Juniper Networks, Inc.

Greetings and welcome to Juniper Network's second quarter 2021 financial results conference call. At this time, all participants are in the 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 now like to turn the conference over to your host, Jess Lubert, Vice President, Investor Relations.

Thank you, operator. Good afternoon, and welcome to our second quarter 2021 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 8-K 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, and thank you for joining us on today's call to discuss our Q2 2021 results. We reported better than expected Q2 results, delivering a second consecutive quarter, which saw year-over-year revenue growth across all verticals and geographies. We also experienced record orders in Q2, which helped us grow backlog both sequentially and year-over-year. Momentum is strong entering the second half of the year. I'm encouraged by the diversity of the strength we are seeing, which is spread across verticals, customer solutions, and geographies. While the strength is due in part to improve trends with some of our large strategic customers, particularly in the cloud and service provider verticals, we're also seeing strong momentum with new logos and an increased number of deals greater than a million dollars, especially in the enterprise verticals. I would call out three factors driving our momentum. First, our focus on leading the industry and delivering simplified operations and a superior user experience, what we call experience-first networking, is resonating in the market. Our AI and software management tools are second to none and deliver meaningful customer value that is enabling us to accelerate our success and take share, particularly in the enterprise campus, and the data center markets but also in service provider and cloud verticals by leveraging software control points like mist abstra and juniper paragon to improve customer operations and experience we're not only creating sticky new software revenue streams but also creating platforms that pull through a broader suite of core juniper infrastructure Second, our teams are executing extremely well. Our internal alignment around customer solutions and investments in our go-to-market organization are enabling us to capitalize on our technical differentiation and benefit from improved end-market conditions we're seeing. In addition, our customer satisfaction ratings are at record highs, reflecting the strong work of our engineering and services organizations. as well as our supply chain team, which continues to work tirelessly to meet customer demand in an extremely tight supply environment. Third, we are seeing improved end market conditions across verticals and geographies. As global businesses reopen and companies look to bring workers back to the office, many projects which were halted are resuming, and many new ones are starting as digital transformation and clarification initiatives accelerate. Enterprise, cloud, and service provider customers are all recognizing the strategic importance of the network and investing to support a more distributed workforce, which is increasingly reliant on high bandwidth applications such as real-time video collaboration. While the demand environment is strong, we, like others in our industry, are managing through significant supply chain challenges. customers have become more aware of these challenges, and many are either placing orders early or providing significantly greater visibility into future projects. This is particularly true with some of our large strategic customers, especially in the cloud and service provider verticals. We view these early orders and insight into our customers' longer-term plans as a positive development. Importantly, Even excluding these accelerations, orders are estimated to have experienced mid-teens growth in the period with healthy momentum across vertical and customer solutions. Based on this trend, we now expect to grow our business approximately 6% in 2021 on a full-year basis, despite the challenging supply chain backdrop. I'm excited by the momentum we're seeing. The investments we're making are paying off and I'm increasingly confident in our ability to not only grow our business this year, but to do so on a sustainable basis. Our strategy is sound and we're investing and succeeding in several big industry opportunities that should provide attractive tailwinds over the next few years. The first area we're winning is the enterprise transition to AI-driven cloud architectures. NIST was one of the first to deliver on this vision with wireless, and since the acquisition, we have brought the same automation, insight, and agility to the wired LAN and now the WAN. This unique client-to-cloud approach for AIOps delivers superior end-user and operator experiences, which is enabling us to both land new full-stack WANs defined as Wi-Fi, wired, and SD-WAN, and expand our opportunity with large existing accounts. While marketing messages can sound similar, we believe Juniper with NIST AI has fundamental architectural advantages that will stand the test of time, including a purpose-built microservices cloud architecture, six-generation data science expertise, a unified AI engine across the LAN, wireless LAN, SD-WAN, and AI-driven support led by the industry's only conversational assistant, Marvis. This differentiation has enabled us to take share in key networking segments, which we believe will continue as the $20 billion campus and branch market transitions to AI-driven cloud architectures in the years to come. We're also continuing to see success with our 400 gig offerings, both in wide area as well as data center use cases. We now maintain more than 200 wins that span across hyperscale, service provider, and cloud major accounts, which is up materially on a quarter-over-quarter basis. We remain optimistic regarding our ability to not only protect our footprint, but also to capture net new opportunities in these larger accounts. We continue to expect 400 gig deployments to begin later this year and present increasing tailwinds over the next few years. In addition, we're optimistic about our 5G metro opportunity. We believe the investments we're making in our Juniper Paragon automation suite, as well as our ACS metro access and aggregation portfolio, will position us to capitalize on this sizable and growing market. While it remains early, we're seeing healthy customer interest in our new Metro portfolio, and we expect to continue to introduce new solutions over the next 18 months that should further enhance our ability to succeed in this market. Now I'd like to provide some additional insights into the quarter and address some of the key developments we're seeing from a customer solutions perspective. Starting with our automated LAN solutions, while revenues slightly declined year over year due to the timing of shipments in the cloud, we experienced strong orders with solid momentum in both our service provider and cloud segments. We saw healthy demand across both our MX and PTX product families and improved adoption of our newer products as well as our automation software portfolio. Our 400 gig solutions are performing well and enabling us to not only protect our existing footprint, but also to secure several net new wins. While we are continuing to see strong customer demand for our automated WAN solutions, these products are currently the most impacted by supply chain challenges and therefore the most difficult for us to predict. As a result, despite very strong orders, we now expect our results from this segment to return to within the range of our long-term model, calling for a minus 1% decline to a 3% growth during the year. with supply likely to be the biggest determinant of where we will ultimately fall within this range. Our cloud-ready data center solutions experienced 28% year-over-year growth during the June quarter, and encouraging order trends from our cloud, enterprise, and service provider customers. We saw strong momentum with new logos as well as an increase in average deal size in the period, including a meaningful increase in deals over $1 million. After exceeded expectations for a second consecutive quarter, and it's creating a significant buzz in the market. This is leading to more software opportunities and full-stack data center wins. Customer interest in our cloud-ready data center portfolio is high, and we remain optimistic regarding the outlook of this business. For the year, we believe our cloud-ready data center business is now tracking at to slightly above the high end of our long-term model, looking for 5% to 9% growth year over year. Finally, our AI-driven enterprise solutions also grew 28% year over year. Our missed AI differentiation continues to resonate in the market as new logos increase 130% year-over-year and missed orders experience another quarter of solid triple-digit growth. Our mystified revenue from wireless LAN, wired assurance, Marvis virtual network assistance, and associated EX pull-through nearly doubled year-over-year, and we saw another quarter of record EX pull-through. I believe the MIST pull-through opportunity will continue to grow thanks to the recent introduction of the EX4400, a groundbreaking new access switch that combines true enterprise-grade scalability and performance with the ease of AI-driven cloud operations. MIST also positively impacted our branch security business. which performed well in Q2, and we continue to make progress with 128 technology, which we are integrating with our SRX secure branch gateways under a common cloud and AI umbrella. The pipeline of SUN opportunities remains strong thanks to these technology differences coupled with the unique synergy potential of a unified client-to-cloud enterprise portfolio from Uniper with end-to-end automation insight, and action. In addition to strength with large Fortune 500 customers, we continue to see very strong momentum in the channel and success with smaller commercial accounts during Q2, which highlights the value of our AI-driven enterprise offerings to customers of all sizes and across all verticals. We believe Mist AI continues to offer unique and market-leading differentiation, resulting in the best user and operator experiences. I remain encouraged by the momentum we're seeing in this business and remain confident our AI-driven enterprise solutions are likely to see double-digit growth in 2021. Our security revenue experienced strong results during the June quarter, and orders also exceeded expectations. Strength was especially notable in the high end of the market, where we have historically been strong, although we saw growth across all customer verticals and most product families. Our connected security strategy is gaining traction in the market because the convergence of networking security provides us with a competitive advantage in the portions of the market where we are currently focused. We believe our technical strength in both security and networking will continue to provide tailwinds in future quarters and should enable our security business to achieve our growth objectives. Our software momentum is also strong. Our software and related services revenue grew 59% year-over-year in Q2 as we experienced growth with radical subscription, solid updates of our Flex software licenses, and strong sales of certain perpetual on-box licenses. ARR grew 32% year-over-year in the period driven by a combination of mis-subscriptions, ratable security software offerings, and the related services associated with these software offerings. We've experienced record software orders in the quarter due to broad base strengths across verticals and use cases. we're seeing ongoing strength in ratable subscription offerings and improved adoption of our on-box flex licenses, which are seeing traction across all of the customer verticals that we serve. Based on the momentum we're seeing, we remain confident in the long-term software and ARR targets we presented at our recent investor day. I'd like to mention that our services team delivered another solid quarter and continued growth on a year-over-year basis due to strong renewal and service attach rates. Our services team continues to execute extremely well to 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.