Juniper Networks, Inc.

Greetings and welcome to the Juniper Network's third quarter 2020 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would like to turn this conference over to your host, Mr. Justice Luber, VP of Investor Relations, Thank you. You may begin.

Thank you, operator. Good afternoon, and welcome to our third quarter 2020 conference call. Joining me today are Rami Rahim, Chief Executive Officer, and Ken Miller, Chief Financial Officer. Today's call contains certain forward-looking statements based on our current expectations. These statements are subject to risks and uncertainties, and actual results might differ materially. These risks are discussed in our most recent 10Q, the press release, and CFO commentary furnished with our 8K file today and in our other SEC filings. Our forward-looking statements speak only as of today, and Juniper undertakes no obligation to update any forward-looking statements. Our discussion today will include non-GAAP financial results. Reconciliation information can be found on the investor relations section of our website under financial reports. Commentary on why we consider non-GAAP information a useful view of the company's financial results is included in today's press release. Following our prepared remarks, we will take questions. Please limit yourself to one question and one follow-up. With that, I will now hand the call over to Rami.

Good afternoon, everyone. Like many of you on this call, we're continuing to navigate the COVID-19 pandemic and take actions to both meet the needs of our customers and ensure the safety of our workforce. Most of our employees are continuing to work from home and successfully leveraging the various technologies enabled by the network to maintain a high level of productivity despite the current environment. To this last point, I'd like to reiterate my belief that the strategic importance of the global network has never been clearer and the long-term outlook for the markets we serve remains positive. We are investing not only to survive the current environment, but to capitalize on the opportunities our markets present and to come out stronger on the other side. Now on to our results. We delivered solid results during the September quarter, with revenue of $1,138,000,000 exceeding the midpoint of our guidance due to better than expected results in our service provider and enterprise verticals, both of which grew year over year. Upside in these areas, more than offset some lumpiness with our cloud customers, Non-GAAP earnings per share of 43 cents was in line with the midpoint of our forecast. Orders once again exceeded our expectations, particularly in our enterprise business, which saw double-digit order growth year over year, despite the challenging macro backdrop. We are executing well in the current environment. We firmly believe we are taking share and that our technology differentiation, along with our investments in go-to-market, are enabling us to win at a time when challenging market conditions have adversely affected our competitors. Our momentum is strong entering our fiscal fourth quarter, and this momentum is increasing my confidence that we will be able to grow the business on an organic basis for the full year 21. With that said, I'd like to touch a bit on our strategy and some of the actions we are taking to win the next decade of networking. Specifically, At the beginning of this year, we focused our sales teams, product management teams, and engineering teams on compelling and differentiated use cases targeting the AI-driven enterprise, automated WAN solution, and cloud-ready data centers. We believe each of these use cases is likely to see very attractive market tailwinds over the next several years, and focusing our resources on these specific areas should enable us to accelerate our growth as these opportunities unfold. It's worth mentioning that each of these use cases span across the three industry verticals that we target, and by focusing our resources on these areas, we should have the opportunity to speed time to market, accelerate share, and leverage development costs across a wide base. While this alignment should position us to better capitalize on big opportunities like the move to AI-driven cloud-managed architecture, 400G, and 5G in the years to come, the early feedback from our teams has been incredibly positive, and we're already starting to see the benefits of this alignment, which you'll hear me discuss more in future calls. Now I'd like to provide some additional insight into the quarter and address some of the key developments we are seeing within each of our core verticals. Starting with the enterprise, we are particularly encouraged by the improved momentum we are seeing as this business experienced double-digit sequential growth and slightly grew on a year-over-year basis. We saw improved momentum in the US and Asia, which more than offset weakness in Europe. Order growth was solid and exceeded our expectations, particularly in the North American enterprise and US federal verticals. Based on our results, we believe we are taking share, a dynamic we expect to continue in the future. Our optimism is fueled by the customer response to our AI-driven enterprise vision, which we began executing to early last year. This effort started with an investment in go-to-market headcount and was followed shortly thereafter with the acquisition of Mist Systems. These moves have not only enabled us to broaden our reach, but also added some game-changing AI and cloud management technology, which we are extending across our enterprise portfolio. The MIST technology is truly differentiated and has enabled our customers not only improve network performance, but also to capture material operational savings and deliver significant improvements in end-user experience. The differentiation of MIST, which has been extended to our wired offerings, can be seen in the order of momentum I mentioned this quarter. To this point, MIST reported another record quarter with new logos once again growing more than 100% year-over-year and orders rising more than 180% year-over-year. We also saw very strong adoption of our MIST wired assurance capabilities and corresponding pull-through of our EX switching portfolio, which positively impacted orders in the Q3 timeframe and should benefit revenue on a go-forward basis. To this point, joint NIST and EX orders exceeded a 200 million annualized run rate in the Q3 timeframe. Our investments in go-to-market are beginning to pay off, and we are also seeing positive momentum in the channel, both of which are creating optimism that the success we have been seeing is likely to continue in future quarters. Our agreement to acquire 128 Technologies represents the next step in our AI-driven enterprise evolution. 128's technology is truly unique and offers customers material benefits over any alternative S-U-N solution today. Some of the benefits include much lower hardware costs, much lower latency, and significantly lower bandwidth costs. In addition to these benefits, customers will see application performance improve and users will receive a better overall experience. 128 Technologies' user-centric SD-WAN is the perfect complement to our AI-driven enterprise solution, delivering market-leading insights and automation from clients to cloud. I expect our enterprise momentum to build in the quarters to come and believe this business is positioned to not only grow organically and take share in 2020, but also in 2021 and beyond. Our service provider segment also saw very healthy results in the September quarter, growing 5% year-over-year despite ongoing challenges from a supply chain perspective. Although we are continuing to see some COVID-19-related capacity benefits, we believe the primary driver of the service provider strength we are seeing continues to be our efforts to diversify this business across customers, products, and geographies. Similar to Q2, We continue to benefit from the strength with our U.S. cable customers, as well as Tier 2 and Tier 3 carriers in international markets. We also saw solid demand for our switching products in addition to our routing solutions. While we did see some weakening in our SP security business, we believe this was a function of timing and would note that the pipeline here remains strong. Our diversification efforts are only likely to strengthen as we increasingly target access, aggregation, and network routing opportunities and introduce new software-centric testing and automation capabilities acquired through NetRound that further enhance our ability to win in these growing areas of the routing market where historically we hadn't played. Based on Q3 results and Q4 pipeline, We continue to believe our service provider business is likely to see a mid-single-digit decline in 2020. While we acknowledge some of our service provider customers are continuing to face business challenges that may impact their ability to spend in future quarters, based on our recent momentum and customer conversations, we believe this business has the potential to further stabilize in 2021. Our cloud business came in slightly weaker than we originally expected. We believe the decline on both a quarter-over-quarter and year-over-year basis was largely a function of lumpiness following five consecutive quarters of year-over-year growth. We believe this lumpiness reflects normal customer consumption patterns. Our cloud backlog remains healthy, and we believe the general spending outlook from a hyperscale and Tier 2 customers remains favorable. We believe we are holding our WAN footprint and are increasingly optimistic regarding our potential to gain data center share in the years to come. While we now believe our cloud business is likely to be flatly up for the full year 2020, we remain confident in our ability to grow this business in 21 and beyond. Importantly, we're continuing to make progress on 400 gigs with additional wins and strong pipelines of opportunities in both our cloud and service provider segments. While many of our wins are addressing wider use cases where we have historically been strong, we've also secured net new switching opportunities, including a design win with a top 10 cloud provider. We continue to expand our 400 gig product set and deliver new features needed to gain share in this critical market. We believe we have the right products and customer engagement to both protect our wider footprint and capture switching share as the 400 gig cycle unfolds across our cloud and carrier customers in years to come. We continue to expect the 400 gig opportunity to begin in earnest next year, with revenue starting to become material during the second half of next year. Our software revenue represented less than 10% that failed for our second consecutive quarter due to a lower mix of certain products that drive higher on-box attach rates of perpetual licenses. That said, we continue to see strong adoption of our myths and security subscriptions. Our efforts to transition certain perpetual software offerings to term-based subscriptions are beginning to drive improved results. We believe growth in these recurring software offerings is an encouraging dynamic that should improve visibility over time and give us confidence in the long-term outlook for our software revenues. I'd like to mention that our services team delivered another solid quarter and continues to grow on a year-over-year basis due to strong renewals and service attack rates. Our services team continues to execute extremely well and ensure our customers receive an excellent experience. I would like to extend my thanks to our customers, partners, and shareholders for their continued support and confidence in Juniper. I especially want to thank our employees for their hard work and dedication, which is essential to creating value for our stakeholders. I will now turn the call over to Ken, who will discuss our quarterly financial results in more detail.