Juniper Networks reports preliminary fourth quarter and fiscal year 2019 financial results
January 2020 by Patrick LEBRETON
Juniper Networks (NYSE: JNPR), a leader in secure, AI-driven networks, today reported preliminary financial results for the three months and fiscal year ended December 31, 2019 and provided its outlook for the three months ending March 31, 2020.
Fourth Quarter 2019 Financial Performance
Net revenues were $1,208.1 million, an increase of 2% year-over-year, and an increase of 7% sequentially.
GAAP operating margin was 14.8%, a decrease from 16.7% in the fourth quarter of 2018, and an increase from 12.2% in the third quarter of 2019.
Non-GAAP operating margin was 20.3%, a decrease from 21.1% in the fourth quarter of 2018, and an increase from 18.3% in the third quarter of 2019.
GAAP net income was $168.4 million, a decrease of 12% year-over-year, and an increase of 70% sequentially, resulting in diluted earnings per share of $0.49.
Non-GAAP net income was $198.7 million, a decrease of 3% year-over-year, and an increase of 19% sequentially, resulting in non-GAAP diluted earnings per share of $0.58.
Full Year 2019 Financial Performance
Net revenues were $4,445.4 million, a decrease of 4% year-over-year.
GAAP operating margin was 9.9%, a decrease from 12.3% in fiscal year 2018.
Non-GAAP operating margin was 16.6%, a decrease from 18.1% in fiscal year 2018.
GAAP net income was $345.0 million, a decrease of 39% year-over-year, resulting in diluted earnings per share of $0.99, a decrease of 38% year-over-year. The change in GAAP net income was primarily due to a higher tax rate and lower revenue.
Non-GAAP net income was $597.5 million, a decrease of 10% year-over-year, resulting in diluted earnings per share of $1.72, a decrease of 9% year-over-year.
The reconciliation between GAAP and non-GAAP results of operations is provided in a table immediately following the Preliminary Net Revenues by Geographic Region table below.
“We returned to year-over-year growth during the December quarter and saw encouraging trends across various areas of our business, including record Enterprise sales, double digit year-over-year growth in the Cloud, solid momentum with Mist, and another quarter of strength in our services organization,” said Juniper’s CEO, Rami Rahim. “We believe we are executing well and positioned to sustainably grow the business starting this year.”
“We experienced better than expected top and bottom-line results during the December quarter,” said Juniper’s CFO, Ken Miller. “While we are making some incremental investments for growth that are expected to cause non-GAAP operating expenses to increase during the upcoming year, we still expect non-GAAP earnings to grow in 2020 and leverage to improve in future years.”
Balance Sheet and Other Financial Results
Total cash, cash equivalents, and investments as of December 31, 2019 were $2,543.6 million, compared to $3,758.1 million as of December 31, 2018, and $2,826.7 million as of September 30, 2019.
Net cash flows provided by operations for the fourth quarter of 2019 was $95.7 million, compared to $212.4 million in the fourth quarter of 2018, and $185.0 million in the third quarter of 2019.
Days sales outstanding in accounts receivable was 66 days in the fourth quarter of 2019, compared to 58 days in the fourth quarter of 2018, and 51 days in the third quarter of 2019.
Capital expenditures were $26.1 million, and depreciation and amortization expense was $55.2 million during the fourth quarter of 2019.
These metrics are provided on a non-GAAP basis, except for revenue and share count. Non-GAAP earnings per share is on a fully diluted basis. The outlook assumes that the exchange rate of the U.S. dollar to other currencies will remain relatively stable at current levels.
At the mid-point of guidance, we expect year-over-year growth in the first quarter for revenue and non-GAAP earnings per share.
We expect revenue and non-GAAP earnings per share to grow on a sequential basis beyond the first quarter and we expect modest growth for the full year.
We expect non-GAAP gross margin to experience normal seasonal patterns in the first quarter and improve with volume through the course of the year. While non-GAAP gross margin can be difficult to predict, and can be impacted by deal and customer mix, we currently expect full year gross margin to be flat to slightly up versus 2019 levels.
We expect first quarter non-GAAP operating expense to increase sequentially due to the reset of variable compensation and typical seasonal increase of fringe costs. We expect quarterly non-GAAP operating expense to remain near first quarter levels through the course of the year. While we expect total non-GAAP operating expense to be up on a full year basis as we invest to take advantage of market opportunities, we remain committed to disciplined expense management and expect earnings to grow in 2020.
For 2020, we expect a non-GAAP tax rate on worldwide earnings to be 19% plus or minus 1%.
Our Board of Directors has declared a 5% increase in our quarterly cash dividend to $0.20 per share to be paid on March 23, 2020 to shareholders of record as of the close of business on March 2, 2020.
Our guidance for the quarter ending March 31, 2020 is as follows:
Revenue will be approximately $1,030 million, plus or minus $30 million.
Non-GAAP gross margin will be approximately 59.5%, plus or minus 1%.
Non-GAAP operating expenses will be approximately $495 million, plus or minus $5 million.
Non-GAAP operating margin will be approximately 11.5% at the mid-point of revenue guidance.
Non-GAAP tax rate will be approximately 19%.
Non-GAAP net income per share will be approximately $0.27, plus or minus $0.03. This assumes a share count of approximately 340 million.
All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition and strategic investment related charges, restructuring benefits or charges, impairment charges, strategic partnership-related charges, legal reserve and settlement charges or benefits, gain or loss on equity investments, loss on extinguishment of debt, retroactive impact of certain tax settlements, significant effects of tax legislation and judicial or administrative interpretation of tax regulations, including the impact of income tax reform, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and the income tax effect of non-GAAP exclusions, and do not include the impact of further changes to previously announced tariffs and the impact of any future acquisitions, divestitures, or joint ventures that may occur in the period. Juniper is unable to provide a reconciliation of non-GAAP guidance measures to corresponding U.S. generally accepted accounting principles or GAAP measures on a forward-looking basis without unreasonable effort due to the overall high variability and low visibility of most of the foregoing items that have been excluded. For example, share-based compensation expense is impacted by the Company’s future hiring needs, the type and volume of equity awards necessary for such future hiring, and the price at which the Company’s stock will trade in those future periods. Amortization of intangible assets is significantly impacted by the timing and size of any future acquisitions. The items that are being excluded are difficult to predict and a reconciliation could result in disclosure that would be imprecise or potentially misleading. Material changes to any one of these items could have a significant effect on our guidance and future GAAP results. Certain exclusions, such as amortization of intangible assets and share-based compensation expenses, are generally incurred each quarter, but the amounts have historically and may continue to vary significantly from quarter to quarter.
Fourth Quarter and Fiscal Year 2019 Financial Commentary Available Online
A CFO Commentary reviewing the Company’s fourth quarter 2019 and fiscal year 2019 financial results, as well as the first quarter 2020 financial outlook will be furnished to the SEC on Form 8-K and published on the Company’s website at http://investor.juniper.net. Analysts and investors are encouraged to review this commentary prior to participating in the conference call webcast.
Conference Call Webcast
Juniper Networks will host a conference call webcast today, January 27, 2020, at 2:00 pm PT, to be broadcast live over the Internet at http://investor.juniper.net. To participate via telephone in the US, the toll-free number is 1-877-407-8033. Outside the US, dial +1-201-689-8033. Please call 10 minutes prior to the scheduled conference call time. The webcast replay will be archived on the Juniper Networks website.