Juniper Networks(JNPR) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Results This section details Juniper Networks' Q1 2024 financial performance, including the proposed HPE merger, key financial metrics, management commentary, and balance sheet and cash flow highlights Proposed Merger with Hewlett Packard Enterprise Juniper Networks announced a pending all-cash acquisition by Hewlett Packard Enterprise (HPE) for $40.00 per share, valuing the company at approximately $14 billion, with the transaction anticipated to close in late 2024 or early 2025 pending regulatory approvals - Hewlett Packard Enterprise (HPE) plans to acquire Juniper Networks in an all-cash transaction for $40.00 per share[2] - The deal represents an equity value of approximately $14 billion and is expected to close in late calendar year 2024 or early 2025, subject to regulatory approvals[2] First Quarter 2024 Financial Performance In Q1 2024, Juniper Networks experienced a significant downturn in financial performance, with net revenues declining 16% year-over-year to $1.15 billion, resulting in a GAAP net loss of $0.8 million and a 38% year-over-year decrease in non-GAAP net income Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | YoY Change | Q4 2023 | QoQ Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenues (in millions) | $1,148.9 | $1,371.8 | -16% | $1,365.0 (implied) | -16% | | GAAP Operating Margin | (1.2)% | 8.4% | -9.6 p.p. | 9.2% | -10.4 p.p. | | Non-GAAP Operating Margin | 10.6% | 14.8% | -4.2 p.p. | 18.3% | -7.7 p.p. | | GAAP Net (Loss) Income (in millions) | $(0.8) | $85.4 | -101% | $124.3 | -101% | | Non-GAAP Net Income (in millions) | $96.6 | $156.6 | -38% | $196.9 | -51% | | GAAP Diluted EPS | $(0.00) | $0.26 | -100% | $0.38 | -100% | | Non-GAAP Diluted EPS | $0.29 | $0.48 | -40% | $0.61 | -52% | Management Commentary Management acknowledged performance impacts from macroeconomic headwinds and customer order digestion but expressed optimism for recovery in cloud demand and double-digit order growth in the Mist-led business, emphasizing a focus on profitability and long-term AI-driven growth - CEO Rami Rahim noted that despite macro headwinds, the company is seeing a recovery in demand from cloud customers and another quarter of double-digit order growth in its Mist-led business[5] - CEO remains optimistic about long-term growth prospects, especially with customer adoption of AI offerings for network operations and data centers[5] - CFO Ken Miller highlighted strong non-GAAP gross margin and better-than-seasonal expense trends, emphasizing a continued focus on profitability while investing for growth[6] Balance Sheet, Cash Flow, and Capital Return Juniper's financial position strengthened with total cash and investments rising to $1.53 billion and net cash from operations increasing to $325.0 million, while a $0.22 per share dividend was declared, and the stock repurchase program was suspended due to the pending HPE merger Key Balance Sheet and Cash Flow Metrics (Q1 2024) | Metric | Q1 2024 | Q1 2023 | Q4 2023 | | :--- | :--- | :--- | :--- | | Total cash, cash equivalents, and investments (in millions) | $1,534.9 | $1,191.0 | $1,324.3 | | Net cash flows provided by operations (in millions) | $325.0 | $191.5 | $9.1 | | Days sales outstanding (DSO) | 64 days | 70 days | 69 days | - A cash dividend of $0.22 per share was declared, payable on June 24, 2024[8] - The stock repurchase program has been suspended in accordance with the terms of the merger agreement with HPE[8] Detailed Financial Statements This section provides a detailed breakdown of Juniper Networks' Q1 2024 financial statements, including consolidated statements of operations, revenue segmentation by customer solution, vertical, and geography, and comprehensive balance sheet and cash flow summaries Preliminary Condensed Consolidated Statements of Operations For Q1 2024, total net revenues decreased 16% year-over-year to $1,148.9 million, leading to a GAAP operating loss of $14.2 million and a net loss of $0.8 million, primarily due to the revenue decline and $28.3 million in merger-related charges Q1 2024 vs. Q1 2023 Statement of Operations (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total net revenues | $1,148.9 | $1,371.8 | | Gross margin | $680.9 | $771.2 | | Total operating expenses | $695.1 | $655.5 | | Merger-related charges | $28.3 | $0.0 | | Operating (loss) income | $(14.2) | $115.7 | | Net (loss) income | $(0.8) | $85.4 | Preliminary Net Revenues Breakdown In Q1 2024, net revenues declined across most customer solutions, verticals, and geographic regions compared to Q1 2023, with Service Provider revenue dropping by 31% and the Americas showing the largest regional decrease Net Revenues by Customer Solution (in millions) | Customer Solution | Q1 2024 | Q1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Wide Area Networking | $350.4 | $474.5 | -26.2% | | Data Center | $163.1 | $193.6 | -15.8% | | Campus and Branch | $240.5 | $317.0 | -24.1% | | Hardware Maintenance & Prof. Services | $394.9 | $386.7 | +2.1% | Net Revenues by Vertical (in millions) | Vertical | Q1 2024 | Q1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Cloud | $250.0 | $264.9 | -5.6% | | Service Provider | $381.9 | $549.9 | -30.5% | | Enterprise | $517.0 | $557.0 | -7.2% | Net Revenues by Geographic Region (in millions) | Region | Q1 2024 | Q1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Americas | $665.5 | $798.5 | -16.7% | | Europe, Middle East, and Africa | $311.1 | $369.9 | -15.9% | | Asia Pacific | $172.3 | $203.4 | -15.3% | Preliminary Condensed Consolidated Balance Sheets As of March 31, 2024, Juniper's balance sheet remained stable with total assets of $9.48 billion, notable changes included a decrease in accounts receivable to $814.9 million and a minor decrease in total liabilities Balance Sheet Highlights (in millions) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,069.8 | $1,068.1 | | Accounts receivable, net | $814.9 | $1,044.1 | | Inventory | $958.2 | $952.4 | | Total assets | $9,478.2 | $9,518.5 | | Total current liabilities | $2,030.0 | $2,104.0 | | Long-term debt | $1,607.1 | $1,616.8 | | Total stockholders' equity | $4,481.2 | $4,492.7 | Preliminary Condensed Consolidated Statements of Cash Flows For Q1 2024, net cash provided by operating activities significantly improved to $325.0 million, primarily due to accounts receivable collection, while net cash used in financing activities decreased to $53.9 million due to suspended stock repurchases Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $325.0 | $191.5 | | Net cash (used in) provided by investing activities | $(265.5) | $42.2 | | Net cash used in financing activities | $(53.9) | $(190.8) | | Net increase in cash, cash equivalents, and restricted cash | $2.0 | $44.1 | - The increase in operating cash flow was largely due to a $228.8 million positive change from accounts receivable collection[41] - Cash used for repurchase of common stock decreased from $151.3 million in Q1 2023 to $14.6 million in Q1 2024[41] Non-GAAP Financial Measures This section provides a reconciliation of GAAP to non-GAAP financial measures for Q1 2024 and discusses the rationale and specific adjustments made for these non-GAAP presentations Reconciliation between GAAP and non-GAAP Financial Measures For Q1 2024, significant adjustments, including $79.9 million in share-based compensation and $28.3 million in merger-related charges, reconciled the GAAP operating loss of $14.2 million to a non-GAAP operating income of $121.3 million, and the GAAP net loss of $0.8 million to a non-GAAP net income of $96.6 million GAAP to Non-GAAP Reconciliation Highlights - Q1 2024 (in millions) | Metric | GAAP | Key Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Operating (Loss) Income | $(14.2) | Share-based comp: $79.9
Merger charges: $28.3
Amortization: $17.1 | $121.3 | | Net (Loss) Income | $(0.8) | Share-based comp: $79.9
Merger charges: $28.3
Tax effect: $(32.1) | $96.6 | Discussion of Non-GAAP Financial Measures Juniper justifies its use of non-GAAP measures to provide investors with supplemental data for enhanced transparency and comparability of continuing business operations, detailing exclusions across acquisition-related charges, other infrequent items, and share-based compensation - The company uses non-GAAP measures to assess performance by excluding items that may obscure underlying business trends, such as non-cash expenses or infrequent charges[29] - Note A (Acquisition Related Charges): Excludes amortization of purchased intangible assets to better reflect internally developed product costs[31] - Note B (Other Items): Excludes unique or infrequent events like merger-related charges, restructuring costs, and strategic investment gains/losses[32][33] - Note C (Share-Based Compensation): Excludes share-based compensation and related payroll tax to allow for more accurate comparisons with peer companies, as these are non-cash expenses with varying valuation methods[35]