revenue by Vertical (Q3 2020) | Revenue by Vertical (Q3 2020) | Net Revenues (Millions USD) | YoY Change (%) | | :--- | :--- | :--- | | Cloud | $253.1 | -7% | | Service Provider | $475.1 | +5% | | Enterprise | $410.0 | ~0% | | **Total** | **$1,138.2** | **~0%** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Q3 and nine-month 2020 financial performance, covering business environment, COVID-19 impacts, revenue, gross margin, operating expenses, liquidity, and capital return strategies [Business and Market Environment](index=33&type=section&id=Business%20and%20Market%20Environment) Juniper focuses on high-performance networking for Cloud, Service Provider, and Enterprise, accelerating AI-driven enterprise networking through the Mist Systems acquisition and expanding its security portfolio - The company's strategy focuses on compelling use cases in **AI-Driven Enterprise, Automated WAN Solutions, and Cloud Ready Data Centers**[138](index=138&type=chunk) - The acquisition of **Mist Systems** in 2019 is a key part of accelerating the company's execution in **cloud-managed, AI-enabled enterprise networking operations**[135](index=135&type=chunk) [COVID-19 Pandemic Update](index=34&type=section&id=COVID-19%20Pandemic%20Update) COVID-19 continued to negatively impact Q3 2020 financial results through supply chain constraints and increased logistics costs, though manufacturing capacity improved, and the company entered Q4 with a healthy backlog - Supply constraints during the first three quarters of 2020 were due to both **constrained manufacturing capacity and component parts shortages**[140](index=140&type=chunk) - The supply chain issues resulted in **extended lead-times, increased logistics costs**, and **negatively impacted revenue recognition and gross margins**[140](index=140&type=chunk) - Despite challenges, the company entered Q4 2020 with a **healthy backlog in its Cloud and Service Provider verticals**[143](index=143&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Q3 2020 net revenues slightly increased, driven by Service Provider, while gross margin decreased to 57.8% due to COVID-19 logistics costs, operating expenses decreased by 1%, and the effective tax rate was -30.3% due to a tax dispute resolution - Q3 2020 **product revenue decreased** due to declines in switching and security, offset by growth in routing, while **service revenue increased** due to strong sales of support contracts and software subscriptions[158](index=158&type=chunk)[159](index=159&type=chunk) - **Product gross margin as a percentage of revenue decreased** in Q3 2020 primarily due to **increased logistics and other supply chain-related costs** from the COVID-19 pandemic and **unfavorable product mix**[163](index=163&type=chunk) - **Total operating expenses decreased** in Q3 2020, driven by **reduced travel expenses** due to COVID-19, partially offset by higher personnel-related expenses from increased headcount[168](index=168&type=chunk) - The **effective tax rate decreased significantly** in Q3 2020 due to a change in the effect of discrete items, including the **resolution of a tax dispute with India Tax Authorities** for the 2010-2012 tax years, resulting in a **release of $54.5 million in unrecognized tax benefits**[174](index=174&type=chunk)[111](index=111&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2020, total cash and investments were $2,561.2 million, with net cash from operations at $486.2 million, supporting continued capital return through $300.0 million in stock repurchases and $197.9 million in dividends - The company repurchased **14.5 million shares** for **$300.0 million** in the open market during the first nine months of 2020[185](index=185&type=chunk) - A quarterly cash dividend of **$0.20 per share** was paid, totaling **$197.9 million** for the first nine months of 2020[187](index=187&type=chunk) - As of September 30, 2020, approximately **$1.4 billion** remained authorized under the 2018 Stock Repurchase Program[185](index=185&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in market risk exposures since December 31, 2019, referring to its Annual Report on Form 10-K for detailed disclosures - There have been **no material changes** in the company's market risk exposures since the end of the previous fiscal year (December 31, 2019)[191](index=191&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting during Q3, despite the remote work environment - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were **effective** as of the end of the reporting period[193](index=193&type=chunk) - **No changes in internal control over financial reporting** occurred during Q3 2020 that have materially affected, or are reasonably likely to materially affect, internal controls[194](index=194&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal proceedings in the ordinary course of business but does not anticipate any material adverse effect on its financial position - The company is subject to various legal proceedings but **does not expect them to have a material adverse effect** on its financial position[124](index=124&type=chunk)[196](index=196&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) This section outlines numerous risks, including the uncertain impact of COVID-19, supply chain dependencies, system security threats, and various legal, regulatory, and compliance challenges - The COVID-19 pandemic poses a **significant risk**, with uncertain duration and extent, potentially **impacting operations, supply chains, customer demand, and financial performance**[198](index=198&type=chunk)[199](index=199&type=chunk) - The company's operations **depend on contract manufacturers and single-source suppliers**, making it **vulnerable to manufacturing issues, supply-chain disruptions, and component shortages**, which have been exacerbated by the pandemic[227](index=227&type=chunk)[228](index=228&type=chunk)[230](index=230&type=chunk) - **System security risks, data protection breaches, and cyberattacks** are significant threats that could **compromise proprietary information, disrupt operations, and harm the company's reputation**[235](index=235&type=chunk) - The business is subject to **extensive legal and regulatory risks**, including those related to **international trade** (tariffs, export controls), **data privacy** (GDPR, CCPA), and **environmental compliance**[252](index=252&type=chunk)[258](index=258&type=chunk)[266](index=266&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q3 2020, the company repurchased **4.2 million shares** for approximately **$23.81 per share** under its 2018 Stock Repurchase Program, with **$1.4 billion** remaining authorized as of September 30, 2020 Common Stock Repurchases (Q3 2020) | Period (2020) | Total Shares Purchased (Millions) | Average Price Paid per Share (USD) | | :--- | :--- | :--- | | July | 0 | N/A | | August | 2.6 | $24.50 | | September | 1.6 | $23.03 | | **Total Q3** | **4.2** | **~$23.81** | - As of September 30, 2020, approximately **$1.4 billion** remained for share repurchases under the authorized program[294](index=294&type=chunk) [Item 6. Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section lists Form 10-Q exhibits, including updated Change of Control and Severance Agreements, CEO and CFO certifications, and iXBRL-formatted financial statements - Filed exhibits include **updated forms of Change of Control and Severance Agreements** for certain officers, effective November 2, 2020[301](index=301&type=chunk) - **Certifications from the Chief Executive Officer and Chief Financial Officer** pursuant to SEC rules are included as exhibits[301](index=301&type=chunk)